Round and round on Vietnam’s merry-go-round procedures

Nguyen Dang Anh Thi

It was six years ago that I met Takeshi.

I had been invited to speak at a climate change conference in Ho Chi Minh City and Takeshi, a development representative for a Japan based world-leading corporation in waste incineration, was in attendance.

By then, he and his business partners had spent several months promoting investment for a project that would help the city treat its waste in an environmentally friendly manner. They were stuck at the step of completing procedures for the investment proposal. After several exchanges, Takeshi suggested that I work as an independent consultant for the project. I said yes. I wanted to be a part of turning such a meaningful project into reality for Vietnam.

Generating energy from waste is a field that is managed by both the environment and energy agencies in the country. Accordingly, for project location and permission to get the waste for burning, we have to work with the city’s Department of Natural Resources and Environment. Then, to send electricity to the national power grid, we have to work with the Department of Industry and Trade and the state-run power monopoly Vietnam Electricity (EVN).

Then, for the next step, we have to work with the city's Department of Planning and Investment on the procedures for submitting and getting the investment proposal approved.

The city's Department of Natural Resources and Environment comes into the scene then, in order to evaluate the project’s environmental impact. Then, the project should be subjected to technical appraisal by the Department of Science and Technology.

Then, even though the city’s power development plan allows the construction of a waste incineration plant, we still have to acquire a written confirmation from the industry-trade department saying that the proposed project was in line with the plan.

And, for good measure, the investors may have to work with related ministries on issues outside the city's jurisdiction.

As I listed the procedures, Takeshi rubbed his eyes and told me he felt dizzy. I told him I’d rather let him know up front the rough path ahead than leave him clueless, picking up pieces along the way later.

I would not say it was prescience, of course, but what I had prepared Takeshi for came true. For almost a year, his group and I repeated the loop of filing reports, submitting reports, attending meetings, making records of those meetings, again and again. During that journey, I found myself admiring the Japanese for their patience and carefulness. Everything that happened in every meeting was carefully recorded by Takeshi before his partners took a look of his notes for reporting to their superiors.

"We would not go anywhere if we keep circling around like this," I told Takeshi one day when I sat down with him for dinner.

"I know," he replied. "But this is my responsibility and I have to fulfill it. There have been some people suggesting I give bribes to this person and that to get things done, but my career and our company’s dignity does not allow me to do so."

Takeshi then asked me if the path he had taken was a mistake. I apologized. "There is nothing wrong with the path you’ve taken. It’s just that it will not lead you to where you want to be. And I feel ashamed for that."

A few months later, his company summoned him back to Tokyo, leaving behind his ambition and dream for an environmentally friendly project that could have worked as an icon not just for waste treatment but also for bilateral cooperation between Vietnam and Japan.

I wonder how many foreigners like Takeshi have had their hands tied by the complicated investment procedures in Vietnam when they want to choose the path of no corruption. I believe it’s not a small figure. To be fair, Takeshi and I had met and worked with officials who were exemplary and willing to support investors, but that did not prevent us from being trapped in a maze of procedures.

Having worked several years for an investment fund in Vietnam, I have met with many people who brought their project over, asking to be funded. Their so-called projects were basically a piece of paper green-lighting their projects. They did not have a team of technical experts, they could not prove their experience in the field they wanted to invest in, and most importantly, they had zero sources of investment.

However, they had one very important thing. They had connections. And I came to realize that in the mindset of many people, investment basically meant "investing in relationships."

Connections, connections

One of the latest examples for this mindset is the case of the Hoa Thang Nam One Member Ltd Company.

The firm was given a plot of prime land at 8-12 Le Duan Street in Ho Chi Minh City’s District 1 in 2018 for doing business, just four months after its establishment, despite its zero experience or capacity, not having completed a single real estate development project.

