Vietnam - FIEs may have to stop operation because of procedures

VietNamNet Bridge – Nearly 800 foreign invested enterprises (FIEs) in HCM City are facing the risk of getting dissolved or having to stop operation because they cannot make the re-registration, as requested by the 2005 Investment Law and Enterprise Law.

A lot of foreign investors try to re-register their operation in accordance with the new laws, but they still have not completed the re-registration formalities due to the technical problems.

In the document sent to the Prime Minister, HCM City authorities informed that a lot of profitable FIEs may have to stop operation in 2012. Some FIEs have even one more month to operate as written down in the investment license.

According to the HCM City People’s Committee, since July 1, 2011, the deadline for re-registration, the city has not received any applications for re-registration any longer as stipulated in the relating laws.

However, three FIEs still have requested to help them fulfill the procedures for re-registration in order to be able to extend the operation duration. These include the Saigon Joubo Textile Company, SKF Vietnam and RMIT Vietnam, an international university.

These are three cases among the FIEs which need to make re-registration in order to continue their operation but have not fulfilled the procedures.

Also according to the city’s authorities, there are 784 FIEs, or 20 percent of the enterprises still allowed to operate, which have been operating under the investment licenses granted prior to July 1, 2006.

Of this amount, 27 enterprises would have to terminate their operation in 2012 since their investment licenses would expire this year. Meanwhile, 174 more FIEs would also have to stop operation in the period from 2013 to 2020, if they cannot fulfill necessary procedures by that time.

Making a re-registration is just an administrative formality. However, if the administrative formality is not followed, FIEs would have to stop operation, when their investment licenses expire.

The FIEs established prior to July 1, 2006, which want to register more business fields and extend the operation duration are mostly the profitable ones. Big enterprises have made heavy investment in machines, technologies, equipment and infrastructure items in their long term investment plans in Vietnam. They need more time to develop their business, take back the investment capital and make profits.

The HCM City’s authorities have warned that if the 800 FIEs have to dissolve, this would have big impacts on the socio-economic life of the city and Vietnam. A lot of workers would lose jobs, which would lead to the lower state budget collection. More importantly, this would create uncertainties to the national economy and worsen the investment environment.

This does not come in line with the Vietnamese consistent policy on encouraging and supporting enterprises’ operation, so that they can make great contribution to the socio-economic development.

In the immediate time, 27 enterprises would have to stop operation because they cannot extend the licenses. This spells that the city would see the foreign direct investment capital drop by 672 million dollars and the chartered capital drop by 634 million dollars. These are really significant figures, especially when the city tries to attract more investment and needs capital.

Two solutions have been suggested to settle the problem. In the first one, the Prime Minister would allow to extend the operation of FIEs by granting new licenses adjusting the operation duration.

In this case, FIEs can continue operating in the business fields stipulated in the investment licenses granted before. However, they would not be able to enjoy the investment incentives until new regulations come out.

With the second scenario, foreign investors would be granted investment certificates on setting up businesses with new names.

Source: TBKTSG

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