Investment in Vietnam

September 17, 2008

Maria, Kwak

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Contents

1.Introduction

2.Research Results and Analysis(a) Economic and Political Situation(b) Infrastructure(c) Business Climate(d) Tax Incentives

3. Conclusion

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1. Introduction

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1. Introduction

◆ Nationality: The socialist Republic of

Vietnam◆ Weather:

North-Subtropics South-Tropical Monsoon

◆ Ethnic group:Kinh 89%,Tai 2%,Thai 1.6%,Hoa

1.5%◆ Size: 330,000km2◆ Major Cities:

Ho Chi Mihn City, Hanoi ◆ Population:

84million◆ Religion:

Buddhism 60%, Catholic 20%,Christian 5%,etc

◆ Currency unit:Vietnamese Dong (VND)

16,010VND=1US$◆ Neighboring Countries: China, Lagos,

Cambodia

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2. Research Results and Analysis

2-(a) Economic Situation

Strengths One of the fastest-growing economies in Asia (8%) Economic boom

− Poverty rate decreased from 58% in 1993 to 20% in 2004

Weaknesses Shortage of skilled labours One of the world’s most corrupt countries

2-(a) Economic Situation

Opportunities Member of WTO and APEC Transition from a centrally planned economy to a

market oriented one Returning labours from overseas

Threats Bureaucracy and corruption Slow speed of domestic reforms

2-(a) Political Situation

Strengths Government determination to push ahead with the

market-oriented reforms Good relations with the US

Weaknesses Corruption among government officials Public dissatisfaction with the handling of political

dissent

2-(a) Political Situation

Opportunities Public recognition of corruption as the threat to

legitimacy Political leaders responsive to private business

Threats Tensions with ethnic minority groups Possibility of ending of one-party-state

2-(b) Infrastructure Strengths

Investment in transport infrastructure − $9.1bn during 2004-2010

Airport upgrade and construction in HCM City Scheduled construction of two ports near the HCM City

by 2010 Construction of 880 km express railway route, Hanoi-

HCM City 25% Increase in power production from 2005 to 2015 Plentiful supply of water in Mekong River: very cheap

2-(b) Infrastructure

Weaknesses Construction relying on foreign import Private participation for only 15% of construction

investment Surging prices of construction steel and loan interest

rates Barriers exist in entry for foreign constructors Most of large construction companies are state owned Outbreak of bird flu

In run-down-state, but gradually improving

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2-(c) Business Climate: Investment Licence

Strength Foreign Investment Agency (FIA) provides One Stop

Shopping to Foreign Direct Investors (FDIs)

Easy to get licence in HCM City− If investment amount is less than US$18.5mil − Register with People's Committee and Management

Boards of Industrial Zones in HCM City

Source:FIA

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2-(c) Business Climate: Corruption

Weaknesses Vietnam's transparency ranking = No.111/164 in 2006

− One of the most corrupt nations in Asia Corruption = “A daily event” “endemic problem”

− Private sector and government officials

Average “unofficial payment” =bribe is 1.8mil dong = $108.

Government efforts to fight corruption− Anti-corruption law passed in 2005− Takes a long time to be practically effective

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2-(d) Tax Incentives

Strengths Corporate tax rate is 28% in Vietnam Generous tax incentives for high-tech FDIs:

− 10% Standard tax rate− Tax exemption for 4 years and 50% reduction (5%

effective tax rate ) for 9 years

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3. Conclusion

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3 Conclusion

Subject Description Grade

1EconomicSituation

Fast-growing-economies in Asia WTO and APEC membership A

2PoliticalSituation

Economy is driven by governmentGood relationship with US B+

3 InfrastructureConstruction industry is driving force of economy Infrastructure is gradually improving B+

4BusinessClimate

Government helps to obtain licenses quicklyCorruption is widespread and common B

5 Tax Generous tax incentives A+

Total A

These grades are based on our subjective opinion

3 Conclusion

In conclusion,

We recommend Ho Chi Minh City as a favourable investment opportunity

In conclusion,

We recommend Ho Chi Minh City as a favourable investment opportunity