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Real estate sector’s large share of foreign capital
Too much capital – 50 per cent of the US$45.28 billion in foreign direct investment for the first seven months of this year – has been given over to real estate projects across the nation.
"This is not a good sign," independent think tank Le Dang Doanh told Viet Nam News, concerning FDI in the property market, adding that this capital flowing into the property market over the past few months had not helped with major economic issues in the country.
The capital has not created more jobs for the millions of local labourers, even though there has been a large demand for land to build on.
Many private Vietnamese enterprises, which create 1 million new jobs every year, must fight tooth and nail for land, and at dear costs to their firms.
The influx of real estate projects has been predicted to hinder the nation’s programme for economic and social development.
"I agree that becoming a ‘tourism paradise’ is obviously good if we [Vietnam] can balance the major factors of people, infrastructure, environment and supply-demand." senior economist Pham Chi Lan told Viet Nam News.
"Meanwhile, municipal regulators are granting licences for foreign investors all too easily, and provinces are trying to reel in more and more money in order to polish up their names," Lan said.
Regulators have been urged to thoroughly consider the benefits given to people who lose their houses and farmlands, and to think about the long-term effects of projects before giving foreign investors the go ahead, Lan said.
It should also be noted that many real estate projects have taken over thousands of ha of farmlands, seriously impacting national food security and causing unemployment amongst farming households. Compensation for such losses has remained modest, at best.
Sure, FDI will bring more apartments, more houses, more villas and more resorts, but what number of the country’s 85 million residents will be able to afford these places? Who are they being built for?
Nguyen Dang Son, deputy head of the Institute for Urban Research and Infrastructure Development, said that FDI real estate was reserved for companies and luxury-class members of society.
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Billion-dollar projects |
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In the first seven months of this year, of the 27 projects granted investment licences [at least US$100 million each],15 were property related.
Four ‘supper’ property and tourism projects – Starbay in Phu Quoc, Good Choices and ACDL in Vung Tau and New City (Brunei) in Phu Yen – have total registered capital of $11.4 billion.
Three other property and tourism-related projects by Cattigara One, Banyan Tree and Lap An Investment and Development Company in Thua Thien-Hue Province have attracted up to $1.28 billion.
Luxury living quarters and new urban areas are continuing to absorb a huge amount of money.
Since the beginning of this year, Malaysian Berjaya Corp has been granted licences for three projects worth $4.58 billion, including Viet Nam International University Township (VIUT), Viet Nam Financial Centre in HCM City and a complex building in Bien Hoa City.
Phu My A Chau Company and Riviera Point Company in turn have invested $333 million and $206 million to build other urban areas in HCM City.
The southern province of Dong Nai has also become an attractive destination for real estate projects. Aqua City Company and Waterfront City Company have both registered to invest $518 million and $750 million, respectively.
Some other foreign investors have pretended to set up hi-tech projects, but have actually constructed $2.05 billion offices and buildings to lease to software makers. |
Lower – and middle-class people – the very classes with an urgent need for liveable space – would not be able to afford such property.
Responding to this problem, Prime Minister Nguyen Tan Dung ordered municipal authorities to review projects and to restrict turning farmlands into resorts, building complexes or golf courses.
The Ministry of Planning and Investment also sent inspection teams to several FDI-flooded provinces to check on actual situations.
"The real-life situations of many FDI projects in the southern provinces are at the top of our priorities list," an anonymous MPI inspector told Viet Nam News.
Further details have not been disclosed.
Experts were also concerned that too much capital poured into the real estate market would cause a larger trade deficit, as buildings, resorts and tourism projects required more imported machines and construction materials.
Even foreign investors earning Vietnamese dong simply exchanged this to a foreign currency once their projects were completed. The foreign currency was then transferred abroad. Vietnam must therefore use foreign reserves to meet their demands.
So then the big question is: what’s next?
Vietnam must find the balance between benefiting provinces and the national economy while steadying the amount of FDI poured into the real estate and other sectors.
VNN
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