Vietnam Investment Environment: New Elements to Attract Foreign Investors

 

Dr Nguyen Anh Tuan, Editor-in-Chief of Investment Newspaper under the Ministry of Planning and Investment, said that in the international integration process, Vietnam is consolidating its position in the regional and global economy. Since 1998, Vietnam has licensed 8,166 foreign-invested projects valued at US$74.76 billion. In 2006, registered FDI capital was US$10.2 billion, of which US$4.1 billion has been disbursed. In the first 11 months of 2007, the country drew US$15 billion, higher than the goal set for the whole year. According to economists, Vietnam can attract US$16-17 billion of foreign investment capital in 2007. This is a record high over the past 20 years since Vietnam has applied policies to attract foreign investment capital. There are an increasing number of big foreign-invested projects.

 

A number of different factors foster competitiveness in attracting FDI to Vietnam. The first factor is political stability, helping investors feel secure in doing business here. The second factor is geographic location. Vietnam has many seaports along its coastline and airports for easy transport of commodities. The third factor is Vietnam’s rich natural resources. The fourth is its abundant and young labour pool. The fifth is the rapid expansion of Vietnam’s domestic market, with 85 million consumers drawing international retailers.

 

Since the renovation process began, Vietnam has achieved rapid economic growth. In 2001-2005, average GDP growth was 7.5 per cent. The figure was 8.2 per cent in 2006 and is estimated at 8.5 per cent in 2007. These figures show Vietnam to be an ideal destination to make profit. After joining international organisations such as WTO and APEC, Vietnam actively promotes the Asian-European relationship.

 

Apart from promoting its inherent advantages, Vietnam is quickly streamlining administrative procedures and improving the legal system to attract investors. The introduction of a series of new laws, such as the Business Law, the Securities Law, the Banking Law, the Credit Organisation Law, the Science and Technology Law, the Real Estate Law and the Technology Transference Law, shows the development of the Vietnamese legal system toward satisfying the requirements of a market-oriented economy. Especially, the Investment Law 2005 and the Enterprise Law 2006 have created a level playing ground for companies of different scales, because they eliminated monopolies and privileges for State-owned enterprises and put an end to barriers against investment and business expansion by investors. Last but not least, Vietnam offers tax incentives for investors in different fields.

 

The Vietnamese government focuses on calling foreign investment in the key fields of industry-construction, agro-forestry and fisheries, and tourism and service. The industry and construction field has 109 projects in need of foreign investment capital to develop infrastructure, mining, metallurgy, engineering, electricity, petrochemical, chemical industry, new material production, new energy production and hi-tech product manufacturing.

 

The service and tourism field has 48 projects in post, telecom, healthcare, education and training, urban infrastructure, hotel and travel. The training of high-quality human resources is a national strategy, and this is an opportunity for foreign investors. The agriculture, forestry and fisheries field has 6 projects in breeding, export processing and consumption. The government will give tax incentives for projects in encouraged fields. For example, in the high-tech field, investors have to pay only 10 per cent of tax and will enjoy tax exemption over four years and a 50 per cent discount in corporate income tax.

 

Besides, foreign investors also have the opportunity to enter the finance and banking sector, because by 2012 foreign investors will be permitted to set up banks in Vietnam.