Prospects of Attracting FDI into Hanoi's Service Sector 1. Prospects of FDI into Vietnam

investment licenses without paying attention to how the project is managed and monitored. FDI attraction policies compared to other cities in the region are not attractive enough to attract foreign investment.

- The strategic orientation of attracting FDI is mainly focused on export production, but the connection and coordination between FDI enterprises and domestic enterprises is still weak, so the added value in some export products invested in Vietnam is forced to import most of the input materials due to lack of supply sources in Vietnam.

- Planning work is still unreasonable, especially industry planning which is still heavily focused on protecting domestic production and has not been promptly adjusted to comply with international commitments.

- Weak infrastructure, underdeveloped supporting industries, low technology and labor productivity, high management costs, and limited policies to mobilize domestic and foreign resources.

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- The apparatus, personnel work and administrative reform have not met the development requirements in the new situation. The capacity of cadres working and doing foreign economic work is still limited in terms of expertise and foreign languages. It is not excluded that some cadres still cause trouble for businesses, negatively affecting the business environment of the city.

- Information is not transparent, data on the situation of foreign investment in the city is not updated continuously, making it difficult to find information on the city's FDI situation.

CHAPTER III: PROSPECTS AND SOME SOLUTIONS TO ENHANCE FDI ATTRACTION IN THE SERVICE SECTOR OF HANOI

I. FDI trends in the world in the coming time

First , from a regional perspective, the world's FDI flows are shifting from industrialized countries to some emerging markets, especially those in Asia and Southeast Europe. FDI flows to Latin America will continue to recover while flows to Africa are expected to remain at 2004 levels.

Second, from a national perspective, China is considered the most attractive FDI destination, followed by the US, India, Russia, and Brazil.

Third , from an industry perspective, services are still considered to be the industry that will attract more FDI capital than other industries. Specific industries with the most potential to attract FDI capital include: computers and information technology, electricity and electronics; machinery, mining and oil and gas.

Fourth, in terms of FDI capital, the US will continue to be the country with the largest FDI capital in the world, followed by the UK, Germany, and China. Besides China, Brazil, South Korea, and Malaysia are also among the 15 countries with important FDI capital for their neighbors.

Fifth , in terms of market entry methods, M&A is considered the main form of FDI capital flows. In addition, new investment is also considered the main form of FDI capital flows into developing countries.

Sixth , in terms of the movement of corporate functions, the production function is considered to move abroad the fastest, followed by logistics, business support services, distribution and consumption. Although the movement of R&D functions by TNCs is assessed very differently among experts, the UNCTAD report on FDI shows that the world's largest share of R&D spending will increase until 2009, with China, India and the United States being the world's leading destinations for R&D FDI.

Seventh , from the perspective of attracting FDI, competition to attract FDI among countries will increase in the period 2006-2010 with measures and policies used such as increasing the targeting of FDI capital flows, increasing investment promotion, providing more investment incentives, and further liberalizing FDI capital flows.

Eighth , to absorb the maximum benefits of FDI capital flows (market, technology, spillover effects, etc.) and minimize their negative impacts (environment, monopoly, etc.), the ability to orient (target) this capital flow as well as infrastructure and human resource quality play a particularly important role. In other words, in addition to increasing FDI capital attraction, it is necessary to pay attention to the quality of this

II. PROSPECTS OF ATTRACTING FDI INTO THE SERVICE SECTOR OF HANOI 1.Prospects of FDI in Vietnam

In the period 2006-2010, services were considered the spearhead sector for the country's economic development. The wave of FDI pouring into services was considered a positive signal, but that was why it was necessary to improve the quality of service products, focus on developing potential services and further promote the socialization of service sectors.

Currently, many businesses from countries around the world are tending to invest in Vietnam, especially in the banking and financial market - a new and promising field. Regarding the application of technological solutions in modernizing banks, there are currently two trends. First , on a large scale, banks will invest in technology themselves. Second , on a smaller scale, they will cooperate with information technology businesses and solution providers, thus making it easier to regularly update and innovate technology.

Priority sectors to attract FDI are agriculture, forestry, construction of raw material areas, food and grain processing. It is necessary to develop projects and measures to further encourage investment in the fields of mineral processing, agricultural-forestry-fishery processing associated with raw material areas, forestry and perennial industrial tree planting to exploit the potential of the territories.

Investment projects in high technology, new technology, advanced technology and applied technology that have the potential to improve production capacity and increase technological and economic efficiency of enterprises or investment projects to produce new equipment and new materials that domestic production capacity cannot meet.

Give appropriate priority to projects in the fields of oil and gas exploitation and processing, telecommunications, steel production, etc. Some key industries such as electronics, microelectronics, biotechnology, and new materials technology.

Focus on projects in the service industry with high profit margins such as tourism, real estate business, banking and finance.

Encourage human resource training projects to meet the needs of industrialization, modernization and international economic integration.

Encourage investment in the fields of infrastructure construction and resource development in agriculture, irrigation, ecology, transportation, local industry, environmental protection, mining, and tourism.

Further encourage investment in existing industrial parks and export processing zones with the view that industrial parks are the core of urban planning chains that will be formed in the future with high-quality industrial park infrastructure, associated with the formation of residential areas, commercial areas and other services.

Promote FDI attraction from partners with potential capital and technology, targeting domestic industries that are still facing difficulties, using advanced technology. Focus on attracting FDI from countries with strong financial and technological potential, advanced management experience, first of all North America, Western Europe and East Asia.

