FDI Investment Situation in Tourism - Services Sector in the Period 1993-2005

According to table 2.4, investment projects in the industrial sector that were still in effect from 1991 to the end of 2005 had 30 projects, accounting for 39.47% of the total 76 projects in all sectors with investment capital reaching 203,246,675 USD, accounting for 39.50% of the total capital of 513,770,023 USD of all valid projects. Since the Asian financial and economic crisis in 1997, especially after 2000, after two consecutive years of Quang Ninh not attracting any projects in the industrial sector, the situation of attracting foreign direct investment in the industrial sector showed signs of recovery and continuously increased strongly in the following years. By 2005, the investment capital attracted in the industrial sector had made a leap forward, reaching 13,700,000 USD compared to 2000 (only 500,000 USD), an increase of more than 27 times. This is a positive signal demonstrating the effectiveness of the efforts of the leaders of Quang Ninh province in improving the investment environment and promoting foreign direct investment.

However, the period 1993-2000 also witnessed instability in attracting and implementing foreign investment projects not only in the industrial sector, the attraction results were positive, but the number of projects that could not be implemented or were implemented ineffectively was quite large. In the period 1993-2000, 20 projects had their investment licenses revoked with a total capital of 573,374,072 USD. Notably, during this period, there were two large projects on the cement industry in Hoanh Bo district with a total investment capital of 510,000,000 USD that could not be implemented, there were both subjective and objective reasons.

The situation of attracting foreign direct investment in the industrial sector in the recent period clearly reflects both the difficulties and advantages of Quang Ninh.

In terms of advantages, first of all, the political and social environment is stable, which creates the best conditions for investment and business of all economic sectors and foreign investors. To achieve the above results, Quang Ninh is working with the whole country to implement sustainable development policies, eliminate hunger and reduce poverty, create jobs, and maintain socio-economic stability.

Second, we must mention the geographical location and natural conditions of Quang Ninh. Quang Ninh has a strategic location in the key economic zone of the North, with an international border gate for trade with China.

Third, Quang Ninh's population is over 1 million people, of which the number of people of working age with knowledge, skills and experience is quite large, able to meet all requirements for labor recruitment for projects. At the same time, Vietnam is also a large consumer market for products.

Fourth, Quang Ninh is rich in natural mineral resources, which is a potential for processing, mining, mechanical and shipbuilding industries. Quang Ninh is also a province with a tradition of coal mining.

Fifth, the policy system on foreign direct investment as well as the awareness of the importance of foreign direct investment are receiving special attention from all levels and sectors. This creates a legal basis as well as confidence for foreign investors when investing in Vietnam in general and Quang Ninh Province in particular.

Besides the advantages, Quang Ninh province is also facing great difficulties in attracting foreign direct investment in the industrial sector. There are both objective and subjective reasons.

Regarding objective reasons, we must mention the unstable world political situation. The investment market tends to decrease in some traditional markets such as Singapore and Taiwan.

Regarding subjective causes, policies on investment attraction are not yet consistent, there are many shortcomings, and awareness among all levels and sectors is inconsistent, thus causing many difficulties for investment promotion and attraction.

The investment environment still has many limitations, and the capacity of staff is not up to par with the demands and requirements of the job. Although administrative procedures have been reformed, they have not been completely overcome, affecting the psychology of investors.

Many investors have come to Quang Ninh to seek investment opportunities but failed due to lack of land for the project. For example, a Korean investor intended to invest in a stainless steel rolling mill with an investment capital of over 100 million USD but could not do so due to lack of land (about 15-20 hectares) and many other investors are in the same situation.

* Tourism and service sector

As of December 31, 2005, Quang Ninh province had 32 investment projects in the tourism and service sector with legal validity, accounting for 42.11% of the total number of projects, with a total investment capital of 290,348,348 USD, accounting for 56.50% of the total FDI investment capital with legal validity. This is the sector with the largest revenue proportion. Currently, 21 projects have officially come into operation, 09 projects are in the basic construction stage, 02 projects have not been implemented since being granted an investment license. There are 6 hotels and 1 villa area put into operation, with 2,900 rooms meeting 3-star standards or higher. In addition, FDI enterprises also invest in service activities to attract tourists such as: Entertainment areas with prizes for foreigners (Hoang Gia International Joint Venture Company, Hai Ninh Loi Lai Joint Venture Company), outdoor parks (Hoang Gia International Joint Venture Company, Hong Van Hotel Joint Venture Company), eco-tourism, accommodation tourism on the bay, ... have contributed to diversifying service types to create attraction for tourists. Most FDI enterprises in the tourism sector operate stably, contributing positively to the economic development of the locality, creating jobs for thousands of workers with stable income, exploiting the advantages of the province to serve the economic development of the country.

