VietNamNet Bridge – Vietnam will put greater effort into decentralisation model’s feasibility and effectiveness by strengthening state agencies’ coordination and management in a bid to improve the quality of foreign direct investment inflows to the country.

The Ministry of Planning and Investment’s (MPI) Foreign Investment Agency (FIA) said last week said at a press conference that the government would not centralise again its licencing system in regard of foreign invested projects, but rather the current decentralisation model would “continue being bettered in order to ensure its effectiveness and feasibility.”

FIA director Do Nhat Hoang said the improvement would mean strengthened coordination between the MPI, relevant governmental agencies and municipal and provincial governments in FDI management, and enhanced inspection and supervision of licenced foreign invested projects nationwide.

“In the future, large-scale foreign invested projects of national interests and projects which are located in more than a city or province must be consulted with and approved by the MPI and other relevant ministries before they are licenced by the local governments,” Hoang said.

Before 2006, the MPI, authorised municipal and provincial industrial and export processing zones management authorities, Hanoi and Ho Chi Minh City were foreign invested project licencing agencies. With the introduction of the Investment Law issued in 2005, all municipal and provincial governments nationwide were given the power to licence and manage their own foreign invested projects.

However, Hoang said that with decentralised power, many cities and provinces became “easygoing” in licencing new foreign invested projects, especially large-scale ones. Even local governments have raced to lure FDI at all costs, breaking the development planning of regions and industries.

For instance, during 2007-2012, 24 foreign invested projects with the total registered capital of over $1 billion each were licenced. But many of these projects have had their licences revoked.

Tran Trong Binh, a senior attorney from France’s Hanoi-based international law firm Audier & Partners LLC, told VIR that his firm’s European clients said they were not impacted by whether the MPI or localities, or both, were empowered to licence foreign invested projects.

Binh explained that when a city or a province wanted to licence a foreign invested project, especially a big one, it often sought advice from the central government or the MPI, and other relevant ministries. This advice would often be used as the city and province’s basis for final decision of licencing.

“By nature, I think the MPI or even the Vietnamese government indirectly licences foreign invested projects,” Binh said.

According to Binh, Vietnam should have specific FDI zoning plans depending on each city and province’s advantages. For instance, northern Thai Nguyen Province and Haiphong City should be focused on development of steel industry and seaports, respectively.

“Investors are most interested in what Vietnam’s FDI zoning is, so that they can make the right investment decisions,” he said.

“Once the Vietnamese government has good FDI geographical zoning with strict regulations, cities and provinces cannot attract assorted projects rampantly, and Vietnam’s 63 cities and provinces will not become 63 mini-economies with the same projects as they are today,” he added.

Hyun-Hoon Lee, dean of the Department of International Trade and Business under South Korea’s Asia-Pacific Cooperation Academy, told VIR that clear geographical zoning would enhance Vietnam’s ability to attract FDI.

“In a bid to lure high-quality FDI, South Korea has since 2003 opened six free economic zones for specific targeted FDI. Each type of FDI in these zones benefited from different investment incentives,” Lee said. “Vietnam is currently faced with difficulties in attracting high-quality FDI via its decentralisation. Vietnam should clearly map out specific geographical locations for FDI with different purposes.”

Source: VIR