VietNamNet Bridge – All localities have geared up for the race
to lure more foreign investors, especially when economists have predicted a new
foreign direct investment wave heading for Vietnam.
The local authorities’ stiff competition
When Ninh Binh provincial leaders
finished the investment promotion conference in late November 2012, they
granted the investment registration certificate to a special project – Kyoei
project, capitalized at VND3.9 trillion dong.
In fact, the project kicked off
eight months prior to the event. However, the local authorities still decided
to hold a ceremony on granting the license in a move to highlight the
provincial achievements in promoting FDI to the locality.
In early 2012, Quang Ninh also
once organized an investment trade promotion conference with the participation
of nearly all the members of the government. Unlike Ninh Binh, Quang Ninh
provincial authorities did not have any opportunities to grant investment
license to any FDI projects on the occasion.
However, Quang Ninh reaped the
fruits at the end of the year, when the FDI capital by the end of 2012 had
reached $412 million, a 15 fold increase in comparison with 2011.
Ninh Binh and Quang Ninh are the
two of the few localities in the north which organized big conferences in 2012
to promote FDI. Though the advantages of the two provinces lie in tourism, they
also want to attract FDI projects in industries, like the ones which have
brought big benefits to the neighboring Vinh Phuc province.
Vinh Phuc, when it was just split
from Phu Tho province a decade ago, the province’s budget was very modest,
about VND100 billion a year. Meanwhile, the figure jumped to VND14 trillion in
2011 and 12 trillion in 2012 thanks to the development of foreign invested
industry projects, including Toyota’s and Honda’s.
Industry projects have also
brought benefits to many other provinces, including Dong Nai and Binh Duong in
the south, where foreign invested enterprises make up nearly 80 percent of the
industrial production value. This is the thing other localities also strive
for.
The competition among localities
to attract FDI began in 2006, after the government started the decentralization
mechanism, giving the power to license FDI projects to local authorities.
Attracting FDI has been written
down in provinces’ resolutions as one of the most important tasks. In Thai
Nguyen province, for example, steering committees have been set up just to pave
the way for a big investment project.
Especially, the race has become
so serious that 52 provinces and cities have offered overly high investment
incentives which go beyond the frames stipulated by the Ministry of Finance, in
order to attract more investment.
When asked if local authorities
demand “under-the-table” fees when licensing FID projects, Minister of Planning
and Investment Bui Quang Vinh said though he does not know exactly about this,
he does not think the problem exist at a serious level.
Vinh said all the localities now
compete to scramble for investors; therefore, they would not be foolish enough
to demand underground fees from investors. Especially, some local authorities
offered overly high incentives to attract investment, while they were not sure
how the incentives would affect the provincial budget.
The leaders of Ha Tinh province,
for example, have recently entreated help from the government, because it could
not arrange the site clearance for the $5billion dollar steel project developed
in Indian Tata Group.
The provincial authorities have
to spend some $300 million for the site clearance to allocate 400 hectares of
land to the investor. The local authorities asked Tata group to advance $300
million for the site clearance, which would be deducted later to the sums of
tax Tata has to pay. However, Tata said it can only “lend” $50 million to the
local authorities, which are in charge of the site clearance.
TBKTSG
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