Vietnam set to ink $1.48b foreign investment deal

Vietnam set to ink $1.48b foreign investment deal

HANOI (Agencies): Vietnam is set Friday to sign its largest foreign investment deal ever, officials and executives confirmed Thursday.

The US$1.48-billion deal, an integrated gas project between the state's PetroVietnam and a consortium of foreign investors led by British Petroleum (BP), would provide a much-needed lift to sagging inflows that have recently plagued the communist nation.

"The terms and conditions have been agreed," BP chief representative Ian Sutherland told Deutsche Presse-Agentur DPA.

A signing for three contracts, including a $580 million gas transport and processing contract as well as vital government guarantees and undertakings, is set for Friday evening, a PetroVietnam spokesman said.

The deal includes India's Oil & Natural Gas Corp. with 45 percent, BP with 26.67 percent, and Norway's Statoil with 13.33 percent.

PetroVietnam will take a 15 percent stake in the project, which will exploit two reserves in the Nam Con Son offshore gas field in Block 06.1 about 400 kilometers southwest of Vietnam's coast, where BP discovered gas back in 1992.

Asked if BP was happy with the result of the nearly decade- long negotiations, Sutherland said: "We would not initial if we were not satisfied. The terms and conditions reflect a reasonable and equitable deal for all parties involved."

Diplomats who had followed the project for years were encouraged by the deal.

"This is the signal a lot of foreign investors have been looking for," said Jane Owen, deputy head of mission at the British Embassy.

Foreign direct investment (FDI) has dropped steadily since the Asian financial debacle in 1997, with commitments plunging to $1.57 billion in 1999 and a worrying $713.2 million through the first 11 months of 2000, according to official figures.

But the FDI tally for 2000 is likely to double in December alone, authorities have said, with $930 million to be committed if three major licenses, including the BP gas transport deal, are issued by year end.

British investors are particularly pleased, Owen said.

Vietnam's communist authorities assured foreign donors Thursday that they understood swift action to boost investor confidence was essential if they were to achieve their ambitious goal of doubling gross domestic product (GDP) over the next decade, AFP reported.

The government recognized that 2001 would be "critical" to the success of the 10-year development plan to be adopted by a congress of the ruling communist party in March, Planning and Investment Minister Tran Xuan Gia told a key donors' review meeting.

Gia said authorities were encouraged that growth had already begun to recover from the regional financial crisis of 1997-8, which had been compounded in Vietnam by serious floods in both of the past two years.

Growth had rebounded to nearly 7 percent this year from 4.8 percent in 1999, its lowest level in the 1990s.

But the minister acknowledged that still higher growth was needed if Vietnam was to avoid falling further behind its neighbors.

Foreign investors have long complained that high power and telecommunications costs here cancel out any competitive advantage gained from Vietnam's huge pool of cheap labor.

On Wednesday, First Deputy Prime Minister Nguyen Tan Dzung promised foreign investors Vietnam would move to follow China's example by phasing out the two-tier pricing system long in force for foreigners for everything from hotels to domestic transport.

Vietnam's state-owned railways have already moved to cut the fare surcharge payable by foreigners from 100 percent to 50 percent.