FDI engine needs a big overhaul

“Vietnam’s attraction of foreign direct investment (FDI) is being impacted by regional countries like Indonesia, Myanmar, Thailand and the Philippines offering attractive investment incentives. To keep it as a good FDI spot, Vietnam needs to better its investment incentives for foreign investors soon,” he said.

“Vietnam’s macro-economy has also become unstable, discouraging more FDI from entering the country. There has been evidence that FDI from Vietnam is decreasing and to other regional countries it is increasing,” Mealy said.

Specifically, Thailand lured about $18 billion of registered FDI last year, up sharply from $8.5 billion in the previous year. Meanwhile, Myanmar’s registered FDI rose from $8 billion in 2011 to about $40 billion during last year’s first nine months. Indonesia’s reported registered FDI also climbed from $18.9 billion in 2011 to $21 billion last year, and it was expected to soar to $29 billion this year.

Meanwhile, Vietnam’s  registered FDI reduced from $14.7 billion in 2011 to $13.1 billion last year.
According to statistics by a Hanoi-based US’ investment consultancy firm, Vietnam’s investment incentives for foreign investors remained less attractive than those of regional countries.

For example, for projects in economic zones, Vietnam offers corporate income tax (CIT) exemption for four years and 50 per cent reduction of payable tax amounts for nine subsequent years.

But in Thailand, CIT exemption lasts up to eight years plus a 15 per cent CIT incentive for another five years. Besides, Thailand also offers double deduction of transportation, power and water supply costs for foreign investors, and an additional 25 per cent deduction of infrastructure construction and installation costs.

Also in the Philippines, the CIT exemption lasts six years, with free import tax for raw materials, capital equipment, machineries and spare parts, and exemption from payment of any of all local government imposts, fees, licences or taxes.

Zaw Naing Thein, member of the Union of Myanmar Federation of Chamber of Commerce and Industry, told VIR that Myanmar’s government adopted its Law on Investment on November 11, 2012, offering many priorities and incentives for investors. For instance, land lease time will be lengthened, while time for investors to enjoy CIT is also prolonged from three to five years. Import tax exemptions will also be applied to imports of machine, equipment and raw materials used for the projects.

“Particularly, Myanmar’s government will not hold monopoly over almost all sectors and attract the private sector into the nation’s development. It is quite an attractive point to foreign investors,” Thein said.

Vietnam’s Minister of Planning and Investment (MPI) Bui Quang Vinh said amid the global turbulent economy, the competition in FDI attraction among Asian nations was “becoming tougher and tougher.”

At 2012’s year-end Consultative Group Meeting for Vietnam, Prime Minister Nguyen Tan Dung told the international community that: “With a view to luring more FDI, we will build Vietnam into an investment destination far more attractive than other regional nations.”

Vietnam targets to attract $13-$14 billion of registered FDI and $10.5-$11 billion of  disbursed FDI this year, accoording to the MPI.