Mechanical Firms Demand Preferences

“Domestic companies have suffered so many disadvantages in comparison with FDI enterprises” said Mr Dao Phan Long, Vice President of the Vietnam Association of Mechanical Industry (VAMI). The underlying reasons to this reality come from the Government’s less investment for metallurgical mechanical industry than other economic sectors such as electricity, transportation and telecommunications.

 

VAMI President Nguyen Van Thu said, “We could spare VND30 trillion to revive the real estate industry while the mechanical industry received less than VND30 billion for development although it is regarded as one of backbone industries of the country”.

 

Mr Le Van An, General Director of Agriculture & Irrigation Mechanization and Electrification Corporation (AGRIMECO), cited that domestic companies have to pay land taxes while foreign-invested ones enjoy more preferences, including land tax exemption in the first four years and a 50 per cent reduction from the fifth to ninth years together with many other incentives.

 

For example, Formosa, a foreign-invested steelmaker in Vung Ang Economic Zone (Ha Tinh province), which is being accused of polluting the environment by discharging wastes into the sea, does not have to pay land rent or land-use fee, enjoy an import tax exemption in five years, a preferential corporate income tax of 10 per cent in 15 years since the official operation of the project, and an income tax exemption in four years since the year with taxable income and a 50 per cent reduction in the next nine years.

 

Mr Thu said Vietnam is falling into tender trap in the mechanical industry. As lower prices win bids, general contracts are awarded to Chinese companies. And, domestic companies are hired as subcontractors.

 

Moreover, foreign general contractors bring not only old machines but also workers to Vietnam. They also cause environmental pollution and long-term harm.

 

“We have to accept to be cheaply employed in our own country. The mechanical industry in particular and Vietnamese companies in general is wiped out and lose business opportunities,” he added.

 

Thu said that many domestic mechanical enterprises have boldly invested to import expensive advanced manufacturing technologies from Europe and the United States and hire foreign experts to consult, operate, design and manage their business to enhance competitiveness. “Mechanical businesses do not blame policies or the State but they want the market, employment, trust and respect. Let businesses have the market and have ground for living. Don’t appoint contractors, award contracts or hold bids just for showing,” he stressed.

 

He noted that VAMI asked the Prime Minister for solutions to competitiveness improvement, especially when Vietnam joins the Trans-Pacific Partnership (TPP).

 

VAMI also proposed the National Assembly and the Government review and revise land tax or exempt and reduce land tax for a certain period for domestic manufacturing enterprises in general and mechanical enterprises in particular. According to VAMI, the law on non-agricultural land tax still raises difficulty to production enterprises. Moreover, due to investment attraction policies, at present, many FDI firms are offered land tax exemption or reduction, which results in inequality in competition among businesses. VAMI asked the Government and the Ministry of Industry and Trade to consider applying preference policies in support of the development of mechanical industry.