Vietnam encourages FDI in hi-tech sectors, but still installs barriers

Intel, Samsung, Nokia and Compal are the names that people regularly mention when talking about the hi-tech projects in Vietnam. However, in fact, not every project is considered a “high technology project” and receives preferential treatment.

In 2008, when receiving the investment certificate for the mobile phone factory Samsung Electronics (SEV) in Bac Ninh province, Samsung was recognized as a high technology enterprise.

However, when the investor expanded the project by raising the investment capital from 670 million dollars to 1.5 billion dollars, and planned to make printing machines, mobile phone batteries and cameras as well; the products were not listed as high technology products. As a result, the investor can only enjoy some incentives after entreating a specific mechanism from the government.

Nokia was in the same situation. If referring to the current laws, Nokia does not have enough conditions to be recognized as a high technology company. The Article No. 18 of the High Technology Law, which has been valid since July 1, 2009, stipulates that enterprises must meet five conditions to be recognized as high technology enterprise and enjoy the incentives at the highest level.

Meanwhile, Nokia could not satisfy the requirements. When considering the project, relevant ministries and branches had to discuss thoroughly to find out a preferential mechanism for Nokia.

Some analysts have pointed out that it is impossible to satisfy the requirements of the Article No. 18 of the law.

The High Technology Law also sets up the requirements on the total costs for the research and development work, which is believed the most difficult requirement. Under the law, the total average expenses of high technology enterprises for R&D activities in Vietnam in three consecutive years must be equal to at least one percent of the total annual revenue. Meanwhile, the expenses on R&D from the fourth year must be higher than one percent of total revenue.

Compal, the computer manufacturer in Vinh Phuc province, has also warned that with the current mechanism, even the big investors in Vietnam would leave or do not intend to expand their business in the country.

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