Ministry concerned over trade surplus of FIEs

Vice Minister of Industry and Trade Nguyen Thanh Bien said that the operation of foreign-invested enterprises (FIEs) in Vietnam’s export import need to be supervised carefully and cautiously.

Total import expenditure of Vietnam during the first six months of 2011 was estimated at $48.9 billion, a year-on-year rise of 25.8%. Growth rate in import of FIEs was higher than that of local busineses. In Jan-June, domestic companies spent $27.6 billion on imports, up 22.9% while FIEs’ import spending surged 29.7% to $21.4 billion.

Export turnover of the country as a whole during the period reached $42.3 billion, up 30%. Including crude oil FIEs saw trade surplus of $15.4 billion. Excluding oil, the group of FIEs made a trade deficit of $1.83 billion in the first half of this year.

In the margin of H1 import export conference held on July 6, Vice Minister assessed that FIEs’ trade deficit was attributed to higher import of machines, equipments for production. Most of these equipments and machines are used for petroleum exploration and drilling.

But, he added, it is necessary to supervise operations of FIEs in Vietnam’s import export because the market share of the corporate group in some fields such as transporting equipments, components, industrial and processed products accounted for up to 80-90%.

Before Vietnam joined World Trade Organization (WTO), FIEs had enjoyed a lot of incentives provided that they had to focus on pouring capital to develop production in Vietnam, creating jobs. They were only allowed to import commodities for production in Vietnam, disallowed to import goods for direct business as distribution, retailing.

However, as Vietnam became WTO member, FIEs are treated equally according to regulations of most-favored nation (MFN). Some firms took advantages of distribution right as WTO commitments to import goods from their parent company to sell in Vietnam. Even few others narrowed production in Vietnam and concentrated more on trading operation. Thus, FIEs are enjoying more advantages than local rivals in imports (because of incentives), goods sources and prices.

Bien said, Ministry of Industry and Trade planned to work with Ministry of Planning and Investment in management decentralization for FIEs. The target of the government is to attract foreign investment in production fields. The State does not encourage FIEs to invest in non-production because the investment fields do not generate goods or foreign currency for macro-economic stability target.

Posted by VBN on Jul 8 2011. Filed under Investment. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry