Vietnam finalising plan for fund to attract foreign investment

FILE PHOTO: A woman works at a furniture factory in Xuan Hoa, outside Hanoi, Vietnam December 9, 2016. REUTERS/Kham

HANOI (Reuters) - Vietnam's Ministry of Planning and Investment is finalising a draft plan to set up a fund to help attract foreign investment and maintain the country's competitiveness, according to a ministry document reviewed by Reuters.

The draft will be submitted to the central government by Friday, according to the document dated June 29.

The Southeast Asian country, which is an important manufacturing base for companies like Samsung Electronics, Foxconn and Intel, is heavily reliant on foreign investment for growth. Companies with foreign investment account for around 70% of its total exports.

The fund and other incentives have been highly anticipated by multinationals after Vietnam's parliament last year approved the OECD-led global minimum corporate tax rate of 15%, raising the effective tax level paid by companies.

The fund, which would be financed by the state budget and by revenue from corporate tax, was part of efforts to "maintain Vietnam's competitiveness in the face of changeable global conditions and fierce competition among countries in attracting investment," the document said.

The Vietnam Fund for Investment Support would provide cash to projects to partly cover costs for infrastructure, fixed assets and human resource training.

Vietnam aims to attract $30-$40 billion of foreign investment a year in the 2021-2025 period, and $40-$50 billion annually in the 2026-2030 period, the document said.

Foreign investment inflows last year rose 34.5% to $39.4 billion, it said.

"Though foreign investment in Vietnam has been rising over recent years, the number of large-scale foreign investment projects with high technologies remain modest, while some existing projects have suspended their plans to expand," the document said.

It said some potential big investors were still deliberating on whether to invest in Vietnam, pending more information about investment incentives.

According to the draft, investments eligible for the incentives would include high-tech projects worth at least 12 trillion dong ($471.51 million) and with annual revenues of at least 20 trillion dong.

Projects investing in artificial intelligence and semiconductors worth at least 6 trillion dong, and projects to develop research and development centres worth at least 3 trillion dong would also be eligible.

"The fund would not solely be aimed at compensating firms affected by the global minimum tax, but at encouraging all investment projects," the document said.

($1 = 25,450 dong)

(Reporting by Khanh Vu; Editing by Ed Davies)