Despite bringing about positive effects in attracting foreign direct
investment (FDI), decentralisation leaves corollaries. In order to secure the
national interest in calling for more quality FDI, it’s high time to improve
this mechanism.
After participating in an
inspection tour to check the management and implementation of projects in
tourism, real estate and resorts in several cities and provinces nationwide,
Tran Hong Ky, Chief Inspector of the Ministry of Planning and Investment (MPI)
frankly commented: “State management on investment, especially FDI in these
sectors has been loosen since the decentralisation started.”
Of course, it is impossible to
give one answer for all fields. However, it can be sure that Ky’s comment is
not unilateral. Because, though it is undeniable that the decentralisation
policy has a positive impact on the initiative of local governments in cities
and provinces in investment promotion activities, improving the investment
climate, reducing troublesome as well as saving time and costs for investors,
the fact is, a lot of shortcomings have arisen during the implementation of
this policy.
A success in Vietnam’s FDI
attraction that has been proved through a quarter of a century is that as of
October 20, 2012, Vietnam attracted over $208.1 billion of FDI, with
significant contributions of decentralisation policy.
According to a report in the
provincial competitiveness index in 2011 conducted by the Vietnam Chamber of
Commerce and Industry (VCCI), while in 2009, FDI enterprises had to wait for
two months to enter the market, the duration was reduced to 43 days in 2011.
The licence granting time was also shortened from 60.9 days to 49.5 days, and
business registration process only took 20.8 days instead of 48 days.
Obviously, this is a very positive move.
However, with decentralised
power, many localities have become quite ‘easy-going’ in licencing new FDI
projects, especially large-scale ones which not only greatly affect the local
socio-economy, but also put impact on the entire national or regional economy,
said Do Nhat Hoang, director of the MPI’s Foreign Investment Agency.
MPI statistics show that only
from 2007 to date, 24 FDI projects having the registered investment capital of
more than $1 billion each were licenced, with the total registered capital of
$70.8 billion, a far difference from the previous 20 years’ period when there
were only two licenced FDI projects having the registered investment capital of
over $1 billion each.
Until now, many of the 24
licenced projects have burnt into the air with their investment certificates
revoked, such as the $9.8 billion Ca Na Steel Complex in south central Ninh
Thuan province, or Dragon Beach, Nam Phu Yen Creative City and Wonderful World
Park in southern Ba Ria -Vung Tau province.
It was said that the
decentralisation policy in Vietnam had created too many “conductors” for
managing FDI projects across the country. Therefore, due to the “tenure”
thoughts of those conductors, cities and provinces have joined a race to
attract FDI at all costs, breaking the development planning strategies of
regions and industries.
Not to mention, the issuance of
investment certificates was still regardless of quality and effectiveness of
the proposed projects. Project verification remained troublesome. What’s worse,
inspection and supervision activities were not paid enough attention, leading
to the situation that many projects were licenced but not implemented on
schedule. The case of a series of large-scale cement, iron and steel
FDI projects which were licenced by cities and provinces, inappropriate with
the development planning of industries and regions can be considered as the
prime example.
Which way decentralisation should follow?
Existing shortcomings from the
decentralisation policy are increasingly visible. If adjustment measures are
not applied soon, or the state management and supervision is not tightened,
negative impacts on the national socio-economic development will become
tremendous. Thus, many opinions say that the decentralisation mechanism should
be reviewed in order to optimise the effectiveness of this policy.
If the decentralisation mechanism
is affirmed to be correct and necessary, ‘shrinking’ of this policy should not
be mentioned. Moreover, Prof. Nguyen Mai, former deputy chairman of the former
State Committee for Cooperation and Investment, now the MPI, frankly said that
it was difficult to make a lot of changes in the implementation of the
decentralisation mechanism, as psychologically, local leaders just wanted to
extend the power of decentralisation, not to ‘give it back’.
However, according to Mai, to
ensure the national interest in attracting FDI, it is a must to conduct
specific surveys, with an objective and scientific attitude, on results and
implementation of the decentralisation policy to local governments in cities and
provinces from 2006, in order to make proper adjustments, promoting the
creativity of localities as well as ensuring uniformity of investment-related
laws and at the same time, improving the performance of state management
authorities.
Mai also proposed three solutions
to adjust the decentralisation mechanism. The “optimal solution” is to
appropriately amend the regulations of streamlining power to local governments.
Specifically, important projects such as those in power, transportation and
manufacturing having the registered investment capital of $50 million onwards
each will be licenced by the MPI after consulting relevant ministries and
localities, in order to ensure overall benefits in the distribution of
productive forces in regions and across the country as a whole. Municipal and
provincial peoples’ committees and economic and industrial zones management
boards will be authorised to licence FDI projects with less than $50 million in
the registered investment capital each.
In the second solution, parts of
regulations of streamlining power to local governments will be adjusted, with a
specific mechanism for Hanoi and Ho Chi Minh City in the direction of keeping
the current regulations. In other cities and provinces, the first solution will
be applied.
As the third solution, the
current regulations will be kept in a condition that the planning of industries
associated with the planning of regions and localities will be made public.
Local governments can only licence FDI projects within the framework of the
planned strategies, and local governments’ regulations that are contrary to
their competence will be reviewed and repealed. Relevant ministries will be
responsible for compiling, issuing and giving guidelines to the implementation
of norms, standards, procedures and regulations, while regularly checking and
strictly handling all violations.
“The minimum solution is easy to
implement because it will not face negative reactions of localities, however,
it is a compromise solution that is not originated from the need of improving
the performance of the state management authorities over FDI sector,” said Mai.
Relating to this issue, an expert
with extensive experience in the field of FDI said, if the decentralisation
policy was implemented as present, there would be a lot of problems, especially
in the project appraisal stage, which is “overwhelming” to the local
authorities’ capacity. “Thus, inter-regional, nation-scale and high technology
projects should be licenced by the central governmental agencies,” the expert
said.
In an orientation proposal of
raising the effectiveness of attracting and using FDI until 2020, the MPI has
referred to the consideration of reviewing and adjusting the decentralisation
mechanism to make it more reasonable.
“Conductor” in FDI management
Nguyen Van Tu, former deputy
director of Hanoi Municipal Department of Planning and Investment mentioned in
his story a trend of “three no’s” in the city’s FDI management activities after
FDI projects were granted with investment certificates. This can be seen as an
example of the inadequacies in the current decentralisation policy.
These “three no’s” were initiated
as the current investment-related laws aim at creating more favourable
conditions for investors to do business, thus, state management authorities
even do not know “who the investors are”, “where the enterprises’ locations
are” and “how they work”.
According to Tu, this is the
reality that many cities and provinces are facing without solutions. However,
in the coming time, these problems may be resolved when a mechanism of
coordination in management and supervision from the central to local levels
over the FDI sector is built. The MPI is now drafting this set of regulations.
Similarly, a series of mechanisms
and policies in FDI management will be changed in the near future to create
favourable conditions for cities and provinces and ensure more strict and
effective management at the same time. Moreover, the MPI has also proposed the
establishment of a coordinating board at the macro-level, chaired by a deputy
prime minister, to handle problems arising during the implementation of FDI
projects, which ministries and localities cannot solve.
Nguyen Duc | vir.com.vn
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