OVERVIEW ABOUT FDI
Definition
The World Trade Organization gives the following definition of FDI:
Foreign direct investment (FDI) involves an investor from one country acquiring and managing assets in another country, distinguishing it from other financial instruments Typically, both the investor and the managed assets are business entities, with the investor known as the "parent company" and the acquired assets referred to as such.
Foreign direct investment (FDI) refers to a long-term investment made by an individual or company in one country into a business or production facility in another country This investment allows the foreign investor to gain control over the established business.
Forms of FDI
2.1 Classified by investment nature a Investment in operating facilities
Operating facilities investment represents a type of foreign direct investment (FDI) where a parent company allocates resources to procure and establish new business facilities in a host country, thereby enhancing the overall investment volume Additionally, mergers and acquisitions play a crucial role in this investment strategy.
Mergers and acquisitions represent a type of foreign direct investment (FDI) where two or more enterprises either merge or one acquires another, which may be based in the host country or abroad This strategy does not always result in an increase in overall investment volume.
2.2 Classified by the nature of capital flows a Stock capital
Foreign investors may purchase shares or corporate bonds issued by a domestic company at a level large enough to have the right to participate in the company's management decisions. b Reinvestment capital
FDI enterprises can use profits earned from past business activities to make additional investments. c Internal debt transactions
Between branches or subsidiaries in the same multinational company may lend to each other to invest or buy shares, corporate bonds of each other.
2.3 Divided by the motive of the investor a Capital to search resources
Capital flows are directed towards leveraging the host country's inexpensive and plentiful natural resources, as well as its low-cost labor, whether skilled or unskilled Additionally, these investments seek to capitalize on valuable brand-name assets, such as renowned tourist destinations, and to utilize the intellectual property available in the host nation Furthermore, this type of capital is also focused on securing strategic resources to prevent competitors from gaining access.
Capital plays a crucial role in leveraging low input costs in receiving countries, including affordable raw materials, inexpensive labor, and reduced production expenses such as electricity, water, and transportation Additionally, favorable tax rates and legal conditions further enhance the investment landscape, making it essential for businesses to capitalize on these market opportunities.
Investment plays a crucial role in market expansion and protection against competitive threats It also seeks to leverage economic cooperation agreements between host nations and other regions, using these countries as strategic entry points to access broader regional and global markets.
Factors promoting foreign direct investment
3.1 Differences in marginal productivity of capital among countries
The marginal productivity of capital varies between countries, with surplus nations typically experiencing lower marginal productivity compared to those with capital scarcity, which often have higher marginal productivity This disparity drives capital flows from surplus to capital-scarce countries in pursuit of maximizing profits, as production costs tend to be lower in the latter However, it is essential to note that not all high marginal productivity activities receive investment from enterprises; some crucial activities, despite yielding lower marginal productivity, are vital for overall production.
For most businesses involved in international business, the life cycle of these products consists of three main stages: the new product stage; maturity of products; standardized product stage
3.3 Special advantages of multinational companies
Multinational companies possess distinct advantages, including core competencies, that enable them to navigate cost challenges in foreign markets, prompting direct investments abroad When selecting investment locations, these companies prioritize regions where favorable conditions—such as labor availability, land accessibility, and political stability—allow them to leverage their unique strengths Their significant capital and technological resources give them an edge in countries rich in raw materials, with low labor costs and emerging consumer markets, highlighting the clear benefits of such strategic investments.
3.4 Market access and reduced trade conflict
Foreign direct investment (FDI) serves as a strategy to mitigate bilateral trade conflicts, particularly highlighted by Japan's trade surplus with the United States and Western European nations In response to complaints regarding trade imbalances, Japan has bolstered its direct investments in these markets by establishing manufacturing facilities for cars and computers in the U.S and Europe, effectively reducing exports from Japan Additionally, Japan has expanded its investments in third countries to facilitate exports to North American and European markets, further addressing trade concerns.
Foreign Direct Investment (FDI) is not solely a one-way street from developed to developing countries; in fact, the reverse trend is increasingly prominent Japan exemplifies this by actively investing in the United States to leverage its pool of skilled professionals For instance, Japanese automotive firms have established design departments in the U.S to hire American experts, a strategy mirrored by Japanese technology companies This trend is not unique to Japan, as other industrialized nations also adopt similar investment strategies in the U.S.
