KOREA INVESTMENT IN VIETNAM & FDI POLICIES
Seoul – 31st March 2014
PRESENTER: NGUYEN THI MINH HIEN- DEPUTY DIRECTOR FOREIGN INVESTMENT AGENCY- MINISTRY OF PLANNING AND INVESTMENT
1 I. VIETNAM IN PROFILE
II. FDI IN VIETNAM AND KOREA FDI IN VIETNAM
III. INVESTMENT POLICIES IN VIETNAM
2
I. VIETNAM IN PROFILE
3 COUNTRY & PEOPLE
Area : 331,689 sq. km. Coastline : 3,260 km.
Major cities : Hanoi Capital, Danang, Hochiminh city.
Population : 88.5 mil – ranking: 13th in the world
Natural resources: oil & gas, minerals, sea and tropical forestry.
4
4 INFRASTRUCTURE ROAD NETWORK
Road network:
• Road system 251,786 km country-wide
• North-South pivot:
The 1A National Highway: 2,260km through 31 cities/provinces
The Ho Chi Minh Highway: 3,167km
5
5 INFRASTRUCTURE (cont.) RAILWAY NETWORK
•Total length of 2,632 km of rail network
• 278 stations country-wide
• Hanoi – Ho Chi Minh City line: 1,726 km; 29.5 – 40 hours; Targeting to reduce to 10 hours with new high-speed connection.
• Linked to China railways in two directions, one from Lao Cai province to Yunnan province and one from Lang Son province to Kwangsi province of China.
• Construction of the railway lines connecting with Laos and Cambodia has been included in the Government’s development strategy for the Railway industry of Vietnam. 6
INFRASTRUCTURE (cont.) SEAPORTS and AIRPORTS
Seaports: - 3,260km coastline, a strategic position close to international shipping routes and favored conditions of shpping with china, ASEAN and world wide. - Major Ports : 119 seaports in which Cai Lan (50,000DWT); Hai Phong (40,000DWT); Da Nang (45,000DWT); Quy Nhon (50,000DWT); Sai Gon (50,000DWT); Thi Vai (60,000DWT)
Airports: - 10 international airports (Noi Bai – 4 million passengers; Tan Son Nhat – 8 million passengers; Da Nang; Cam Ranh – Khanh Hoa; Cat Bi – Hai Phong; Chu Lai – Quang Nam; Cam Ranh – Nha Trang; Phu Bai – Hue; Can Tho; Phu Quoc; Long Thanh – Dong Nai. - 14 domestic airports
7 Special zones
255 IZs/EPZs and 11 EZ Over 20 IZs/EPZs are developed by Joint Ventures (government & foreign investors) e.g. TLIP (Japan), Tanthuan EPZ (Taiwan), Amata (Thailand)
Korea invest in IZs/EPZs mostly: s.g. Yen Phong-Bac Ninh (Samsung mobile);Dung Quat-Quang Ngai (Doosan); VSIP – Advantages: Binh Duong; Nghison - Thanhhoa - Higher quality infrastructure (electricity, transport, telecommunication) and available public system - Availability of land and most of IZ/EPZ in the convenient location - Simple administration procedure, expedited licensing process and convenient service for investors as mechanism “one stop” in IZ Management Board. - Fiscal incentives to infrastructure developers and projects inside economic zones 8 Human Resourses
Strengths Weaknesses . Labor cost is still competitive in Asia • Shortage of qualified technical workers due to (Can operate over 300 days/year training not tied to requirements occupations, (48h/week) ) skill levels, and production technology required .Technical workforce, particularly workers with higher qualifications, have leading officials of almost all areas . Abundant labor force
Opportunities Threats . Construction of high-quality training - The labor cost has been increasing in recent center and high-quality multidisciplinary years. universities located in Hung Yen. - The quality of work force is slowly improved . Building a specialized health center for therefore the company need to re- train the the region is expected in Ha Tay and Hai workers Duong (plays a crucial role in the training and health care for both regional and national) .. Research of building high-level training center for the region located in Vinh Phuc
