Sunday, August 20, 2017 - 22:43:32

Foreign firms steer clear of production

Print

Foreign invested enterprises (FIEs) are paying more heed to distribution and importing than actually producing anything locally.

This is because they enjoy many incentives from reductions in import tariff reductions – sometimes down to zero – and other preferential policies after the country joined the World Trade Organisation (WTO).

Industry insiders said that production, which create more jobs for local labourers and transfer vital technology, cost more for FIEs to establish than the commercial field.

Now, instead of pouring money into Vietnam for production, FIEs tend to operate as traders only by importing goods from their countries and then selling them in Vietnam . Consequently, domestic industries are becoming more dependent on foreign countries.

According to the Hai Quan (Customs) newspaper, nearly 20 years ago, the Japan-based Sony company began its investment in Vietnam with only one assembly line and about 200 local workers.

In 2008, the company announced that it decided to halt operations in the country, meaning that it was not planning to invest any more money for production. However, Sony-branded products still sell like hot cakes.

Many other huge foreign corporations have been establishing distribution networks instead of investing more money in production.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said that the new FIE trend will affect adversely the country's inflation and trade deficit, and prevent it from building a healthy industrial atmosphere.

A representative of Vinaxuki JSC said that it is now unlikely that a domestic auto industry will be created, adding that the number of auto and motorbike producers has been squeezed down to 10 from 70 companies in the past.

He said this proves that FIEs tend to switch from production to distribution and importing.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, Vietnam's plan to disburse total foreign direct investment capital of 11.5 billion USD for the entire year might fall short as FIEs have disbursed only 10.05 billion USD in the past 11 months.

Meanwhile, FIE import revenues fetched 43.49 billion USD in the past 11 months, a year-on-year increase of 31 percent, showing the sector had imported significantly.

In terms of creating jobs in the past 10 years, FIEs have hired about 1.7 million local workers, accounting for 10 percent of demand.

Deputy Minister Bien said that the import-tariff schedule needs to be reviewed as well as the FIE mechanism of switching from production to imports and distributions.

He said this should be done while assessing import-export management so that regulations on granting distribution and import licences for FIEs can be properly adjusted./.
Your comments about this article ...
Others