It is a growing tendency that Vietnamese enterprises order foreign companies to make products and then import the products as the exclusive distributors on the domestic market.
Housewives may think that Dr. Kool, Dr. Clean or Queenie products imported from South Korea, Malaysia and Singapore bear foreign brands. However, in fact, all the brands belong to a Vietnamese enterprise – Sao Nam Trade, Production and Service JSC.
A survey by Nguoi lao dong reporters has found out that Dr. Kool brand toothpaste, toothbrush, Dr. Clean brand washing liquid have been available at most of big supermarkets such as Unimart, Fivimart and Metro. Big C, the supermarket which prioritizes Vietnam made products, also sells the products as imports.
According to Pham Cong Sinh, Director of Sao Nam, the company orders foreign enterprises to make products in accordance with the designs and quality set by the company, then imports the products as the exclusive distributor. In this case the products bear the brands of the manufacturers with the sub-labels in Vietnamese language.
Similarly, plant protection chemicals have also been outsourced to foreign enterprises. Deputy Minister of Agriculture and Rural Development Nguyen Thi Xuan Thu has confirmed this, saying that the high profits have encouraged Vietnamese companies to do this.
Vu Vinh Phu, Chair of the Hanoi Supermarket, noted that the products are not competitive in prices if compared with domestic products. Foreign enterprises use modern technologies and have high productivity; therefore, they can save the production costs. However, they have to pay higher for the labor cost and transportation cost. Moreover, imports are imposed import tax.
However, according to Phu, the imports still can sell well because Vietnamese prefer foreign brand products.
It is obvious that Vietnamese enterprises have pocketed fat profits from the new business, but in return for this, the domestic production has been in danger.
“More and more foreign products would flow to Vietnam after they win Vietnamese consumers’ hearts. If so, consumers would not buy domestically made products any more, the State would not be able to collect tax, and the labor cost would become redundant,” Phu warned.
“The domestic capital would flow abroad instead of staying in Vietnam to encourage the local production,” he continued.
Dr. Hoang Tho Xuan from the Trade Institute, an arm of the Ministry of Industry and Trade, noted that the outsourcing to foreign enterprises and the import of products for domestic consumption will in no way help develop the national economy.
Xuan also said that this would not benefit consumers as well, because they have to buy products at the prices higher than the actual values.
Thu from agriculture ministry fears that it would be difficult for state management agencies to control the imports and grant quality certificates. In principle, Vietnamese management agencies don’t examine the quality of the imports, while it’s unclear if the foreign made products can satisfy the quality set by the outsourcers.
Phu, though affirming that the business is not illegal, has called on policy makers to build up the legal framework to control the new business.