“The Foreign Direct Invested (FDI) sector still face difficulties in integration commitments and investment environment,” stated some representatives of Vietnam’s Association of Foreign Invested Enterprises (VAFIE) in a conference on “FDI enterprises – post-WTO accession” held in Hanoi last week.
“A single year of WTO membership is too short a time for Vietnam to evaluate the impacts the WTO will have on our economy,” says Mr Truong Dinh Tuyen, former Minister of Trade, and a government consultant on a WTO programme. “There have been two unexpected factors in the domestic economic requiring attention from economic managers: the trade deficit and the record inflation rate. Another surprise lies in the fact that FDI enterprises for the first time are overwhelmed by domestic enterprises in terms of production and exports. Export value of the latter reaches 22.1 percent while that of the former is only 18.1 percent,” he added. Seeking reasons for this reduction of the FDI sector, a Vietnam Business Forum journalist talked with some enterprise representatives at the conference.
Mr Bui Bao Hung, vice general director of LSIS-Vina (a joint venture with 65 percent Korean capital) revealed, “Concerns exist that foreign enterprises investing in Vietnam will encounter big obstacles since the Vietnam government will subsidize domestic enterprises in various ways. In my opinion, these concerns are unfounded. After ten years operation in Vietnam, we have been entitled to a 15-25 percent discount in tax while private sector and some state-owned enterprises are subject to a 28% tax payment. We have not seen any discrimination against us or subsidy towards domestic enterprises. Regarding Vietnam’s environment, however, we could attract more investors if administrative procedures were further reformed. Reform can be done on two aspects: first, cut troublesome and time-consuming paperwork and second, improve transparency. Our products are mainly electric devices in heavy industry so our operation method is based on project bidding. Information about many projects, however, is suppressed, leaving us unable to attend, or if attending, our possibility to win the contract is very low. To win a contract, quite a few times, we have to “go around the block” to find further information.”
Due to the imperfect legal framework of the country, FDI enterprises are being faced with new challenges. The most significant challenges are investment license granting and accessing distributing areas in Vietnam. Upon WTO entry, Vietnam committed to opening the door wide for foreign investors. However, FDI enterprises are allowed to import goods but not to retail goods on the Vietnam market. Instead, they can only distribute goods to a sole agent (as stated in Decree 32, Circular 09 issued by Ministry of Industry and Commerce).
Mr Nguyen Trong Binh, vice general director of LG Electronic Vietnam, said that the company has received a new license and entered the business of importing brand new cars. For new models without known consumption markets, though LG Electronic VN imports them, they are very worried about the selling process since according to the new regulation, LG Electronic VN can only appoint one distributor per product line. Currently, the company has four branches and in every big city, there are about six more sub-distributors. With the same amount of goods, costs can be cut if goods are authorized to various distributors. If a northern distributor is authorized to import goods consumed in southern provinces, transportation fees will negatively affect prices. “The government sets such regulations and is so obsessed with the phrase ‘distribution,’ but it’s not reasonable at all. Doing this is the same with forcing enterprises to go around the block,” complains Mr Binh.
Sharing the same opinion on “inconveniences” in goods distribution, Mr Mitsushige Ueda, General Manager of International Operation Division of Hasegawa Kogyo Co Ltd reveals, “This is the second time we’ve researched the Vietnam market, searching for an official distributor for our automatic folding ladders made of alloy. We have been unable to find a distributor since Vietnam law only allows one official distributor, causing us many difficulties in our choosing process. This raises our market research costs and takes so much time.”
A representative of Nghi Son Cement Company also expressed concern, since according to the new regulation enterprises cannot decide issues related to state assets in enterprises. In case they fail to get a 60 percent majority, 51 percent must be reached so as to decide such issues.
An official from the Foreign Investment Agency stated that the government has assigned ministries to set conditions for areas under their management, but up to now only the Ministry of Industry and Commerce has really done that. The draft decree on Vietnam’s implementation of some WTO commitments to foreign investments has been submitted to the Government by the Ministry of Planning and Investment, but has not yet been considered. Issues related to the operation in FDI enterprises, accordingly, have not yet been clearly defined. Many enterprises wanting to reregister or transform have not been able to do so. Many “grievances”, therefore, can still be heard from enterprises.
Huong Ly
Vietnamese