Vietnam’s labor cost is still competitive in Asia Electricity
Strengths Ready and it will be connected to the fence of the border of each land lot. Power is supplied sufficiently and stably Two Sub-stations of 110/22kV – 40 MVA. High-voltage: 22KV (+) Nomal hours : From Monday to Saturday (From 04h00– 9h30) (11h30’ – 17h00) (20h00 – 22h00’); On Sunday (From 04h00’ – 22h00) (+) Off- peak hours (From 22h– 04h) in all day (+) Peak hours (From 9h30–11h30’)(17h30’ – 20h00’)
Electricity Cost
For industrial manufacture:(Unit: VND/Kwh)
For business and services: (Unit: VND/Kwh)
Weaknesses and Opportunities - Power outages often happen in the IZ due to overload. However, EVN will prioritize for power production in the IZ. - Son La hydroelectric projects (Southeast Asia's largest) with a total capacity of 12.8 billion kwh, has been completed and others being implemented: + Trung Son hydroelectric, + Ban Chat hydroelectric, + Duyen Hai 3 thermoelectric… + Mong Duong power plant; + Ninh Bình power plant; Those electricity plants will contribute to stability and adequate supply of electricity for production
In conclusion:
In 2014, there will be 14 new electricity plants to operate with the capacity is 4,031 MW, to increase the total capacity to 33,017 MW. This guarantee for the supply of electricity for the production.
Why Vietnam?Political & Social Human Global Security Resource Integration
Natural Resources Legal Why Vietnam? Environment
Geographic Economic Growth Location & Competitive Market Potential Business Costs II. FDI IN VIETNAM AND KOREA FDI IN VIETNAM
15 II. FDI IN VIETNAM
Up to February 2014 there are 16.053 FDI projects, with total registered capital of nearly 235 billion USD In recent years implementation capital in 10,5-11,0 billion USD
2012
Source: Ministry of Planning and Investment 16 10 BIGEST INVESTORS IN VIETNAM
Unit: billion USD
Source: Ministry of Planning & Investment 17
FDI IN VIETNAM BY SECTOR
18 Source: Ministry of Planning and Investment VIETNAM-KOREA RELATIONSHIP
To February 2014 Korea is the 3rd largest investors in Vietnam with total registered capital of more than 30 billion USD and in the first rank amount of projects with 3,647 (Vietnam is the 3rd largest oversea investment location of Korea after America and China). − The biggest Korean companies in the FORTUNE 500 list investing in Vietnam are Samsung, LG, GS, Posco, Hyundai, SK ... − Investment of Korean companies has been focused in manufacturing, processing, infrastructure, construction, service ... − Signed Agreement on Investment Promotion and Protection (1993), Agreement on Double Taxation Avoidance (1994). − Korea-Vietnam trade reaches 27.3 billion USD in 2013, (in 2012 its is 21 billion USD), FTA between two countries is in progress (In 2020 the bilateral trade will be 70 billion USD). − Korea is the 2nd largest bilateral donor for Vietnam with around 1,2 billion USD commitment soft loan (EDCF) in 2012 ~ 2015.
19 KOREA INVESTMENT IN VIETNAM
6 Korea investment tendacy to Vietnam (1988 ~ 2012)
(Unit:billion USD) 5
3
2
1
0 KOREA INVESTMENT IN VIETNAM
Korea investment tendency to Vietnam (2008 – 2013)
(Unit: billion USD)
2008 2009 2010 2011 2012 8/2013 Registered 5,276 1,895 2,545 1,467 1,285 0,99 capital New capital 4,278 1,623 2,089 0,873 0,777 0,68
Increased 0,998 0,275 0,456 0,591 0,508 0,31 capital −The new registered capital is increasing trend. −Investment capital in processing, manufacturing has been increasing.
