In Vietnam, there are two types of processing manufacturers: local
processing enterprises (LPEs) and export processing enterprises (EPEs) I
have experienced working for both of them for quite a long time.
Someone may argue that there are many similarities between LPEs and
EPEs. However, they are different in legal rights and responsibilities,
the level of their technology and production, and the effectiveness of
their management. EPEs are business models for LPEs to follow.
In
terms of legal issues, each of them has different rights and
responsibilities. LPEs are owned by Vietnamese nationals or local
institutions. LPEs are also restricted to selling their products to
local markets
and to buying the main raw materials from overseas markets. Besides,
LPEs are allowed to hire foreign employees up to 5 percent of their
total workforce. LPEs have to pay value-added, import and export taxes.
In contrast, EPEs are owned by foreign individuals or institutions. EPEs
have to export all their products to overseas markets and to buy the
main raw materials from foreign countries. Moreover, EPEs are allowed to
hire foreign employees up to 10 percent of their total workforce. But
EPEs are exempted from value-added, import and export taxes.
The
two types of processing enterprises also differ in technology and
production level. Being local companies with limited capitals, LPEs are
not usually able to adopt new and expensive technology. The local
workforce, which has limited English and technical skills, prevents LPEs
from applying new technology from foreign countries. Therefore, LPEs
can only produce simple, non-technological products such as garments and
shoes. On the other hand, EPEs are usually technology-rich firms with
modern production methods because they must satisfy the technological
requirements set by the Vietnamese government in order to have a license
to operate in Vietnam. Thus, EPEs normally have their higher level of
technology and produce highly technological products such as color
printers and digital cameras.
Another
difference between LPEs and EPEs is the effectiveness of management.
LPEs normally have old management systems, which are bureaucratic,
inflexible and conservative. These systems slow down the decision making
process, thus prevent LPEs from being able to improve fast their
production performance, produce new products and grow in highly
competitive environments. In contrast, EPEs have networked, flat,
flexible, diverse and global management that allows EPEs to respond
quickly to environmental changes and adjust their organizational
structures to fit new situations. As a result, EPEs are able to operate
across the borders, compete in international markets and build networks
with international business partners.
Although the two kinds of
manufacturers are different in legal rights and responsibilities, the
level of their technology and production, and the effectiveness of their
management, they do not totally contrast one with another. Having their
higher technology level and effective management, EPEs are business
models for LPEs to follow. On the other hand, LPEs learn from EPEs not
only the new technology they bring in but also the way they manage their
business and compete in international markets. Thus both EPEs and LPEs
contribute to the diversity and development of the Vietnamese
manufacturing industry.
No comments:
Post a Comment