FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
As two prominent economic powerhouses in Southeast Asia, Vietnam and Singapore have forged a strategic partnership that spans across various sectors. In this blog post, we will explore the key aspects that make this bilateral relationship thrive, including trade volumes, investment flows, collaborative initiatives, and mutual benefits. Join us as we delve into the dynamic and prosperous trade and investment landscape between Vietnam and Singapore, uncovering the vast opportunities that await those seeking to capitalize on this flourishing partnership.
Overview of Vietnam and Singapore relations
Ever since Singapore and Vietnam set up their formal bilateral diplomatic relations in August 1973, their relations have been strongly tightened. The two countries have signed several frameworks with regards to a variety of sectors, in order to strengthen their bilateral friendship and multifaceted cooperation. Multiple official visits between the leaders of two nations, including bilateral visits and meetings at multilateral forums such as ASEAN and APEC meetings, have also taken place. In April 2021, Prime Minister Pham Minh Chinh and his Singaporean counterpart Lee Hsien Loong decided to strengthen their cooperation during the war against the Covid-19 Pandemic, as well as continue to further boost the bilateral relationship.
Trade and investment links between Vietnam and Singapore
Trade and investment relations between Vietnam and Singapore have been a significant factor in forging robust bilateral ties. In this regard, it is crucial to mention the highlight of the bond between these two ASEAN powerhouses: the Singapore – Vietnam Connectivity. Established in 2006, the SVCFA is an annual platform that plays a key role in the mission of maintaining the economic bilateral relations between Vietnam and Singapore.
Ever since the implementation of the SVCFA, a conducive environment with various investment opportunities in Vietnam for Singaporean business has been incubated. Annual Connectivity Ministerial Meetings are also organized in order to review the progress of the six sectors of cooperation under the framework, namely, education and training, finance, information technology, and telecommunications, investment, trade and services, and transportation. Hitherto, there have been 16 Connectivity Ministerial meetings that have been held between both country’s ministers.
Overall, the bilateral relations between the two countries have been effectively maintained and enhanced, particularly in the field of trade and investment.
Vietnam Singapore Industrial Park – Binh Duong
Foreign Direct Investment (FDI)
Throughout the years, Singapore has maintained its firm position, standing as one of the partners that invest in Vietnam in the most robust volumes. Singapore’s direct investment in Vietnam has increased steadily since 1998, especially in sectors such as real estate, processing, manufacturing, and construction. In the first two months of 2023, Singapore maintained its position as the largest foreign investor in Vietnam among the 51 countries and territories investing in the country. With a contribution of 978.4 million USD, Singapore accounted for approximately 31.6% of the total registered Foreign Direct Investment (FDI) in Vietnam. The nine Vietnam – Singapore Industrial Parks have epitomized the effectiveness of Singapore’s direct investment in Vietnam: VSIP 1, VSIP 2, and VSIP 3 in Binh Duong, VSIP Bac Ninh , VSIP Hai Phong, VSIP Quang Ngai, VSIP Hai Duong, VSIP Nghe An and VSIP Becamex Binh Dinh .
Singapore remains a top investor in Vietnam, holding the leading position among ASEAN countries and ranking second out of 141 countries investing in Vietnam as of December 2022. Singapore's investments are spread across 51 out of Vietnam's 63 provinces and cities. On the other hand, Vietnam has 140 valid investment projects in Singapore, with a total registered capital of over $586 million.
By December 2022, Singapore had invested in 18 diverse industries, leading to an 11.6% increase in the import-export turnover between Vietnam and Singapore compared to the previous year. However, given the overall economic decline in 2023, sustaining or surpassing the trade growth achieved in 2022 will present significant challenges. Despite the complex global economic landscape, the progress made by Singaporean investors in terms of investment cannot be overlooked.
Singapore's investment impact in Vietnam has remained strong and consistent, with the country being a frontrunner among the pioneering ASEAN nations in exploring Vietnam's investment market since the 1990s.
Over the past decade, bilateral trade between Singapore and Vietnam also saw a steady rise. Singapore and Vietnam have shared close and long-term economic relations, and their two-way trade grew steadily in the past decade, hitting 31 billion SGD (over 22.9 billion USD) in 2022. Vietnam's exports to Singapore amounted to $3.89 billion in 2021. The primary products that Vietnam exported to Singapore included Integrated Circuits ($469 million), Broadcasting Equipment ($405 million), and Crude Petroleum ($283 million). Over the past 26 years, Vietnam's exports to Singapore have grown at an average annual rate of 8.98%, starting from $416 million in 1995 and reaching $3.89 billion in 2021. In contrast, Singapore's exports to Vietnam in 2021 reached $8.11 billion. The main products Singapore exported to Vietnam were Refined Petroleum ($893 million), Ethylene Polymers ($552 million), and Integrated Circuits ($507 million). Over the same 26-year period, Singapore's exports to Vietnam have increased at an average annual rate of 6.02%, starting from $1.78 billion in 1995 and reaching $8.11 billion in 2021.
Opportunity and Challenges
Opportunity
In 2022, Singapore and Vietnam signed five agreements and several MOUs to strengthen their cooperation in various sectors including trade, digital economy, cybersecurity, clean energy, sustainable development, and intellectual property rights. Both countries actively engage in trade liberalization agreements and multilateral pacts to enhance their economic ties.
Recently, On February 9, 2023, Singapore and Vietnam solidified their economic cooperation by signing multiple MoUs. These MoUs aim to strengthen collaboration in various sectors such as trade, the green-digital economy, as well as maritime and port cooperation. The signings took place during the official visit of Vietnamese Prime Minister Pham Minh Chinh to Singapore, witnessed by Singapore Prime Minister Lee Hsien Loong. Notably, one of the MoUs focuses specifically on economic trade and cooperation, building upon a previous agreement signed between the two nations in February 2022.
