OBG talks to Bui Quang Vinh, Vietnamese Minister of Planning and Investment

Interview: Bui Quang Vinh

What is Vietnam’s strategy for attracting foreign direct investment (FDI) in value-added sectors?

BUI QUANG VINH: FDI has played an important role in the development of Vietnam’s economy. Our current priority is to attract high value-added projects, particularly in manufacturing and processing, two areas where FDI already accounts for more than 53% of total capital investment. In recent years, the number of high-tech and high-value projects in Vietnam has been modest, given that the largest proportion in manufacturing has been assembly, which is characterised by low added value. If there is no added value, the profit merely goes to the investors and brings no benefits for the Vietnamese people. For that reason, the transition from assembly industries to high-value-added manufacturing and processing is our top priority, and we are pursuing an investment policy to attract such projects.

One of our principal strategies is to attract strong supporting industries that will generate high value-added chains. Foreign companies also support this strategy, as they do not want to import components and prefer to use the domestic market. Our priority in the coming years is to identify the areas where we want to give better, more transparent incentives to supporting industries and facilitate the entry of high-tech projects. The government is working to revise some laws and push for tax incentives, exceptions on land leases and policies to support the training of the labour force. If local labour does not meet the demands of investors developing high-tech projects, they can import workers. We want to develop a more competitive incentive scheme for high-tech and high-value projects.

How do you evaluate Vietnam’s position relative to its neighbours in terms of labour and logistics?

VINH: Despite favourable conditions for opening up our market gradually, it is now time for Vietnam’s full integration with the world economy, starting in 2015 with the ASEAN Economic Community. We have already done several things in this respect, but many Vietnamese enterprises are still unprepared to compete with international companies as the race for attracting FDI from South-east Asian countries gets tighter. We now have to compete in terms of quality, not just quantity.

Low-cost labour, resources and basic incentives are no longer effective, but we now have to resort to highly qualified labour and management skills to attract FDI, especially as we not only need to compete with developed economies but also with other developing countries. Vietnam has an advantage over other countries in having 90m inhabitants, in which 68% are of working age. Yet highly qualified labour is still lacking, and manual labour will lose competitiveness as incomes rise in tandem with the development of the economy. We must train our labour to meet the demand from foreign investors, particularly in vocational education. Also, the logistics sector has yet to be developed. Vietnam has a favourable location, 3260 km of coastline and many deepwater ports for logistics infrastructure. This needs high capital investment, so it is crucial to develop a master plan to develop linkages and a comprehensive system of road and port infrastructure.

Which regions of Vietnam offer the best value for new investors in services and manufacturing?

VINH: Foreign investors are likely to choose the most convenient locations in Vietnam’s southern, northern or central regions, taking into consideration factors like infrastructure, labour and energy. Our political and economic centre is in the north, where Hanoi and neighbouring provinces have ports and airports which make them accessible for export industries. In the southern region, we have the largest economic centre in Ho Chi Minh City and the neighbouring provinces, and in the centre of the country we have the best resources for tourism development and investment, as this is where the beaches are located. For the projects that invest in areas like Hanoi and Ho Chi Minh City, we have strict environmental requirements, but we have lower standards in the remote regions to encourage investors.