For raw materials, many multinational companies seek to invest in countries with abundant resources Japan's first major wave of foreign direct investment in the 1950s was for this purpose.
Benefits of attracting FDI
Economic growth theories consistently highlight the importance of capital To accelerate growth, an economy requires increased capital investment When domestic capital is insufficient, the economy seeks foreign capital, particularly foreign direct investment (FDI), to support its expansion.
4.2 Acquire technology and management know-how
In some cases, capital for growth despite lacking can still be mobilized partly by
Austerity policies may not foster the technological advancements and management expertise essential for economic growth Attracting foreign direct investment (FDI) from multinational corporations offers countries the chance to access valuable technology and business management skills developed over years of investment However, the effective dissemination of these technologies and knowledge throughout the country is largely contingent upon its capacity to absorb and implement them.
4.3 Join the global production network
Attracting foreign direct investment (FDI) from multinational companies involves not only the enterprises receiving the investment but also domestic businesses that engage in partnerships with these multinationals This collaborative effort contributes to the regional division of labor, enabling the investing country to integrate into the global production network, ultimately enhancing export opportunities.
4.4 Increase the number of jobs and labor training
Foreign Direct Investment (FDI) aims to capitalize on favorable conditions for low production costs, leading foreign-invested enterprises to hire numerous local workers This influx of employment boosts the income of a segment of the local population, positively impacting economic growth Additionally, these enterprises often provide training in new and advanced occupational skills, enhancing the local workforce's capabilities As a result, both ordinary workers and local professionals gain opportunities for professional development within foreign-invested companies, fostering a skilled labor force that attracts further FDI.
For many developing countries, or for many localities, taxes paid by foreign-invested enterprises are an important source of budget revenue.
OVERVIEW OF FOREIGN DIRECT INVESTMENT FLOWS INTO VIETNAM 6 1 Scale of FDI investment in Vietnam
Investment structure by industry
Sectors that attract foreign direct investment in Vietnam include agriculture,manufacturing, real estate, The sectors which have been expanded and diversified over time.
Foreign direct investment projects licensed by kinds of economic activity (Accumulation of projects having effect as of 31/12/2018) by Kinds of economic activity and Items
Total registered capital (Mill USD)
Electricity, gas, stream and air conditioning supply 119 23092.8
Water supply, sewerage, waste management and remediation activities 70 2658.7
Accommodation and food service activities 734 12025.6
Human health and social work activities 142 1970.9
Table 2 FDI projects licensed by kinds of economic activity (General statistics office of Vietnam)
Investment structure by economic region
Foreign investment in Vietnam is unevenly distributed, primarily favoring major cities like Ho Chi Minh City, Hanoi, and Da Nang, as well as economically developed provinces This concentration of investment boosts local budgets, enhances labor resource availability, generates employment opportunities, and raises income levels for residents.
Foreign direct investment projects licensed in 2018 by province by Cities, provincies and
Total registered capital (Mill. USD)
Northern midlands and mountain areas 102 1423.1
North Central area and Central coastal area 16 364.7
Table 3 FDI projects licensed in 2018 by cities, provinces and items (General statistics office of Vietnam)
Investment structure by investment partners
Investment capital flowing into Vietnam is increasingly abundant, primarily from countries that are either developed or rapidly growing in the international market and have strong ties with Vietnam Historically, Japan has been the leading source of investment capital in the country.
Vietnam, including ODA and FDI However, in the past decade, South Korea started to rise and ranked first in terms of total FDI inflows into Vietnam.
Foreign direct investment projects licensed in 2018 by main counterparts by Main counterparts and Items Number of projects Total registered capital (Mill USD)
Table 4 FDI projects licensed in 2018 by main counters (General statistics office of
SITUATION OF KOREAN DIRECT INVESTMENT IN VIETNAM
Overview of Korean FDI
Korea is actively engaged in investment projects across the globe, spanning 185 countries and territories Notably, its largest investments are concentrated in China, with total registered capital reaching $83.3 billion, including Hong Kong, followed by the United States at $76.5 billion Other significant investment destinations include Vietnam, Australia, the Netherlands, Canada, and Indonesia.
