Vietnam finally brings out the axe to deal with delayed FDI projects

By Ngan Anh, Thanh Nien News

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The construction site of Guang Lian Dung Quat Steel Mill in the central province of Quang Ngai. Photo credit: Dau Tu The construction site of Guang Lian Dung Quat Steel Mill in the central province of Quang Ngai. Photo credit: Dau Tu


Many did not expect the central province of Khanh Hoa to axe a giant property project early this month, only less than a year after its Indian developer received the investment license. 
The province refused to give Dewan International Vietnam more time to find money, canceling the ambitious yet controversial beachfront project that was set to take over 14 hectares of Nha Trang. The company had missed two deadlines, in January and June, to put at least VND420 billion (US$19.26 million) into the project.
This is the first time local authorities have made such a quick move to cancel a foreign-invested projects. 
More often than not, cities and provinces drag their feet alongside delayed projects, giving investors chances after chances to kickstart their plans. They rarely choose to revoke the licenses, and as a result, many projects that have missed multiple deadlines continue to be postponed for a long time. 
But in the past few months, experts say they have seen a change in how officials deal with these sluggish projects.
Many provinces have started to take more drastic measures, eventually holding foreign investors to their commitments. 
Authorities in the northern province of Vinh Phuc last month recalled the license of a $200-million factory invested by the world's largest electronics manufacturer Foxconn.
The Taiwanese company, which has partnered with many giants including Apple and BlackBerry, failed to start the project licensed in 2008, according to the management board of Vinh Phuc economic zones.
It is not immediately clear why the project has stalled.
Under Foxconn's initial plan, the factory would go into operation in 2009, manufacturing electronics, computers and mobile phones.
The central city of Da Nang has recently decided to revoke the license of a hi-tech project. 
The US invested $278 million Da Nang Hi-Tech Park was expected to model after Silicon Valley when coming into operation in 2023.
However, the investor has done nothing with the project since 2013. 
“We have tried to satisfy the investors. However, many of them have delayed their projects, so we have to revoke the licenses,” local media quoted Tran Tho, chairman of the People’s Municipal Committee of Da Nang, as saying.
The city is ready to stand trial if the investor decides to take the case to court, he said.
Nguyen Dinh Cung, head of the Central Institute for Economic Management (CIEM), hailed these decisions. 
"We should not let investors postpone their projects for too long when they don't have any real intention to start or they are not capable of carrying out their projects,” Cung said. 
“We should deal with them in a thorough, transparent and fair manner to create an open investment environment and more opportunities for other investors,” he said.
Vietnam has so far licensed more than 30 foreign invested projects with an investment of billions of US dollars each, but only a few of them have come into operation, according to local newspaper Dau Tu (Investment), a publication of the Ministry of Investment and Planning.
But it is not always easy to pull the plug on delayed projects, often because cities and provinces themselves have also spent a lot of money on site clearance and certainly do not want to see their efforts also go to waste.
In some cases, provincial authorities are caught in a legal dilemma. Binh Dinh Province has recently ordered relevant agencies to cancel the Vinh Hoi Resort project, a complex of hotel, golf course, and villas. 
Licensed in 2007, the US invested project was slated to be completed last year. But to date, only a road to the site has been built. 
The province was aware of the investor's delay, but there was very little it could do because it also failed to complete site clearance work. 
Only 135 hectares of clear land have been handed over to the investor, while the province has committed to give it a total of 235 hectares. The province may be sued if it decides to revoke the project, according to newspaper Dau Tu (Investment).
Quang Ngai Province is also facing difficulties in dealing with the Guang Lian Dung Quat Steel Mill project.
The multi-billion dollar project’s investors have recently confirmed that they are unable to fund the project, nine years after it was licensed. They are also ready to have the license withdrawn. 
However, how to deal with financial issues in the aftermath is a difficult question for the province.
As of June, Quang Ngai authorities had spent VND223 billion ($10.21 million) on compensation to residents relocated for the project. Two-thirds of the site has been cleared.
Meanwhile, the investors have doled out around $73 million to build initial structures for the construction, a sum that they may want to reclaim when their project is canceled. 
Foreign investors have brought into Vietnam an estimated $6.3 billion in actual investment in the first half of this year, up 9.6 percent from a year ago, the Planning and Investment Ministry said on Friday.
New FDI pledges in the January-June period fell 21 percent from a year ago to $3.83 billion, with most of the funds going to processing industries and property projects, similar to the investment trends in 2014, the ministry's Foreign Investment Agency said in a statement.

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