New rules to boost outbound investment efficiency

The new amended and supplemented version of governmental Decree 78/2006/ND-CP on outbound investment contains a fresh chapter on state capital outbound investment.

This new section of the document stipulates tighter control targets for both direct and indirect investments through stocks, bonds and valuable paper purchases as well as securities investments and investment through intermediary financial institutions.

Developers of state-backed projects for outbound investment will have to show documents indicating relevant authorities’ approval for state capital usage in outbound investment when they ask for outbound investment certificates.

Besides, the application record must also include a report given by state appraisal bodies evaluating a project’s economic efficiency. The regulation works towards investment projects with investors being business entities from assorted economic sectors.

To put post-licensing on inspectors’ radar screen, the draft regulates project progress looking at work volume and quality, relevant costs and changes, all of which would be subject to regular reviews.

“This will help state management agencies get exposure to project problems in a timely manner to seek opportune rectifications,” said a member from the draft’s compiling board.

In light of the draft decree, state-backed outbound investment projects will also be subject to regular checks by developers and state management agencies –on either planned or without early notice basis.

Inspection will cover project obedience of regulations on project establishment, appraisal and approval, usage of investment capital and other resources, capital allocations and disbursement and cost balance-sheets.  

To scale up state capital usage efficiency, the draft regulates that at state-backed outbound investments in which the developers hold 100 per cent investment capital or take ruling role procurement of commodities, consultancy and construction services must follow current bidding regulations.

The public raised concerns over actual efficiency of outbound investment over a year ago after the Ministry of Planning and Investment (MPI) released a report of a 21-year review of Vietnam’s outbound investment. The report stated that over the past 21 years Vietnamese firms transferred nearly $1.8 billion abroad and received a measly $39 million in profits in return. The profit rate for this whole period remained very low at 0.46 per cent of total investment capital.

The MPI report also showed that $1.99 billion was registered for outbound investment in the year to October, bringing Vietnam’s total outbound investment registered capital until present to $10.8 billion with over 60 per cent of this coming from state coffers.