Korea's investment landscape is predominantly focused on the manufacturing sector, with a significant registered capital of USD 122 billion Other key areas of investment include mining at USD 85 billion, finance and insurance at USD 41 billion, and wholesale and retail, which attracted USD 33.7 billion The real estate business garnered USD 26.3 billion, while professional, scientific, and technical services received USD 20.4 billion Additionally, construction saw investments of USD 9.9 billion, IT attracted USD 7.1 billion, transportation received USD 5.5 billion, and accommodation and catering services accounted for USD 5 billion.
Table 5: Korea's FDI capital flows into the nations
Vietnam and South Korea, which established diplomatic relations on December 22, 1992, have consistently ranked among the top five countries in terms of economic relations To enhance bilateral cooperation, they formed the Korea-Vietnam Intergovernmental Committee on Economic, Scientific, and Technical Cooperation and signed key agreements, including the Agreement on Economic and Scientific Cooperation in February 1993 and the Agreement on Encouragement and Protection of Amended Investment in September 2003 Over the past decade, South Korea has recognized Vietnam's progress in developing infrastructure clusters that support various industries, including electricity, electronics, and textiles.
The bilateral trade agreement signed between Vietnam and Korea in May 2015 is set to enhance trade and investment cooperation significantly This agreement includes Vietnam's commitments to improve investment services for Korean companies under the VKFTA Furthermore, Korea's engagement with ASEAN is strengthened through the initial commitment package of the ASEAN-Korea Free Trade Agreement, fostering deeper economic ties in the region.
Korean investments in Vietnam primarily target the manufacturing sector, leveraging the country's abundant labor force Many foreign investors, including those from Korea, aim to capitalize on Vietnam's cost-effective labor for their ventures The flow of Korean foreign direct investment (FDI) is concentrated in industries such as automobiles, motorcycles, electronics, and civil and export products.
South Korean investors primarily engage in Vietnam through 100% foreign-owned enterprises, which represent approximately 80% of their investments Joint ventures account for around 15%, while the remainder consists of contractual business cooperation agreements This cautious approach reflects Korean investors' meticulous selection of partners, investment forms, sectors, and locations.
3 Scale of Korea FDI investment in Vietnam
Korean investment projects typically demonstrate strong performance, boasting an average capital scale exceeding 40 million USD, significantly higher than the national average These projects primarily concentrate on material production and are often situated in regions with robust infrastructure Additionally, the rate of dissolved projects among Korean investors is relatively low, around 10%, as they conduct thorough surveys and research to mitigate risks prior to commencing operations.
As of October 2016, South Korea stands as the largest foreign investor in Vietnam, with over 50 billion USD in registered investment capital across 5,593 projects Korean foreign direct investment (FDI) enterprises significantly impact the Vietnamese economy by generating employment for 70,000 workers and accounting for approximately 30% of the country's total export value Recognized for their methodical business practices, Korean companies are viewed as serious and highly effective investors, making substantial contributions to Vietnam's economic growth.
For example, Korea was the country with the most direct investment in Vietnam in
In 2015, Vietnam attracted 24% of its total investment capital from foreign direct investment (FDI), with numerous large and small projects implemented across various regions Countries such as Japan, Taiwan, and Singapore are anticipated to significantly contribute to FDI inflows into Vietnam in the coming years.
B ri tis hV ir gi nl sl an ds
Table 6 Total register investment capital 2015 (General statistics office of Vietnam)
As of November 2015, Korean Foreign Direct Investment (FDI) represented 31.6% of the total FDI in Vietnam Including the Hyosung Group's $660 million investment through a Turkish entity, Korean FDI rises to 34.9%, significantly surpassing Japan by 4.1 times, Taiwan by 6.2 times, and Singapore by 6.8 times, although traditional FDI partners rank second, third, and fourth in Vietnam.
