Many more loss-making FDI firms flee

Created 24 March 2018
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HANOI – After the U.S. withdrew from the Trans-Pacific Partnership (TPP) trade pact, many foreign direct investment (FDI) enterprises have decided to get away from Vietnam, leaving behind huge salary and social insurance debts.

Executives of KL Texwell Vina Co Ltd in Bau Xeo Industrial Park in Trang Bom District, Dong Nai Province had returned to their home country before the Lunar New Year holiday, leaving behind social insurance debts of VND17 billion (US$0.75 million) and unpaid salaries of VND13.7 billion.

Therefore, the Dong Nai government had to use the local budget to financially support workers, take measures to arrange jobs for laborers and coordinate with the labor union to sue the company. However, the lawsuit seems unworkable.

That FDI firms disappear after racking up social insurance and salary debts may worsen in the coming time.

Do Quynh Chi, director of the Research Center for Labor Relations, said owners of big foreign brands often cover few stages, including the first stage of research and development, and the final stage of marketing and sales, leaving all production stages to subcontractors.

The production phase of textile-garment products of big brands, for example, is mainly assumed by Korean and Chinese companies. They will be responsible for drawing up plans, finding materials and processing products at the lowest prices, which bring in the lowest profits in the textile-garment sector (7-15%).

Most FDI enterprises in the textile-garment sector are small and do business in Vietnam due to low labor cost. They cannot operate efficiently if their products are not exported.   

Many textile-garment enterprises from South Korea and China have penetrated into the Vietnamese market to benefit from the tariff incentives offered by the U.S. thanks to the TPP trade pact. Therefore, when the TPP agreement failed and at a time the EU-Vietnam Free Trade Agreement is not yet ratified, such enterprises tend to leave Vietnam for other countries such as Bangladesh and Cambodia to be entitled to export duty exemptions the U.S. offers to underdeveloped countries.

Chi proposed social insurance agencies in provinces, especially those having many Korean and Chinese textile-garment and leather-footwear companies, review if such enterprises owe social insurance premiums and take measures to force those enterprises owing social insurance for more than six months to pay debts, otherwise they are disallowed to leave Vietnam.

Nguyen Tri Dai, head of the Collection Department of the Vietnam Social Security (VSS), said most of FDI enterprises running away from Vietnam hire machines and laborers in the country rather than acquiring such fixed assets, causing difficulties for State management agencies when they take flight. Those investing in equipment in Vietnam find it hard to leave the country.

VSS has not commenced criminal proceedings against any FDI enterprises incurring social insurance debts as there is no legal document guiding the implementation of the law on lawsuits against such firms.

 

Source: ThesaigonTimes

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