Đầu tú chui
Dear list,
I've been puzzled over this phenomenon called "dda^`u tu' chui" whereby
foreign investors would set up a company under the domestic investment
laws rather than foreign investment laws by registering the company under
a Vietnamese person's name. Obviously this is quite a risky choice but I've
found quite a few such cases during my recent fieldwork. But I cannot
really make sense of this phenomenon even after talking with
some of those who actually made those choices.
My initial inclination was the difference in legal minimum wages
for foreign and domestic companies that may explain this.
As far as I could tell, this was not the case for
most of the cases I've had access to, though I suspect this may be a
reason for some of the "dau tu chui" cases at least. The foreign investors
I talked with generally mentioned "unwanted attention from the government"
as the main reason. But wouldn't the government know about this?
I think this is especially puzzling, in light of the claim that domestic
investors are discriminated against in relative terms as foreign
investment laws provide more favorable conditions. Then why would those
foreigners not take advantage of them?
So I'd love to receive collective wisdom of this list.
(1) How should this term "dau tu chui" be best translated?
(2) What may explain this?
(3) Similar phenomena from other countries?
Besides these, any ideas of how to make sense of this phenomenon would
also be very much appreaciated!
Thank you very much in advance!
Jee Young
Hey Chi,
This is a very interesting issue to me, too, and it's one I've been
thinking about a fair amount. I think a relevant literature is the
one that differentiates between vertical specialization (separate
ownership at different levels of production hierarchy) and vertical
integration (integrated ownership). A key question about the so-
called "dau tu chui" is the exact extent of the foreign investment
and the subsequent incentives to the Vietnamese owner. A good number
of cases that I've seen seem to me to be cases where the foreign
party is interested in reducing their own exposure to the risks of
the local business environment and increasing the incentives for in-
country management to maximize efficiency. This reasoning for me
involved working backward from the argument that the vertical
integration literature gives for why multinationals would want to
have actual ownership over production in foreign countries instead of
buying from the market.
The "dau tu chui" instances seem like a step from integration towards
the market aimed at keeping the advantages of integration but
reducing its disadvantages. In these cases, the foreign party may be
providing all of the imported inputs and buying all the output (and
possibly even providing the loan for startup capital... though I
doubt its ever full 100% because foreign party's would always rather
find a domestic partner willing to invest some risk of their own into
the venture), but the Vietnamese ownership still increases their own
profits if they find ways to reduce costs. Naturally there's a
constant situation of bargaining going on, whereby if the foreign
party learns of the cost savings they may use their power as input
provider and output market to squeeze these margins back to minimal
levels. At the same time, there's also a possibility that, over
time, the domestic partner diversifies and the original "dau tu chui"
conception that the foreigner had is no longer reflective of reality.
On the language issue, I think to a certain extent the word reflects
widespread Vietnamese cynicism about successful entrepreneurs. It
reminds me a bit of the glee with which the media took up the idea
that new companies were "cong ty ma" that were formed only to get VAT
receipts and cheat the state.
Markus
FYI
There's a decent article on Chinese investment in Viet Nam in today's =ashington Post.
Probably not much new here, but worth reading:
http://www.washingtonpost.com/wp-dyn/content/article/2005/12/05/AR2005120=02098.html
The focus is on labor, Vietnam's workers' alleged "willingness to eat =ore bitterness", and some suggestion that, in some parts of China, =here are efforts to move "dirty" (i.e. polluting) industries southward.
Perhaps there is some relation to "dau tu chui" too...since one might =ssume at least a portion of Chinese investment is facilitated by locals =ith ethnic or other ties to China...
Cheers
JL
--
Jonathan D. London, Ph.D.
Assistant Professor of Sociology
Nanyang Technological University
Singapore
I saw this too. The problem is that, as the fine print in the article
admits, there really isn't that much (mainland) Chinese FDI in Vietnam
yet, at least not in the sectors where poor working conditions and labor
relations are common. That's still dominated by Koreans, Singaporeans
and Taiwanese. If the author is intent on finding some hidden Chinese
plot to take over SE Asia, there's much more fertile ground in looking
at Chinese exports (dumping?) of cheap consumer goods (where do all
those motorbikes come from anyhow?). And agricultural trade, which goes
both ways: much of the fruit on sale in Hanoi this time of year comes
from China, but meanwhile there appears to be growing contract farming
in VN to meet Chinese orders. I observed some of this recently at an
agricultural training center in Ninh Binh province. In northern Laos,
it's already widespread.
I'd also question the author's assumption that VNese labor laws and
standards are behind China's. The opposite may well be the case. True
that VNese wages are lower, but that's a different matter. In any case,
it's a more complicated picture than the Chinese-led race to the bottom
depicted in the Post. Or maybe just my idle hopes that Hanoi doesn't
look like a Chinese city ten years from now!
Andrew
I'd be terribly worried if my boss should tell me that
I "don't eat bitterness." This word is directly
translated from Mandarin /Chinese -and if literally
read with Western commonsense will be totally
negative. (The history of the Warring States will be
able to give a better insight to the positiveness of
this term).
We cannot assume that VN signed away their rights to
decide which FDIs to accept or reject. "Dau tu chui"
makes a lot of sense when barriers are erected-and
which sectors they are I should not pinpoint here in
case I am alleged of making allegations. I think
talking to practising consultants will help a lot.
All the best,
Grace
Regarding Andrew's hunch and the topic under discussion, VSG members might find useful the article "The Impact of the State on Workers' Conditions - Comparing Taiwanese Factories in China and Vietnam," by Anita Chan and Hong-zen Wang, in Pacific Affairs, 77 (Winter 2004-2005): 629-46.
Ben Kerkvliet
The article Ben refers to is on line at
http://www.global-standards.com/Resources/ChinaVietnam-ChanHongZen.doc
It is quite an extraordinary piece, and flies in the face of the assumption that labour standards are lower in Vietnam than China just because the country is poorer. Also, reading bao Lao Dong every day and watching how the VGCL - itself led by the Communist Party - reports favourably on the various strikes around the country - including even in state firms - certainly gives one a very different picture to what I nunderstand about the situation in China
Michael Karadjis