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KOREA INVESTMENT IN VIETNAM
& FDI POLICIES
1
PRESENTER: NGUYEN THI MINH HIEN- DEPUTY DIRECTOR
FOREIGN INVESTMENT AGENCY- MINISTRY OF PLANNING AND
INVESTMENT
Seoul – 16th April 2015
2
I. VIETNAM IN PROFILE
II. OVERVIEW FDI AND KOREA FDI IN VIETNAM
III. INVESTMENT POLICIES IN VIETNAM
3
I. VIETNAM IN PROFILE
4
4
Area : 331,689 sq. km.
Coastline : 3,260 km.
Major cities : Hanoi Capital, Danang, Hochiminh city.
Population : 88.5 mil – ranking: 13th in the world
Natural resources: oil & gas, minerals, sea and tropical
forestry.
COUNTRY & PEOPLE
5 Source: Ministry of Planning and Investment
FISCAL ECONOMIC REVIEW
• GDP: 5.98 % (GDP per capital reached 1,960 USD)
• Export value 150 bil USD, 13.6% increased ;
Import value 148 bil USD, 12.1% increased
• Consumer Price Index (CPI) 4.09%
• Economic restructuring in 3 sectors: public investment,
state owned enterprises & banking system
• 289 IZs and 15 EZs attracted approx;
In 2014: 1,588 new FDI projects with 15.64 bil USD of
registered capital
6
VIETNAM INFRASTRUCTURE
7
7
Road network:
• Road system 287,698 km country-wide with 39,800 bridges
• North-South pivot:
The 1A National Highway: 2,260km through 31 cities/provinces
The Ho Chi Minh Highway: 3,167km
INFRASTRUCTURE ROAD NETWORK
8
INFRASTRUCTURE (cont.) RAILWAY NETWORK
•Total length of 2,632 km of rail network
• 278 stations country-wide
• Hanoi – Ho Chi Minh City line: 1,726 km;
29.5 – 40 hours; Targeting to reduce to 10
hours with new high-speed connection.
• Linked to China railways in two directions,
one from Lao Cai province to Yunnan province
and one from Lang Son province to Kwangsi
province of China.
• Construction of the railway lines connecting
with Laos and Cambodia has been included in
the Government’s development strategy for the
Railway industry of Vietnam.
9
INFRASTRUCTURE (cont.)
SEAPORTS and AIRPORTS
Seaports:
- 3,260km coastline, a strategic position close to international shipping routes and favored
conditions of shpping with china, ASEAN and world wide.
- Major Ports : 119 seaports in which Cai Lan (50,000DWT); Hai Phong (40,000DWT);
Da Nang (45,000DWT); Quy Nhon (50,000DWT); Sai Gon (50,000DWT); Thi Vai
(60,000DWT)
Airports:
- 10 international airports (Noi Bai – 4 million passengers; Tan Son Nhat – 8 million
passengers; Da Nang; Cam Ranh – Khanh Hoa; Cat Bi – Hai Phong; Chu Lai – Quang
Nam; Cam Ranh – Nha Trang; Phu Bai – Hue; Can Tho; Phu Quoc; Long Thanh – Dong
Nai.
- 14 domestic airports
10
289 IZs/EPZs and 15 FEZ
Over 20 IZs/EPZs are developed by Joint Ventures (government & foreign
investors) e.g. TLIP (Japan), Tanthuan EPZ (Taiwan), Amata (Thailand)
Korea invest in IZs/EPZs mostly: s.g. Yen Phong-Bac Ninh (Samsung
mobile);Dung Quat-Quang Ngai (Doosan); VSIP – Binh Duong; Nghison -
Thanhhoa
SPECIAL ZONES
Advantages:
- Higher quality infrastructure (electricity, transport, telecommunication) and available
public system
- Availability of land and most of IZ/EPZ in the convenient location
- Simple administration procedure, expedited licensing process and convenient service
for investors as mechanism “one stop” in IZ Management Board.
- Incentives to infrastructure developers and projects inside economic zones, IPs
HUMAN RESOURCES
Strengths Weaknesses
Labor cost is still competitive in Asia (Can operate over 300 days/year (48h/week) ) Technical workforce, particularly workers with higher qualifications, have leading officials of almost all areas Abundant labor force
• Shortage of qualified technical workers due to training not tied to requirements occupations, skill levels, and production technology required
Opportunities Threats
Construction of high-quality training center and high-quality multidisciplinary universities Building a specialized health center for the region is expected . Research of building high-level training center for the region
- The labor cost has been increasing in recent years. - The quality of work force is slowly improved therefore the company need to re- train the workers
COMPETITIVE LABOR COST
Strengths
Ready and it will be connected to the fence of the border of each land
lot. Power is supplied sufficiently and stably
Two Sub-stations of 110/22kV – 40 MVA.
