Vietnamese workers at a Japanese-invested factory in Tan Thuan Export Processing Zone in Ho Chi Minh City. PHOTO: HUONG GIANG
Draft amendments to the Investment Law and Enterprise Law may fail to significantly help investors while at the same time making it harder for the state to manage foreign investment projects in Vietnam, experts warn.
The draft amended Investment Law would allow foreign investors to establish enterprises in Vietnam and without registering their projects. Under current laws, the state manages investors through their business licenses.
“Some investors don't believe the changes will benefit them, as the investment registration certificate provides a legal foundation for them to implement certain procedures related to land allocation, construction and the environment,” Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, said at a foreign direct investment conference in Hanoi on May 16.
In addition, the elimination of investment registration regulations will shrink the state’s ability to manage investment projects at a time when management is fairly slack, he said.
Vice General Director of auditor KPMG Vietnam Nguyen Cong Ai said people may abuse the unregulated investment environment to build up businesses they only plan to sell off at a later date.
“Thousands, perhaps tens of thousands of companies could be established on paper, without having to operate in practice,” he said. “Vietnamese authorities would have to manage a huge number of enterprises, which don't bring any benefit to the economy.”
Foreign investors will find it easier to trash the environment if their projects aren't carefully vetted, he said.
Mai said investment registration is quick and easy and Vietnam could make it easier still by putting the whole process online.
Some delegates at the conference didn't agree with a number of changes put forward in the first draft amendments to the Enterprise Law.
The elimination of a requirement for foreign firms to spell out their business for the authorities came under heavy fire.
Mai said that while the changes could increase the number of small FDI projects in Vietnam, the country should focus on quality over quantity to ensure it only attracts genuine investors with strong financial capacity.
Ai objected to the change on the grounds that many foreign investors want their business to be spelled out on their registration certificates because it makes working with customs officers and building inspectors much easier.
“The change may cause more difficulties to foreign investors, as provincial agencies may require certain certificates for, say, beginning construction, or engaging in export activities,” he said.
Mai said the draft amendment should reduce areas that ban foreign investment or require certain conditions for investment. Under current law, several dozen fields remain closed to foreign investment and around 330 other fields require certain conditions for investment.
Do Nhat Hoang, head of the Foreign Investment Agency under the Ministry of Planning and Investment, said Vietnam will focus on projects that carry high added value, utilize advanced technology and are environmentally friendly.
The agency is currently seeking investors in the fields of information technology, agriculture, infrastructure development and high-quality human resource training.
Hoang said Vietnam's management hasn't kept pace with its development and lacks the necessary tools to manage additional projects.
“It will be very dangerous, if we loosen licensing restrictions on foreign investment, at a time when we lack the tools necessary to controlling investor activities.”
For this reason, he said, Vietnam will have to improve its capacity to manage foreign investment.
Vietnam attracted FDI of $4.8 billion in the first four months of this year, down 40.9 percent over the same period last year, according to the Ministry of Planning and Investment.
As of late April, the ministry reported that the country houses 16,323 operational foreign investment projects with a registered capital of $237.6 billion.