Vietnam Seeks to Boost Foreign Direct Investment (FDI)

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HCMC – According to Vietnam’s Foreign Investment Agency, FDI approvals for the first 10 months of 2014 are 23.9 percent lower than the same period last year. However, capital disbursements by FDI enterprises have increased 5.9 percent year-on-year (YoY) to a total of US$10.15 billion.

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The decline in FDI has occurred despite a number of recent large investments into the country, these have included:

  • US$1.4 billion in a Samsung CE Complex project at Saigon Hi-Tech Park in HCMC
  • US$1-billion project in Bac Ninh Province by Samsung Display Bac Ninh
  • US$300-million project in Quang Ninh Province by Texhong Ngan Ha Co. Ltd

Currently, the leading countries for FDI into Vietnam are South Korea (US$3.6 billion), Singapore (US$2.64 billion), and Hong Kong (US$1.67 billion). The leading FDI sectors are as follows:

  • The processing and manufacturing industry: US$9.7 billion
  • The real estate sector: US$1.22 billion
  • Construction: US$1.03 billion

Not all was bad news however, FDI exports for the first 10 months of this year were up 13.6 percent YoY, totaling US$82.48 billion. Imports only increased by 10.7 percent to a total of US$68.66 billion resulting in a trade surplus of US$13.82 billion.

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Da Nang

The coastal city of Da Nang makes a good case study of how Vietnam is seeking to increase FDI into the country. FDI into the city for this year so far has been US$153 million, down 47 percent YoY.

In order to counter this trend, Da Nang has put forth a number of proposals aimed at attracting further investment into the region, these include:

  • Incentives for FDI projects with capital of US$200 million or more
  • Incentives for hi-tech projects that spend one percent of annual total revenue on research and development

These projects will be granted a corporate income tax rate of 10 percent for 30 years and a 50 percent reduction on land rents. Previously, investors could only receive the 10 percent tax rate for 15 years.

Da Nang is not the only area that has struggled with investment. Even Ho Chi Minh City’s Hi-Tech and New Urban Areas have seen investors slow to set up operations in the area.

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