Investors forced to walk the talk

Decentralisation is partly responsible for the boom in redundant golf courses

Foreign investors will increasingly be in a position to make sure their actions speak louder than their words.

The proposed tightening of construction timeline commitment regulations is an important part of a new decree, drafted by Ministry of Planning and Investment (MPI), to replace the current governmental Decree 108/2006/ND-CP guiding the implementation of the Investment Law. The draft decree is expected to take effect before the end  of 2010.

According the MPI’s Legislation Department, the decentralisation policy introduced in line with the Investment Law, which gave power to provincial authorities in foreign direct investment (FDI) management, will be maintained. But, the draft decree will specify foreign investors’ responsibilities for implementing their commitments, including the processes of fund mobilisation and construction.

Since the full decentralisation policy took effect four years ago, FDI registered in Vietnam has increased rapidly. In 2006, Vietnam licenced more than 800 FDI projects with the total registered investment capital of $12 billion. The registered FDI fund in 2007 was $21 billion and $71 billion in 2008. Amid the global economic recession in 2009, foreign investors registered to invest $21.48 billion in the country.

However, many foreign investors have failed to meet their commitments, such as the $9.8 billion Ca Na steel making facility backed by Malaysia’s Lion Group and local Vinashin in Ninh Thuan province and the $3 billion Guang Lian Steel project in the Dung Quat Economic Zone.

Nguyen Mai, chairman of Vietnam Association of Foreign Invested Enterprises, said the decentralisation policy had actively contributed to booming FDI projects in Vietnam.

But he said it was also a reason for poor quality FDI projects because provincial authorities, with the full power in licencing projects, “don’t have enough ability to appraise and supervise projects”.

Provincial authorities’ weaknesses are also considered why there are too many steel, cement and golf course projects in Vietnam, breaking the government’s development master plans.

The MPI’s Legislation Department said the new decree would appraise all FDI projects to ensure that they were in step to development master plans before licencing. Furthermore, the new decree will also require foreign investors to regularly report the development of their projects to relevant authorities.