High-voltage: 22KV
(+) Nomal hours : From Monday to Saturday (From 04h00– 9h30)
(11h30’ – 17h00) (20h00 – 22h00’); On Sunday (From 04h00’ –
22h00)
(+) Off- peak hours (From 22h– 04h) in all day
(+) Peak hours (From 9h30–11h30’)(17h30’ – 20h00’)
ELECTRICITY
ELECTRICITY COST
For industrial manufacture:(Unit: VND/Kwh)
For business and services: (Unit: VND/Kwh)
15
To 2020, Viet Nam will be important part of international economic connection networks with more than 55 partners, in which 15 are
member of G-20.
TPP
AEC 2015, VISIONS & OPPORTUNITIES
AEC Vision:
- Free trade in goods, services
- Free flow of investment, capital & skilled labor
Opportunities:
- Gateway to access to:
+ Dynamic market with 600 mil consumers
+ 300 mil labor
+ GDP scale up to 3,000 bil USD
+ Linking East - West, average GDP growth above 5%/year
WHY VIETNAM
Why Vietnam?
Human
Resource
Natural
Resources
Economic Growth
&
Market Potential
Legal
Environment
Competitive
Business Costs
Global
Integration
Geographic
Location
Political &
Social
Security
II. FDI IN VIETNAM AND KOREA FDI IN VIETNAM
18
19 19
FDI IN VIETNAM
Source: MPI, up to January, 2015
20277
2762
21348
71726
2310718590
1469513013
2230020230
0
10000
20000
30000
40000
50000
60000
70000
80000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Resgistered capital Implemented capital
From 1988-January, 2015: 17,579 FDI projects, total registered capital of 251.8 bil USD
Implemented capital per year 10.5-11.0 bil USD
In 2014: Registered capital 20.23 bil USD; implemented capital: 12.35 bil USD
20
TOP 10 FDI PARTNERS IN VIETNAM
Source: Ministry of Planning & Investment of Viet Nam
Rank Countries and Territories No of projects Total Registered Capital
(Million USD)
1 South Korea 4,240 37,843.43
2 Japan 2,494 36,891.18
3 Singapore 1,359 32,745.44
4 Taiwan 2,373 28,401.43
5 BritishVirginIslands 552 17,987.70
6 Hong Kong 873 15,463.21
7 United States of America 717 10,937.34
8 Malaysia 484 10,768.04
9 China 1,092 7,952.16
10 Thailand 377 6,691.99
Other 91 countries and territories 3,118 46,763.57
Total 17,579 251,835.62
21
FDI IN VIETNAM BY INDUSTRIES
Source: Ministry of Planning & Investment of Viet Nam
Manufacturing & Processing
56%
Real Estate19%
Accommodation & Restaurant Service
4%
Construction5%
Production and Distribution of
Electric, Gas, Water and Steam
4%
ICT2%
Others10%
22
VIETNAM-KOREA RELATIONSHIP
Up to now 2015 Korea is the 1st largest investors in Vietnam with total registered
capital of 42.87 billion USD with 4,200 projects (Vietnam is the 3rd largest
oversea investment location of Korea after America and China).
− The biggest Korean companies in the FORTUNE 500 list investing in Vietnam are
Samsung, LG, GS, Posco, Hyundai, SK ...
− Investment of Korean companies has been focused in manufacturing, processing,
infrastructure, construction, service ...
− Signed Agreement on Investment Promotion and Protection (1993), Agreement on
Double Taxation Avoidance (1994).
− Korea-Vietnam trade reaches 29 billion USD in 2014, (in 2013 its is 27.3 billion
USD), FTA between two countries is in progress (In 2020 the bilateral trade will be
70 billion USD).
− 850 thousand Koreab visited Vietnam in 2014
− Korea is the 2nd largest bilateral donor for Vietnam with around 1,2 billion USD
commitment soft loan (EDCF) in 2012 ~ 2015.
23
VIETNAM – KOREA, AT A GLANCE
Korean FDI By Sectors
Korean FDI by Provinces
24
III. INVESTMENT POLICIES IN VIETNAM
1. Investment Policy
2. Investment Guarantees
3. Investment Incentives
4. Investment procedures
25
III. INVESTMENT POLICY IN VIETNAM
1. Transparent regulations on investment prohibition
and conditional investment sectors.
