Viewpoints, Policies to Attract and Improve the Efficiency of FDI in Vietnam

within a period of time sufficient to recover investment capital and make reasonable profits, then have the obligation to transfer it to the Vietnamese State without collecting any money.

* Build - transfer - operate (BTO) contract

Is an investment method based on a document signed between a competent state agency of Vietnam and a foreign investor to build and operate an infrastructure project. After construction is completed, the foreign investor transfers the project to the Vietnamese State. The Vietnamese State will grant the investor the right to operate the project for a certain period of time to recover investment capital and make reasonable profits.

* Build-Transfer (BT) contract

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Is a method of foreign investment based on a document signed between a competent State agency of Vietnam and a foreign investor to build an infrastructure project. After construction is completed, the foreign investor transfers the project to the Vietnamese State, and the Vietnamese Government creates conditions for the foreign investor to implement another project to recover the investment capital and make reasonable profits.

* Manufacturing enterprise

Is an enterprise that produces export goods, provides services for export production and export activities, established and operates according to government regulations on export processing enterprises.

1.2.2. Viewpoints and policies on attracting and improving the efficiency of FDI in Vietnam

The transition from a centrally planned subsidized economy to a socialist-oriented market economy under the management of the State is an innovation in the thinking and theory of our Party to mobilize all resources for national development. The 6th Party Congress affirmed that in the long transition period to socialism, our country's economy is a multi-sector economy. The 6th Congress put forward the policy: "Expanding the economy with foreign countries and establishing order and discipline in all economic activities, expanding the scale and improving the efficiency of production cooperation with the Soviet Union, Laos, Cambodia and other socialist countries, gradually developing economic relations with a number of countries

Other, attract foreign technical capital in many forms: production cooperation, processing, service contracting, joint venture, full investment, long-term loans.

Thus, to a certain extent, for the first time, economic cooperation with capitalist countries has been mentioned with the aim of attracting capital and technology, opening a new channel for attracting capital for investment in the country's socio-economic development. This is the first concrete step of the Party's innovation and opening-up policy, at the same time creating the premise for changes in laws and policies for international economic cooperation, including foreign direct investment.

The 1987 Foreign Investment Law is considered the beginning of the period of innovation and opening up. Vietnam's awareness of the role, position and effect of FDI on the national economy has become clear, practical and specific. The 1987 Foreign Investment Law affirmed: The Socialist Republic of Vietnam welcomes and encourages foreign organizations and individuals to invest capital and technology in Vietnam on the basis of respecting Vietnam's independence and sovereignty, complying with Vietnamese law, equality and mutual benefit.

The 7th National Party Congress (June 1991) was a supplementary step to develop the renovation and opening policy of the 6th Congress. The 7th Party Congress advocated expanding foreign relations with countries around the world and in the region on the principle of maintaining independence and self-reliance while expanding international cooperation, multilateralizing and diversifying relations with foreign countries, combining economics with national defense and security, building an open economy, focusing on exports, and replacing imports with effectively produced domestic products.

Regarding the role and position of FDI, the 7th Party Congress affirmed: Economic cooperation with foreign countries is not only the main method to attract foreign investment capital but also the appropriate path to receive advanced technology, skills, and management experience, open the way to regional and world markets, promote exports, increase competitiveness, adjust and shift economic structure in accordance with changes in the international situation, and effectively exploit comparative advantages in each development period. With the active method of attracting investment

Further improve the investment environment, innovate and manage cooperation and joint venture activities with foreign countries in many appropriate forms to take advantage of all investment capital sources, focus on developing cooperative relationships with world-class multinational companies to take advantage of the transfer of modern technology, advanced management and operation skills, and open the way to penetrate regional and international markets.

At the 8th National Party Congress (June 1996), our Party continued to affirm: The policy of building an open economy, multilateralizing and diversifying foreign economic relations, focusing on exports, while replacing imports with domestically produced goods that are effective, taking advantage of capital, technology and international markets to carry out industrialization and modernization. Widely developing forms of State capitalist economy, applying many methods of cooperation and joint ventures between the State and domestic capitalists and foreign capitalist companies. Improving the investment environment and enhancing management capacity to effectively attract foreign direct investment.

With these new features, Vietnam has demonstrated to the world its consistency in attracting FDI and its efforts in reforming administrative procedures, improving the investment environment and issuing legal documents with content consistent with international practices.

To overcome the impact of the 1997 regional financial crisis, the Vietnamese Government issued Decree 10/1998/ND-CP on a number of measures to encourage and ensure foreign direct investment in Vietnam. This Decree detailed the fields of investment encouragement, the areas of investment encouragement in the direction of encouraging exports, applying high technology, using a lot of labor, investing in areas with difficult socio-economic conditions.

