The Ministry of Planning and Investment (MPI) is drafting a legal document which aims to strengthen the state management over foreign invested enterprises (FIEs).
Under the draft circular, MPI would be given more power to strengthen the inspection over the compliance of FIEs with the legal regulations on investment licensing. Besides, the ministry would also supervise the implementation of foreign invested projects operational in the Vietnamese territory.
MPI’s minister Bui Quang Vinh, the head of the compilation committee, said the main purpose of the new legal document is to ensure the enforcement of legal regulations on FDI and FIE management. Meanwhile, the supervision over the FDI projects would also help discover unreasonable things in order to make timely amendments in policies.
Vinh said that the ministry would undertake the monitoring over the project implementation by sending inspection groups to the sites or requesting reports from FIEs.
The move by MPI, according to economists, aims to regain the power to supervise the investment, which the ministry gave to local authorities since the day the decentralisation mechanism was applied. The Decree No. 108 released in 2006 gave the power of investment management to provincial authorities.
Though the decentralisation mechanism has been applauded by analysts, it has shown a lot of problems. It has turned the Foreign Investment Agency (FIA) under MPI into the agency which calculates FDI capital instead of a state management agency.
However, calculating FDI capital and projects also seems to be a hard work for the agency. A report by the National Assembly’s Economics Committee has shown the big gaps in the statistics released by different management agencies.
The report has pointed out that in July 2008, the gap between the figure released by FIA and the local authorities in the central region reached 3.8 billion dollars. Especially, even the multi billion dollar projects were also missed out.
FIA reported that the total FDI capital in December 2008 was 64 billion dollars, or 7 billion dollars lower than the actual figure.
FIA has found out that a lot of projects were licensed by local authorities, but they were not reported by the local authorities to MPI.
The Ba Ria – Vung Tau province, for example, which has big advantages in tourism development, licensed 18 steel production projects, or 6-7 projects higher than the ceiling level set up by the Ministry of Industry and Trade for the steel industry.
In related news, MPI has released the dispatch No. 3511 in late May, requesting FIEs to provide information about their borrowing.
In late 2011, FIA once requested FIEs to provide detailed information about their borrowing, explaining that it was necessary to tighten the control over the borrowing by FIEs, after some FIEs, which borrowed money from the banks in Vietnam, did not pay debts and ran away, thus badly affecting the investment environment in Vietnam.
Analysts have said that if FIEs had strictly fulfilled the request of FIA in 2011, MPI would have had sufficient database about FIEs’ borrowing, and that no need to issue another legal document with similar request in late May 2012.
FIA has also been assigned to carry out the project on analysing the FDI capital structure in order to make reasonable FDI policies. The agency would conduct a survey on FIEs in 14 provinces in Vietnam.
The State Bank of Vietnam is also compiling the plan to improve the management over the FDI capital flow to Vietnam.