More and more foreign-invested enterprises (FIEs) have left Vietnam after making big money, leaving unpaid debts.
Local newspapers one month ago reported that an Austrian investor had left Vietnam, leaving unpaid taxes and hundreds of workers who had not received salaries for July.
The investor, an Austrian citizen, was Harald Biebl, the owner of Bach Hop Company headquartered in HCM City.
HCM City Social Insurance department confirmed that the company still owes VND586 million in insurance premiums and VND310 million in salaries to workers.
The Hanoi Planning and Investment Department has also reported that 5 FIEs have “disappeared”, including Fujiya Vietnam (Japan), Narai Company Ltd (Japan), Vladivostok Avia (Russia), Opac Power and Investimo JSC.
The other five enterprises reported as absent at registered head offices, including Tabata Nam Viet Nam, Airea Company Ltd (Japan), DIC Vietnam, To Viet Construction Company Ltd (China) and Thai Viet Nam Company Ltd (India).
These enterprises have been found violating Vietnamese laws as they did not register tax codes, did not declare tax, did not operate at registered addresses, and did not submit reports to competent agencies about their business performance.
Under current laws, enterprises that commit these kind of violations will have their investment licenses revoked.
The Ministry of Planning and Investment (MPI) also released a report showing that 500 FIEs escaped in 2013.
Meanwhile, the number of FIEs evading tax and conducting transfer pricing has become alarmingly high. The General Department of Taxation (GDT) reported that 720 out of the 870 inspected FIEs were suspected of evading tax or regularly declaring losses.
FIEs pocket profits, then run
Dr. Le Cao Doan from the Vietnam Economics Institute said there were two reasons that prompt businesses to escape. First, they might escape to fly from their creditors. Second, they “take French leave” (leaving without saying good-bye to the host) because they thought they had earned enough money in Vietnam.
“They made big money not from healthy businesses, but sought profits via illicit affairs and then left quietly to escape the dragnet of the law,” he said.
The economist went on to say that the high number of escaped FIEs as reported by the taxation body showed that the “skim-and-leave” strategy has been pursued by only some enterprises, but that the problem had reached alarming levels.
“Registering investments in Vietnam, making money and leaving might be the stages programmed by investors before they arrive in Vietnam,” Doan said.
“They left after they ate their fill,” he said, adding that the government should tighten the control over the operation of FIEs.
Pham Chi Lan, a renowned economist, has also repeatedly warned about the “reverse side of the FDI coin”, saying that many foreign investors come to Vietnam just to exploit the bad business environment and mismanagement in the country. As such, the foreign investor, to some extent, does not bring what Vietnam wants – advanced technologies, capital and modern corporate governance.