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| Dr. Vo Tri Thanh, Director of the Institute of Branding and Competition Strategy |
2024 is the first year Vietnam officially applies the supplementary corporate income tax according to the provisions of the global base erosion and profit shifting (BEPS) framework. In this new context, what opportunities does Vietnam have, sir?
Vietnam’s economy has passed the most dangerous and difficult period and is now more stable. Inflation, exchange rates, and interest rates have decreased, bank liquidity has stabilized, and the stock and bond markets have experienced shocks and begun to recover. Vietnam has never had an opportunity like this before to attract foreign investors, especially strategic investors. In the first two months of 2024, FDI increased by nearly 40%, highlighting economic prospects.
Currently, there are four most important factors that investors consider when choosing a national destination: economic investment efficiency; comparative advantages in labor, natural resources, and domestic market; confidence in strategy, politics, and finally risk management factors, economic resilience.
Comparing the above factors, obviously, Vietnam has many favorable conditions for attracting FDI. We have liberalized with many trade agreements, and comparative advantages still exist; maritime, air, and maritime connectivity is quite good. Regarding the second group of factors, Vietnam is also digitizing, making efforts in green transformation, and catching up with various aspects of the Fourth Industrial Revolution.
Vietnam currently has many reliable partners associated with free trade agreements. Recently, Vietnam has also upgraded its relationship to Comprehensive Strategic Partnership with many important partners. Finally, Vietnam’s economy has relatively endured through epidemics and the current world crisis. But that doesn’t mean everything is smooth; there are still many challenges.
So what are those challenges, and how does Vietnam need to overcome them to not lose its advantage in attracting FDI in the current new context?
From January 1, 2024, Vietnam officially implemented the global minimum tax. This is an opportunity not to be missed. However, Vietnam is facing significant challenges such as labor issues, infrastructure, environment, and legal administration. Especially, the trend of world economic development towards green and digitalization is increasingly clear. This shift is reshaping global FDI, gradually reducing FDI projects that benefit from loose environmental protection policies in developing countries.
The global minimum tax could affect global FDI flows and each country’s FDI attraction policy. Multinational companies in the digital field are growing rapidly and changing the nature of cross-border investment. Global investment flows are increasingly shifting towards digitalization.
It is time for Vietnam to shift to a business environment that promotes conditions rather than hindering them, simplifying investment and business procedures. Vietnam needs to continuously improve its legal framework to promote a new circular economy, a digital economy. Along with that, Vietnam is also preparing a strategy to attract “eagles” in technology, and semiconductor chips.
Therefore, if Vietnam improves its image and investment environment comprehensively, the current opportunities will be realized. We hope to attract a lot of FDI investors this time, not just investment capital, but more importantly, capital from high-quality investors. Because investment projects in Vietnam themselves, along with the spread of technology and skills, will ensure sustainable development and green growth.
How do you assess the expectations of attracting investment in HCM City in the context of implementing the global minimum tax?
HCM City is a focal point, a truly important leverage for development not only for the city but also for the whole country. It is not by chance that we say “the whole country for HCM City and HCM City for the whole country.” It can be said that attracting FDI investors to HCM City is not just the story of the city, but in this multidimensional game, it is the common story of the whole country.
Because alongside the advantages that the general context brings, HCM City itself has its own advantages to further promote the common advantages of the whole country. If the aspirations of HCM City are not achieved, the aspirations of Vietnam to become a developed country cannot be achieved either.
Therefore, thanks to the National Assembly’s adoption of Resolution 98 on special mechanisms for HCM City, the city can create a new breakthrough in development, in reform to attract FDI investment in the trend of implementing the global minimum tax. I emphasize again that it is not only for HCM City but also for the whole country.
Thank you, sir!