FDI dead weight dropped

In early July 2015, authorities of the central province of Khanh Hoa decided to revoke the licence of the US$1.25 billion Phoenix Beach project in the coastal city of Nha Trang, as its investor, Hong Kong’s Dewan International, failed to contribute capital to the project, as regulated by the investment certificate.

Licensed in August 2014, Phoenix was a rare decisive case, and its licence was revoked quickly. According to the decision, Dewan will still have to pay all the fees related to the completion of investment procedures.

However, few provinces could make such a fast decision. For example, Kien Giang was put into a dilemma with a resort complex project worth US$1.6 billion, funded by Starbay Holdings Ltd., a subsidiary of Hong Kong’s Millennium Group.

Since the investor received the licence seven years ago, nothing has been done. Although local authorities warned Starbay Holdings many times about licence revocation, the project has remained sluggish.

Even in June 2014, Kien Giang requested the investor make a deposit for the project, complete all the necessary procedures for the adjustments to its investment certificate, and build compensation and site clearance plans before December last year. However, very little has been done.

Another project is the US$3.5 billion Vietnam International University Township (VIUT) in Ho Chi Minh City, developed by Malaysia’s Berjaya Vietnam. Although it was licensed in 2008, the project still only exists on paper.

Two other projects by Berjaya are also sitting in the same situation, including a US$930 million project in Ho Chi Minh City called Vietnam Financial Centre, and a US$2 billion project in Dong Nai province.

These sluggish projects have caused indignation among local residents, as their long delays have resulted in a huge waste of land funds, amid a serious lack of arable land. However, it is not easy to revoke licences from stagnant FDI projects, as localities often find it hard to seek new investors.

Moreover, the revocation is affected by many prior commitments between localities and investors.

For example, the US$250 million Vinh Hoi tourism project of Viet My Hotel and Tourism Co. Ltd., which was licensed in Binh Dinh province in 2007, has fallen far behind schedule. Although local authorities have asked many times that the Nhon Hoi Economic Zone Authority should take steps to cancel this project, the investor has yet to implement any components of the project, which covers 300 hectares.

However, Binh Dinh may be used if it recalls this project, as the province had previously pledged to hand over 235 hectares of cleared land to the investor for development. So far, just 135 hectares of land have been cleared.

Similarly, the central province of Quang Ngai is conflicted about recalling the US$3 billion Guang Lian steel project funded by Taiwan (China)’s E-United Group, although the investor announced that it could not arrange capital for the project and accepted the locality’s revocation decision.

According to Quang Ngai authorities, the investor previously supplied US$73 million to the project. Therefore, if the province recalls the license, it will have to pay this investment back.