Mr. Kyle Kelhofer, Senior Regional Director, IFC Vietnam, Cambodia and Laos
Representatives of foreign business associations in Vietnam believe that if Vietnam wants to increase investment from foreign investors, especially in high-tech sectors, it must amend current laws and institutions.
Foreign investors are viewing the market positively, considering it a promising opportunity. As the Vietnamese economy grows, foreign direct investment (FDI) is also flowing into Vietnam in greater quantities, especially in the high-tech sector.
However, at the 2019 Private Economic Forum, Mr. Hong Sun – Vice President of the Korean Business Association in Vietnam – stated that many Korean companies have expressed concerns about initial promises that have not been fulfilled, particularly the contradictions in tax incentive policies.
Agreeing with the above statement, the Vice President of the American Chamber of Commerce in Vietnam (Amcham), Ms. Virginia Foote, emphasized that domestic and foreign investors always desire a level playing field, not only to attract more investment in the future, but also to maintain existing investment flows.
Notably, in 2018, the 50% reduction in personal income tax for workers in economic zones (including the Trang Due industrial park in Hai Phong) was unexpectedly canceled by a newly passed decree.
In addition, representatives of US businesses investing in Vietnam also expressed concerns about the increasingly serious shortage of electricity supply, along with the dangerous levels of air pollution and environmental degradation (especially in the southern region).
Furthermore, Mr. Hong Sun emphasized that, in order to attract more foreign investment in the high-tech sector, Vietnam must reform several necessary aspects of its laws. In particular, the Vietnamese government should introduce new and more groundbreaking incentives in its policies for promising industries such as electric vehicles and solar energy.
Tomaso Andreatta, Vice President of the European Business Association in Vietnam, believes that improved support policies will help attract more foreign investment, contributing to a better trade and investment environment in Vietnam, making it an attractive business market. He also added that in the automotive industry, mandatory social insurance for foreign workers, legal harmonization for medical equipment products, and customs procedures pose significant challenges for European companies.
Kyle Kelhofer, Senior Regional Director of IFC Vietnam, Cambodia, and Laos, suggested that the Vietnamese government needs to establish a new FDI strategy that reflects the following directions:
– Aiming to encourage and provide incentives for businesses and investors.
– A comprehensive strategy based on the company's competitive advantages to attract and develop long-term growth.
– Performance-based incentives are best, and ideally, they should be focused on the company's goals.
– Managing public administration and creating transformation within the government.
In parallel, Virginia Foote advised Vietnam to focus on high-quality foreign investors to help develop the entire ecosystem of local businesses and entrepreneurs, in addition to developing the overall national economy.
