VINACHEM

Vietnam’s economic growth is still heavily dependent on foreign invested enterprises (FIEs), especially conglomerates.

According to a report from the General Statistics Office (GSO), in July, Vietnam exported $17.5 billion, a decrease of 1.7 percent compared with the month before. Of this amount, Vietnamese enterprises exported $4.9 billion, and FIEs $12.6 billion.

Compared with exports of the same period last year, Vietnam’s export turnover increased by 17.9 percent, including 13.1 percent from Vietnamese enterprises and 19.9 percent from FIEs.

As such, in the first seven months of 2017, the total export turnover reached $115.2 billion, up by 18.7 percent in comparison with the same period last year.

While Vietnamese enterprises exported $32.2 billion worth of products, FIEs exported $83 billion.

Vu Hong Thanh, chair of the National Assembly’s Economics Committee, said he can see problems as economic growth depends on external sources.

Vietnam has been trying to attract foreign direct investment (FDI) by offering big investment incentives to investors. The Ministry of Planning and Investment (MPI) and other agencies often release reports about FDI registration as examples of economic achievement.

However, as Thanh pointed out, Vietnam still cannot exploit fully the investments. If the national economy becomes too reliant on FIEs, internal strength will weaken.

Pham Chi Lan, a renowned economist, commented that Vietnam has been relying on FIEs to obtain high achievements in export and economic growth, but this cannot ensure sustainable growth.

Lan expressed concern about investment incentives offered to foreign investors. While FIEs have privileges in land and capital access and tax rates, Vietnamese enterprises do not enjoy the incentives.

Lan said it was unnecessary to offer so many incentives to foreign investors. “Reducing the high investment incentives for foreign investors, creating a leveling playing field for all enterprises and punishing FIEs which conduct transfer pricing all should be done,” she said.

Lan warned that once the investment incentives expire, FIEs would leave Vietnam and head for new fertile land.

Nguyen Van Ngai from the HCM City Agriculture & Forestry University commented that when foreign enterprises invest in Vietnam, their products made in Vietnam contribute to Vietnam’s GDP (gross domestic product), but not to GNP (gross national product).

Ngai warned that many Vietnamese businesses will go bankrupt when more South Korean, Japanese and US investors with advanced technology, powerful financial capability and experience enter the market. - Source: VNN -