Decree 10 has focused on reforming administrative procedures for FDI projects such as regulations on investment license registration, eliminating “sub-licenses”, and the right of investors to make their own decisions. In particular, the principles of retroactivity and non-retroactivity have been regulated in a way that is beneficial to businesses.

To continue improving administrative procedures and creating favorable conditions for FDI enterprises, the Prime Minister issued Directive No. 11/1998/CT-TTg, affirming the important role of FDI and the urgency in attracting this capital source for the socio-economic development of Vietnam, while clearly demonstrating the determination of the Vietnamese Government in improving the investment environment by continuing to reform administrative procedures towards simplification and transparency.

On March 26, 1999, the Prime Minister issued Decision No. 53/1999/QD-TTg on a number of measures to encourage foreign direct investment. It can be said that in a short period of time, by issuing Decree 10, Directive 11 and Decision 53, Vietnam has expressed its determination to persevere in the reform and opening-up policy, improve the investment environment, create all favorable conditions for investors, and gradually move towards a common policy for foreign direct investment.

To continue to promote the attraction of foreign direct investment to meet new needs, on June 9, 2000, the National Assembly of the Socialist Republic of Vietnam passed the "Law amending and supplementing a number of articles of the Law on Foreign Investment in Vietnam".

The highlights of the 2000 Foreign Investment Law are that FDI enterprises are allowed to convert investment forms, split, merge, consolidate, retroactive and non-retroactive issues, foreign currency balance issues, loss transfer issues to the following year (regulated for all forms of FDI instead of only for joint ventures as in the 1996 Law), reduce tax rates for transferring profits abroad, and the issue of investment license registration is regulated for the first time in the 2000 Foreign Investment Law.

With the results achieved after more than 10 years (1987-2000) of attracting FDI, the 9th National Party Congress affirmed that enterprises with foreign direct investment have created 34% of the total production value of the industrial production sector, about 23% of export turnover (excluding oil and gas) and contributed over 12% of the country's GDP. The foreign-invested sector has attracted over 350,000 direct workers and hundreds of thousands of indirect workers working in the construction, trade and service sectors.

Trade and related services, contributing significantly to the economic restructuring, improving technology level, management level and expanding the market. Creating favorable conditions for the foreign-invested economy to develop smoothly, focusing on export, building economic and social infrastructure associated with attracting modern technology, creating more jobs. Improving the economic and legal environment to strongly attract foreign investment capital ... The foreign-invested economy is a part of the Vietnamese economy, encouraged and developed.

Thus, at the 9th Congress, the foreign-invested economy was affirmed as a part of the Vietnamese economy, encouraged to develop, and to effectively use this economic component, our Party continued to emphasize attracting FDI capital in the direction of encouraging projects with modern technology, producing export goods, replacing imported goods, and at the same time solving jobs for workers.

To implement the Resolution of the 9th Party Congress, the Government issued Resolution 09/2001/NQ-CP on enhancing the attraction and improving the efficiency of attracting foreign direct investment in the period 2001 - 2005 and Directive 19/2001/CT-TTg of the Prime Minister on organizing the implementation of Resolution 09/2001/NQ-CP with the following orientations:

- Strongly encourage the attraction of foreign direct investment in export manufacturing industries, processing industries, industries serving rural development and rural economy, projects applying information technology, biotechnology, oil and gas, electronics, new materials, telecommunications, socio-economic infrastructure development, industries in which Vietnam has many competitive advantages associated with modern technology, creating more jobs, contributing to economic restructuring.

- Continue to attract FDI to areas with many advantages to promote the role of dynamic regions, creating conditions for linking and developing other regions on the basis of promoting comparative advantages. Encourage and create maximum conditions for investors to invest in economic regions with difficult socio-economic conditions. Focus on attracting industrial parks that have been formed according to approved planning.

In March 2003, the Government issued Decree 27/2003/ND-CP amending and supplementing a number of articles of Decree 24/2000/ND-CP detailing the implementation of the Law on Foreign Investment in Vietnam; in April 2003, Decree 38/2003/ND-CP was issued on the conversion of a number of foreign-invested enterprises into joint stock companies. With these documents, Vietnam once again demonstrated its determination in reform, innovation, openness, and proactive participation in the integration process.

international economy as well as efforts to improve the investment environment.

