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Against India, ...Challenges to attract FDI
Date: 5/25/2023 1:46:17 PM
In the first quarter of 2023, the attraction of foreign direct investment (FDI) decreased by 38.8% over the same period last year and in 4 months decreased by 18%. The decline in FDI in Vietnam has once again become a ’hot’ issue mentioned.

 Keeping investors in front of the moving trend

As of April 20, 2023, the total newly registered, adjusted and contributed capital to buy shares of foreign investors accumulated since the beginning of the year was estimated at USD 8.9 billion, down 18% over the same period last year. before. Previously, in the first quarter of 2023, according to a report of the Ministry of Planning and Investment, FDI attraction decreased by 38.8% compared to the same period last year.

Thang Long Industrial Park, Dong Anh District, Hanoi.  Photo: Pham Hung

Thang Long Industrial Park, Dong Anh District, Hanoi. Photo: Pham Hung

Even realized FDI capital (disbursed capital) also decreased by 1.2% over the same period last year, reaching 5.85 billion USD in 4 months.

In terms of investor portfolio, the top partners are from East Asia such as Singapore, China, Taiwan, Hong Kong, Korea and Japan. The contribution of FDI inflows from Europe and North America is still very modest.

Deputy Minister of Planning and Investment Do Thanh Trung also pointed out that attracting FDI is facing many difficulties and challenges.

Since the Covid-19 epidemic, global investment has plummeted. In addition, the protracted Russia-Ukraine war, global economic slowdown, high inflation, etc., reduced business and investment confidence, caused disruptions in global value chains, and had a strong impact. to the recovery of global FDI, including Vietnam.

In addition, Vietnam has also oriented to select FDI projects more carefully, improve standards on environmental protection, reduce emissions to move towards sustainable development and comply with commitments to fight against environmental pollution. Climate change also partly affects FDI inflows.

According to the World Bank (WB), among the underlying reasons for the decline in FDI inflows to Vietnam have been pointed out, there are also problems related to the business investment environment, the ability to absorb and readiness to receive large capital flows, including land, human resources, infrastructure, supporting industries...

In addition, in 2023, FDI flows will be further affected by the global minimum tax policy, making investment flows more "hesitating".

The report on foreign direct investment in Vietnam in 2022 published by the Association of Foreign Investment Enterprises (VAFIE) shows that up to 68.5% of FDI enterprises think that Vietnam has favorable factors compared to other countries. other countries make them consider investing here.

However, administrative procedures, quality of infrastructure and public services are still emerging issues that need to be overcome to help Vietnam really attract foreign investors.

Strong competition in attracting FDI

There have been signs that large corporations are carefully considering continuing to make large investments in Vietnam in the face of the impact of the global minimum tax policy and the Government’s policy response.

Chairman of the Korean Chamber of Commerce in Vietnam (KoCham) Hong Sun shared that at present, orders in industries such as apparel, bags, and footwear... have decreased by 50% compared to previous years. This also leads to certain difficulties for Korean investors who are investing or expanding their investment in Vietnam.

General Director of Samsung Vietnam Complex Choi Joo Ho shared that the global minimum tax will have a significant impact. Accordingly, the government’s preferential policy on corporate income tax exemption and reduction

Manufacturing electronic equipment at Rhythm Precision Vietnam Co., Ltd, Noi Bai Industrial Park, Hanoi.  Photo: Pham Hung

Manufacturing electronic equipment at Rhythm Precision Vietnam Co., Ltd, Noi Bai Industrial Park, Hanoi. Photo: Pham Hung

The current implementation of Vietnam will lose its practical effectiveness. Therefore, Samsung proposed to continue to improve the investment environment of Vietnam. Samsung agrees that it should issue a global minimum tax policy this year as well as legislate specific policies.

General Director of AEON Vietnam Furusawa Yasuyuki also expressed his wish that Vietnam will simplify administrative procedures. At the same time, local authorities need to make faster decisions to promote the development of foreign enterprises in Vietnam.

The World Bank expert said that, when geopolitical tensions escalate, many big countries have come up with strategies to shift production and capital back home or to close partners to preserve the supply chain.

For example, the US introduced a policy of reducing income tax from 25% to 21%, reformed investment licensing procedures, introduced flexible standards to increase the competitiveness of some industries (energy and energy). , automobiles, steel...); while the EU establishes a "strategic autonomy" economy by controlling the flow of investment abroad.

The competition to attract FDI among Southeast Asian countries is also increasingly fierce.

Recently, Malaysia has introduced a domestic minimum additional tax, in parallel with the application of a global minimum tax...

Indonesia has issued a new decree allowing the implementation of a global minimum tax based on a regulatory system of measures against tax loss and tax arrangements for foreign investment. "We find the effect is similar to the domestic minimum additional tax," commented the World Bank’s expert.

An emerging pole with very strong FDI attraction is India. To attract FDI, India has exempted and reduced taxes for new investment projects over $100 million and set aside more than 460,000 hectares of "clean" land to attract manufacturers from China to move back.

In addition, India has selected 10 manufacturing industrial centers in 9 states, with 100 famous industrial parks to introduce to 600 famous companies in the world.

India has abundant human resources, trains the most engineers in the world, while wages are much lower (about 60-70% compared to Vietnam), these are great advantages of India.

Therefore, the problem at this time is not only an urgent need, but even an urgent need to solve from the root the difficulties, obstacles, shortcomings and limitations of mechanisms and policies related to investment and business. business… and quick policy response to the global minimum tax.

Review and adjust foreign investment policies

In June 2022, the Government issued the Foreign Investment Cooperation Strategy for the period of 2021 - 2030. At the end of March 2023, Deputy Prime Minister Tran Luu Quang signed and promulgated the Action Plan to implement this strategy.

Accordingly, a series of important tasks have been assigned to ministries, branches and localities. Including research to have a policy response to the global minimum tax issue; report on the possibility of formulating a law on venture capital and amending and supplementing a number of laws related to investment and business; there is research on cooperation mechanism with corporations to train workers according to "orders"... ; develop programs to support tariffs, develop supporting industries, as well as build a database of
Vietnamese enterprises that meet the standards of being a supplier to foreign enterprises in a number of specific industries and occupations. …

There is still much work to be done to strengthen Vietnam’s capital attraction advantage in the eyes of investors, such as taking advantage of the Free Trade Agreements (FTAs) that Vietnam has joined.

In which, soft infrastructure and hard infrastructure continue to need improvement. With soft infrastructure, investors believe that the task now is to redouble efforts to strengthen investor confidence in regulatory frameworks; with hard infrastructure, continue to develop infrastructure, strengthen supporting industries, human resources ... to reduce costs for businesses ...

We must make sure that the affirmations of corporations and international organizations that "Vietnam is a safe, attractive destination" and a "first choice" are actually realized by the investment hundreds of millions and billions of dollars.

(Source:Kinh tế Đô thị)
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