Nov 19, 2012

Vietnam - Samsung in R&D race against time

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Samsung Electronics Vietnam is struggling to build a research and development facility in Hanoi that will enable the firm to be officially recognised as a hi-tech one in Vietnam.

According to a document sent by Bac Ninh People’s Committee to the State President’s Office, all of the locations Hanoi People’s Committee suggested to Samsung Electronics Vietnam were not favourable to the mobile-phone maker.

Samsung currently runs a $670 electronic manufacturing complex in northern Bac Ninh province. Last week, the provincial people’s committee announced that it was about to grant Samsung a certificate for investing an additional $830 million in the complex, raising its total investment in Vietnam to $1.5 billion.

Since Samsung first proposed to build a research and development (R&D) centre in Hanoi last year, Hanoi People’s Committee has introduced three locations in Dong Anh district. However, Samsung refused to set up an R&D centre at these locations because of the distance to the city centre and high land rental rates, ranging from $1,500 to $2,000 per square metre. In addition, the locations are rice cultivated land that could lead to difficulties in site clearance.

If Samsung Electronics Vietnam cannot find a location, it would fail to meet the R&D criterion so as to be labelled as a “hi-tech” firm. Only when recognised as a hi-tech firm Samsung could enjoy the highest corporate income tax incentive of 10 per cent, against the standard rate of 25 per cent.

According to Vietnam’s Law on High Technology, a company will be recognised as “hi-tech” if it satisfies some criteria, including manufacturing hi-tech products listed by the government, average total expenditure for R&D activities in Vietnam during the first three years equalling at least 1 per cent of its total annual turnover and more than 1 per cent of its total turnover from the fourth year.

If Samsung does not meet the criteria, the world’s leading mobile-phone-maker would have to return all tax incentives it has received in the first three years of operation.

Ngoc Linh |

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