Mar 1, 2013

Vietnam - Investors threaten to cancel projects if they cannot enjoy incentives

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VietNamNet Bridge – Foreign investors said they would cancel the plans to expand their investment in Vietnam if the expanded projects cannot enjoy investment incentives.

Hong Han Thanh, General Director of Pepperl + Fuchs Vietnam, the company which specializes in making sensors and signal transmission equipment, said his company has been running well with 100 engineers and 300 workers in the Tan Thuan Export Processing Zone, with the investment capital of $11 million.

Pepperl + Fuchs plans to invest $30 million in the second factory, which it thinks would employ 500 workers. However, the company has been told that it would not be able to enjoy the investment incentives for the expanded investment project, it considers canceling the project.

The same thing is occuring with Unilever Vietnam. A senior executive of teh enterprise said Unilever has invested $200 million in Tay Bac Cu Chi industrial zone and it plans to expand the factory here. However, the investor now reconsiders the investment plan because it would not be given investment incentives for the expanded project.

The executive said that if the investor cannot enjoy the investment incentives, the competitiveness of the products would be lower. “It’s unreasonable that the two projects of the same investor and in the same place bear the two different tax schemes,” he said.

Businessmen all said that they have to think twice before deciding to expand their investment scale in the context of the global economic crisis. Therefore, the removal of the investment incentives would make them shrink back. Once the incentives are not given more, the investment expansion would be canceled.

According to Nguyen Tan Dinh, Deputy Head of the HCM City Management Board of Export Processing Zones and Industrial Zones. He heard similar complaints from other investors, who cannot enjoy investment incentives for the expanded investment projects after the corporate income tax took effect in January 2009.

Deputy Mayor of HCM City--Le Manh Ha, thinks that the foreign investors are reasonable to ask for the same investment incentives for their expanded projects.

“Why do the policies only offer incentives to new investors, not to the existing investors who have been here in Vietnam for a long time and have big contributions to the development of the national economy?” he questioned.

Tran Thi Le Nga from the HCM City Taxation Agency confirmed that she heard a lot of complaints about the tax policies applied to expanded investment projects.

However, Nga said the problem would be settled, because the government’s Resolution No. 2 says investors would enjoy the investment incentives for the expanded investments as well. The resumption of the tax incentives would be decided by the National Assembly, when the Ministry of Finance submits the draft on the corporate income tax law amendment in upcoming May.

Nga said that if refering to the government’s resolution, the resumption of the tax incentives would be in April 2013. Meanwhile, the draft law compiled by the Ministry of Finance says the law would have the retroactivity, which means that the tax incentives would be given to the expanded projects since January 1, 2009 as well.

The management agencies have released optimistic reports about the foreign direct investment (FDI), saying that foreign investors registered the investment projects worth $280 million in January 2013, an encouraging result in the context of the FDI sharp fall worldwide.

However, analysts have pointed out that that FDI flow to Vietnam has been on the decrease. They also said this should not be seen as an encouraging result at all, if noting that the FDI flow to neighbouring ASEAN countries still keeps on the rise.

Compiled by C. V

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