and the unified cooperation between local promotion organizations. Funding for organizing investment promotion activities is still very limited. Most promotion activities are organized with sponsorship money, or in coordination with other activities. The system of organizing investment promotion agencies from the central to local levels has been formed but still has many limitations. The organization of each place is different, making the activities of investment promotion centers not carried out according to a unified plan, lacking coordination. The consequence is overlap in organizing investment promotion activities. Localities compete to introduce their own policies, competing to attract investment, causing many damages to overall benefits.
3.6. Other preferential policies
Building industrial parks and export processing zones to encourage investment
Realizing the necessity and important role of this form of investment, right from the first years of opening up, the State has focused on perfecting the legal environment, planning development and organizing the construction of industrial parks and export processing zones.
According to the Ministry of Planning and Investment, by October 2009, we had 228 industrial parks and export processing zones established with a total natural land area of 58,220 hectares, of which the industrial land area available for lease was 38,075 hectares, accounting for 65.5% of the total natural land area. Industrial parks and export processing zones are distributed in 54 provinces and cities nationwide, concentrated in the 3 key economic regions of the South, Central and North with a total of 149 industrial parks with a total natural land area of over 49,232 hectares (accounting for over 80.9% of the total area of industrial parks nationwide).
It can be said that, up to now, industrial parks have become an indispensable part of Vietnam's economic structure. Its activities have brought about encouraging results both economically and socially. It plays an important role in diversifying investment capital sources for infrastructure development, production and business, and is an attractive address.
7 http://www.vinacorp.vn/news/khoi-day-tiem-nang-dau-tu-vao-kcn/ct-392501
for domestic and foreign investors, thereby promoting economic restructuring. It is estimated that up to 30% of foreign investment capital is invested directly in industrial parks. In addition, industrial parks and export processing zones also create interactions with enterprises outside industrial parks and export processing zones. The economic relationship between these two areas is the relationship of supplying materials, raw materials and consumer goods. This relationship is increasingly developing.
However, the development of industrial parks and export processing zones in our country today still has many limitations.
mechanism:
- Investment in developing industrial zones does not follow a unified plan. Almost every locality has industrial zones with similar functions, so comparative advantages cannot be taken advantage of, leading to fierce competition and encroachment to attract investment.
- Lack of coordination between industrial parks and between localities in the regions. Industrial parks often develop separately, investing in all construction items, including building residential clusters, costly investments, reducing the operational efficiency of industrial parks.
- The occupancy rate of industrial parks is still low. The business efficiency of infrastructure investors depends largely on the occupancy rate of industrial parks. By September 2008, this rate in the Northern region was 40.9%, in the Southern region was 53.3%, the highest was in the Central region with a rate of 67.8%. 8.
- The planning for industrial park development is not linked to the planning for human resource investment and environmental protection, the planning for infrastructure construction for areas outside the industrial park to serve the accommodation, living, entertainment, recreation, study, etc. of workers. Therefore, problems arise such as: lack of labor supply for industrial parks, export processing zones, causing environmental pollution, causing negative impacts in many aspects.
- The management mechanism of industrial parks still has many shortcomings, the management mechanism has not been clarified, the relationship between relevant agencies still lacks synchronous coordination, and is slow to issue amendments and supplements to the regulations of industrial parks and export processing zones.
8 http://www.khucongnghiep.com.vn/news_detail.asp?ID=159&IDN=2134&lang=vn
Increase budget proportion for infrastructure construction
Infrastructure is one of the fundamental factors when assessing the development level of a country, and is also an attractive factor to attract foreign investment. Therefore, our State always focuses on the construction and completion of infrastructure to create a good foundation for economic development. Every year, the State Budget always allocates a significant amount of investment for basic construction.
