Minister of Planning and Investment Bui Quang Vinh spoke about Vietnam’s economic performance in 2011.
Could you tell us about Vietnam’s socio-economic performance in 2011?
In the context of the economic difficulties in Vietnam and around the world, there were encouraging results from implementing socio-economic tasks and the State budget in 2011, including tasks specified in the government’s Decision No 02/NQ-CP and Resolution No 11/NQ-CP.
The pace of inflation by the end of the year had slowed down remarkably compared with the beginning of the year. Revenue collection was high and far exceeded the projected target. The budget deficit fell to below the target set by the National Assembly (NA).
Public investment was strictly managed and cut, to focus on selected projects with high levels of efficiency. Exports exceeded targets by as much as three-fold. GDP growth was estimated at 5.9 per cent, which can be regarded as high in the context of a greater focus on curbing inflation.
The agriculture sector recorded sound results and a record-high rice output, ensuring food security and social stability in rural areas and throughout the country and increasing exports, bringing in hard currency. Industrial production increased despite many difficulties.
Social welfare was ensured, many more jobs were created, and the poverty elimination scheme was relatively successful, helping to improve material lives.
Apart from these achievements there were also some weaknesses and shortcomings in the economy that need to be overcome, such as a number of social and economic targets for 2011 not being met. Macro-economic stability remained a problem, and inflation and interest rates remained rather high.
Industrial production and business activities faced a range of difficulties. Due to large inventories, especially at the end of the third quarter and the beginning of the fourth quarter, many businesses incurred major losses and some were dissolved or went bankrupt. Reform of the growth model and the restructure of the economy remained slow.
What should be done to overcome these weaknesses and shortcomings?
I think that these weaknesses and shortcomings stem from both subjective and objective factors, from unstable economic factors and public debt in a number countries around the world. But I think they mainly come from subjective factors: an inefficient growth model and a need for economic restructuring.
In order to improve the situation we should enhance the successes that we have achieved and overcome our weaknesses, especially with specific measures to curb inflation, ensure macro-economic stability and social welfare, so as to achieve sustainable economic development in 2012.
Some analysts have said that for quite a long time Vietnam has been too eager to attract foreign direct investment (FDI) without serious selection criteria. Do you think we should now review the status of FDI attraction in the past and that MPI should exercise stricter control?
I think that, like many things, FDI attraction has both a positive and a negative side. The Prime Minister has instructed the Ministry to conduct a comprehensive review of the status of the implementation of FDI over the last 20 years. The positive side will be improved and negative side overcome.
There was a particular phenomenon relating to FDI attraction in recent years, where quite a few foreign investors did not bring in capital but mobilised it in Vietnam instead. They failed to use this capital effectively, leading to project cancellation and even bankruptcy. There are cases in which foreign investors incurred major losses and accumulated huge debts then left the country, impacting on credit institutions and Vietnam’s investment environment.
In the face of such a situation we have suggested to city and provincial people’s committees that they instruct their planning and investment boards, industrial park management authorities, hi-tech and economic management authorities, and other relevant agencies to review and supervise FDI projects that have obtained loans from Vietnamese commercial banks.
At the same time, violations of the laws or failure to realise projects deserve heavy penalties. Commercial banks should be timely informed about the inability of foreign investors to repay debts, so that they can take measures to retrieve their money. Transfer pricing activities by foreign enterprises must be better controlled and supervised more strictly by relevant agencies.
What is MPI’s orientation for FDI attraction in the coming years, in order to strictly supervise FDI inflows?
Looking at the FDI inflow into the country over the last ten years we can see that in 2000 it started to recover from the negative impact of the financial and currency crisis in Asia and increased in 2005 by 45.1 to 50.8 per cent over 2004.
Total registered capital during the 2001-2005 period was $20.8 billion. From 2006 to 2008 there was a sudden rise of FDI inflows into the country, with total registered capital of $12 billion in 2006, $21.3 billion in 2007 and $71.7 billion in 2008. FDI inflows in 2008 were more than three times higher than in 2007.
In 2009 and 2010, despite the impact of the global financial crisis and economic recession and the post-crisis outcome, registered FDI capital was estimated at $23.1 billion in 2009 and $18.6 billion in 2010.
As I mentioned earlier, besides the achievements in terms of increasing project numbers and registered capital in recent years, some side-effects have also been exposed. The period of “rolling out the red carpet” to attract FDI at any cost has finished.
Future FDI attraction will be focused on projects that bring about investment efficiency and help restructure the economy, improve growth quality and raise the competitive edge of the economy.
To be more specific, Vietnam will focus on attracting FDI projects relating to transport infrastructure, agriculture, education, public health, hi-tech and advanced technologies, and environmentally-friendly and green technologies. Vietnam will not welcome projects with low technology or high energy consumption, or projects that cause environmental and ecological pollution.