vietnam asean 10avr02
vietnam television
By Luu Tien Hai
The pep pill for the Vietnamese economy
Since its official accession to ASEAN, investment from ASEAN enterprises to Viet Nam, in fact from five ASEAN " major powers" namely Singapore, Thailand, Malaysia, the Philippines and Indonesia, has kept increasing in both absolute and relative terms, though recently at a lower pace as a result of the regional economic crisis.
According to statistics by the Ministry of Planning and Investment (MPI), by July 1995 before Viet Nam's entry into ASEAN, this region accounted for just 17.27% of total registered investment in Viet Nam by ASEAN countries and territories. This figure has now grown up to 25.56%. ASEAN countries currently have 422 projects under operation in Viet Nam with US$ 9.2 billion of registered capital, a 3.2 times higher than that in July 1995. ASEAN investors are present in all sectors but mainly in industrial sectors including oil and gas exploration and exploitation. However, the investment proportion that goes to the real estate sector is the largest and much higher than other sectors. As far as investment quality is concerned, figures show that the ratio of implemented capital against registered capital of ASEAN countries is only about 30%, which is relatively low compared to 44% on average of the whole FDI sector. The internal rate of return against implemented capital is only 0.93, also lower than the whole FDI sector's average figure of 1.25. ASEAN investment efficiency is not really high partly because investors are badly affected by the Asian crisis, and partly because technologies transferred to Viet Nam are yet to be really modern. Product competitiveness and the share of exported products, therefore, are not high.
Nevertheless, according to project managers, the outcomes of ASEAN investment in Viet Nam over the past decade have demonstrated ASEAN investors' encouraging efforts despite Viet Nam's incomplete investment and business environment. Series of ASEAN investment projects are considered successful, such as Heineken beverage project, IBC soft drink project, Natsteel Vina steel milling project, CP (Dong Nai) husbandry project, Golden Hope Nha Be cooking oil project, and so on.
The establishment of a number of industrial and export processing zones (IZs and EPZs), which are relatively effective, characterizes another salient feature of ASEAN investment. Most notably are Viet-Sing (Binh Duong) IZs, AMATA IZ (Thailand-Viet Nam joint-venture), Da Nang EPZs (Malaysia-Viet Nam joint-venture) and Noi Bai IZ (Malaysia-Viet Nam joint-venture). These IZs have attracted dozens of projects with total investment capital of more than US$ 700 million. Over 25% of total industrial land has been leased.
It can be said that ASEAN investment is the pep pill for the Vietnamese economy, providing a substantial supplement for the whole country's investment and at the same time helping carry out the structural adjustment towards industrialization and modernization. If the remaining registered capital (more than US$ 6 billion) is disbursed soon, ASEAN investors' position in Viet Nam will be much stronger.
Viet Nam and AIA
Following the AFTA Agreement, the AIA Framework Agreement was signed on the 7th, October 1998 in Makatu, marking a new step on the path of economic integration and linkage among ASEAN members. The objective of AIA is to build a liberal, transparent and attractive ASEAN Investment Area in order to promote investment into ASEAN from both ASEAN and non-ASEAN sources. It is expected that under the AIA Agreement member countries will "immediately open" all industries and "immediately grant" National Treatment. However, Article 7 of the AIA Agreement also provides that depending on their specific conditions, each member country will elaborate the Temporary Exclusion List and Sensitive List composed of any industries or measures which have impacts on investment that the country can not open or grant National Treatment Status to ASEAN investors.
Viet Nam's "Temporary Exclusion List" under which certain industries are not yet open to ASEAN investors consists of some 23 products that the country is basically able to produce to meet domestic demand. Any member country that wishes to invest in these industries is required to meet certain conditions in terms of high technology, exports, use and development of local material inputs. With regard to its "Sensitive List" under which National Treatment is not yet granted to ASEAN investors, Vietnam has put forward some 10 measures under State management in respect of land, real estate, forms of investment, Government subsidy, foreign exchange balancing, local content and so on. In another document known as "the sensitive list" under which certain industries are not yet open to ASEAN investors, Viet Nam has put forward over 20 industries/sectors with different levels of restriction. Generally, the content of the three lists mentioned above has been stipulated in the Vietnamese law, especially the Foreign Investment Law that has been recognized by ASEAN members.
The above-mentioned regulations show that ASEAN investment activities in Viet Nam still meet with certain constraints and the current investment environment in Vietnam is not attractive to foreign investors. It will take some time for us to remove these difficulties.
The AIA Agreement aims to encourage not only ASEAN enterprises to invest in Viet Nam but also Vietnamese enterprises to invest in other ASEAN countries. The Vietnamese Government has promulgated Decree 22/1999/ND-CP, providing for overseas investment by Vietnamese enterprises. Thanks to this Decree, in 1999, Viet Nam invested in 10 projects in Laos, Cambodia and Singapore with the total investment capital of US$18.14 million - a figure much higher than before.
However, in order to properly implement AIA, it is necessary to overcome the current situation of unequal development. Investment in Viet Nam is not meagre from Indonesia. It is less than that from Laos and Cambodia, and investment from Myanmar and Brunei is nil. Likewise, Viet Nam's investment in other countries is even much more negligible.
Two-way investment among ASEAN countries constitutes the most important part in ASEAN cooperation. Increasing the efficiency of investment in the region is, therefore, the responsibility, obligation and also the interest of member countries. The revised Foreign Investment Law demonstrates Vietnam's great effort on the path of Doimoi with a wish to contribute actively to the common development of ASEAN