Remove bottlenecks, facilitate FDI flows among Mekong Subregion: experts

Greater awareness of the opportunities and required policy support are key to expanding the scale, quality and speed of foreign investment in the Mekong Subregion, experts say.

They made several observations and recommendations at the 10th Mekong Forum organized in Hanoi on Friday by the Vietnam-Asean Association for Economic Cooperation Development (VASEAN). The theme of the forum was: “Strengthening Development Cooperation, Post Covid-19 Economic Recovery in the Mekong Region.”

The Institute for Southeast Asian Studies said the Greater Mekong Subregion (GMS) was a natural economic zone covering 2.6 million square kilometers with countries connected to each other via the Mekong River and having historical, social and cultural similarities.

Formed under the initiative of the Asian Development Bank (ADB), GMS is a comprehensive cooperation program in the Mekong Subregion to strengthen economic ties between Cambodia, Laos, Myanmar, Thailand, Vietnam, and the two Chinese provinces of Yunnan and Guangxi.

It prioritizes development in transportation, energy, telecommunications, environment, human resource development, tourism, trade, private sector investment and agriculture.

Currently, the scale of GMS cooperation has reached $28 billion with hundreds of investment projects and technical support in many fields, including construction and upgrades of nearly 12,000 kilometers of roads, 700 kilometers railways, and nearly 3,000 kilometers of power transmission lines, the forum heard.

Speaking at the event, Dr. Nguyen Anh Tuan, standing vice chairman of the Vietnam’s Association of Foreign Invested Enterprises (VAFIE), said that the Covid-19 pandemic has exerted a negative impact on global FDI flows, especially into developing countries, including that of the Mekong Subregion.

Vietnam is a country that both receives FDI and invests abroad. Of Vietnam’s outbound investments, Mekong Subregion countries account for a large proportion.

Data from the Ministry of Planning and Investment’s Foreign Investment Agency shows that as of August 2022, Vietnam had invested in four Mekong Subregion countries - Laos, Cambodia, Myanmar and Thailand with 549 projects worth $9.73 billion, accounting for 87% of Vietnam’s capital invested in ASEAN countries.

Vietnam has also attracted investment from Mekong Subregion countries. According to the foreign investment agency, as of September 2022, four Mekong Subregion countries have invested in 707 projects in Vietnam with a total registered capital of $13.23 billion. Of these, Thailand is the largest investor with 668 projects worth $13.1 billion.

In general, internal direct investment among Mekong Sub-region countries was still limited and not commensurate with its potential and expectations.

Main problems

Dr. Tuan, also editor in chief of The Investor, highlighted the difficulties facing the promotion of direct investment among Mekong Subregion countries.

First, the world has been constantly witnessing new and unpredictable developments with serious impacts, especially developing nations including Mekong Subregion.

Second, Mekong Subregion members are mainly FDI recipients with limited capability in terms of capital, technology and overseas investment experience, except for some large corporations in Thailand and Vietnam.

Third, though the investment environment of Mekong Subregion countries has improved, it is still not very favorable. Laws and policies to attract FDI have many shortcomings. There is a lack of specific support policies for investment projects within the subregion. The implementation of the ASEAN Comprehensive Investment Agreement (ACIA) is slow and has not been properly promoted.

These are factors that slow down the speed of FDI flows among ASEAN countries in general and Mekong Sub-region countries in particular.

Fourth, the need to improve the quality of FDI flows of countries requires investors to make great efforts to implement projects in the Mekong Subregion.

For starters, they have to consider the of technology, environmental friendliness, emission reduction, economical use of energy and natural resources associated with circular economy development.

Suggested solutions

In this context, in order to increase the scale and speed of FDI flows within the Mekong Subregion, Dr. Tuan made several recommendations for governments and businesses.

Firstly, Mekong Sub-region countries need to be more aware of the role of FDI in promoting economic cooperation in the subregion. They should continue to improve the investment environment, create favorable conditions and adopt policies to promote economic cooperation, promote and contribute actively and responsibly to the building of a complete ASEAN Community by 2025.

Second, the subregion should make their economies more resilient and able to withstand negative external impacts and maintain macroeconomic stability, control inflation, and overcome supply chain disruptions and shortage of high-quality labor in some countries.

Third, the countries should continue to improve their investment environments, especially the legal framework, with transparent and simplified investment procedures, and train human resources to meet the needs of investors.

Fourth, they should optimally use the support of countries and international organizations in infrastructure development, especially intra-regional transport connections, ensure energy security associated with transition to clean energy, support capacity building for green growth; and apply circular economy and digital economy models.

Fifth, the subregion should strengthen the exchange and update of information on investment attraction policies, investment potential and opportunities in member countries; support small and medium enterprises in accessing information and guide them on investment cooperation in the region.