Table 1.4: Construction investment capital in total state budget
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | |
Investment capital for construction and development (billion VND) VND) | 26211 | 36139 | 40740 | 54430 | 61746 | 72842 | 81078 | 107440 |
Proportion in State budget (%) | 24.06 | 27.85 | 27.49 | 30.04 | 28.83 | 27.73 | 26.32 | 26.9 |
Speed of increase (%) | 137.9 | 112.7 | 133.6 | 113.4 | 118.0 | 111.3 | 132.5 |
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However, the majority of State investment capital is for urban areas and industrial zones, and other basic construction works. Therefore, our country's urban areas have many conditions for development. Meanwhile, the budget capital for rural areas, although increasing in absolute terms, has not increased significantly in proportion. Total investment from the State budget for agricultural and rural infrastructure development in recent years has only reached about 15-17%. That shows that social investment in agriculture and rural areas is still too low. But more importantly, investment efficiency is also reduced when the quality and stability of planning and investment plans for rural infrastructure development are still weak. Investment structure
Investment is still unreasonable, capital allocation in programs and goals is still uneven, average, etc. Meanwhile, we also do not have many effective mechanisms and policies to encourage and attract non-budgetary capital sources for investment in agricultural infrastructure. Foreign direct investment in this area accounts for only 7.3% of total FDI capital in the country.
4. Assessment of the implementation of the State management role for FDI
4.1. Achievements
From the practice of State management of foreign direct investment activities over the past 20 years, it can be said that State management of this capital source has achieved certain achievements. First of all, our State has chosen the right and steadfast economic innovation path, in line with the regionalization and globalization trends, improved the investment and business environment, the legal environment, created unity in the legal system on investment, created favorable conditions to attract FDI and effectively implemented FDI projects. The organization of State management apparatus for FDI activities has been gradually improved, on that basis the quality of management work has been increasingly improved.
The current foreign investment legal system has ensured the implementation of the Party and State's policies in the field of foreign direct investment, protecting the sovereignty and interests of the State as well as Vietnamese enterprises. The interests of Vietnamese parties and the Vietnamese State are considered and protected in the process of assessing investment licenses and managing foreign investment projects.
The decentralization of investment certificate issuance to the provincial People's Committee and the Management Board is a policy of administrative reform in economic management and has been summarized over many years, creating favorable conditions for the provincial People's Committee and the Management Board to carry out the responsibility of managing domestic investment and foreign investment activities in the area. The decentralization has created conditions for the ministries and branches of State management to focus on the function of policy making, forecasting, inspection and supervision. Up to now, the management of FDI activities in localities, especially localities with many enterprises
FDI has been put into order, in a reasonable order, simplified, etc., and is assessed by the business community to have many innovations, contributing to improving the local investment and business environment.
4.2. Limitations
Besides the achievements, the State management of foreign investment activities still has many limitations that need to be overcome.
Firstly, the State management work still lacks systematicity and synchronization in long-term macroeconomic stabilization solutions. The legal system on FDI is in the process of completion, so it still lacks consistency, some regulations overlap, some regulations lack precision, are not consistent with domestic practice and international practices, making it difficult to understand, apply, and enforce, and at the same time create loopholes for enterprises to circumvent the law, while State management agencies can apply it arbitrarily, thereby causing corruption and authoritarianism. The basic thing is that legal documents and sub-law documents are issued slowly, have to be amended many times, so they do not ensure clarity and predictability, making it difficult for enterprises to plan their business strategies. The policy system directly related to the activities of FDI enterprises has not really encouraged and facilitated the production and business activities of foreign-invested enterprises. On the other hand, there are some stages of slow issuance and management, or even not yet issued, leading to loopholes that cause damage to the Vietnamese side.
Second, the planning work is not good, for a long time, there has been no strategy or master plan to attract and use FDI in accordance with the requirements of an open economy. In reality, due to unhealthy competition among localities, chasing quantity, it has disrupted the overall planning of product industries and socio-economic development plans, and produced overcapacity. The planning work in general and specific plans related to FDI activities are still slow, not implemented uniformly from the central to local levels, and the quality is poor.
The quantity is not high and lacks specificity, causing foreign investors to spend time learning when first investing in Vietnam.
Third, investment promotion and mobilization work is still limited, the law has not been properly enforced, FDI policies are not yet serious, and the methods of handling issues related to FDI are still confusing and inconsistent. The inspection and supervision of FDI activities according to the law is still loose, and the handling of violations of the law is not taken seriously. Support tools for enforcement, inspection, and supervision of law compliance have not been taken seriously and well applied.
Fourth, the training and development of cadres, especially economic management cadres in the FDI sector and the supply of labor to foreign-invested enterprises, has not kept up with the development of FDI activities, creating a huge deficit, causing damage to Vietnam and the country.
