VN puzzled in handling consequences caused by fleeing FIEs The number of foreign invested enterprises (FIEs) reporting loss accounts for 50 percent of the total operational FIEs in Vietnam. A lot of the business owners have run away.    Declaring loss and… There are 14,550 operational foreign invested projects in Vietnam with the total registered investment capital of $211 billion and the implemented capital of $100 billion. The Ministry of Finance has found that there are numerous unprofitable FIEs, accounting for 50 percent of the operational enterprises nationwide. Of these, a lot of businesses have reported losses in the last 3 consecutive years. The southern province of Binh Duong had 754 out of 1,490 FIEs reporting loss in 2010, which accounted for 50.6 percent of the enterprises in the locality. Of these, 200 businesses were found as having the loss higher than the stockholder equity. However, a lot of enterprises, after being inspected by taxation agencies, suddenly reported profits or lower losses. The coffee companies in Lam Dong province were among them. A paradox exists that though incurring big losses for a long time, the FIEs still have been expanding their business. Coca Cola has never made profit over the last tens of years in Vietnam. Most recently, Nestle Vietnam reported the loss of $30.8 million. However, in 2012, Nestle still poured 230 Swiss France into the project on building a new factory in Amata Industrial Zone in Dong Nai province, raising the total investment capital of Nestle to $466 million in Vietnam. The factory was inaugurated on July 9. The unusual behaviors of taking loss and scaling up production have raised doubts in the Vietnamese agencies’ mind. In 2011, the Ministry of Finance inspected 921 FIEs which were suspected of conducting the transfer pricing – declaring loss to evade tax. The enterprises then accepted the loss lower by VND6,617 billion and paid the tax arrears of VND1,669 billion. …casting off responsibilities A report of the Ministry of Planning and Investment showed that 518 FIEs with the registered investment capital of $903 million had been found as without ownership by May 31, 2013. The enterprises are mostly from South Korea and China, which operated in the service sector – construction, real estate, trade, restaurant… They did not develop workshops of their own, but used the leased material facilities. Dr. Nguyen Mai, former Deputy Minister of Planning and Investment, has classified the enterprises into 3 groups. The first includes the ones which could not continue their operation due to the economic recession. The second includes the ones which had no capital when entering Vietnam. They operated with the money borrowed from banks and then took big losses. The enterprises of the third group are the ones which planned to make swindling right when they entered Vietnam. Economists said they don’t think the enterprises would cause high economic corollaries, because the number of enterprises with escaped owners is small if noting that there are 12,000 FIEs in Vietnam and only account for one percent of the total investment capital. However, they have warned that the enterprises would bring big social consequences with tens of thousands of workers losing their jobs. The next “victims” of the enterprises would be commercial banks, partners and social insurance agencies. Source: NCDT