FDI needed in infrastructure development

From a low starting point, Vietnam’s infrastructure system has been improved significantly. However, quality is still a persistent issue, causing a bottleneck limiting economic development, making it necessary to focus FDI capital in this sector.

According to WEF’s Global Competitiveness Report 2017-2018, Vietnam’s competitiveness currently ranks 55^th out of 137 countries, five steps higher compared to last year and 20 places higher than five years ago. As many as ten out of 12 indicators have been improved.

In the report, Vietnam’s infrastructural development indicator ranks 79^th among 137 countries, which is still considered weak despite improvements in the past many years.

Vietnam has been working to innovate the system for over 30 years and obtained several socio-economic development achievements, but there are sign of slowing growth, causing difficulties to overcome the middle-income trap. High-cost and low-efficiency investment do not attract foreign capital in key large-scale projects, which challenges the countries aims to reach sustainable economic growth.

“The Vietnamese government determined that infrastructure development is an important task and set it among the three breakthroughs in the socio-economic development strategy for the 2011-2020 period,” noted Deputy Minister of Planning and Investment Nguyen Van Hieu at the Workshop on Vietnam-World Economic Forum (WEF) infrastructure development co-operation on November 16, 2017.

They need approximately $132 billion to meet Vietnam’s infrastructural development demand by 2030 (excluding high-speed railways), while the 2016-2020 mid-term state budget allocated VND150 trillion ($6.6 billion) for this sector.

Thereby, attracting non-state and private resources into infrastructure projects is the best choice now, especially in the form of public-private partnership (PPP).

As a result, the Vietnamese government signed a bilateral co-operation agreement with WEF on “Developing a self-reliant Vietnamese economy” in seven sectors of co-operation, including the “Future of long-term investment, infrastructure and development,”  established a Vietnam Infrastructure Working Group (IWG), and a community of leaders, businesses, and scholars for initiative sharing.

This is an opportunity for Vietnam to research and learn other countries’ experiences as well as attract investment capital flows into infrastructure development.

Source: VIR