Perfecting mechanisms and policies to attract foreign direct investment in Hanoi capital in the period 2001-2010

Plot 2:

Foreign direct investment capital of Hanoi by country and territory

Foreign direct investment capital in Hanoi classified by nation and territory

Unit: USD

No.

Nation/Territory

Number of Project

Investment capital

Singapore Japan

Rep. Of Korea

Hong Kong Thailand Australia Sweden

United Kingdom Taiwan

France USA

Malaysia Philippines Denmark China Indonesia Holland Switzerland Germany Panama Poland Argentina Austria Hungary Russia

PDRep of Korea Luxembourg Cuba

Czech New Zealand India

Israel Italy Laos Other

2,980,000,000

1,260,000,000

965,000,000

487,000,000

425,500,000

395,336,000

368,245,840

358,000,000

261,000,000

193,958,460

172,000,000

163,000,000

99,700,000

79,636,000

68,000,000

67,592,000

58,830,770

58,505,000

45,000,000

27,350,400

15,800,000

14,073,932

14,000,000

11,400,000

10,511,400

8,100,000

7,619,400

6,600,000

6,298,313

5,200,000

5,000,000

1,981,136

1,500,000

686,000

476,533,809

Maybe you are interested!

(Source: [75])

Plot 3:

Business environment rankings of some countries in the ASEAN region

Singapore	Brunei	Malaysia	Thailand	Philippines	Indonesia	Vietnam	Myanmar	Laos	Cambodia
Airport	4.9	3.3	3.1	3.1	2.3	3.0	1.9	1.6	1.5	1.6
Port	4.9	3.0	3.1	2.5	2.4	2.4	2.0	1.5	-	1.5
Transportation	4.6	3.3	2.7	1.6	1.9	2.3	1.9	1.6	1.5	1.8
Energy	4.4	3.6	2.6	2.7	2.2	2.6	1.9	1.4	1.7	1.4
Telecommunications	4.7	3.5	3.2	3.0	2.7	2.7	2.2	1.4	1.5	1.4
Human resources	4.1	2.8	2.9	2.7	3.1	2.5	2.7	2.3	1.7	1.4
Technology	3.8	2.6	3.0	2.6	2.8	2.2	1.9	1.8	1.5	1.3
Finance	4.6	3.3	3.0	2.5	2.6	2.0	1.6	1.6	1.3	1.2
Living conditions	4.1	3.3	3.2	2.7	2.7	2.3	1.8	1.7	1.4	1.5
Tax system	4.2	3.3	3.2	2.7	2.7	2.3	1.8	1.7	1.4	1.5
Consequences of the administrative apparatus	4.5	3.0	3.0	2.3	2.4	1.9	1.4	1.6	1.3	1.1
The fairness of the administrative apparatus	4.3	2.3	3.0	2.3	2.2	1.8	1.5	1.6	1.4	1.1
Medium	4.4	3.1	3.0	2.6	2.5	2.1	1.9	1.7	1.5	1.4
Average rating from best to the worst	1	2	3	4	5	6	7	8	9	10
On a scale of 5 with 5 being the highest

(Source: [75])

Plot 4:

Progress of the Law on Foreign Investment in Vietnam amended and supplemented in 1996 and 2000

Advances of the Law on Foreign Investment

revised 1996

New features of the Law on Foreign Investment

amended and supplemented in 2000

Compared with the 1992 amended Law on Foreign Investment, the 1996 amended Law on Foreign Investment has a number of

new point:

 Encourage more FDI on the basis of more flexible tax incentives to attract FDI into the fields and

areas such as export production; agriculture, forestry, fishery; use of high technology; infrastructure construction; use of many workers

mountainous areas, remote areas; areas with particularly difficult economic conditions (Article 39). The Law on Investment diversifies investment methods (additional investment methods BOT, BT, BTO) (Article 19). At the same time, the Law also has adjustments on capital contribution in Vietnamese currency by foreign investors; ensures support for foreign currency balance for infrastructure projects, production of goods to replace essential imports and other important projects (Article 33); narrows down the topics that must be voted on according to the principle of consensus.

The amended law also provides financial incentives with more incentive standards, clearer fields, terms and industries. Investment projects are divided into different groups such as: normal projects, investment incentive projects, projects with many investment incentive standards and special investment incentive projects.

