KOREA INVESTMENT IN VIETNAM

& FDI POLICIES

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PRESENTER: NGUYEN THI MINH HIEN- DEPUTY DIRECTOR

FOREIGN INVESTMENT AGENCY- MINISTRY OF PLANNING AND

INVESTMENT

Seoul – 16th April 2015

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I. VIETNAM IN PROFILE

II. OVERVIEW FDI AND KOREA FDI IN VIETNAM

III. INVESTMENT POLICIES IN VIETNAM

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I. VIETNAM IN PROFILE

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Area : 331,689 sq. km.

Coastline : 3,260 km.

Major cities : Hanoi Capital, Danang, Hochiminh city.

Population : 88.5 mil – ranking: 13th in the world

Natural resources: oil & gas, minerals, sea and tropical

forestry.

COUNTRY & PEOPLE

5 Source: Ministry of Planning and Investment

FISCAL ECONOMIC REVIEW

• GDP: 5.98 % (GDP per capital reached 1,960 USD)

• Export value 150 bil USD, 13.6% increased ;

Import value 148 bil USD, 12.1% increased

• Consumer Price Index (CPI) 4.09%

• Economic restructuring in 3 sectors: public investment,

state owned enterprises & banking system

• 289 IZs and 15 EZs attracted approx;

In 2014: 1,588 new FDI projects with 15.64 bil USD of

registered capital

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VIETNAM INFRASTRUCTURE

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Road network:

• Road system 287,698 km country-wide with 39,800 bridges

• North-South pivot:

The 1A National Highway: 2,260km through 31 cities/provinces

The Ho Chi Minh Highway: 3,167km

INFRASTRUCTURE ROAD NETWORK

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INFRASTRUCTURE (cont.) RAILWAY NETWORK

•Total length of 2,632 km of rail network

• 278 stations country-wide

• Hanoi – Ho Chi Minh City line: 1,726 km;

29.5 – 40 hours; Targeting to reduce to 10

hours with new high-speed connection.

• Linked to China railways in two directions,

one from Lao Cai province to Yunnan province

and one from Lang Son province to Kwangsi

province of China.

• Construction of the railway lines connecting

with Laos and Cambodia has been included in

the Government’s development strategy for the

Railway industry of Vietnam.

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INFRASTRUCTURE (cont.)

SEAPORTS and AIRPORTS

Seaports:

- 3,260km coastline, a strategic position close to international shipping routes and favored

conditions of shpping with china, ASEAN and world wide.

- Major Ports : 119 seaports in which Cai Lan (50,000DWT); Hai Phong (40,000DWT);

Da Nang (45,000DWT); Quy Nhon (50,000DWT); Sai Gon (50,000DWT); Thi Vai

(60,000DWT)

Airports:

- 10 international airports (Noi Bai – 4 million passengers; Tan Son Nhat – 8 million

passengers; Da Nang; Cam Ranh – Khanh Hoa; Cat Bi – Hai Phong; Chu Lai – Quang

Nam; Cam Ranh – Nha Trang; Phu Bai – Hue; Can Tho; Phu Quoc; Long Thanh – Dong

Nai.

- 14 domestic airports

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289 IZs/EPZs and 15 FEZ

Over 20 IZs/EPZs are developed by Joint Ventures (government & foreign

investors) e.g. TLIP (Japan), Tanthuan EPZ (Taiwan), Amata (Thailand)

Korea invest in IZs/EPZs mostly: s.g. Yen Phong-Bac Ninh (Samsung

mobile);Dung Quat-Quang Ngai (Doosan); VSIP – Binh Duong; Nghison -

Thanhhoa

SPECIAL ZONES

Advantages:

- Higher quality infrastructure (electricity, transport, telecommunication) and available

public system

- Availability of land and most of IZ/EPZ in the convenient location

- Simple administration procedure, expedited licensing process and convenient service

for investors as mechanism “one stop” in IZ Management Board.

- Incentives to infrastructure developers and projects inside economic zones, IPs

HUMAN RESOURCES

Strengths Weaknesses

Labor cost is still competitive in Asia (Can operate over 300 days/year (48h/week) ) Technical workforce, particularly workers with higher qualifications, have leading officials of almost all areas Abundant labor force

• Shortage of qualified technical workers due to training not tied to requirements occupations, skill levels, and production technology required

Opportunities Threats

Construction of high-quality training center and high-quality multidisciplinary universities Building a specialized health center for the region is expected . Research of building high-level training center for the region

- The labor cost has been increasing in recent years. - The quality of work force is slowly improved therefore the company need to re- train the workers

COMPETITIVE LABOR COST

Strengths

Ready and it will be connected to the fence of the border of each land

lot. Power is supplied sufficiently and stably

Two Sub-stations of 110/22kV – 40 MVA.

