Quality the FDI buzzword

CA - Future foreign direct investment is to be held up to greater scrutiny to stamp-out long-delayed and environment polluting projects.

Do Nhat Hoang, director of the Ministry of Planning and Investment’s (MPI) Foreign Investment Agency (FIA), said the MPI had recently asked provincial authorities to tighten the supervision of foreign direct investment (FDI) projects’ implementation.

Recent environmental pollution at FDI companies and delays to projects, especially property projects, indicate that we need pay more supervision to them,” said Hoang. He said state authorities, which are in charge of licencing FDI projects, would also more carefully appraise investment proposals.

While Vietnam is emerging as one of the most global attractive investment destinations, FDI quality concerns have emerged. According to the FIA, about 9,000 foreign-invested projects have been registered in Vietnam with total investment capital of around $147 billion.

However, disbursed FDI is modest compared to investors’ commitments. So far, foreign investors have disbursed only $47 billion, accounting for one-third of registered capital, said Hoang.

Many large projects have been plagued by delays and licences have been revoked for giant projects such as the STX shipbuilding venture in Khanh Hoa province. Others such as a $10 billion steel complex in Ninh Thuan province and a $4.15 billion tourism complex in Quang Nam province are on the edge of having licences revoked as there’s no progress on these projects.

The recent environment pollution discovered at the Huyndai Vinashin shipyard, Tung Kuang and Vedan has also raised concerns.

Though all foreign investors must prove their financial capacity and environment impact assessments of projects before gaining investment certificates, Hoang said supervision and management of FDI projects during their operation were being relaxed.

“FDI quality is now an worrying issue in the country. If the government does not have measures to ensure quality, we cannot meet FDI targets,” said Nguyen Mai, chairman of the Vietnam Association of Foreign-Invested Enterprises.

According to a FIA report, foreign-invested companies had only contributed $8.6 billion to the state budget during 2001-2008. “Most FDI projects in Vietnam are granted tax incentives, so their contributions to the state budget are not high,” said Hoang, adding that the MPI could remove FDI tax incentives in several sectors like mining.

Matthias Duhn, director of EuroCham in Hanoi, said Vietnam already had all its essential regulations to manage FDI projects. “I see Vietnam’s legal framework on managing investment is very good. The problem is the implementation of regulations, especially at provincial authorities,” he said.

Duhn believed Vietnam could attract more quality FDI projects by improving infrastructure and human resources, adding that the government should focus on luring manufacturing and hi-tech projects instead of speculative property ones.

Between January and April saw Vietnam’s newly registered and expanded FDI capital reach $5.92 billion, including $5.59 billion coming from 263 new FDI projects.