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VIETNAM: FDI Applications Set for Increased Scrutiny

The Political Bureau (Politburo) of the Central Committee of the Communist Party of Vietnam, the country’s highest decision-making authority, has called on all government bodies to step up their scrutiny of foreign direct investment (FDI) proposals. The directive forms part of Resolution 50-NQ/TW, a raft of recently approved measures intended to boost efficiency and productivity in the FDI sector.

While acknowledging the importance of FDI to the country’s overall economic development, the Politburo has expressed concern that the majority of such projects are small-scale, labour-intensive and set at the lower end of the value chain. Furthermore, few – if any – utilise cutting-edge technology, resulting in local employees gaining little experience of working in a high-tech environment.

It also noted that many FDI- backed businesses fail to comply with local tax requirements, engage in Certificate of Origin fraud and ignore labour and wage-related regulatory requirements. In another area of concern, the body maintained that the ratio of actual FDI disbursal vis-à-vis committed/registered capital remains low, while FDI-related revenue contributions have declined.

In light of these concerns, the resolution calls for priority to be given to high-tech and environmentally-friendly FDI proposals, as well as those likely to produce high-value added products or upskill local workers. At the same time, the directive warns against granting approval to any parties deemed to be on an uncertain financial footing, likely to engage in corrupt or illegal practices, threaten national security, utilise obsolete technology or cause environmental damage.

The resolution, however, emphasised that all reasonable applications will still be approved, with overseas investors continuing to have the same rights as their local counterparts. In line with this, local agencies are required to protect the rights of overseas investors, particularly those related to intellectual property, assets and invested capital.

It is believed this resolution will underpin the country’s FDI policy until 2030.

Content provided by Picture: HKTDC Research
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