High-voltage: 22KV

(+) Nomal hours : From Monday to Saturday (From 04h00– 9h30)

(11h30’ – 17h00) (20h00 – 22h00’); On Sunday (From 04h00’ –

22h00)

(+) Off- peak hours (From 22h– 04h) in all day

(+) Peak hours (From 9h30–11h30’)(17h30’ – 20h00’)

ELECTRICITY

ELECTRICITY COST

For industrial manufacture:(Unit: VND/Kwh)

For business and services: (Unit: VND/Kwh)

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To 2020, Viet Nam will be important part of international economic connection networks with more than 55 partners, in which 15 are

member of G-20.

TPP

AEC 2015, VISIONS & OPPORTUNITIES

AEC Vision:

- Free trade in goods, services

- Free flow of investment, capital & skilled labor

Opportunities:

- Gateway to access to:

+ Dynamic market with 600 mil consumers

+ 300 mil labor

+ GDP scale up to 3,000 bil USD

+ Linking East - West, average GDP growth above 5%/year

WHY VIETNAM

Why Vietnam?

Human

Resource

Natural

Resources

Economic Growth

&

Market Potential

Legal

Environment

Competitive

Business Costs

Global

Integration

Geographic

Location

Political &

Social

Security

II. FDI IN VIETNAM AND KOREA FDI IN VIETNAM

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FDI IN VIETNAM

Source: MPI, up to January, 2015

20277

2762

21348

71726

2310718590

1469513013

2230020230

0

10000

20000

30000

40000

50000

60000

70000

80000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Resgistered capital Implemented capital

From 1988-January, 2015: 17,579 FDI projects, total registered capital of 251.8 bil USD

Implemented capital per year 10.5-11.0 bil USD

In 2014: Registered capital 20.23 bil USD; implemented capital: 12.35 bil USD

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TOP 10 FDI PARTNERS IN VIETNAM

Source: Ministry of Planning & Investment of Viet Nam

Rank Countries and Territories No of projects Total Registered Capital

(Million USD)

1 South Korea 4,240 37,843.43

2 Japan 2,494 36,891.18

3 Singapore 1,359 32,745.44

4 Taiwan 2,373 28,401.43

5 BritishVirginIslands 552 17,987.70

6 Hong Kong 873 15,463.21

7 United States of America 717 10,937.34

8 Malaysia 484 10,768.04

9 China 1,092 7,952.16

10 Thailand 377 6,691.99

Other 91 countries and territories 3,118 46,763.57

Total 17,579 251,835.62

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FDI IN VIETNAM BY INDUSTRIES

Source: Ministry of Planning & Investment of Viet Nam

Manufacturing & Processing

56%

Real Estate19%

Accommodation & Restaurant Service

4%

Construction5%

Production and Distribution of

Electric, Gas, Water and Steam

4%

ICT2%

Others10%

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VIETNAM-KOREA RELATIONSHIP

Up to now 2015 Korea is the 1st largest investors in Vietnam with total registered

capital of 42.87 billion USD with 4,200 projects (Vietnam is the 3rd largest

oversea investment location of Korea after America and China).

− The biggest Korean companies in the FORTUNE 500 list investing in Vietnam are

Samsung, LG, GS, Posco, Hyundai, SK ...

− Investment of Korean companies has been focused in manufacturing, processing,

infrastructure, construction, service ...

− Signed Agreement on Investment Promotion and Protection (1993), Agreement on

Double Taxation Avoidance (1994).

− Korea-Vietnam trade reaches 29 billion USD in 2014, (in 2013 its is 27.3 billion

USD), FTA between two countries is in progress (In 2020 the bilateral trade will be

70 billion USD).

− 850 thousand Koreab visited Vietnam in 2014

− Korea is the 2nd largest bilateral donor for Vietnam with around 1,2 billion USD

commitment soft loan (EDCF) in 2012 ~ 2015.

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VIETNAM – KOREA, AT A GLANCE

Korean FDI By Sectors

Korean FDI by Provinces

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III. INVESTMENT POLICIES IN VIETNAM

1. Investment Policy

2. Investment Guarantees

3. Investment Incentives

4. Investment procedures

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III. INVESTMENT POLICY IN VIETNAM

1. Transparent regulations on investment prohibition

and conditional investment sectors.

