Lan said the rapidly increasing FDI levels that followed Vietnam’s entry to the World Trade Organisation (WTO)—especially in exports—prove the country’s incentive policies are overgenerous.

Incentives unthinkable for local businesses

Lan said Vietnamese real estate prices continue to rise, limiting domestic businesses’ access to land. Conversely, almost all FDI enterprises can claim more land than strictly necessary. 
 

Localities offer foreign investors land at artificially reasonable prices. Vietnamese businesses never receive similar treatment.

FDI enterprises get long-term tax exemptions—as much as ten years with no tax, and a further ten years of 50% discount. They can easily borrow capital from Vietnamese banks. Vietnamese private enterprises are often forced to borrow loans at higher than listed interest rates.

Poor FDI enterprise management has serious consequences

Discriminating between FDI and local enterprises will lead to serious repercussions. In the short-term, weakening local businesses create space for FDI expansion and increased market share. Economic development should rely on internal rather than external strength, she noted.

FDI enterprises might push Vietnam’s GDP and exports higher but such figures are conditional on perpetually granting those businesses preferential treatment. A mass retreat of foreign investors, like Thailand’s 1997 experience, is always an unstated possibility and implied threat.

The State should limit the preferential conditions it offers foreign investors and level the playground with local competitors.

Some FDI enterprises, even those investing in Vietnam for dozens of years, still manage to evade paying their due in tax.

Lan blames poor management and preferential policies. Foreign businesses must first obey Vietnamese obligations and laws.

The State should extend its authority to supervise and control these businesses.