Continue to narrow the scope of regulations on the principle of consensus in Joint Venture Enterprises.

Instead of four topics requiring unanimous voting, the new 2000 Law

The revised regulation is narrower and only retains two items: appointment and dismissal of the General Director, Deputy General Director, Chief Accountant; amendment and supplementation of the enterprise charter (Article 14). This regulation is an important adjustment, contributing to satisfying foreign investors.

Create conditions for foreign investors to freely choose forms and transfer investment capital in accordance with international practices.

Article 19 of the 1996 Law on Foreign Investment is supplemented in the new Law: "Enterprises with capital

During their operations, foreign investors are free to choose the form of investment, separation, merger, and consolidation of enterprises. This is an important addition that creates conditions for foreign investors to use capital more flexibly to avoid high risks.

Article 34 of the 1996 Law on Foreign Investment stipulates:

The regulation requires 100% foreign-owned enterprises to prioritize transferring capital to Vietnamese enterprises. This regulation is a necessary measure to ensure the interests of Vietnamese enterprises, but it reveals some limitations: it both constrains us and causes reactions from investors.

FDI. The 2000 Law overcomes this limitation by only providing that "Foreign investors in 100% foreign-owned enterprises have

the right to transfer one's capital".

The period of exemption from income tax is also extended to a maximum of 8 years. Enterprises have the right to carry forward losses of any tax year to the next year and offset those losses with profits of the following years, but not more than 5 years [23,81-88].

In addition to tax exemptions and reductions, emphasis is also placed on income tax refunds. Income tax is refunded for projects

reinvestment project in encouraged sector

Investment, reinvestment capital is used for 3 years or more and the legal capital is fully contributed. Depending on the different levels of encouragement, the profit tax refund rate can be 50%, 75% or 100% (Decree No. 10-1998/CP dated January 23, 1998 continues to encourage and ensure foreign direct investment activities in Vietnam, expanding the scope of income tax exemption for 4 years from the date of commencement of business with 1Li, and reducing 50% in the next 4 years such as projects producing new varieties, hybrid varieties that meet international standards and have high economic efficiency, producing new materials, electronics, biology, telecommunications technology, etc.)

 State management is more clearly defined when decentralizing the functions and powers of the Government, Ministries, ministerial-level agencies and agencies directly under the Government, People's Committees of provinces and centrally run cities in the direction of ensuring coordination between ministries, local branches in managing foreign investment activities, avoiding overlap, creating the necessary legal basis to strongly improve investment procedures, and enhance the effectiveness of state management of investment activities.

One-step administrative procedure reform

by shortening the licensing time

investment. This is an important reform step.

Reduce the level of State intervention in production and business activities in joint venture enterprises.

Article 41 of the 1996 Law on Foreign Investment stipulates that "after paying income tax, joint venture enterprises shall allocate 5% of the remaining profits to establish a reserve fund. The reserve fund is limited to 10% of the enterprise's legal capital. This provision of the 1996 Law reduces the obligation of joint venture enterprises to set up a reserve fund (reducing the maximum level from 25% as prescribed by the 1992 Law on Amendments and Supplements to a maximum level of no more than 10% of the legal capital of the joint venture enterprise). However, this provision is still lacking in specificity, and does not clarify the purpose or mechanism for using the reserve fund. According to the opinion of foreign investors, this provision interferes with the right to proactively produce and do business of joint venture enterprises and affects the profits of the parties in the joint venture. To overcome this limitation, Article 41 of the new Law is revised to "the establishment of a reserve fund is decided by the enterprise".

This regulation is more open and does not interfere with the business operations of enterprises as before, meeting the requirements for the right to proactively produce and do business and ensuring improved profits for the parties in the joint venture.

Provisions on the "non-retroactive" principle in Decree 12/CP and Decree 101/1998/ND-CP

d= legalized

The issue of "non-retroactivity" is included in the Law.

FDI in Vietnam in 1992, but only regulated

The general principle is that "The Vietnamese State shall take appropriate measures to resolve the interests of investors when changes in law cause damage to the interests of the investment enterprise as stipulated in the investment license". To guide the implementation of this provision, Article 101 of Decree No.

to gradually improve administrative procedures in FDI attraction activities because this factor often discourages investors.

DTNN.