With a fast-growing economy, Vietnam offers numerous business opportunities for Singaporean companies in various sectors, namely manufacturing, consumer services, hospitality, food processing, infrastructure, real estate, high-tech manufacturing. With an appealing market profile – low-cost labor, rapid-growing economy, strategic location, and among other strengths, Vietnam is undisputedly an appealing target for Singapore partners to establish businesses.
Challenges
Despite the positive characteristics of the Vietnam trade and investment market, foreign businesses still face numerous challenges, particularly regarding corruption and inadequacy of Vietnam Intellectual property law. Ranking 113th in 2016, in the Corruption Perceptions Index, The Government took the initiative to come up with several relevant legal actions such as giving out approval for the law of accessing information, revising the law on anti-corruption, and incorporating the United Convention against Corruption (UNCAC) regulations. By tackling this severe issue effectively, their efforts have drastically improved the situation, increasing their CPI ranking to 77th in 2022 amongst 180 economies.
Conclusion
Singaporean businesses have steadily remained in Vietnam’s long-term economic prospects and participated actively in various sectors in different parts of Vietnam. So far, Vietnam – Singapore relations have continued to develop in a positive manner, making significant contributions to the process of industrialization and modernization of Vietnam.
If you are Singaporean investors who need support with setting up a company in Vietnam, please contact the Viettonkin consultant team via email or contact page. With our specialized knowledge and experience in helping foreign enterprises’ getting into the Vietnamese business environment, we can provide detailed advice on procedures, stages, and documents required to prepare for the application of a Vietnam business registration certificate.
Vietnam, with its dynamic economy and thriving business landscape, presents a wealth of business opportunities for entrepreneurs, investors, and professionals looking to tap into its potential. If you are eager to explore the exciting prospects that Vietnam has to offer, we cordially invite you to join our highly anticipated webinar on 19 July 2023. This immersive online event will provide you with the tools, knowledge, and strategies to unlock your full potential and achieve remarkable business success in Vietnam. We will also dive into the latest regulatory updates and policies.
An brief overview of Vietnam
Vietnam has emerged as a vibrant and promising market, attracting global attention with its rapid economic growth, favorable investment climate, and a young, talented workforce. Whether you are a seasoned entrepreneur seeking new horizons or an aspiring business professional with an eye on international opportunities, our upcoming webinar is tailor-made to equip you with the insights and expertise necessary to thrive in Vietnam's dynamic business environment.
Webinar Details
Date: 19 July 2023 (Wednesday)
Time: 2:00 pm to 3:00 pm (UTC+7 Indonesia, Vietnam time)
Duration: 1 Hour
Venue: Online (link will be provided upon registration)
Gain valuable insights into Vietnam's economic landscape, business culture, and market dynamics. Our expert speaker, David Lang, who has a deep understanding of the Vietnamese business environment, will provide you with key information to navigate the local market successfully.
2. Unleashing Business Opportunities:
Discover the untapped potential and specific sectors with high growth potential in Vietnam. Learn about emerging industries, investment opportunities, and strategic areas where you can capitalize on the country's economic expansion and favorable policies, which stimulates consumer spendings and consumptions.
3. Unlocking Your Full Potential
Tap into your full potential as a business leader and learn how to adapt your skills to the Vietnamese market. Our experienced speakers will share practical strategies to leverage your strengths, build strong networks, and establish a competitive edge in Vietnam's business landscape.
4. Developing Effective Market Entry Strategies
Master the art of market entry and expansion in Vietnam. Acquire the knowledge and tools necessary to develop robust business plans, identify target markets, and navigate legal and regulatory frameworks to ensure a smooth and successful entry into the Vietnamese market.
5. Cultivating Business Relationships
Learn the nuances of Vietnamese business etiquette, communication styles, and relationship-building techniques. Discover how to establish and nurture fruitful business relationships with local partners, clients, and stakeholders, paving the way for long-term success.
6. Seizing Opportunities in Digital Transformation
Explore the transformative power of technology and digitalization in Vietnam's business ecosystem. Gain insights into the digital trends shaping various industries and learn how to leverage technology to enhance efficiency, reach new customers, and drive innovation.
Let's discover business opportunities in Vietnam, shall we?
The time is now to capitalize on the abundant business opportunities that Vietnam has to offer. By joining our July 2023 webinar, you will gain the knowledge, strategies, and connections needed to unlock your full potential and achieve remarkable business success in Vietnam. Don't miss this chance to immerse yourself in the dynamic Vietnamese market, learn from industry experts, and join a network of like-minded professionals on the path to success.
Registration is now open, but seats are limited. Reserve your spot today and embark on an exciting journey towards business growth and prosperity in Vietnam. Together, let's seize the immense potential of Vietnam's market and unlock unprecedented opportunities for success in 2023 and beyond.
The concept of technology transfer holds immense significance for policymakers, carrying substantial implications for global economic progress. This is particularly relevant for countries like Vietnam, currently undergoing industrialization and modernization. The process involves rigorous research, policy formulation, and strategic planning aimed at maximizing the efficiency of adopting and implementing cutting-edge foreign technologies in domestic production. Equally crucial is the successful integration of homegrown technology across diverse industries and fields. This pivotal stage serves as a catalyst for achieving swift and sustainable development, playing a vital role in ensuring long-term economic prosperity.
An overview of technology transfer in Vietnam
Over the past few decades, Vietnam has made significant progress in technology transfer through policies aimed at attracting foreign direct investment (FDI) projects. These initiatives have yielded substantial successes in acquiring technology for production and business development, gradually raising the country's domestic production capabilities. Notably, industries such as Post and Telecommunications, Banking, Oil and Gas, Construction, Traffic have successfully absorbed advanced technologies, placing Vietnam at the forefront of global innovation.
The increasing competitive pressure from FDI enterprises has prompted domestic companies to invest in importing new equipment and technologies, as well as establish dedicated departments and research and development (R&D) centers to enhance their technological capabilities. Among the economic sectors that have thrived due to technology transfer and R&D collaborations associated with FDI projects, the oil & gas, and communications sectors stand out. They have progressed rapidly and modernized, keeping pace with regional and global standards.
