Several global corporations, including LG, Samsung, and Intel, have halted billion-dollar projects in Vietnam, primarily due to inadequate investment incentives.
Samsung announced it will relocate its production line to India, while LG has paused a $5 billion investment plan for electronics production. Japan’s SMC is contemplating investing $500 million to $1 billion in Dong Nai, according to the Ministry of Planning and Investment.
A recent draft decree on the establishment, management, and use of the Investment Support Fund reveals that many large corporations have explored investment opportunities in Vietnam but eventually opted for other countries. For instance, LG Chemical proposed a battery production project in Vietnam, requesting 30% production cost support, but later moved to Indonesia. Intel considered a $3.3 billion chip manufacturing project in Vietnam with a 15% cash support request, but chose Poland instead. Austria’s AT&S Semiconductor Group also shifted its plans to Malaysia due to unmet cost support and high-tech labor requirements in Vietnam.
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A Shoe Factory in VietnamThe Ministry highlighted that Vietnam’s current investment incentive policies are outdated, relying solely on income-based incentives like tax exemptions and land rental reductions, with no cost-based incentives. These policies have not kept pace with global changes, particularly the introduction of the Global Minimum Tax. Additionally, Vietnam’s budget law lacks provisions for budget spending on forms of investment support outlined in the Investment Law.
Urgent measures are needed to address the impact of the Global Minimum Tax and prevent a wave of investment shifts away from Vietnam. Consequently, the Ministry’s latest draft proposes the creation of an Investment Support Fund. This fund will derive revenue from the state budget, additional corporate income tax revenue, contributions, aid, sponsorships, interest from deposits, annual fund balances, and other sources.
The fund aims to support high-tech enterprises, investment projects for high-tech product production, high-tech application projects, and research and development centers. Cost supports will cover human resource development training, research and development, fixed asset investments, high-tech product production, and social infrastructure system investments.
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Source: Vietnam Insider