The government last week officially put the nail in the coffin of Vietnam’s largest registered foreign direct investment project.
According to a Government Office announcement, Prime Minister Nguyen Tan Dung agreed with Ninh Thuan People’s Committee to revoke the investment certificate of the long-delayed $9.8 billion Ca Na steel manufacturing complex project.
The agreement put an end to the so called “illusive project”, which was registered for investment by Malaysia’s Lion Group and financially-troubled Vinashin three years ago.
The case leaves lessons for local authorities, responsible for attracting foreign direct investment (FDI) to their provinces under the government’s decentralisation policy.
“The Ca Na steel manufacturing case reminds provincial authorities of projects’ quality instead of illusive registered capital,” said Cao Ba Khoat, general director at K & Partners Law Firm.
FDI attraction has been booming since 2006, when the government decentralised investment management and licensing to local authorities. However, analysts said many provincial authorities lured poor quality FDI.
“Over the past years, registered capital has been reported as a big achievement at many provinces. Provincial leaders, however, did not care whether the projects were really essential and did not carefully appraise investors’ ability,” said Professor Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises.
With the registration of the Ca Na steel project with an annual output of 14 million tonnes of steel, Ninh Thuan province was lauded as an outstanding place for FDI in 2008. The Lion Group-Vinashin joint venture held a ground breaking ceremony two months after receiving an investment certificate and announced to finish the project’s first stage in 2010. However, nothing further was done. Ninh Thuan People’s Committee said the two firms had insufficient financial muscle to carry out the project.
The project’s 1,650 hectare site will be offered to the domestic Ocean Energy Development Corporation for developing a deep seaport and industrial parks. However, the total investment capital of those projects has not been revealed.
“The change aims to use land effectively and attract investments for developing the province’s industrial sector in accordance with its economic development plan till 2020,” said a Ninh Thuan People’s Committee announcement.
Those industrial parks will attract manufacturing projects to support the development of nuclear power and wind power plants in Ninh Thuan.
Mai, also former vice chairman of the State Committee for Cooperation and Investment – now the Ministry of Planning and Investment, said local authorities should take lessons from the Ca Na debacle.
“Quality and effectiveness of projects must be the first priority, not registered capital,” he said.
Last year, Quang Nam People’s Committee withdrew the investment certificate of a $4.15 billion recreation resort project, registered by US-based Dragon Beach Group. Phu Yen People’s Committee also cancelled the investment certificate of US-based Galileo Investment Group’s $1.68 billion Creative City project. Both investors are said to be too financially challenged to develop the projects.
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