Fifth, the policy of decentralizing investment management to localities, besides the positive side of enhancing local autonomy and dynamism, its negative side is also quite obvious . This is clearly shown recently, in many localities, there is a "wave" of revoking investment licenses of a series of projects. Incomplete data shows that Bac Ninh province has 46 projects with revoked licenses, Tay Ninh has 22 projects, Lam Dong has 29 projects, Ninh Thuan has 12 projects, 12 projects in Phu Quoc (Kien Giang), 23 projects in Dung Quat (Quang Ngai) 9 ... The current "wave" of revoking investment licenses is in stark contrast to the previous movement of "rolling out the red carpet", taking advantage of attractiveness, attracting investment at all costs. In most localities, the reasons given for revoking project licenses are that investors do not have sufficient financial capacity, the objectives in the granted licenses are not achieved, progress is stagnant, prolonged, or enterprises establish projects with the purpose of occupying land and transferring it for profit. This shows that the licensing appraisal process in localities still has many weaknesses. Moreover, the situation of attracting foreign investment has led to a movement of "attracting" and inviting investors by all means in localities, causing licenses to be
9 http://www.mof.gov.vn/Default.aspx?tabid=612&ItemID=64522
too easy, the top priority is to quickly "fill" industrial zones. Besides, the management of foreign investment in localities is different, not handled in a unified manner, competition in attracting investment between localities has affected the common interests.
Reason
Subjective causes
- State management activities with FDI are complex and comprehensive activities, related to the management activities of many sectors, levels and fields in the economy. Moreover, this activity is not only a problem of one country but also related to many international organizations, countries in the region and the world. This is a completely new issue for the team of policy makers as well as those directly managing the management work. Therefore, the existing problems in the management work are inevitable. Although the majority of our country's managers in general and FDI managers in particular from the central to local levels are dedicated to their work for the cause of economic development of the country, wishing to contribute their intelligence to bring the country on par with the world powers.
- The views of all levels and sectors are not yet unified on the role of FDI in the economic development of our country, and there are also different views on the effectiveness of FDI. That has inconsistently affected and controlled policy making, law making as well as practical direction and management of this activity.
- The process of opening up to attract FDI in our country is slower than other countries in the region due to the embargo, siege, and isolation of Vietnam by hostile forces, so the knowledge and experience in attracting and managing these activities are not much. At the same time, the prolonged war has left serious consequences for the economy. In addition, the centralized planning mechanism has caused many harmful effects in management activities, especially the legacy of backward, voluntaristic, stagnant, bureaucratic, administrative-oriented management thinking, and the lack of attention to applying objective laws, which is seriously affecting state management activities.
The State is still confused in the process of policy making, law making and organizing the apparatus to implement State management activities for FDI in the context of developing a socialist-oriented market economy which is considered the natural result of those processes.
- The reform of administrative institutions is proceeding slowly while the transition from a planned economy to a market economy requires the superstructure to be compatible with the infrastructure. When the tasks of the authorities change, there must be changes in the functions and operating methods of the management apparatus to implement, adapt to and ensure the transition from a planned institution to a socialist-oriented market economy. To undertake the functions and complete the task of state management for a market economy requires a talented and effective government. Meanwhile, the administrative reform process has not kept up with the innovation of the economy. The state management apparatus for the economy is still cumbersome, overlapping, with unclear functions, many people are unworthy of their titles, irresponsible, and lack knowledge. This is one of the reasons why the operations of state management agencies are ineffective, leading to complicated and cumbersome procedures, causing harassment to domestic enterprises as well as foreign-invested enterprises.
- Differences in economic, political and social conditions compared to other countries in the region such as ownership regime, operating regime of types of enterprises in foreign investment cooperation. In Vietnam, joint ventures with foreign countries are mainly state-owned enterprises. This difference requires creativity in management but the capacity and qualifications of management staff are still limited.
Objective reasons
- The impact of the fierce international competition in attracting FDI of countries in the region, especially China and ASEAN countries, has caused great impacts in the field of adjusting Vietnam's investment attraction policies to be compatible with countries in the region. This causes the situation that although newly issued policies in Vietnam are outdated compared to the region and