Mon. Nov 28th, 2022

VietNamNet Bridge – The picture of foreign direct investment (FDI) in 2012 exhibits two distinct bright and dark segments. While the bright color should be further highlighted, the dark one needs to be removed for a better investment environment.

Highlight of Japanese investment

Although the total FDI inflow into Vietnam declined sharply last year, the capital source from Japanese investors significantly rose. Japan was the largest investor in Vietnam in 2012 with total fresh and additional capital of US$5.13 billion, accounting for 39.5% of the total FDI commitments.

Japanese investors are now eyeing Southeast Asia and Vietnam in particular is considered a potential destination, said the Japan External Trade Organization (JETRO) in Vietnam. In fact, Japanese firms have been shifting their production overseas after their country was badly hit by the tsunami and earthquake in 2011.

Analysts said the tense relationship between Japan and China at present could lead to an investment shift from China to Vietnam.

Japanese investors said they chose Vietnam because of lower labor costs than China’s, the potential in the local market, labor skills and a foundation for export to third-world countries.

In 2012, Japanese investors continued to expand their factories and actively join merger and acquisition (MD) deals with local firms to further penetrate the domestic market. They promised to boost investment in Vietnam in the coming time, focusing on the items for domestic consumption and export to Asian countries.

Handsome additional capital

According to the Ministry of Planning and Investment, the operational foreign-invested enterprises (FIEs) in Vietnam greatly raised their capital and increased disbursement last year. An additional US$5.15 billion was poured into 435 ongoing projects, up 58.5% in capital and 7.4% in project number over the preceding year.

This indicates foreign investors were still confident in the local investment environment as well as the outlook for the future. Experts said the capital increase of the operating FIEs proved that they were performing well in Vietnam and thus it would help lure more future foreign investors into the country.

FIEs operating in export-processing and production for domestic consumption, especially those active in the fields of electronics, telecommunications, mechanical engineering and consumer goods, added considerable funds.

With a population of nearly 90 million, Vietnam is seen as a promising potential market for foreign investors.

In the past, Japanese enterprises mainly invested in industrial production, processing and assembly for export to make use of the abundant and low-cost workforce. In the last two years, they have made their presence felt in all sectors.

FDI disbursement also went well last year. Some US$10.46 billion was disbursed, down 4.9% year-on-year, but it is described as a good result in the current context.

Axe falls on foot-dragging projects

In 2012, localities got tougher on slow-moving projects. For example, in the final quarter of the year, Binh Dinh cancelled multiple foot-dragging projects in the province.

In addition, the authority of Nhon Hoi Economic Zone in Binh Dinh revoked investment certificates of a number of projects in the economic zone and industrial parks.

Huynh Thi Thanh Thuy, deputy director of the provincial Department of Planning and Investment, said Binh Dinh would further inspect the province-based projects, especially in the tourism and industrial production fields.

This move is to eliminate incompetent investors and those making dispersed investment. It will create chances for other investors to find good projects and locations and settle the public displeasure at delayed projects and unviable planning schemes, said Thuy.

Meanwhile, according to the planning and investment department of Ba Ria-Vung Tau, the province last year withdrew licenses from 40 projects, including 16 FDI deals with total pledged capital of nearly US$90 million.

Localities used to focus on the number of projects and registered capital in the past, but last year they paid attention to capital disbursement of the already licensed projects with a determination to get rid of slow-moving, inefficient and unfeasible projects. Slow progress pushes up costs, impairs project efficiency and badly affects the economy.

Runaway investors

The number of FIEs whose owners have taken flight has been growing over the years, but it markedly surged last year, causing tax revenue losses and leading to consequences for their employees and partners.

Le Viet Dung, deputy director of the planning department of Binh Duong, said a number of foreign investors from Taiwan, South Korea and China had fled for reasons other than economic woes.

Most owner-absent projects have registered capital of less than US$1 million. They rent workshops and mainly operate on loans.

When the owners take flight, the assets left behind are too small compared to debts. For example, a fleeing FIE owner leaves behind assets worth only VND300 million, while debts to employees reach VND900 million and other debts amount to VND12 billion, Dung said.

There might be fraud related to such runaways, he stressed. “Runaways were plotted beforehand. In many cases, FIE owners even sold machines to have an additional sum before taking flight,” he said.

Owner-absent FIEs share a common theme in that their owners have fled to their home countries without going through dissolution procedures and leaving a massive debt to banks, tax agencies, employees and local partners.

However, according to the local authorities, it is difficult to delete the names of such enterprises and revoke their investment certificates due to the lack of legal corridor and sanctions. As a result, land resource is being wasted and IP infrastructure developers are suffering economic damages.

Source: SGT

By vivian