Foreign manufacturers use foreign parts suppliers to avoid tax: Analysts

VietNamNet Bridge – Foreign automobile and electronics manufacturers often choose foreign enterprises for their parts and accessory suppliers instead of Vietnamese companies because it allows them to engage in transfer pricing, some analysts have claimed.

Samsung, Toyota, Canon and other giants in the manufacturing industry have complained many times that they could not find Vietnamese companies capable of providing high-quality parts and accessories in their global production chains.

Vietnamese enterprises are believed to have such low ability that they even cannot make simple parts and accessories like a screw.

However, local companies have denied that this was the reason they were not being chosen for orders.

“You should not say Vietnamese cannot make screws,” said Mai Van Dan, director of a company that has made motorbike parts for the last 20 years and exports its products to the EU, a choosy market.

Dan said that the problem was not that companies were not capable enough or lacked high technologies, but that foreign manufacturers preferred foreign subsidiaries of the same groups.

“When multinational groups enter Vietnam, they follow the ‘relatives’ of the companies. And the groups prioritize orders with them,” Dan said. “It is very difficult for Vietnamese enterprises to obtain orders.”

“Moreover, I think multinational groups tend to make purchases among the member companies of the groups to be able to conduct transfer pricing more easily,” he added.

A director of a mechanical engineering company said it was nearly impossible to meet multinational top executives to discuss possible business partnerships.

“They (the multinational manufacturing groups) may cite 1,001 reasons to refuse to admit you to their production chains,” the director said.

“If you say you can make a set of accessories they have been importing from China, they set price requirements that you cannot satisfy,” he said.

Bui Thanh Nam, director of Hanoi Plastics Company, noted that in many cases, Vietnamese companies’ reasonable prices, high quality of products and high capability were not enough to help enterprises get the nod from multinational groups.

The Hanoi Plastics Company has been supplying VND50 billion worth of parts and accessories to LG Vietnam, a South Korean investor. However, LG is likely to stop using the products provided by the company, while it may join hands with two other companies, also from South Korea.

Samsung’s managers said some days ago at a workshop that they could not find many suitable Vietnamese part suppliers, and that only seven out of its 95 part suppliers were Vietnamese. They said the Vietnamese suppliers could only make simple products.

In reply, Vietnamese suppliers said that they were supplying electronic parts to Samsung. However, they can only do this through intermediary parties and they don’t have opportunities to work with manufacturers directly.

“It is very difficult to meet Samsung’s general director. I feel the manufacturer only works through intermediary parties,” said Tran Anh Vuong, director of Bac Viet Company.