Table 2.6. FDI investment situation in tourism - services sector in the period 1993-2005

(as of December 2005 - only valid projects are counted)

Year

Project Number	Total investment (USD)
1993	2	30,751,048
1994	1	46,000,000
1995	2	22,000,000
1998	1	9,500,000
2000	2	3,550,000
2001	1	576,000
2002	6	77,695,400
2003	4	30,500,000
2004	8	61,484,900
2005	5	38,800,000
Total	32	290,348,348

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Source: Management Board of Industrial Parks and Foreign Investment of Quang Ninh Province

To achieve the results of attracting FDI investment in the tourism - service sector, Quang Ninh has known how to take advantage of the advantages and besides that, there are also specific difficulties as follows:

In terms of advantages, there are the following highlights:

- International economic integration is an inevitable trend of the world economy. Our country is actively participating in the process of international economic integration. Vietnam is now a member of many international economic organizations such as: ASEAN, APEC, ... especially we have joined the World Trade Organization WTO (November 7, 2006). Participating in deep and full international economic integration creates favorable conditions for the development of the economy in general and the tourism service industry in particular.

- The local infrastructure system is being upgraded and completed to suit the socio-economic development requirements of the province such as: National Highway 18A Hanoi

- Ha Long, the seaport system, and Bai Chay bridge are being urgently completed, making foreign investors confident in the development potential of Quang Ninh and boldly investing in the locality.

- Quang Ninh has many famous scenic spots, favorable for developing many types of tourism and attractive services. In addition, Quang Ninh also has many famous historical, cultural and artistic relics, creating the possibility of opening tourist routes both at sea and on land.

On the difficult side.

- State management: FDI enterprises in the tourism industry are increasingly growing in scale, many new enterprises are being established across districts and towns in the province, new types of tourism services are being developed in a variety of ways, creating many difficulties in the management of state agencies.

- For businesses: Administrative procedures have been gradually reformed but are still cumbersome, causing difficulties for businesses to go to many industries and levels to be granted operating licenses. Fierce competition between businesses participating in tourism business activities ...

* Agriculture - Forestry - Fishery sector

Favored by nature, Quang Ninh has also been highly appreciated by foreign investors, specifically the following foreign investment projects:

Table 2.7. FDI investment projects in the fields of Agriculture, Forestry and Fishery in the period

1990-2005

(as of December 2005 - only valid projects are counted)

Year

license

STT	Project name	Investment capital (USD)
1990	1	Quang Ninh Seafood Export Company	1,200,000
1997	2	Halong Pearl LLC	2,000,000
1999	3	Taiheiyo Shinju Co., Ltd. - Vietnam	1,500,000
	4	Centre Way (Holdings) Limited Vietnam Company	1,500,000
	5	Hong Hai Scientific Research Development Co., Ltd.	500,000
2000	6	Oriental Pearl Company Limited	500,000
2001	7	G&A Aquaculture Corporation	1,800,000

8	Pearl farming business cooperation agreement	1,500,000
2003	9	Business Cooperation on Growing Bamboo Shoots for Export	5,000,000
2003	10	Thanh Phong Seafood Import Export Company	1,500,000
2005	11	Vica-Aquatech Joint Venture Company	4,500,000
	12	HH Dai Hai Company	500,000
	13	Viet Can Seafood World Company Limited	1,000,000
	14	Monosex tilapia farming business cooperation	475,000
Total			23,475,000

Source: Management Board of Industrial Parks and Foreign Investment of Quang Ninh Province

By the end of 2005, the province had attracted 14 investment projects in the agriculture, forestry and fishery sector with a total investment capital of 23,475,000 USD, accounting for 18.42% of the number of projects and 4.75% of the total FDI capital of the province. The main objective of the projects is to cultivate and process aquatic products for export, including shrimp, clams, fish, pearls , etc. This is an industry with a positive growth rate and high export value. Agriculture and forestry currently has only one effective project (Business Cooperation on Growing Bamboo Shoots for Export) with a total investment capital of 5,000,000 USD. From the results of attracting FDI capital into the agriculture, forestry and fishery sector, we can see that it is not commensurate with the potential and strengths of Quang Ninh.

