Loosened law makes it difficult to control FIEs: MPI

The fact that a lot of foreign invested enterprises (FIEs) have fled, refused to pay debts and carried out the so called “price transfer” to evade taxes, has been blamed on the management loosening by state management agencies, according to Do Nhat Hoang, Director of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI).
In the interview given to Tien phong, Hoang emphasized that it is necessary to check foreign direct investment (FDI) projects whose investors have fled and tried to escape from debts, especially when Vietnam is in very difficult conditions.

If the foreign investors cannot kick off projects for objective reasons, Vietnam may consider applying necessary measures to support them. Meanwhile, the investors, who have bad financial capability, and register projects just to transfer the projects later for profit, need to be punished.

A lot of FIEs have fled from Vietnam, leaving huge unpaid debts. Do you think that they can easily escape from Vietnam because there are many loopholes in the Vietnamese laws?

Vietnam, which was under the pressure to carry out an administrative reform, enacted the 2005 Investment Law which stipulates new investment procedures, which are much more simple than the previous ones. In the past, when considering a project, we needed to examine the financial capability of the investors and the efficiency of the projects. Meanwhile, nowadays, the financial capability of investors is not an item for examination any more. Instead of this, we try to control the speed of the project implementation.

For example, if the investors do not kick off the projects within 12 months after they get investment licenses and cannot show legitimate reasons, government agencies have the right to revoke the granted licenses.

Under the new investment law, a decentralization mechanism in licensing is being applied, which I believe a reasonable policy. However, the problem is that local authorities have become overloaded and they do not have enough experienced staff to supervise the investors.

All the fled FIEs once borrowed money at Vietnamese commercial banks after mortgaging the assets created by the loans themselves. Can you see any problems here?

These are the problems relating to the law implementation. In the past, the laws stipulated that investors must have at least 30 percent of capital of the total values of projects, and they could borrow no more than 70 percent. The ratios could be lower in special cases (20 percent and 80 percent).

However, the provision has been removed by the 2005 Investment Law. When receiving the proposal to lend capital, banks themselves have to take initiative in examining the financial capability of the investors. The investors could escape from debts because the banks could not strictly supervise the investors’ use of capital. This also shows that we are still too loose in administrative management.

We are now amending the government decree that guides the implementation of the Investment Law. We suggest re-applying the provision that requires foreign investors to have at least 30 percent of capital when entering Vietnam. Investors have to use their capital first, before they can use borrowed capital, or they have to use the two sources of capital at the same time.

Some experts believe that it is now the right time for Vietnam to say “no” to the FDI projects which consume too much energy, cause environment pollution and take long time to take back capital. Do you agree with this?

A recent Prime Minister’s instruction stated that Vietnam should restrict the licensing to the projects which consume much energy and cause environment pollution.

The Prime Minister has also requested ministries and branches to check FDI projects and find out unnecessary projects. It happened in the past that local authorities, which tried to license as many projects as possible, while they did not thoroughly consider if the projects were feasible and suitable to the overall development programs.

Let’s talk about the stories about the Taiwanese and South Korean investors who have fled from Phu Tho and Hai Duong provinces. What will Vietnam do to deal with the debts worth 80 million dollars?

In the past, when investors fled, the state would come forward and liquidate investors’ assets. However, the regulation has been removed, which makes it very difficult to do that.

I hope that the government will agree to resume the provision in order to ensure the interests of creditors.
Source: Tien phong

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs