In order to reach the GDP growth rate of over 8% as targeted, Vietnam plans to mobilise 22% of the total capital needed from domestic sources. That means it will need $9bil of foreign direct investment (FDI) every year in the next five years to reach that end.

We have high expectations of the increasing FDI flow injected after the recession, but the implemented ratio seems to be quite modest?

Six billion dollar in FDI is an encouraging result, marking a milestone in FDI attraction in Vietnam in 2005, of which $3.4bil has been put into the projects. However, the figure just approximates the 1997’s level.

It is clear that Vietnam has overcome the crisis period in FDI attraction in 1998-2002. During 1988-2002, Vietnam successfully lured $46bil, of which the implemented capital was $26bil, or 55% of the total registered capital.

The low level of implemented capital shows the instability of FDI. In a market economy, the investors can register investment, but do not implement the projects. We have the habit of declaring the registered capital, but it does not have much significance in economics. Moreover, it should be noted that, Vietnam has to contribute 15% of the total capital.

Which role will FDI play in the national economy development in 2006?

With such a low level of implemented capital, Vietnam will need 8-9bil of registered FDI capital every year from now to 2010 to meet the requirements for economic growth. No FDI, no high economic growth rate.

During 1998-2005, FDI capital has generated 14.3% of GDP in Vietnam. However, the importance of FDI capital should not be seen only in the capital volume. In 2005, the foreign invested enterprises’ export turnover was $19bil, amounting to 60% of the country’s total export turnover, and the enterprises paid $1bil in taxes to the state budget.

Is it feasible to attract $8-9bil a year, when even China finds it difficult to call for more FDI to the country?

Prior to 2003, China had absolute advantages in calling for FDI: cheap and skilled labour force, good supporting industries, and big market. However, the situation has changed: Vietnam has emerged as a redoubtable rival: ranks second among ASEAN countries in terms of population, while the Government of Vietnam is making great efforts to improve the investment climate.

However, it will be very difficult to reach the target in FDI attraction if the shortcomings in the government apparatus are not repaired. It remains a ruling apparatus, not a serving apparatus.

FDI flows to several key industries and sectors only, that is why concern has been raised that it will cause imbalance in investment structure. How do you comment about this?

It is true that FDI capital has come to several heavy industries like steel, cement, and ore mining and the projects are mainly run industrial zones in flat country. However, we have not seen any imbalance in economy development. In fact, nearly all economies have not fully developed in the true sense of the word.

It is natural that the investors will only inject their money in the places that can bring profit. That is why the economic structure is also defined by the investors. Remote areas have not successfully attracted investment because of the poor infrastructure there. In the long term, the Government has not been really successful in creating a legal corridor beneficial for economic structure regulating.

If the current situation is maintained, that means the FDI capital is poured to some certain places only, and the infrastructure is remained the same as currently, Vietnam will fail to settle the imbalance in the economic structure.