Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Vietnam is exploring “breakthrough” incentives to attract foreign investors in semiconductor manufacturing, artificial intelligence and green energy, as the south-east Asian manufacturing powerhouse seeks to draw investment in high-tech industries.
Vietnam has been one of the biggest beneficiaries of a global production shift from China as companies seek to protect their supply chains from an escalating trade war between Beijing and Washington.
The country now hosts important manufacturing hubs for companies such as Samsung and Foxconn. But it has struggled to bring in investment in higher-value, high-tech industries, with investors deterred by a shortage of skilled labour and concerns about stable power supply, according to a senior government official and businesses. Vietnam faces competition for technology investment from south-east Asian countries such as Malaysia.
“In the very competitive global context, Vietnam needs breakthrough [incentives] as well as very competitive investment incentives and policies,” Do Nhat Hoang, the director of Vietnam’s foreign investment agency, told the Financial Times in an interview.
There are “tens of billions of dollars” of potential high-tech investment on the table, Do Nhat said, but their fulfilment hinges on the offer of more incentives. He declined to identify the potential investors, but said Apple chief executive Tim Cook and Nvidia chief Jensen Huang, who have both visited Vietnam over the past seven months, had shown interest in the country.
Vietnam is considering offering special deals on land lease fees, corporate taxes and import and export duties, said Do Nhat, whose agency is part of the ministry of planning and investment.
He said the government was developing an investment support fund that would offer cash grants or cost-based incentives to companies planning high-tech investments in an effort to offset higher taxes. Vietnam last year adopted the global minimum rate of 15 per cent tax on large multinationals’ profits, which undermined previous tax benefits offered by Hanoi. It came into force this year.
Do Nhat said Vietnam also planned to partner with universities and multinationals to upgrade its labour force, and expedite licensing and registration. “These high-tech projects, which also happen to be large-scale projects, require very fast administrative procedures,” he said.
Vietnam has faced a significant slowdown in government activity in recent years due to a sweeping corruption crackdown that has resulted in the arrests of hundreds of officials and a reshuffle of its top ranks.
Erratic power supply is also a deterrent. Last year, a shortage caused blackouts and affected manufacturing plants in northern Vietnam, the centre of the country’s latest investment wave.
“The energy shortage situation in Vietnam is no longer in existence,” Do Nhat said, pointing to new power generation plants and improved transmission. In July, Vietnam also allowed some entities to purchase electricity directly from solar and wind energy producers, a move that would benefit large manufacturers. “We surely will be able to meet the demands put forth by these investors,” said Do Nhat, referring to the energy-intensive technology industry.
Vietnam remains a top draw for foreign direct investment. Registered FDI capital rose nearly a third last year to $36.6bn, with a record $23.2bn of that amount disbursed. The country is confident of attracting $40bn or more in registered FDI annually for the next five years, with a higher share for high technology investments, Do Nhat said, despite concerns over a global economic slowdown.
In a recent research note, HSBC warned that if Vietnam were to sustain robust investment inflows, it would be critical for the country “to climb up the manufacturing value chain and raise the domestic value-added content in these goods”.
“This requires taking proactive steps to foster upskilling in technical fields and improving existing infrastructure to facilitate and accommodate additional FDI inflows,” HSBC analysts wrote.
Read the full article here
