Vietnam grows more attractive to foreign investment

China has lost its competitive edge as a low-cost manufacturing hub with producers of everything from handbags to clothing to basic electronic components relocating to Vietnam economists at Savills said recently in a research report.

Quoting research by the Standard Chartered Bank, Savills said there has been a shift of FDI away from China to ASEAN member countries such as Vietnam to best position to take advantage of the Vietnam-EU and the Trans-Pacific Partnership (TPP) free trade accords.

Vietnam is one of the 12 countries participating in the TPP, a landmark 12-nation free-trade deal whose negotiations concluded earlier this week.

The accord, if ratified, would let Vietnam ship many products tariff-free to countries that constitute two-fifths of the world's trade.

The shift is best illustrated by the waning foreign direct investment (FDI) into China, which has alternatively been flowing into manufacturing companies operating in countries like Vietnam and Thailand.

Vietnam’s Foreign Investment Agency (FIA) tallied newly-registered and supplemental FDI for the eight months leading up to September at US$13.3 billion, a  year-on-year 30.4% surge, Savills underscored in its report.

Cost savings drive FDI

The impetus for the healthy FDI figures appear to be a combination of cost saving benefits from the Vietnam-EU and TPP trade deals in tandem with lower labour costs in Vietnam, Savills underscored in its report.

Notably, both trade deals contain rules of origin provisions requiring high percentages of clothing and textile industry exports to originate within member countries and this in turn has been driving investment dollars into the industry’s supply chain.

By relocating their supply chains to Vietnam the multinational corporations are better posturing to maximize their profits and take full advantage of lower labour costs and potential reduced tariffs afforded the trade agreements.

In reality FDI in Vietnam is dominated by a few large corporations and over three-fourths of it has flowed into manufacturing companies in the clothing and textiles industry Savills said in its report.

So far this year, three textile plants operated by Polytex Far Eastern Co Ltd, Hyosung Istanbul Tekstil and Worldon Vietnam Co Ltd of Hong Kong have registered FDI of US$1.24 billion.

Industrial zones attract foreign investment

Additionally, Microsoft had earlier this year announced it will relocate two Nokia plants from China to Vietnam in the near future.

Microsoft also said it plans to invest US$210 million in the Vietnam-Singapore industrial zone in Bac Ninh, which will increase the number of its jobs in the zone threefold.

Meanwhile Samsung Display Vietnam had earlier this year committed to increasing its FDI in Bac Ninh Province by US$3 billion.

The Regional Comprehensive Economic Partnership (RCEP) and ASEAN Economic Community (AEC) have also contributed greatly to creating favourable conditions for investment in Vietnam Savills reported.

The Vietnam-Singapore industrial zone located in Quang Ngai Province has attracted US$7.8 million of FDI since it first opened in late 2013.

Recently, the Mapletree Group based out of Singapore pledged another US$1 billion of FDI to construct manufacturing facilities in it.

(Tan Binh Industrial Park)

Source: vietnamnet

Ministry defends tax reforms

A tax official helps tax payers at a one-stop-shop service in Thai Nguyen Province. — VNA/VNS Photo Hoang Hung

HA NOI (VNS) — The calculation of time spent on filing taxes and making payments is based on World Bank criteria, with consultancies from Pricewaterhouse Coopers and the International Finance Corporation (IFC).

The finance ministry said this in a statement in response to findings recently published by the Central Institute for Economic Management (CIEM), which expressed the opinion of businesses that improvements in tax reforms were not as good as the ministry had reported.

Specifically, the surveyed businesses felt that the time spent on filing taxes and making payments was cut just by 110 hours or 20 per cent, compared with the ministry's claim that the time had been cut by a hefty 420 hours to the current 117 hours.

The claim triggered doubts that the ministry had not studied the actual application of tax reform measures to calculate the reduction in the time needed for filing taxes and making payments.

In response, the ministry said the General Department of Taxation had joined PricewaterhouseCoopers and the IFC to check, analyse and evaluate the time businesses spent in preparing and paying taxes based on World Bank criteria.

However, it said the process of tax refunds and tax finalisation for business dissolution continued to be slow.

The ministry said the time spent on tax refunds and handling tax-related complaints was not included in calculating the time spent on filing taxes and making payment this year. It will be taken into consideration from next year, following government resolution 19/NQ-CP, dated March 19, on improving the business environment and national competitiveness during the 2015-16 period, which wants the tax reforms to reach the level of ASEAN+4.

This required greater efforts to hasten tax reforms, the ministry said.

The ministry also said achievements in tax reforms were highly appreciated by the business community, citing a report by the Viet Nam Chamber of Commerce and Industry that said more than 70 per cent of the businesses were satisfied with the tax procedure reforms.

Rise in online tax

The latest statistics of the Ha Noi Department of Taxation show that about 96,000 businesses, or 91.5 per cent of the city's firms, registered to pay taxes online during the past nine months.

This exceeds the goal of 90 per cent set by Resolution 19, the tax department said.

According to the General Department of Taxation, 98 per cent of the businesses in the country used online tax filing procedures and 90 per cent made online tax payments as of the end of September.

Online filing of taxes and payments help to cut the time spent on the procedures by 10 hours per year.

(Tan Binh Industrial Park)

Source: VNS