Transparency must be the supreme principle for FDI

VietNamNet Bridge – Taxation bodies are expected to examine the behavior of foreign-invested enterprises suspected of conducting transfer pricing, without fuss. However, most of the works have never been made public.

Vietnam, FDI, FIA, MPI

State agencies have had their reasons to keep the cases silent. However, this has angered the public and economists. Silence gives the public another reason to believe that many names on the black list of FIEs (foreign invested enterprises) conducting transfer pricing have not been exposed.

Nguyen Duc Kien, deputy chair of the National Assembly’s Economics Committee, noted that Metro’s story showed the duplicity of foreign direct investment (FDI).

“Investors always try to make things to optimize their profit and minimize costs,” he explained, adding that transfer pricing is the other side of FDI.

Do Nhat Hoang, head of the Foreign Investment Agency, an arm of the Ministry of Planning and Investment (MPI), appeared to be unhappy when any FIE was suspected of making transfer pricing.

At a workshop on transfer pricing situation in Vietnam last October, when asked about the dubious repeated losses declared by Metro Vietnam, Hoang replied that mass media must not stick a label on somebody if it cannot prove this.

He also said transfer pricing is a problem all over the world, and that transfer pricing in Vietnam, if this happens, only happens at some FIEs.

Dr. Le Dang Doanh, a renowned economist, former head of the Central Institute of Economic Management (CIEM), does not think keeping silent was a right choice.

“Why not make public the transfer pricing cases?” he said. “It is necessary to clarify the problems.”

Doanh went on to say that Vietnam offers a lot of attractive investment incentives to foreign investors. However, the investors, once arriving in Vietnam, have to “play fair”.

“I cannot understand why we have to keep silent. This is strange behavior,” Doanh said.

“Vietnam also needs to be fair. It needs to make compliments when someone does well and criticize those who commit wrongdoings,” he added.

The economist commented that GDT has made considerable progress making public the result of the inspections. This may initiate further inspections and discoveries about the transfer pricing committed by FIEs. The results of other inspection tours would also be made public.

The Ministry of Finance (MOF) sometimes makes statements about transfer pricing, including information about figures about tax arrears collected and FIE losses, but it does not name any names.

Pham Huyen