FIEs’ Ups and Downs Affect Vietnam’s Economic Index

Vietnamese economy is so reliant on the foreign-invested economic sector that any change in foreign invested enterprises (FIEs) can affect economic indexes.
News09.08.2017Mai Chi / VEPR
Vinh Phuc
Vinh Phuc provincial authorities, for example, are concerned about the decrease in this year’s local budget revenue. VEPR

Hoang Van Noi, head of the provincial taxation agency, said the locality just fulfilled 38 percent of the year’s plan on tax collection in the first six months of the year. This was attributed to the fact that Toyota and Honda had stopped manufacturing some car models at their factories in the province.

In the first half of the year, the taxation agency collected VND11.6 trillion in tax, a decrease of 15 percent from the same period last year. The amount of tax from FIEs was VND9.7 trillion, down by 19 percent.

Vinh Phuc, near Hanoi, is the location of several production bases for multi-nationals, including Toyota and Honda. 

The local budget revenue depends on tax amounts collected from enterprises. With satisfactory budget revenue in 2016, Vinh Phuc was one of 13 provinces which contributed money to the central government budget.

In Q1, Vietnam saw GDP growing by 5.21 percent compared with the same period last year, the lowest rate in many years. One of the reasons behind this was the trouble with Samsung Galaxy Note 7.

The Samsung problems caused a loss of $1 billion, or 0.5 percent of Vietnam’s GDP.

Since April 2017, as Samsung Vietnam’s major operation recovered, which, as reported by Nikkei Asian Review, helped Vietnam recover its GDP growth rate.

Nguyen Duc Thanh from VEPR commented that the ups and downs of Samsung will cause Vietnam’s economic indexes to change proportionately.

Vietnam now has the biggest trade deficit with South Korea, not China. Analysts believe that Samsung’s imports are the major reason. 

Three subsidiaries of Samsung are leading the country in import turnover. Samsung Electronics Vietnam – Thai Nguyen reported import turnover of $14.94 billion, up by 69.7 percent over the last year’s same period. 

Samsung Electronics Vietnam’s import turnover was $9.8 billion, while the figure was $6.62 billion for Samsung Display.

Vietsovpetro (oil & gas) and CP Vietnam (husbandry), ranked 17th and 18th in top 500 large enterprises in accordance with Vietnam Report 2016, are all FIEs with minimum revenue of $2 billion a year, or 1 percentage point of Vietnam’s GDP. Therefore, any changes with them have a big impact on the economy.