Foreign direct investment (FDI) has brought major economic benefits butnew issues have emerged, requiring the Government to introduce newmeasures to effectively utilise this vital source of capital, theEnglish language version of the Nhan Dan (People) newspaper reported.
Expertssay that the Government, ministries, agencies and provincialauthorities should strengthen their FDI management, to turn FDI into atrue lever to boost economic growth, contributing to nationalindustrialisation and modernisation.
According to the ForeignInvestment Agency (FIA) under the Ministry of Planning and Investment(MPI), as of July 20, Vietnam had 16,813 FDI projects with totalregistered capital of over 242.4 billion USD, more than half of whichhad been disbursed.
In general, both economic experts andmanagement officials agreed that FDI had brought great economic benefitsto Vietnam , as evidenced by the advent of new technology, strongexports, shifting economic structure and creation of jobs. FDI projectsalso created a spillover effect to draw smaller manufacturers into theproduction chain, helped Vietnamese companies gain administrative andmanagement experience from foreign enterprises, and enhanced theeffectiveness of international economic cooperation and Vietnam ’sposition in the international arena.
However, former FIA DirectorPhanHuuThang said that among more than 16,000 FDI projects for over thelast 26 years, up to over 13,500 are wholly foreign invested while onlya modest 2,860 are joint ventures. Thus, technology transfer is veryscarce. Even with high-tech projects, technical employees are restrictedto their own areas of the workplace. Another issue is that FDI intoagriculture and fish farming accounts for a very small proportion and isdeclining. In previous years, the ratio was as high as 15 percent buthas dropped to just 1-2 percent of total registered capital.
Accordingto the MPI, most of FDI projects in Vietnam (about 80 percent) areemploying intermediate-level technology. Some even use obsoletetechnology that consumes excessive energy and is harmful to theenvironment.
Although FDI attraction is growing steadily, theratio of added value to production value remains low. Director of theBac Ninh Department of Industry and Trade, Vu Duc Quyet admitted thatexports from FDI enterprises based in the province grew strongly, butthe trade surplus was still only around 2 billion USD and the ratio ofadded value fell from 13.3 percent in 2011 to 8 percent in 2013. Quyetexplained that the electronics manufacturing sector, which made up 70percent of Bac Ninh’s FDI, required a strong auxiliary industry whilethe whole country and Bac Ninh in particular were unable to meet thisrequirement.
For example, the Samsung complex in Vietnamneeded 300 providers of spare parts of various sizes so the company hadto bring other Korean manufacturers to form a value chain and this wasout of the control of Vietnamese authorities. General Director of theSamsung complex in Vietnam , Shim Won Hwan was quoted as saying thatif Vietnamese manufacturers could meet Samsung’s requirements, thecompany was ready to place orders because it was more effective thanbuying parts abroad.
Apparently, there is still a gap and lack oflinkage between domestic and FDI enterprises and the FDI sector’seffect on other sectors of the economy is still very limited. Someenterprises poured money into assembly projects with energy-consumingand environmentally harmful equipment and machinery.
The sourceand quality of workers are also knotty problems to foreign investors,with some large projects unable to proceed due to a lack of trainedemployees. General Director, Shim Won Hwan said frankly that in Vietnamtoo much importance is placed on formal qualifications, while there is aserious lack of attention on vocational training, which is in contrastwith German, Japan and the Republic of Korea. Samsung was struggling tofind enough employees for their expansion in Vietnam . The VietnameseGovernment should paid more attention to developing support industryand training high-quality human resources.
According to theBacNinh Taxation Agency, the majority of FDI enterprises comply fullywith tax regulations. However, from recent investigations, the Bac NinhTaxation Agency discovered that Viet Pacific Clothing Company wasengaged in transfer pricing and has collected arrears of 14 billionVND(658,000 USD).
Many localities are beginning to adjust theirstrategies in a bid to remedy shortcomings in the attraction and use ofFDI. According to Director of Hai Duong provincial Department ofPlanning and Investment, Vuong Duc Sang the province has built a list ofareas in which the province limits FDI capital, does not encourage FDIor does not provide investment certificates.
