Foreign Capital Actively Finds Its Way Into Manufacturing Projects10/12/2021
The mechanical engineering sector accounts for a large proportion in the structure of investment attraction, but most of it comes from foreign direct investment (FDI) enterprises, while domestic enterprises suffer from inferiority.
Desire to cooperate, invest in production in Vietnam
Talking to a reporter of Online Investment Newspaper – Baodautu.vn, Ms. Jinying Zhang, General Director of Pigeon Company, a leading bicycle manufacturing enterprise in China, said that the demand for bicycles in the Vietnamese market is is very large, so her business not only introduces new products, but also wishes to cooperate and invest in production in Vietnam.
At the Vietnam Expo held in early December in Ho Chi Minh City, Pigeon Company brought 16 bicycle models and were ordered by customers. Only a few days later, the Company has a schedule to work with potential partners to discuss cooperation plans.
Although recently, Taiwan’s leading bicycle manufacturer (China) DDK Group has also started construction of a production complex in Binh Duong province, with an area of about 80 hectares, but Ms. Jinying This will not greatly affect Pigeon’s plans in the Vietnamese market, Zhang said.
“Pigeon Company has production plants in 29 provinces in China, but does not have any production facilities in ASEAN. With good signals in the Vietnamese market, maybe here we will consider investing in a production plant,” said Ms. Jinying Zhang.
Mr. Yu Xue Jun, Chairman of Tian Jin Zheng Fang Company commented, the potential of the mechanical field in Vietnam is huge. Therefore, his company is planning to learn about the investment environment, investment incentive policies, etc. of this field. It is likely that businesses will choose Ho Chi Minh City to set up production bases. It is known that Tian Jin Zheng Fang is an enterprise specializing in the production of power transformers and the products manufactured by the company are now sold in the Vietnamese market.
Sharing at the Conference “Beijing, Tianjin, and Hebei Trade and Investment Promotion in Vietnam” just held in Ho Chi Minh City, Mr. Vo Tan Thanh, Director of the Vietnam Chamber of Commerce and Industry, Chi Ho Chi Minh City branch (VCCI HCMC) said that the recent increase in trade and investment cooperation between the two countries is the reason why many Chinese businesses come looking for opportunities in Vietnam. Previously, only southern Chinese enterprises went to Vietnam due to geographical proximity, now there are more enterprises in Beijing, Tianjin, Hebei (localities in the North of China) came to introduce new products, seek cooperation opportunities with Vietnamese enterprises.
Difficulties surround domestic enterprises
Mr. Do Phuoc Tong, Chairman of Duy Khanh Mechanical Co., Ltd. said that the company has just decided to invest in a project in Ho Chi Minh City Hi-Tech Park (SHTP) with a registered investment capital of 5.2 million USD, has the goal of making precision machines and molds.
Vietnamese enterprises are inferior when they have to compete with FDI enterprises with the same industry. FDI enterprises are much stronger in terms of financial potential, technology and management.
“Vietnam’s mechanical enterprises have a level that is not inferior to foreign enterprises, but only those who are really drunk with their jobs take risks to pour large capital into investment. Currently, there is still the “reverse” policy, which hinders and causes difficulties for the development of mechanical engineering enterprises, “said Mr. Tong.
Specifically, according to Mr. Tong, the import tax policy is making it difficult for businesses, when imported machinery (complete units) enjoy a tax rate of 0%, while the components and equipment that enterprises import to assemble and make that machine is subject to a tax of 10-15%. For example, for pharmaceutical machines, the import tax for complete units is 0%, but imported materials for assembling to make this machine such as stainless steel plates have a 10% tax, or automatic control components are not subject to tax. Import tax is 15%. This has pushed up input production costs of enterprises, leading to poor competitiveness with foreign products.
Another difficulty is that Vietnamese enterprises have to compete with FDI enterprises with the same industry in their “home turf”. Not to mention the fact that FDI enterprises are much stronger in terms of financial potential, technology, management … when investing in Vietnam, they already have customers, so they only care about production to supply.
For example, enterprises of Korea, Japan, … operating in the field of supporting industries (including many mechanical enterprises – PV) have recently invested in Vietnam a lot because before. There have been large corporations in their country to implement the project. These corporations will, of course, “favor” their country’s businesses, so it is difficult for any Vietnamese enterprise to enter.