Nokia Stuck in Tax-Breaks Talks With Vietnam Over New Factory

Nokia Oyj, the world’s biggest maker of mobile phones by volume, has entered a second round of negotiations over tax breaks for its planned factory in Vietnam after rejecting an initial offer, a government official has told Bloomberg.


Vietnamese authorities have offered Nokia a fresh proposal for tax incentives and are waiting for the Finnish company’s response, Vice Minister of Planning and Investment Dang Huy Dong said in an interview in Hanoi. He declined to give details of the package under discussion.


Nokia announced plans on March 2 to build a plant near Hanoi, saying it would invest 200 million euros ($289 million) and target opening in 2012. The manufacturer is seeking status as a high-tech producer, which can bring tax rates as low as zero in the first year. Chief Executive Officer Stephen Elop is cutting more than 1 billion euros in costs by the end of 2013 while refreshing its product lines to return the Espoo, Finland- based company to growth.


“Vietnam has this huge opportunity to become the next workshop of the world,” said Fred Burke, Ho Chi Minh City-based managing partner at Baker McKenzie in Vietnam. “If they don’t get it right with their tax incentives and the approval processes, then they will blow it. People will just go elsewhere.”


Nokia hasn’t announced whether the Vietnamese factory would make mobile phones or smartphones, said spokeswoman Marianne Holmlund.


“Nokia’s commitment to Vietnam and Hanoi has not changed,” Holmlund said. “We are working with the local government on necessary procedures.”


Nokia already has 10 handset factories. Three make smartphones, in Finland, China and South Korea, and one in the U.K. makes luxury models. Low-end mobile phones are made in Brazil, Mexico, China, Romania, Hungary and India. A round of 4,000 job cuts announced in April spared the factories while consolidating research and development sites.

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