Elevating Vietnam-China relations

VietNamNet•12/09/2023

A stable and favorable policy environment is needed.

President Joe Biden's historic visit and the upgrading of relations to a comprehensive strategic partnership will create unprecedented opportunities to promote new, groundbreaking areas of cooperation, building internal strength so that Vietnam can truly be present in global value chains.

A series of notable Vietnam-US technology cooperation projects have been announced, such as the Amkor Technology semiconductor supply chain (headquartered in Arizona), which will officially begin operations in Bac Ninh in October 2023. The total investment for this project is $1.6 billion.

Synopsys (based in California) will launch a semiconductor design and innovation incubation center in collaboration with the Ho Chi Minh City High-Tech Park. Marvell (based in California) will also announce the construction of a world- class semiconductor design center in Ho Chi Minh City.

Minister of Industry and Trade Nguyen Hong Dien stated that there is a clear trend of large US corporations such as Intel, Apple, Google, Boeing, Walmart, etc., researching and investing in expanding their supply chains in Vietnam.

According to data from the Foreign Investment Agency ( Ministry of Planning and Investment ), as of the end of 2022, American businesses had invested in 1,216 projects in Vietnam, with a total capital of $11.4 billion. The United States ranked 11th among countries and territories investing the most in Vietnam.

However, these figures may not fully reflect the investment flows of American businesses, as many US multinational companies regularly invest indirectly in Vietnam through other countries and territories such as the British Virgin Islands, Samoa, and the Cayman Islands.

Speaking with PV.VietNamNet, Ms. Nguyen Minh Thao, Head of the Business Environment and Competitiveness Research Department (Central Institute for Economic Management Research), said: The upgrading of relations between Vietnam and the US to a comprehensive strategic partnership is an opportunity to attract investors, especially technology investors from the US.

However, to attract these investors to Vietnam, a favorable policy environment is essential.

This is not about incentives, but about creating an institutional environment that facilitates investors' business development and attracts their supply chain networks to Vietnam.

To attract large American corporations, Ms. Nguyen Minh Thao recommended: "A stable policy environment and more streamlined procedures are needed so that investors see this as a good investment opportunity. Large foreign investors often place great emphasis on policy stability, which is what they need most."

According to this expert, investors are awaiting Vietnam's policies before deciding on investment options. Upgrading the relationship to a comprehensive strategic partnership between the two countries is an opportunity for investors to re-evaluate the institutional framework for business operations.

New investment areas in technology will also be relatively new to Vietnam. Is Vietnam ready to open itself up to new business and investment models and new technologies, or will it continue to use old management methods for these new investment activities?

This also creates room for fostering an environment that encourages new businesses to invest, generating a ripple effect among domestic enterprises.

"Foreign investors still believe there are some barriers to the business environment when entering the Vietnamese market. This is also an opportunity for us to re-evaluate our institutions and assess where the room for reform lies in order to attract investors in new sectors," Ms. Thao hoped.

Apple is expanding its supply chain in Vietnam.

Efforts to improve infrastructure to attract large capital inflows.

Mr. Nguyen Dinh Luong, former head of the negotiating team for the Vietnam-US Bilateral Trade Agreement (BTA), emphasized: Americans are very pragmatic and professional, so they prefer a systematic, professional, and modern way of doing business, rather than a quick-profit approach.

To enter any market, they must conduct research and develop a long-term strategy. They will only invest when they are truly confident in the value of their money.

The former head of the BTA negotiating team also agreed with the view that the business environment needs to be improved to attract more investment from the US. This will help to make the economic and trade relations between the two countries more balanced and sustainable.

In addition, we need to improve infrastructure and human resources. These are also issues that need attention and require specific solutions for Vietnam to improve its investment environment and attract new investment waves.

Furthermore, high-quality US investment flows into Vietnam will face a new challenge: the global minimum tax policy. Countries receiving FDI are not allowed to apply tax rates lower than 15%. This will create significant difficulties for countries that attract FDI through tax incentives, such as Vietnam.

According to the Ministry of Planning and Investment, investors, especially multinational companies, invest in new projects as well as expansions in Vietnam primarily due to the stability of the investment environment and the commitment to policies guaranteeing investment and business in the event of changes in laws and policies.

Vietnam's lack of timely solutions to support businesses will affect the investment expansion or maintenance decisions of multinational companies operating in Vietnam, leading to a decline in attracting other satellite companies. At the same time, it will reduce the incentive for new investors planning to invest in Vietnam.

If Vietnam does not take steps to adjust its investment incentive policies and implementation mechanisms accordingly, the application of a global minimum tax rate policy will reduce the effectiveness of Vietnam's corporate income tax incentives; it will no longer be attractive enough to retain or attract new investment capital from multinational corporations. As a result, Vietnam's competitive position compared to other countries in the region, as well as its ability to attract selective, high-quality FDI, will be affected.

Therefore, the Ministry of Planning and Investment and the Ministry of Finance are drafting resolutions for the Government to submit to the National Assembly for promulgation of new policies and mechanisms to attract FDI. These include a draft resolution on piloting investment support policies in the high-tech sector; and a draft resolution on applying supplementary corporate income tax in accordance with global anti-base erosion regulations...

The implementation of a global minimum tax policy will fundamentally alter the investment dynamics of multinational corporations, including American investors. Investment decisions by businesses and foreign investors will depend on non-tax factors in the future, such as the business environment, technological infrastructure, the quantity and quality of labor, and supporting industries.

The Minister of Industry and Trade speaks about American "eagles" investing and expanding in Vietnam. The Minister of Industry and Trade stated that there has been a clear trend of large US corporations such as Intel, Apple, Google, Boeing, Walmart, etc., researching and investing in expanding their supply chains in Vietnam.

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