State pledges to not take the eye off the ball

Phan Huu Thang, former director of Foreign Investment Agency under the Ministry of Planning and Investment (MPI), said the increase of post-licencing monitoring activities at foreign-invested projects would benefit not only the government, but also investors.

“When we closely watch the development of each project, we will recognise whether the investor implements their commitments,” Thang said. “Thus, we will know exactly what project deserves incentives or not.”

Through tightening post-licencing monitoring activities, Thang added, state authorities would realise difficulties facing by investors and then to give the right support.

Since opening the economy to foreign investors in 1987, Vietnam mostly appraises foreign direct investment projects at the pre-licencing period.

This includes appraising business plans, construction schedules and environmental impact assessment reports. Poor post-licencing monitoring unintentionally created a gap for many foreign investors to violate their commitments, Thang said..

Foreign companies like Taiwanese-backed Vedan Enterprise and Tung Kwang have been detected polluting the environment by discharging waste water directly into rivers. Meanwhile, other companies like Coca-Cola and PepsiCo are suspected of transfer pricing activities.

Nguyen Mai, former vice chairman of State Commission for Investment and Cooperation (now the MPI), said  authorities just focused on luring new investments, but not watched closely on the operation of foreign companies after they obtain investment certificates.

“That is our big mistake. How can we know investors will truly implement their commitments regarding labour, imports, exports and localisation to enjoy tax incentives? How can we know exactly whether a manufacturing project will pollute environment just by reading a report?” he said.
Mai, who is also chairman of Vietnam Association for Foreign Invested Enterprises, said the government should enhance post-licencing monitoring soon to ensure quality of FDI inflow to Vietnam.

The Vietnamese government acknowledged the importance of post-licencing monitoring in 2010 when Prime Minister Nguyen Tan Dung signed Decision 77/2010/QD-TTg forcing foreign invested enterprises to report gross revenue, production, legal capital, sources of disbursed capital, recruited labour, and manufacturing technology and tax every month to local Statistics Offices.

According to the decision which took effect on January 15, 2011, enterprises with more than 10 per cent of foreign capital will have to implement the reports.

However, this regulation has not been implemented seriously so far. Thang said that was because there had been no strong sanction forcing investors to comply the regulation, and because of the weak cooperation between State authorities.

“Only by increasing post-licensing monitoring activities, the quality of FDI will improve,” said Thang.