This optoelectronics company expected that after investing in Vietnam they would have found domestic support companies which could offer good products at low costs. However, for the last 4 years, 100% of their materials have either been imported, or produced by foreign businesses in Vietnam.
According to experts, it is the taxes on components and accessories that is holding back Vietnamese firms. The tax rate for some domestically-produced items account for 20% of their cost, while imported items benefit from duty free policies. Furthermore, domestic supporting enterprises have to pay income tax while FDI enterprises enjoy investment incentives.
"FDI companies were given incentives to come here and have support from their parent companies abroad. In addition, they may also have links to firms abroad prior to arriving in Vietnam, helping them find clients", said Do Phuoc Tong - Chairman of Ho Chi Minh City Engineering Association.
Factors like income tax and access to capital are also obstacles for Vietnamese firms. Therefore, it is a challenge for them to compete with foreign enterprises.
