Vietnam needs fortified investment law to ensure national security: lawmakers

Speaking at a parliamentary session Friday, National Assembly delegate Truong Trong Nghia noted that the Politburo, the Communist Party's decision-making body, had issued a resolution on foreign investment last August that not only highlighted the sector as an important component of Vietnam's economy whose long-term development is encouraged and facilitated, but also called for the addition of provisions on "national defense and security conditions."

The resolution said that such provisions needed to be part of the process of reviewing and issuing registration certificates for new investment projects, including investments made through capital contribution or purchase of stakes.

Late last month, the government issued an action program to implement this resolution and tasked the Ministry of Planning and Investment with developing regulations to tackle the issues of "thin capitalization" and "undercover" investment.

"This is an issue that has been receiving widespread attention from the public and experts. It is a fact that some foreign investors have taken advantage of loopholes in the law, as has been seen recently," Nghia said. He cited a recent report by the Ministry of National Defense that highlighted instances of Chinese investors using various ruses to acquire land in areas of great importance for Vietnam's national security and defense.

Nghia noted that several of his colleagues had already questioned ministry leaders in previous National Assembly sessions on the issue of foreigners buying land, or even taking up residence in areas sensitive to national security and defense, but they did not receive clear, specific answers.

In one instance, Minister of Natural Resources and Environment Tran Hong Ha even claimed the authorities had yet to detect any case of foreigners buying land in Vietnam.

Vietnam allows foreigners to buy apartments, but no more than 30 percent of a residential quarter or an apartment project, as long as the project is not located in areas deemed vital to national security. They are not allowed to buy land.

"So far the defense ministry's response to voters' inquiry has been fairly detailed and very true to the issue mentioned in the Politburo's resolution," Nghia said, reiterating the need for formulating a foreign investment law that clearly regulates issues of national security and defense.

He noted that under the current Law on Investment, projects must receive the National Assembly's approval if they have a major impact on the environment or use upstream, border area or forest land of at least 50 hectares (124 acres), but major projects that affect national security and defense or projects that use under 50 hectares of border land are outside the National Assembly's purview at present.

"A small area of just 5-10 hectares or even less, but in important locations such as near military airbases could still affect national security and defense, and must be clearly regulated in the law in order to form a 'filter" to defend national sovereignty," Nghia added.

Major General Nguyen Minh Duc, deputy head of the NA's Committee on National Defense and Security, agreed that there have been cases of capital contributions, mergers and acquisitions that involve "sensitive matters" but there has been no effective control mechanism to deal with them.

Functional authorities therefore need to soon institutionalize the Politburo's resolution to overcome these limitations and shortcomings, he said.

Duc also requested that the government look into developing regulations on ensuring national defense and security in economic activities to adjust four groups on: foreign investment projects; indirect investments, mergers and acquisitions; borrowing and asset transfer activities; and major trade contracts in the fields of aviation and telecommunications.

Le Thanh Van, standing member of the NA's Finance and Budget Committee, proposed the development of a Law on Economic Security, which he argued was necessary because there were eight risks that could undermine Vietnam's economic security.

The first risk was from foreign economic activities violating Vietnam's sovereignty, like businesses with Chinese elements releasing products with the illegal nine-dash line or implementing real estate projects in coastal areas.

Other risks listed by Van included the risk of instability in macroeconomic balance through indicators of growth, public investment, safety and fiscal policy, the risk of corruption and economic manipulation through cooperation projects and risks to the environment from industrial parks.

"The Law on Economic Security will, in principle, be a combination of solutions to handle related violations," Van said.