Source: Viettonkin Consulting
Vietnam's technology market has experienced a vibrant transformation following the enactment of the Technology Transfer Law in 2017. This legislation aims to encourage the transfer of advanced and clean technologies while discouraging the importation of outdated and hazardous technologies. As a result, the technology landscape in Vietnam has become dynamic, fostering sustainable development and innovation.
In the realm of high technology, foreign investors have been drawn to Vietnam's three national high-tech parks, with the Hi-Tech Park in Ho Chi Minh City achieving notable success. Over the course of its 20-year establishment, the park has attracted approximately 130 investment projects with a total registered capital of nearly $7 billion. It has become a hub for renowned global corporations such as Intel, Microsoft, Nidec, Sanofi, Nipro, and Samsung, manufacturing high-tech, value-added products. Notably, Samsung has invested hundreds of millions of dollars to establish an R&D center, further affirming the government's commitment to creating a favorable high-tech investment environment and promoting technology transfer in Vietnam.
Source: Viettonkin Consulting
Some limitations in technology transfer through FDI projects
From an objective standpoint, foreign investment has undeniably played a role in reshaping Vietnam's economic structure. Through FDI projects, technology has been transferred from overseas to Vietnam, leading to a gradual shift in the country's technological landscape. Nonetheless, the outcomes attained thus far have fallen short of Vietnam's socio-economic development goals and requirements.
While it is true that the technology transferred into Vietnam largely matches or even surpasses the existing technology in the country, its overall level remains only moderately advanced compared to other regional nations. Many cutting-edge and modern technology products are yet to penetrate the domestic market.
A significant portion of technology transfer contracts registered at regulatory agencies for science and technology primarily emphasize the transfer of technological processes, technological know-how (73%), technical assistance (77%), and training (71%). Conversely, technology transfer that involves industrial property objects represents a relatively small fraction (13%) of these contracts.
In addition, the number of enterprises holding core technology and engaging in high-tech investments in Vietnam remains relatively low, with many FDI projects primarily focusing on low-value assembly and processing operations, leading to a limited localization rate and inadequate value generation within the country. Consequently, the expected technology spillover from FDI enterprises to domestic counterparts has not materialized as anticipated.
How Vietnam can leverage tech transfer & knowledge with the high-quality FDI projects
In order to enhance the technology transfer from FDI enterprises and maximize the benefits derived from this capital flow, Vietnam should prioritize the implementation of various solutions, such as: Establishing robust FDI policies, Strengthening intellectual property rights (IPR) protection, Supporting research and development (R&D) initiatives, and Establishing Intermediaries in Application and Technology Transfer.
Establishing effective FDI policies to promote technology transfer
To effectively attract high technology and technology transfer, particularly in high-tech fields and FDI projects, Vietnam should create and implement clear policies that incentivize technology transfer and knowledge sharing as a requirement for FDI projects. These policies can outline the expectations and obligations of foreign investors in terms of sharing their technology, expertise, and knowledge with local partners and employees.
A significant step in this direction was taken in 2021 when the Prime Minister issued Decision 29/2021/QD-TTg, which introduced special investment incentives designed to attract selective FDI investments. The decision offers preferential tax rates for corporate income tax to FDI enterprises that meet specific technology transfer requirements. For instance, investors who fulfill the level 1 technology transfer criteria can enjoy a reduced corporate income tax rate of 7% for 33 years, while those meeting the level 2 technology transfer requirements can benefit from a 5% corporate income tax rate for 37 years.
Notably, Vietnam has provided the highest level of incentives available under current laws to encourage hi-tech application projects and support hi-tech enterprises. Additionally, the Law on Investment recognizes high-tech enterprises as eligible for investment incentives, emphasizes investment incentives for hi-tech activities, and extends these incentives to hi-tech zones. This demonstrates the government's commitment to consistent policy-making in attracting foreign investment and promoting the inflow of advanced technology and high-tech expertise into Vietnam.
Enhancing intellectual property rights (IPR) protection
To facilitate technology transfer, it is essential for Vietnam to strengthen the protection of intellectual property rights (IPR).
FDI projects, particularly those of larger scale, are often undertaken by transnational companies (TNCs). Developing countries like Vietnam prioritize attracting such investments and offer various incentives to entice them.
However, TNCs face significant limitations when it comes to transferring new and highly competitive technologies to their overseas affiliates. They are concerned about potential risks of disclosure, loss of technology copyright, and unauthorized imitation or modification by local companies in the host country. While TNCs may often cite the host country's failure to meet their technology utilization requirements as the reason for not transferring new technologies, the underlying concern is the protection of their intellectual property.
By strengthening IPR protection, Vietnam can address these concerns and alleviate the fears of TNCs regarding technology transfer. This, in turn, will encourage TNCs to share their advanced technologies and knowledge with local partners and employees, promoting technological progress and fostering mutually beneficial collaborations.
Promoting research and development (R&D) initiatives
In addition to technology transfer, transnational companies (TNCs) also engage in research and development (R&D) activities within the host country. However, it is important to note that most R&D efforts conducted by overseas branches of TNCs primarily focus on adapting existing technologies to suit local conditions.
Therefore, to further bolster its technological capabilities, Vietnam should actively encourage FDI projects that prioritize R&D activities. By providing incentives and support for such initiatives, the country can attract foreign investors who are dedicated to innovation and technological advancement. These projects often involve a higher level of technology transfer and knowledge sharing, as they encompass the creation and dissemination of new technologies and expertise.
Establishing Intermediaries to facilitate technology transfer
As of 2022, Vietnam had 14 technology hubs and over 20 local technology exchanges designed to facilitate the connection, promotion, and transfer of technology to organizations, businesses, and individuals both domestically and internationally.
The presence of these technology hubs and intermediary organizations strengthens the linkages between researchers, entrepreneurs, and investors. They provide a platform for knowledge and technology exchange, supporting the implementation of innovative solutions in industries, and driving economic growth through technology-driven advancements.
