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Officials question wisdom of outsourcing strategy

Update: November, 11/2013 - 09:53
Vu Vinh Phu, chairman of the Ha Noi Supermarket Association, says that in general, prices of these products are higher than locally made ones. But, given the local consumers' preference for imported products, the higher prices are not a discouraging factor.—VNA/VNS Photo

HCM CITY (VNS)— The wisdom of Vietnamese enterprises outsourcing production to other countries in order to earn higher profits, taking advantage of local consumers' preference for imported products, is being questioned by experts and officials.

They say the practice harms the local economy and inflicts revenue losses on the State budget.

Several consumer products imported from South Korea and Malaysia, like the Dr Kool toothpaste and toothbrushes and Dr Clean hand wash soap, are actually owned by a Vietnamese company – the Sao Nam Production Trading and Services Co., Ltd.

These products are available on many supermarkets' shelves as imported products.

Pham Cong Sinh, director of Sao Nam Production Trading and Services Co., Ltd, says his company placed orders with overseas companies to produce products with his company's design and brand.

The company then imports these products into the country as a sole distributor, and sticks auxiliary labels in Vietnamese on them before distribution, Sinh tells the Nguoi Lao Dong newspaper.

Such outsourcing is also being done for several plant protection products.

Nguyen Thi Xuan Thu, Deputy Minister of Agriculture and Rural Development, says many firms are placing orders with enterprises in other countries to produce plant protection products, chemicals used to ripen fruits and other similar products.

Vu Vinh Phu, chairman of the Ha Noi Supermarket Association, says that in general, prices of these products are higher than locally made ones. But, given the local consumers' preference for imported products, the higher prices are not a discouraging factor.

Profit from outsourcing production is higher than having goods produced at home, he says.

However, the outsourcing threatens local industries and the State loses revenue from production and corporate taxes, he says.

Dr Hoang Tho Xuan of the Trade Research Institute under the Ministry of Industry and Trade says this kind of business makes no contribution to domestic production or the nation's economy; and it does not benefit consumers.

It badly affects local production and leads to drastic competition with locally made goods. Meanwhile, consumers must pay higher prices for the products, he said.

Thu says the outsourcing has also caused difficulties for agencies that are supposed to issue quality certificates for the imported products. In case there are any production violations, the agencies find it hard to tackle the root of the problem.

Xuan says Viet Nam is yet to satisfactorily manage the quality of products bearing foreign brands, and "we also do not know if outsourced products are of guaranteed quality or not."

Currently, there is no legal framework regulating this kind of practice, so the Government should intervene and do the needful, Phu says. — VNS


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