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Hi-tech projects: foreign guests reap more fruits than the landlord   2012-06-23 - Doanh Nhan

Samsung and Nokia have announced the huge investment projects worth billions of dollars, planning to earn billions of dollars a year from exports. Meanwhile, Vietnam, as the landlord, only would be able to collect little money in tax from them, while the added value of the products to be generated in Vietnam would be modest.

 

After many times of renewing the investment certificates, in early April 2012, Samsung Electronic Asia Holding Pte Ltd which registers business in Singapore, again asked the Bac Ninh provincial Industrial Zone and Export Processing Zone Board of Management to accept the shifting of Samsung Electronic Vietnam (SEV) from an inland enterprise into an export processing enterprise.



Explaining this, SEV said that this would help the company to take full advantage of the taxation and customs preferential policies, thus allowing it to cut costs and improve their competitiveness.



In order to cut down expenses, the investor has also competent agencies to allow SEV to continue enjoying the current incentives and some other preferences. It wants to have the right to import goods, sell the products it manufactures, or exports to the domestic market with no limitations on the quantity and number of sales agents.



It has also asked to be allowed to open sales branches located outside the export processing zone, which would sell products on the domestic market when necessary. It is also seeking the permission to make payment in convertible foreign currencies when dealing with inland enterprises or other export processing enterprises.



Not only having asked for investment incentives for itself, SEV has also suggested that its satellite businesses should be allowed to operate as export processing enterprises, and some other corporate or import tax incentives.



The high committed investment capital of 1.5 billion dollars has surprised many economists, who believe that the project deserves the investment incentives.



However, analysts have pointed out that though the investment capital is huge, the added value to be generated in Vietnam would be not big. This also means that the State would not collect much money in tax from the enterprises, once it has offered a series of incentives and tax reductions.



SEV once asked for the permission to exempt from the import tax imposed on all the materials and accessories to be imported to make Galaxy Tab for five years. The Ministry of Finance then refused the proposal, saying that the accessories which can be made domestically just can account for a very small proportion of the product, and they are not main accessories.



It’s undeniable that SEV’s presence in Vietnam has helped lure tens of satellite investors, which help develop the supporting industries – the thing that Vietnam really wants. However, the satellite enterprises have also demanded a lot of incentives, including the tax exemption or reduction.



SEV itself has stated that it would optimize the supply chain, when the suppliers to SEV also operate as export processing enterprises and enjoy similar incentives.



This means that the main thing Vietnam would obtain from the huge investment projects is the modest salary to the workers in the electronics part assembling factories. Meanwhile, there is no high hope about the technology transfer from the foreign investors, because very few domestic enterprises can join SEV’s production chain.



Some days ago, when SEV reported the export turnover of one billion dollars, some experts pointed out that this is should not be as a big achievement. In order to earn 1 billion dollars in turnover, the expenses spent might be up to 900 million dollars.



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