With the above innovations, the Law

The 1996 amendment to the Law on Foreign Investment in Vietnam is more progressive, open, strict and consistent with international practices than the old Law, which is a

important contribution to perfecting the legal environment, improving the investment environment with the aim of attracting FDI in larger quantities and higher quality, contributing to the implementation of the country's socio-economic development strategy, enhancing economic integration with countries in the region and the world.

Following the 1996 amended Law on Foreign Investment, the Government issued many important policies and decisions (Decree 12/CP and Decree 10/1998/ND-CP of the Government, Directive No. 11/1998/CT-TTg and Decision No.

Decree No. 53/1999/QD-TTg of the Prime Minister) aims to continue improving the investment environment, orienting and encouraging

Foreign investment in industries, fields and localities that need to attract foreign investment capital, is encouraged by investors.

FDI highly appreciated. Government decided

set out a series of measures to encourage and facilitate further business operations of foreign-invested enterprises, focusing on three main directions [21]:

+ Directly reduce investment costs for businesses, improve competitiveness and production and business efficiency;

+ Further simplify procedures, reduce hassles and remove difficulties for foreign investors;

Decree 12/CP dated February 18, 1997 stipulates a number of "satisfactory solutions" including [13, 12]:

- Change the project objectives;

- Tax reduction and exemption within the framework of the law;

- Losses of foreign investors are considered as losses and are carried forward to the next year;

- Consider appropriate compensation in certain necessary cases.

In order to further specify the above Provision, Article 1 of Decree 10/1998/ND-CP dated January 23, 1998 affirms the principle: not to apply the provisions of new legal documents if causing damage to the interests of enterprises.

As stipulated in the investment license, the incentives issued after the enterprise is granted an investment license will be adjusted by the investment licensing authority for the enterprise to enjoy according to the provisions of this Decree.

The above regulation is an important investment guarantee measure in accordance with international practice and is highly appreciated by investors. However, due to the

Although stipulated in a Government Decree, the above measures do not have high legal effect and are only applied in a very limited manner in terms of scope and subjects of regulation. To overcome this limitation and comply with the provisions of the Law on promulgation of legal documents, the provisions

The "non-retroactive" provisions of Decree 12/CP and Decree 10/1998/ND-CP were codified in

Article 21 of the Law on Foreign Investment amended and supplemented in 2000.

Some regulations on finance and foreign exchange

amended or codified:

** Regarding tax on profit remittance abroad: The new amended Law adjusts the tax rate on profit remittance abroad from 5%, 7% or 10% down to 3%, 5%, 7% (Article 43).

+ Open up new preferential conditions for

** Regarding subjects of import tax exemption:
Which investors meet the criteria?	The provisions of Article 10 of Decree 10 are
on high export ratio, export goods have	legalized in the supplement to Article 47 of the Law
high localization content, high usage	new in 2000 to encourage imports of
labor.	assets to continuously innovate technology
Although the DL has undergone three revisions,	advanced that cannot be produced domestically.
before the rapid development of the situation	** Regarding loss transfer regulations: Law amended in 2005
economic and social situation, capital needs for	2000 VND expands the scope of the regulated objects.
investment development in the coming period is very large,	both joint venture and 100% owned enterprise
especially the investment environment of the countries	foreign capital and enterprises participating in the cooperation
There are also many changes in the world and region.	business cooperation instead of just business
change, urgent requirements arise	joint venture as before (Article 40).
amend the Law on Foreign Investment in 1996 to increase	** Regarding foreign exchange management: In Article 33 of the Law
Competitive intensity of the initial environment	1996 FDI stipulates: enterprises with capital
private in Vietnam. June 9, 2000 in the National	FDI, foreign party participating in the contract
10th Congress, 7th session passed	self-sufficient business
Law on Foreign Investment, 4th Amendment	outside for its operations". This regulation
	especially enterprises with foreign direct investment (FDI) capital before many
	difficulties and risks in securing foreign currency for
	its operations. To overcome the limitations
	above, the new Law of 2000 amends Article 33 of the
	Law on Foreign Investment 1996: Enterprises with capital
	FDI, foreign party participating in the contract
	Business partners can buy foreign currency at the bank.
	trade to meet the needs of vLng transactions and
	other permitted transactions as prescribed by
	"Foreign exchange management law".
	** Regarding mortgage of loan assets: New law in 2015
	2000 (Article 46) Law allows enterprises to have capital
	Foreign investors are allowed to mortgage assets attached to land and
	Land use rights value to secure loans at
	credit institutions are allowed to operate in
	Vietnam". This is a new addition to remove
	remove capital difficulties for businesses with capital
	FDI that the previous FDI Law did not mention
	arrive.

