Oversea Investment: An Economic Integration Trend to be Encouraged

Oversea Investment: An Economic Integration Trend to be Encouraged 10/11/2008 08:53:00 846

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Vietnam ’s oversea investment has robustly developed for five years.  More and more businesses have stronger financial capacity and pay more attention to expanding their operation scale, expanding their consumption market, saving production and transport cost as well as take all the advantages of the international economic integration. The Government has defined this an economic integration trend to be encouraged.


Increase in oversea investment project

US$1 billion over US$2.5 billion of the registered oversea investment capital has been realised with the average capital scale of US$7.8 million. As revealed by the Foreign Investment Agency, some big projects have been put into implementation such as the oil and gas exploration projects in Algeria and Malaysia valued at US$150 million, invested by PetroVietnam; the US$22.7 million project in Singapore of PetroVietnam Technical Service Company; a hydro-power project in Laos worth US$100 million; a FPT’s software programmer training project in Japan or a project on building a Hochiminh city multi-purpose community centre in Russia, etc...


One of the most remarkable oversea project in 2008 is HUD’d project signed with economic groups in Cuba to invest in golf-course and real estate in an area of 300 - 400 hectares in Lahabana capital and a five-star hotel with 800 rooms in Santa Lucia. Regarding potential of the project, HUD’s Deputy General Director - Mr Nguyen Van Bach said: The distance from the project site to the city’s centre and to the international airport Hose Marti and the site’s natural terrain are suitable for building golf course, villas, hotels and resorts with attractive landscape and potential of high economic efficiency. Especially, foreigners are potential to buy houses to live here due to a shortage of living houses for foreigners in the centre of Lahabana. As one of leading enterprises in the field of dwelling house and new urban area construction in Vietnam, HUD have conducted research on Cuba’s dwelling house market for the purpose of promoting cooperation in this field. Bach added that on the spirit of hurried implementation of projects under the MOU signed between HUD and Cuban partners early April 2008, HUD has sep up HUD CARIBE joint stock company and if there is no change, upon the 26th Vietnam-Cuba Government meeting session, a delegation of HUD shall pay a visit to Cuba to negotiate with partners to sign the documents for setting up a Joint Venture company investing in the aforesaid projects.


To date, Vietnam ’s outward investment projects have operated in 35 nations and territories. Of which, Laos is the nation receiving the majority of projects from Vietnam, accounting for around 40 per cent of registered capital, followed by Cambodia and Russia. Some outward investment projects have started to gain efficiency and expand its scale such as PetroVietnam’s oil and gas exploration and drilling projects in Algeria and Malaysia with investment of US$30 million. These projects continue to expand investment size after discovering a new oil stream. Moreover, projects of growing industrial trees and rubber tree in four provinces in southern Laos by Vietnam Rubber Corporation and Dac Lac Rubber Company worth more than US$60 million have been on track.


The agriculture-forestry sector occupies the biggest share of Vietnam ’s outward investment projects. The projects in this sector are mainly cultivation of industrial trees such as rubber and cashew in Laos . PetroVietnam have carried out exploration and drilling projects in Cuba , Cameroon , Peru , Algeria , Russia and Kazakhstan . The trade centre project worth US$30 million in the United States has been invested by the Transport Engineering Construction and Business Investment Stock Company 584, and the project on establishing and developing a VOIP-technology telecom network providing telephone and mobile network service worth US$27 million has been invested in Cambodia by Viettel


How to support businesses?

It is expected that in the next three years (2008 – 2010), offshore investments of domestic enterprises will make annual increases of US$0.5 billion on average. The Foreign Investment Agency under the Ministry of Planning and Investment estimated an amount of US$500 million of outward investment this year, 20 percent over that of 2007. However, the outward investment are facing difficulties in terms of mechanism and the lack of support in policies.


Outward investment is defined as an important solution to take the active role in the international economic integration process. However, the State has yet provided sufficient policies on supporting businesses including through-breaking solution to encourage. Investment promotion to some focal countries such as Lao , Russia , the US and Cambodia should be accelerated. Businesses also need the support in term of information especially those related to investment attraction, investment activities, business and production, potentials and opportunities for investment in some industries and sectors, projects calling for foreign investment in the local countries.


The Project on “Supporting and promoting outward investment of Vietnamese enterprises" have been drafted and have been given out to gather comments from experts and enterprises making outward investment. Under the Draft, outward investment must be seen as an integral part of the socio-economic development strategies, planning and plans. Outward investors shall not be discriminated in term of their ownership forms and shall be subjected to equal treatment and protection. The State give special encouragement and support to outward investment projects in some focal fields which are essential for the national economic development strategy such as oil and gas, power and fossil coal, etc... with the view to satisfy demand for materials, fuels serving the production, market expansion and improvement of enterprises competitiveness.


The Government is considering the gradual decentralisation in granting Outward Investment Certificates to ministries, sectors and localities. At the same time, the provision of comprehensive and specific regulations on outward investment encouragement and support and the establishment of an fund serving as a financial support to outward investment are also put into consideration. According to te Ministry of Planning and Investment, specilised agencies shall submit the project on decentralisation in outward investment management to the Government in the time to come for the purpose of favorable operation of enterprises doing outward investment. The Draft also requires enterprises to make periodical reports serving as basis for evaluating the outward investment performance to provide proper and timely policies.

State management agencies shall conduct non-stop information collection about investment environment in other countries to provide to Vietnamese enterprises who are desiring to make outward investment, namely: policies and projects calling for investment, legal regulations relating to investment activities, business operation of enterprises, investment potential and opportunities in specific sectors and fields in the local countries where Vietnamese enterprises want to invest in. Information about specific investment projects signed between Vietnam s Government and other countries shall be announced...


The shortage of capital of enterprises having conducted outward investment is another problem. The State shall support outward investment projects which can affect the national economic development such as power projects to export to Vietnam , projects on mineral exploitation to replace imported minerals used for local production... These projects shall be entitled to loans from the State via the Bank for Investment and Development of Vietnam (BIDV) at least 30 percent of the total investment at preferential interest rate and shall be exempted from the credit guarantee in kind. Besides, a project invested in Russia , Lao and Cambodia shall be guaranteed by the Government for loans from a domestic commercial bank not exceeding 15 percent of the charter capital of such bank. In some special projects, enterprises may request for the capital contribution by the State and shall be subjected to corporate income tax exemption for the profit remitted to Vietnam which have been taxed in the invested country.