VietNamNet Bridge - Besides its happiness to receive billions of US dollars more from FDI projects that increase capital, officials of the Ministry of Planning and Investment showed the cautious attitude as the licensing of these projects can completely change the master plan.

Photo: Bloomberg.

According to the May data of the Ministry of Planning and Investment, in addition to new projects, investors also poured more capital into the projects that are being implemented. There were 160 FDI projects raising investment capital, totaling more than $3.4 billion, up 14 percent compared to the same period of last year and higher than the average rate of 9 percent of the country.

A major contribution of FDI increase is the Japanese investor’s contribution $2.8 billion in the Nghi Son oil refinery project in Thanh Hoa. Many projects in the fields of energy and raw materials are also being targeted by foreign investors for expansion plans. Taiwanese investor Formosa proposed capital increase by nearly three times, to $28.5 billion for the steel mill project in Ha Tinh. The investor of Vung Ro Oil Refinery also wanted to double capital to $3.2 billion.

Going along with billions of dollars of capital raising is the increase of the capacity of these projects. Officials of Phu Yen province, where hosts the Vung Ro oil refinery, if the initial capacity of 4 million tons per year is maintained, this project will be "inefficient and unprofitable," so the investor proposed to double the capacity. Meanwhile, Formosa also has ambitions to increase its capacity to more than three times.

Dr. Luu Bich Ho - Former Director of the Institute for Development Strategy, said these capital rising commitments will help Vietnam achieve big success in attracting FDI, but it also poses many concerns because the nation’s development plans for the energy and steel industries will be affected.

"At present, Vietnam has about 4 to 5 petrochemical projects that are awaiting permission or being implemented alongside the Dung Quat oil refinery. For the steel industry, the current supply in the country is showing signs of excess. Hence, Vietnam needs to be cautious in allowing these projects to increase capacity to avoid affecting the supply and demand of the domestic market," he said.

He also took the example of the $27 billion petrochemical project in Nhon Hoi Economic Zone, Binh Dinh Province. Previously, when the Petroleum Corporation of Thailand suggested the construction of this plant, the Vietnam Oil and Gas Corporation (PetroVietnam) and a number of experts strongly opposed by the risk of oversupply in the domestic market and its impact on the performance of the Dung Quat and Nghi Son oil refineries.

Deputy Minister of Planning and Investment, Mr. Dao Quang Thu, said the Nhon Hoi refinery project is a big one and if it is carried out, it will have a strong impact on Vietnam's economy, but it is necessary to "consider carefully the planning."

He reminded local authorities to not allow FDI projects to raise capital without careful consideration to avoid long-term impacts.

At the conference reviewing 25 years of foreign direct investment in Vietnam, officials of the Ministry of Planning and Investment said that one of the reasons that made the low quality of FDI inflows is the competition among provinces in luring FDI. Some provinces licensed projects that cause environmental pollution, use and exploit natural resources inefficiently.

Thu said the Ministry of Planning and Investment is implementing a number of changes in investment licensing process. Accordingly, provinces will send FDI projects to the Ministry of Planning and Investment for consideration before sending to the Government for approval.

S. Tung