2. Improved regulation on investment guarantee and

investment treatment

3. Improved investment licensing procedure

4. Improved regulations on investment incentives

5. Improved decentralization mechanism

UPDATES ON NEW INVESTMENT LAW 2014

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Investors have the rights:

Doing business in all non-prohibition and conditional sectors

in Law on Investment

Self-decision in business, using credit, supporting fund,

natural resource and land in the Law

Recognize, protect asset ownership, investment capital,

incomes, legal rights of investors

Apply equality between investors, creating favorable

condition for doing business, sustainable development of

investors

Respect and implement international agreements

I.INVESTMENT POLICIES

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No nationalization or confiscation of investors’

assets

Protection of intellectual property rights

Remittance of capital and assets abroad

Government’s guarantee in some important projects

Investment guarantees in the event of changes in law

or policies

Resolve investors’ dispute in doing business in

Vietnam

II.INVESTMENT GUARANTEES

III. INVESTMENT INCENTIVES

1. Sectors entitled to investment incentives

Production of new materials and energy; hi-tech products;bio-tech and IT,

mechanical manufaturing.

Cultivation and processing of agricultural, forestry and aquatic products; creation of

new plant and animal varieties;

Use of high technology and advanced techniques, protection of ecological

environment; research, hi-tech development.

Development of infrastructure facilities.

Development of education, training, health care, physical education and sports.

2. Geographical areas entitled to investment incentives

Areas with especially difficult socio-economic conditions.

Areas with difficult socio-economic conditions.

Hi-tech Zone, Economic Zone, Industrial Zones.

III. INVESTMENT INCENTIVES 1. Corporate Income Tax (CIT)

- Standard rate (CIT) : 22% (to be reduced to 20% as from 1/1/2016)

- 20% (to be reduced to 17% as from 1/1/2016):

• 10 yrs: areas with socio-economic difficulties; production of feeds, agricultural machinery,

energy –saving products, high-grade steel; traditional trades

• Entire operation period: (i) enterprises with aggregate revenues of less than VND 20 billion;

(ii) income of people’s credit fund & micro-finance institutions

- 10% in 15 yrs, exemption in 4 yrs and reduction of 50% in following 9 yrs:

• areas with special socio-economic difficulties, Economic Zones and High Tech Zones;

projects with hi-tech, R&D, hi-tech business, composit, valuable materials, recyclable,

green energy, energy from waste, biological technology development, environment

protection, agricultural projects with hi-tech.

• Production projects with minimum investment capital of 6.000 billion VND (equivalent

around 300 million USD) with its disbursement in 3 years and minimum revenue of 10.000

billion VND at least after 3 years or using 3.000 workers; (exept projects producing

products with special consumption tax; mineral exploitation)

• Supporting semiproducts/materials for textile-garment; leather-shoe, electronics, car,

mechanics satisfied EU or equivalent standards that not producing in Vietnam

III. INVESTMENT INCENTIVES

1. Corporate Income Tax (CIT)

- 10% for income from enterprises:

• Socialized activities in training, education, health, culture, sport and environment

• Social real estate business-investment, newspaper, publication

• Forest planting, breeding, protecting; Agricultural, Forest, Fishing planting, breeding

in socio-economic difficult areas; producing, creating new plants, animals; producing

and processing salt; preventing agricultural, fishing products after crop.

• Cooperation organizations in agricultural, forest, fishing, salting producing.

- 20% with exemption in 2 yrs and 50% reduction in 4 following yrs

• Producing high level steel, products saving energy, machinery, equipments for

agriculture, forest, fishery, salty, irrigation; processing food for animals, poultry,

seafood; traditional products development

• Projects in IP …

III. INVESTMENT INCENTIVES

2. Land lease exemption

Type of projects Exemption

Projects in sectors of investment incentive 3 yrs

Projects in areas with socio-economic difficulties 7 yrs

Projects in areas with special socio-economic difficulties or in

sectors of investment incentives and in areas with socio-economic

difficulties

11 yrs

Projects in sectors of investment incentives and in areas with special

socio-economic difficulties 15 yrs

III. INVESTMENT INCENTIVES

3. Import duty exemption

Machines, materials, dedicated transport… imported to create fixed properties

of investment incentive projects.

Materials which are not locally produced.

Commodities are imported devices for the 1st time according to the

Government’s List such as projects of hotels, offices, apartments,

supermarkets, golf course, hotels, resorts, clinics, training, culture, finance…

Raw materials, materials, components of projects of investment incentives or

conditional areas with exceptionally difficult ones are exempted from import

tax within 5 yrs from the beginning…

4.Personal Income Tax

Tax

Bracket

Tax Rate

(%)

Portion of Annual Assessable Income

in million VND

(equivalent USD at

1USD=16,480VND)

Portion of Monthly Assessable

Income in million VND

(equivalent USD at

1USD=16,480VND)

1 5 Up to 60 (3,640) Up to 5 (303)

2 10 Over 60 to 120 (~7,300) Over 5 to 10 (~600)

3 15 Over 120 to 216 (~13,100) Over 10 to 18 (~1,100)

4 20 Over 216 to 384 (~23,300) Over 18 to 32 (~2,000)

5 25 Over 384 to 624 (~37,800) Over 32 to 52 (~3,100)

6 30 Over 624 to 960 (~58,200) Over 52 to 80 (~4,800)

7 35 Over 960 Over 80

III. INVESTMENT INCENTIVES

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5. VALUE-ADDED TAX (VAT)

All business establishments are subject to VAT

VAT rates:

‒ 28 categories of goods and services are VAT- exempt, including medical

services, education, goods in transit or under temporary admission, life

insurance or capital goods that cannot be produced locally.

