Big investment incentives only benefit foreign investors: experts

Commenting about the investment incentives offered to automobile manufacturers, especially the latest decision on the policies for the auto industry, Nguyen Van Nam, a renowned economist, said state management agencies apparently followed the old way when designing policies.

Vietnam, which has been cherishing the ‘automobile dream’ for some decades, has once again offered big preferences in tax, land and credit to investors.

“Management agencies always follow the same way when they think about the solutions to develop the automobile industry,” Nam said, implying the offered investment incentives.

“The incentives are really necessary, but are they all enough to develop the automobile industry?” Nam said. 

To develop the automobile industry, Nam said Vietnam needs to have strong mechanical engineering and metallurgy. But the industries remain very weak. Enterprises are established, but they don’t receive any support from the state, while they don’t know what to manufacture and to whom to sell the products. 

Vietnam has attracted foreign automobile manufacturers, hoping that they would step by step raise the localization ratio in Vietnam. 

However, while requesting foreign manufacturers to raise the locally made content in automobiles, Vietnam ‘forgot’ to set up detailed requirements. Only when reviewing the development of the automobile industry after tens of years have the management agencies realized that the localization ratio remains very ‘modest’.

Meanwhile, foreign invested automobile manufacturers, when asked about the low localization ratios, said that they could not do this because no Vietnamese enterprise can satisfy their requirements.

“Obviously, Vietnam must not expect too much on foreign invested enterprises to develop its automobile industry,” Nam commented. “We need them, but we have to build and encourage Vietnamese enterprises.”

An analyst, while agreeing with Nam that it is necessary to rely on Vietnamese enterprises to develop the automobile industry, commented that many Vietnamese investors, including Vinaxuki and Vinamotor, want to make cars, but they cannot receive necessary support from the State.

“State agencies are indifferent to them (Vietnamese enterprises) when they have difficulties. As a result, they have either are dissolved or are equitized,” the analyst commented.

He went on to say that enterprises do not need general investment incentives. 

“With such general policies, we will never have an automobile industry of our own,” he said, adding that the current policies only benefit foreign investors, while Vietnamese enterprises won’t be able to grow.

“We need a specific program to give enterprises what they need,” Nam said.

“Enterprises, for example, not only need support in tax or land, but also support to promote consumption,” he said.