Vietnam remains an appealing destination for FDI

Vietnam remains attractive for FDI 

First, public infrastructure investment, combined with the newly adopted National Power Development Plan VIII and the Government's supportive policies for socioeconomic recovery and development, will be key driving forces in attracting long-term FDI.

The second advantage is the low labor cost. In comparison to its competitors, Vietnam's low-cost workforce attracts foreign firms. Vietnam has a labor market of over 52 million people, one of the largest in the ASEAN area, with a labor participation rate of 76 percent. Furthermore, the monthly cost of labor in Vietnam is roughly USD 171, which is significantly lower than its rivals.

The third factor is the strategic location. Vietnam is strategically located in Southeast Asia. It is bounded to the north by China, to the west by Laos and Cambodia, and to the east and south by the Gulf of Thailand, Singapore, and the South China Sea. Vietnam now has access to important shipping routes in the South China Sea and the Indian Ocean, as well as huge markets in China, Japan, and South Korea.

Furthermore, the Port of Singapore serves as a vital hub, connecting over 600 ports in over 100 countries. It is important in global trade, handling over 20% of the world's cargo containers and permitting the transfer of nearly half of the world's crude oil supply. With a cargo handling capacity of about 537.6 million tons, this port receives over 140,000 ships each year for loading and unloading activities. As a result, Vietnam's excellent position and the Port of Singapore's skills as a premier marine center complement one another, providing considerable benefits to firms engaged in regional and global commerce and logistics.

The fourth goal is to keep the USD/VND exchange rate stable. To fight inflation, the FED has voted to raise rates by 0.25% to 5.25- 5.5%. However, due to a variety of variables, there are now no major exchange rate pressures. In 2023, Vietnam is predicted to receive significant remittance inflows of VND19.4 billion, as well as USD inflows from recent mergers and acquisitions. Furthermore, the State Bank of Vietnam has acquired around USD6 billion, adding to the bountiful supply of dollars. Furthermore, Vietnam's trade surplus in the first half of 2023 is expected to be USD12.25 billion, strengthening USD inflows even further. These criteria are critical in terms of currency stability and attracting foreign direct investment inflows.

The fifth point is the extensive array of free trade agreements. Vietnam's admission into the ASEAN Economic Community (AEC), which has roughly 19 free trade agreements, provides a fantastic chance to connect Vietnam with the global market. Furthermore, in conjunction with integration, Vietnam's institutions, rules, and transparency have continuously improved, not only enabling long-term conditions for investors to operate, but also assisting enterprises in participating in global supply chains.

The sixth factor is the worldwide minimum tax rate. The worldwide minimum tax rate is expected to generate worry about a strategic disruption in investment locations, multinational company operations, and FDI attractiveness methods, necessitating a quick reaction. According to the General Department of Taxation, there are around 335 FDI projects in Vietnam with investments of more than USD100 million apiece. They typically operate in the manufacturing and processing sectors in economic zones and industrial parks, and they benefit from a corporate income tax rate of less than 15%. These include high-tech behemoths like Samsung, Intel, LG, Bosch, Sharp, Panasonic, and Foxconn.

"In the short term, Vietnam will face a significant challenge in implementing a global minimum tax rate of 15% on FDI beginning in 2024." The levy is expected to raise "concern about a strategic disruption in investment locations, the way multinational corporations operate, and FDI attraction strategies," said Kis Vietnam.