Accreditation sought by high-tech FIEs

SMC Manufacturing Vietnam, Photo: smcworld.com

Japanese-invested SMC Manufacturing Vietnam is struggling to complete procedures to get it certified as a high-tech enterprise for its expanded project in the country.

According to a VIR source, the company wants Vietnam to become its main production hub, and it had plans to invest an additional $300 million in the country in the next three years. The only barrier is how to get the high-tech project certificate.

The company raised its problem in meetings between Dong Nai People’s Committee and foreign-invested enterprises to look for a solution and detailed guidance, to no avail.

The source added that in the framework of Prime Minister Pham Minh Chinh’s official visit to Japan last November, a representative of SMC Corporation told the prime minister about the problem and then sent a document to the government on the situation, but the company has yet to receive any feedback.

A general supplier of pneumatic components, SMC was first established in 2008 as a representative office. In 2011, it became a wholly foreign-owned establishment in Vietnam and a subsidiary of SMC Corporation, with three main offices and a warehouse for fast delivery as well as a factory in the southern province of Dong Nai.

The case is a shared problem for various other foreign-invested enterprises that said they face a lot of barriers to being recognised as a high-tech enterprise (FIEs) when they either start investing or expand their operation in Vietnam.

A survey organised by the Japan Bank for International Corporation (JBIC) in September-October last year and published last month stated, “Many businesses complained that they do not enjoy benefits from Decree No.57/2021/ND-CP allowing enterprises to enjoy corporate income tax (CIT) incentives for those manufacturing prioritised supporting industry products since 2015.” Decree 57 went into effect in June 2021.

“Due to lack of detailed guidance, FIEs do not understand the regulations and do not know how they can access such incentives. They also do not know what agencies they can meet to get more information,” the survey noted without specifying the concrete number of respondents.

Tran Thi Thu Huong, a senior investment expert dispatched from Sojitz who is also deputy general director of Long Duc Industrial Park in Dong Nai, told VIR, “Our partners here also face similar problems in getting a high-tech certificate from the Ministry of Science of Technology (MoST), which is a compulsory requirement. It takes a lot of time to get the certificate, thus if they focus on this step they will miss their investment schedule compared to the initial plan.”

At present, Sojitz is the largest shareholder with a 50.2-per-cent stake of Long Duc Investment Pte., Ltd., the developer of Long Duc, and 60 per cent of Long Binh Industrial Zone in Dong Nai.

In 2021, the MoST granted high-tech certificates to five enterprises – Vi Na Data IT Service JSC, Jukwang Precision Vietnam Co., Ltd., Vietnam Post And Telecommunication Industry Technology, Hana Micron Vina Co., Ltd,, and Mcnex Vina Co., Ltd. Two other dossiers had been submitted to the MoST for approval.

Last March, the prime minister issued Decision No.10/2021/QD-TTg detailing the criteria for determining high-tech enterprises, effective from the following month. This regulation applies to businesses manufacturing high-tech products and providing related services in Vietnam.

Enterprises wanting to be recognised as high-tech manufacturer must be involved in the listed high-tech products focused on development under the provision of the law.

Not only is it mandatory for businesses to employ eco-friendly standards, but they must also make sure their products conform to the government’s energy-saving and environmental protection standards.

However, it is claimed that Vietnam’s incentives for high-tech industries, while attractive on paper, can present challenges to investors unfamiliar with the country’s legal system.

Respondents noted in JBIC’s survey that the conditions “are so detailed that businesses cannot meet them.” Although the government is calling on foreign groups to invest in high-value projects in high-tech parks, when they want to expand operations they have to complete stricter procedures and spend more money compared to developing their projects in normal industrial zones, the survey added.

“The Ministry of Planning and Investment is in charge of granting related incentives, but this work is conducted in conjunction with local authorities,” said Nguyen Tan Tai, tax and corporate services manager of Grant Thornton Vietnam. “During the application process, various ministries may be involved to assess a project. Once incentives are granted, the Ministry of Finance and local tax departments are responsible for scrutinising the applicable incentives at a later stage.”