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Expert in improving the quality of foreign investment flows to Vietnam

Expert in improving the quality of foreign investment flows to Vietnam

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Economist, Dr. Nguyen Minh Phong.

News reporters discuss with economist, Dr. Nguyen Minh Phong – former Head of Economic Research Department (Hanoi Institute of Socio-Economic Development Research) on this issue.

The thing that is interesting from the macroeconomics in the first 8 months of this year comes from the FDI sector. How do you assess this issue?

Positive data on FDI inflows confirms investors’ confidence in Vietnam’s investment environment. The drastic solutions taken by the Government and the Prime Minister in the first months of this year have been effective in supporting and eliminating difficulties for companies to channel investment capital.

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New investment projects still focus on provinces and cities in Vietnam which have many advantages in attracting foreign investment in terms of good infrastructure, stable human resources and efforts to reform administrative procedures. .

According to the General Statistics Office, on August 20, the total new registered capital, adjustment and capital contribution to buy shares, buy capital contribution of foreign investors reached nearly 18.15 billion USD, up 8.2% over the same period last year. Realization of foreign investment project capital is estimated at around US$13.1 billion, up 1.3% compared to the same period in 2022. It can be said that the pace of attracting FDI in the first eight months of this year has reversed. -year experienced a continuous decline from 2019 to 2022, changing to a slight increase compared to the same period last year.

As of August 20, Vietnam had 38,084 legal projects with a total registered capital of 453.26 billion USD. The accumulation of realized capital of foreign investment projects is estimated at nearly 287.1 billion USD, equivalent to 63.3% of the total legal registered investment capital. Adjusted investment capital continues to increase month by month compared to the first months of the year. The number of projects with capital adjustments also continued to increase in the same period, confirming investors’ confidence in Vietnam’s investment environment and continuing decisions to expand existing projects.

New investment projects still focus on provinces and cities that have many advantages in attracting foreign investment in terms of good infrastructure, stable human resources, efforts to reform administrative procedures and dynamism in investment promotion… such as: Hanoi, Hai Phong, Ho City Chi Minh, Bac Giang, Binh Duong, Bac Ninh, Dong Nai… Investors from Asia, the tradition of investment partners still accounts for the most part such as: Singapore, Japan, China, Korea, Hong Kong, Taiwan.

This impressive result is a combination of various reasons, the first and foremost is that Vietnam continues to be recognized by the world community for its political stability and positive economic growth; make efforts to implement a multilateral and peaceful foreign policy, establish friendship with all countries, maintain balance between major countries; constantly improving the business investment environment towards harmonization of interests, strictly complying with international integration commitments and fulfilling good practices in the world in promoting and protecting the interests of investors. .

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The impact of FDI on the improvement of science and technology is still limited.

However, the impact of FDI on improving science and technology is still very limited. In particular, the phenomenon of transfer pricing, tax evasion and many environmental incidents caused by the disengagement activities of FDI companies in recent years demonstrated the negative impact of the attractiveness of FDI in Vietnam.

Sir, the increasingly tight competition to attract FDI in the region has caused a tendency for some FDI flows to shift (first in textiles and garments and footwear) from Vietnam to other countries. In your opinion, what solutions should Vietnam take advantage of in a competitive environment to attract foreign investment?

Based on the latest survey in 2023 conducted by the German Chamber of Commerce and Industry in Vietnam (AHK Vietnam), 88% of survey respondents are confident about their business situation in Vietnam and 91% of German investors want to continue investing or expanding their business. in Vietnam and about 40% of them plan to increase their workforce in the next 12 months.

However, in the short term, business in Germany remains cautious due to concerns over economic development policies, shortages of skilled workers and risks of supply chain disruptions, inflation, the tendency to segregate dependencies of major countries and increasing political influence on supply chains. low global demand…

In addition, intensifying competition to attract FDI in the region has led to a tendency to divert some FDI flows for a variety of reasons, including a loss of competitiveness in terms of wages, and a lack of compliance with green export requirements and net zero carbon emissions in the region. supply chain… Currently, the average wage of a garment worker in Bangladesh is only 120 USD/month, much lower than in Vietnam. In particular, one of the hot issues circulating in attracting FDI in the world and in Vietnam is the issue of tax incentives in the context of implementing a global minimum tax policy of 15%…

Therefore, Vietnam needs to continue to improve institutions and laws, improve policies to attract and use FDI (first of all, the duration of business visas, compliance procedures and fees for investment licensing, registration and registration of business establishments, customs inspection and supervision . , industrial estate land leases and elimination of illegal fees…) to steer FDI strongly into green growth, digital transformation and supply chain connectivity responsiveness from Vietnamese companies to FDI companies, especially transnational companies.

In addition, Vietnam needs to establish an ecosystem that basically supports the domestic supply chain to enhance the capacity of modern management, continuous improvement (Kaizen) and stable and sustainable development, production and sales. products meet world standards (such as the US, UK, Europe .. .); strives to supply products under its own brand in order to gain high profits and enhance the spirit of national pride and Vietnamese brand pride.

In the context of a global economy that is undergoing many changes, do you think there are any risks or challenges that might affect the growth of foreign investment in the future?

Perhaps the biggest risk and challenge is the prospect of global FDI becoming increasingly “fragmented” by alliances; In other words, the geographical footprint of FDI is directly proportional to the current trend of geopolitical linkages, as can be seen from the proportion of FDI between countries that have geo-politics which continues to increase, exceeding the proportions of other countries. geographically close countries.

According to the World Bank (WB), one of the reasons for the decline in FDI inflows to Vietnam is the existence of problems related to the business investment environment, absorption capacity and growth of FDI inflows. flows, including land, human resources, infrastructure, supporting industries…

In the long term, this is an excellent opportunity for Vietnam to restructure its strategy to attract foreign investment, from a traditional to a circular economy model, with environmentally friendly and sustainable growth, thus creating a foundation for future projects. . But in the near future, in order to maintain its special advantages, Vietnam needs to study and quickly find non-tax support solutions for FDI companies…

Vietnam also needs to redefine its competitive advantage in the new period, based not only on low labor costs and abundant labor resources, but also on new factors such as worker skills, infrastructure, and friendliness, environmental friendliness, understanding of projects – technology projects and intellectual property. protection requirements, origin…; having an orientation towards selecting FDI projects more carefully, raising environmental protection standards, reducing emissions towards sustainable development and complying with commitments to combat climate change, also impacts FDI inflows…

The General Department of Taxation (Ministry of Finance) is studying and proposing support policies to replace corporate income tax incentives for affected FDI companies when Vietnam implements a global minimum tax of 15%.; at the same time, studying the right to impose additional tax on overseas Vietnamese direct investment projects if the projects are subject to the global minimum tax and enjoy an actual tax rate lower than 15%.

In principle, support for the business world in implementing the global minimum tax is carried out by the Government by using the minimum tax revenue to support the business world in research and development, investment in equipment, production of high technology based on their respective characteristics, characteristics and standards. type of company (for example, India has a policy of endorsing a certain amount of money for each manufactured product sold). Therefore, Vietnam should urgently issue a policy on implementing a global minimum tax and start drafting relevant specific policy laws.

Which, focus on developing and implementing global minimum tax declaration processes and procedures under the guidance of the Organization for Economic Co-operation and Development (OECD); clarifying the object, scope and methods as well as the level of support to the affected subjects; at the same time, continue to consolidate and increase the capacity of tax administration, improve the investment environment for the business world to meet the increasingly complex, sophisticated, highly integrated and cross-border nature of competition.

– Thank you very much!

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