Hundreds of rep offices disappear, others operating illegally

Vietnam Net
21st Jan 2008
VietNamNet Bridge – 305 of 600 foreign representative offices in HCM Cit recently inspected by the City’s Trade Department, have had their licenses revoked for not reporting as required or have simply disappeared.

Lone rangers

Vietnam’s previous licensing scheme stipulated that licenses, once granted, have no time limit, they are valid forever. State Management Agencies have not appropriately supervised the operations of licensed offices.

In many other countries, parent companies need to extend their operation licenses periodically.

Several years ago, local newspapers reported a case trade fraud – the HCM City Electricity Company purchased low quality Linkton electric meters to place at households.

When HCM City residents complained, the police investigated and found that the supplier who signed the contract to sell meters to HCM City Electricity Company was the representative office of Singapore-based Linkton Company. Though the operation license of Linkton in Singapore had expired, its office in Vietnam still signed commercial contracts.

Analysts say poor management over representative offices means consumers are not protected from bad quality products or services.

In mid 2006, Vietnam promulgated Decision No 72, on the operation of representative offices in Vietnam, which stipulates that representative offices’ licenses are valid for only five years. After said time, offices must re-register.

The recent inspections conducted by the HCM City Trade Department discovered that many foreign representative offices had disappeared. The department’s officials could not find the addresses of 445 offices.

An official said the department has been trying to contact foreign companies to find out about the offices, but have failed.

The department has revoked the licenses of 305 representative offices. Some did not make regular reports, as required; others had parent companies that have ceased operating in their home countries. These included 56 South Korean offices, 47 Taiwanese, 43 Singaporean, 34 Chinese. Meanwhile, 170 offices do not meet re-registration requirements because their parent companies have been dissolved.

Insufficient staff

An official from the HCM City Trade Department said that his division, in charge of managing foreign representative offices, has 10 officers but the workload of 50 (in 2007 alone, the division had to license 407 offices). This is why the State Management Agency is not able to regularly inspect, regulate and help manage all of the representative offices.

The official said that under current regulations, representative offices are not allowed to do business (they can only conduct market surveys and promote the business of parent companies), regardless, many of these offices are still doing business and evading tax.

According to Tran Vinh Nhung, Deputy Director of the HCM City Trade Department, he and his colleagues discovered many representative offices conducting large-scale business, including Nike, Swiss Diethelm, and Singaporean Maersk.

In 2007 alone, the Trade Department inspected and imposed fines on 215 offices. Mr. Nhung said that the current fines are insignificant to large companies, certainly not enough to deter violating offices (VND40mil for carrying out illegal trade). Meanwhile, many offices were discovered declaring low staff salaries to evade personal income tax.

http://english.vietnamnet.vn/biz/2008/01/765158/