21 KOREA FDI IN VIETNAM ( BY SECTORS )
Dvụ lưu trú và ăn uống Bán buôn,bán lẻ;sửa 2% chữa 1,4% Vận tải kho bãi 3,7% CN chế biến,chế tạo Nghệ thuật và giải trí 50% 3,7%
Xây dựng 8,5%
KD bat động sản 27,3%
22 Source: Ministry of Planning and Investment KOREA FDI IN VIETNAM ( by localities)
Investment capital ( Localities No. projects billion USD) 1 Hanoi 690 4,778 2 Ho Chí Minh city 893 3,742 3 Ba Ria – Vung Tau 55 3,573 4 Đong Nai 273 3,489 5 Binh Duong 488 1,566 6 Hai Phong 47 1,130 7 Bac Ninh 165 0,724 8 Đa Nang 30 0,695 9 Quang Ngai 7 0,681 10 Long An 79 0,556 49 other provinces 656 3,928 Total 3.292 25,731
23 III. INVESTMENT POLICIES IN VIETNAM
24 III. INVESTMENT POLICY IN VIETNAM
1. Investment Guarantees 2. Incentive Investment Sectors and Regions 3. Investment Incentives 4. Government Supports to Investment 5. Investment procedures
25 Investment Guarantees
No nationalization or confiscation of investors’ assets Protection of intellectual property rights Remittance of capital and assets abroad Application of uniform prices, fees and charges Investment guarantees in the event of changes in law or policies
26 Incentive Investment Sectors and Regions
Incentive investment sectors Geographical areas of investment incentives • Manufacture of new material, new • Areas with difficult socio-economic energy, high-tech products, bio- conditions; areas with specially technology, information technology difficult socio economic conditions. • Agricultural, forestry and • Industrial zones, export processing aquaculture zones, high-tech zones and economic • Labor intensive industries; zones. • Infrastructure development • Education, training, health, sports • Development of traditional crafts and industries
27 CIT INVESTMENT INCENTIVES
. Some special incentives: 10%: • 15 years (special difficult localities, high-tech parks) • 15 - 30 years (special investment attraction sectors) • For all life of projects (education, Health care, culture, sport, environment) 20%: From 01/01/2016 will be 17% • 10 years (difficult localities) • For all life of projects (Agricultural cooperation, people credit Fund) General Rate(CIT) : From 01/01/2014 CIT 22% and from 01/01/2016 will be 20% CIT exemption and reduction: apply for investment incentive sectors and investment incentive localities maximum tax holidays in first 4 years and reduction of 50% CIT in 9 following years.
28 CIT RATES
Educatio n, Agricultur Techn High-tech, vocation al Special ology, infrastruct Diffic al cooperati difficult TAX Durati infrast ure, soft ult training, on, localities, rates on ructur ware localit health people high-tech e, soft ies (special care, credit parks ware attraction) culture, fund sport 10 20% X years All 20% projec X t life 15 X 10% X years 30 10% X years All 10% projec X 29 t life CIT EXEMPTION; REDUCTION
Educat Socialize ion, Socialized Impl High- d sectors Vocati sectors in emen tech in FEZ, onal non- tatio CIT 50% sector, difficult high- train, difficult n in holida redu infrastr or tech health or non- diffic ys ction ucture, special parks care, special ult soft difficult culture difficult locali ware localities enviro localities ties nment
9 4 X X X X yrs 5 X 4 yrs 4 x 2 30 yrs
Personal Income Tax
Tax Tax Rate Portion of Annual Assessable Income Portion of Monthly Assessable Bracket (%) in million VND Income in million VND (equivalent USD at (equivalent USD at 1USD=16,480VND) 1USD=16,480VND) 1 5 Up to 60 (3,640) Up to 5 (303) 2 10 Over 60 to 120 (~7,300) Over 5 to 10 (~600) 3 15 Over 120 to 216 (~13,100) Over 10 to 18 (~1,100) 4 20 Over 216 to 384 (~23,300) Over 18 to 32 (~2,000) 5 25 Over 384 to 624 (~37,800) Over 32 to 52 (~3,100) 6 30 Over 624 to 960 (~58,200) Over 52 to 80 (~4,800) 7 35 Over 960 Over 80
31 LAND RENTING EXEMPTION, REDUCTION
Projects in the list Exemption
Investment Encourage sectors 3 yrs Difficult socio-economic localities 7 yrs
Special difficult socio-economic localities or Investment encourage sectors in 11 yrs difficult socio-economic localities Investment encourage sectors in special 15 yrs difficult socio-economic localities
32 VALUE-ADDED TAX (VAT)
All business establishments are subject to VAT VAT rates: ‒ 28 categories of goods and services are VAT- exempt, including medical services, education, goods in transit or under temporary admission, life insurance or capital goods that cannot be produced locally. ‒ Exports of goods and services: 0% ‒ 21 categories of goods and services: 5%, including medical equipment, basic chemicals, fresh foodstuff and metallurgical products. ‒ All other goods and service: 10%.
