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Jul 23, 2019 / 14:44

Chinese FDI projects pose risks of outdated technologies: Expert

Unless Vietnam has measures in place to prevent low quality FDI projects, investors using outdated technologies in their projects would cause negative impacts on the country’s economy, said experts.

A majority of coal-fired power plant projects financed by Chinese capital in Vietnam under the form of engineering, procurement, and construction (EPC) contract have experienced delay with outdated technologies, posing risks to the environment. 
 
Overview of the conference. Source: Ngoc Thuy.
Overview of the conference. Source: Ngoc Thuy.
The information was revealed in a survey jointly conducted by the Vietnam Institute for Economic and Policy Research (VEPR) and the US-based Center for International Private Enterprise (CIPE). 

Pham Sy Thanh, director of VEPR’s China Economic Research Program (VCES), said 19 out of 30 coal-fired power plants financed by Chinese investors, or 63.3% of the total, have caused serious environmental problems. 

Thanh referred to the case of Vinh Tan thermal power plant No.2, which was built near a residential area and is causing severe air pollution with its coal dust. Additionally, the power plant also violated a series of regulations on environmental protection. 

Meanwhile, the Vinh Tan thermal power plant No.1 has not fulfilled its commitment on environmental protection, and deliberately built 11 illegal facilities at housing areas for its experts and workers. 

Thanh acknowledged while project owners must bear the main responsibilities for these violations, government agencies should share the blame for the deficient supervision and management. 

Nguyen Duc Thanh, director of the VEPR, said it is difficult to identify the source of investment capital from Chinese investors to Vietnam, due to Chinese funds coming to Vietnam through third countries or territories, such as Hong Kong or Japan. 

“From the perspective of Chinese investors, they think this would make their investment in Vietnam more convenient,” Thanh said. 

FDI commitments in the January – June period totaled US$18.47 billion, down 9.2% year-on-year, while disbursement of FDI projects totaled US$9.1 billion in the six-month period, representing an increase of nearly 8% year-on-year, a report of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment has shown.

The data shows that out of 95 countries and territories investing in Vietnam in the six-month period, Hong Kong (China) took the lead with US$5.3 billion, accounting for 28.7% of total investment, and China at the third place with US$2.29 billion, or 12.4% of the total. 

Vigorous screening process necessary

According to the VEPR’s director, the escalation of US – China trade war alongside with the Comprehensive and Progressive Trans – Pacific Partnership (CPTPP) coming into effect has shifted the investment capital from China to Vietnam. 

“Unless Vietnam has measures in place to prevent low quality FDI projects, investors using outdated technologies in their projects would cause negative impacts on the country’s economy,” Thanh warned. 

Former Minister of Trade Truong Dinh Tuyen, an eminent trade negotiator, urged Vietnam to “keep a cool head” when dealing with Chinese investors. 

Tuyen said not only China, but other countries would jump at the opportunity of exporting outdated technologies to another country. 

“But the rights to choose a project or an investor is in our hands,” Tuyen noted. 

Under the current global context, Tuyen expected the investment capital into Vietnam would increase significantly, therefore, requesting government agencies to be aware and remain responsible during the screening process of FDI projects. 

Minister of Planning and Investment Nguyen Chi Dung in a meeting on July 18 requested provinces to be more selective and refrain from issuing investment licenses for FDI projects that use outdated technologies, consume to much energy and pose risks of trade fraud.

Vietnam is scheduled to tighten its standards and technical specifications regarding products, environment, resources and cost efficiency during the process of reviewing FDI projects, Dung continued.