Poor-quality schemes firmly in firing line

Criteria is still being built so that many more ventures are started in Vietnam that align with quality goals, Photo: Le Toan

In late December, the decision was made to introduce procedures regarding ventures with outdated technology, and especially with potential for environmental pollution and resource depletion. The new rules come into effect on February 15.

According to the Ministry of Science and Technology (MoST), the decision will contribute to perfecting the legal corridor and implementing new regulations on tech management according to provisions of the Law on Investment 2020.

The MoST clarified Article 44 of this law, which stipulates that upon expiry of the duration of a project, if the investor wishes to continue executing it and satisfies the conditions as prescribed by law, the duration of the venture may be extended – unless it is based on obsolete, environment threatening, or resource-intensive technologies.

In addition, projects in which the foreign investor must transfer assets without reimbursement to the Vietnamese government will also be removed.

“This is an important move because, in some localities, many foreign-invested project approvals are mainly based on experience, without detailed instructions, specific criteria, and detailed evaluation. Remarkably, many ventures are perfunctorily chosen in some localities, especially aspects such as environment and society that are less focused,” said Dau Anh Tuan, deputy general secretary and head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI).

“In addition, some businesses do not comply well with the environmental regulations of Vietnamese law, creating a devastating effect on society. Major sea pollution incidents here in 2016 and further back in 2009 remind us of the potential environmental risks if foreign-invested projects are not properly managed and strictly supervised. Therefore, the problem is how to clarify poor quality foreign-invested projects to be removed from the country.”

A report from the Ministry of Planning and Investment outlining Vietnam’s strategy for foreign investment towards 2030 suggested that only 5 per cent of foreign-invested enterprises in the country are using high technology. Meanwhile, around 80 per cent are using mid-level technologies and 14 per cent low technologies. In addition, the localisation of foreign-invested enterprises is lower than that in other countries in the region.

In November 2023, at least two electronic component and telecommunications equipment manufacturers were fined for flouting construction and environmental regulations. Hai Duong-based Synopex Vietnam, making electronic circuit boards and glass for camera equipment, phones, and tablets, was fined $9,700 for discharging wastewater. As the first-level vendor of Samsung Group in Vietnam, it is also a partner of large corporations such as Vingroup, Foxconn, and BKAV.

Phu Tho-based Electro M Vina Co., Ltd. was also fined $18,000 for violations in environmental protection. The South Korean-invested electronic spare parts and component manufacturer did not approve the results of the appraisal of an environmental impact assessment report according to regulations.

“It is necessary to have more criteria to filter quality foreign-invested projects from investors with a responsible business orientation. Along with new policies, it is necessary to have detailed instructions or tools to support the screening, assessment and appraisal of ventures in localities,” said Tuan of the VCCI.

Along with the filters to remove existing poor-quality projects, Vietnam has been attempting to build filters to select high-tech projects.

In November 2022, the VCCI along with the United Nations Development Programme launched a mechanism to review foreign-invested projects applying for permits in Vietnam. The filter includes categories and factors to help localities evaluate when receiving investment certificate applications from foreign investors.

Specifically, the tool includes mandatory assessments on the compliance of investment regulations in Vietnam; mandatory assessments of potential economic, social, and environmental risks; and criteria to encourage business compliance based on international best practices and responsible business practices. In addition, the toolkit includes a list of relevant factors in the screening and appraisal of foreign-invested projects.

FDI prospects off to stellar start for 2024 Numerous ventures worth hundreds of millions of USD are pouring into Vietnam, promising positive results in foreign investment mobilisation and contributing to economic growth for 2024.

$2.36 billion of FDI flows into Vietnam in January Vietnam lured over $2.36 billion in registered foreign direct investment (FDI) capital in January 2024, an increase of 40.2 per cent against the same period in 2023.