1.2 Specific objectives
The positive results achieved in 2006, especially the rapid economic growth, improved investment environment, official accession to the World Trade Organization (WTO) and the United States' approval of Permanent Normal Trade Relations with Vietnam, and the enhanced reputation of our country in the international arena, will create momentum for an increase in foreign investment flows into our country in the following years.
Based on the assessment of the country's potential as well as new factors affecting foreign investment flows, it can be predicted that if infrastructure, human resource quality, and administrative procedures are well resolved, foreign investment flows into Vietnam will continue to increase. Some main indicators of FDI in the period 2006-2010:
Implemented FDI capital: reached about 24 - 25 billion USD (increased 70-75% compared to the period 2001 - 2005), accounting for about 17.8% of total social investment capital.
Registered capital: Total newly registered and increased FDI capital in the 5 years 2006-2010 reached about 38-40 billion USD (an increase of more than 80% compared to the period 2001-2005), of which newly registered capital reached about 28 billion USD, increased capital reached about 10-12 billion USD.
Revenue: about $216 billion
Export - import : export reached about 106.5 billion USD (excluding crude oil); import reached 131.3 billion USD.
State budget contribution: about 8.7 billion USD.
Capital structure by sector: FDI capital implemented in industry accounts for about 60%, agriculture-forestry-fishery about 5% and services about 35%.
2. Orientation
Based on the goal of attracting FDI and the country's socio-economic development strategy until 2010 and becoming an industrialized country by 2020
We can specifically orient FDI attraction from specific countries as follows:
2.1. By field:
To improve the efficiency of attracting FDI from TNCs, Vietnam needs to focus on attracting FDI in industries and fields where we can take advantage of TNCs (high-tech industries, source technology, information technology, biotechnology, new materials, telecommunications), industries where Vietnam has competitive advantages (textiles, footwear, processing industry), industries with high profitability (tourism, banking and finance, insurance and some other service industries) to create more jobs and contribute to economic restructuring.
Gradually open the market, properly implement the opening roadmap for industries and fields as committed in joining the WTO, creating momentum to promote the development of other economic sectors such as banking, finance, insurance, and telecommunications.
Publicly announce the list of prohibited and restricted investment. Except for the prohibited and restricted investment sectors, domestic and foreign investors have the right to conduct business in all sectors and in any form permitted by law. The State needs to encourage investment in key projects that have an important impact on the economy according to the "List of Special Investment Encouragement" and "List of Investment Encouragement".
2.2. By partner
Up to now, FDI capital from countries investing in Vietnam is mainly from Asian countries, especially Japan, Korea, Singapore... TNCs from countries in the European Union EU and the US are still very limited. Therefore, to improve the efficiency of attracting FDI capital, on the one hand, we should continue to focus on FDI capital flows from Asian countries. Besides, investors from the US and countries in the European Union EU are potential investors.
capital and technology. If Vietnam attracts a lot of FDI from these countries, the investment capital will be very large. Along with it are source technologies and advanced management skills. Based on the strengths of the countries and the fields in which Vietnam needs to attract FDI, it is possible to identify the target industries and target FDI partners to attract as follows:
Table 3.1 Vietnam's FDI attraction goals for the period 2006-2010
Target industry
Target TNCs | |
Information technology | USA, Japan, EU, Singapore, India |
Electronics | USA, Japan, EU, Korea |
Chemical | USA, Japan, EU, Korea |
Oil and gas | US, EU, Russia |
Food processing | China, Japan, EU, Korea |
Textile, Leather and Footwear | China, Korea, Hong Kong, Singapore |
Industrial Park Infrastructure Construction | Japan, Singapore, China, Korea |
Finance, banking | EU, US, China |
Insurance | EU, US, China |
Maybe you are interested!
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Current Status of FDI in Vietnam's Service Sector -
Viewpoints and Goals of Vietnam's Foreign Trade Development -
Goals and Development Orientation of Vietnam's Foreign Exchange Market -
Prospects of Attracting FDI into Hanoi's Service Sector 1. Prospects of FDI into Vietnam -
Contents of Vietnam's FDI Policy Framework:
Source: Institute of Strategy - Ministry of Planning and Investment (2007)
2.3 By territory
The terrain of Vietnam is divided into many different regions. Each region has its own characteristics and advantages. In order to promote the strengths of each region, the Government needs to have development orientations for each region based on the strengths as well as the difficulties and limitations of each locality. In order to attract more FDI capital from TNCs, Vietnam needs to continue to attract and expand FDI projects from TNCs in areas with many advantages to promote the role of dynamic regions, export processing zones, concentrated industrial parks, and open economic zones.
The specific localities are: Hanoi, Ho Chi Minh City, Binh Duong, Dong Nai, Hai Phong. Encourage the development of cooperation in industrial and service zones. Besides, we also need to give incentives to TNCs investing in areas with difficult socio-economic conditions such as: Son La, Lai Chau, Cao Bang, Bac Can, Nghe An, Ha Tinh, Quang Binh, Quang Tri...
In short, to achieve the target of an average economic growth of 8% per year in the 2006-2010 period, Vietnam needs to follow the orientations for attracting FDI capital from TNCs as set out by the Party and State for each specific field, partner and territory.
II. LESSONS LEARNED FROM THE PROCESS OF PERFECTING THE POLICY FRAMEWORK OF SOME ASIAN COUNTRIES.
1. China
1.1. Law
Unlike Vietnam, China has not enacted a general law regulating foreign direct investment in China. China's legal framework for foreign investment includes: the Constitution, laws (passed by the National People's Congress), legal guidance documents (issued by the Standing Committee of the National People's Congress, the State Council, the Premier of the State Council, and competent ministries), and foreign investment policies of both central and local governments.