2. Improved regulation on investment guarantee and
investment treatment
3. Improved investment licensing procedure
4. Improved regulations on investment incentives
5. Improved decentralization mechanism
UPDATES ON NEW INVESTMENT LAW 2014
26
27
Investors have the rights:
Doing business in all non-prohibition and conditional sectors
in Law on Investment
Self-decision in business, using credit, supporting fund,
natural resource and land in the Law
Recognize, protect asset ownership, investment capital,
incomes, legal rights of investors
Apply equality between investors, creating favorable
condition for doing business, sustainable development of
investors
Respect and implement international agreements
I.INVESTMENT POLICIES
28
No nationalization or confiscation of investors’
assets
Protection of intellectual property rights
Remittance of capital and assets abroad
Government’s guarantee in some important projects
Investment guarantees in the event of changes in law
or policies
Resolve investors’ dispute in doing business in
Vietnam
II.INVESTMENT GUARANTEES
III. INVESTMENT INCENTIVES
1. Sectors entitled to investment incentives
Production of new materials and energy; hi-tech products;bio-tech and IT,
mechanical manufaturing.
Cultivation and processing of agricultural, forestry and aquatic products; creation of
new plant and animal varieties;
Use of high technology and advanced techniques, protection of ecological
environment; research, hi-tech development.
Development of infrastructure facilities.
Development of education, training, health care, physical education and sports.
2. Geographical areas entitled to investment incentives
Areas with especially difficult socio-economic conditions.
Areas with difficult socio-economic conditions.
Hi-tech Zone, Economic Zone, Industrial Zones.
III. INVESTMENT INCENTIVES 1. Corporate Income Tax (CIT)
- Standard rate (CIT) : 22% (to be reduced to 20% as from 1/1/2016)
- 20% (to be reduced to 17% as from 1/1/2016):
• 10 yrs: areas with socio-economic difficulties; production of feeds, agricultural machinery,
energy –saving products, high-grade steel; traditional trades
• Entire operation period: (i) enterprises with aggregate revenues of less than VND 20 billion;
(ii) income of people’s credit fund & micro-finance institutions
- 10% in 15 yrs, exemption in 4 yrs and reduction of 50% in following 9 yrs:
• areas with special socio-economic difficulties, Economic Zones and High Tech Zones;
projects with hi-tech, R&D, hi-tech business, composit, valuable materials, recyclable,
green energy, energy from waste, biological technology development, environment
protection, agricultural projects with hi-tech.
• Production projects with minimum investment capital of 6.000 billion VND (equivalent
around 300 million USD) with its disbursement in 3 years and minimum revenue of 10.000
billion VND at least after 3 years or using 3.000 workers; (exept projects producing
products with special consumption tax; mineral exploitation)
• Supporting semiproducts/materials for textile-garment; leather-shoe, electronics, car,
mechanics satisfied EU or equivalent standards that not producing in Vietnam
III. INVESTMENT INCENTIVES
1. Corporate Income Tax (CIT)
- 10% for income from enterprises:
• Socialized activities in training, education, health, culture, sport and environment
• Social real estate business-investment, newspaper, publication
• Forest planting, breeding, protecting; Agricultural, Forest, Fishing planting, breeding
in socio-economic difficult areas; producing, creating new plants, animals; producing
and processing salt; preventing agricultural, fishing products after crop.
• Cooperation organizations in agricultural, forest, fishing, salting producing.
- 20% with exemption in 2 yrs and 50% reduction in 4 following yrs
• Producing high level steel, products saving energy, machinery, equipments for
agriculture, forest, fishery, salty, irrigation; processing food for animals, poultry,
seafood; traditional products development
• Projects in IP …
III. INVESTMENT INCENTIVES
2. Land lease exemption
Type of projects Exemption
Projects in sectors of investment incentive 3 yrs
Projects in areas with socio-economic difficulties 7 yrs
Projects in areas with special socio-economic difficulties or in
sectors of investment incentives and in areas with socio-economic
difficulties
11 yrs
Projects in sectors of investment incentives and in areas with special
socio-economic difficulties 15 yrs
III. INVESTMENT INCENTIVES
3. Import duty exemption
Machines, materials, dedicated transport… imported to create fixed properties
of investment incentive projects.
Materials which are not locally produced.
Commodities are imported devices for the 1st time according to the
Government’s List such as projects of hotels, offices, apartments,
supermarkets, golf course, hotels, resorts, clinics, training, culture, finance…
Raw materials, materials, components of projects of investment incentives or
conditional areas with exceptionally difficult ones are exempted from import
tax within 5 yrs from the beginning…
4.Personal Income Tax
Tax
Bracket
Tax Rate
(%)
Portion of Annual Assessable Income
in million VND
(equivalent USD at
1USD=16,480VND)
Portion of Monthly Assessable
Income in million VND
(equivalent USD at
1USD=16,480VND)
1 5 Up to 60 (3,640) Up to 5 (303)
2 10 Over 60 to 120 (~7,300) Over 5 to 10 (~600)
3 15 Over 120 to 216 (~13,100) Over 10 to 18 (~1,100)
4 20 Over 216 to 384 (~23,300) Over 18 to 32 (~2,000)
5 25 Over 384 to 624 (~37,800) Over 32 to 52 (~3,100)
6 30 Over 624 to 960 (~58,200) Over 52 to 80 (~4,800)
7 35 Over 960 Over 80
III. INVESTMENT INCENTIVES
35
5. VALUE-ADDED TAX (VAT)
All business establishments are subject to VAT
VAT rates:
‒ 28 categories of goods and services are VAT- exempt, including medical
services, education, goods in transit or under temporary admission, life
insurance or capital goods that cannot be produced locally.
