Vietnam Invests in Non-Urgent, Grandiose Projects

Ninety billion US dollars for infrastructure projects in the 'Expanding Hanoi' scheme; and more than 55 billion dollars for the construction of the high speed North -- South railways. This massive amount of capital investment is planned for these grand projects in the next few years, in comparison to Vietnam's Gross Domestic Product (GDP), which is currently only at approximately $100 billion.

Strong and Aggressive Campaign
There are many other projects and schemes, some very urgent with apparent outcomes, that are in need of capital investment and have yet found a funding source. Some of these projects are the metro system in Hanoi and Ho Chi Minh City; the North-South high speed road; Long Thanh international airport, and Van Phong international container transshipment port. For some unknown reasons, there seems to be a strong and aggressive campaign from relating departments and industries for those two grand projects to pass. Aiming for this purpose, people are putting forward all kinds of reasoning, such as let's just agree on the urgent necessity of the project first, then other factors such as the project efficiency, implementation and where the funding source come from can be discussed later. While in practice, an investment process should have been the reverse.

It is because whether these grandiose projects are implemented or not, it is not the same as when one buys a bunch of vegetables or a kilogram of fish. It requires a thorough study of the feasibility in terms of economic efficiency, repayment ability as well as the owner of the technology, and above all, affordability is the security of national finance.

Necessary To Prioritize Investments
Every body knows that to implement grand projects such as those mentioned above, foreign debts cannot be considered because of the limited capacity of the current national financial situation. Moreover, current government's debts have almost exceeded the safety threshold, while the budget deficit is still growing strongly. In the circumstances of very limited national finance capacity, everyone understands that it is necessary to prioritize investments for projects that can bring the fastest economic efficiency as well as rapid returns, otherwise the burden of national debts would be too overbearing for future generations.

Considering these criteria, those grandiose projects pose immediate problems on their effectiveness and feasibility. Many delegates from the National Assembly have frankly expressed their concerns about the economic burden and the financial security of the nation, should these two super projects be implemented.

Corporations for Investments
The question is: Why is it that those projects are still being interpreted as urgent projects for the economy? The answer does not lie anywhere else, but in the thirst for capital investment and local benefits of economic corporations, of the State's mother company and possibly for the benefit of certain groups. Corporations always crave for investments to feed themselves, and most of the time without any consideration for the overall interests of national economy.

However, the fact that projects such as these are put forward to Congress for discussion, people have the right to hope that delegates would actually consider for the common interests of the economy as a whole, and for the benefits of people at the present and also in the future, therefore, would refuse the thirst of benefit groups and corporations for investments. Otherwise, the loss will be bear by the economy as a whole, while the benefit would go to a minority of corporations regardless of the risk on the security of the national finance.

Vietnam Needs Effectiveness of Foreign Direct Investment

Vietnam needs to make major adjustments to the foreign-invested sector, which accounts for over 40 percent of the country's total capital and about 30 percent of its Gross Domestic Product (GDP), to make its economy sustainable.

In the 2007-2009 period, the country attracted 4,098 Foreign Direct Investment (FDI) projects capitalized at $114.15 billion, 4.5 times the five-year target from 2006-2010, the Ministry of Planning and Investment reported. In 2009 alone, despite impacts of the global economic crisis, Vietnam received a total registered FDI capital of nearly $21.5 billion.

Planning and Investment Minister Vo Hong Phuc attributed the good performance to three factors: the country has made changes to its economic policies under its WTO commitments; domestic companies have expanded their overseas markets for their goods and services; and the country has removed obstacles to foreign investors and given them incentives.

Despite what the figures say, the government has to make some big changes in the way it evaluates foreign investors to guarantee progress for the FDI sector.

Few Projects in Infrastructure, Agriculture
The rapid FDI growth has brought some problems. One of which is most FDI projects focus on natural resource exploitation, real estate and some service sectors, while the country's strong point, agriculture, is largely overlooked. Infrastructure is also often left out of the FDI picture.

issue is that many projects do not have enough capital so they rely on loans, which affect their progress and economic efficiency. In addition, since most FDI projects mainly rely on low labor costs for growth, rising wages could spell trouble.

Some large FDI projects have exposed their infeasibility. One example is the Ca Na steel project in Ninh Thuan Province, which may have its license revoked, according to reliable sources. This four-phase project started in 2008 with an investment of $10 billion and was scheduled to complete this year with an annual capacity of 4.5 million tons of steel per year. But the site has not developed since it broke ground.

In Thai Nguyen Province, a $450 million FDI project to exploit minerals has been at a standstill since it was licensed several years ago. Currently, negotiations are underway to transfer the project to a domestic investor.

In Quang Ngai Province, the $1.2 billion Tycoon - E. United steel complex project, licensed in September 2006, has yet to be developed, though it was licensed three years ago.

More Stringent Evaluation Needed
Another problem lies in the rate of actual capital disbursement for FDI projects, compared to the registered capital. In the 2008-2009 period, the total registered capital of FDI projects was over $85 billion, but only 25 percent of the amount was disbursed.

Dr Phan Huu Thang, former head of the Foreign Investment Department, under Ministry of Planning and Investment, blamed the poor performance on legal loopholes, obsolete infrastructure, and unqualified human resources. Thang said the fact that investors were often not assessed stringently enough, had added to FDI problems, as many of them were not capable of doing what they said they could do.