By fostering the development of such intermediaries, Vietnam can create an ecosystem that facilitates effective technology transfer, encourages collaboration between academia and industry, and promotes the commercialization of research and development outcomes. These initiatives will further enhance the overall competitiveness and innovation capacity of the country.
Final Thoughts
Through the implementation of robust FDI policies, reinforced intellectual property rights (IPR) protection, and active promotion of research and development (R&D) initiatives, Vietnam has established an environment conducive to unlocking new horizons in technological advancement.
By embracing these opportunities, investors and business owners can tap into Vietnam's vibrant market and contribute to its technological growth. To explore the multitude of business prospects that await, we extend a special invitation to join our upcoming webinar, "Unlocking Business Opportunities in Vietnam." This webinar will provide valuable insights into the dynamic Vietnamese market, showcasing the potential for FDI projects and demonstrating how technology transfer and knowledge sharing can yield remarkable returns.
Singapore's ability to attract high-quality high-tech foreign direct investment (FDI) projects is a testament to its compelling strategies and business environment. While there is no one-size-fits-all approach, Vietnam can take inspiration from Singapore's achievements and learn valuable lessons to enhance its own investment landscape. By adapting and implementing successful strategies, Vietnam can pave the way for increased high-quality high-tech FDI and foster economic growth.
Singapore’s FDI inflow in the high-tech sector
Singapore's ICT and high-tech sector has emerged as a cornerstone of the country's thriving knowledge-based economy. In 2021, the sector witnessed a remarkable surge in foreign direct investment (FDI), with software and IT services leading the charge. With a staggering 90 projects, this sector alone accounted for over one-quarter (26.5%) of all investments pouring into the country.
The country’s ability to attract high-tech investment can be attributed to its steadfast commitment to fostering a business-friendly environment, supported by a robust infrastructure, substantial investments in R&D, and a highly-skilled labor force. These factors have propelled Singapore to the forefront of the global high-tech industry, establishing it as a premier destination for foreign investors seeking a thriving and innovative business ecosystem.
What makes Singapore an ideal destination for high-tech investors
Singapore's transparent legal landscape and attractive tax incentives have positioned it as an enticing destination for investors looking to tap into the high-tech sector.
One of Singapore's standout features is its efficient and business-friendly environment, as exemplified by the seamless company incorporation process. Foreign investors can establish a business in Singapore swiftly, with the registration procedure often completed within a single day, provided all the necessary documentation is in order. This streamlined process eliminates unnecessary bureaucratic hurdles and allows investors to swiftly kickstart their high-tech ventures.
To further attract top-notch talent and promote technological innovation, Singapore also introduced extensive incentive policies, one of which is the pioneering work permit called Tech.Pass in 2021. This permit is specifically designed to entice highly accomplished technology entrepreneurs, experts, and business leaders. Unlike the traditional Employment Pass, Tech.Pass does not require the sponsorship of a local employer, granting professionals greater flexibility in their activities.
Singapore's attractive tax regime is another enticing factor for high-tech investors. The country offers competitive corporate tax rates and a plethora of tax incentives and exemptions, including research and development (R&D) tax incentives, investment allowances, and enhanced deductions for qualifying expenses. These measures significantly reduce the tax burden for companies operating in the high-tech sector, allowing them to allocate more resources toward innovation and growth.
Well-established infrastructure
Singapore's dedication to infrastructure investment has propelled it to the forefront of global rankings, securing its position as the world leader in terms of infrastructure quality. In 2021, Singapore jumped up two places to claim the number one spot in the Global Infrastructure Index 2021.
Singapore has also invested heavily in the development of cutting-edge facilities and technology parks that cater specifically to the needs of high-tech companies. These specialized zones, such as the renowned one-north precinct, are designed to foster collaboration, innovation, and knowledge-sharing among industry players. They provide state-of-the-art research and development facilities, advanced laboratories, and incubation spaces that support the growth and expansion of high-tech enterprises.
By prioritizing infrastructure development, Singapore has created a solid foundation that supports various sectors, including the high-tech industry.
Government’s intensive investment in R&D
Looking ahead, Singapore has committed to allocating over S$25 billion (US$17.6 billion) for R&D in a continuing effort to build a more resilient and sustainable economy.
To support the R&D efforts, Singapore has also established model factories within its universities and research centers, providing researchers and industry players a testbed for new manufacturing techniques, technologies, and business models, to refine their innovations before they are exported to the rest of the world.
These investments not only foster technological advancements but also create a fertile ground for collaboration between academia, research institutions, and industry players. This collaborative environment fuels the development of groundbreaking solutions and positions Singapore as an attractive destination for high-tech investors seeking to leverage cutting-edge research and innovation.
Singapore’s intensive investment in tech-talent
Singapore boasts a highly skilled workforce, securing the second rank globally in the 2021 Global Talent Competitiveness Index, published by INSEAD.
Despite the global job cuts in the tech sector in the first quarter of this year, Singapore’s tech talent remains resilient and sought after. The country continues to prioritize investments in tech skills, with major banks like OCBC, DBS, and UOB offering training programs for technology staff and tech industry entrants.
The country's collaboration between industry, education, and government entities ensures the continuous development of tech professionals and job opportunities, which ultimately solidifies Singapore's position as a leading destination for tech innovation and investment.
Singapore’s exemplary success in attracting high-tech FDI to the semiconductor sector
The semiconductor industry, characterized by its rapid pace of innovation, finds a welcoming home in Singapore, a nation that recognizes the paramount importance of technological advancements. Singapore's commitment to fostering a culture of research and development (R&D) is evident in its robust initiatives aimed at propelling the semiconductor sector to new heights. Steady and sustained investments in R&D form a key pillar of Singapore's economic development strategy, providing the country with a competitive edge against larger and better-resourced nations. Specifically, in December 2020, the Singapore government announced a significant boost in its R&D budget, allocating $25 billion for the next five years, a 30% increase from the previous allocation. This substantial investment underscores Singapore's unwavering dedication to sustaining its competitiveness and bolstering its status as a leading tech and innovation hub, further reinforcing its commitment to supporting the semiconductor industry. By continuously investing in R&D, Singapore ensures that it remains at the forefront of semiconductor technology, attracting high-tech FDI and solidifying its position as a global leader in innovation.