4 Structure of Korean direct investment capital into Vietnam
4.1 Investment structure by investment sector
Manufacturing and processing industry real estate business
Table 7 Korea's FDI structure by sectors into Vietnam 2015 (General statistics office of Vietnam)
In 2015, Korean investments in Vietnam spanned 18 out of 21 sectors, with the manufacturing and processing industry leading with 2,566 projects and a total registered capital of $24.03 billion, representing 64.5% of the total investment The real estate sector followed with 82 projects and $6.99 billion in capital, accounting for 18.5% of the total investment The construction industry ranked third, comprising 579 projects and $2.4 billion, which is 6.4% of the overall investment capital.
Korean investment projects in Vietnam, particularly in the automobile manufacturing sector, have made significant contributions to the socio-economic stability of localities A notable example is the Vietnam-Daewoo Automobile Company in Hanoi, established in 1996 with a registered capital of $32.2 million, which has achieved a 15% market share in the country and has been profitable since 2000 Despite facing challenges such as fierce competition and high input costs due to reliance on imported raw materials, Korean enterprises continue to perform relatively well, supported by tax commitments under the AKFTA However, issues such as labor disputes arising from economic conflicts and working conditions have occurred in some 100% Korean-owned companies These disputes are generally resolved through conciliation and negotiation, with local agencies involved to ensure satisfactory outcomes.
Ha Noi Thai Nguyen Dong Nai Others
Table 8 Structure of FDI by locality of Korea into Vietnam 2015 (General statistics office of Vietnam)
In 2015, South Korea invested in 51 out of 63 cities and provinces across Vietnam, with Hanoi leading as the top destination, attracting 885 projects and a total registered capital of $5.3 billion, which represents 14% of the overall investment Thai Nguyen followed with 43 projects and an investment of $4.72 billion, accounting for 12.5% of the total, while Dong Nai secured third place with an investment of $4.56 billion, making up 12.1% of the total capital Other localities also received varying amounts of investment.
4.3 Results from Korean direct investment in Vietnam a South Korea has become an important economic partner of Vietnam After establishing official diplomatic relations at the end of December 1992, the economic relations between the two countries had much development Right from the first years of promulgating the Law on Foreign Investment of Korean investors was present in Vietnam As of now, Korea is the first country among 105 countries and territories investing in Vietnam with 4,777 valid projects with a total registered investment capital of nearly 4.36 billion USD Investment of Korean enterprises is mainly concentrated in big cities, with relatively good infrastructure conditions such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and concentrated mainly in the industries such as auto assembly, steel, mechanics, electronics, footwear, textiles and construction b Most large Korean corporations have been present in Vietnam to create jobs for workers
Several large-scale investment projects in Vietnam, including Hyundai Shipyard - Vinashin with an investment of $192.6 million, Samsung Factory - Vina Synthetics producing fabrics and polyester yarn at $192.6 million, Orion Hanel's lamp company with $178.5 million, and Deaha Company Limited's $52 million investment for a five-star hotel, along with the VSC - POSCO steel production project at $56.1 million, have significantly contributed to the country's socio-economic development.
Scale of Korea FDI investment in Vietnam
Korean investment projects typically demonstrate strong performance, with an average capital scale exceeding 40 million USD, primarily concentrated in material production These projects are often situated in regions with well-developed infrastructure Notably, the rate of dissolved projects in Korea is low, around 10%, as investors conduct thorough surveys and research to mitigate risks prior to commencing operations.
As of October 2016, South Korea stands as the largest foreign investor in Vietnam, leading with over 50 billion USD in registered investment capital across 5,593 projects Korean foreign direct investment (FDI) enterprises significantly impact Vietnam's economy, providing jobs for 70,000 workers and accounting for approximately 30% of the country's total export value These businesses are recognized for their methodical operations and are regarded as serious and highly effective investors, making substantial contributions to Vietnam's economic growth.
For example, Korea was the country with the most direct investment in Vietnam in
In 2015, foreign direct investment (FDI) in Vietnam reached 24% of the total investment capital, encompassing a diverse range of large and small projects throughout the country Notably, Japan, Taiwan, and Singapore are anticipated to contribute significantly to FDI inflows into Vietnam in the coming years.
