Doubts arise over big Nokia project

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Nokia is yet to take out an investment certificate for its manufacturing project in the northern province, although the firm originally hoped this would be granted within the second quarter of this year.

A senior official at Bac Ninh Industrial Parks Management Authority said Nokia had not pushed ahead with investment certificate procedures after the government refused to grant the firm the preferential policies associated with a high-tech project licence last month.

Instead, Nokia is to be certified as an export processing enterprise.

“We really want Nokia to invest here and are willing to hand over the investment certificate, but they [Nokia] seem to be hesitating,” said the official.

Phan Cam Ly, a communication officer at Nokia in Vietnam told VIR the firm “is still pushing up dialogues” with the Vietnamese government for the investment plan.

“Nokia’s commitments in Vietnam are unchanged,” Ly said.

In March, Nokia announced plans to build a manufacturing plant in Vietnam-Singapore Industrial Park in Bac Ninh province, where its rival Samsung Electronics set has up a $670 million mobile phone factory and is expanding production. Last month, the Korean manufacturer was officially granted the highest tax incentives from the government after three years of operations. Samsung will now enjoy 10 per cent corporate income tax for all products during the entire project life, instead of 25 per cent as previously.

The proposed new 80,000-square-metre factory would be Nokia’s 11th, and would include two module production halls, two iHub warehouses and two shipping warehouses.

Initial investment was slated at approximately €200 million ($275 million) with further sizeable investments thereafter, said the firm.

But a source at the Ministry of Planning and Investment said Nokia had said it was reconsidering its investment plan in Vietnam now as the plant would not be considered a high-tech project.

“It still wants to enjoy the highest tax incentives for a high-tech project before officially constructing the factory,” he said.

However, the government stated Nokia’s investment would only be certified as high-tech once products manufactured in Vietnam had been assessed as high-tech. Nokia’s delay comes at a time when Nokia’s global business is being seriously threatened by competitors like Samsung Electronics and Apple and raises questions as to the main reason for Nokia stalling investment in Vietnam, with some suggesting that bad business results in the first half of this year are to blame.

On May 31, Nokia announced multiple factors had negatively impacted on Nokia’s devices and services businesses to a greater extent than previously expected in the second quarter of this year.

These factors included the competitive dynamics and market trends across multiple price categories, particularly in China and Europe, a product mix shift towards devices with lower average selling prices and lower gross margins and pricing tactics by Nokia and certain competitors.