HANOI 26 June 2014 – The United Nations Industrial Development Organization (UNIDO) and the Foreign Investment Agency under Viet Nam’s Ministry of Planning and Investment, today held a workshop in Hanoi where key findings of their joint empirical research on the link between enterprise performance and fiscal investment incentives were presented.
The analysis was based on the enterprise level data collected in the ambit of the 2011 Viet Nam Industry Investor Survey.
Survey responses suggest that foreign companies’ investment decisions in Viet Nam are mainly influenced by strong economic fundamentals such as political and economic stability, physical infrastructure and labour costs, rather than solely the incentive framework. The empirical analysis called for the granting of investment incentives to become more selective and tailored to high value added manufacturing activity.
Summarising the main conclusions from this analysis, UNIDO Technical Advisor, Brian Portelli, said that although there was consensus that fiscal incentives tended to enhance investor competitiveness, in the longer term incentives should never substitute for competitiveness since such policy stance had a high opportunity cost for host country governments and could ultimately undermine the objectives of inclusive and sustainable industrial development.
Deputy Director of the Foreign Investment Agency, Dang Xuan Quang, said that in order to lure more foreign investment capital relevant governmental agencies needed to strengthen communication with the business community to insure that proper incentives are in place in accordance with international norms and local business conditions. In addition, it was necessary to insure that high importance was attached to negotiating incentives in a timely manner to attract state-of-the-art large-scale foreign-invested projects, he added.
Patrick Gilabert, UNIDO Representative to Viet Nam, said that fiscal incentives were important factors for investors in medium and low-tech projects, whereas human capital remained the decisive factor for investment in high-tech projects which account for only five to six per cent of foreign-invested projects.
The workshop was attended by representatives of government institutions, and academia.
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