‒ Exports of goods and services: 0%
‒ 21 categories of goods and services: 5%, including medical equipment,
basic chemicals, fresh foodstuff and metallurgical products.
‒ All other goods and service: 10%.
III. INVESTMENT INCENTIVES
36
LABOR REGULATION
8 hours/day, 6 days/week; Overtime: 4h/day, 200h/year
Health Insurance Fund: Employers: 2%; employees: 1% of gross wage
Social insurance fund: Employers: 15% of gross wages; employees: 5% of
their wage.
Minimum wage scales (monthly wage) for employees in foreign invested
companies, depending on location: (lowest in SEA)
‒ VND920,000 ($54)
‒ VND950,000 ($56)
‒ VND1,080,000 ($63) and
‒ VND1,200,000 ($74).
IV.ADMINISTRATIVE PROCEDURE REFORM
No.
Items Before reform After reform Target in 2015
1 Tax payment procedures
537 hours/year 201 hours/year 171 hours/year (at the same level of the ASEAN 6)
2 Custom procedures 126 hours/year 63 hours/year At the same level of the ASEAN 6
3 Social Insurance Procedures
335 hours/year 108 hours/yea 49.5 hours/year (At the same level of the ASEAN 6)
4 Electricity supply Procedures: - High voltage electricity - Middle voltage electricity - Low voltage electricity
180 days 132 days 90 days
70 days 33 days 15 days
5 Enterprise Establishment Procedures
32 days (from 2005 until 2008)
5 days (from 2008 up to now)
2-3 days
Asean 6: Singapore, Malaysia, Thailand, Brunei, Indonesia and Philippines
Investment and Enterprise Registration Procedure
Enterprise
Registration
38
Foreign Investors
Investment
Registration
Certificate
Enterprise
Registration
Project
Implementation
Investment In-Principal
Approval
Domestic
investors
FOREIGN INVESTORS’ COMPANY ESTABLISHMENT PROCEDURE
FOREIGN INVESTOR
INVESTMENT REGISTRATION CERTIFICATE
ENTERPRISE
REGISTRATION
CERTIFICATE
- Max 15 working days for
nomal projects
- Max 40 working days for
projects renting state land
- Max 60 working days for
projects having PM’s opinion
- Following the time of Nat
Assembly Meeting for projects
reporting to National Assembly
DEPARTMENT OF
PLANNING&INVESTMENT/EZ,IP
MANAGEMENT BOARD
Max 3 working days
in Business
Registration Agency
DOING BUSINESS
REFERENCE WEBSITES:
No Website Administrative Offices
1 www.chinhphu.vn Government web portal of Vietnam
2 www.mpi.gov.vn Ministry of Planning and Investment
3 www.fia.mpi.gov.vn Foreign Investment Agency
4 www.gso.gov.vn General Statistics Office of Vietnam
5 www.khucongnghiep.com.vn Vietnam Industrial Parks
6 www.dauthau.mpi.gov.vn Public Procurement Information
7 www.moit.gov.vn Ministry of Industry and Trade
8 www.mof.gov.vn Ministry of Finance
9 www.vietnam.e-regulation.org Investment Procedures in Vietnam
40
FOREIGN INVESTMENT AGENCY CONTACTS:
South Foreign Investment Center
178 Nguyen Dinh Chieu, Ho Chi Minh City.
Tel: 848.39306671 Fax: 848.9305413
Website: http://sfic.vn
Investment Promotion Center – Central Vietnam
103 Le Sat, Hai Chau, Da Nang
Tel: 84511.3797689 Fax: 84511.3797679
Website: http://centralinvest.gov.vn
Investment Promotion Center – North Vietnam
65 Van Mieu, Hanoi
Tel: 844.38458149 Fax: 844.38437927
Website: http://ipcn.mpi.gov.vn
Foreign Investment Agency
6B Hoang Dieu Street, Hanoi
Tel: 84.8048461 Fax: 844.37343769
Website: http://fia.mpi.gov.vn
41
Ms. NGUYEN THI MINH HIEN
Investment Counselor / Vietnam Embassy to Korea
Email: hienmpivn@yahoo.com / minh_hien@mpi.gov.vn
Mobile: 82-(0)10-5759-1965 / Tel (Fax): 82-2-737-2317
THANK YOU !
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