Investing in Vietnam, many foreign investors have been more interested in low labor costs, than in bringing advanced technologies, he said. They appeared to take advantage of the cheap labor costs to be competitive internationally.

Tax Reports
The credibility of tax reports by FDI companies were another problem. In Ho Chi Minh City, of the 1,254 FDI companies that submitted their 2008 tax reports, 708 reported losses with 90 percent of them in the garment sector.

Their reports exposed an obvious irrationality, experts argued, saying that most domestic garment companies reported profits, despite the need to import most of their materials. Therefore, FDI enterprises, which were provided with materials and other facilities by their holding companies, could not operate at a loss.

Technology Transfer
Technology transfer by FDI companies is another problem. Economic expert Bui Trinh said that in 2004-2009, the Total Factor Productivity (TFP), which is an indicator related to the use of technology, of State-owned, private and foreign-invested sectors were 8.6, 3.1 and -17.6 respectively. This showed that the State-owned sector received the most technology transfer, suggesting that the FDI companies mainly depended on cheap labor not technology for their growth.

A recent survey showed that most machinery and equipment at many FDI enterprises were second-hand.

Funnel FDI Where It Is Needed
As the world economy is on the recovery, experts forecast an increase in FDI inflow, but said such FDI should be more centered on important fields of the economy, like supporting industries, infrastructure, farm produce processing, high value-added services, energy-saving industries, production of goods for export, and human resource development.

Dr Le Dinh An, director of the National Center for Socioeconomic Information and Forecast, said the FDI in 2010 must match the country's economic strategy, with focus on a number of specific industries and products.

Dr An said Vietnam needs a flexible master plan for FDI attraction, subject to adjustment based on development and investment trends. Experts said more reliable evaluation of investors was needed and investment licenses must be granted to only investors with a proven track record of success.

Nguyen Mai, chairman of the Foreign Invested Enterprises Association, said that FDI must match the goals of development in the different sectors. He said that foreign investors should be clearly informed about what fields they were encouraged to invest in the country.

Vietnam Seeks Crimes Control Cooperation With Germany, Cambodia

A meeting jointly organized by the Vietnam's General Department of Police (Ministry of Public Security) and the German Federation Investigation Agency was held in Ho Chi Minh City recently to review the implementation of the agreement between the two governments on the cooperation for the prevention and combating dangerous criminals and organized crimes.

The seminar was presided by Major General Do Kim Tuyen, deputy director general of the General Department of Police for Crimes Prevention, with the participation of the German delegation led by Peter Henzler, Director of Department for the prevention of organized crimes, German Federation Investigation Agency and head officers of various police operational departments and sections of the two countries.

Combating Criminals and Organized Crimes
The Agreement on the prevention and combating of dangerous criminals and organized crimes relevant to Vietnam and the Federation Republic of Germany was signed by the two governments on August 2006 in Berlin. After three years of implementation, the police forces of the two countries have achieved important results.

The coordination, extradition, information sharing on criminals, and case investigation have been promptly implemented with high effectiveness. Besides, the cooperation and financial and material support have contributed to upgrade the operational efficiency of activities in preventing and combating crimes, thus ensuring the security and order in both countries.

After reviewing all the cooperation activities in since few years, the two parties agreed to further strengthen total cooperation in the struggle to prevent and combat crimes through increase of information sharing and coordination in criminal investigation, particularly dangerous criminals and organized crimes in narcotics smuggling, money laundering, human trafficking and hi-tech crimes together with support in training and operational means and equipment to ensure social order and security environment in each country.

On the same day, also in Ho Chi Minh City, the Standing Office for the Prevention and Combating Crimes and Narcotics Smuggling has organized a seminar with the theme cooperation in the preventing and fighting of narcotics smuggling between Border Liaison Office (BLO) between Vietnam and Cambodia with the participation of Hoang Anh Tuyen, deputy head of the office and head of the Vietnamese delegation and Brigadier General Phon Boramy, director of the antinarcotics smuggling Executive Department of the National Commission for Narcotics Control of the Kingdom of Cambodia together with members of the two missions.

Coordination To Fight Narcotics Smuggling
Within the framework of the agreement on the cooperation for preventing and combating crimes signed by the Vietnamese Ministry of Public Security and the Royal Cambodian Ministry of Internal Affairs and other cooperation documents, to this date, the coordination to fight narcotics smuggling at the border provinces of the two countries has brought important results.

In 2009 alone, the police force in Long An Province in coordination with their colleagues in Svayrieng Province (Cambodia) have discovered three cases and captured five criminals of narcotics dealing; police in An Giang Province has discovered and arrested 156 cases with 271 suspects together with 0.846 kg of heroin and ten of thousands synthetic narcotics; the police in Kien Giang Province has discovered and arrested three suspects transporting 400 drug pills and 6.4 kg of synthetic narcotics.

At the seminar, the two parties have agreed to deploy new directions for cooperation in the future namely: to continue information sharing on criminals; to increase coordination and support in drug crimes investigation; to increase the number of BLO in other provinces; to support in operational equipment and in training of BLO staff; to jointly study the pilot project to build drug-safe hamlets, communities and schools at the border area of the two countries.