Pouring clear water into the glass to facilitate EPEs

Pouring clear water into the glass to facilitate EPEs

Numerous investors from Japan and Europe have been working with EY Consulting Vietnam Ltd., to look for support in establishing manufacturing facilities in the country under the export-processing enterprise (EPE) model to export to the United States. According to EY Consulting representative Bui Van Tram, the administrative procedures to secure an enterprise registration certificate (ERC) under the EPE model are arduous. Starting by submitting dossiers to apply for an investment registration certificate (IRC), many complained that there is no clear timeline for the procedure. Even when the applications are refused, they only receive unclear explanations from local authorities which leave them unable to remedy the shortcomings of their applications.

A number of investors went to meet local authorities with the expectation of sharing their experiences and receiving specific guidance in building a complete dossier. They thought this would help reduce waiting times but it was all in vain, explained Bui Van Tram, director of EY Consulting.

In addition, the lack of specific regulations related to fence and camera systems as well as the material management system to help local customs authorities’ monitoring and inspection work at export processing zones (EPZs) are causing a great many difficulties to foreign investors.

An investor from Europe who worked with Vinh Phuc Industrial Zones Management Authority to establish a $25 million manufacturing factory in Ba Thien 2 Industrial Park was left waiting for more than two years for specific guidance to complete administrative procedures to receive the ERC under the EPE model. The Vinh Phuc customs authority refused the company’s application and to comment on the dossier, citing the lack of specific guidelines on customs inspection and supervision.

Vinh Phuc Industrial Zones Management Authority advised the company to register to operate as a normal enterprise until there are appropriate guidelines and then complete procedures to switch to the EPE model. In this case, the newly-established enterprise may be able to get a VAT refund for the construction period as well as during operation, provided the supporting documents are in order.

Otherwise, the company needs to wait until clear and detailed guidance on EPE is released, then Vinh Phuc Zones Management Authority will grant the IRC to the company. The foreign investor opted for the first alternative to avoid further delays in its investment plan.

According to Tram, as of now the government, the Ministry of Planning and Investment, the Ministry of Finance, and the General Department of Vietnam Customs are discussing specific guidelines for granting IRC and ERC for investors.

“Issuing new regulations is similar to a filter that prevents an overabundance of licences across the country. However it is necessary to hammer out detailed guidelines otherwise they will accidentally become barriers when interested investors look into the investment environment in Vietnam,” Tram added. “If the problems are not dealt with in short order, foreign investors may decide against investing in the country. Vietnam could miss many great opportunities from the global relocation of manufacturing operations, which is taking place at a lively pace right now.”

According to the suggestion of EY Consulting Vietnam, while waiting for more specific regulations, the local authorities should also consider the financial health of the businesses as a basis for licensing. Notably, they can use the investors’ detailed investment plans, their potential employment capacity, and financial potential as a basis for evaluation to grant the ERC under the EPE model.