VietNamNet Bridge – Though Vietnam continues keeping its doors open widely to foreign direct investment (FDI), it will be choosier in licensing projects.

The Ministry of Planning and Investment (MPI), when drafting the amended investment law, stated that the law will ensure most favorable conditions for foreign investors to do business in Vietnam by creating a transparent and friendly business environment, but it will also be stricter to prevent possible negative impacts of the investments.

There will be not any discriminatory treatment to domestic and foreign investors. In case the relating laws change, the investment incentives offered to foreign investors will be maintained.

The law’s provisions would be amended so as to give investment incentives to the projects using high and new technologies, the projects in agriculture, forestry and fisheries, supporting industries and the projects creating high added values.

The one-stop shop mechanism will be set up to deal with the matters relating to the investment procedures, land and construction.

MPI plans to set up stricter rules to manage foreign invested projects. Under the draft law, state management agencies have the right to revoke the investment registration certificates granted to investors if they do not implement the projects within 12 months since the day of licensing.

The same punishment will also be applied in the case where state management agencies cannot contact the investors. If the investors don’t have sufficient conditions to implement the projects as promised, investors can ask for the permission to delay the project implementation, but the delay must not be last more than 36 months. The delays must be informed to the state management agencies.

The draft law says the quality of the machines and equipments to be imported to serve the projects’ implementation will be examined and valuated as a part of the state management’s work. This will also provide the information for reference when defining the taxable prices, aiming to prevent the transfer pricing.

Though having discovered a lot of cases of tax evasion and collected tax arrears, dealing with transfer pricing remains a hot potato to the government bodies. The Ministry of Finance has vowed to find out effective measures to prevent foreign investors of conducting the transfer pricing.

Dr. Nguyen Mai, Chair of the Foreign Invested Enterprises’ Association, when asked to make comments about the amendments, said that Vietnam now needs to tighten the control over the FDI.

He went on to say that the MPI report about the suspension of 500 foreign invested enterprises capitalized at $1 billion and the escape of a lot of the business owners showed the big problems in the state management.

Dr. Christian Kamm, President of Kamm Investment Inc, a consultancy firm, noted that all developing economies try to attract foreign direct and portfolio investments in order to maintain high GDP growth rates and stabilize the macro economy.  However, he warned that the overly high FDI capital may lead to the imbalance in the national economy, which causes the monetary instability, affects the GDP growth, trade and causes high inflation.

When a government releases a decision that may affect foreign investors, it could be the aiming point of criticism from different groups of interests. However, the expert noted that attracting FDI should be seen as a marathon, not a short-interval run tournament.

DNSG