The main laws regulating foreign investment in China include: Law on Sino-Foreign Joint Ventures, Law on Wholly Foreign-Owned Enterprises, Law on Sino-Foreign Contractual Joint Ventures, and Law on Income Tax Related to Foreign Investment and Foreign-Invested Enterprises.
1.2 Investment fields:
To improve the investment environment, create favorable conditions for attracting investment.
In order to encourage foreign investment, the State Council of China has issued regulations on encouraging foreign investment. Accordingly, the People's Republic of China encourages foreign investors to establish 100% foreign-owned enterprises, joint ventures with Chinese partners to establish joint ventures with capital contributions and joint ventures under contracts between China and foreign countries, and provides special incentives to enterprises and investment projects in the following areas:
+ Manufacture products mainly for export.
+ Use advanced technology provided by foreign investors to produce and replace old products to increase foreign currency earnings through export or import substitution.
+ Investment in basic and supporting industries.
+ Invest in the Central and Western regions. These are large areas with great potential for farming, livestock, mining and service activities.
1.3. Tax policy:
According to China's tax law, since July 1, 1991, foreign-invested enterprises and foreign parties participating in joint ventures under contracts and foreign-invested companies operating in China are subject to a common corporate income tax rate of 30% of their taxable income. In addition, they are subject to a local income tax of 3% of their taxable income, which is paid directly to the local government. However, foreign-invested enterprises investing in encouraged industries, sectors and areas are only subject to a corporate income tax rate of 24% or 15%.
Corporate income tax of 15% applies to the following enterprises:
+ Enterprises in economic zones
+ Enterprises in economic and technological development zones
+ Enterprises in new technology and high-tech development zones
+ Enterprises in coastal open economic zones and urban areas carry out projects: with high technology ratio, foreign investment capital of over 30 million USD and long payback period; projects in the energy, transportation and port construction sectors.
+ Foreign banks, joint venture banks and other financial institutions in special economic zones, with foreign investment capital of over 10 million USD and operating time of over 10 years
+ Enterprises in some special areas as prescribed by the government
Corporate income tax at 24% for businesses:
+ Enterprises in coastal open economic zones and open cities along the border and the Yangtze River
+ Businesses in tourist and resort areas.
1.4. Investment implementation procedures
China recognizes many forms of foreign direct investment, and each form of investment is regulated by separate legal documents. Therefore, the procedures for implementing foreign investment in China are regulated in different documents and reviewed by many competent authorities.
Documents required in an application for establishing an FDI enterprise include: Enterprise charter, application for investment license, joint venture contract.
The application will then be reviewed and approved. The competent authorities that grant licenses for foreign direct investment projects in China include:
+ The State Development Planning Commission, the State Economic and Trade Commission, and the Ministry of Foreign Trade and Economic Cooperation are responsible for reviewing and granting investment licenses to projects with a total foreign capital of 30 million or more operating in the industrial sector and other projects requiring investment licenses issued by agencies under the State Council.
+ Provincial, autonomous region, and municipal government agencies issue licenses for projects with total foreign capital of less than 30 million USD and not located in restricted investment areas. For projects with total foreign capital of less than 30 million USD in restricted areas, applications must be submitted to the National Assembly Office. Projects related to quota issuance must be submitted to the Ministry of Foreign Affairs and Economic Cooperation.
1.5. Some lessons.
(1) Open up to attract foreign direct investment step by step, by region.
Implementing Deng Xiaoping's ideology, China has gradually opened up step by step according to the "feeling the stones to cross the river" therapy, easy first, difficult later, progressing step by step, reducing risks, thus avoiding major social collisions and rapid polarization as happened in the former Soviet Union and Eastern European countries due to the implementation of "shock therapy".
(2) Methods of attracting advanced foreign technology.
China's motto of "using the market to exchange for technology" is a double-edged sword, because with this motto, China's technical level has made significant progress in a short time compared to other developing countries. However, besides the achievements, China has also encountered enormous difficulties. That requires appropriate policies and steps to promote the positive aspects and limit the negative aspects in attracting foreign direct investment.
(3) On the management of operations of enterprises with foreign direct investment capital.
Develop national technology base to both cooperate and compete with transnational corporations; speed up inspection and auditing work in enterprises with foreign investment capital, strive to increase the contribution ratio of partners in the investment-receiving country to limit losses in foreign investment.
(4) Improve the effectiveness and efficiency of State management in attracting foreign direct investment capital.
To expand the attraction of foreign investment capital, it is necessary to have preferential policies for foreign investors, but it is necessary to research to have appropriate preferential policies to create equality in competition between enterprises of all economic sectors, avoiding causing losses to domestic enterprises.
Regarding administrative procedure reform, China has implemented a decentralization of investment decision-making to provinces and cities, creating more favorable conditions for investors in terms of time and cost in completing investment procedures. The downside of this decentralization is the emergence of conflicts between local interests and national interests, creating bureaucracy, stagnation, bribery and corruption among investment officials. Therefore, it is necessary to enhance the role of the State in inspecting, controlling and supervising all activities related to foreign investment.
2. Singapore
Singapore is a country with almost no natural resources. In addition, Singapore's agricultural sector is not really developed, accounting for only 0.17% of GDP. However, Singapore is known as a leading investment destination in the world with modern infrastructure and quality human resources.