VIETNAM HAS ATTRACTED NEARLY 438.7 BILLION USD OF FOREIGN INVESTMENT CAPITAL OVER THE PAST 35 YEARS 

After more than 30 years of opening to attract foreign investment, the flow of foreign direct investment into Vietnam is constantly increasing. So far, after 35 years, Vietnam has attracted nearly 438.7 billion USD of foreign investment capital.

According to the draft "Report on review and overall assessment of current investment incentive policies in Vietnam and some recommendations", the Ministry of Planning and Investment said: Overview of the investment incentive policy system investment in Vietnam, after more than 35 years of attracting foreign investment, Vietnam has continuously improved institutions and investment incentive policies to attract and better manage domestic and foreign investment resources. Basically, Vietnam's main investment incentives focus on three groups: (i) corporate income tax incentives, (ii) import-export tax incentives and (iii) financial incentives. the land itself. The criteria to enjoy investment incentives are designed with 03 main groups including: (i) investment area, (ii) industry, investment field and (iii) investment project scale.

Recent outstanding investment incentive policies

In order to continue to create a favorable, transparent, equitable, safe and friendly investment and business environment for all people and businesses, while improving the effectiveness and efficiency of state management of business investment activities, the Government has recently made efforts to complete important legal documents, including new policies, amendments and supplements on investment incentives…

On June 17, 2020, the National Assembly issued Investment Law No. 61/2020/QH14 effective from January 1, 2021 (Investment Law 2020), including Articles 15 to 20 The law regulates investment incentives and support policies. Accordingly, this Law has amended and supplemented sectors and occupations with investment incentives to ensure selective and quality attraction of investment according to Resolution No. 50/NQ-TW of the Politburo, and at the same time ensure Consistency and synchronization in the implementation of investment incentives and support policies according to the provisions of the Investment Law, Tax Laws and related Laws. Some outstanding amendments to the Investment Law 2020 include:

(i) Adding regulations to encourage research and development activities; producing and trading products formed from the results of scientific research and innovation activities; producing goods or providing services to create or participate in value chains or industry clusters; Environmental industrial development.

(ii) Supplementing regulations on principles and conditions for applying investment incentive policies to ensure the quality and effectiveness of implementing this policy such as: applying incentives for a limited time, based on actual results Currently, investors must ensure that they meet preferential conditions during the incentive period according to the provisions of law.

(iii) Adding special investment incentives to encourage the development of a number of investment projects with great socio-economic impacts (allowing the application of incentives up to 50% more than the highest level under regulations of current Law). 

On October 6, 2021, the Prime Minister also issued Decision No. 29/2021/QD-TTg regulating special investment incentives for investment projects specified in Clause 2, Article 20 of the Investment Law. April 2020 (Decision 29). This is considered a breakthrough in Vietnam's investment incentive mechanism with the highest investment incentives for strategic investment projects. Decision 29 also set out transparent and clear criteria for the level of technology transfer, investment in R&D, creation of added value, and enterprises participating in the supply chain, and divided into different levels. different with specific criteria. This shows that the Vietnamese Government's consistent view is to give higher incentives to investment projects in the field of high technology with great impact. 

Some achievements and limitations of Vietnam's investment incentive policies

Achievements of preferential investment policies

The number of tax-registered and operating businesses has increased over the years: in 2011 it was 457,217 businesses, by 2017 it was 561,064 businesses and by the end of 2021, Vietnam had nearly 860,000 operating businesses.

Thanks to preferential policies for industrial parks, the number of Industrial Parks (IZs) in Vietnam has increased significantly. From 01 industrial park in 1991, up to 260 industrial parks in 2010, 326 industrial parks in 2017 and 406 industrial parks in 2022.

After more than 30 years of opening to attract foreign investment, the flow of foreign direct investment into Vietnam has continuously increased. So far, after 35 years, Vietnam has attracted nearly 438.7 billion USD of foreign investment capital. Of this number, 274 billion USD has been disbursed, equal to 62.5% of the total valid registered investment capital. To date, 129 countries/territories have invested in Vietnam. FDI projects are present in 63/63 localities, FDI capital has also been invested in 19/21 production and business industries of Vietnam.

The foreign invested enterprise sector has contributed significantly to the country's socio-economic development. State budget revenue from the foreign-invested enterprise sector has always grown steadily. The foreign investment sector has also contributed significantly to budget revenue, with the value of budget contributions increasing from 1.8 billion USD (period 1994 - 2000) to 14.2 billion USD (period 2001 - 2010). In the period 2011 - 2015, budget revenue from the FDI sector reached 23.7 billion USD, accounting for nearly 14% of total budget revenue; In 2017, the FDI sector contributed nearly 8 billion USD to budget revenue, accounting for 14.46% of total state budget revenue; In 2021, the FDI sector contributes about 9.6 billion USD to budget revenue, accounting for 17% of total state budget revenue.

In particular, some large FDI projects, often given high tax incentives by the Government, such as Samsung projects in Bac Ninh and Thai Nguyen, have contributed strongly to Vietnam's exports in recent years. This. In 2015, total export turnover from Samsung projects in Vietnam reached more than 30 billion USD, accounting for 20% of Vietnam's total export turnover. In 2022, Samsung's production and business results are also very impressive, exports reach 65 billion USD, accounting for 8.9% of Vietnam's export turnover, making an important contribution to the process of economic recovery and development. of Vietnam. In addition, with the strong participation of the FDI sector in export activities, exports from high value-added products have expanded faster than the group of traditional export products.

Limitations of current investment policy

Firstly, investment incentive policies in Vietnam are not diverse, only focusing on income-based incentives with almost no cost-based incentives, thereby not really encouraging substantive investment activities with long-term benefits. Relying too much on income-based tax incentives can be counterproductive due to many limitations in tax administration, which creates "loopholes" for businesses to carry out shifting profit behaviors.

Second, Vietnam's investment incentive policies have not kept pace with advanced policies and international practices. Currently in the world, many countries have been implementing cost-based incentives to overcome the disadvantages of income-based incentives. Cost-based incentives have been very popular and are leading practices around the world for many years in developed countries such as the US, Europe, Japan, Korea,... and are also becoming Trends in preferential policy development in developing countries such as India, China, Thailand...

Third, preferential policies do not meet the requirements in the context of the Global Minimum Tax policy taking effect in 2024. Accordingly, current corporate income tax preferential policies will no longer have much meaning, indirectly. affecting the attractiveness of Vietnam's investment environment, especially in attracting corporations, strategic investors and satellite businesses in the global supply chain of these investors.

Fourth, a number of investment incentives and support policies have been stipulated in the Law but there are no specific instructions for implementation, so they have no effect in practice.

Fifth, tax incentives are regulated in many different tax laws, causing problems and difficulties in the process of implementing and applying incentives and increasing compliance costs for businesses. This complexity risks making the implementation of incentives less effective and hindering policy reform efforts.

In section 5 of Resolution No. 110/2023/QH15 dated November 29, 2023, the 6th session of the 15th National Assembly, the National Assembly agreed to the policy and assigned the Government in 2024 to conduct an overall review for synchronous completion. policy and legal system on investment encouragement, meeting the country's development requirements in the new situation. Carrying out assigned tasks, the Ministry of Planning and Investment has developed a draft "Report on review and overall assessment of current investment promotion policies in Vietnam and some recommendations". 

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