4.

CONCLUSION
The attraction and harnessing of FDI inflows by Vietnam has been a leading
element of the economic transition process in Vietnam, and has played an important role
in the country’s drive for economic development and poverty alleviation.
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Beyond the direct inputs and returns that foreign-invested enterprises have generated,
such as new jobs, the technology, skills and expertise they ‘import’, the
foreign exchange and the tax revenues they generate are all contributing to the
development of the Vietnamese national economy. Looking ahead, and despite the
growth of a more vibrant domestic private sector, the FDI sector is expected to
continue playing an important role in the economic development of Vietnam. The
extent of this role will depend in part on the provision of a host country environment that
is attractive to increasingly mobile foreign capital.
Some of the kinds of policy reforms proposed in the second part of this article,
intended to assist Vietnam in continuing to attract foreign investment inflows, are
gradually occurring. Various economic reform and business liberalization
commitments that Vietnam has made – such as those under the ASEAN Investment Area
(primarily relating to national treatment issues), conditions agreed
under the current IMF loan programme, and the recent bilateral trade deal with
the United States – will also help bring about positive changes to the host country
business environment that will be welcomed by both foreign and local private
investors alike. So, to some extent at least, the sort of FDI promotion policy
agenda that is proposed above is already picking up some degree of momentum.
However, improved coordination and enactment of these various initiatives would
be expected to improve their positive impact on FDI inflows.
This author also believes there is a role for creativity in the policy mix used to
attract FDI inflows. In general, the Southeast Asian countries have tended to
adopt a broadly uniform approach to their FDI strategies, despite the fact that
they are often directly competing for foreign investment. While it would undoubtedly be
sensible for Vietnam to broadly follow the pertinent aspects of ‘best
practice’ adopted by a country like Singapore, which has a strong track record in
the field of FDI attraction and promotion, there is also merit in seeking to identify
new and innovative ways of encouraging foreign investment that are tailored to
leverage the specific strengths of Vietnam. (Besides, what may have worked for
Malaysia or Thailand in attracting FDI inflows during the 1980s, may not necessarily
work for Vietnam in the new millennium.) Policies that excite and stimulate
the creative and entrepreneurial instincts of foreign investors should be rewarded
with greater FDI inflows, despite the presence of various host country obstacles.
Vietnam might therefore be well-advised to consider re-designing elements of its
current strategy towards foreign investment. Indeed, this may be necessary if
Vietnam is to achieve the US$12–16 billion target it has set itself for foreign
private capital inflows between 2001 and 2005.
There is much that other developing and transition economies can learn from
Vietnam’s experience in attracting foreign investment since the late 1980s; from
the need to carefully manage foreign investor expectations and sentiment (both on
the upside and the downside), to providing the kind of host country business
environment that is conducive to the new kinds of foreign-invested activity that
have been emerging. This in turn necessitates that policy-makers remain abreast
of developments in the international business arena, and cognizant of what
companies are seeking from host countries. Ironically, in arguably seeking to meet
the needs of foreign investors more than the domestic private sector (at least prior
to 2000), Vietnam may have inadvertently exacerbated the decline in its FDI
inflows after 1996. As foreign investment activity has mutated away from conventional
‘greenfield’ projects, towards more complex (equity- and non-equity-based)
linkages and production networks with domestic firms, the importance of having
a strong local corporate sector has risen. Having now attracted a substantial
community of foreign investors, their long-term presence and development in
Vietnam will also be dependent in part on establishing sufficiently robust linkages
with domestic suppliers. Vietnam’s experience would suggest that developing and
transitional economies might be well advised to integrate their FDI strategies
within a wider policy approach that seeks to create a conducive environment for
the development of both domestic and foreign-invested companies alike