Vietnam’s export relies on foreign-invested sector

The majority of the exports in the first nine months of the year came from foreign invested enterprises (FIEs). Experts have warned that domestic enterprises would “die” or be swallowed by foreign sharks.

 

 

 

 

 

A report of the Ministry of Industry and Trade showed that Vietnam exported $96.27 billion worth of products and services in the first nine months of the year, an increase of 15.5 percent over the same period of the last year.

The high export achievements did not make government officials happy. Of this amount, FIEs brought the turnover of $58.69 billion, or 61 percent of the total export turnover, not including the crude oil exports. This means that the foreign invested economic sector, not domestic enterprises, was the major momentum of the economic growth.

FIEs exported $15.4 billion worth of phones and phone accessories out of the total $15.521 billion. They exported $7.568 billion worth of computers, electronics and electronic parts out of the total $7.568 billion. The figures were $4.6/$6 billion in footwear, $7.8/$13 billion in garments and $1.6/$2.6 billion in wooden furniture products.

FIEs were also the big exporters of farm produce, in which domestic enterprises have great advantages. They exported $0.67 billion worth of coffee products out of the total $2.2 billion and $0.4/4.6 billion worth of seafood products.

An official of the Ministry of Industry and Trade has admitted that Vietnam, which strives to the sustainable export development, cannot rely on FIEs, but needs to boost exports with the inner strength of domestic enterprises.

Vu Tien Loc, Chair of the Vietnam Chamber of Commerce and Industry (VCCI), in an interview given to Dau tu newspaper, commented that the Vietnamese export-oriented economy is now running with just one engine – the foreign invested economic sector.

Dr. Nguyen Minh Phong, a well-known economist, also said he can see problems in the FIEs’ dominance in export. It is obvious that domestic enterprises have fewer advantages than FIEs.

Meanwhile, though making up a high export proportion, FIEs have not created positive influences to the national economy. The FIEs only assemble products in Vietnam with the import materials for export, while they have not made contribution to the development of Vietnam’s industries.

Samsung, for example, exported $20 billion worth of products, but it imported $19 billion worth of input materials. Meanwhile, it enjoys big tax incentives which are not given to domestic enterprises.

Bui Kien Thanh, also a well-known economist, agrees that domestic enterprises are at a disadvantage compared with FIEs.

Domestic enterprises have to borrow money from domestic banks at the high interest rates of 10-20 percent, while FIEs pay 1-2 percent only. FIEs can enjoy tax incentives and preferences in land using.

Thanh emphasized that the overly high interest rates have burdened domestic enterprises. While FIEs’ export turnovers have been increasing rapidly, domestic enterprises have been struggling just to survive.

“The State needs to reconsider the monetary policies, taxes, fees and other policies, or domestic enterprises would die or be swallowed by foreign sharks,” Thanh said.

Phong warned that if the current situation cannot be improved, domestic enterprises would get more ailing. Meanwhile, Vietnam cannot rely on FIEs, which FIEs may leave Vietnam in the future, when they cannot enjoy investment incentives any more, for the countries with promised higher profits.

Vietnam’s export relies on foreign-invested sector