The province willnot allow FDI in a non-manufacturing sector, projects wasting energy andnatural resources, projects using backward technology or projects thatare likely to pollute the environment, he noted.
Meanwhile,Director of Dong Nai provincial Department of Planning and Investment,Bo Ngoc Thu said that the province was making every effort to draw FDIcapital in the right direction by facilitating investment in supportindustries, in 'green' industries and in industrial zones.
Regardingtransfer pricing of FDI enterprises, General Director of TaxationDepartment, Bui Van Nam said that management over tax payments from FDIenterprises had been strengthened. From 2013, the Taxation Departmentordered tax agencies at all levels to list high-risk enterprises, and tobuild appropriate plans to inspect and supervise their operations with afocus on tax bill violations, and suspicious banking transactions,among others.
The General Director affirmed that 30 percent ofthe total 20,000 FDI enterprises revealed dubious signs. Since earlythis year, the taxation sector has inspected nearly 1,000 FDIenterprises that reported losses and had signs of transfer pricing,collecting around 30 trillionVND (1.41 billion USD) in tax arrears. Themove has produced an effect on FDI enterprises, with an obviousreduction of enterprises declaring losses.
To better manage FDIcompanies, the taxation sector will concentrate on measures to detectand handle tax bill violations, trade fraud related goods origin,commodities with abnormal revenue, enterprises with high tax arrears andhigh losses, firms temporarily importing materials for re-exporting andso on.
For example, the Department of Industry and Trade of BacNinh province required Samsung Group to pledge a profit not less than 2percent of its total turnover during negotiations before accepting thegroup's investment in the province. In addition, the province also askedSamsung to invest 0.75 percent of its total revenue in research,development and technology transfer activities.
According toDirector Thang, Vietnam should clarify its strategy on attractingFDI, including strategic partners such as Intel and Samsung, as now wasnot the time to attract FDI at all costs.
He suggested the Stateenhance the efficiency of FDI management, complete the legal system andreform administrative procedures, among other measures, to lure foreigninvestment into targeted areas such as support industries, high-techsector and agricultural, forestry and fisheries sectors.-VNA
Expertssay that the Government, ministries, agencies and provincialauthorities should strengthen their FDI management, to turn FDI into atrue lever to boost economic growth, contributing to nationalindustrialisation and modernisation.
According to the ForeignInvestment Agency (FIA) under the Ministry of Planning and Investment(MPI), as of July 20, Vietnam had 16,813 FDI projects with totalregistered capital of over 242.4 billion USD, more than half of whichhad been disbursed.
In general, both economic experts andmanagement officials agreed that FDI had brought great economic benefitsto Vietnam , as evidenced by the advent of new technology, strongexports, shifting economic structure and creation of jobs. FDI projectsalso created a spillover effect to draw smaller manufacturers into theproduction chain, helped Vietnamese companies gain administrative andmanagement experience from foreign enterprises, and enhanced theeffectiveness of international economic cooperation and Vietnam ’sposition in the international arena.
However, former FIA DirectorPhanHuuThang said that among more than 16,000 FDI projects for over thelast 26 years, up to over 13,500 are wholly foreign invested while onlya modest 2,860 are joint ventures. Thus, technology transfer is veryscarce. Even with high-tech projects, technical employees are restrictedto their own areas of the workplace. Another issue is that FDI intoagriculture and fish farming accounts for a very small proportion and isdeclining. In previous years, the ratio was as high as 15 percent buthas dropped to just 1-2 percent of total registered capital.
Accordingto the MPI, most of FDI projects in Vietnam (about 80 percent) areemploying intermediate-level technology. Some even use obsoletetechnology that consumes excessive energy and is harmful to theenvironment.
Although FDI attraction is growing steadily, theratio of added value to production value remains low. Director of theBac Ninh Department of Industry and Trade, Vu Duc Quyet admitted thatexports from FDI enterprises based in the province grew strongly, butthe trade surplus was still only around 2 billion USD and the ratio ofadded value fell from 13.3 percent in 2011 to 8 percent in 2013. Quyetexplained that the electronics manufacturing sector, which made up 70percent of Bac Ninh’s FDI, required a strong auxiliary industry whilethe whole country and Bac Ninh in particular were unable to meet thisrequirement.
