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Vietnam Today

Midterm VBF: Problems persist for FDI enterprises

Released at: 13:17, 16/06/2017

Midterm VBF: Problems persist for FDI enterprises

Photo: Quang Huy

Host of issues raised at Midterm Vietnam Business Forum in Hanoi on June 16.

by Quang Huy

Themed “Strengthening the Links Between Foreign Direct Investment (FDI) and Domestic Businesses in the New Global Context”, the Midterm Vietnam Business Forum 2017 was held in Hanoi on June 16, attended by Deputy Prime Minister Vuong Dinh Hue, among others.

After receiving huge incentives in taxes and land waivers, together with possessing strengths in capital and international experience, FDI enterprises have contributed significantly to Vietnam’s economy, as shown by them accounting for 50 per cent of the manufacturing and processing industry and 70 per cent of the country’s exports.

Addressing the forum, Dr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry, said the role of the FDI sector is clear in all economic sectors.  

But Vietnam has yet to utilize their strengths. The interrelationship between FDI and domestic businesses is still weak, while any spillover effect in technology remains limited, as shown by the small number of joint ventures in FDI projects, with up to 80 per cent of projects being 100 per cent foreign capital.

In describing the weak interrelationship, Dr. Loc said that only 14 per cent of private enterprises have domestic FDI customers. FDI enterprises tend to import goods from businesses in their home countries rather than work with Vietnamese enterprises. One matter worth noting is that Vietnamese enterprises have yet to meet the standards set by their foreign counterparts.

Problems persist

One matter consistently brought up at the forum is the inconsistent application of taxation and customs procedures.

According to Mr. Tomaso Andreatta, Chairman of the European Chamber of Commerce and Industry (EuroCham), cities and provinces compete against each other to attract investment, resulting in the inconsistent application of incentives. EuroCham therefore suggests that all city and provincial governments be transparent in applying policies, ensuring a fair and equal playing field for projects in different areas.

Mr. Andreatta told VET that there needs to be stricter fines on businesses that violate intellectual property rights, so that foreign enterprises can operate more comfortably.

Moreover, foreign businesses want to resolve disputes via international arbitration, while at the same time domestic businesses need to respect international law and implement signed contracts in accordance with international standards.

Addressing Vietnam’s $34 billion trade surplus with the US, Mr. Jonathan Moreno, Chairman of the American Chamber of Commerce and Industry (AmCham), said it is particularly important for Vietnam to be seen as seriously addressing the numerous non-tariff technical barriers to trade mostly encountered at the border and the so-called behind the border barriers that restrict the activities of companies and hamper the flow of US exports into the country.

“Removing barriers to trade and improving market access will attract new investors to Vietnam,” Mr. Moreno said. “However, FDI is increasingly reliant on both expansion by investors who are already established as well as the accounts they provide to prospective investors. This means that future FDI depends on improving the general operating environment for businesses.”

He also believes that cutting the cost and complexity of doing business will benefit Vietnamese-owned businesses, many of which are small and medium-sized enterprises (SMEs), and will spur entrepreneurship, which will, in turn, ensure Vietnam’s future competitiveness and growth.

Circular No. 23, relating to the importation of second-hand machinery, was touched upon by the Japanese Business Association in Vietnam (JBAV), with it proposing the government be more flexible in allowing second-hand machinery imports to promote the country’s support industry and investment by Japanese businesses.

A representative from the Korean of Chamber of Commerce and Industry (KoCham) proposed an exemption of export duties on aluminum products, that branches, representative office, and project management offices from foreign countries be permitted to open bank accounts, and that the fire-fighting act be clarified in detail.

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