B ri tis hV ir gi nl sl an ds
Table 6 Total register investment capital 2015 (General statistics office of Vietnam)
As of November 2015, Korean foreign direct investment (FDI) represented 31.6% of the total FDI in Vietnam, which increases to 34.9% when including the Hyosung Group's $660 million investment via a Turkish entity This makes Korean FDI 4.1 times greater than that of Japan, 6.2 times that of Taiwan, and 6.8 times that of Singapore, despite these countries traditionally ranking as Vietnam's main FDI partners.
4 Structure of Korean direct investment capital into Vietnam
4.1 Investment structure by investment sector
Manufacturing and processing industry real estate business
Table 7 Korea's FDI structure by sectors into Vietnam 2015 (General statistics office of Vietnam)
In 2015, Korean investments in Vietnam spanned 18 out of 21 sectors, with the manufacturing and processing industry leading with 2,566 projects and a total registered capital of $24.03 billion, representing 64.5% of all foreign investment The real estate sector followed, featuring 82 projects and a capital of $6.99 billion, which accounted for 18.5% of total investment The construction industry ranked third, with 579 projects and an investment of $2.4 billion, making up 6.4% of the overall investment capital.
Korean investment projects in Vietnam, particularly in the automobile manufacturing sector, have significantly contributed to socio-economic stability and development The Vietnam-Daewoo Automobile Company, established in 1996 with a registered capital of $32.2 million, has captured a 15% market share in the country and has been profitable since 2000 Despite facing challenges such as fierce competition and high input costs due to reliance on imported raw materials and spare parts, Korean enterprises continue to perform well, especially with commitments to tax reductions under AKFTA However, labor disputes have arisen in some fully Korean-owned companies, primarily due to economic conflicts and working conditions, but these issues are generally resolved through conciliation and negotiation with local authorities.
Ha Noi Thai Nguyen Dong Nai Others
Table 8 Structure of FDI by locality of Korea into Vietnam 2015 (General statistics office of Vietnam)
In 2015, South Korea invested in 51 out of 63 cities and provinces across Vietnam, with Hanoi leading the way by attracting 885 projects and a total registered capital of $5.3 billion, which represents 14% of the overall investment Thai Nguyen followed with 43 projects and an investment of $4.72 billion, accounting for 12.5% of total investments, while Dong Nai secured the third position with $4.56 billion, making up 12.1% of the total capital Other localities contributed to the remaining investments.
4.3 Results from Korean direct investment in Vietnam a South Korea has become an important economic partner of Vietnam After establishing official diplomatic relations at the end of December 1992, the economic relations between the two countries had much development Right from the first years of promulgating the Law on Foreign Investment of Korean investors was present in Vietnam As of now, Korea is the first country among 105 countries and territories investing in Vietnam with 4,777 valid projects with a total registered investment capital of nearly 4.36 billion USD Investment of Korean enterprises is mainly concentrated in big cities, with relatively good infrastructure conditions such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and concentrated mainly in the industries such as auto assembly, steel, mechanics, electronics, footwear, textiles and construction b Most large Korean corporations have been present in Vietnam to create jobs for workers
Significant investment projects in Vietnam, including the Hyundai Shipyard - Vinashin with $192.6 million, the Samsung Factory - Vina Synthetics at $192.6 million, Orion Hanel with $178.5 million, Deaha Company Limited's $52 million five-star hotel, and the VSC - POSCO steel production project at $56.1 million, have made substantial contributions to the country's socio-economic development.
Korean foreign direct investment (FDI) enterprises significantly impact Vietnam's economy, generating approximately 70,000 jobs and accounting for around 30% of the country's total export value in 2014 Notably, several major projects exceeding $1 billion have been established in Vietnam, underscoring the substantial role of Korean investments in the region.
The Sam Sung Thai Nguyen High-Tech Complex Project - Phase 2, backed by Sam Sung Electronics Vietnam Co., Ltd., is located in the Yen Binh I Industrial Park of Thai Nguyen Province This significant investment project boasts a total registered capital of $3 billion.
LG Electronics Vietnam Hai Phong Co., Ltd., a subsidiary of LG Electronics INC, has launched a significant project in the Hai Phong Industrial Zone, located in Hai Phong province, with a total registered investment capital of $1.5 billion.
