VIPC- About VIETNAM

Thank you

June 2010 VIPC Viet Investment Power1

VIETNAMEmerging Land for Opportunities

JESSIE LAN VODeputy CEO Assistant

• I. Vietnam –Emerging Land for Opportunities• II. Foreign Direct Investment in Vietnam• III. Post-WTO Investment Climate and Legal

Frameworks• IV. Investment-Related Costs

CONTENT

2June 2010 VIPC Viet Investment Power

1. Vietnam at a glanceGeography- Population(‘09): 85.79 mil.- Centre of Southeast Asia- Area: 331,698 sq. km- Coastline: 3,260 km

Society - Growth rate (’07): 1.2%- Under 30 yrs old: >60%- Literacy rate: >90%

Infrastructure- National highways: 86,327 km- Railways:3,219 km- Int’l airports: Hanoi,Da Nang & HCMC- Int’l seaports: 11( Cai Lan, Da nang, Van Phong, etc.)- 150 IPs with area of 31,436 ha- 8 EZs with area of 323,940 ha

Economy - Real GDP: 94.68 bil. US$- Real GDP growth rate(‘09):5.2%, year 2010e: 8.5% - Real GDP per capita(‘09): US$ 1052,year 2010e:1200 US$- Export turnover( May 2010): US$ 6.1bil.

I. Vietnam –Land for Opportunities


• 2. Why do invest in Vietnam - Political and socio-economic stability - Brisk and steady economic growth - Transportation hub of Southeast Asia - Abundant young labor force at low price - Member of WTO, APEC, ASEAN, ASEM - Favorable FDI promotion policies - Rapidly improving infrastructure

CONTENT

4June 2010

I. Vietnam – Land for Opportunities

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e0

1

2

3

4

5

6

7

8

9

10

5.81

8.78.08

8.839.54 9.34

8.15

5.764.77

6.75 6.84 7.01 7.17.7

8.4 8.2 8.48

6.32

5.2

8.28

Vietnam GDP Growth rate (%) Source: FIA , GoldmanSachs forecast

• 1. FDI inflows to Vietnam( 1988- May 2010)

II. Foreign Direct Investment in Vietnam


1988-19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

5 months 2

0100

10000

20000

30000

40000

50000

60000

70000

10200

21300

64000

21480

5920803011500 10000

3600

Investment inflowsDisbursed

US$ mil.

• 2. FDI distribution by sector(1988-2007)



4.59%

15.93%

28.73%

4.28%

6.90%

4.71%

0.53%

2.53%5.08%

7.21%

1.08%1.47% 4.09%

11.07%1.78%

FDI distribution by sector( 1988-2007) Oil & gas industry

Light industry

Heavy industry

Food

Building

Agro-forestry

Marine industry

Services

Transportation-Post

Hotel-Tourism

Banking-Finance

Culture- Medical-Educa-tion

New urban infrastructure

Office-Apartment build-ing

IPs-Ezs infrastructure

Light industry

Source: FIA

Heavy industry

FoodBuilding

Agro-Forestry

Oil & gas industryIPs-EZs infrastructure

Office-ApartmentNew urban

Hotel-Tourism

Transporta-tion-Post

Marine industryServices

• 3. Top ten countries investing to Vietnam



No. Countries Number of projects

Investment capital Legal capital Disbursed capital

1. Korea 1857 14,398,138,655

5,168,461,054

2,738,114,393

2. Singapore 549 11,058,802,313

3,894,467,177

3,858,078,376

3. Taiwan 1801 10,763,147,783

4,598,733,632

3,079,209,610

4. Japan 934 9,179,715,704

3,963,292,649

4,987,063,346

5. BritishVirginIslands 342 7,794,876,348

2,612,088,725

1,375,722,679

6. Hong Kong 457 5,933,188,334

2,166,936,512

2,161,176,270

7. Malaysia 245 2,823,171,518

1,797,165,234

1,083,158,348

8. USA 376 2,788,623,488

1,449,742,606

746,009,069

9. Holland 86 2,598,537,747

1,482,216,843

2,031,314,551

10. France 196 2,376,366,335

1,441,010,694

1,085,203,846

Schedule of concessions & commitments on goods:• Bound rates for 10,600 tariff lines• An average cut from 17.4% to 13.4%

phased over 5-7 years since 2007• Largest reduction applied to garments &

textiles, fish& fish products, wood & paper, other manufactured goods, machinery, electrical & electronic items

• Committed to be member(fully or partially) to initiatives for IT products, garments & textiles, medical equipment, aircraft, chemicals, construction, equipment etc. Tariffs cut phased over 3-5 years since 2007

Schedule of specific commitments on trade in services

• Open door in 11 out of 12 service sectors(or 110 out of 115 sub-sectors), including: business services, communication, construction & related engineering, distribution, health, insurance, education, tourism, environment, finance, entertainment, transportation, etc.• Commitments put in force right after WTO accession. In some cases, they’re phased over 2-4-6 years since 2007

IIII. Post-WTO Investment climate & Legal framework

1. Vietnam’s commitments to WTO

VIPC Viet Investment Power 8

2. Investment-related obligations

• TRIMS (effective from 11 Jan 2007): Eliminate the application of requirements on trade balance, foreign exchange control on imports, export performance, export restrictions, local contents

• Intellectual Property Rights: Comply with TRIPS Agreement upon accession

• Transparency: Make public draft WTO-related legal instruments for public comments; Make public all legal documents; Provide WTO members with annual reports on equalization program

III. Post-WTO Investment climate & Legal framework


Preferential sectors:- Manufacture of new material & production of new

energy, manufacture of high-tech products, bio-technology, information technology & mechanical manufacturing;