Once again, the National Assembly of the Socialist Republic of Vietnam promulgated the Investment Law No. 59/2005/QH11 on November 29, 2005, effective from July 1, 2006. The two important contents of the previous investment law, investment guarantee and investment support and incentives, have been completed this time to comply with the requirements of international economic integration. Most of the conditions for enjoying incentives remain the same as before, but economic zones are added to the list of locations eligible for investment incentives. The new law creates attractive points by stipulating that foreign investors are no longer controlled by only one type of limited liability company or by organizations that manage and operate companies in a manner that is imposed in favor of the "homeowner". Furthermore, investment support and incentive measures will be applied to all investors regardless of nationality, the number of conditional business sectors and industries will be significantly narrowed, and many service sectors will be open to foreign investors.

Up to the most recent Party Congress, the 10th Party Congress continued to affirm and determine: Continue to innovate economic institutions, review legal documents, complete the legal system to ensure consistency, stability and transparency, improve the investment environment, attract FDI capital sources. Strongly attract resources from foreign investors, improve the legal and economic environment, diversify forms and mechanisms to strongly attract resources from foreign investors in important industries and business fields.

It can be seen that, through the Congresses from 1986 to present, our Party has had a series of innovations in thinking that have contributed to creating a foundation for the formation and gradual development of policies and the foreign direct investment environment. On the basis of

On this basis, by confirming and encouraging foreign investment in the 1992 Constitution and amendments and supplements to the Law on Foreign Investment and promulgating sub-law documents, Vietnam has affirmed its consistency in policy, reform, and openness, affirming the important position and role of FDI in our country's economy, as well as great efforts in improving the investment environment and enhancing the efficiency of FDI capital use.

The viewpoints, guidelines, policies and results achieved in attracting foreign direct investment in recent times have truly become one of the most prominent points in the overall picture of economic achievements in the period of renovation and opening up of the Vietnamese economy and are also the basis for continuing to expand and promote the attraction of foreign direct investment in the coming time.

1.2.3. Situation of attracting foreign investment capital in Vietnam

Since the promulgation of the Foreign Investment Law in 1987, Vietnam has been very successful in attracting FDI flows into economic development, so foreign direct investment has become an important economic component of the economy and has made positive contributions to the socio-economic development of Vietnam in recent times. According to the report of the Ministry of Planning and Investment, the number of licensed FDI projects increased continuously in the period 1988 - 2005. If in 1988 there were only 37 projects with a total registered capital of 371.8 million USD, by 2005 the number of licensed projects was 922 projects with a registered capital of 4,268 million USD. As of December 31, 2005, the country had 6,030 valid projects with a total registered investment capital of 51.017 billion USD, and realized capital of nearly 27.986 billion USD.

Over the 18 years of implementing the Law on Foreign Investment in Vietnam, FDI activities have gone through various ups and downs.

From 1988 to 1990 were the first 3 years, FDI did not have a clear effect on the socio-economic situation in Vietnam.

Chart 1.1. Registered foreign direct investment (1988 - 2005)

Unit: million USD

8497.3

6530.8

5168

4649.1

4268.4

3765.6

3897

2900

2535

2165

2012

2222.1

1322.3

1557 1512.8

371.8 582.5

839

9000

8000

7000

6000

5000

4000

3000

2000

1000

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

Source: Foreign Investment Agency - Ministry of Planning and Investment From 1991 to 1997 was a period of rapid growth and contributed increasingly importantly to the implementation of socio-economic goals. In the 5-year plan 1991-1995, over 16 billion USD of registered capital was attracted, the annual growth rate was very high, the registered capital in 1991 was 1.322 billion USD, in 1995 it was 6.5308 billion USD. 1996 was the peak of FDI attraction in Vietnam, with registered capital of 8.497 billion USD. Ta

It is seen that investors were very eager to invest in Vietnam in the first half of the 90s.

From 1998-2000, since the Asian financial crisis, the foreign investment situation in Vietnam has worsened, marked by a serious decline in FDI capital. In 1998, registered capital was 3.897 billion USD, then in 1999 it was only 1.568 billion USD, equal to 40.2% of 2000's 2.012 billion USD.

From 2001 to now, it can be said that FDI activities have recovered. In 2001, registered capital was 2.535 billion USD, an increase of 22.6% compared to 2000, and realized capital was 2.3 billion USD. In 2002, newly registered capital was 1.557 billion USD and realized capital was 2.65 billion USD. In 2004, newly registered capital was 2.222 billion USD and realized capital was 2.85 billion USD. In 2005, Vietnam attracted 922 projects with registered capital of 4.268 billion USD and realized capital of nearly 2.23 billion USD. Although Vietnam has made remarkable improvements in FDI policy and has generally attracted the sympathy of foreign investors, it seems that this is still not enough to attract new capital sources.

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