Samsung Electro-Mechanics Vietnam Co., Ltd is the investor behind the Samsung Electro-Mechanics project, located in the Yen Binh I Industrial Park in Thai Nguyen Province, with a substantial total registered capital of $1.23 billion.
Posco-Vietnam Co., Ltd., a subsidiary of Korea's Posco Co., Ltd., is investing $1.128 billion in the My Phu II Industrial Park located in Ba Ria - Vung Tau Province.
Samsung Display Bac Ninh Co., Ltd, the investor behind the project, has initiated a significant investment of 1 billion USD in the Yen Phong I Industrial Park located in Bac Ninh province.
The Impact of Korea’s FDI on the Vietnamese Economy
Over the past decade, diplomatic relations between Vietnam and Korea have strengthened, resulting in a stable annual growth of 10-15% in two-way trade Vietnam's improved infrastructure and economic reforms, including its accession to ASEAN and the WTO, have attracted significant foreign direct investment (FDI) from Korea and other Asian nations This influx of FDI has positively impacted the Vietnamese economy by enhancing labor productivity, generating employment, and facilitating technology transfer Additionally, data indicates that FDI, alongside domestic investment and human capital, has contributed to economic growth across various provinces in Vietnam, generating substantial revenue and encouraging further foreign investments.
Vietnam is focused on generating capital to invest in the development of facilities, industrial parks, and factories, which will create job opportunities for workers By leveraging the country's strengths, Vietnam aims to enhance its economic growth and prosperity.
Korea's foreign direct investment (FDI) has significantly benefited Vietnam in recent years, contributing to economic growth and development However, alongside these advantages, there are certain negative impacts that need to be addressed to ensure sustainable progress for the country.
The rapid establishment of Korean factories nationwide has sparked mixed reactions among the public While these factories promise economic growth, they occupy valuable land and pose risks to the long-term living environment Additionally, the lack of adherence to safety standards raises concerns about the health and safety of workers.
Korea primarily invests in secondary industries in our country, which require low-skilled labor and consequently offer low wages This focus results in the production of low-value goods that do not contribute significantly to the economy, leading to a waste of social resources and creating an imbalance among various sectors.
And, businesses are mainly invested with 100% foreign capital, so we have difficulty controlling, limited technology transfer, not helping long-term development.
CHAPTER IV Proposals to attract more FDI capital into Vietnam
Experiences from other countries
China has actively attracted foreign direct investment (FDI) through various mechanisms, including production contracts and joint ventures, as well as allowing 100% foreign investment in designated areas A key strategy in this effort is the tax policy, which includes specific tax incentives for different investment forms across 14 coastal cities Joint ventures are subject to a 30% tax rate, along with an additional 10% tax benefiting localities, while enterprises with 100% foreign capital face profit tax rates ranging from 20% to 40%, plus an additional 10% for local governments.
China has eliminated import taxes on various items, including machinery, equipment, spare parts, and materials used as joint venture capital This exemption also applies to foreign machinery and equipment brought in for oil and gas exploitation, energy development, and infrastructure projects like railways and roads, as well as for use in export processing zones.
Regarding administrative procedures, China decentralizes strongly to localities on project evaluation and investment licensing After obtaining the investment license, the procedures related to project implementation were quickly resolved.
The challenges related to ground clearance, electricity and water supply, traffic, and environmental concerns have been effectively addressed The introduction of a "one-door" policy aims to facilitate foreign direct investment (FDI) attraction Furthermore, China may continue to maintain its competitive advantage for an extended period.
Indonesia encourages investment in export projects, saving foreign currencies, processing finished and semi-finished products, transferring technology, employing experts and Indonesian labor.
Companies in the region face a tiered profit tax structure: a 15% tax applies to net profits of 10 million rupees or less, while profits exceeding 10 million rupees are taxed at 25% For profits over 50 million rupees, the tax rate increases to 35% Additionally, various income sources such as interest, rental income, resource fees, technical services, and management fees are uniformly taxed at 15% on sales, with no reductions available for sales or income tax.
Indonesia has an import duty exemption or reduction policy on machinery, equipment and parts approved by the investment committee in the list.
