Overseas Investment: Opportunities and Challenges

As reported by the Ministry of Planning and Investment (MoPI), Vietnam currently has over 600 overseas investment projects. Making investments overseas shows their maturity and competitiveness. Being able to affirm their standing in the international market will help Vietnamese enterprises approach markets better, expand investment opportunities, contacts and establish appropriate business channels. It is necessary for enterprises to expand their businesses to regional and global markets once they have successfully occupied the domestic market and are competitive enough for international markets. Military Electronics Telecommunications Corporations Viettel is a typical example.

 

So far, Viettel has been assessed to be the most successful telecom group making overseas investment. Viettel co-operated with Lao Asia Telecom to become Lao’s number 1 company with largest subscriber market share and network infrastructure within two years’ time. In addition to Viettel, Hoang Anh Gia Lai is proving its important position in Lao with projects in mining, sugarcane and sugar industry, rubber and hydroelectricity. In early September 2011, Hoang Anh Gia Lai signed four MoUs with Lao partners to implement projects in this country. Thanks to what Vietnamese enterprises have done, Vietnam is now among leading foreign investors in Laos.

 

Apart from Laos, Cambodia also draws attention of Vietnamese enterprises. During the past years, Vietnamese enterprises have bolstered investment promotion there. Not stopping at neighbouring countries, many large corporations and companies of Vietnam have reached further to American and African nations. FPT signed strategic cooperation MoUs in telecommunications, education and equipment manufacturing with 21^st Century Company of Nigeria. The disastrous earthquake with a death toll of over 300,000 people in Haiti did not discourage Viettel from investing in this area. After over a year, Viettel launched its mobile network and became a supplier with a strong infrastructure system. Viettel Joint Venture is also the only company in Haiti to supply a full range of telecommunications services and the only provider with 3G technology.

 

Initial successes of pioneering enterprises serve as driving force to build the confidence of domestic enterprises to reach out into the world. Although tough competition is ahead, opportunities are available and waiting for many enterprises.

In order to enter the global market, enterprises must have an appropriate and sustainable development roadmap. Overall, the development capacity of quite a few Vietnamese enterprises is still limited. While we are striving to attract foreign investment, making investment overseas needs to be balanced and reasonably selected. Domestic enterprises do facing difficulties when investing overseas. Though overseas investments are encouraged, barriers exist against these activities.

 

Capital is the prerequisite condition for investment. Foreign currency taken out of the country must meet regulations on foreign currency management. If a domestic enterprise wants to transfer foreign currency to other countries but commercial banks do not have the amount, it cannot transfer the money even though it has already been granted the investment certificate. However, given the fact that Vietnam’s reserves of foreign currencies is low and foreign currency balance still encounters many difficulties, enterprises are under pressure to bring profit back to the country early when investing overseas.

 

Besides, procedures for investment overseas are facing obstacles from state management procedures. The Ministry of Planning and Investment is in charge of granting certificates to invest in foreign countries. Local enterprises wishing to invest overseas are supposed to apply for investment certificates at the MoPI. They have to contact 11 state administration agencies before receiving the investment certificate. Even worse, they are required to have official permission or negotiation documents with the nation they wish to invest in. However, many nations regulate that foreign enterprises can only make investment in their countries on condition that they have had permission to do so from their mother countries’ governments. This helps to avoid money laundering through overseas investment. The nations receiving investment want to have clean money flowing into their markets. Conflicts in regulations on investment certificate granting create quite a few obstacles for enterprises wishing to bring capital to do business overseas.

 

Another difficulty lies in the fact that legal regulations on indirect overseas investment of local enterprises do not exist in the legal system of Vietnam. So far, there are only regulations on direct overseas investment.

 

Overseas investment strategy is not only an opportunity, but also a lever to upgrade the position of Vietnam on the global market. Yet, it is pivotal that an appropriate management mechanism be established.