New role of State Audit in attracting new-generation FDI ​

The scientific workshop on enhancing the effectiveness of FDI attraction and the role of the State Audit of Vietnam (Photo: VietnamPlus) 

Hanoi (VNA) – The State Audit of Vietnam (SAV), through its regular auditing activities, has discovered many violations of law by foreign-invested enterprises in various fields such as environmental protection, land use, and transfer pricing, said Deputy Auditor General Doan Xuan Tien.

In a presentation at a scientific workshop on June 9 on enhancing the effectiveness of FDI attraction and the role of the SAV, the Deputy Auditor General said based on those findings, the SAV has made recommendations to management agencies regarding the amendment and addition of regulations to correct shortcomings and fill in loopholes in mechanisms and policies.

Tien highlighted the great contribution made by foreign investors and FDI enterprises to economic development in Vietnam, noting that they have supplied a remarkable amount of much-needed capital for development investment.

He cited figures that showed since the promulgation of the Law on Foreign Investment in 1987, Vietnam has attracted more than 30,000 investment projects from 130 countries and territories with combined registered capital amounting to 362 billion USD, with 211 billion USD already disbursed. FDI projects have contributed to GDP growth and State budget revenues, as well as exports. They also put pressure on domestic enterprises, forcing them to renew technology, expand export markets and strengthen trade links.

FDI enterprises also helped enhance productivity through the introduction of advanced production technologies and modern corporate governance. Besides, they played a role in facilitating Vietnamese enterprises’ participation in global production networks and supply chains.

Half of FDI enterprises report losses

Besides the good points, there are also negative sides in the FDI sector with remarkable impacts, according to the Deputy Auditor General.

He cited as an example the fact that as many as 50 percent of FDI enterprises reported losses, one of the reasons for which is transfer pricing.

“What is illogical here is that despite reporting repeated and big losses, many FDI enterprises continued to expand production and business scale (for example Coca Cola or Pepsi). It is worth mentioning that while FDI enterprises reported losses, most domestic businesses in the same sector reported profits, especially in the garment-textile and leather-footwear industries,” Tien said.  

The SAV estimated that transfer pricing by FDI enterprises resulted in losses amounting to trillions of VND to the State budget.

Limited role of SAV

Through annual auditing activities, the SAV has detected many violations of regulations involving FDI enterprises and made recommendations to management agencies on how to correct the shortcomings and loopholes in regulations and policies.

Deputy Auditor General Tien also admitted that the SAV still plays a limited role in auditing FDI attraction policies and their implementation.

He said a legal basis is lacking for the SAV to audit the promulgation of policies on FDI attraction and assess the implementation of those policies.

In fact, SAV auditors have only conducted auditing of some small links in the FDI sector’s operation. In addition, the coordination between the SAV and other State management agencies faces many obstacles due to a lack of legal basis.

Policies to attract FDI and measures to implement those policies are very complicated, while many FDI projects have big scales and increasingly use modern technologies, which require auditors to constant enhance their knowledge and professional skills in order to be able to work in new waters.

Therefore, the SAV held the scientific workshop to seek solutions to improving the quality and effectiveness of auditing activities in connection with attracting healthy FDI, cleaning up the investment environment and helping Vietnamese enterprises increase their competitive capacity.

The workshop also aims to analyse, discuss and compare viewpoints, thus clarifying the role of the SAV in FDI attraction, thus contributing to tightening discipline and order in the national finance system, Deputy Auditor General Tien emphasized./.