What key lessons can Vietnam learn from Singapore’s success in attracting high-tech investments?
The Vietnamese government has set clear targets and objectives to draw high-tech FDI. Specifically, the National Strategy for Foreign Investment Cooperation for the 2021-2030 period aims to raise the percentage of registered foreign capital from Asia, Europe, and the US to over 70% of the total disbursed in Vietnam by 2025 and 75% by 2030. However, the country’s still facing several challenges related to infrastructure development, the lack of industrial real estate properties, eco-industrial parks, and the complexity of the administrative procedures. To fully realize this vision, Vietnam must tackle these obstacles by taking inspiration from Singapore's experience.
Incentives and Streamlining Administrative Procedures
Singapore's exemplary success in attracting high-tech investments offers valuable insights for Vietnam. One crucial aspect is the provision of attractive incentives and the streamlining of administrative procedures.
To stay competitive in the region, the Vietnamese government must ensure that its incentive packages remain attractive to potential investors since the current complex administrative procedures can pose a significant challenge to funding opportunities. The approval and licensing process can be onerous, with differing requirements and timelines between provinces.
Thus, to enhance the country's attractiveness for investment, it’s important that the Vietnamese government streamline the licensing and approval procedures for projects. Simplifying the process will enable companies to establish their operations promptly and encourage more inflows into the country.
Enhancing Infrastructure and Facilities
Singapore's success in attracting high-tech investments is closely tied to its highly developed infrastructure, which has played a pivotal role in facilitating business operations and logistics. Vietnam should prioritize enhancing both the quantity and quality of its infrastructure and facilities to attract high-tech foreign-led companies. While the northern region of Vietnam has made significant strides in transportation infrastructure over the last five years, there is a pressing need to improve road transport systems and airports in the southern region. This will accommodate the surging demand and logistical requirements of existing and potential manufacturers. By investing in robust transportation infrastructure, Vietnam can effectively address connectivity challenges and position itself as an attractive destination for high-tech investments.
Final thoughts
Singapore's remarkable success in attracting high-quality high-tech foreign direct investment (FDI) projects serves as a valuable blueprint for Vietnam. The nation's proactive approach, characterized by a business-friendly environment, state-of-the-art infrastructure, enticing incentives, and a skilled workforce, has propelled it to the forefront of the global high-tech investment landscape.
Vietnam has much to gain by emulating Singapore's strategies and adapting them to its unique context. By cultivating an environment that nurtures business growth, streamlining administrative procedures, and offering compelling incentives, Vietnam can position itself as an irresistible destination for high-quality high-tech FDI projects, fostering remarkable economic development and innovation.
To delve deeper into Vietnam's immense potential and gain invaluable insights into navigating its dynamic investment landscape, we would like to invite investors and business owners to join our upcoming webinar, "Unlocking Business Opportunities in Vietnam.” This exclusive event promises to unveil the untapped possibilities that Vietnam holds, enabling participants to connect with industry experts, engage in meaningful discussions, and acquire the knowledge needed to make informed investment decisions.Seize this unique opportunity to unlock the doors to Vietnam's thriving business landscape. Reserve your spot today and embark on an exhilarating journey toward maximizing your investment potential in Vietnam's high-growth sectors. Together, let's explore the limitless horizons of Vietnam's dynamic economy and pave the way for a prosperous future.
Da Nang is a booming hub for high-quality FDI projects in Vietnam. The city’s strategic location, business-friendly environment, and advanced infrastructure have drawn foreign investors looking for profitable opportunities in Southeast Asia.
This article explores the most updated government initiatives to promote and support investments in Da Nang’s high-tech parks. Whether you are an experienced investor or a newcomer to the Vietnamese market, this comprehensive guide will give you valuable insights into the current investment climate and the opportunities in Da Nang’s high-tech parks.
FDI situation in Da Nang in the first 6 months of 2023
Economic and FDI situation in Da Nang
According to the Director of the City Statistics Department, for the first 6 months of 2023, Da Nang’s economy ranks third among the five centrally administered cities in terms of growth rate, which is estimated at 3.74% for the first 6 months of the year. The city’s gross domestic product (GRDP) has risen by 3.74% compared to the same period in 2022, and by 13.48% compared to the first 6 months of 2019, before the COVID-19 pandemic.
Regarding foreign direct investment (FDI) attraction, Da Nang has attracted 64 new FDI projects with a total registered capital of 10.6 million USD, an increase of 45 projects and 47% of the capital compared to the same period last year. The total capital registered in Q2 of 2023, including new and additional capital, was 27.31 million USD, which was 60.7% of the amount registered in the same period in 2022.
Additionally, 18 foreign investors participated in capital contribution and share purchase with a total value of 2.77 million USD. There were also 20 FDI projects that adjusted their capital, with an additional investment of 13.94 million USD.
High-tech parks in Da Nang
According to the Management Board of Da Nang Hi-Tech Park and Industrial Parks, Da Nang Hi-Tech Park has a total planned area of over 1,128 hectares (ha), divided into six functional sections: Production (202.58 ha), R&D (99.93 ha), Logistics - logistics - CNC service (27.45 ha), Residential (31.4 ha), Focal technical infrastructure (9.75 ha) and Administration (28.35 ha).
Source: Internet
This place has attracted 29 FDI projects with a total 905 million USD investment by the end of Q1 of 2023. The current occupancy rate in the Hi-Tech Park is 44%, with 58% in the production section, 76% in the logistics, logistics and high-tech services section, and 5.5% in the research, development, training and business incubation section.
Government initiatives on high-quality FDI projects in the high-tech parks in Da Nang
Da Nang Central Government Objectives and Directions in attracting high-quality FDI projects in high-tech parks.
According to Resolution No. 43-NQ/TW on Da Nang construction and development until 2030, with a vision to 2045, the city aims to become a smart eco-city, a hub for entrepreneurship and innovation, as well as a livable coastal city at the Asian level.
