Private capital does not flow to research and development sector

Minister of Science and Technology Nguyen Quan said at a recent workshop that the total society’s investment in science and technology development in Vietnam is lower than the investment in science and technology made by South Korean Samsung Group (800 million dollars vs. 1 billion dollars a year).
Also according to Quan, in other countries in the world, the total society’s investment in science and technology is 2-3 times, or 5-10 times in some countries, higher than the state budget’s investment in the sector.
Meanwhile, official statistics show that in Vietnam, only 25 percent of the total society’s investment in science and technology development comes from the private sector. It is because the current policies cannot encourage businesses to invest in science and technology. Besides this, the majority of Vietnamese enterprises are small or tiny ones, which have small capital and low productivity; therefore, they cannot make big and long term investment in science and technology.

The current corporate income tax law stipulates that enterprises can use 10 percent of their pretax profits at maximum to invest in science and technology. However, the regulation does not help push up the development of science and technology, because this is not a compulsory obligation of enterprises, and no punishment would be made on the enterprises which do not spend money on research activities.
As a result, the majority of enterprises do not allocate budget for science and technology research works, or spend a little money on the work.

Meanwhile, even if small and medium enterprises allocate 10 percent of their profits to the work, the sum of money would be very modest, just tens or hundreds of millions of dong, which is not high enough to satisfy the enterprises’ demand for renovating technologies.

Meanwhile, Minister Quan has said the ministry has been insisting on the allocation of 10 percent of pretax profits to develop research and development activities of enterprises and contribute to the science development of the country.

Quan also said that it is necessary to set up reasonable mechanism which allows enterprises to use the budget themselves, or contribute the money to the local funds for science and technology development.
Current financial mechanism unreasonable

It always takes a lot of time to wait to get money to carry out scientific research works. In general, the Ministry of Science and Technology has to build up the list of scientific research projects that need the State’s sponsor 18 months in advance. After that, the ministry would send the report to the Ministry of Finance which would submit to the government.

This means that in order to have money for the projects to be carried out in 2011 and 2012, the ministry needs to prepare the list in late 2009 and finish no later than July 31, 2010.

However, the Prime Minister only in July 2011, did the Prime Minister approve the five-year plan 2011-2015. Then the Ministry of Finance decided that the tasks in 2011-2012 must be fulfilled in accordance with the Prime Minister’s decision. However, the science ministry argued that the tasks, which were approved prior to July 2011, must not be covered by a decision released after that day.

The prolonged argument between the two ministries led to the fact that only in February 2012, scientists could receive the money to implement the tasks designed for 2011.

Source: Tia Sang