Haiphong

LG to Invest US $1.5 Billion in Vietnamese Electronics Production

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LG LogoBy: Aysha Nesbitt

On ­­­­May 6, LG Display Group, a subsidiary of South Korea’s LG Electronics, pledged US $1.5 billion to establish a screen factory in Hai Phong. Launching next year, the factory will produce high-tech digital displays using LG’s organic light emitting diodes. This investment comes just a year after LG  opened a US $1.5 billion factory in Hai Phong and follows similar investments from the likes of Samsung and Nokia.

Over the past four years, Vietnam’s electronics sector has grown by 78 percent, becoming the country’s number one export in 2013. With pro-foreign investment policies and a competitive labor force, Vietnamese electronics production has also quickly surpassed regional rivals such as Thailand and the Philippines and is expected to grow at a modest five percent over the next two years, positioning Vietnam to surpass Singapore as the region’s fifth largest electronics exporter.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Corporate Establishment Services

A primary catalyst of Vietnam’s growing stature in the electronics supply chains has been the emergence of China plus one production models. Since 2010, many companies have chosen to relocate production to Vietnam because of its lowered labor costs which average US $174 per month – almost three times lower than going rates in China.  In addition to lowering costs and helping investors to hedge against international demand volatility, Vietnam is also perfectly positioned for smooth integration into existing china based supply chains.

As a result, electronics giants, such as Intel, Samsung, and Japan’s Panasonic are some of many that have turned to Vietnam to manufacture their products. In the past five years alone, Vietnam has experienced substantial inflows of FDI, which reached an all-time high of 17.5 percent in 2015. In the past year there has been a notable increase in capital originating from within ASEAN, due to the TPP and ASEAN’s Economic Community (AEC), while in the short-to-medium term, investors from India and the EU are expected to become more prominent.

While agreements such as the TPP bring with them tariff reductions for specific nations, all companies operating in Vietnam will also benefit from state level reform commitments. Upon implementation of the TPP, Vietnam will be required to adhere to structural adjustments, such as enhancing transportation, labor standards, and establishing a more competitive environment for state-owned businesses. With these adjustments in place, the country’s exports are predicted to grow by 37 percent by 2025. 

Related-Reading-Icon-Asean Link RELATED: Sparking Excitement – Investment Opportunties in ASEAN’s Electronics Industry

Independent of international commitments, the Vietnamese government has also established a pro-foreign investment stance and has been working to improve its legal framework. With regard to electronics, those companies who invest in software manufacturing or high technology factories will qualify for reduced corporate tax rates of 17 percent – down from the standard rate of 20 percent.

Although the benefits of doing business in Vietnam are considerable, companies are likely to face issues relating to poor infrastructure and workforce inefficiency if investments are carried out without proper planning. These challenges can present a barrier to entry and limit otherwise competitive aspects of Vietnam’s investment environment. To confront these challenges, companies should be sure to conduct thorough due diligence of investment locations and select production sites that are well equipped to meet the needs of their operations.

In addition to infrastructure and labor productivity, the level of bureaucracy in Vietnam may also slow down production and cause general challenges to doing business. This obstacle can be confronted with a well-rounded understanding of local regulations. Such an understanding will help in the navigation of Vietnam’s laws which continue to evolve and often create difficulty for those unfamiliar with their interpretation and application.

Dezan Shira & Associates provides accounting and tax compliance services to companies investing in Vietnam. The firm can help companies establish an online presence and direct office in the country and can guide them through the affiliated accounting, tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact us at: vietnam@dezshira.com


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Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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FDI Inflows Soar in Haiphong

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HANOI – In the first quarter of 2014, the northern port city of Haiphong attracted more than US$235 million in FDI.  The city licensed 11 newly registered projects and saw five existing projects register to increase their level of investment capital. The projects’ investment areas included support industries, housing construction, services, trade and automobile spare parts manufacturing.

As of February 2014, the port city had 400 effective FDI projects worth US$8 billion in total registered capital.

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Vietnam’s Regions and Key Economic Zones

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May 29 – Vietnam is composed of 63 provinces and five centrally-governed cities, which stand on the same administrative level as provinces (namely Hanoi, Ho Chi Minh City, Can Tho, Da Nang and Hai Phong). The General Statistics Office of Vietnam further groups these provinces and cities into eight regions, listed below:

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Nov. 17 – The Vietnamese government approved and outlined plans for two new international airports in a meeting chaired by Deputy Prime Minister Hoang Trung Hai on Monday – one in the southern province of Dong Nai and one in the northern port city of Haiphong.

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Vietnam Takes First Step into Wind Turbine Industry

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Oct. 18 – Vietnam’s first wind power turbine production factory, a US$61 million dollar project, was inaugurated at the Nomura Industrial Zone in the port city of Haiphong on October 15.

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Vietnam Airlines Cuts Domestic Fares by 50 Percent

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Sept. 7 – The country’s flag carrier, Vietnam Airlines, has announced it will slash fares on domestic flights by 50 percent from September 15 to October 30.

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E-Customs Clearance Now Available for Lao Cai Border Gate

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Aug. 3 – Electronic customs declaration and clearance is now available for trade passing by the Lao Cai border gate beginning August 1.

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Vietnam to Waive Visa Fees for August and September

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Apr. 27 – Vietnam will waive visa fees for foreign visitors to the country from August to September as part of the “Impressive Vietnam Grand Sale 2010” campaign.

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Vietnam to Limit Car Imports

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Mar. 4 – The Ministry of Industry and Trade plans to limit car imports by implementing regulations that would help cut down its trade deficit.

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Jan. 21- A US$1 billion Vietnam-Singapore Industrial Park has just opened in the northern city of Haiphong.

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