Lao Cai Towards Quality and Sustainability of FDI Attraction

10:10:10 PM | 30/9/2015

Since it was re-established in 1991, Lao Cai province has yet to attract many foreign direct investment (FDI) projects although it has certain advantages in FDI attraction like rich mineral resources in large reserves, hydroelectric potential, trade development potential, tourism and agro-forestry, and an attractive investment environment. Currently, the province has shifted its focus on drawing FDI projects using advanced environment-friendly technology, supporting industry projects, modern service projects, and industrial and economic zone construction projects. To learn more about investment attraction results, as well as efforts and measures for further improvement of the business environment and FDI attraction, Vietnam Business Forum interviewed Mr Hoang Quoc Khanh, Director of Department of Planning and Investment of Lao Cai province. Hoang Bach reports.
How do you assess the investment attraction results, especially FDI projects, of Lao Cai province in recent years?
Lao Cai province attained important investment attraction results from 2011 to 2015. The province approved 456 investment projects with a total registered capital of VND57.5 trillion in the period, an increase of 2.6 folds in projects and 3 folds in capital over 2010, including 27 FDI projects with VND10.6 trillion. To date, investors disbursed 56.3 percent of their registered capital. FDI projects were mainly invested by investors from China, France and Singapore and engaged in tourism, services, industry and agriculture.
Lao Cai province has some very big important projects, including a VND4,767 billion steel and iron mill with an annual designed output of 500,000 tonnes, which went into operation in 2014; a VND4,404 billion DAP fertiliser production plant No. 2 with a yearly production capacity of 330,000 tonnes, which was put into operation in 2014; a VND4,40 billion Fansipan Sa Pa cable car, entertainment and hotel complex, expected to be completed in late 2015. The attraction and carrying out of investment projects has made significant contributions to boosting socioeconomic development and poverty reduction in the province, sustain the average annual economic growth of 14.1 percent in the 2011-2015 phase, and accelerate the shift of investment flows from State budget-driven structure to private-driven structure. Investment projects have also increased State budget revenue and were projected to pay VND1,800 billion to State coffers in 2015, accounting for 36 percent of the province’s total budget collections. They have also generated some 1,5000 jobs a year and helped raised incomes for local people.
In the 2006 - 2015 phase, Lao Cai province has attracted 19 ODA programs and projects with a total aid fund of US$247.6 million (VND5.2 trillion) and 54 projects and grants worth VND130 billion from foreign non-governmental organisations (NGOs). These results are very important to a mountainous province with a lot of existing difficult conditions like Lao Cai. Therefore, many completed ODA-funded investment projects have brought about practical effects; improved rural and urban infrastructures; accelerated agricultural development, hunger eradication and poverty reduction; improved people's living standards; and addressed environmental issues. Typical projects include World Bank (WB)-funded Poverty Reduction Project (stage 1, stage 2 and extended stage); WB-funded Urban Development Project; French Development Agency (AFD)-funded Rural Infrastructure Project; Asian Development Bank (ADB)-funded Transport Links Upgrading Project; ADB-funded Agricultural Infrastructure Project, and South Korea-funded 500-bed hospital project.
According to data from the Ministry of Planning and Investment, in the first six months of 2015, Lao Cai was one of 23 provinces and cities without new FDI capital. How do you assess this reality?
That was correct. Lao Cai could not attract any FDI project in the first seven months of 2015. We have pointed out some objective reasons for this fact.
- Typical inherent difficulties of a mountainous province: Lying far from major cities like Hanoi, and seaport systems like Hai Phong Port. Although highways have been put into operation, shipping costs are still relatively high.
- Policies are changeable but incomplete. The Law on Investment and the Law on Enterprises of 2014 went into effect, but secondary legislations (decrees and circulars) have not been issued, thus affecting the determination of investors.
- Some foreign investors expressed their desires to invest in big projects in the province but regulations of the central government inhibited them. For example, a German investor proposed using new electricity production technology (Aqua-power) - a totally new technology to Vietnam and little seen in the world. Moreover, this investor requested the Government to buy its electricity at a price which is 15-20 percent higher than the current price. A South Korea proposed exchanging his wastewater treatment facility powered by new technologies of South Korea for land chosen by the investor in Sa Pa Town and Lao Cai City.
One of the most important factors is Lao Cai province imposes stricter conditions for approving FDI projects, with more attention paid to quality and local development planning. Thus, we turned down some investment proposals in the first months of the year. We will continue to work with investors to clarify investment conditions.
Could you please introduce the details of investment attraction efforts by Lao Cai province in the coming time?
Based on our current contexts and trend forecasts, Lao Cai province will focus on attracting investment capital into downstream processing projects for iron, copper, apatite and other minerals; waste treatment projects in industrial parks; tourism and services projects in Lao Cai Border Gate Economic Zone, Sa Pa Town and Bac Ha Town; important infrastructure projects like Lao Cai Airport and new industrial zones.
How has the Department of Planning and Investment introduced specific plans and solutions to maintain and improve provincial competitiveness index (PCI) to enhance the healthy, transparent and attractive investment environment in 2015?
In 2015, to further improve the investment environment and support investing enterprises, we will carry out some of the following key tasks.
- Renovating, perfecting and professionalising investment promotion activities. The department will actively supporting existing investors in the province while contacting big investors with environment-friendly and influential projects from developed countries.
- Carrying out district competitiveness index in 2015; advising the Provincial People’s Committee to issue overall action plans for enhancing the investment, production and business climate.
- Urging and regularly inspecting and urging department employees to raise awareness of supporting investors and businesses to quickly and completely resolve their problems arising from their current investment projects.
- In 2015, a lot of investment policies will be changed; the department will keep track of new changes and advise the Provincial People’s Committee to issue instructive documents for the local business community.
As a key advisor on investment and business environment improvement, do you have any announcement or commitment for investors?
The province’s commitments to investors:
- Site clearance: The department is a specialised agency of the province that helps to carry out site clearance in the shortest time.
- Employment: The department supports projects to recruit appropriate workers.
- Administrative procedure: The department will apply single-window mechanism for investment procedures.
- Incentive: The department will apply central and provincial policies to provide highest preferences for investors.