The Ministry of Finance recently reported the results of synthesis and analysis of financial statements in 2019 of FDI enterprises to the Prime Minister.

FDI enterprises’ contribution was not commensurate with incentives given to them.
Illustrative photo. 

Accumulated losses up by 26%

This report is based on data of 22,603 ​​FDI enterprises, accounting for 99.9% of all 22,617 FDI enterprises and equaling 90.2% of the total 25,054 FDI enterprises at the end of 2019.

The report said the scale of production and business of FDI enterprises in 2019 continued to highly increase compared to 2018, hittingVND 7,181,000 billion, an increase of more than VND 720,000 billion year-on-year. Total assets reached VND 7,752,000 billion, a surge of more than VND 981,000 billion year-on-year.

HCM City had the largest revenue scale of FDI enterprises across the country. Followed by respectively Bac Ninh, Thai Nguyen, Dong Nai, Binh Duong and Hanoi. HCM City is also the city with the top total assets of FDI enterprises in the country.

The report shows the activities of FDI enterprises in the northern mountainous provinces such as Dien Bien, Lai Chau, Cao Bang, Bac Kan, Ha Giang, Lao Cai, Son La, Yen Bai and some Central Highlands provinces declined, and revenue in 2019 decreased by 10% year-on-year.

Also, according to areport of the Ministry of Finance, in 2019, the pre-tax profit of 22,603 FDI enterprises reached more than VND 387,000 billion, up more than VND 29,000 billion year-on-year, whileprofit after tax was more than VND 324,000 billion, an increas
e of more than VND 19,000 billion year-on-year.

Sectors with good profit margins included manufacturing and assembling cars, motorbikes and other motor vehicles; food processing industry; alcohol, beverages; business support services; distribution and maintenance of cars and motorcycles; and medical, education and training, science and technology

However, according to areport of the Ministry of Finance, only 9,949 of 22,603 enterprises reported profit for the year (45%), an increase of 18% year-on-year.

Up to 12,455 enterprises reported losses, accounting for 55%, although total revenue of these enterprises reached about VND 847,000 billion, up nearly 12.7% compared to 2018 and total assets decreased by 0.7% compared to 2018.

About 3,545 enterprises suffered from losses in 2019, accounting for nearly 15.7%, of which, 2,160 enterprises’ revenue still grew.

Some sectors hadcompanies with losses fortwo consecutive years and losses in the previous year higher than the next yearare production of steel and other metals, distribution and production of petroleum and petrochemical products.

Regarding FDI firmswith accumulated losses, by the end of 2019, there were 14,822 enterprises with accumulated losses ofmore than VND 520,000 billion (or 66% of 22,603 ​​enterprises) on the financial statements, or 41% of investment capital of the owners and a 26% increase in the number of businesses with accumulated losses, an increase of more than 23% in capital losses compared to 2018.

The budget payment is not commensurate with the enjoyed incentives

The report assessing the performance of FDI enterprises by country and territory showed that the FDI enterprises of investors from the EU (Denmark, the Netherlands, France, and Luxembourg) hadthe highest profit.

The enterprises of the countries with largest registered capital in Vietnam, including South Korea, Japan, Singapore, Taiwan, and the British Virgin Islands, reported reasonable profit.

However, two investors in the top 10 major investors in Vietnam ofHong Kong and China have low profit.

Regarding State budget payment, according to the General Department of Taxation, in 2019, the revenue from domestic taxes excluding crude oil of the FDI sector topped VND 210,200 billion, an increase of about 13% compared to 2018. The growth rate of the budget payment of the FDI sector in 2019 wasfaster than that of the two previous years.

In this report, the Ministry of Finance assessed the growth of the owner's revenue, assets and investment capital was lower than in the previous years, but remained at a high level, showing the performance of FDI enterprises still maintains astable growth rate.

FDI enterprises play a more important role in the country's socio-economic development and increasingly contributeto the State budget, showing the steady increase in payments to the State budget and import-export tax payments over the years.

However, according to the Ministry of Finance, the efficiency of assets and investment capital in FDI enterprises is still low, and has not fully utilised their potentials, and the budget payment is not commensurate with incentives they enjoyed.

The number of profitable FDI enterprises accounts for a small proportion, only 45% while many enterprises suffer from large and continuous losses for many years.

In addition to some large projects with high economic efficiency and good budget payment, there are many projects with low efficiency and low budget payment.

At the same time, transfer pricing and tax evasion still occurred in some FDI enterprises. They always reported losses, or even continuous losses for many years, but still expanded production and business and their revenues keptincreasing years, causing lossesto the State revenue.

The Ministry of Finance also said that the analysing of the financial situation of some large enterprises in "electronic components, computers and computer peripherals, optical equipment", "electricity manufacturing, distribution and trading","production of iron, steel and other metals" show efficiency and payment to the State budget are different.

The two big companies in the sector of "production of iron, steel and other metals" are Hung Nghiep Formosa Ha Tinh Iron and Steel Co., Ltd and Posco Yamoto Vina Steel Joint Stock Company, despite the financial situation in two consecutive years impactedby the global steel and iron prices in a downward trend, the total revenue of the two companies increased from VND 77,456 billion to VND 82,741 billion, but their budget payment decreased from VND 101 billion to VND 92.6 billion.

According to the Ministry of Finance, the payment to the State budget is not commensurate with incentives given to these large firms.