We have inspected and tightened control over foreign-invested projects. Why?
Because foreign direct investment (FDI) has two sides. We cannot deny the role of FDI in the last over 20 years. Without FDI, we would have not achieved today’s growth and economic structure. The Prime Minister has assigned the Ministry of Planning and Investment (MoPI) to summarize the operation of this sector in the past two decades.
However, provinces have designed over-incentive polices to attract FDI and built a lot of industrial zones to serve foreign investors.
Inspection shows that many investors enjoy maximal land-tax reduction while local governments have to revoke land of local residents to give to investors. Foreign-invested enterprises are also exempted or enjoy maximal reduction of other kinds of taxes. They do not have to pay any taxes in the first five years of operation, only 5 percent of corporate income tax after that and only 10 percent of corporate income tax ten years later.
After all, investors support provinces or vice versa? Provinces have not benefited much from FDI after tens of years. In addition, some foreign-invested enterprises always report losses but they keep expanding production. Foreign investors must bring money into Vietnam to invest but they mainly raise domestic capital.
FDI, thus, must be inspected to see how foreign investors raise capital in Vietnam and how much of capital they have brought into Vietnam. Based on the inspection, we will have measures to deal with these matters and to restore order. Moreover, some foreign-invested firms have recently discharged untreated waste to the environment.
We tighten control over FDI because of economic difficulty?
No, we have realized problems associated with FDI so we have to correct it. FDI must be capable groups which operate in Vietnam in the long run and participate in sustainable and qualified development, not the FDI that brings nothing to Vietnam.
We have to prevent foreign investors from taking advantage of our incentive policy to make price transfer and dodge taxes. Vietnam needs to restructure foreign investment attraction, emphasizing on investors with advanced technology, particularly environmentally friendly technology.
The period that we roll out red carpet for inviting foreign investors at any cost has been over; otherwise Vietnam will become a processing and assembly market.
Tightening control over FDI is accidentally implemented at the time of difficulty of some may think that Vietnam tightens control over FDI because of economic difficulty. But price transfer has been mentioned for years, since FDI entered Vietnam.
Why we deal with it until now?
Price transfer has happened a long time ago, but at small scale, and at the same time we were in need of attracting FDI so we did not fully analyze it. Gradually, we have detected many problems. Investors always report losses but they keep expanding production.
It’s time to check and closely manage the foreign-invested sector. This is a must-do task, though it is difficult.
Phuong Loan
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