2. Service development orientation

2.1 Development orientation of Vietnam's service industry

In the process of preparing the 5-year Plan 2006 - 2010, the Ministry of Planning and Investment has provided key orientations on structure, policies, and macro-mechanisms to promote service development; Ministries and sectors have proactively developed strategies, plans, and action programs for service sector development, as well as specific solutions.

possible to implement on the basis of general orientations and industry development strategies.

2.1.1 On general orientation of service development investment.

- Continue to mobilize investment capital from all economic sectors at home and abroad to upgrade and build new infrastructure and equip modern technical facilities to facilitate service development.

- Capital from the state budget (central and local) should be prioritized for the development, consolidation, upgrading and modernization of infrastructure, especially transportation, airports, seaports, post and telecommunications, tourism, finance and banking. Support modern equipment and technical means for key service sectors to enhance domestic and international competitiveness and increasingly better serve the production and consumption needs of the people.

- Open the service market according to international commitments, strengthen mobilization and promotion of foreign investment in the service industry, meeting over 30% of capital needs with FDI sources.

- Strongly carry out equitization, organize business activities according to new and effective models to mobilize resources from the whole society for investment and service development, first of all in the following sectors: insurance, banking, tourism, passenger and cargo transport, post and telecommunications, real estate business, wholesale and retail of goods and some other sectors.

2.2.2. On investment orientation of some key service sectors

- Transportation services:

+ Invest in maintaining, consolidating, upgrading and developing key transport infrastructure. Upgrade existing road traffic works, build new key works, and gradually build a system.

Expressway system, first of all, is the system connecting key economic zones, important traffic axes with large traffic volume, connecting tourist areas, unique historical and cultural relics of Vietnam as well as the region. Improve the quality of passenger and cargo transport services, promptly meet the requirements of socio-economic development and people's travel.

+ Renovate, upgrade and synchronize the existing railway network, modernize information and signal systems, improve service quality, and strive to catch up with regional standards.

+ Synchronously invest and modernize the seaport system. Form a number of seaports according to the open port model, gradually increase transshipment services. Develop the national maritime transport fleet in a specialized and modern direction. Rejuvenate the fleet, combine domestic construction and purchase of ships abroad. Further promote the equitization process of maritime service enterprises. Improve the quality and professionalism of exporting transportation services and crew, focusing on developing the type of full-package maritime services.

+ Invest in renovating, upgrading, modernizing and building new international airport systems, facilities for flight operations and control. Invest in purchasing new aircraft and modernizing the fleet, capable of competing in the regional aviation market. Gradually open the market, attracting the participation of international airlines.

- Tourism services:

Vietnam's tourism must truly become a spearhead economic sector based on mobilizing resources from the entire society to effectively exploit the country's potential and advantages in terms of natural conditions, ecology, cultural and historical traditions; strive to attract over 6 million international visitors and over 25 million domestic tourists by 2010. State budget capital continues to focus on supporting investment in developing tourism infrastructure, first of all in key national tourism areas and regions with tourism development potential, especially tourist areas.

tourism associated with cultural and historical relics that have been planned and have a development strategy until 2010 approved by the Prime Minister. Continue to support from the state budget for the implementation of the National Action Program on tourism.

- Construction services:

Create a legal framework and driving force to promote the development of construction investment activities, forming a construction market with an increasingly large, diverse and rich scale; continue to expand decentralization, clearly define the rights and responsibilities of subjects participating in construction to ensure construction quality and efficiency.

- Financial services:

Create a favorable environment for organizations of all economic sectors to participate and compete equally in the financial market and financial services; adjust mechanisms and policies so that the financial market and financial services market operate in accordance with economic conditions and implement international commitments on finance and financial services. Improve the financial situation and strengthen the financial potential of state financial service organizations. Strengthen the state's control over financial services.

- Banking services:

Promote the modernization of the banking payment system, enhance banking utilities to encourage economic sectors, including individual consumers, to use banking payment services, limit the use of cash in commercial relations, continue to build and perfect mechanisms and policies to attract remittances. Enhance the capital mobilization capacity of commercial banks, especially medium and long-term capital sources, and at the same time simplify processes and procedures to continue expanding credit activities in a safe and effective manner in accordance with international practices, meeting the needs of the day.

better capital needs for economic growth targets. Continue policies to diversify the operations of commercial banks towards approaching new financial services, meeting diverse needs of customers, improving the competitiveness of domestic commercial banks, preparing for the process of integration into the world and regional economy, especially when implementing commitments under the Vietnam - US Trade Agreement and commitments after joining the WTO.

- Postal and telecommunications services:

To build and develop a widespread postal, telecommunications and information technology network in a modern direction, improve the quality and competitiveness of services to better meet the requirements of socio-economic development, ensure national security and defense and develop information technology applications according to the objectives of the Vietnam Post and Telecommunications Development Strategy to 2010 and orientation to 2020 approved by the Prime Minister.

- Science and technology services:

Focus on developing various types of scientific and technological services to serve the country's industrialization and modernization process according to the following orientations:

+ Services requiring high technical requirements, such as instructions on installation and operation of technological lines; restoration, repair, and calibration of machinery, equipment, testing instruments, measuring instruments, and scientific and technical equipment with automatic control units.

+ Data processing, calculation, analysis to directly serve research, implementation, testing and experimentation; prepare pre-feasibility and feasibility study reports.

+ Activities related to intellectual property protection; activities supporting technology transfer, applying new techniques to production, technology demonstration; services on information, scientific and technological consulting, brokerage, promotion.

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