Strengthening Links Between the Foreign Invested Sector and Local Enterprises

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Strengthening Links Between the Foreign Invested Sector and Local Enterprises was the title of the Vietnam Business Forum, which I attended last Friday, in Hanoi.

Participants included HE Deputy PM Vuong Dinh Hue, Deputy Minister of Planning and Investment (“MPI”) Dang Huy Dong, World Bank Country Director Mr Ousmane Dione, IFC and other Government departments, Embassies, Business Groups, and others.

As reported by the Deputy Minister from MPI Foreign Direct Investment, FDI has, and continues to be a driving force behind the economic development of Vietnam and accounts for 22% of GDP and 70% of the country’s exports. FDI is also needed to continue, in order to help Vietnam avoid the middle income trap.

However, the Government is concerned about the uneven growth rate between local businesses and FDI businesses and the potential conflicts this could cause. With the “revolution” in science and technology, Vietnam is losing the advantage of low cost unskilled labor and therefore needs to maximize the use of skills the country has. This requires the Government and business to work together.

FDI businesses and local business need to work together to maximize the benefits of science and technology with a planned integration and transformation of local business. The Deputy Minister did recognize that the Government was trying to level the playing field but that there were still inconsistent implementation of policies and regulations.

Implied in this is the need for Joint Ventures, however some of us remember the many failed and disastrous joint ventures in the early days of Doi Moi, and I wonder if the local mindset and the recognition of the need for transparency and corporate governance has yet reached the right level, in general, to enable successful joint ventures..

In his closing remarks, DPM Hue made reference to the Government’s policy of creating a path to clean and transparent business and part of the plan for this is to have 80% of all administration procedures handled online. He mentioned a reduction in the number of customs inspections and the overall reduction in administrative procedures through Resolutions 19 and 35.

It is clear that the Government wants to see a more vibrant Vietnamese private sector with development supported by the FDI business sector, however the practical implementation will be very challenging, at least until there is a much more transparent business environment and transparent interaction with Government bodies, which still at a local level leaves a lot to be desired.

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