Gov’t encourages outward investments, but policies do not

Vietnamese businessmen complain that though the State encourages enterprises to make outward investment, the overly strict policies on outward investment management make investors hesitant in making investment decisions.

A report by the Foreign Investment Agency shows that by July 29, Vietnam had had 601 outward investment projects with the total registered capital of 24.56 billion dollars. If considering the chartered capital, Vietnamese investors have committed to contribute approximately 10 billion dollars to the projects.

The Ministry of Planning and Investment (MPI) has set up 10 its branches in foreign countries, which are called the ministry’s antennas, in charge of promoting investments. This shows that making outward investment now is seen as a growing tendency; therefore, MPI believes that it is necessary to have deep analyses about the outward investment in order to better manage the capital flow.

However, Vietnamese investors have complained that the current policies do not encourage them to make outward investment as promised.

“It is necessary to amend the Decree 78 on outward investment management,” said Tran Bac Ha, Chair of the Bank for Investment and Development of Vietnam BIDV. “It seems that MPI is very conservative in the issue.”

Eight unreasonable provisions in the decree have been cited by Ha which he believes have been hindering investors to make outward investments. The biggest problem, according to Ha, is the regulation on not allowing investors to transfer money abroad before the outward investment projects get approval.

“In order to consider investment opportunities, you should have to spend money on surveying the market, exploring the situation, making report, sending experts to the sites… Meanwhile, enterprises cannot transfer money abroad to pay for the expenses,” Ha said.

As a result, enterprises have to transfer money abroad through unofficial channels by bringing money across the borders, though they understand well that the behavior is considered illegal, and those, who bring money across the borders, will be heavily punished.

Meanwhile, Bui Ngoc Bao, Chair of Petrolimex, can see the problems in the article 25 of the Decree 78.

Bao said that to date, Petrolimex has made investments only trade activities, while it has not set up material facilities in foreign countries. Under the current regulations, the profit must be transferred from the foreign countries to Vietnam six months after the tax finalization at the latest. “If we do in accordance with the current regulations, we will not have money for re-investment,” Bao said.

“Barriers should not be installed to hinder outward investment activities,” he added.

Ha from BIDV said that lacking capital remains one of the biggest headaches for Vietnamese investors. In China, in some cases, investors can borrow 70-85 percent of the total investment capital needed. Meanwhile, it is very difficult to access bank loans in Vietnam, because there is no concrete regulation on the issue.

In fact, bankers can lend big sums of capital to investors if they believe in the feasibility of the projects. However, the thing cannot be applied in a large scale, because there is no regulation relating to this. Ha has proposed the State Bank of Vietnam to draft the decree on providing credit to outward investment projects, under which investors can borrow up to 80 percent of the total investment capital.

A rule which has been existing for many years in international practice, that host countries always ask foreign investors to make contributions to the local social and economic developments, such as to the building of schools or upgrading healthcare conditions to local residents. In reality, Vietnamese investors have to pay money for this, but they cannot legalize the expense items.

At present, enterprises have to use the money from their welfare funds to spend on such items, or ask for the permission from the Ministry of Finance in such cases.

Ha stressed that in the immediate time, Vietnam should not too much concentrate on the profitability of outward investment projects. “It’s the time to occupy places in foreign markets, or it will be too late,” he said.

Source: TBKTVN