(Source: [6])

Plot 5:

Some of Vietnam's FDI incentives are more attractive than those of some Asian countries.

1. Tax exemption and reduction incentives

On corporate income tax rates According to the Law on Foreign Investment in Vietnam amended in 1996 and 2000, tax
income business	The common income rate applicable to enterprises with foreign investment capital and foreign parties participating in business cooperation contracts is 25% (Article 38 - Law 2010).
	1996; Article 45 of Decree No. 24/200-0/CP dated July 31, 2000 guiding the implementation
	(Law supplemented and amended in 2000). With income tax rate
	Businesses in countries around the world often fluctuate in the range of
	30% - 60%, this tax rate of Vietnam is low. Even compared
	Compared to other countries in the region, Vietnam's tax rate is also considered low.
	is more attractive, such as the current corporate income tax of
	Brunei 30%; Malaysia 28%; Myanmar 30%; Singapore 26%; Thailand
	30%; China 30%, plus local income tax
	is 3%; while in the Philippines, corporate income tax rates gradually decrease from
	34% in 1998, down to 33% in 1999, and 32% from 2000 onwards.
	Tax incentives, corporate income tax exemptions.
	Vietnam's corporate income tax incentives are also considered
	is attractive with preferential tax rates of 20%, 15%, 10%, term
	Maximum tax exemption is 8 years. Preferential tax rate and exemption period
	Tax depends mainly on a number of criteria such as investment sector, location.
	investment, export rate, technology level, number of employees,
	the level of use of domestic materials and supplies... The more projects meet
	The more criteria you meet, the higher the preferential rate you will enjoy.
	Deadline:
	- Based on investment field criteria: According to current regulations of
	Vietnam, investment projects in encouraged industries such as processing
	agriculture, forestry, fishery, construction of infrastructure works... can be
	enjoy different preferential tax rates of 10%, 20% and are exempted,
	tax reductions at varying rates, up to a maximum of eight years. Meanwhile
	Malaysia regulates investment projects in new fields to be reduced by 30%.
	tax and duty exemption for up to 5 years from the date of manufacture, while Philippines

The maximum tax exemption is 6 years from the date of commencement of operations. - Based on criteria on investment location: Vietnam stipulates: projects Investment in mountainous, remote and isolated areas enjoy a preferential tax rate of 10% for 15 years, tax exemption for 4 years and 50% tax reduction for the next 4 years. China stipulates that investment projects in remote and underdeveloped areas enjoy a 15-30% tax reduction for the next 10 years after the normal tax exemption period, while Laos considers these projects enjoying a preferential corporate income tax rate of 10-15% and tax exemption is only considered for a few special cases, etc.
2. Tax exemption and reduction incentives	Vietnam's preferential policy on basic import tax exemption is relatively broad. In principle, all assets of invested capital are exempted.
import	Import taxes include:
	- Specialized machinery, equipment, and means of transport located in the production line
	technological lines to create fixed assets of the enterprise, components, and details
	accessories, raw materials, supplies for manufacturing components, details ...
	- Construction materials to create fixed assets that cannot be produced domestically.
	- Projects in the list of special investment incentive projects and projects
	Investment projects in mountainous, remote and isolated areas are exempt from import tax.
	with raw materials produced within 5 years from the start of production.
	- Imported raw materials and supplies for export production.
	The preferential treatment of import tax exemption is also enjoyed by many countries in the region.
	applicable area. In addition to the general requirement that imported goods must
	belong to the investment capital and must be directly used for the project, the exemption,
	Import duty reductions should usually be considered by countries along with a
	certain other conditions. For example:
	+ China stipulates from 1-1-1998 one of the conditions to be
	Exemption from import tax on imported machinery and equipment for projects
	must be on the list of investment incentive projects.
	+ Indonesia and Malaysia regulate import tax refund for raw materials
	imported materials to produce export goods. However, Malaysia still has regulations
	For raw materials with import tax rate <3%, it is not allowed.
	Consider import tax exemption.

Perfecting mechanisms and policies to attract foreign direct investment in Hanoi capital in the period 2001-2010 - 28

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