Da Nang City People's Committee approved Decision No. 3395/QD-UBND promulgating "Project on promoting investment attraction in Da Nang city in the period of 2021-2025, vision to 2030”. The project targets to attract registered investment capital of about 3 billion USD for the 2021-2025 period, and about 4 billion USD for the next 5 years. Following the project plan, it is also expected that by 2025, 50% of the enterprises will make use of modern management, environmental protection, and high technology. By 2030, this proportion is expected to reach 100%.
To reach such goals, Da Nang is keying on developing three main pillars: Tourism, High-tech Industry and Marine Economy, and five key areas: Tourism and high-quality services linked to resort real estate, Seaports and airports linked to logistics services, High-tech industry linked to creative and start-up urban construction, and the information technology, electronics and telecommunications industries linked to the digital economy.
The city sees attracting investment in the hi-tech park as the core driving force for creating breakthroughs and making a key contribution to Da Nang’s economic development. We expect Da Nang Hi-Tech Park to contribute at least 10-15% to the overall economic output during the 2025-2030 period.
Mr. Le Trung Chinh - Da Nang City People’s Committee Chairman
Particularly, Da Nang Hi-Tech Park focuses on attracting investment from leading technology groups in production chains, prioritizing large-scale projects with investment rates of 15 million USD/ha or more.
The city leaders are determined to continuously create and improve a favorable business and investment environment for investors to do business and grow. We believe that the city’s success depends on the success of businesses and investors.
Mr. Le Trung Chinh.
Initiatives on high-quality FDI projects in high-tech parks in Da Nang
According to Mr. Vu Quang Hung - Head of the Management Board of Da Nang Hi-Tech Park and Industrial Parks, the city has separate policies to support investors in addition to the national policies. The city also prepares urban-level social infrastructure for foreign investors who invest in Da Nang Hi-Tech Park.
Improvement of the effectiveness and efficiency of investment management and supervision;
Renovation and improvement of investment promotion activities;
Promotion of administrative reform.
In addition, the approval for Da Nang to apply all mechanisms and policies specified in Decree No. 94/2020/ND-CP for the National Innovation Center is also suggested.
Regarding tax incentives, for new investment projects, technology enterprises in Da Nang Hi-Tech Park enjoy an income tax rate of 10% for 15 years. Meanwhile, new investment projects with a capital scale of 3,000 billion VND or more are entitled to a 10% preferential tax rate for up to 30 years. Technology enterprises also get an income tax exemption for 4 years and a 50% reduction in tax payable amount for the next 9 years.
Businesses and investors will also be exempt from tax on goods imported to create fixed assets in high-tech park projects namely machinery, components, means of transport, construction materials, among others. Along with that, import tax is exempt for a period of 5 years if investors import raw materials, supplies and components that have not yet been produced at home, or imported for production of investment projects in high tech parks.
Additionally, the Prime Minister’s Decision No. 66/2014/QD-TTg and the Government’s Decree No. 111/2015/ND-CP specify the list of industries and trades that are prioritized for investment to Da Nang Hi-Tech Park. Specifically, 6 following industry groups are given priority for investment in the high-tech parks:
Information technology, the media, computer software
New material technology, nanotechnology, new energy
Automation and precision mechanics
Environmental technology, petrochemical technology and some other special technologies
Biotechnology for health, agriculture and fisheries
Technology of microelectronics, mechatronics, optoelectronics
The management board always supports the business. We will stand by them when they come to do the investment procedures, walking them through each step of the process. We will provide the highest level of support in making the application dossier and issuing investment certificates as fast as possible.
Mr. Vu Quang Hung
Similarly, the City People’s Committee has decided to reduce the processing time by 25% (currently 11 working days) to make it easier for organizations and individuals, foreign investors and foreign-invested enterprises in obtaining and making amendments to the Investment Registration Certificate.
How to invest in high-tech parks in Da Nang
Source: Management Board of Da Nang Hi-tech Parks and Industrial Parks, designed by Viettonkin Consulting
Final Thoughts
To sum up, Da Nang's high-tech parks present a compelling opportunity for foreign investors looking to capitalize on Vietnam's growing economy. With the government's updated initiatives and unwavering support for high-quality FDI projects, the city is poised to become a hub of innovation and business excellence.
To not only explore the potential of Vietnam but also Da Nang and other regions, along with gaining deeper insights into navigating the investment landscape, we invite you to join our upcoming webinar, "Unlocking Business Opportunities in Vietnam". Our panel of experts will share the latest Vietnamese Market Regulations, Policies, and FDI trends to help you make informed decisions and maximize your investment potential.
Don't miss this chance to connect with industry leaders, network with like-minded professionals, and gain a competitive edge in the Vietnamese market. Reserve your spot today by visiting our LinkedIn or contacting our team directly. Together, let's embark on the prosperous journey into Vietnam!
Remember, the future of venturing into Vietnam awaits – and we are here to guide you every step of the way.
Enabling technologies play a pivotal role in Vietnam's economic development. These technologies, which include advancements in areas such as information technology, telecommunications, and infrastructure, provide a solid foundation for growth and innovation. As Vietnam continues to leverage enabling technologies, it can unlock new opportunities, accelerate economic growth, and pave the way toward a more prosperous future.
How technology is transforming Vietnam’s economy
According to the Ministry of Science and Technology's statistics, the significant contributions of science, technology, and innovation to socio-economic development are evident. This impact is not limited to a single sector, as technology is reshaping various industries such as healthcare, finance, and retail.
For example, in the healthcare sector, telemedicine has emerged as a transformative solution, sizing down crowds at clinics and hospitals by offering online consultation services. This enables doctors to make diagnoses and create treatment plans remotely, improving professionalism and reducing waiting times for patients.
Similarly, the retail industry has harnessed the power of e-commerce platforms, connecting businesses with customers, increasing convenience, and boosting revenue. By embracing digital storefronts, retail businesses can cater to customer needs more effectively.
