The Vietnamese parliament has authorized Prime Minister Nguyen Xuan Phuc to issue extraordinary incentives for foreign direct investment (FDI) projects with high economic impacts, according to Minister of Planning and Investment Nguyen Chi Dung.

Minister of Planning and Investment Nguyen Chi Dung at the conference. Photo: MPI.

“Vietnam is determined to attract large-scale projects, in which multinationals are required to transfer modern technologies to their local peers, or help Vietnam further integrate into global value chains,” Dung said at a conference discussing measures to support Vietnamese enterprises in developing sustainable value chains on July 24.

“By fulfilling these criteria, they would receive special treatment exceeding the limit that other foreign investors are receiving,” Dung stressed.

Over the past year, Vietnam has achieved significant results in attracting FDI and developing the private sector. However, the weak linkages among domestic enterprises and also between Vietnamese and foreign-invested firms are restricting the development of the business community, Dung said.

To address this issue, the Politburo, the supreme decision-making body in the country, has released Resolution No.50 on luring high quality foreign investment until 2030, in which a strong focus is to help local small and medium enterprises (SMEs) move up in the global value chain.

However, to realize such goals, breakthrough solutions are necessary as major FDI firms often have their own supply chains, not to mention most local enterprises are of small scale with limited capacity.

“This fact makes it difficult for Vietnamese enterprises to satisfy their foreign partners’ requirements, while some do not want to take risk to invest in production expansion,” Dung noted.

Meanwhile, the Covid-19 pandemic is transforming the global economy with new consumer behaviors and business models, and most importantly, new linkages and value chains.

Dung said this is the chance for Vietnamese enterprises to restructure their operations and enhance their adaptability against market uncertainties by going digital, which does not cost much but could provide immediate benefits in capacity building. 

“Enterprises must act fast and adopt drastic measures to grasp this one-in-a-lifetime opportunity for recovery and expand sustainable value chain,” Dung stressed.

To further clarify the difficulties that Vietnamese enterprises are facing, USAID LinkSME Deputy Director Duong Thi Kim Lien said one of the major issues is the weak capacity, as Vietnam is still dependent on China for input materials.

For example, the textile industry is importing 70 - 80% of materials from China, electronics with imported input materials at 77% of total product value, pharmaceuticals with 85 – 90%.

In order for Vietnam to absorb the shifted capital inflows and ensure sustainable supply chains, Lien suggested the government invest in infrastructure development, including industrial parks, economic zones, along with supporting facilities and high quality human resources.

Another priority is to continue pushing for administrative reform towards greater transparency and consistency, so that instead of having to address concerns of the business community, the government could focus on creating favorable conditions for them to grow.