Drastically Improving Investment Environment


In recent years, Hanoi has implemented measures to improve its investment and business environment and facilitated the development and competitiveness enhancement of enterprises. To further understand this issue, Vietnam Business Forum had an interview with Mr Nguyen Manh Quyen, Deputy Director of the Department of Planning and Investment of Hanoi. Trang Tran reports.

Hanoi is currently leading the country in attracting FDI. Specifically, it ranks 2nd of 63 in terms of number of projects and 3rd of 63 in terms of registered capital. What do you think of this result and how it will change in the coming years?
After 25 years of attracting foreign investment (from 1987 to 2012), Hanoi has attracted 2,494 projects from 41 countries and territories with a total investment capital of US$ 20,03 billion, in which realized capital was US$ 10,12 billion. Korea is leading in quantity with 665 projects (worth US$ 3,83billion), while Japan is leading in capital with US$ 4.52 billion (477 projects). According to statistics from the Ministry of Planning and Investment, by December 31, 2012, Hanoi had accounted for 16.9 percent of the total projects and 10.07 percent of the total FDI of the country (ranking third after Ho Chi Minh City and Ba Ria – Vung Tau).

Those results are thanks to, firstly, the fact that Hanoi is one of the two major economic centres, as well as the leading economic zone of the North. Each year it contributes 11.2 percent to the country’s total GDP, 8 percent to industrial output and 8.4 percent to national exports. The expansion of administrative boundaries in 2008 created new development when the capital’s area was expanded to 3,200 square kilometers, and with a population of seven million people. Secondly, Hanoi has many advantages including great location in the heart of the Red River Delta, synchronous water transportation, aviation and rail systems, abundant scientific human resources and well-trained workforce in many areas.

In recent years, the city’s authority has implemented several mechanisms and policies to facilitate the development of enterprises such as Socio-economic Development Strategy towards 2030 with the vision to 2050, the Overall Socio-economic Development Plan of Hanoi Capital towards 2020 with a vision to 2030, and the Overall Planning of Hanoi Construction approved by the Prime Minister. By the end of 2012, the city had approved 17 of 18 plans on socio-economic development at district level, 41 of 49 sector plans, 5 zoning plans, etc., which created a basis for the formulation and implementation of investment projects. Capital Law was also passed in December, 2012 and came into effect in 7th January, 2013, continuing to create specific favourable policies for Hanoi.

Besides, Hanoi is seriously considering administrative reform in a radical way. Particularly, 2013 is considered an administrative discipline year, which has shown the great political will of the capital’s authority. Along with financial solutions, brand development, market expansion, to create space for businesses, the city has reviewed all available land, cleared land and created a clean land fund for projects. Hanoi has also developed Strategies to Attract Investment in the period from 2011 to 2015, with the vision to 2020, and listed Investment Promotion Project Portfolio.

However, the investment process also revealed some limitations. Specifically, the legal system is not clear or comprehensive enough, administrative reform has been slow in comparison with requirements, long-term strategies on attracting FDI are still lacking, infrastructure has not improved much, the production chain and service supply is not yet synchronous, and investment promotion has not yet reached high efficiency.
According to forecasts, the demand for social investment capital in Hanoi is approximately VND 3,900 to 4,100 billion (about US$ 180-190 billion), and VND 6,500-7,000 (about US$ 300-320 billion) in the periods 2011-2020 and 2021-2030, respectively. To mobilize this capital, the diversification of capital sources such as promoting the development of social infrastructure, encouraging the attracting of BOT, BTO, BOO, PT, PPP and FDI, is very essential,

Requirements for attracting FDI by Hanoi’s authority are to ensure quality, modern technology, development of high quality human resources and high-skilled labour to create high value-added products. FDI projects also need to strengthen the connection with domestic firms to ensure consistent planning, environmental protection and sustainable development. Hanoi is striving to reach the top 2 localities in FDI attraction and disbursement, with FDI contributing about 15-20 percent to the social investment capital of the city every year. By 2015, projects in the field of high quality service will have exceeded 50 percent of the total registered FDI.

