Reducing risks of outward foreign direct investment

The Vietnam Cross-Border Investment conference discussed outward foreign direct investment

On January 10, 2019, Oxfarm in Vietnam, in collaboration with the Vietnam Chamber of Commerce and Industry (VCCI) and People and Nature Reconciliation (PanNature) held a seminar on cross-border investment in Vietnam, outlining the risks and challenges in legal compliance.

According to the Ministry of Planning and Investment, as many as 149 projects were granted certificates for OFDI with the total investment of $376.1 million and total additionally-registered capital of $56 million. Vietnam is investing in 38 countries and territories. Of these, Laos ranks first with $81.5 million of total investment, making up 18.8 per cent, followed by Cambodia and Myanmar.

In addition to contributing to the socioeconomic development of Vietnam and recipient countries, OFDI, especially in the agricultural sector, carries risks, particularly related to the environment and social affairs due to the high demand for land funds and labour.

Sharing his experiences about investing in Laos and Cambodia, Nguyen Thi Hai, deputy general director of Dak Lak Rubber JSC (DAKRUCO), said that the company faced a lot of difficulties. They had to research legal policies and translate all documents by themselves because consultancy services in these countries are not yet available, along with numerous challenges in technical infrastructure and cultural differences.

At the seminar, Voluntary Guidelines on reducing environmental and social risks for Vietnamese OFDI businesses in the agricultural sector at Mekong Sub-Region area has been introduced. This is the first guideline in this sector, which was built by a bottom-up approach through practical experience from pioneering business groups, including six companies and two associations. This guideline also referred to the United Nations Guiding Principles on Business and Human Rights.

Dau Anh Tuan, head of VCCI's legal department, said, "We have built these voluntary guidelines in order to provide information on the steps of the OFDI process, as well as warn of the environmental and social risks in relevant legal policies. These guidelines will reduce risks in investment activities and provide useful information and connect involved parties and strengthen investment performance."

These Voluntary Guidelines have been applied by Vietnam Rubber Group (VRG) and Dak Lak Rubber JSC (DAKRUCO). They have been checked and implemented in line with social-environmental policies, as well as strengthened their community activities in Laos and Cambodia.

Trinh Le Nguyen, director of PanNature, said, "These guidelines are used for Vietnamese businesses investing in the agricultural sector in Mekong Sub-Region countries, especially Laos and Cambodia. However, its content draws on international experiences and documents, particularly the UN Guiding Principles on Business and Human Rights, so it could be applied in other regions."

Lauding these guidelines, Dinh Trong Thang, head of the Investment Policy Department of the Central Institute for Economic Management (CIEM) of the Ministry of Planning and Investment, said that it is necessary to make these processes the new standards in the time coming, and even put these principles into law to promote the sustainable development of OFDI enterprises. Agencies should disseminate this information among businesses, as well as recognise enterprises’ outstanding achievements in order to strengthen the participation of others.