Vietnam should ask foreign investors to make deposits

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A security guard points at equipment left in poor condition in the factory of the Korean-invested Hojin Company in Ho Chi Minh City in a photo taken in April 2013. The company owner fled Vietnam in April 2006, still oweing more than VND230 million in salary of 230 employees.

Some foreign investors leaving behind their businesses in Vietnam and flee home because of losses and other reasons, but the law has no means to deal with this.

Authorities should require foreign investors to pay a deposit when they seek a license, and draft regulations to resolve such cases, Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, tells Vietweek.

Vietweek: The Ministry of Planning and Investment has proposed that foreign investors should be made to pay a deposit before they are allotted land or issued licenses to prevent them from fleeing the country. What do you think?

Nguyen Mai: We could ask investors we do not really believe in to pay the deposits. In our history of attracting foreign investment, we have seen many genuine investors. They could face difficulties and we should help them. It is unnecessary to ask them pay the deposit.

However, some foreign investors have asked us to license big projects, including one with registered capital of US$4 billion, and then failed to go ahead. It was a waste of our time to consider their projects and help them complete administrative procedures.


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In the past there was a plan to get foreign investors we did not trust to pay deposits to prevent them from fleeing.

We could ask investors to pay a deposit of 1 percent of their project's value in a local bank. The money would be returned to them in three to six months after they start work on their projects. If the investors do not start their projects, they would lose the money. The regulation does not violate the law. This is a measure to keep out dubious foreign investors.

Some people are concerned this could adversely impact our investment environment"¦

This would not be a measure applicable to all investors, so it would not affect the investment environment. It is unnecessary to ask genuine foreign investors to make deposits. The measure should only apply to investors we do not trust much.

It is common in many other countries. Genuine investors do not complain about it. We do not ask investors to demonstrate their financial capacity. But even if we do, we cannot know if banks' certification of an investor's financial capacity is correct. So the best way is to ask them to make deposits. The regulation is common, and does not violate the law.  NGUYEN MAI, chairman of the Vietnam Association of Foreign Invested Enterprises

NGUYEN MAI, chairman of the Vietnam Association of Foreign Invested Enterprises

[When] localities were allowed to license [foreign-invested] projects, they have not done it properly. They have tried to get FDI at any cost... Thus, many investors who lacked the financial wherewithal were licensed.  

Why do investors flee? Does it have to do with the fact that the appraisal before issuing licenses is not thorough?

Earlier projects were carefully assessed by the Ministry of Planning and Investment. Then localities were allowed to license some projects, but they have not done it properly. They have tried to get FDI at any cost. Some localities have been interested in how many foreign projects they can get, not their financial capacity. Thus, many investors who lacked the financial wherewithal were licensed, and they dropped their projects because they could not implement them.

But there are [also] projects that have got under way but then faced difficulties. Their investors left behind the facilities after they facing prolonged losses amid the economic slowdown.

What should we do when foreign investors bolt because of losses?

We should categorize the investors fleeing Vietnam to resolve it in a reasonable manner. That the owners of over 500 out of 12,000 foreign firms in Vietnam have fled the country is a remarkable figure.

Localities found firms whose foreign owners fled Vietnam 10 years ago, but could not do anything about them. The Ministry of Planning and Investment should have quickly categorized and resolved the cases. We have not resolved them for long time. It is a legal lacuna. There are cases where investors returned home and left their facilities in Vietnam for five to 10 years. But they have not been resolved. We should have new legal provisions to resolve the cases.

What are the problems in dealing with these cases?

Our law does not yet have provisions to deal with these cases. Foreign firms whose owners left behind their facilities in Vietnam could not announce bankruptcy. So we should have regulations to deal with the issue in our laws.

We could stipulate that relevant agencies will deal with foreign firms that shut down and their owners who are absent for three to six months under the bankruptcy law. Now we do not have this provision, so we do not know how to deal with these cases.

We could establish a council with representatives of relevant agencies and employees to deal with the cases. The council could inventory the firms' assets, and sell them to pay employees' salaries and debts.

As of the end of May foreign investors in 518 projects with total registered capital of $903 million surreptitiously returned to their home countries, leaving behind their facilities in Vietnam.

Most of them are from China and South Korea and were operating in the construction, trading, software, restaurant, and realty industries, according to the ministry.

Their businesses defaulted on salaries and wages and payments to partners, and evaded taxes. Some even borrowed from local partners and illegally transferred the money home, it revealed.

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