Capital contributions: A new trend in HCMC

15:00 | 15/04/2017 Investment

(VEN) - The growth is attributed to a city decision that took effect in November 2016, allowing foreign investors to register capital contributions and share purchases online. This has contributed to increasing foreign investors’ capital contributions and share purchases related to city-based businesses.

capital contributions a new trend in hcmc

Capital contributions and share purchases have become a new investment trend of foreign investors

According to the Ho Chi Minh City Department of Planning and Investment, in the first two months of 2017, the city licensed 96 projects totaling more than US$119 million in registered capital, up 6.7 percent in the number of projects compared to the same time last year.

In the first two months, 24 FDI projects increased their capital by a total of US$59.7 million. The information and communications sector was the biggest FDI attractor with US$50.5 million (accounting for 42.4 percent of the city’s total). It was followed by car, motorcycle and motorbike wholesale, retail and repair businesses, with US$31.92 million (26.8 percent of the city’s total), the processing and manufacturing industry with US$10.34 million (8.7 percent), and construction with US$9.86 million (8.3 percent).

Since early 2017, the city has licensed 217 foreign investors to contribute capital to and/or buy shares worth a total of US$264.3 million of companies in the city, increasing six-fold over the same period in 2016. Since early this year, the city has attracted US$443.1 million in FDI capital, including newly licensed projects, added capital to existing projects, capital as value of shares and capital contributions in domestic companies, up 61.3 percent from the same period of 2016.

In 2016, 1,935 foreign investors contributed capital to, and bought shares of, enterprises in Ho Chi Minh City with a total value of US$1.8 billion, accounting for 53 percent of the country’s total.

New investment trend Su Ngoc Anh, director of the Ho Chi Minh City Department of Planning and Investment, said a number of foreign investors have shifted to contributing capital to and/or purchasing shares of city-based companies instead of setting up wholly foreign-owned projects. This mode of investment doesn’t require them to make initial investment assessments, go through licensing procedures, workspace construction, and site clearance, among others, Anh explained.

Foreign investors used to contribute capital to and/or buy shares of domestic companies in accordance with the 2005 Investment Law, which includes a number of ambiguous provisions. The 2014 Investment Law was issued to provide clearer and more transparent regulations on capital contribution and share purchase by foreign investors. In parallel, administrative procedures have been simplified and the time it takes businesses to register has been shortened significantly to facilitate investors’ project implementation. 

Since early this year, foreign investors have poured an increasing amount of capital into domestic companies in Ho Chi Minh City (HCMC) in the form of capital contributions and/or share purchases, expanding the volume of foreign direct investment (FDI) in the city.

Thanh Thanh