Economists note that the historic visit by US President Joe Biden and the upgrading of the Vietnam-US relations to comprehensive strategic partnership will create unprecedented opportunities to promote new cooperation fields and strengthen Vietnam’s internal power to join global value chains.

A series of projects on technological agreement have been announced on the occasion of the visit, including the $1.6 billion Amkor Technology invested semiconductor supply chain with a factory in Bac Ninh, scheduled to become operational from October 2023. 

Synopsys is going to introduce a semiconductor design and creative incubation center under cooperation with the HCM City Hi-tech Park. Meanwhile, Marvell is expected to announce the building of a semiconductor design center of international stature in HCM City.

According to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI), as of the end of 2022, the US had invested in 1,216 projects in Vietnam with total investment capital of $11.4 billion. The US ranks 11th among the top foreign investors in Vietnam.

However, state officials said the statistics do not truly reflect the real situation of the US investments in Vietnam, because many American multinationals have made indirect investments in Vietnam through third countries and territories, such as British Virgin Islands, Samoa and Cayman Islands.

Nguyen Minh Thao from the Central Institute of Economic Management (CIEM) said that the Vietnam-US relation upgrading is a great opportunity for Vietnam to attract investors, especially US technology firms.

However, to attract the ‘eagles’, Vietnam needs to a good investment environment for them.

This doesn’t mean investment and tax incentives, but means favorable institutions for the investors to develop their business activities here.

The business environment and policies need to be stable, and procedures need to be more favorable for investors to see Vietnam as a good investment destination. 

“Big foreign investors always attach much importance to the stability of policies,” Thao said, adding that investors are waiting for Vietnam’s policies to determine their investment plans. The upgrading of the relationship of the two countries is a chance for investors to review the institutional framework.

Vietnam is expecting new investments in technological projects. The question is whether Vietnam is ready and open to new business and investment models and new technologies, or it will still adopt the old management method for new investment activities?

“Foreign investors say there are still some barriers in the business environment. It is time for us to review the institutions and find out where there is room for reform to lure more investors to new business fields,” Thao said.

New investment capital inflow

Nguyen Dinh Luong, former head of the Vietnamese delegation at the negotiation for the Vietnam-US Bilateral Trade Agreement (BTA), said American businesspeople are practical and professional, and they prefer methodical, professional and modern business, rather than ‘quickies’.

Luong agrees that Vietnam needs to further improve the business environment to attract more American investors. This will help the two countries' economic and trade relations become more balanced and sustainable. Also, Vietnam needs to improve infrastructure and human resources.

Luong went on to say that high-quality investment inflow to Vietnam will face a new challenge – the global minimum tax policy, under which FDI receivers must not set corporate income tax rates below 15 percent. Vietnam has attracted many investments through tax incentives.

According to MPI, investors, especially multinationals, register new investment projects or expand existing investment in Vietnam because of the stability of the investment environment and Vietnam’s commitments to ensure business and investment if laws and policies change.

If Vietnam doesn’t have timely solutions to support enterprises, this will affect multinationals’ decisions on expanding and maintaining investments, which will result in a decline in satellite companies.

Therefore, MPI and the Ministry of Finance (MOF) are compiling draft resolutions on new policies to support FDI attraction.

Economists say that the global maximum tax regime will change the investment driving force of multinationals, including American investors. The investment decisions in the time to come will depend on non-tax factors, which include the business environment, technological environment, workforce quality, and supporting industries.

Manh Ha