Oct 16, 2012

Vietnam - Micro projects given warning

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Very small foreign-invested projects may be fenced off as the government seeks to improve the quality of foreign investment.

According to the Ministry of Planning and Investment (MPI), a large number of foreign direct investment (FDI) projects capitalised at less than $100,000 have been licenced in Vietnam in recent years. In the first three quarters of this year alone, 145 projects of such sizes were registered, making up 18.7 per cent of the total FDI projects registered in the period.

At a workshop held last week in Hanoi, MPI Deputy Minister Dao Quang Thu said several local authorities had expressed their concerns over the efficiency of very small FDI projects and proposed new regulations on minimum registered capital.

Danang city has recently proposed that the MPI increase the scale of registered capital for FDI projects with the aim of raising the quality of investment capital.

Danang People’s Committee Vice Chairman Phung Tan Viet described how some foreign investors found ways to stay in Vietnam by setting up very small projects while seeking other employment.
They dissolved their businesses after landing a new job, he said.

“FDI projects with capital of under $100,000 account for 50 per cent of Danang’s total number of FDI projects. There are even projects capitalised at only $5,000-7,000, which are inefficient,” said Kieu Van Tam, head of Danang Department of Planning and Investment’s Foreign Relations Division.

According to Tam, FDI projects capitalised at more than $100,000 would be efficient. Nguyen Van Tu, former vice director of Hanoi Department of Planning and Investment, said projects with unusually small capital and vague business purposes raised doubts about the investors’ true intentions.
But Tu suggested that a unique threshold should not be applied to all sectors. Instead, he said different minimum capital requirements should be put in place.

The MPI is working on regulations on minimum capital requirements on FDI projects to improve foreign investment quality.

Kieu Linh | vir.com.vn

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