Investors face tougher financial capacity tests

HA NOI — 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. — VNS

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Tour company to list on Hanoi exchange

The Hanoi Stock Exchange has given the green light to Ocean Hospitality
and Service Joint Stock Company to list 100 million shares.

The shares, which will be listed under the code OCH, will debut on October 1, 2010.

"The share listing will enhance our financial capacity to implement
large-scale real estate projects nationwide," said the company's general
director Ta Thanh Thuy.

"Many foreign and domestic
investors have shown their interest in investing in our company. We are
on the way to choose suitable strategic partners," Thuy said.

Top priority will be given to investors with strong financial capacity
and rich management experience in the hotel and tourism industry, she
added.

The company, a subsidiary of Ocean Group, has
a charter capital of 1 trillion VND (52.6 million USD). Its business
interests include hospitality, hotels, restaurants, real estate,
infrastructure, housing and food processing.

The
company has co-operated with leading global design and hospitality
management groups in constructing 4-5 star hotels under the StarCity
trademark. Among these are the StarCity Westlake Hanoi, Novotel StarCity
Hoi An Resort, StarCity Nha Trang Hotel, StarCity Nha Trang Hotel,
StarCity Sai Gon Hotel and StarCity Airport Hotel.

Novotel StarCity Hoi An Resort and StarCity Sai Gon Hotel are scheduled to open this year.

The group posted a pre-tax profit of 86.7 billion VND (4.6 million
USD) in the first half of this year and is targeting a pre-tax profit of
163 billion VND (8.6 million USD) by the year-end.

In response to the huge potential of the real estate and tourism sectors
the company plans to continue pumping investment in these key areas,
Thuy said./.

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IT firms fail to invest in R&D

Photo: Reuters

Most Vietnamese IT firms have failed to make adequate investment in research and development due to limited financial capacity and a lack of skilled personnel, said HCMC Computer Association chairman Chu Tien Dung.

In the past 10 years, firms focused on creating IT products to meet short-term market demands rather than properly investing in research and development (R&D), Dung said.

Domestic IT businesses that took on outsourcing work from foreign partners found it difficult to make sufficient investment in R&D because most of them were small and medium-sized, said Vietsoftware chairman of the board Tran Luong Son.

Some of the companies realised the importance of R&D but due to insufficient financial capacity, their R&D investment had yet to bring satisfactory results, he said.

While investing in R&D seems to be difficult for small IT firms, several larger enterprises have invested in R&D, resulting in new production technologies and unique products that have played a decisive factor in sharpening their competitiveness.

TMA Solutions, a large software outsourcing company, recently opened its first R&D centre in the Quang Trung Software Park in HCMC to expand its business in training, mobile service and business solutions.

Chairman of TMA Solutions Nguyen Huu Le said the company accepted outsourcing contracts from foreign companies over the past 12 years and also executed R&D projects under contracts with foreign partners.

"To date, TMA has accumulated good experience in innovation technologies from these projects and we can produce many items in Vietnam," he said.

Mobile provider Viettel also established an R&D centre to develop new telecommunication equipment. The company has developed a USB with integrated 3G, the VT1000-3G, and plans to put it on the market by the end of the year.

CMC Group has also announced that it will set aside US$2 million to research or acquire new technology.

Establishing R&D centres in Vietnam, however, still faced tax barriers and difficulties with equipment testing procedures, Le said, adding that it took his company three years to complete all relevant procedures.

Le suggested the Government should offer incentives for R&D projects.

Dung agreed. He said that Vietnamese ICT companies were seeing big opportunities in technology transfer from global IT companies as they move their R&D centres to Vietnam to cut costs.

Several local outsourcing companies have seen a chance to receive R&D centres from foreign partners. The centres brought comprehensive technology and increased profits for local outsourcing companies, he noted.

To encourage more enterprises to shift to R&D, Dung suggested the Government rethink its tax policy for ICT companies that invested in R&D projects or R&D labs.

 

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