If the country persists in increasing the number of FDI projects but supplying human resources ineffectively, it will face unexpected risks.

Nguyen Xuan Trung from the Vietnam Academy of Social Sciences (VASS) said that foreign direct investment (FDI) has played an important role in the country’s socio-economic development as it contributed up to 25 percent of total social investment capital, 19 percent of total GDP and roughly 40 percent of total industrial value in the 2006-2010 period.

FDI is considered one of the most important capital sources for Vietnam in the face of the global economic downturn as ODA funds for Vietnam are likely to decline after its admission to the group of middle-income countries.

From aspirations for development

Vietnam’s investment environment is attracting foreign investors by social trends, not just by its blessed natural resources, favourable geographical location and beautiful scenery.

Nguyen Tran Bat, general director of Investconsult Group, said that the requirement for development has become a common aspiration in society. This is one of the most important social trends which make Vietnam’s investment environment still attractive to investors.

He explained that foreign investors come to Vietnam to exploit cheap labour costs and the increasing purchasing power from a large population of approximately 90 million.

At present, many Vietnamese people, including farmers, tend to get further involved in the industrial area instead of farming. And, thanks to their improved living standards, they also like to go shopping more than before.

Nguyen Van Phuc, deputy head of the National Assembly Committee for Economic Affairs, said that the Government and the National Assembly have paid special attention to improving Vietnam’s investment environment. Apart from issuing legal documents on investment, Vietnam has also offered special incentives to investors.

In fact, as Vietnam’s legal policies encourage localities to attract foreign investment in an independent manner, many try to attract FDI by offering cheap land rental and preferential tax rates without careful consideration of projects to see if they are feasible or not.

...to hidden traps

Although Vietnam has an attractive investment environment, there remain risks of attracting FDI inflows.

Associate Professor Phung Xuan Nha from Hanoi National University said that Vietnam’s human resources have not met investors’ requirements. Therefore, the Government of Vietnam should further focus on training high quality human resources to serve the country’s economic restructuring process while training vocational workers for foreign enterprises.

Mr Bat pointed out hidden traps set by FDI inflows as they can make Vietnamese people become either rich or poor. He said while attracting FDI, Vietnam should consider the possibility of becoming a dumping ground for obsolete machinery and equipment.

Sharing the same viewpoint, Professor Nguyen Mai, who is also Chairman of the Vietnam Association of Foreign Invested Enterprises, said Vietnam is not much interested in the quality of technological investment.

Therefore, some foreign investors have introduced outdated technologies into Vietnam, causing environmental pollution and a great loss of energy. Moreover, some FDI enterprises do not respect the legal rights of workers to have a suitable job, good payment and bonus./.