State plugs into hi-tech company solution

January 15, 2013 | 15:04
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Vietnam will downgrade criteria for hi-tech enterprises when it redraws the contentious Law on High Technology, with tax incentives in the offing.

“The government agreed to propose the National Assembly revise the Law on High Technology.

This is a part of the policy change to encourage more hi-tech foreign direct investments to the country,” said Bui Quang Vinh, Minister of Planning and Investment.

“Many international hi-tech firms could leave Vietnam for other countries because they cannot meet the current criteria to enjoy tax incentives granted to hi-tech enterprises. That why we have to reconsider this law,” he added.

However, Vinh said the revision would take time because this process was just in an “initial step”.
“We are happy to hear that. The law should be revised because many regulated criteria for a hi-tech enterprise are unclear or too high,” said Vo Quang Hue, managing director of Robert Bosch Vietnam.

The German firm is seeking approval from the government for an investment expansion in southern Dong Nai province and also wants to be recognised as a hi-tech one.

According to the Law on High Technology, a company will be recognised as a hi-tech enterprise when it satisfies all criteria, including manufacturing hi-tech products listed by the government.

Also, the  average total expenditure for research and development activities in Vietnam during the first three years must equal at least 1 per cent of its total annual turnover and 1 per cent of its total turnover from the fourth year.

In addition, the average turnover from hi-tech products in the first three years must equals at least 60 per cent of its total annual turnover and at least 70 per cent from the fourth year.

The number of its workers with a university or higher degree personally involved in research and development (R&D) activities must also account for at least 5 per cent of its total workforce.

Even well-known Vietnam-based subsidiaries of hi-tech firms like Intel, Samsung and Nokia have failed to meet the criteria of Law on High Technology. However, the prime minister has been forced to step in and recognise them as hi-tech enterprises.

“Actually, 1 per cent of total annual turnover expended on R&D is a very big amount of money, especially for exporters. Secondly, it is not easy to recruit 5 per cent of total labourers working in R&D activities in the context of lacking a well-trained workforce in Vietnam,” Hue added.

Kim Yong Seok, planning director of Samsung Electronics, also admitted 1 per cent of total revenue was a giant amount of money because the company’s revenue would increase year by year. South Korea’s firm is planning to build an R&D centre in Hanoi for developing new hi-tech products. Previously, this investor also proposed the government to reconsider the criteria for R&D cost and workforce.

By Ngoc Linh

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