The Investment Attractiveness and Investment Law in Vietnam for the Foreign Investors
The foreign enterprises' investment opportunities in Vietnam have increased significantly since Vietnam joined the WTO 10 years ago. Vietnam has attracted 27,353 projects nearly USD 340.16 billion in registered capital. With the signing of a free trade agreement (EVFTA) with the European Union in 2018, Vietnam's real GDP increased by nearly 7.4% in the first quarter. Furthermore, the total newly registered FDI capital, adjusted capital, and contributed capital to purchase shares of the foreign investors exceeded USD 10.8 billion in the first 4 months of 2022.
Consistently favorable conditions and an open-minded law on investment in Vietnam make Vietnam a promising market in the eyes of the foreign investors. The following sections provide detailed information on why foreign investors should invest in Vietnam, as well as notes on the Law on Investment in Vietnam for the foreign enterprises considering investment in Vietnam.
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Vietnam has attracted 27,353 projects nearly USD 340.16 billion in registered capital
1. Why is Vietnam a potential market that attracts many foreign investors?
a. Competitive labor cost
Being highly educated and trainable is another important competitive advantage for attracting foreign investment in Vietnam. Nghe An has a large number of educational institutions at various levels, including 7 universities, 6 colleges, 4 professional training schools, and 61 vocational schools.
Vietnam has a highly educated and trainable workforce
b. Many incentives for the foreign investors from the local authorities
The local authority also encourages foreign investment in Vietnam by allowing the foreigners to own 100% of public companies in a variety of industries, as well as the right to purchase real estate in Vietnam. These regulatory changes increase Vietnam's investment opportunities and contribute to the country's economic growth.
c. Strategic manufacturing location
Vietnam's geographical and natural conditions are favorable for agricultural investment, which company includes more than 60% of the total workforce. However, Vietnam is gradually turn into an investment destination for many manufacturing and service industries, particularly in the Northern region. This transition has resulted in rapid consumption growth and a rapidly increasing capacity to produce goods and services. This is one of the main factors attracting many investors to explore the opportunities for investment in Vietnam.
2. Notes for the foreign investors about Law on Investment in Vietnam
The National Assembly of Vietnam passed a new Law on Investment on June 17, 2020, effective from January 01, 2021 (LOI 2020) and will replace the Law on Investment 2014. (LOI 2014). Here are some points about profits in the recently passed the Law on Investment in Vietnam that the foreign investors should pay attention to.
a. Conditions to enter the market under the Law on Investment in Vietnam
Under the Law on Investment in Vietnam 2020, the foreign investors are entitled to the same market entry conditions as domestic investors, with the exception of sectors with market entry conditions announced by the Government. The following new business fields and projects are among those approved to the foreign investors under the Law on Investment in Vietnam in 2020:
Higher education projects, as well as the manufacture of medical equipment and pharmaceuticals. Projects to manufacture products in supporting industries on the list of industries encouraged for development stated in the Government's Decree 111 dated November 03, 2015. Furthermore, social housing projects and innovative start-up projects are also one of the industries encouraged to invest. Enterprises invest in Research and development centers, facilities, small and medium-sized startup incubators, and the construction of business workspaces. These changes in the Law on investment in Vietnam create a number of favorable conditions for foreign entities to enter the Vietnamese market.
Furthermore, Article 40 of the Law on Advertising 2012 states that "the foreign organizations and individuals may cooperate and invest with Vietnamese advertising service providers in form of joint ventures and business cooperation contracts." As a result, some business lines in which foreign investors investing in Vietnam are required to enter joint ventures with Vietnamese enterprises that are already operational and licensed to operate, such as advertising.
b. Special incentives and support of the Government for investment in innovation and creativity
Under regulations, the government can apply special incentives and investment support to encourage projects that have a significant impact on socio-economic development, such as projects to establish creativity and innovation centers, research and development centers, with an investment capital of more than 3,000 billion VND. The government also disburses at least VND 1,000 billion within 3 years of project approval or issuance of the Investment Registration Certificate (IRC).
Projects entitled to benefits for special incentives under the Law on Corporate Income Tax and the law include corporate income tax, land rent, and water surface rent incentives. In particular, enterprises are entitled to a 5% reduction in corporate income tax for a maximum of 37.5 years, a 22.5 exemption from land rent, and not more than 75% reduction in land rent. Furthermore, businesses receive other benefits such as support for the development of technical and social infrastructure systems, training support, and human resource development. Regulations also support businesses in gaining access to business site, manufacturing facilities, scientific and technological support, technology transfer, market development, and research and development.
c. Cases that do not receive investment incentives and support according to the Law on Investment in Vietnam
The Law on Investment in Vietnam 2020 excludes the following cases from the special incentives and investment support: projects of exploitation, production, and trading of goods and services, particularly commercial housing projects. Some industries are not recommended for investment because they can harm the environment or have negative effects on human health.
3. Nghe An - a potential destination for investment in Vietnam
Because of its complex of business, education, production, transportation, and strategic logistics location, Nghe An is considered an appealing destination for investors. Vinh city is also the North Central region's economic and cultural center. Nghe An is the province with the fourth largest population in the country, indicating an abundant labor force to meet the North Central region's production facilities. This is a benefit that manufacturers and investors seek for when participating in business development activities in Vietnam.
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WHA is currently investing in the development of WHA Industrial Zone 1 – Nghe An
WHA is one of the investors that offers industrial zones, industrial land for building factories and utilities solutions that meet international standards and investor requirements. WHA is currently developing the WHA Industrial Zone 1 – Nghe An, Vietnam. When collaborating with many foreign investors and enterprises to set up production bases in Nghe An and need solutions for factories in the industrial zone, WHA fully complies with the provisions of the Law on Investment in Vietnam. WHA is a reliable partner with local knowledge and a commitment to advising and accompanying foreign investors when they invest in Vietnam.
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