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Investors face tougher financial capacity tests   2010-10-14 - Viet Nam News

A new regulation being drafted by the Ministry of Planning and Investment would impose stricter financial capacity requirements on foreign investors.

Disbursement of foreign investment has lagged far behind the commitments made by foreign investors, suggesting that investors without sufficient financial capacity have still been receiving licences from investment authorities, says the director of the ministry’s legal department, Pham Manh Dung.

In many cases, Dung added, foreign investors had registered projects without an intention to bring foreign capital into Viet Nam to implement the projects. Instead, they had sought financing in Viet Nam after obtaining an investment licence.

To deal with these issues, the ministry has drafted a decree that would require investment agencies to verify investors’ financial capacity, requiring investors to provide confirmation from internationally reliable banks and credit institutions or other investor guarantees on the source of funding for a project.

The decree would also allow for the withdrawal of investment licences after an assessment of financial capacity of an investor, Dung said.

Thousands of foreign-invested projects had been licensed and allocated land, only to remain idle for years, he noted. Some projects in Ba Ria-Vung Tau Province, for instance, had not broken ground a full decade after being licensed.

Without regulations providing for the withdrawal of licences, some provinces have required foreign investors to post a security deposit equal to 5 per cent of the project’s total budget in order to keep the land.

The draft decree would authorise municipal and provincial planning and investment departments to set up boards empowered to suspend foreign-invested projects that have not been put into operation as scheduled without a valid explanation for the delay.

Under the draft decree, projects with investment capital in excess of VND300 billion (US$15.4 million) would also have to be examined for compliance with development master plans for industries and localities.

Projects that had a small scale of investment but required large areas of land could also be turned down on the basis of waste, Dung said, with the regulation aiming to make the most efficient uses of available land.

The draft decree would guide the implementation of the 2005 Law on Investment and, if approved, would replace Decree No 108/2006/ND-CP issued in 2006, Dung added.

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