Vietnam's Investment Abroad on the Rise

According to the Foreign Investment Department, in 2005, Vietnam had a total of 37 overseas investment projects with a combined capital of US$368.4 million, higher than the grand investment capital combination of previous years. To date, Vietnam has invested in 153 projects abroad with an aggregate registered capital of US$655.3 million.

 

More and more enterprises are financially capable and are interested in expanding their business market to sell more products, minimise production costs, reduce transport fees and exploit advantages of the international integration process.

 

Several overseas projects are operating effectively and have been expanded in size. For example, promising projects are oil and gas exploration projects of Vietnam Oil and Gas Corporation (PetroVietnam) in Algeria and Malaysia, or rubber-growing projects in four provinces in Southern Laos by Vietnam Rubber Corporation (Geruco) and Dak Lak Rubber Company.

 

Vietnam has invested in 33 countries and territories, in which Laos attracts the most with US$364 million, followed by Iraq US$100 million, Russia US$38 million, Algeria US$35 million, Malaysia, Singapore and Cambodia from US$18-30 million each.

 

The industrial sector attracts the most investment capital from Vietnam with US$505.5 million: US$161 million for oil and gas, and US$289 million for heavy industry. Agriculture ranks second with US$81.9 million and the third place belongs to the service sector with US$67.9 million.

Overseas investment activities have new advantages. First, the Investment Law 2005, which takes effect from July 1, 2006, and its Directive Decrees will create more favourable conditions for overseas investment activities. Second, more and more enterprises have stronger financial capabilities. Third, the international integration process is sped up by signing and implementation of bilateral and multilateral agreements, which also facilitates Vietnam’s investment activities abroad. Fourth, the overseas market expansion of Vietnamese enterprises is inevitable as they need to expand their export markets, their economic and technical cooperation, economise investment costs, reduce transport fees and bring the integration advantages into full play to improve investment efficiency.

 

From these factors, Vietnam’s investment outflows in the 206-2010 will increase and will have positive effects on the national economy. Vietnam is estimated to invest US$1 billion in important projects abroad in this period.

According to the Foreign Investment Department under the Ministry of Planning and Investment, the legal corridor for overseas investment of Vietnamese enterprises was just issued in 1999. The Decree No. 22/1999/ND-CP and instruction documents marked a milestone in shaping the legal framework for overseas investment activities by Vietnamese enterprises.

 

However, after more than six years, many deficiencies have emerged and need amendments. Existing legal documents lack specific and clear sanctions about reporting, information provision and project implementation mechanism, controlling mechanism and management cooperation mechanism for overseas investment.

 

These entanglements will be removed when the Decree on Overseas Investment by Vietnamese Enterprises to instruct the implementation of the Investment Law 2005. The draft decree has been sent to the Government for approval. The decree focuses on four targets: more practicalities, clearer stipulations, efficiency increases in State management and administrative procedure simplifications. Particularly, to increase business autonomy, this decree provides that investors and enterprises of all economic sectors, private enterprises, State-owned enterprises and foreign-invested enterprises, are allowed to invest abroad, are self-responsible for business operations, can choose and change their internal management organisation forms and suitable investment modes, and are protected by the law.

 

Besides, this draft decree also specifies responsibilities and relations between State organisations with investors and enterprises, implementation of these relations as well as sanctions when there are violations from two sides (investors and State organisations). Especially, the contents of the draft decree will cover the commitment implementation roadmap in bilateral and multilateral agreements, especially the national treatments (NT) and the most favoured nation (MFN) regulations.

Our company carried out overseas investment procedures two years ago but our project has not been activated because of procedural entanglements. The authority of the Ministry of Planning and Investment to only license projects with an investment capital of less than US$1 million is too low and illogical. I think the local government should also have the licensing power. For example, an enterprise in Ho Chi Minh City, which wants to invest in a small project, must visit the Ministry of Planning and Investment to have their investment procedures made. This is time-consuming and costs a lot of money. If the local government is entitled the licensing authority, the enterprise will reduce this cost. In addition, only the local government knows clearly how the enterprise is operating.

 

Mr. Nguyen Thang Long, General Director of Vietnam-Laos Construction Joint Stock Company: An Easier mechanism is needed

 

Previously, it was difficult for a Vietnamese to invest abroad because the law system in Vietnam and other countries were largely different. If an enterprise wanted to invest a handsome sum of investment abroad, it had to ask permission from six or seven ministries and branches and then submit to the Government. The capital moving procedure is too time-consuming. The project can be very profitable but with troublesome and lengthy formalities, enterprises could shrink from difficulties. In my opinion, an easier mechanism is essential to make overseas investment normal as foreign investment into Vietnam. We should remove overlapping agencies and formalities. In general, enterprises need more favourable conditions. It is better if Vietnam has an agency specialising in supporting enterprises to invest abroad. Otherwise, Vietnam needs only one ministry responsible for this while another ministry only has consultative functions.