Quang Ninh has advantages in attracting FDI in the agriculture, forestry and fishery sector such as: Rich and diverse resources are widely distributed throughout the province, suitable climate conditions are suitable for many types of crops and livestock to grow, there is still a lot of land potential, can invest in exploitation and production. The labor force in rural areas and non-agricultural areas is still very large, enough conditions to provide labor for projects. Investment projects in Quang Ninh will be very convenient in exporting products because Quang Ninh has Mong Cai border gate connecting with Guangxi province of China. The central and local governments always give the most preferential policies to projects that solve a lot of labor and protect the environment.

Difficulties: Aquaculture and exploitation must be associated with environmental protection in Ha Long Bay. This is a sensitive issue because the aquaculture process will release pollutants into the environment to water sources. The starting point of the agricultural production industry is still low, production is self-sufficient, the growth rate is slow. Large-scale concentrated production areas, specialized and intensive areas have not been formed. There is still a lot of fallow land. The rural processing and service industry system has not been formed, agricultural products have not been industrially processed, so the value of goods is low.

2.2.4. Forms of foreign direct investment in Quang Ninh

According to the provisions of the Law on Foreign Investment, foreign investors investing in Vietnam must implement one of three forms: Joint venture enterprises, 100% foreign-invested enterprises and business cooperation contracts. This section will clarify the proportion of foreign direct investment forms in the period 1991 - 2005, the trend of fluctuation in the proportion of foreign direct investment forms over the years and the situation of conversion of foreign direct investment forms.

Although according to the Foreign Investment Law, all three forms of investment are equal, in reality, foreign direct investment activities in Vietnam in general and Quang Ninh in particular, the proportions of these forms are very different. Table

2.7 shows the structure of foreign direct investment projects in Quang Ninh in the period 1991 - 2005 by investment form.

Table 2.8. Forms of foreign direct investment in the period 1991 - 2005 (only valid projects are counted)

Form

Project		Investment capital
Project Number	Proportion (%)	Capital (USD)	Proportion (%)
Joint venture	31	40.79	371.207.906	72.25
100% foreign invested capital	29	38.16	91,510,300	17.81
Business Cooperation	16	21.05	51,051,817	9.94
Total	76	100.00	513.770.023	100.00

Source: Management Board of Industrial Parks and Foreign Investment of Quang Ninh Province

In terms of investment forms, joint ventures are the main form of foreign investment that Quang Ninh has attracted. By the end of 2005, the province had 31 out of 76 projects in the form of joint ventures, accounting for 40.79% of the total number of projects, with attracted investment capital of 371,207,906 USD, accounting for 72.25% of the total investment capital. In the form of 100%, Quang Ninh attracted 29 projects, accounting for 38.16% of the total number of projects, with 91,510,300 USD, accounting for 17.81%. In the form of business cooperation contracts, the number of projects attracted 16 projects, accounting for 21.05% of the total number of projects, with the total attracted capital of 51,051,817 USD, accounting for only 9.94%.

In general, we see that the joint venture form is the most popular form, accounting for a large proportion of investment capital, creating a difference compared to the other two forms. Although the number of projects established in the form of 100% foreign investment with a small scale of investment capital, in recent years there has been an increase in the proportion of investment projects. The form that is rarely chosen by foreign investors is the form of business cooperation contract, there is only one project in this form with a large total investment capital of 30,000,000 USD (Uong Thuong Coal Mining Business Cooperation Contract), the rest are mostly under 2 million USD.

2.2.5. Investment structure by location

After 15 years of attracting FDI capital, foreign direct investment attraction activities in Quang Ninh province have focused on 8 districts, towns and cities including: Ha Long City, Yen Hung, Uong Bi, Van Don, Mong Cai, Cam Pha, Dong Trieu.

Table 2.9. Results of FDI attraction by investment location in the period 1990-2005

(only valid projects)

Investment location