In this case, former HCMC vice chairman Nguyen Thanh Tai is facing charges of causing losses of VND250 billion ($10.7 million) to the state exchequer by violating land regulations. Investigators from the Ministry of Public Security have told prosecutors to indict Tai for "violating regulations related to the management and use of state-owned property that caused losses or wastefulness," a crime that carries a jail term of 10-20 years.

Another example is a major loophole in the "asking–giving" mechanism during the process of energy development. Many investors with weak capacities have still been able to acquire large-scale renewable energy projects that they quickly transfer to foreign investors for handsome profits.

The government last month requested the Ministry of Industry and Trade to look into a case in which Hanoi-based HLP Invest had got permission to invest in the $4.4 billion Co Thach sea wind farm project in the south-central province of Binh Thuan, but transferred it to a Chinese investor.

As I typed the Vietnamese key words "chay du an" which means getting a quick investment approval through relationships and bribery, almost 52 million results came up. That figure is almost half Vietnam’s population.

A woman files for administration procedures at the office of Ho Chi Minh City's District 12 People's Committee, June 2019. Photo by VnExpress/Quynh Tran.

It is common knowledge that when one cannot reach the destination via a direct path, a detour is taken. Several solar power projects in Vietnam have been transferred to the hands of foreigners via merger and acquisition deals, a move that the trade ministry has described as "normal in the market mechanism." These are detours taken.

After decades of working in the field of energy and environment, I’ve seen many people who do not want to have any direct involvement or invest in a project when it is still on paper, and many only want to be a part of it once they know it can succeed. Then there are people like Takeshi, who give a project their all from the very beginning and want do it right.

Popular modus operandi

There are people and institutions out there with both experience and financial ability that have to struggle unduly to become an investor in Vietnam.

Then there are those in the nation who have in their hands a series of projects, but are focused on just on thing: selling them as soon as they can do so for a profit.

What this means is that many quality investment opportunities that could benefit both Vietnam and the investors have been missed.

What this also means is that the market is distorted and the notion of an open investment environment in Vietnam is belied.

This is not to mention that such distortion can have negative impacts on the infrastructure planning, causing losses for the state and making citizens pay a higher price than needed for infrastructure services. Meanwhile, the money silently flows into the pockets of those trading on relationships.

On May 22, Prime Minister Nguyen Xuan Phuc gave the nod to establish a special working group headed by the Minister of Planning and Investment to prepare Vietnam to catch capital inflows from foreign investors who are diversifying investment locations and repositioning manufacturing facilities after the Covid-19 pandemic. This has kindled hope and excitement, but I think that is unwarranted at this point.

Attracting investment is not like harvesting an agricultural crop. It is a long-term strategy that takes a lot of serious, careful effort.

Need for transparency is clear

What Vietnam has to do has been said for many years now. We have to completely abolish the asking-giving mechanism in project investment and ensure absolute application of public and competitive bidding to choose investors.

Of course, the bidding mechanism must be made transparent in accordance with the best standards applied in the world.

Internationally, competitive bidding has proven to be an effective tool to reduce electricity prices. The International Renewable Energy Agency (IRENA) said that bidding to select investors has been applied in more than 100 countries, but Vietnam is still one of a few countries that has not used this method to promote renewable energy. Consequently, the country is buying solar and wind power at prices that are more than twice the price that many countries are paying. Just last month, India selected a solar investor that sells energy for 3 cents per kWh, compared to Vietnam's buying price of VND1,644 (7 cents) per kWh.

Bidding to select investors has only been applied on a pilot scheme in the past few years and this process has just been adjusted in a decree issued on February 28, 2020. But this mechanism can become efficient only when it is widely applied to all infrastructure projects and not limited to the public-private partnerships (PPP) or other investment forms.

As long as the asking-giving mechanism exists in many forms and becomes more and more "sophisticated," corruption and bribery will continue to remain issues to be discussed.

*Nguyen Dang Anh Thi is an expert on energy and environment issues. The opinions expressed are his own.