Last update 3/7/2012 8:51:00 AM (GMT+7)

Vietnam encourages FDI in hi-tech sectors, but still installs barriers

VietNamNet Bridge – Vietnam is calling for foreign direct investment (FDI) into high technologies. However, it would be an impossible mission, if Vietnam does not change its current policies.

Intel, Samsung, Nokia and Compal are the names that people regularly mention when talking about the hi-tech projects in Vietnam. However, in fact, not every project is considered a “high technology project” and receives preferential treatment.

Besides Intel, which makes chipset, is recognized as high technology project and enjoys investment incentives. Other names are not recognized as high technology projects, if referring to the list of high technology projects issued by the government.

In 2008, when receiving the investment certificate for the mobile phone factory Samsung Electronics (SEV) in Bac Ninh province, Samsung was recognized as a high technology enterprise.

However, when the investor expanded the project by raising the investment capital from 670 million dollars to 1.5 billion dollars, and planned to make printing machines, mobile phone batteries and cameras as well; the products were not listed as high technology products. As a result, the investor can only enjoy some incentives after entreating a specific mechanism from the government.

Nokia was in the same situation. If referring to the current laws, Nokia does not have enough conditions to be recognized as a high technology company. The Article No. 18 of the High Technology Law, which has been valid since July 1, 2009, stipulates that enterprises must meet five conditions to be recognized as high technology enterprise and enjoy the incentives at the highest level.

Meanwhile, Nokia could not satisfy the requirements. When considering the project, relevant ministries and branches had to discuss thoroughly to find out a preferential mechanism for Nokia.

Even the experts from the Ministries of Finance, and Industry and Trade said that if referring to the law, no enterprise in Vietnam would satisfy the requirements to be recognized as high technology enterprise.

If referring to the old regulations, from the day the Vietnam Foreign Investment Law took effect to 2006, only 11 enterprises were recognized as high technology enterprises.

Some analysts have pointed out that it is impossible to satisfy the requirements of the Article No. 18 of the law.
The High Technology Law also sets up the requirements on the total costs for the research and development work, which is believed the most difficult requirement. Under the law, the total average expenses of high technology enterprises for R&D activities in Vietnam in three consecutive years must be equal to at least one percent of the total annual revenue. Meanwhile, the expenses on R&D from the fourth year must be higher than one percent of total revenue.

Samsung has shown its determination to fulfill its investment commitments by planning to pour tens of millions of dollars to build a R&D center in Hanoi.

However, Kim Yong Seok, Planning Director of Samsung Complex, said that Samsung may have to ask the government to adjust the required spending on R&D, because one percent of revenue is too much.

In 2011, when checking the investment projects in the high tech park in HCM City, the board of management of the park found out that very few investors have fulfilled their commitments about R&D activities.

Experts do not think that foreign investors deliberately break the commitments, but they simply cannot fulfill the promises. The regulation about the percentage of laborers at R&D centers, for example, proves to be unfeasible to many enterprises.

Compal, the computer manufacturer in Vinh Phuc province, has also warned that with the current mechanism, even the big investors in Vietnam would leave or do not intend to expand their business in the country.

Source: TBKTVN