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FDI flaws blamed on officials’ interference   2010-08-10 - Tien phong

An economist recently agreed with newspapers ringing alarm bells over the high number of “virtual” foreign direct investment (FDI) projects – those registered, but not implemented.

Economist Pham Chi Lan

Pham Chi Lan, a former member of the Prime Ministerial Economic Research Team, in an interview with Tien Phong newspaper, revealed that provincial authorities admitted that they were not cautious enough when verifying registered investment projects and licensing the projects. It was because many of the projects were “introduced” by the “central level”.


Tien Phong: Local newspapers recently have published many reports about “virtual” FDI projects. Do reports show problems in FDI attraction?


Pham Chi Lan: Formosa is not a powerful group in the steel field in Taiwan. However, Vietnam still welcomed its project with registered capital of up to $16 billion. I myself was surprised by the information. If we had checked with Taiwanese agencies, we will have known the investor’s real capability.


Nowadays, before signing contracts with partners, many enterprises do try to check partners by hiring consultants and banks. Overseas agencies such as business transaction divisions under Vietnamese embassies in foreign countries can help. Vietnamese companies can avoid risks by spending just some hundreds of dollars before signing multi-million dollar contracts.


Government agencies at the central level, when decentralizing authorities in licensing investment projects, need to assist them when necessary, because flawed projects will bring big consequences.


As for investment projects that have been slow in implementation, but have investors who still want to develop them, we need to be determined in forcing them to speed up implementation.


Foreign investors must also obey regulations on depositing money. If they cannot follow current laws, they should not be allowed to develop projects in Vietnam. We should also keep strict control over capital that foreign investors bring to Vietnam. The figures released by the Ministry of Planning and Investment showed that foreign investors only have 28 percent of capital when they commit to implement investment projects. This is really a too small.


TP: In reality, some Vietnamese officials played an active role in introducing foreign investment projects to localities. These include the “bogus” projects like the $30 billion by Eminence Group introduced to Thanh Hoa province in 2007. . .


Lan: To date, the licensing of “virtual projects” has been blamed on the limited capabilities of provincial authorities, because they cannot verify the projects. Meanwhile, these officials claim it is not their fault, because most big FDI projects have been introduced by the central level.


In many cases, projects were carried out due to pressure from some “VIPs”. When authorities consulted with ministries, the ministries either did not give answers, or gave vague answers, which actually meant ‘go ahead’. Therefore, when problems are discovered, no one takes responsibility.


TP: What would you say about the fact that government officials “introduce” investment projects to local authorities?


Lan: I think that it is not good when government officials introduce investment projects. Officials must not be the brokers.


We need to reconsider projects in whcih VIP officials force authorities to license them. What is behind the “enthusiasm” of the officials?


TP: Experts say that many problems still exist in Vietnam’s ability to attract FDI. Provincial authorities have been trying to license as many projects as possible, without being selective. What would you say about that?


Lan: Even developed countries like the US, or EU countries and Japan, are still attracting FDI. The way they attract FDI is quite different from ours. The governments do not come forward to attract FDI, they just create more favourable conditions for doing business and welcome investors who obey the laws. All investment projects are examined very carefully.


What we need in attracting FDI are technology, management skills and market connection that allow Vietnam to join the global market. Meanwhile, technologies brought to Vietnam, in many cases, are not modern technologies.


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