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Sony’s decision to shut down workshop expected: MPI   2008-09-08 - TBKTVN

Head of the Foreign Investment Agency under the Ministry of Planning and Investment Phan Huu Thang affirmed that Sony’s decision to shut down its assembling workshop in Vietnam was expected, denying the rumour that Sony made the decision due to problems in the country’s investment environment.


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Thang said that a lot of comments and conjectures were made after Sony Vietnam announced its plan to shut down its workshop in Vietnam, none of which were entirely correct.


He said:


I have to clarify that under the licence granted in 1994 by the then State Committee for Cooperation and Investment, the state management agency in investment, now the Ministry of Planning and Investment (MPI), the operation duration of Sony Vietnam joint venture was 10 years.


However, Sony asked to extend the licence in 2004, which means that the duration of the joint venture has been extended to 13 years of the date of licencing.


The decision by Sony to extend the duration and increase its investment capital from $6.6mil to $16.6mil showed that Sony Vietnam is a successful project in Vietnam. During its operation in Vietnam, Sony has respected all the commitments it made.


So, the decision by Sony to stop production in 2008 was expected, and must not be considered an unexpected move. It would have been problematic if Sony had registered for 30-50 year investment and stopped production halfway through.


While Sony decided to stop production as its licence has become no longer valid, a lot of large-scale projects, ten times bigger than Sony, are waiting for licences.


Therefore, I can say for sure that there is no reason to say that there is a wave of foreign investors withdrawing from Vietnam, and that Sony decided to stop production in Vietnam because Vietnam’s investment environment is not attractive.


You have said that Sony has been operating successfully in Vietnam. Can you give more details to show the success of the joint venture?


In general, Vietnamese customers like well-known Japanese products. Sony is a leading trademark for electronics products; therefore, Sony Vietnam’s products have been consumed by many Vietnamese people. That is a great success of the joint venture.


The reports by the enterprise show that its production and businesses have been going very well. Sony has been strictly following regulations on the environment, labour use and reporting, and has been following its commitments in making financial contributions.


The local authorities where Sony Vietnam’s workshop is located do not have any complaints about the enterprise during its period of operation.


So, it is clear that Sony Vietnam has been operating well. How has Vietnam benefited from the project?


We have learned the technology Sony applies, including screen-assembling technology, production organising, and distribution network development – techniques we lacked in the first period of attracting foreign investment.


As Sony is a leading group in the world, Sony’s standards in production organisation and distribution network development prove to be worth Vietnamese enterprises learning.


However, the project has a short operation duration, and the project has been granted a lot of incentives...


I have to say that many other projects had even shorter durations. The life of projects needs to fit the characteristics of the projects.


At first, the Foreign Investment Law stipulated relatively short durations for investment projects with the maximum duration of up to 20 years. After that, law adjustments allowed investment projects to last up to 50 years, and in special cases, projects can be extended up to 70 years.


The moment when Sony decided to make investment in Vietnam was the first period of Vietnam’s foreign investment attraction. At that time, in order to lure foreign investment, Vietnam had to offer some investment incentives to foreign investors in terms of infrastructure and land use tax.


We have entered a new period of foreign investment attraction, under which we attract investment selectively. Would MPI grant a licence to a similar project like Sony now?


We have to obey the current laws, and fulfill our commitments we made to foreign investors.


Currently, we don’t have any regulations that set limitations on capital and projects’ operation durations. The licencing will be carried out after considering projects and must be implemented in accordance with the laws.


Vietnam now is encouraging foreign investment in high technologies, infrastructure development and encouraging investment in difficult areas. However, this does not mean that we are restricting investments.


What should we do to minimise licencing projects which may become blunders in the future?


We should follow strict procedures in licencing in order to ensure that we do not make mistakes. It may happen that in the future socio-economic conditions will see big changes, far beyond our expectations. If so, things which are suitable at this moment may become unsuitable in the future. This should be seen as a normal thing in the development process.


I think that some projects may be blunders, but we need to do all the things we can now to ensure that the number of blunder projects is just the minority.


About Sony Vietnam


Sony Vietnam is a joint venture between Viettronics Tan Binh (Vietnam) and Sony Corporation (Japan) which was set up in accordance with Licence No 1013/GP granted by the State Committee for Cooperation and Investment on October 17, 1994.


The company’s investment capital was $6,666,000, while the legal capital was $2mil, of which the Vietnamese side contributed 30% ($600,000) and the foreign side 70% ($1,400,000).


The initially set duration of the joint venture was 10 years.


On June 3, 2004, MPI approved the proposal by the joint venture to raise the investment capital to $16,666,000 and legal capital to $5mil. The duration of the joint venture was extended to 13 years.


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