In a recent report by the Ministry of Planning and Investment, it was revealed that major global companies like Intel, LG Chemical, AT&S, Samsung, and SMC are either choosing to invest in other countries instead of Vietnam or are not considering any new investments in the country. The ministry highlighted that Vietnam’s current investment support policy lacks comprehensive incentives, focusing only on income-based perks like tax exemptions and fee reductions. The impending Global Minimum Tax (GMT) is expected to have a significant impact on Vietnam, necessitating updates to its legal framework.
One example cited in the report is LG Chemical, which initially proposed a battery production project in Vietnam and requested financial support, but ultimately decided to invest in Indonesia. Similarly, Intel had plans to invest $3.3 billion in chip production in Vietnam but opted for Poland instead. AT&S, a producer of high-end printed circuit boards, also shifted its investment to Malaysia due to Vietnam’s inability to meet its investment support requirements.
The ministry noted that other major investors in Vietnam are awaiting new policies before committing to further investments. Failure to provide adequate support in line with GMT could lead to Samsung relocating production lines to India and LG halting a proposed $5 billion investment in electronics production. Japanese sanitary ware producer SMC and Taiwanese firms like Foxconn, Compal, and Quanta are also monitoring the situation.
The ministry emphasized that Vietnam’s main draw for foreign direct investment (FDI) lies in its stable investment environment. However, without updates to the legal framework, the country’s attractiveness to foreign investors may diminish. To address these challenges, the ministry proposed the establishment of an Investment Support Fund, which would utilize additional tax revenues resulting from the global exchange rate increase, as well as funds from the state budget, donations, and interest income.
According to the draft decree, the fund aims to support high-tech enterprises, those producing high-tech equipment, businesses with high-tech applications, and enterprises operating research and development (R&D) centers. The support provided by the fund would cover expenses related to workforce development, R&D activities, investments in fixed assets, production of high-tech items, and investments in social welfare infrastructure.
Overall, the Ministry of Planning and Investment’s report underscores the need for Vietnam to revamp its investment support policies to remain competitive in the global market, especially in light of upcoming changes like the GMT. Failure to do so could result in a loss of major investments from global giants and a decline in the country’s attractiveness to foreign investors.
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