Vietnam plans to strengthen post-licensing control to heighten FDI quality

VietNamNet Bridge – Vietnam believes that it’s now the right time to shift from the pre-licensing to post-licensing inspection over foreign invested projects to improve the foreign direct investment (FDI) quality.

Vietnam, FDI, decentralization mechanism, foreign investors, capital

The draft of the government resolution on improving the effectiveness in attracting, using and managing FDI, shows a lot of measures to tighten the control over the FDI project implementation after the licensing. The draft resolution says that local authorities and watchdog agencies need to keep a close watch over the implementation of the projects to timely help investors settle their arising problems.

There’s a noteworthy point in the draft resolution that competent agencies will have the right to stop the investments and revoke investment licenses of the projects which do not fit the development strategies of the industries or the localities, or the projects whose investors are too slow in the implementation.

Phan Huu Thang, Director of the Foreign Investment Research Center, an arm of the Hanoi Economics University, while applauding the viewpoint, said that it’s a necessary work, which allows to ensure the committed disbursement speed and help settle arising problems timely.

Dr. Nguyen Mai told Dau tu newspaper that it’s now the right time for Vietnam to shift from the pre-licensing to post-licensing control mechanism. If Vietnam does not follow that way, it would never be able to improve the quality of the foreign investment.

Analysts also commented that over the last 25 years, since the day Vietnam opened its doors to FDI, it has been concentrating on considering the registered projects thoroughly before licensing. Meanwhile, local authorities have not been paying much attention to the implementation of the projects. This explains why they don’t have updated information about the disbursement rate or the difficulties of the investors.

In many cases, foreign investors escaped Vietnam, leaving big unpaid debts. However, the competent agencies had no information about the enterprises until the day the investors left Vietnam. Especially, they knew nothing about the bad business performance of the enterprises which occurred many years before the day the investors escaped.

Over the last 25 years, FDI has been bringing to Vietnam not only capital and technology, but also bringing environment pollution and tricks, such as the transfer pricing. This has been blamed on the Vietnam’s unreasonable FDI management mechanism: it has been gathering on the pre-licensing control, while making light of post-licensing management, while the latter is the most important work.

“If we had kept tight control in the post-licensing period, the Vedan case would have occurred,” said Mai.

Vedan, a seasoning powder manufacturer, was found as causing the serious environment pollution when discharging its waste water directly to the environment without any treatment.

The problem, according to Mai, was that the competent agencies only considered the report on the possible impacts on the environment submitted by the investors, while they did not keep a close watch over the implementation of the project after the licensing.

“Let the investors build their factories and put them into operation. We will supervise their operation to be sure that they don’t break the commitments. If they do, we will ask them to halt operation or shut down,” Mai said.

“Investors would not dare to make violations to see their factories shut down, because by that time, they will have spent big money on the projects already,” he continued.

Tran Thuy

Vietnam, FDI, decentralization mechanism, foreign investors, capital