33 EXEMPTION OF IMPORT DUTY
Goods imported as fixed assets for eligible investment projects in encouraged sectors or regions Raw materials and supplies for eligible investment projects in specially encouraged sectors or in regions with difficult socio-economic conditions, for a maximum period of 5 years; Capital goods imported by BOT enterprises. For “one-off” purchase of certain specified equipment for projects in certain services (e.g. hotel, sports, culture, finance) Goods imported for export processing
34 LABOR REGULATION
8 hours/day, 6 days/week; Overtime: 4h/day, 200h/year Health Insurance Fund: Employers: 2%; employees: 1% of gross wage Social insurance fund: Employers: 15% of gross wages; employees: 5% of their wage. Minimum wage scales (monthly wage) for employees in foreign invested companies, depending on location: (lowest in SEA) ‒ VND920,000 ($54) 2 ‒ VND950,000 ($56) ‒ VND1,080,000 ($63) and ‒ VND1,200,000 ($74).
35 LICENSING- LICENSING AUTHORITIES
Provincial Management Central Authorities People’s Boards of IPs, Committee EZs
BOT MPI Department Projects projects of Planning & Projects for infrastruct Investment located ure Oil & Gas inside MOIT developme projects IPs, EZs nt of IPs, Projects EZs located Credit outside IPs SBV Institutio and EZs ns
Insurance MOF projects 36 Investment Certification (Licensing) Process
Projects falling in conditional sectors* Investment Registration No Yes Investment Procedures Evaluation Procedures
Yes
Investment capital of Respond within VND300 billion or Respond within 15 working days more (approx. US$19 25-40 working million) days
The Lists of conditional sectors for both domestic and foreign investors and specifically for foreign investors can be found in the Law on Investment and its guiding Decree No.108 dated 22 September 2006
37 REFERENCE WEBSITES:
No Website Administrative Offices
1 www.chinhphu.vn Government web portal of Vietnam
2 www.mpi.gov.vn Ministry of Planning and Investment
3 www.fia.mpi.gov.vn Foreign Investment Agency
4 www.gso.gov.vn General Statistics Office of Vietnam 5 www.khucongnghiep.com.vn Vietnam Industrial Parks
6 www.dauthau.mpi.gov.vn Public Procurement Information
7 www.moit.gov.vn Ministry of Industry and Trade
8 www.mof.gov.vn Ministry of Finance
9 www.vietnam.e-regulation.org Investment Procedures in Vietnam
38 FOERIGN INVESTMENT AGENCY CONTACTS:
Foreign Investment Agency 6B Hoang Dieu Street, Hanoi Tel: 84.8048461 Fax: 844.37343769 Website: http://fia.mpi.gov.vn Investment Promotion Center – North Vietnam 65 Van Mieu, Hanoi Tel: 844.38458149 Fax: 844.38437927 Website: http://ipcn.mpi.gov.vn Investment Promotion Center – Central Vietnam 103 Le Sat, Hai Chau, Da Nang Tel: 84511.3797689 Fax: 84511.3797679 Website: http://centralinvest.gov.vn South Foreign Investment Center 178 Nguyen Dinh Chieu, Ho Chi Minh City. Tel: 848.39306671 Fax: 848.9305413 Website: http://sfic.vn Ms. NGUYEN THI MINH HIEN Investment Counselor / Vietnam Embassy to Korea Email: [email protected] / [email protected] Mobile: 82-(0)10-5759-1965 / Tel (Fax): 82-2-737-2317 39 THANK YOU !