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4 . C O N C L U S I O NThe attraction and harnessing of FDI inflows by Vietnam has been a leadingelement of the economic transition process in Vietnam, and has played an important rolein the countrys drive for economic development and poverty alleviation.

06 1354786042000207344.fm Page 217 Friday, May 7, 2004 9:36 AMDownloaded By: [La Trobe University Library] At: 02:29 6 May 2011N I C K J . F RE E M A N218Beyond the direct inputs and returns that foreign-invested enterprises have generated,such as new jobs, the technology, skills and expertise they import, theforeign exchange and the tax revenues they generate are all contributing to thedevelopment of the Vietnamese national economy. Looking ahead, and despite thegrowth of a more vibrant domestic private sector, the FDI sector is expected tocontinue playing an important role in the economic development of Vietnam. Theextent of this role will depend in part on the provision of a host country environment that

is attractive to increasingly mobile foreign capital.Some of the kinds of policy reforms proposed in the second part of this article,intended to assist Vietnam in continuing to attract foreign investment inflows, aregradually occurring. Various economic reform and business liberalizationcommitments that Vietnam has made such as those under the ASEAN Investment Area(primarily relating to national treatment issues), conditions agreedunder the current IMF loan programme, and the recent bilateral trade deal withthe United States will also help bring about positive changes to the host countrybusiness environment that will be welcomed by both foreign and local privateinvestors alike. So, to some extent at least, the sort of FDI promotion policyagenda that is proposed above is already picking up some degree of momentum.

However, improved coordination and enactment of these various initiatives wouldbe expected to improve their positive impact on FDI inflows.This author also believes there is a role for creativity in the policy mix used toattract FDI inflows. In general, the Southeast Asian countries have tended toadopt a broadly uniform approach to their FDI strategies, despite the fact thatthey are often directly competing for foreign investment. While it would undoubtedly besensible for Vietnam to broadly follow the pertinent aspects of bestpractice adopted by a country like Singapore, which has a strong track record inthe field of FDI attraction and promotion, there is also merit in seeking to identifynew and innovative ways of encouraging foreign investment that are tailored toleverage the specific strengths of Vietnam. (Besides, what may have worked forMalaysia or Thailand in attracting FDI inflows during the 1980s, may not necessarilywork for Vietnam in the new millennium.) Policies that excite and stimulatethe creative and entrepreneurial instincts of foreign investors should be rewardedwith greater FDI inflows, despite the presence of various host country obstacles.Vietnam might therefore be well-advised to consider re-designing elements of itscurrent strategy towards foreign investment. Indeed, this may be necessary ifVietnam is to achieve the US$1216 billion target it has set itself for foreignprivate capital inflows between 2001 and 2005.

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There is much that other developing and transition economies can learn fromVietnams experience in attracting foreign investment since the late 1980s; fromthe need to carefully manage foreign investor expectations and sentiment (both onthe upside and the downside), to providing the kind of host country businessenvironment that is conducive to the new kinds of foreign-invested activity that

have been emerging. This in turn necessitates that policy-makers remain abreastof developments in the international business arena, and cognizant of whatcompanies are seeking from host countries. Ironically, in arguably seeking to meetthe needs of foreign investors more than the domestic private sector (at least priorto 2000), Vietnam may have inadvertently exacerbated the decline in its FDIinflows after 1996. As foreign investment activity has mutated away from conventionalgreenfield projects, towards more complex (equity- and non-equity-based)linkages and production networks with domestic firms, the importance of havinga strong local corporate sector has risen. Having now attracted a substantialcommunity of foreign investors, their long-term presence and development inVietnam will also be dependent in part on establishing sufficiently robust linkages

with domestic suppliers. Vietnams experience would suggest that developing andtransitional economies might be well advised to integrate their FDI strategieswithin a wider policy approach that seeks to create a conducive environment forthe development of both domestic and foreign-invested companies alike