Export products benefit from a favorable credit interest rate of 9% per year, significantly lower than the 18-24% rates applicable to other loans Additionally, exporters may be refunded or exempted from import taxes on specific items Companies engaged in the production of goods for export are permitted not only to export their own products but also to facilitate exports for other businesses.
Recently, Indonesia has fostered a competitive market by allowing all industries, except those on the exclusion list and in bonded warehouses, to operate freely in the domestic market Additionally, the country has removed restrictions and taxes on foreign labor, promoting greater participation from international talent.
Indonesia simplifies procedures for granting investment licenses, especially industrial investment.
The Thai government prioritizes collaboration between investors and state agencies to promote resource exploitation while ensuring environmental protection Emphasis is placed on labor-intensive projects, labor export, and the use of Thai raw materials to reduce reliance on imported goods.
The rate of joint venture capital does not become a mandatory condition However, for projects that allow Thailand to contribute more than 50% of capital, the investment committee issues guarantee certificates.
In Thailand, companies and partners listed on the stock market face a 30% profit tax, while other entities are subject to a 35% tax Additionally, depending on the specific project, businesses may benefit from income tax exemptions or reductions lasting 3 to 8 years once they become profitable Furthermore, enterprises can receive a 50% exemption on import tax for goods that are not produced domestically.
Exporting enterprises benefit from significant tax exemptions, including relief from import taxes on materials, spare parts, and components temporarily imported for re-export Additionally, these businesses enjoy a reduced income tax rate of 5% Furthermore, companies operating within export processing zones are also exempt from import taxes on their supplies, enhancing their competitive edge in the global market.
Solutions to improve the efficiency of attracting and using foreign
In the context of the robust 4.0 Industrial Revolution, Vietnam must prioritize attracting foreign direct investment (FDI) that aligns with the nation's goals for international economic integration This strategic focus is essential for fostering sustainable growth and enhancing the country's competitive edge in the global market.
To effectively attract foreign direct investment (FDI) into high-tech sectors, it is essential to focus on advanced technologies, environmentally friendly innovations, information technology, telecommunications, and electronics Additionally, prioritizing investment in automotive technology, agricultural machinery, construction equipment, industrial and electrical equipment, as well as supporting industries, research and development, financial services, logistics, and other modern services will enhance competitiveness at a global level.
Identifying foreign direct investment (FDI) opportunities presents both challenges and advantages, fostering mutually beneficial relationships To enhance product value and localization rates, foreign investors should focus on capital investment and advanced technologies, allowing deeper integration into global production networks and value chains This approach will boost Vietnam's innovation capacity, competitiveness, and the quality of its businesses and services Additionally, strengthening connections between the FDI and domestic sectors is essential for increasing localization rates and product value, ultimately leading to expanded exports and promoting economic restructuring in line with the innovations of the Fourth Industrial Revolution.
A strategic initiative is in place to enhance the professional skills, behavior, and work attitudes of managers and technical workers in foreign direct investment (FDI) enterprises This includes developing managerial competencies in foreign economic operations, market exploitation, business acumen, and international law Additionally, attention is being given to salary policies and the establishment of trade unions within FDI enterprises to safeguard the legal rights of Vietnamese workers.
To enhance the investment environment, it is essential to improve laws and policies by promoting transparency and competitiveness with regional counterparts This includes ensuring that procedures are clear, detailed, and easy to apply Additionally, legal documents should be refined to facilitate technology transfer while effectively managing this process to prevent issues like price manipulation and tax evasion through technology transfer agreements.
After over two decades of economic reforms and foreign investment initiatives, particularly following our entry into the World Trade Organization, Vietnam has achieved significant progress in national development Transitioning from a poor and underdeveloped nation, we have laid a strong foundation to secure our position in the global arena.
To transform our nation into an industrialized country by 2020, the government must implement strategies to attract foreign investment, optimize capital use, and prioritize environmental protection while ensuring sustainable growth It is essential to invest wisely and align with global social development trends, rather than merely imitating other nations Building strong international relationships and centering human development in our national agenda is crucial Additionally, it is important to eliminate harmful projects that threaten our people and natural environment.