Vietnam - Local authorities criticized for favoring big FIEs more than small ones

VietNamNet Bridge – While local authorities are ready to create most favorable conditions for foreign investors, they seem to “forget” small ones, which experts believe, would restrict the impacts of foreign direct investment (FDI) on the national economy.

Bac Ninh provincial authorities have succeeded in attracting the world’s biggest conglomerates to the locality. Canon and Sumitomo from Japan, Samsung, Orion from South Korea, Foxconn from Taiwan, Tyco Electronics from the US, ABB from Sweden and most recently, Nokia from Finland all have set up their production bases in the northern province.

The leaders of Bac Ninh province would be certainly pleased if they know that a South Korean investor said he chose Bac Ninh because of the cooperative attitude of the provincial authorities.

A recent survey conducted by the Institute for Development Studies IDS, an arm of the Vietnam Chamber of Commerce and Industry VCCI on the driving force for economic reform has also found that local authorities have made every effort to create most favorable conditions for foreign investors to implement their projects.

However, the survey, conducted in four provinces in Vietnam, including Bac Ninh, Hung Yen in the north, and Dong Thap and Ca Mau in the south, has also found out that the same treatment has not been made equally to all enterprises.

Dau Anh Tuan, Deputy Head of the Legal Department of VCCI, said that the unequal treatment can be seen most clearly in Bac Ninh province. At the direct interviews, small enterprises in the locality said that the local authorities have “close ties with big enterprises, especially foreign invested enterprises FIEs.”

The leaders of the provinces have also said that when big enterprises need support, they can complain directly to the high ranking leaders of the local authorities. They believe that this is the best way for them to understand the enterprises’ problems and help settle the problems quickly.

Meanwhile, according to Tuan, small enterprises do not have such opportunities. They mainly have to meet local associations or low ranking officials of the local authorities.

The report made after the survey for the provincial competitiveness index (PCI) in 2010 showed that 43.6 percent of the 101 interviewed businesses in Bac Ninh “feel that the local authorities prioritize to attract FDI rather than developing the private economic sector. Especially, FIEs get special preferences in land allocation.”

“In order to attract foreign investors, the host localities provide “ready clean land” at preferential prices. The favor has brought disadvantages to small enterprises,” Tuan said, “especially when more and more big investors hold the land strictly but do not implement the registered projects.”

The noteworthy thing is that the discriminatory treatment not only has been seen in Bac Ninh.

The survey has also found the same situation in Hung Yen province, where more than 70 percent of polled businesses said FIEs get more favors in land access, and 40 percent said the provincial authorities pay more attention to attracting FDI than private investors.

The local enterprises also complained that they had also been blocked by the big investors from other localities.

Experts have warned that this is a big problem of local authorities, which may lead to the decrease in the enterprises’ confidence on the local authorities and badly affect the relations among enterprises.

Pham Thi Thu Hang, Secretary General of VCCI, said the survey has pointed out the key role in the economic management improvement of the private economic sector, and the differences in development of local economies.

Hung Yen and the neighbor Bac Ninh, are believed to have similar development conditions, but they still have different features in economic development.

The private economic sector in Bac Ninh province has made a great contribution to the reform by showing their opinions in regular dialogues with the local authorities on controversial issues.

Source: TBKTSG

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