Speaking at a conference reviewing foreign direct investment (FDI) in the city over the last 20 years, Alain Cany, chairman of the European Chamber of Commerce (EuroCham) in Vietnam, said immediate changes would be necessary on the Vietnamese side.

He said improving infrastructure and administrative reforms would be the key factors in attracting more FDI.

FDI began to enter Vietnam in 1988 after the government initiated what are known as the doi moi (reform) economic policies in 1986 and issued the Foreign Investment Law a year later.

As of December 31, 2008, foreign investors had pledged more than US$25.6 billion in 3,100 Ho Chi Minh City projects and had disbursed about $10.1 billion of those funds, according to the local Department of Planning and Investment (DPI). The country attracted nearly $159.8 billion in pledged FDI in the same period.

However, Cany said the city has not done enough.

He said Hanoi had far outpaced Ho Chi Minh City in terms of new infrastructure development.

He also said prolonged corruption and red tape could begin to wear on investor confidence.

Though the city government had done well in improving its paperwork procedures, Cany said, too many bureaucrats were slowing down progress with corruption and personal interests.

The municipal Department of Planning and Investment admitted in a report at the conference that agencies in charge of granting investment licenses can rarely do so within 30-45 working days as required by regulations.

Many related regulations overlapped one another, hindering the license-granting process and the implementation of FDI projects in the city, the report said.

Jack Howell, CEO of Prudential Vietnam, said better infrastructure and administrative systems would help Vietnam, and HCMC in particular, reach the next level of development.

He said he liked the city’s recent idea of identifying the largest 50 FDI projects that have yet to disburse funds as a first step towards tackling the issue of slow investment flows.

According to the Ministry of Planning and Investment, about 12,000 infrastructure projects are planned to be carried out this year across the nation.

The government said part of its planned VND143 trillion ($8 billion) stimulus package would be spent on infrastructure projects.

Vietnam is expected to lure some $20 billion worth of FDI this year, while $8 billion worth of FDI is expected to be disbursed in the same period. In 2010, disbursed FDI is expected to increase to $9 billion.

Speaking at the conference, Deputy Prime Minister Hoang Trung Hai urged the city’s government to improve the management of FDI implementation.

“The city has attracted investments from more than 100 global leading firms to date, but the issue is whether or not we’ve been able to learn from them,” he said.

“If our economic management skills are weak, we won’t be able to strengthen the competitive capacity of our economy,” he said.

Hai called for close coordination between FDI-related government agencies to better attract foreign investors.

Investment breakdown

DPI Director Thai Van Re said the city’s service sector attracted $11.8 billion in FDI, or nearly 71 percent of the city’s total, over the past 20 years.

Re said, however, that foreign investors had apparently shifted their focus this year by mostly investing in the industrial and construction sectors.

Projects worth under $1 million have accounted for about 60 percent of FDI over the last 20years, while 30 percent was made up of projects worth up to $10-million each and projects over $10 million accounted for nearly 10 percent, he said.

Malaysia has topped the list of foreign investors with its Berjaya international university city project, worth $3.5 billion. Singapore and Hong Kong are the next largest foreign investors in Vietnam.

Le Hoang Quan, chairman of the HCMC People’s Committee, said the FDI flow into the city “has played a key role in transforming its economic structure in a positive way.”

FDI made up 18.3 percent of the city’s gross domestic product in 2007, according to DPI.

The total labor force engaged in HCMC FDI projects has amounted to more than 235,000 to date.