Education is also experiencing a technological revolution, with online learning platforms and mobile learning apps providing students with flexible learning opportunities. Additionally, technology empowers lecturers to analyze student data and adjust teaching methods accordingly, enhancing the learning experience.
A significant driver of Vietnam's economic growth is the digitalization of the country. The digital economy is projected to play a pivotal role in achieving the goal of becoming a high-income economy by 2045. By 2025, the digital economy is expected to contribute around 20% to the GDP, with an estimated 30% contribution by 2030.
Source: Bain Analysis
The digital economy is indeed on an upward trajectory, as evidenced by Vietnam's digital marketplace. The E-Conomy SEA 2022 report indicates a substantial 28% increase in gross merchandise value, reaching $23 billion in 2022. Projections suggest further growth, with the digital economy expected to reach $49 billion by 2025, reflecting a remarkable 31% expansion.
Tran Minh Tuan, Director of the Department of Digital Economy and Digital Society under the Ministry of Information and Communications, believed that digital market, digital space, and digital data are necessary for developing a digital economy, and to do that, the first thing is to ensure digital infrastructure. Recognizing the inherent potential of technology, leveraging its power becomes a pivotal undertaking not only for the digital economy but for the nation's economy as a whole.
Future Outlook and Recommendations for Investors
Vietnam's relentless pursuit of technological integration to propel economic development is evident as it prioritizes the infusion of technology across various sectors. There are four key trends that hold immense promise in shaping the country's economic growth, which include: AI and machine learning (ML), 5G, blockchain, and VR/AR.
AI and machine learning (ML)
In Vietnam, AI and ML has made significant strides in recent years and this trend is expected to continue in 2023. According to Mr. Hoang Viet Tien - Deputy Secretary General of the Vietnam Digital Communication Association, in 2023, these technologies are becoming increasingly transcendent, with a particular focus on natural language processing and computer vision, thereby supporting businesses in enhancing operational efficiency.
Recognizing the immense potential, the Vietnamese government has outlined its commitment to AI and ML integration in the National Strategy on Artificial Intelligence, with the goal of becoming one of the leading AI brands in ASEAN by 2030.
As a result, the demand for skilled professionals in AI and ML has surged, particularly in sectors like electronics (E-commerce), digital marketing, fintech, education, healthtech, and emerging fields such as entertainment and human resource management. Roles such as AI Engineers, Big Data Scientists, and Business Intelligence Analysts are in high demand, reflecting the growing importance of AI and ML in Vietnam's commercial industries.
5G
Anticipated for 2023, Vietnam is poised to embrace the widespread adoption of 5G networks, revolutionizing connectivity with faster and more reliable connections for an increasing number of devices. The advent of 5G technology promises immense benefits, particularly in high-tech manufacturing, logistics, and agriculture industries.
In the manufacturing sector, 5G is expected to enhance factory capabilities and operational efficiency by reducing reliance on wired connections. As highlighted in a KPMG report, a factory equipped with a wireless 5G network has the potential to generate an additional value equivalent to $1/m2. To put this into perspective, even the smallest factory area of 10,000m2, when leveraging 5G, could potentially yield nearly $4 million USD in added value per year.
In the field of logistics, 5G networks will propel businesses currently utilizing IoT devices to new heights, resolving common issues such as shipping delays and improving the information flow to customers.
For the agriculture sector, the deployment of 5G infrastructure is a pivotal step toward achieving high-tech agriculture. Given Vietnam's emphasis on agricultural investment, the application of 5G in agricultural production is crucial and highly advantageous.
Beyond these key sectors, 5G holds immense potential for advancing various domains, including smart traffic management, energy management, construction and mining, digital education, telehealth, retail smart solutions, and the development of smart cities.
Blockchain
In Vietnam, blockchain technology has emerged as a cornerstone of technological innovation, presenting a myriad of compelling applications across various sectors. It serves as a secure platform for storing diplomas in the education sector and facilitates processes such as letters of credit, contract guarantees, and payments within the banking industry.
However, according to Dr. Nguyen Quoc Hung, the General Secretary of VNBA, the current implementation of blockchain in Vietnam primarily revolves around the financial domain, particularly digital assets and currencies. Other promising applications, such as traceability in agriculture, logistics, healthcare, and education, have not yet been widely adopted.
Looking ahead, Vietnam anticipates the emergence of new blockchain-based applications and a surge in the utilization of smart contracts. These self-executing agreements, encoded within lines of code, hold the potential to revolutionize traditional contract frameworks, enabling seamless transactions between buyers and sellers.
VR and AR
In the upcoming year of 2023, widespread adoption of VR and AR in Vietnam is anticipated in key sectors such as gaming, retail, and education. This technological integration will empower businesses to deliver innovative products and services, elevate customer experiences, and foster higher levels of engagement.
While the benefits of AR-VR are undeniable, the challenges of its widespread application in Vietnam persist. Experts often attribute this barrier to the complexity of the technology itself, as its advanced nature poses difficulties for universal adoption. However, globally recognized brands like IKEA, Houzz, and Wayfair have successfully harnessed AR-VR applications in sales, proving the potential of these technologies.
The key to unlocking the true potential of AR-VR in Vietnam lies in simplicity and addressing the daily needs of users. Modern users prioritize practicality over extravagant graphics or overly complex experiences. They seek usefulness above all else.
An effective combination that has emerged in the retail industry is "E-commerce & AR-VR." Recognizing this trend, AR-VR businesses in Vietnam, such as ADT Creative, Holomia, and CO-WELL Asia, have collaborated with e-commerce giants Lazada, Shopee, Tiki, and others to provide enhanced buying experiences for customers. By offering the best deals and increasing competition in the market, these collaborations tap into the immense potential of AR-VR technology.
Investors must be keenly aware of the tremendous opportunities presented by the application of AR-VR technology in Vietnam. The market holds significant potential for growth, and it is crucial not to overlook the investment prospects that arise from this emerging field.
