WWF-Viet Nam, RECOFTC, and People and Nature Reconciliation (PanNature) have…
As more Vietnamese enterprises are expanding business overseas, it is becoming imperative to have a good understanding of the policies of the countries home to their investment to avoid unnecessary legal risks. Anh Huong reports.
These days, Le Huy Hoang, Vietnamese Ambassador to Mozambique, is busy working with authorised agencies in the Southeast African nation about how Vietnamese businesses and investors can carry out their projects and do business there.
“Mozambique is a promising land for investment, and we are connecting Vietnamese investors with this attractive market,” he told VIR. “Vietnam has been closely cementing co-operation with Mozambique across a multitude of sectors, including telecommunications. Movitel, a joint venture between Vietnam’s Viettel Group and a Mozambique partner, has invested over $600 million in Mozambique and has already reaped profit.”
In addition to Viettel, some other companies from Vietnam have also been paying attention to Mozambique, including a titanium mining enterprise in the central province of Binh Thuan and several agricultural companies that arrived to Mozambique to cultivate and harvest cashew.
Mozambique is one of 38 countries and territories home to Vietnamese overseas investment. Of these, in 2018, Laos ranked first with $81.5 million of total investment, making up 18.8 per cent, followed by Cambodia and Myanmar.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, as many as 149 projects have been granted certificates for overseas foreign direct investment (OFDI) with the total registered capital of $432.1 million in 2018.
Hoang Quang Phong, vice chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said that through 30 years of integration and development, Vietnam is not only a leading recipient of FDI in the region, but also has more and more OFDI projects. Major sectors of investment overseas include industrial tree plantations, forestry, mining, energy, and telecommunications.
In addition to Mozambique, telecommunications giant Viettel Global JSC (Viettel Global) has been pouring billions of dollars into markets like Cambodia, Laos, Haiti, Myanmar, Burundi, Tanzania, Cameroon, and East Timor. Of these, Myanmar and Tanzania receive the biggest investment through Mytel and Halotel, with $1.75 billion and $783 million.
However, in addition to success, most Vietnamese investors are facing some difficulties from the policies, customs, and culture of the host country, and some OFDI projects have failed to produce the expected benefits.
Nguyen Thi Hai, deputy general director of DakLak Rubber Investment JSC (DRI), which has a branch in Laos, said that the company has great difficulties due to the language barrier, and finding relevant international and local laws.
For instance, DRI has been using images to disseminate information on recruitment, training, and insurance benefits to overcome the language barrier.
Pham Quang Tu, Oxfam’s representative in Vietnam, was of the opinion that the number and scale of the overseas projects of Vietnamese businesses are still limited. Additionally, they are usually said not to thoroughly understand the legislation and policies of the host countries. Additionally, they face issues resulting from incomplete legal systems or fast-changing policies and regulations.
According to Vietnamese not-for-profit organisation People and Nature Reconciliation’s (PanNature) latest survey on cross-border investment risks, there are two main reasons putting Vietnamese investors in legal risks. Accordingly, the companies do not accurately evaluate opportunities and challenges before venturing into the target country, especially the differences in culture, customs, and environmental policies.
Moreover, businesses are not open-minded enough to share information and actively connect with stakeholders, especially non-governmental organisations which have a good understanding and significant experience working with the local communities.
Vietnamese enterprises tend to stick to their tried and tested methods developed in Vietnam when investing overseas, which puts them at considerable risk in foreign markets. Besides, it takes a long time (at least seven or eight years) to recoup investment in the agricultural sector, which is not as fast as producing smartphones or electronic devices (half or one year). Therefore, they need to prepare significant funds to invest overseas.
In the opinion of Nguyen Hoang Phuong, policy programme coordinator of PanNature, there is a mind-boggling number of standards and regulations in the world “playground,” which businesses must know clearly in addition to the policies of the host countries.
They need to be more circumspect and uncover all difficulties and risks not to be taken unawares. In order to gain market share and benefit from overseas markets and free trade agreements, businesses should be more proactive because the slower they are, the more they stand to lose.
Besides legal risks, exchange rate fluctuations is also a concern for overseas investors. In its business plan, Viettel Global anticipated an increase of 1-5 per cent in exchange rates for all of its markets.
“If the exchange rate changes in a negative direction, Viettel Global will pay for equipment purchases, new investments, and even borrow in local currency,” a Viettel Group representative said while he was recently talking with the media about the company’s flexible outlook on exchange rate fluctuations in overseas markets.
Additionally, businesses should co-operate closely with overseas Vietnamese diplomatic agencies and international organisations to find support and overcome difficulties while doing business overseas.
Highlighting the intelligence of Vietnamese businesses in realising and seizing opportunities, Ambassador Hoang expressed his belief that more and more enterprises can invest overseas successfully, in every sector like telecommunications, agriculture, forestry, fishery, and mining – not only in Mozambique but also in every country.
Vu Van Chung – Deputy director, Foreign Investment Agency, Ministry of Planning and Investment
Cross-border investment requires business experience and legal knowledge. If enterprises do not carefully study the laws of the countries where they invest, they incur huge risks. It is not unheard of for a Vietnamese enterprise to be in such conflict.
Vietnamese investors have to obey Vietnamese regulations, the laws of the host country, and international conventions. All Vietnamese policies target boosting Vietnam’s cross-border investment as well as improving the image of Vietnamese investors in the eyes of recipient countries and international markets.
Over the past few years, besides focusing on effective cross-border business, Vietnamese investors have taken it on themselves to obey the laws on environmental protection at the host countries. The efforts also receive positive feedback from the Vietnamese government and other countries.
Diep Xuan Truong – Deputy director, Industry Department, Vietnam Rubber Group
During overseas investment, VRG always focuses on sustainable development and community development. After promulgating the “Regulations on receiving and handling feedback and recommendations, and providing information for individuals and organisations on issues related to VRG’s rubber development project in Laos and Cambodia” in 2018, we requested our subsidiaries to apply the “Handbook of sustainable management of rubber forests according to international forest certification standards” developed by the WWF, the Vietnam Rubber Association, and VRG. Besides, we often send our officers to training courses on environment and ecology, land-related investment risk, effective community approach, as well as meetings with non-governmental organisation (NGOs) in Laos and Cambodia. The co-operation between enterprises and NGOs helps enterprises become more aware of environmental and societal risks when investing overseas.
Le Kim Thai – Programme funding co-ordinator, Oxfam Vietnam
The future of business belongs to inclusive business models that bring benefits to “the three P’s,” including people, profit, and the planet. Inclusive economic development has positive returns for the investor, workers, and local communities. The value of a clean environment, safe and equitable society is beyond financial calculation and creates a firm foundation for responsible businesses to flourish.
Businesses and investors are among the critical stakeholders capable of contributing to environmental sustainability and inclusive growth in Vietnam and in destination countries for investment. By adopting and integrating principles of responsible investment into their policies and practices, businesses and investors can offer their employees a stable livelihood and contribute to environmental protection while earning consistent profits.