The director of a local livestock enterprise admitted that his business was under pressure from foreign-invested firms in the production chain. "There were times when the sales policy of foreign-invested enterprises decided almost all of the selling prices in the market," he said.

Vietnam's livestock industry has grown significantly, but the animal feed industry is largely dependent on the foreign market, and up to two-thirds of the feed is imported.

The director said that foreign-invested businesses have taken Vietnam's livestock industry to another level. 

“They have come to teach Vietnamese businesses, so now we have large-scale livestock enterprises up to international standards,” he said.

In Vietnam, agriculture is the sector that attracts the least foreign capital compared to other industries. 

In the field of logistics, the situation is similar. General Director of the Vietnam Container Corporation (VICONSHIP) Cap Trong Cuong said that Vietnamese logistics enterprises are still having to work for foreign-invested firms in their "home market", even though the quality of human resources, infrastructure, and the management process is not inferior.

According to the Ministry of Industry and Trade, in 2022, of Vietnam’s total export turnover of phones and components of 57.99 billion USD, the FDI sector accounted for 57.8 billion USD, or 99.67%.

Of the country’s total export revenues from computers of 55.53 billion USD, the contribution of FDI enterprises reached over 54.6 billion USD, or 98.31%.

Similarly, the FDI sector accounted for 42.55 billion USD out of 45.75 billion USD of the total export turnover of Vietnam’s machinery and equipment last year, equivalent to 93%.

In the leather and footwear industry, domestic firms account for more than 70% of the total number of enterprises, but account for only over 20% of total export turnover.

Based on the proportion of added value, revenue, and employment in the processing and manufacturing industry, foreign-invested enterprises dominate 12 out of 24 processing and manufacturing sub-industries; and play a dominant role in 4 of the 5 largest export industries of Vietnam, which are textiles, footwear, electronics and furniture.

FDI enterprises contribute more than 20% of GDP, accounting for 72% of total export value, about 50% of industrial output of Vietnam. 

The superiority of the foreign-invested sector is also reflected in the following numbers: the current number of FDI enterprises is about 25,000 compared to nearly 800,000 Vietnamese enterprises.

Of over 25,000 FDI enterprises, the General Department of Taxation counted about 335 projects with registered investment capital of over 100 million USD, mainly in the field of processing and manufacturing industries in economic and industrial zones. industry. The total registered investment capital of these projects accounts for nearly 30% of the total FDI capital in Vietnam (about 131.3 billion USD).

However, corporate income tax revenue from FDI enterprises is only 7.5-8.5% of total domestic budget revenue, according to the General Department of Taxation.

According to the Ministry of Finance’s annual reports in recent years, more than half of FDI enterprises in Vietnam reported losses. In 2021, the number of FDI enterprises reporting losses was 14,293, accounting for 55.

"Many FDI enterprises suffer losses and have not contributed to the budget proportionately," according to the assessment of the Ministry of Finance. 

The common corporate income tax rate (CIT) of Vietnam is 20%, while the actual CIT rate for FDI enterprises is only 12.3% and large foreign corporations are only subject to a CIT rate of 2.75% to 5.95%.

Efficiency and technology transfer from FDI enterprises in Vietnam is also limited and much lower than in other countries in the region, while the proportion of FDI in industry is high compared to many countries.

The number of technology transfer contracts of FDI enterprises is modest, about 1,000 contracts out of a total of nearly 27,500 FDI projects. 

Technology transfer including industrial property only accounts for 13%, according to the Ministry of Science and Technology.

According to the Ministry of Industry and Trade, there are about 5,000 domestic enterprises producing spare parts and components, and about 1,000 of them can participate in the production network of multinational corporations. 

The participation of domestic support enterprises in the supply chain for FDI enterprises remains modest.

The participation of domestic enterprises in the supply chain for foreign-invested businesses is still modest. Most local support firms are tier 3 or tier 4 suppliers, mainly providing simple products or components and supplies of low value.

About 35 domestic enterprises are tier 1 suppliers for Samsung and 136 are tier 2 suppliers, accounting for a very small proportion of the total number of suppliers. Of the second-level suppliers, only three enterprises are electrical and electronic component providers, while the remaining 102 enterprises provide plastic raw materials and mechanical products, and 31 enterprises provide raw materials and accessories.

Looking at the influence of the foreign-invested sector, it is worrying for local enterprises as they are the biggest resource and driving force of the country.

More than 95% of domestic enterprises are small and medium size. Their average capital is equivalent to 1.5% of that of state-owned enterprises and 19% of foreign-invested enterprises. 

Their average fixed assets fluctuate at only VND 4-7 billion, equal to 1% of that of state-owned enterprises and 5% of foreign-invested enterprises. 

Therefore, when foreign-invested firms, which are financially strong, have management experience and global customers, and enjoy great investment incentives, it is certain that they can overwhelm Vietnamese enterprises.

Vietnamese businesses have been struggling for years in the tangle of administrative procedures, sub-licenses, unofficial costs... When they face shocks like the Covid-19 pandemic, global recession, rising interest rates, fluctuations in exchange rates and tightened monetary policy, they are forced to “land” hard. 

Meanwhile, the foreign-invested sector suffers less in terms of administrative procedures, sub-licenses, unofficial costs, and inspections.

Along with taking advantage of more benefits from the foreign-invested sector, the State needs to have policies to nurture domestic enterprises in order to have many large economic groups. 

Director of the Institute for Strategic Studies of Industry and Trade Policy Nguyen Van Hoi said: “In the process of development, we must rely on the private economy to form the leading crane. Relying on the foreign-invested sector as the leading crane is not feasible.”

Ms. Nguyen Thi Minh Thao, head of the Business Environment and Competitiveness Department of the Central Institute for Economic Management, said: “In any country, large enterprises are very important and are one of the factors promoting growth and development of the business sector as well as the economy.

Luong Bang