Fly-by-night foreign companies remain a problem for Vietnam

By Hung Le   November 13, 2018 | 09:29 pm PT
Fly-by-night foreign companies remain a problem for Vietnam
Employees work at the assembly plant of a foreign direct investment car factory in Vietnam. Photo by Reuters/Kham
Vietnam continues to be plagued by foreign company chiefs fleeing the country without paying off debts or workers’ salaries.

Last month Kim Dae Gun, a South Korean national and director of the Cho Won Textile Company in southern Dong Nai Province, disappeared after a business trip abroad leaving the company owing VND23 billion ($990,138) to banks and VND120 million ($5,150) in employees’ social insurance premiums.

The police are investigating the incident, the latest in a slew of such incidents in the country.

Canadian steel-manufacturer Metacor Vietnam based in southern Ba Ria – Vung Tau Province was deeply in the red by mid-2018.

It had racked up nearly VND150 billion ($6.4 million) worth of debts in the form of social insurance obligations, income tax and loans from banks.

Denis Piche, its general director and a Canadian national, was summoned thrice in June this year by the Ba Ria – Vung Tau Industrial Zone Authorities but he failed to respond.

Piche had already left Vietnam, in early June, through the Moc Bai border in Tay Ninh Province, according to local authorities.

In Ba Ria – Vung Tau alone, nearly 20 foreign-owned companies owing taxes worth VND30 billion ($1.28 million) no longer operate at their registered addresses, while another three owing VND60 billion ($2.56 million) have ceased operations completely.

Speaking to Tuoi Tre newspaper, Nguyen Minh Cuong, deputy head of the Ba Ria - Vung Tau Tax Department, said some companies take advantage of lax policies and work online to avoid financial obligations, making it difficult for authorities to properly monitor them.

Nguyen Mai, chairman of the Association of Foreign Investment Enterprises, blamed the problems on poor management of foreign firms by authorities.

Most of the firms are based in industrial zones, each with their own management, and the average size of a zone is only 100-150 hectares, yet foreign enterprises vanish, he said.

"The reason why foreign businesses are able to disappear is because of lax monitoring of their business activities by authorities."

Pham Minh Huan, a former deputy labor minister, said foreign enterprises have been shutting down surreptitiously for years but the issue has not been resolved.

Since there are no specific regulations, local authorities have had to deal with disappearing businesses on an ad-hoc basis, using taxpayers’ money to pay employees’ salaries, encouraging local businesses to recruit the abandoned employees or freezing and liquidating companies’ assets under the Bankruptcy Law.

"But if a business had rented its fixed assets, there is nothing we can do," Huan pointed out.

Phan Huu Thang, former head of the Foreign Investment Agency under the Ministry of Planning and Investment, explained that foreign business executives are able to flee because industrial zone managements, tax authorities and insurance agencies do not supervise their activities closely enough.

In the long term the solution lies in tightening the FDI licensing process by factoring in the history of the investor, he suggested.

Foreign companies’ activities should be assessed every three months to prevent them from disappearing. Though it seems fairly simple to do, the difficulty lies in selecting the government agency to implement it, he said.

Disbursed FDI in Vietnam reached $15.1 billion in January-October this year, up 6.3 percent year-on-year, according to the Foreign Investment Agency.

FDI pledges for new projects, increased capital and stake acquisitions downed 1.2 percent from a year earlier to $27.9 billion in the 10 months.

Vietnamese workers abandoned following disappearance of South Korean boss in a FDI company early this year

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