Nokia case signals hard approach

The Vietnamese government has shown it will not play favourites by once again going slow on Nokia’s request for generous investment incentives.

Deputy Prime Minister Hoang Trung Hai last week ordered the Ministry of Planning and Investment and Bac Ninh People’s Committee to get Nokia’s commitments for its proposed $275 million mobile handset manufacturing project in the province before deciding what incentives would be granted.

Hai said Nokia had to make clear its commitment to manufacturing technologies used at the factory and their benefits to Vietnam. Meanwhile, government bodies and Bac Ninh People’s Committee must develop a mechanism to supervise Nokia’s implementation of its commitments.

The order came after the mobile phone maker once again proposed that its project should be recognised as a high-tech project and thus receive preferential policies as was the case for its rival Samsung Electronics.

But, the Vietnamese government rejected the firm’s claim in June.

Professor Nguyen Mai, former vice chairman of the State Committee for Cooperation and Investment (SCCI), now the Ministry of Planning and Investment, said the order implied that the government was cautious about granting incentives to Nokia because “they [government leaders] don’t know what manufacturing technologies would be applied in Vietnam.”

Vietnam is aiming to shift into a new stage of foreign direct investment (FDI) attraction, with high-tech projects among the top priorities. A United States Agency for International Development and Vietnam Chamber of Commerce and Industry survey released early this year showed that only 13.5 per cent of foreign invested companies in Vietnam are considered high-tech investors with sophisticated technology.

Only a few well-known transnational firms have set up investments here. Among them are Intel with its $1 billion chipset factory and Hewlett-Packard with a research and development centre in Ho Chi Minh City.

The Nokia case indicates that it is no small matter for a foreign investor to obtain incentives for a high-tech project in this country.

In Nokia’s case, “the fame of Nokia trademark isn’t enough to dispel government doubts,” Mai, now chairman of the Vietnam Association of Foreign Invested Enterprises, said.

But Nokia’s case is not unique. Its rival Samsung Electronics had to wait until this May, or after three years of operation, before it received the highest possible tax incentives for its $670 million mobile phone factory in Bac Ninh. The Korean firm will now enjoy 10 per cent corporate income tax for all products during the entire life of the project, instead of 25 per cent as previously.

In a document sent to the government, Bac Ninh People’s Committee said Nokia agreed that the incentives, if granted, would be removed should the firm failed to prove its project was high-tech within three years.

Mai went on to say prudence would ensure the quality of FDI projects in Vietnam, but added the government “should not be overly cautious”.

“The government should also bear in mind that the investment of transnational companies like Nokia and Samsung would not only contribute to the state budget but also create jobs and attract many investors to the country,” he said.  -VIR

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