- Breeding, rearing, growing & processing of agricultural, forestry & aquaculture products, production of salt, creation of new plant & animal varieties;

- Utilization of high technology & advanced techniques, protection of the ecological environment & research, development & creation of high technology

- Labor intensive industries;- Construction &development of infrastructure

facilities & important industrial large-scale projects;- Professional development of education, training,

health, sports, physical education & Vietnamese culture;

- Development of traditional crafts & industries; and- Other manufacturing & service sectors which require

encouragement

Regions entitled to Incentives:- Regions with specially difficult

socio-enonomic conditions;- Regions with difficult socio-

economic conditions; and- Industrial zones, Export

processing zones, High-tech zones & Economic zones


3. Investment Opportunities entitled to Incentives

4. Incentives on Corporate Income Tax• Standard rate: 28% • Preferential rates of 10%, 15% and 20% for a period of 15 years, 12 years and 10

years are available depending on the scope of activities and location of the investment. • Tax holidays: A complete exemption from CIT for a certain period( 4 yrs at maximum)

followed by a period where tax is charged at half rate ( 9 yrs at maximum)• Losses: Carry forward losses for 5 years • Other incentives: Exemption or deduction of land use tax, land use fee, land rent, and water surface rent



Exemption applied to projects in investment encouraged sectors & regions on:• Machinery & equipment, specialized

means of transportation & construction materials( which can not be produced in Vietnam) comprising the fixed assets of certain projects

• Raw materials, spare parts, accessories, other supplies, samples, machinery & equipment imported for the processing of goods for export and finished products imported to stock to the processed goods

Preferential rates applied to imported goods from countries that enjoy MFN with Vietnam(89 countries).Rates vary by the category of goods.

Special preferential rates applied to imported goods from countries that signed special agreement with Vietnam(e.g.ASEAN)

Ordinary rates are 150% of preferential rates


5. Import Duty Exemption & Reduction

VIPC Viet Investment Power

6. Forms of Investment• 100% foreign-owned enterprise

– Limited liability company– Joint stock company– Partnership– Holding company

• Joint venture • Business cooperation contract • BOT, BTO, BT • Capital contribution, purchase of shareholding,

M&A



7. Licensing & Registration Procedure



Investment Registration Procedures

Respond within 15 working days

Investment capital is more than VND 300 mil.

(approx. US$ 19 mil.)

Projects fall in conditional sectors

Respond within 45 working days

Investment Evaluation Procedures

YES

YES

NO

8. Investment Licensing Bodies



Provincial People’s

CommitteeManagement

Boards of IPs,EZs

Department ofPlanning & Investment

Projects outside IPs & EZs

Projects inside IPs & EZs

Projects for infrastructure development of IPs, EZs

1. Monthly-wage (Source: JETRO survey, May 2009)

IV. Investment-related cost


Monthly wage(US$) Ha Noi HCMC Shanghai Hong Kong Singapore

Worker 96 96 249 1294 1027

Engineer 270 270 610 2092 1892

Manager 798 798 966 3237 3139

Legal minimum wage(monthly)

70.7 70.7 140.4 Nil _

2. Land price, office rent (Source: JETRO survey, May 2009)



Land price, office rent($)

Ha Noi HCMC Shanghai Hong Kong Singapore

Industrial land( yearly, per sq.m)

0.119-0.142 (IPs)

0.22 1.8-3.1 309.43 0.52-1.47

Office rent( monthly, per sq.m)

27.5-73.2 82.5 64.7 28-132 36-65

Housing rent for foreigners(per month)

Hanoi tower: 3600

2550 2,047-4,386 1,805-3,868 2,672-4,342

Int’l call charge( for 3 min. to Japan)

0.636 0.636 2.1-3.5 0.38-1.08 0.7-1.8

Mobile phone subscription fee

7.06 7.06 7.3

-29

Internet connection fee( per month)

194.44 194.44 365.5 33 240.5

3. Public Utility & Transportation expenses(Source: JETRO survey, May 2009)



Public Utility Expenses -Transportation fee ($)

Ha Noi HCMC Shanghai Hong Kong Singapore

Electricity rate for business use ( per KWh)

0.028-0.103

0.028-0.103 0.09 0.12 0.147

Water rate for business use ( per cu.m)

0.292 0.59-1.4 0.22 4.6-11 1.39

Gas rate for business use ( per cu.m)

Rate per kg: 0.9

Rate per kg: 0.9

0.25-0.28 rate per MJ: 0.026

0.135

Regular gasoline price (1 liter)

0.65 0.65 0.74 1.62 1.061-1.066

Diesel oil price( 1 liter)

0.65 0.65 0.71 1.06 0.830

5. Taxation (Source: JETRO survey, May 2009)



Taxation Hanoi HCMC Shanghai Hong Kong Singapore

Corporate income tax

28% 28% 25% 16.5% 18%

Personal income tax rate

40% 40% 45% 15% 20%

VAT 0%, 5%, 10% 0%, 5%, 10% 17% Nil 7%

Tax on interest remitted to Japan

10% 10% 10% Nil 10%

Tax on dividend remitted to Japan

0% 0% 10% Nil Nil

Thank you

VIPC Viet Investment Power 20

VIPC Capital Management Corporation8 Nguyen Hue St., Dist.1, HCMC, Vietnam

Tel: (84-8) 38277478/79 – Fax: (84-8) 38277488Email: [email protected] - www.vipc.com.vn

THANK YOU!

June 2010

Economy & Finance

VIPC- About VIETNAM