Hanoi, 23 November 2004 — Vietnam needs to simplify its investment incentives if the country is to attract investors in an increasingly competitive regional environment, said experts attending an investment meeting held today in Hanoi.
The workshop “Investment Incentive Regimes in Vietnam” was held by the Ministry of Planning and Investment (MPI) with support from the Mekong Private Sector Development Facility (MPDF) and the Foreign Investment Advisory Service (FIAS) of the International Finance Corporation and the World Bank Group.
The event brought together representatives from government, business and donors to discuss the issues of incentives and investor protection. Based on this and other inputs, the Law Drafting Team will draft the Comprehensive Investment Law by 2005. The objective of the new law is to integrate investment-related legislation, including the Domestic Investment Encouragement Law and the Foreign Investment Law.
Recognizing that increasing investment by the private sector, both domestic and foreign, is crucial to economic growth, the Government of Vietnam has, over the past decade, developed a system that offers generous incentives for investors.
However, according to the report Investment incentives and investor protection in Vietnam, Vietnam has one of Asia’s most complex incentive structure. The report, which compared incentive regimes and investor protection in five Asian countries (Bangladesh, China, Malaysia, Philippines, Thailand and Vietnam) was prepared by FIAS and MPDF, with financial support from the Australian Agency for International Development (AusAID).
This complexity is a result of successive amendments through the last decade or so. Many incentives are being used to meet multiple objectives simultaneously; as a result, these multiple objectives in some cases have resulted in complexity and contradictions. This reality is quite understandable, given that Vietnam is in the middle of its transition from a centrally planned to a market-oriented economy.
For an incentives system to be effective and achieve its desired objectives of attracting investment, it should be targeted, simple, and easily understood by both the users (the enterprises) and the administrators (civil servants). Its outcomes should also be transparent and predictable.
The Report recommends that rather than make further adjustments to an existing system that is already too complicated, this is an opportunity for Vietnam to introduce a new system that is simple, easy to use, transparent and effective. Such a system would make Vietnam one of the most competitive countries in the region.
Vietnam implemented FDI of 2.37 billion dollars between January and October 2004 or an increase of 5.3% compared to the same period last year, according to the Ministry of Planning and Investment.