For example, the Samsung complex in Vietnamneeded 300 providers of spare parts of various sizes so the company hadto bring other Korean manufacturers to form a value chain and this wasout of the control of Vietnamese authorities. General Director of theSamsung complex in Vietnam , Shim Won Hwan was quoted as saying thatif Vietnamese manufacturers could meet Samsung’s requirements, thecompany was ready to place orders because it was more effective thanbuying parts abroad.
Apparently, there is still a gap and lack oflinkage between domestic and FDI enterprises and the FDI sector’seffect on other sectors of the economy is still very limited. Someenterprises poured money into assembly projects with energy-consumingand environmentally harmful equipment and machinery.
The sourceand quality of workers are also knotty problems to foreign investors,with some large projects unable to proceed due to a lack of trainedemployees. General Director, Shim Won Hwan said frankly that in Vietnamtoo much importance is placed on formal qualifications, while there is aserious lack of attention on vocational training, which is in contrastwith German, Japan and the Republic of Korea. Samsung was struggling tofind enough employees for their expansion in Vietnam . The VietnameseGovernment should paid more attention to developing support industryand training high-quality human resources.
According to theBacNinh Taxation Agency, the majority of FDI enterprises comply fullywith tax regulations. However, from recent investigations, the Bac NinhTaxation Agency discovered that Viet Pacific Clothing Company wasengaged in transfer pricing and has collected arrears of 14 billionVND(658,000 USD).
Many localities are beginning to adjust theirstrategies in a bid to remedy shortcomings in the attraction and use ofFDI. According to Director of Hai Duong provincial Department ofPlanning and Investment, Vuong Duc Sang the province has built a list ofareas in which the province limits FDI capital, does not encourage FDIor does not provide investment certificates.
The province willnot allow FDI in a non-manufacturing sector, projects wasting energy andnatural resources, projects using backward technology or projects thatare likely to pollute the environment, he noted.
Meanwhile,Director of Dong Nai provincial Department of Planning and Investment,Bo Ngoc Thu said that the province was making every effort to draw FDIcapital in the right direction by facilitating investment in supportindustries, in 'green' industries and in industrial zones.
Regardingtransfer pricing of FDI enterprises, General Director of TaxationDepartment, Bui Van Nam said that management over tax payments from FDIenterprises had been strengthened. From 2013, the Taxation Departmentordered tax agencies at all levels to list high-risk enterprises, and tobuild appropriate plans to inspect and supervise their operations with afocus on tax bill violations, and suspicious banking transactions,among others.
The General Director affirmed that 30 percent ofthe total 20,000 FDI enterprises revealed dubious signs. Since earlythis year, the taxation sector has inspected nearly 1,000 FDIenterprises that reported losses and had signs of transfer pricing,collecting around 30 trillionVND (1.41 billion USD) in tax arrears. Themove has produced an effect on FDI enterprises, with an obviousreduction of enterprises declaring losses.
To better manage FDIcompanies, the taxation sector will concentrate on measures to detectand handle tax bill violations, trade fraud related goods origin,commodities with abnormal revenue, enterprises with high tax arrears andhigh losses, firms temporarily importing materials for re-exporting andso on.
For example, the Department of Industry and Trade of BacNinh province required Samsung Group to pledge a profit not less than 2percent of its total turnover during negotiations before accepting thegroup's investment in the province. In addition, the province also askedSamsung to invest 0.75 percent of its total revenue in research,development and technology transfer activities.
According toDirector Thang, Vietnam should clarify its strategy on attractingFDI, including strategic partners such as Intel and Samsung, as now wasnot the time to attract FDI at all costs.
He suggested the Stateenhance the efficiency of FDI management, complete the legal system andreform administrative procedures, among other measures, to lure foreigninvestment into targeted areas such as support industries, high-techsector and agricultural, forestry and fisheries sectors.-VNA
