Checking Effectiveness of Investment Projects

The revocation of investment licences in Vietnam must be based on the laws. Regardless of no matter which source of investment capital, domestic or foreign, licences will be withdrawn. Projects violating the laws or staying idle in 12 consecutive months for no reasonable reason will be rescinded by authorities. According to the Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA), in 2010, Hepza will withdraw investment certificates of 80 domestic and foreign projects in local export processing zones and industrial zones due to their ineffectiveness and inactiveness. In the first six months of 2010, Hepza revoked seven investment certificates of seven projects, including six Vietnamese-led projects.

 

In July, the authority cancelled the validity of eight more projects. According to Hepza, as many as 54 investment projects, including 11 foreign invested ones, are sluggishly being implemented and their investment licences will be retracted if investors fail to speed them up. Besides, other localities also reported a growing number of repealed projects such as 12 projects in Phu Quoc (Kien Giang province), 12 in Ninh Thuan province, 22 in Tay Ninh, 29 in Lam Dong, 51 in Bac Ninh, eight in Long An, Quang Nam, Ba Ria-Vung Tau and others.

 

Mr Le Tri Thanh, Head of Investment Promotion and Business Support Department of Quang Nam province, said Quang Nam has decided to withdraw five real estate projects, including one with a registered capital of US$4.15 billion. Three of five revoked projects are foreign invested, comprising Dragon Beach project invested Tano Capital LLC and Global C & D Inc. (US), Que Viet tourism project invested by Canada and Pegasus beach resort invested by the US. According to Mr Thanh, these projects are in the process of withdrawing investment licences.

 

These projects have been licensed for four years and Quang Nam province has provided considerable supports for administrative procedures, land clearance and land allocation but the process is too slow. As regards the US$4.15 billion Dragon Beach project, the provincial authorities definitely turned down the investor’s request for extension because its financial capacity is too weak.

 

The nearly US$9.8 billion Ca Na steel complex in Ninh Thuan province is now also behind time although the first phase was kicked off in late 2008. According to the Ninh Thuan Department of Industry and Trade, to date, no progress has been made in its construction by the investor, Maju Stabil SDN Company - an affiliate to Lion Group of Malaysia. The province plans to call other capable foreign investors to resume this project.

 

The commonest reason for investment licence withdrawals is financial shortfall or demand miscalculation. Some experts pointed out that many investors wanted to occupy the land to take away opportunities of their rivals.

In order to create more opportunities for investors, in addition to compliance with the law of Vietnam, authorities are willing to consider the extension if investors give reasonable grounds. In principle, the projects violating the laws or staying idle in 12 months or more without giving a good reason, their investment licences will be withdrawn by the State Budget.

 

Indeed, many localities have discussed with investors for find out the reason for the halt. If they actually want projects to continue, provinces will give them the opportunity for extension.

 

At present, many provinces and cities are strengthening inspections in investment projects to siege ineffective or inactive projects. This shows that localities start paying more attention to progress of investment projects instead of only taking care of attraction.

 

In 2009, Bac Ninh province revoked investment certificates of 14 projects, including four FDI projects with total registered capital of VND230 billion. Mr Bui Hoang Mai, Deputy Director of Bac Ninh Industrial Zones Management Board, said: “Four projects registering to invest VND234 billion but they have done nothing but leasing the land. Possibly, one or two years ago, investors are completely capable to cary out their projects but the financial crisis has weakened their capability. Most investors in Bac Ninh voluntarily returned their projects and only a few were forcibly terminated.” Mr Mai said, according to the Decree 108, authorities do not need to check projects worth less than VND15 billion but projects worth from VND15 billion to VND300 billion. “We have checked licensed projects as provided by the laws,” he said, disclaiming authorities’ responsibility for the retreat of investors.

 

The withdrawal of ineffective investment projects is aimed at building up a healthier investment environment. However, to avoid negative impacts on the psychology of foreign investors, authorities need to check each project carefully before and after it is licensed.

 

 

The FDI quality is measured by the suitability of each project with the local, regional and national economic structures. To do so, localities should take initiative in selecting and screening investment projects and investment partners and should not wait for investment size and design of foreign investors. To stop “land occupying”, authorities need to look through land-use purposes and areas needed for each project. Indeed, the level of FDI inspectors and examiners is very important to the success of the purpose.

 

Recently, all revoked FDI projects are reasonable. Many FDI investors had to stop because their parent companies in foreign nations were hit by the global economic crisis and failed to provide credits for their projects on time. In fact, the agency is willing to extend the deadline if investors give reasonable reasons for their lateness. Currently, the Ministry of Planning and Investment is inspecting FDI projects involved in real estate and forest in many provinces.

Authorities need to revoke investment permits if investors do not have projects to continue with. If investors are not very effective when they start their operations, authorities should offer them the opportunity to improve the situation because they have invested in factories and equipment here and their ending will affect local employment. All investors can assure that their projects can immediately operate effectively from the start. As a result, both sides should sit together to have best solutions.

Inactive projects need to be eliminated to make the investment environment healthy. We offer our land fund to potential projects and investors. I think the revocation of investment certificates is an active move, not a negative one. We care about how much foreign investors spend on our country. Registered capital is merely the initial promise.

Kim Phuong