Thailand
Vietnam drafts FDI attraction strategy in new stage
The Hanoitimes – Vietnam’s FDI attraction strategy in the next decade will shift from profit-based incentives to efficiency-based incentives in a move to maximize the spillover effects and added value of the investment source.
It was drafted in the country’s new-generation FDI attraction strategy for 2018-2030, which was compiled by Ministry of Planning and Investment with the support from the World Bank (WB).
Under the strategy, Vietnam will also shift from attracting appropriate investors for Vietnamese products to develop suitable products (including business environment and appropriate investment conditions) for the kind of investment that Vietnam needs in the future.
Regarding the priority areas for investment, WB experts said that the country has a number of new priority areas such as automobiles, motorbikes and supporting industries, machinery, industrial equipment, logistics, high-value agricultural products, environmental technology, renewable energy and information technology application services. In addition, it is also important to continue the growth of the services sector, for example, financial and education services.
As the country pursues priority fields for FDI in the coming period, it must not forget the basic types of FDI which have already seen success in attracting foreign investment, the experts said.
Currently, Vietnam is heavily dependent on short-term tax exemptions, partial tariff exemptions, preferential tariffs and import tax exemptions to attract FDI. However, these mechanisms are no longer considered innovative and limit the potential for positive spillover effects.
Although Vietnam is attracting investment efficiently from Japan and the Republic of Korea, in the long term, the country must attract more investors from other parts of the world such as Europe and the United States to diversify its FDI capital resources.
WB experts suggested that Vietnam should review the current investment incentive framework and the rebalancing of profit-based incentives with efficiency-based incentives. Accordingly, it is necessary to transfer from the Investment Law to the Tax Law and Customs Law, with the support of an effective monitoring and evaluation system.
Industry insiders forecast that Vietnam will continue to remain a priority for foreign investors this year.
Phan Huu Thang, former director of the Ministry of Planning and Investment’s Foreign Investment Agency and deputy chairman of Vietnam Association of Foreign Invested Enterprises, believes that Vietnam can be optimistic about foreign investment capital inflows in 2018 as well as in subsequent years after successfully hosting the APEC Summit last November.
According to experts, foreign investors will continue to find traditional export-oriented sectors, such as electronics, garments, and footwear, to be attractive this year. In addition to export-oriented sectors, the domestic market also provides an opportunity for investors. With growing urbanization and rising incomes, industries such as education, real estate, retail, food and beverage, e-commerce, and FMCG will continue to grow in 2018.
The aforementioned industries will continue to be a priority for the government in the short term. For the long-term, the government is shifting its focus on high-tech and environmentally friendly investments and projects such as renewable energy and high-tech agriculture.
According to Thang, Vietnam has so far planned to focus on attracting FDI to high-tech and environmentally friendly projects. Notably, Vietnam will stimulate investment in renewable energy projects, high-tech agriculture, as well as smart cities, among others.
It will try to attract FDI, while keeping its national identity and safeguarding the environment, Thang said, adding that the country will build solutions to create balance in FDI attraction, instead of focusing on Hanoi, Haiphong, Bac Ninh, Binh Duong, Ho Chi Minh City, and Thanh Hoa.
Regarding the priority areas for investment, WB experts said that the country has a number of new priority areas such as automobiles, motorbikes and supporting industries, machinery, industrial equipment, logistics, high-value agricultural products, environmental technology, renewable energy and information technology application services. In addition, it is also important to continue the growth of the services sector, for example, financial and education services.
As the country pursues priority fields for FDI in the coming period, it must not forget the basic types of FDI which have already seen success in attracting foreign investment, the experts said.
Currently, Vietnam is heavily dependent on short-term tax exemptions, partial tariff exemptions, preferential tariffs and import tax exemptions to attract FDI. However, these mechanisms are no longer considered innovative and limit the potential for positive spillover effects.
Although Vietnam is attracting investment efficiently from Japan and the Republic of Korea, in the long term, the country must attract more investors from other parts of the world such as Europe and the United States to diversify its FDI capital resources.
WB experts suggested that Vietnam should review the current investment incentive framework and the rebalancing of profit-based incentives with efficiency-based incentives. Accordingly, it is necessary to transfer from the Investment Law to the Tax Law and Customs Law, with the support of an effective monitoring and evaluation system.
Industry insiders forecast that Vietnam will continue to remain a priority for foreign investors this year.
Phan Huu Thang, former director of the Ministry of Planning and Investment’s Foreign Investment Agency and deputy chairman of Vietnam Association of Foreign Invested Enterprises, believes that Vietnam can be optimistic about foreign investment capital inflows in 2018 as well as in subsequent years after successfully hosting the APEC Summit last November.
According to experts, foreign investors will continue to find traditional export-oriented sectors, such as electronics, garments, and footwear, to be attractive this year. In addition to export-oriented sectors, the domestic market also provides an opportunity for investors. With growing urbanization and rising incomes, industries such as education, real estate, retail, food and beverage, e-commerce, and FMCG will continue to grow in 2018.
The aforementioned industries will continue to be a priority for the government in the short term. For the long-term, the government is shifting its focus on high-tech and environmentally friendly investments and projects such as renewable energy and high-tech agriculture.
According to Thang, Vietnam has so far planned to focus on attracting FDI to high-tech and environmentally friendly projects. Notably, Vietnam will stimulate investment in renewable energy projects, high-tech agriculture, as well as smart cities, among others.
It will try to attract FDI, while keeping its national identity and safeguarding the environment, Thang said, adding that the country will build solutions to create balance in FDI attraction, instead of focusing on Hanoi, Haiphong, Bac Ninh, Binh Duong, Ho Chi Minh City, and Thanh Hoa.
Source: http://www.hanoitimes.vn/investment/2018/04/81E0C5AE/vietnam-drafts-fdi-attraction-strategy-in-new-stage/