 Closer Watch over FDI Real Estate Projects
vccinews - 9/10/2010 8:30:00 AM
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The Vietnamese real estate market is always very active with the continuous presence of multibillion dollar projects. They have awakened potential of the property market while creating a driving force for the domestic economic development. However, most of biggest projects are branded foreign direct investment (FDI). In reality, many FDI projects use more than a half of domestic capital.
With a very high housing demand in Vietnam, both domestic and foreign companies pour capital into big real estate projects. Typically, most projects start to sell future products when they are still on design papers. By this way, investors easily mobilise domestic money for their projects. According to industry experts, many so-called foreign-invested projects have only 40-50 percent of total investment while the rest is sourced from domestic investors or banks.
This means that the real total FDI amount in Vietnam is lower while Vietnamese open investment policies are being abused by foreign investors. Especially this happens in the current context that capital sources from banks as well as domestic enterprises are falling short.
According to economic experts, most foreign investors are now strictly abiding by the laws of Vietnam. However, a few foreign investors are not serious with their investments and Vietnam needs to take stricter actions to put an end to such a deed.
The injection of a small amount of capital in comparison with registered value reflects the reverse side of foreign investment attraction policies in Vietnam, especially in a hot field like real estate. Weaknesses in testing and overseeing stages are attributed to the main causes of this situation. Although Vietnam currently has sufficient regulations relating to FDI real estate investment, lax oversight of authorities creates an environment for foreign investors to source local finances for their projects. The longer this situation lasts, the more difficulty the Vietnamese monetary market will face.
To shoot this problem, the Government needs clearer, more detailed policies to tie investors, and more regulations to control capital registered by investors before they commence their projects. When they carry out their projects, the inspection progress must be made regular to break their intention of attracting domestic funds for their projects.
According to experts, the people should be advised of policies to not give a hand to foreign investors to abuse Vietnamese policies. The publicity of project information and implementation progress is necessary and preferences need to be cut off if investors violate regulations related to investment process.
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