The recent decision by Binh Dinh Province to cancel the license for a long-delayed trucks parts plant has flagged the need to carefully assess FDI projects before licensing them.
Authorities in the central province revoked the US$1-billion project after its Russian investor failed to begin construction three years after getting the license.
Buscenter Met Company's plant would have produced parts for buses and trucks. The investor had promised to start construction within 45 days after getting the license.
It was the Russian biggest project to be licensed in Vietnam.
Do Nhat Hoang, head of the Foreign Investment Agency, said localities should improve their assessment capacity, adding that many are poor at assessing the feasibility of projects and financial capacity of foreign investors, meaning foreign megaprojects could falter before they become reality.
Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, said many cities and provinces try to attract FDI at any cost without a careful assessment of projects resulting in many of them becoming delayed due to the poor financial capabilities of investors.
Localities focus too much on the investment amount, ignoring the feasibility of projects and investors’ financial wherewithal, he said.
“Many localities don’t have enough information about investors or the knowledge to assess projects in certain sectors oil refining and steel.
“Local authorities should be very careful in licensing foreign-invested projects. We should not covet projects with big capital so much that we cut corners while assessing their feasibility.
“The country has seen hundreds of projects delayed due to failure to carefully assess them before licensing.”
Some foreign investors have registered projects but do not really want to go ahead with them, he claimed.
They are merely land speculators who would sell their projects to other investors to earn profits, and this could be observed in the real estate sector, especially during the market boom a few years ago, he said.
Many hectares of land set aside for such projects have been unused for many years, he said.
Concurring with him, economist Pham Chi Lan said the government needs to make sure foreign-invested projects are feasible to avoid licensing those that look good only on paper.
Local authorities also need to review their roles in site clearance to avoid delays in foreign invested projects, she said.
She cited the case of the Hanoi American International Hospital built by US Keystone Development Management SA. The construction of the hospital in Hanoi’s Cau Giay District has not been finished after nearly a decade.
Work on the $50 million hospital began in 2007, but remains unfinished due to problems with site clearance.
It is not always easy to pull the plug on delayed projects, often because cities and provinces themselves spend a lot of money to acquire land and do not want to see their efforts go waste.
However, many have recently become more determined to call off projects which have been delayed for too long to provide opportunities to other investors.
Besides the Russian auto project, Binh Dinh authorities also canceled the license issued for a $109-million wind power plant by German and Swiss investors that has been delayed for nearly two years.
The province people's committee said it always welcomes investors and offers them "the best conditions for investment," but those who fail to execute their projects as committed need to give up their places to others.
The province has also pulled the plug on the $235-million Vinh Hoi Resort, a hotel, golf course and villas complex, despite initial concerns it may be sued.
Only 135 hectares of land were handed over to the investor while the province had committed promised 235 ha.
However, the province finally axed the US-invested project after it missed multiple deadlines after being licensed in 2007.
Many other localities have also begun to cancel long stalled projects.
Ninh Thuan Province in the central region recently scrapped the $450 million Mui Dinh resort project after its investor, the US-based Cedar Point International, failed to pay the deposit or begin work.
The southern province of Dong Nai, one of Vietnam's top destinations for foreign investment, late last year announced it was scrapping 37 foreign projects worth over US$50.3 million.
A majority of the projects had been abandoned while the rest were either delayed for more than a year or canceled by the investors.
Foreign investors have brought in an estimated $7.25 billion in actual investment in the first half of this year, up 15.1 percent from a year ago, according to the Planning and Investment Ministry.
FDI pledges in the period surged 105.4 percent to $11.3 billion, mostly in manufacturing and real estate, the ministry said.