Pay Policy

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Finance International
FDI IN VIET NAM ECONOMIC
Group 1
Chu Thi Hoang Mai Lu Cu Bang Bui Nguyen Anh Tu
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AGENDA

• Vietnam FDI Overview
• Impacts of FDI to the economics of Vietnam
• Vietnam FDI Update for QI-2009
• Vietnam FDI Attractiveness
• Vietnam Weaknesses in Attracting FDI
• Recommendation and Conclusion

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FDI Flows in Vietnam (BOP source)
In millions of US
Over heating economy - sign of financial crisis
Jan-April 09 US6,35 billion in registered FDI,
down 17 compared to 08, mostly in services.
Asean Financial Crisis
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Overview of FDI Viet Nam in 2008

• Total Registered Capital FDI 64,011 billion USD,
  increased 222 comparing 2007
• 1171 new investment projects
• 311 existing projects increase the capital
• 50 countries and teritories registered to invest
  in Viet Nam
• 11 countries and teritories have the investment
  capital larger than 1 billion USD
• Implemented FDI capital in 2008 is 11,5 billion
  USD, increasing 43,2 comparing 2007

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Vietnam FDI Distributed by Sectors 2008
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Top 10 Investor Nation in Vietnam
2007
2005 -2006

1. USA
2. South Korea
3. Hongkong
4. UK
5. Taiwan
6. Singapore
7. Japan
8. France
9. Netherlands
10. Malaysia

1. Taiwan
2. Singapore
3. Japan
4. South Korea
5. Hongkong
6. France
7. Netherlands
8. Malaysia
9. Thailand
10. USA

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POSITIVE IMPACT OF FDI TO HOST COUNTRY

• 1.Increasing financial resources for development
• 2.Boosting export competitiveness
• 3.Generating employment and strengthening the
  skills base
• 4.Protecting the environment and social
  responsibility
• 5.Enhancing technological capabilities (
  transfer, diffusion and generation of technology.
  Technology transfer from Fdi in turn operates via
  related channels
• 6.Vertical ( backward and forward ) linkages with
  suppliers or purchasers in the host countries
• 7.Horizontal linkages with competing or
  complementary companies in the same industry
• 8.Migration of skilles labour

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IMPACT OF FDI VIETNAM ECONOMY
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IMPACT OF FDI UNEMPLOYMENT RATE VIETNAM
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Impact of FDI - Technology

• Since 1986, a greater part of technology
  used in Vietnam was very obsolete.
• FDI was seen as the major potential source of
  updated technology and skill to replace the old,
  obsolete one.
• Many very important strategic industries were
  born
• by the presence of high technology, such
  as
• 1) Energy resources electronic, Sun, wind,
  nuclear
• 2) Crude oil export, building Dung Quat factory
• 3) Rail road increase to 3260 km
• 4) Airport has 17 civil ports
• 5) Vietnams telecommunications market the
  second fastest growing in the world after
  China

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Negative Impact of FDI

• In 2008, 30 of FDI implemented capital
  concentrated in real - estate which not require
  labour.
• High inflation effects to labor cost and real
  salary of labor
• FDI investors have trends of labor intensive
  labors
• FDI investors utilize the low cost labor but not
  pay attention into training to them.
• FDI has only concentrated into low high tech
  industry
• The impact of FDI to domestic industry is not
  much. The shortage of supportive industry show
  that Vietnam can not utilize the competitive
  advantage to achieve the ambitious target.

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Overview of FDI Viet Nam in Quarterly I - 2009

• 93 new FDI projects
• Registered FDI Capital 2,2 billion USD
• Equal to 28 of projects and 30 of FDI Capital
  in Quarterly I 2008
• Reasons
• (1) world financial crisis
• (2) Other regional countries has raised up their
  competitiveness indexes, which could attract
  more FDI flow in
• (3) Other reasons from selft country
  competitivness like infrastructure conditions,
  amdministration process ...Vietnam's GDP growth
  rate in year 2009 is planned at 6.5

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VIETNAM FDI IN Q1 - 2009
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VIETNAM FDI IN Q1 - 2009
Most of newly FDI licensed projects are still in
real-estate sector focusing in Hotel- Rerorts
Development, Apartments and New Urban
Development.
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Vietnam FDI Attractiveness

• Features
• Political and social stability
• Well-educated, hard study and skillful labour
• Good geographic location
• Natural resources
• 2. Government Policy
• Tax incentive with high tech education training,
  culture, sport
• Waived import tax with raw material and no
  warranty for re-exporting good within 9 months
  process
• Improvement in corporate tax by cutting from 28
  - 25
• Incentive in import and export taxes
• Many Export Processing Zones Industrial Zones
  to reduce administration procedure relevant to
  tax bring convenient to investors
• Improve legal framework, focusing point with
  investment law and enterprise law in 2005

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Vietnam weaknesses in Attracting FDI

• Undeveloped Infrastructure
• Unstable legal system
• Unattractive Investment promotion
• High inflation
• Corruption
• Unwell education system
• Low quality of public good and service
• Corporate tax and personal income higher than
  regional average

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Recommendation to Increase VN FDI Attrativeness

• By fiscal and financial incentives
• Lower corporate income tax on a selective basis
  to revenues costs transparent.
• Tax holidays
• Investment allowances and tax credit
• Accelerated depreciation
• Exemptions from indirect taxes ( VAT, Import
  Tarrif)
• Export processing zone to allow taxpayers to
  avoid contact with tax administration
• By administration tool
• The legal environment and administrative
  procedures were simplified
• Resolving land acquistion-related issues
• Clarity and transparency of investment policies
  and procedures Publicizing the process of
  granting investment permits on the Internet
• Adjusting all sectors in line with Vietnams
  international commitments in the integration
  process