Bottom-up
The significance of enabling technologies in Vietnam's economic development cannot be overstated. These technologies provide a solid foundation for growth, innovation, and competitiveness across industries. By leveraging advancements in information technology, telecommunications, and infrastructure, businesses in Vietnam can thrive in the digital age, with enhanced efficiency, productivity, and market expansion.
To seize the immense potential, we would like to invite investors to explore the high-tech sector in Vietnam and join our upcoming webinar, "Unlocking Business Opportunities in Vietnam". Reserve your spot today by visiting our LinkedIn or contacting our team directly. Together, we can unlock the vast potential and contribute to the continued success of Vietnam's economic transformation!
The Vietnamese government has recently approved and issued some policies about extension and reduction of the taxes for 2023, including continuing to apply the policy of 2% reduction in the value-added tax (VAT) on goods and services. The reduction to 8% VAT aims to stimulate economic growth and provide support to businesses.
In a recent development, the value-added tax (VAT) reduction policy has been implemented as per the Resolution No.101/2023/QH15 of the National Assembly and Decree No 44/2023/NĐ-CP, effective from July 1, 2023. This article aims to provide you with an important update on the eligibility criteria and proper implementation of the tax reduction within your business operations.
Summary of the Decree
The Decree No. 44/2023/NĐ-CP regulates the policy of value-added tax reduction in accordance with Resolution No. 101/2023/QH15 of the National Assembly. The value-added tax reduction applies to goods and services that currently have a tax rate of 10%, with some exceptions. The exceptions include industries such as telecommunications, financial activities, banking, securities, insurance, real estate, metals and prefabricated products, mining products (excluding coal mining), coke, oil refined mines, chemical products, and goods subject to excise tax. Information technology goods subject to the law on information technology are also eligible for the tax reduction.
The reduction in value-added tax is applied uniformly at all stages of import, production, processing, business, and trade. Coal products that are mined and sold are eligible for value-added tax reduction, but specific coal products listed in the decree are not eligible for tax reduction at stages other than mining and selling. Corporations and economic groups that implement a closed process before selling coal will also benefit from the tax reduction.
The Decree specifies the value-added tax reduction rates for businesses that calculate taxes by the deduction method and for businesses that calculate taxes based on a percentage of revenue. The implementation procedures are also outlined, including the requirements for issuing invoices and declaring taxes.
The Decree is effective from July 1st, 2023, until December 31st, 2023. Relevant ministries and agencies are responsible for propagating, guiding, inspecting, and supervising the implementation of the tax reduction. In case of difficulties, the Ministry of Finance will provide guidance and resolutions. Additionally, we at Viettonkin Consulting are ready to assist your company in this transition. Contact us now!
Eligibility and VAT Rate
Eligibility on goods and services made before July 1st:
The Decree specifies the value-added tax reduction policy for goods and services that are currently subject to a tax rate of 10%. However, the eligibility for tax reduction varies depending on the industry and the specific goods and services. The industries eligible for tax reduction include telecommunications, financial activities, banking, securities, insurance, real estate, metals and prefabricated products, mining products (excluding coal mining), coke, oil refined mines, and chemical products. Goods subject to excise tax and information technology goods subject to the law on information technology are also eligible.
The specific goods and services eligible for tax reduction are listed in appendices issued with the Decree. It is important to refer to the appendices (Appendix I, Appendix II, and Appendix III) for a detailed list of eligible goods and services.
Goods and services listed in the appendices that are not subject to value-added tax or are subject to a 5% tax rate as per the Value-added Tax Law will not be eligible for the tax reduction. The provisions of the Value-added Tax Law will apply in such cases.
For businesses calculating value-added tax by the deduction method, the tax rate to be applied for eligible goods and services is 8%. The Decree No 44/2023/NĐ-CP specifies that CNSVN and CNTVN are subject to the VAT rate of 8% from July 1, 2023, to December 31, 2023. It is essential to ensure that invoices for selling goods or providing services belonging to eligible categories are issued on time and within the effective period of Resolution No.101/2023/QH15.
The infographic below will help you better understand the processes and regulations of the Decree.
Important Considerations
While the tax reduction policy aims to simplify the VAT calculation process, it is important to note that certain situations may arise that require additional attention. To assist you in understanding these situations, we have provided the following hypothetical scenarios and their corresponding VAT rates:
1. Service provided in June 2023 but accepted, handed over to clients in June 2023 and issued sales invoices in July 2023:
VAT Rate: 10%
Explanation: According to regulations, the time of invoice issuance for service provision is the time when the service is completed, regardless of whether money has been collected or not. Issuing invoices in July for services provided in June would be considered incorrect, leading to potential fines. Please refer to the relevant legal basis mentioned in the email for detailed information.
2. The service is provided in June 2023 but handed over to the customer in July 2023 and a sales invoice is issued in July 2023:
VAT Rate: 8%
Explanation: Since the service is completed in July, the VAT rate of 8% will be applied in this scenario.
3. The contract was signed before July 1, 2023, with the VAT rate of 10%. Handing over services to customers when completed after July 1, 2023:
VAT Rate: 8%
Explanation: If the service is completed and the invoice is issued in July, the reduced VAT rate of 8% will be applicable, regardless of the VAT rate stated in the contract signed before July 1, 2023.
Guidance and Updates
As the Decree 44 has recently been issued, specific guiding documents and official dispatches from tax authorities for various cases have not been released yet. It is important to stay updated with the latest guidance on VAT reduction in 2023. The responsible authorities will provide additional instructions during the application process, ensuring clarity and compliance with the tax reduction policy.
Conclusion
Understanding the eligibility criteria and proper implementation of the VAT reduction policy is crucial for businesses. By following the guidelines outlined in the Resolution No.101/2023/QH15, Decree No 44/2023/NĐ-CP, and the relevant legal basis, you can ensure the correct application of VAT rates for eligible goods and services. Stay informed about any updates and seek clarification from the authorities if needed to streamline the implementation process effectively. Contact us now for further assistance on taxations and subscribe to our newsletter to stay up-to-date on the VAT reduction.
About Us
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
