New development direction

The 13th National Party Congress determined the goal that by 2030, Vietnam will become a high-middle-income country with modern industry, and by 2045, it will become a developed country with high income. Elements emphasized in the 2021-2030 economic development strategy include technology - innovation, sustainability - environment, integration and autonomy. These elements are shown through the frequency of their appearances in the document, specifically, technology appears 113 times, environment 60 times, innovation 38 times, integration 30 times, sustainability 27 times, and autonomy 16 times.

Integration and autonomy are emphasized in the development orientation, but the important issue is how to combine these two factors towards Vietnam’s development. Recently, Vietnam has taken advantage of opportunities thanks to its integration quite well, demonstrated through the development of international trade, exports, and the large contribution of the foreign-invested sector, especially foreign direct investment. To become a high-income country by 2045, Vietnam needs to try hard to escape the “middle-income trap”. Accordingly, Vietnam needs to promote internal resources for the development of domestic enterprises, while still making good use of integration, especially foreign direct investment capital.

Awareness of the importance of foreign-invested sectors

The foreign-invested economic sector is an important driving force in some key industries. There are three reasons why it is necessary to emphasize the importance of foreign direct investment.

Learn from the countries that succeed in attracting direct investment, receiving technology transfer, and expanding financial capital flows from abroad. Vietnam's development path is that of a “latecomer” country, so it needs to learn from newly industrialized countries as well as the successful lessons of some transition economies, including Poland.

Develop domestic businesses concerning MNEs, based on supporting industries and integrating with global value chains.

China's new strategy and the global investment trend can open up many opportunities for Vietnam to attract high-quality investment flows.

Management implications

Define the orientation and goals of attracting and developing the foreign-invested sector, especially defining what “high quality foreign direct investment” is. The development strategy for the foreign-invested sector should always be included in the overall development roadmap of the country. To become a modern, high-income industrial country by 2045, Vietnam needs a strategy and action plans to learn international experience and continue to innovate itself.

When defining technology - innovation, sustainability - environment for development, it is also necessary to identify orientations for key industries consistent with development trends and especially based on Vietnam's comparative advantages. On that basis, Vietnam develops strategies and policies to attract foreign investment into identified key industries. Resolution No. 50-NQ/TW dated August 20, 2019 of the Politburo set out orientations to perfect institutions and policies, and improve the quality and efficiency of foreign investment until 2030. However, to effectively implement Resolution 50, further studies are needed to concretize the implementation of the proposed directions and viewpoints.

The foreign-invested sector should always be placed in the overall economy when developing strategies and policies. Specifically, strategies and policies need to be assessed in the relationship with the domestic economic sector, facilitate the attraction of foreign capital, and create an equal environment with the domestic economic sector.

It is necessary to review and research Vietnam's foreign direct investment related attraction policies, especially preferential policies, on that basis to eliminate policies that are no longer appropriate or cause inequality between the domestic sector and the foreign- invested sector. There needs to be a specific plan to develop supporting industries and cooperate with countries that are leading value chains. Poland is a very successful country that deeply participates in value chains led by Germany. For Vietnam, in addition to participating in the value chains led by Japan and Korea, it is necessary to participate in new value chains led by the EU thanks to the advantages of the EVFTA.

Policies should support the development of businesses, most imporatnly they should faciliate institutional reform and improve the investment environment. Currently, the quality of institutions in Vietnam is still evaluated as low and is a bottleneck in attracting high-quality foreign investment into Vietnam, while the quality of institutions and the business environment are key factors affecting the investment decisions of businesses. The government needs to establish a sustainable and predictable legal framework. This is a very important factor for businesses and foreign investors to build trust. Key areas: (i) Assurance of property rights; (ii) Business environment reforms; (iii) Amendments to investment, land, construction, resources, and environmental regulations; and (iv) Enhancement of the effectiveness and efficiency of policy enforcement.