FDI backlog: the bogus billions

FDI backlog: the bogus billions

It has become an all-too-familiar pattern: A foreign developer signs agreements with local authorities in Vietnam, getting approval for an ambitious real estate project—a resort, an industrial park, a new “city”—said to be worth billions of dollars.

But then the bold schemes become big disappointments. Today the stockpile of delayed foreign direct investment (FDI) property projects that were supposed to boost Vietnam’s socio-economy and provide thousands of jobs has reached an alarming level.

According to the latest report from the Ministry of Planning and Investment (MPI), by December 15 last year, 389 FDI property projects were licenced with the total investment capital of $49.8 billion, or 23.3 per cent of the country’s total registered FDI. However, 85 out of those projects had investment certificates withdrawn and five were expired.

The delayed FDI property projects are mostly located in Ho Chi Minh City, Hanoi, southern Ba Ria-Vung Tau, Binh Duong and Dong Nai provinces and central Phu Yen province. Ho Chi Minh City ranked the first in the delay list with 163 FDI property projects worth over $12.4 billion.

Among foreign developers involved, Singaporean companies had the largest contingent with 55 projects capitalised at $8.6 billion, followed by South Korean ones with 79 projects worth $6.7 billion. Other foreign developers caught in the FDI property backlog include firms from the US, British Virgin Islands, Malaysia, Brunei and Canada.

Despite the Vietnam’s moribund real estate market, many cities and provinces continue to woo foreign property developers with attractive investment incentives such as tax incentives and rent-free land. Meanwhile, industry insiders said, local authorities often failed to carefully determine foreign investors’ financial ability or their legal responsibilities. The result is that scores of FDI property projects have failed to make progress.

Remarkably, many delayed FDI property projects, which were planned to cover more than 100 hectares with total registered investment capital of over $1 billion, were licenced in 2008 and 2009. Many of these big plans remained on paper, resulting in investment certificate withdrawals because the announced foreign developers were proved to be unable to work on their initial ambitious plans.

Among many troubled property projects are three huge ones backed by US investors. One touted project, capitalised at $4.15 billion, was the Dragon Beach ecological tourism project in northern Quang Ninh province covering more than 400ha.

In another case, the US’ Galileo Investment Group registered to develop the 5,600ha Southern Tuy Hoa Creative City project with the registered investment capital of $11.4 billion, but the project never became true.

The third is Ho Chi Minh City-based Thu Thiem Software Park project worth $1.2 billion and covering an area of 15.9ha.

Another troubled project with the total registered investment capital of more than $1 billion, backed by a Singaporean developer, is the International Culture Park project on 130ha in southern Ba Ria-Vung Tau province.

vir