FDI attraction and use policies should be upgraded to meet targets in green and sustainable growth and to link the supply chains of Vietnamese enterprises with multinational groups in the country, according to the Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE) Nguyen Mai.

The impact of the Russia - Ukraine conflict has disrupted many supply chains, resulting in a global crisis in food and energy due to rising prices and subsequent inflation.

“This poses a high risk and lowers trust in business and investment, affecting the recovery of global FDI in the short and mid-term,” he said at the release of an annual report on foreign investment in Vietnam on March 10.

He added that policy improvements are necessary in the context of regional countries such as India and Indonesia issuing attractive policies to entice leading global multinational groups to invest in projects in green growth, technology, renewable energy, human resources training, healthcare, and pandemic response, to make use of their advantages in population, skilled workforce, and low labor costs.

However, one problem facing Vietnam is that small and medium-sized enterprises (SMEs) lack the capacity to change their production and business models under a circular economy and digital transformation. Few businesses operate in support industries and effectively connect with foreign firms. The majority of Vietnamese enterprises join global supply chain at steps with low added value, according to Mr. Mai.

In order to promote green growth and the circular economy, he believes innovation plays an important role in changing outdated institutions.

Ministries and sectors need to review existing regulations to amend and supplement content to perfect institutions, laws, and policies, he said.

From now to the end of 2025, the change of the traditional model from industrial parks to eco-industrial parks must be completed with support from local authorities, he added. Cities and provinces that are developing plans to build more industrial parks should follow the model of eco-industrial parks and must meet standards before submitting these to the government for consideration.

“In order to attract more multi-national groups, the government should issue new regulations on preferential policies and investment procedures,” Mr. Mai said. “Preferential investment policies need to be amended and supplemented to adapt to new FDI orientations and competition in the region.”

Successful models of cooperation between foreign groups with domestic enterprises such as Samsung should be copied in other localities to help Vietnamese businesses, especially SMEs, effectively cooperative with multinational groups in supply chains, he added.

Vietnam attracted over $27.7 billion in FDI last year, according to the Ministry of Planning and Investment.

VnEconomy