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Vietnam tries to tighten the lending to fund outward investment
Amid the worries about the low efficiency of outward investment and the foreign currency bleeding, the Ministry of Planning and Investment MPI plans to apply a series of drastic measures to manage the outward investment.
Vietnam attempts to control foreign currency remittance abroad
Deputy Minister of Planning and Investment Nguyen The Phuong said that in order to restrict the use of domestic capital to make investment abroad, commercial banks will not be allowed to provide loans in foreign currency to fund outward investment.
“Vietnamese investors would have to arrange capital by seeking capital from foreign banks instead of transferring all the capital needed for the projects from Vietnam abroad,” Phuong said.
According to Phuong, the Ministry of Planning and Investment (MPI) has sent a dispatch to the State Bank of Vietnam, requesting to strengthen the foreign current transactions relating to the outward investment, which aims to supervise the outward investment capital most effectively.
MPI has also asked the State Bank to set up a ceiling level on the total capital to be transferred abroad based after considering the international payment balance in different periods.
Prior to that, the ministry sent a dispatch to the central bank, requesting the bank to check the lending of commercial banks to fund outward investment projects. In the future, all the enterprises must strictly follow the regulations on periodic reporting about outward investments to MPI.
Also according to Phuong, in 2011, MPI organized three inter-ministerial inspection tours to check the enforcement of the laws by big economic groups and enterprises in HCM City and Nghe An. The checking aims to balance the plans to make investment and transfer capital abroad.
MPI has instructed the state owned economic groups and the enterprises which have outward investment projects to focus on developing ongoing projects, or the projects which nearly get completed and become operational, in order to preserve capital and ensure the optimum investment efficiency.
As for the outward investment projects which have just got investment licenses, investors need to define clearly the demand for transferring investment capital and the plan on project implementation. Any plans to use capital of the investors need to come in line with the government’s policies on tightening the monetary policies to curb inflation, stabilize the macro economy and ensure social security.
The State Bank of Vietnam has issued Circular No 45 on the foreign currency management relating to the lending and collecting debts by credit institutions, under which credit institutions must satisfy 8 requirements. They have to examine the investment projects, consider the national risks and the possibility of collecting principals and interests of the loans. Especially, banks will only provide loans to the projects which are within the operation scope of the borrowers, who borrow money to make outward investment.
Outward investment on the rise
Do Nhat Hoang, Head of the Foreign Investment Agency under the Ministry of Planning and Investment said by December 30, Vietnam had had 627 outward investment projects with the total investment capital of 10.8 billion dollars in 55 countries and territories.
Most of the projects are located in Laos (3.4 billion dollars), Cambodia (2.1 billion dollars), Venezuela (1.8 billion dollars), and Russia (776 million dollars).
The total implemented capital has reached 2.7 billion dollars, of which 1.4 billion dollars has been injected in the oil and gas sector.
In 2011 alone, Vietnam licensed 75 outward investment projects in 26 countries and territories. The total registered capital has reached 2.12 billion dollars. MPI says that while the capital transferred abroad has been increasing year after year, the profitability has been very low, at 2.02 percent in 1989-2010.
vietnamnet
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