‒ Exports of goods and services: 0%

‒ 21 categories of goods and services: 5%, including medical equipment,

basic chemicals, fresh foodstuff and metallurgical products.

‒ All other goods and service: 10%.

III. INVESTMENT INCENTIVES

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LABOR REGULATION

8 hours/day, 6 days/week; Overtime: 4h/day, 200h/year

Health Insurance Fund: Employers: 2%; employees: 1% of gross wage

Social insurance fund: Employers: 15% of gross wages; employees: 5% of

their wage.

Minimum wage scales (monthly wage) for employees in foreign invested

companies, depending on location: (lowest in SEA)

‒ VND920,000 ($54)

‒ VND950,000 ($56)

‒ VND1,080,000 ($63) and

‒ VND1,200,000 ($74).

IV.ADMINISTRATIVE PROCEDURE REFORM

No.

Items Before reform After reform Target in 2015

1 Tax payment procedures

537 hours/year 201 hours/year 171 hours/year (at the same level of the ASEAN 6)

2 Custom procedures 126 hours/year 63 hours/year At the same level of the ASEAN 6

3 Social Insurance Procedures

335 hours/year 108 hours/yea 49.5 hours/year (At the same level of the ASEAN 6)

4 Electricity supply Procedures: - High voltage electricity - Middle voltage electricity - Low voltage electricity

180 days 132 days 90 days

70 days 33 days 15 days

5 Enterprise Establishment Procedures

32 days (from 2005 until 2008)

5 days (from 2008 up to now)

2-3 days

Asean 6: Singapore, Malaysia, Thailand, Brunei, Indonesia and Philippines

Investment and Enterprise Registration Procedure

Enterprise

Registration

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Foreign Investors

Investment

Registration

Certificate

Enterprise

Registration

Project

Implementation

Investment In-Principal

Approval

Domestic

investors

FOREIGN INVESTORS’ COMPANY ESTABLISHMENT PROCEDURE

FOREIGN INVESTOR

INVESTMENT REGISTRATION CERTIFICATE

ENTERPRISE

REGISTRATION

CERTIFICATE

- Max 15 working days for

nomal projects

- Max 40 working days for

projects renting state land

- Max 60 working days for

projects having PM’s opinion

- Following the time of Nat

Assembly Meeting for projects

reporting to National Assembly

DEPARTMENT OF

PLANNING&INVESTMENT/EZ,IP

MANAGEMENT BOARD

Max 3 working days

in Business

Registration Agency

DOING BUSINESS

REFERENCE WEBSITES:

No Website Administrative Offices

1 www.chinhphu.vn Government web portal of Vietnam

2 www.mpi.gov.vn Ministry of Planning and Investment

3 www.fia.mpi.gov.vn Foreign Investment Agency

4 www.gso.gov.vn General Statistics Office of Vietnam

5 www.khucongnghiep.com.vn Vietnam Industrial Parks

6 www.dauthau.mpi.gov.vn Public Procurement Information

7 www.moit.gov.vn Ministry of Industry and Trade

8 www.mof.gov.vn Ministry of Finance

9 www.vietnam.e-regulation.org Investment Procedures in Vietnam

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FOREIGN INVESTMENT AGENCY CONTACTS:

South Foreign Investment Center

178 Nguyen Dinh Chieu, Ho Chi Minh City.

Tel: 848.39306671 Fax: 848.9305413

Website: http://sfic.vn

Investment Promotion Center – Central Vietnam

103 Le Sat, Hai Chau, Da Nang

Tel: 84511.3797689 Fax: 84511.3797679

Website: http://centralinvest.gov.vn

Investment Promotion Center – North Vietnam

65 Van Mieu, Hanoi

Tel: 844.38458149 Fax: 844.38437927

Website: http://ipcn.mpi.gov.vn

Foreign Investment Agency

6B Hoang Dieu Street, Hanoi

Tel: 84.8048461 Fax: 844.37343769

Website: http://fia.mpi.gov.vn

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Ms. NGUYEN THI MINH HIEN

Investment Counselor / Vietnam Embassy to Korea

Email: hienmpivn@yahoo.com / minh_hien@mpi.gov.vn

Mobile: 82-(0)10-5759-1965 / Tel (Fax): 82-2-737-2317

THANK YOU !