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Many US investment projects are still just on paper
The US continues to top the list of big foreign investors in Vietnam. Three big projects and 40 smaller ones have been registered by American firms with investment capital of $9.8 billion just in the first quarter of 2010. However, reports Tuoi Tre, many projects promoted by American firms are only beginning to raise the needed capital.
Vietnamese jurisdictions issued more than 1000 investment licenses in 2009, covering a total of $21.4 billion in foreign investment capital and representing investors from 41 countries, Hong Kong and Taiwan.
The capital promised by US investors for projects licensed in the last two years alone totals $12.13 billion, more than 50 percent of the total foreign investment capital promised to Vietnam in 2009.
Superprojects
The newest project from the US is an international conference, exhibition and tourism centre in Vung Tau. ‘Dragon Sea,’ a venture of Sky Bridge Intercontinental Development Corporation, is tentatively capitalized at $900 million, nearly half of the new foreign direct investment registered in the first three months of 2010. The real estate project is expected to be carried out in eight phases and to be complete in ten years.
‘Creative City’ in Phu Yen Province is another gigantic project. The investor is Galieo Group. The first 1100 hectare phase of the city alone requires investment capital of $1.68 billion. The whole city when completed will cover 5600 hectares; total investment capital could reach $11.4 billion.
The $4 billion Dragon Beach project in Quang Nam province has just received its licence. That project got a lot of public attention because it was initially reported to be capitalized at $10 billion.
Factories rise after 10 years
An investment consultant points out Intel’s new one billion dollar factory is the only really large scale manufacturing facility owned by an American company. The investors of the Dragon Sea, Dragon Beach and Creative City superprojects are not ‘big well known names’, but rather corporations and groups newly set up to develop and implement projects in Vietnam.
US firms Proctor and Gamble and Colgate-Palmolive have just expanded their scale of operations in Vietnam after a decade of penetrating the market.
P&G has built a third factory specializing in baby-care products with investment capital of $8 million. Though it has been present in Vietnam since 1996, the world’s leading consumer product maker has manufactured only mass market goods here. The P&G luxury product lines that are sold in Vietnam are imports.
Colgate Palmolive’s case is similar. It has been operating in Vietnam for a long time, specializing in toothpaste and shampoo. However, it was only in late 2009 that Colgate Palmolive built a factory to make toothbrushes, capitalized at $40 million.
General Electric was one of the first American companies to open a representative office in the SRV, in 1993, but it only set up an operating company 10 years later. That company specialised in providing maintenance services to machines and equipment in the healthcare sector. Only in 2008, 15 years after it tiptoed back into Vietnam, GE has invested $61 million to build a factory in Haiphong to manufacture components for power generation systems.
The above examples suggest that the leading US firms may spend a decade or more to understand and explore the situation before they decide to build factories in Vietnam.
Many projects are registered, but few get implemented
According to Tuoi Tre, most of the projects registered by US developers have been slow in implementation because their developers do not have strong financial capability. They only begin mobilizing capital for the projects after they get investment licenses.
The ‘Saigon Atlantis Hotel’ project in Vung Tau City is considered to have the brightest prospects. The investor has presented a plan, set a date for the ground breaking ceremony poured tens of millions of dollars into the project. By contrast, other projects have been very slow in implementation.
An official of the Ba Ria-Vung Tau Planning and Investment Department revealed that the Department is considering revoking the license of the ‘Good Choice’ project, because the investor has made no move to implement the project.
“I am always skeptical about projects capitalized at over $500 million, let alone $1 billion,” said a former official of the Ministry of Planning and Investment.
He said he has learnt from his 20 years of experience that nearly all the projects capitalized on that scale meet troubles, excepting very few projects like the Intel semiconducter assembly and testing plant.
“They (The investors) always say frankly that they will only raise capital for the projects after they get licenses,” he explained. “At a time of global economic crisis, it is very difficult to find investors who are willing to spend billions of dollars to develop resort projects in a market like Vietnam and wait five or ten years to reap the fruits.”
vietnamnet, Tuoi tre
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