As known, the economic resources generated by foreign direct investment (FDI) enterprises are huge. However, for the time being, many FDI companies have halted operations without prior or official notice because their owners or legal representatives have “escaped” or “been in long absence.” Their employees get no pay, social insurance and other benefits, thus adversely affecting the socioeconomic development objectives in the localities where such FDI projects are located.
Alarming rate
According to a preliminary report by the Ministry of Planning and Investment, the number of fleeing FDI enterprises has risen to an alarming rate – 500 companies. These runaways have been found nationwide.
Do Nhat Hoang, Director of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI), said economic downturn around the world, including Vietnam, has caused adverse impacts on FDI enterprises in Vietnam as well as their parent corporations abroad, resulting in terminated operations or getaways without any trait for communication. According to statistics released by the Ministry of Planning and Investment at a recent meeting, most of the 500 runways are engaged in services and they primarily come from South Korea and China and usually have small business scales (below US$500,000). The primary reason for their running away is attributed to unprofitable or even loss-making business. And, in many cases, these FDI enterprises registered to conduct unhealthy business conduct. For instance, they mobilised capital sources in Vietnam and ran away, leaving their projects undone in the country.
Legal loopholes
A deeper-rooted cause is the loopholes in the legal system. Investment laws in Vietnam are not tight or strong enough to prevent them from taking such gaps to benefit themselves.
He added that although running away FDI enterprises have been identified, solutions are difficult to achieve because of the insufficient legal basis in Vietnamese laws, which do not provide regulations on revocation of owner-absent FDI projects. The second difficulty lies in the procedure of their dissolution and liquidation because these companies do not have owners to stand for debt and obligation settlements. The procedure is at a standstill on lack of legal provisions. These legal deficiencies provide insufficient legal foundation for State management agencies to conduct liquidation or dissolution of such FDI enterprises, because the Law on Enterprises and the Law on Investment have abolished the regulation that the State management agencies stand out to perform liquidation when such companies fail to do so. The third difficulty comes from the implementation of bankruptcy procedures. Courts cannot form management and asset liquidation teams because this procedure requires the presence of legal representative of enterprises. In the meantime, many business owners have fled without any trail for contact. As a result, court will not accept filings because such enterprises do not provide valid audited financial statements as stipulated. Their creditors and employees cannot file for lawsuits because defendants’ addresses are unidentified.
Besides, the dissolution or bankruptcy of these FDI enterprises has left their labourers unemployed.
Solutions
Before this tough situation, according to many experts, Vietnam needs to supplement legal provisions on investment. For example, in case the State clears business sites for investors or projects that use up much land or operate in the areas that widely affect the society, such investors have to place deposits. Meanwhile, provincial/municipal authorities will be empowered to handle the rest of the running away projects via the form of auctioning. The proceeds from this process will be credited into escrow accounts and handled in the event of investors’ absence. Such investors will receive the leftover value after deducting expenses and financial obligations incurred. Laws are necessarily added absentee bankruptcy.
As a State body directly in charge of this regard, the Ministry of Planning and Investment has taken many proactive measures to check and handle absentee projects in many localities. On August 23, 2013, the ministry worked with governments, agencies and businesses in Hanoi. In August and September 2013, it established working groups to review and examine projects across the country. From this fact-finding process, the ministry will report shortcomings and solutions to the Prime Minister for approval.
However, many experts raised concerns over the overall impact on FDI and ODA sources, which are playing a crucial role in Vietnam’s development and reconstruction process. While coping with the status of running away FDI enterprises, the new, amended ruling cannot cause a reduction in our investment attraction, troubling investors and infringing international investment and business practices. On the other hand, authorities should also work together to prevent negative actions and avoid the ensuing negative effects on the economy.
Anh Phuong
Đăng ký: VietNam News