Currently, in order to “rescue” the real estate market, many managers and experts have given different, even opposite, opinions. From the perspective of a planning and investment advisor of the city’s authority, what do you think of this issue?The real estate market in Vietnam is quite new. Although it experienced significant grow, it has fallen into stagnation in the last two to three years. To address this situation, the Prime Minister issued Directive 2196/CT-TTg on 6th December, 2011, directing ministries, sectors and localities to implement a number of measures to strengthen the management of property market. The Directive includes five groups of solutions: conducting research on improving the legal system on finance, tax, and credit; reviewing and synthesizing housing development projects, implementing housing development plans annually, in 5 years and in long term; developing financial and supporting credit mechanism, raising investment capital, dealing with specific problems of the market and of each locality; addressing housing relocation and housing for civil servants.

On the basis of the above solution groups, ministries and localities develop and implement specific appropriate measures. However, some measures are agreed on while many solutions are still under discussion, or even dispute, because of opposite opinions. Typical is the discussion on the use of the VND 30,000 billion loan package from the State Bank under Resolution 02/NQ-CP of the Government on converting commercial housing into resettlement and social houses. Many experts question if housing can be converted from commercial to resettlement and social housing use, are apartments with large area suitable for new users? What is the funding and mechanism to implement this Resolution? Is using State budget to purchase housing appropriate in the context that the State budget is limited in financial resources, or is the budget used to buy housing fund prescribed by Budget Law and Procurement Law? That is just one example to illustrate the difficulty facing policy makers.

From the perspective of an advisor in the field of planning and investment of the city’s People’s Committee, I think that the solutions meeting mixed opinions all have certain limitations and positiveness. Therefore, they should be adjusted in the direction of bringing uniformity within each group and between the groups. Some solutions should be performed immediately to address current problems such as financial solution groups. On the other hand, there should also be long-term solutions to stabilize the market, such as the solutions on mechanisms, policies and administrative procedures. With the efforts of authorities of all levels and the efforts of businesses along with effective solutions, I hope that the issue of supply and demand of real estate projects will gradually ease in the near future and prosper again, to start a new development rhythm.

According to the PCI of 2012, Hanoi ranked 51 of 63 provinces, 15 spots lower than 2011 and the lowest ever. What is your opinion of that result? To maintain the sustainable ranking, what specific measures is the city’s authority implementing?2012 was the year the economy encountered several difficulties and complex movements. As reported by VCCI, the PCI index of the country decreased significantly (from 59.15 points in 2011 to 56.2 points in 2012, the lowest point since the regulations in 2009). Hanoi is also part of this general trend. It was down 15 spots, ranking 51/63. Many indicators ranked low and have not been improved. The city’s People’s Committee has seriously analysed and clarified the existing restrictions and the causes for solutions in the future.

To improve the PCI and create a favourable business environment for companies in 2013 and the following years, in addition to the effective implementation of the programs by Committee Members, Resolution of the City Council and the key programs of the capital of Hanoi, Hanoi will focus on implementing a number of the following key solutions: thoroughly and seriously implementing the tasks and solutions to improve the PCI in 2013 and following years; promoting administrative reform, focusing on solving administrative procedures and offering one-stop service, and strictly implementing Directive 01/CT-UBND of April 1, 2013 of the Chairman of the city’s People’s Committee on Administrative discipline Year 2013; accelerating the review and development of mechanism and policies of the City under set out plans to ensure clearness and consistence with the specific laws and decrees which are newly issued in Hanoi; spreading information, and promoting the transparency of laws, policies, plans, budgets and administrative procedures.

In particular, throughout key tasks of 2013 is the focus on removing difficulties for enterprises, effectively implementing 22/Ctr-UBND action program issued on 29th January, 2013 of the city’s People’s Committee, supporting the market and resolving bad debt.