VietNamNet Bridge – While the Ministry of Planning and Investment (MPI) believes that it’s not the right time to apply the decentralization mechanism in licensing foreign direct investment (FDI) projects, local authorities believe that it is the mechanism which has helped Vietnam attract more FDI.

MPI, in its report presented at the national conference reviewing the 25-year Foreign Investment Law implementation, pointed out a lot of existing problems in the implementation of the decentralization mechanism.

MPI Deputy Minister Dao Quang Thu said the mechanism has been applied in a large scale, without the consideration for the local authorities’ management ability, staff qualification and the local economies’ scale.

Under the mechanism, foreign investors only need to contact local authorities for obtaining the investment licenses instead of MPI. Local authorities’ power is now so big that they can license multi-billion dollar projects without having to ask for the permission from MPI.

However, with the limited qualification of the staff and the limited project assessment capability, in many cases, local authorities cannot undertake their works well. Especially, in order to compete with other localities to attract investors, local authorities have spontaneously offered the investment incentives which go beyond the frame incentives stipulated by the State.

MPI, while emphasizing the need to amend the currently applied mechanism to tighten the control over the licensing the supervision over FDI projects, have suggested that local authorities should not be given full powers to deal with FDI projects.

Under the suggested plan, MPI would report to the Prime Minister for his approval for the projects capitalized over $100 million, the projects to be implemented in the area belonging to two or more provinces, the projects which use more than 5 hectares of urban land, or 50 hectares of other types of land.

The suggestion by MPI has raised the strong opposition from local authorities, which can see that their powers would be restricted, while MPI’s power would be bigger.

Hai Phong City’s Mayor Duong Anh Dien said he does not think it’s necessary to change the currently applied licensing procedure.

“Everything has been going smoothly since the day the decentralization mechanism was brought into life. No need to make any changes for now,” he said.

Vice Mayor of HCM City Le Manh Ha has warned that the suggestion should not be applied. “This would cause big changes to the policies. We would need to conduct thorough surveys on the implementation of the decentralization mechanism, and it’d be better not to make so sudden big changes,” Ha said.

Sharing the same view, Le Phuoc Thanh, Chair of Quang Nam province and Nguyen Van Suu, Deputy Mayor of Hanoi, said it’s necessary to review the implementation of the decentralization mechanism first, and then consult with local authorities and investors before any changes are made.

Others have commented that if the MPI’s proposal is approved, Vietnam would make a step back in the process of simplifying the administrative procedures.

Over the last 25 years, since Vietnam opened its door to foreign direct investors with the foreign investment law, the country has attracted 14,095 projects with the total registered capital of $206.8 billion. Of the amount, $97.4 billion, or 47 percent of the registered capital, has been disbursed.

State management agencies have noted the recovery in the FDI flow to Vietnam after a period of decreasing. While the real estate sector always topped the business fields attracting foreign investment in the previous years, it only attracted $250 million worth of projects in the first quarter of 2013.

Compiled by C. V