MANUFACTURING & ASSEMBLY PLANT

I. Introduction to investment promotion

With the development of socio-economy, investment projects are increasingly focused on with the goal of changing the face of the country in general and the locality in particular. In response to this reality, the law has set out regulations on investment promotion activities, especially the promotion of foreign direct investment in Vietnam.

1. What is investment promotion?

The concept of investment in the Investment Law is recorded in Clause 8, Article 3, associated with business investment, which is "the act of investors investing capital to carry out business activities.".

Although it is mentioned a lot as the most common term about investment, however, in all current legal documents, there is no definition of "investment promotion", which leads to difficulties in understanding and accurately identifying this activity. Based on personal knowledge, the author proposes the concept of investment promotion as follows: Investment promotion is the activities of competent authorities to attract economic groups, enterprises, units, and individuals at home and abroad to their locality (country) to invest. Thus, the result of this activity is the investment resources attracted to the locality (country).

Investment promotion plays an extremely important role, contributing to strongly promoting investment capital attraction; forming industrial parks and export processing zones to serve large-scale commodity production activities; Creating conditions for synchronous investment in infrastructure to serve local and national socio-economic development; and reducing information asymmetry.

Investment promotion is a dynamic tool and has an orienting influence on investors and is a form of propaganda to seek and maintain investment capital. First of all, investment promotion is a tool to attract foreign investment and implement FDI policy, which has an impact on encouraging economic growth. FDI promotion is just one tool among the tools for economic development. Investment promotion is essentially solving the problem of finding and maintaining investment capital. Through investment promotion, FDI projects supplement important capital for investment in socio-economic development in each period, and at the same time are an important factor in promoting internal resources, especially in the period when the accumulation level of the economy is still low.

2. Investment promotion activities:

Investment activities are regulated in Article 74 of the Investment Law and the implementation instructions in Decree 31/2021/ND-CP. The contents of investment promotion activities are reflected in these regulations in the following aspects:

2.1. Investment promotion agencies:

Investment promotion agencies are state management agencies in the investment sector, including the Government, the Ministry of Planning and Investment; Ministries, ministerial-level agencies, and provincial People's Committees. Each agency will have different scopes and purposes of investment promotion, including:

- The Government directs the development and implementation of investment promotion policies and orientations to promote and facilitate investment activities by sector, region and partner in accordance with the strategy, planning, plans and socio-economic development goals in each period; ensure the implementation of inter-regional and inter-sectoral investment promotion programs and activities, linked with trade promotion and tourism promotion. (Clause 1, Article 74).

It can be seen that the role of the Government is reflected in "state management of investment promotion activities nationwide." The Government does not carry out investment promotion in its true nature, but provides orientations in investment promotion, as a basis for other agencies to carry out investment promotion in accordance with specific development strategies. This is also understandable because the Government is the leading executive agency, the activities of this agency are only of the nature of "directing" subordinate agencies in each field to reduce the burden on itself, as well as effectively decentralize management.

- The Ministry of Planning and Investment is the agency that helps the Government manage state investment promotion activities nationwide. The Ministry of Planning and Investment develops and organizes the implementation of the national investment promotion plan and program; coordinates inter-regional and inter-provincial investment promotion activities; monitors, supervises and evaluates the effectiveness of investment promotion nationwide. (Clause 2, Article 74).

In the activities of the Ministry of Planning and Investment, the implementation of the national investment promotion program is considered the focus, accordingly, "The national investment promotion program is a collection of investment promotion activities at the national level, inter-regional and inter-sectoral, implemented by ministries and provincial People's Committees using the state budget." (Clause 1, Article 92 of the Investment Law). In addition, the Ministry of Planning and Investment also plans, organizes, operates and arranges inter-regional and inter-provincial investment promotion activities. In fact, the Ministry of Planning and Investment is becoming a strong arm for the Government in both managing and implementing direct investment promotion.

– Ministries, ministerial-level agencies, and provincial People's Committees, within the scope of their tasks and powers, shall develop and organize the implementation of investment promotion plans and programs in the fields and localities under their management in accordance with the strategies, planning, and socio-economic development plans and the National Investment Promotion Program. (Clause 3, Article 74).

Ministries and ministerial-level agencies shall carry out investment promotion activities through focal points for investment promotion activities according to the sectors and fields under their functions and powers. As for the provincial People's Committees, they shall operate through the focal point of the Department of Planning and Investment. In addition, these agencies may establish affiliated agencies or investment promotion departments within their organizational structure and are responsible for arranging facilities, working conditions, staffing, and operating costs. (If an agency is established, it must be considered and decided by the Prime Minister) (Clause 2, 3, 4, Article 91 of Decree 31/2021/ND-CP).

In investment promotion, the role of the Department of Planning and Investment or the Provincial People's Committee is extremely important, this is an activity for the province to attract strong investment capital, contributing to the socio-economic development of the locality.

When mentioning investment promotion agencies, it is impossible not to mention the foreign investment focal point, accordingly "The foreign investment promotion focal point is under the management of the Vietnamese representative agency abroad" (Point a, Clause 5, Article 91 of Decree 31/2021/ND-CP). This is the agency that plays a role in approaching and implementing initial investment promotion activities to seek and attract foreign investment to Vietnam.

2.2. Contents of investment promotion activities:

The contents of investment promotion activities are stipulated in Article 88 of Decree 31/2021/ND-CP, including 8 basic contents:

First, research on potential, market, trends and investment partners. This is the content as well as the first stage in investment promotion activities, which is the stage that determines whether investment promotion is feasible or not and the effectiveness in practice is affected by objective factors.

Second, build image, promote, introduce the environment, policies, potential, opportunities and investment connections. This is an activity to attract, demonstrate the attractiveness of investment projects and show investors the strong development potential of the project, at the same time this is a way for parties to approach and gradually have "sympathy" for each other.

Third, support, guide, facilitate investment activities. Investment activities are the investment of capital invested by investors to carry out business activities, support, guidance or facilitation is the way for investment promotion agencies to "pave the way" for themselves in meeting the requirements of "a customer" before future projects.

Fourth, build an information system and database to serve investment promotion activities. This is the basis for storing and implementing investment promotion activities in a planned, effective, legal and reasonable manner, and are also documents proving that the investment promotion process is in accordance with the procedure.

Fifth, build a list of investment attraction projects. This activity has a truly important role, building a list of investment attraction projects to help investors choose projects that are suitable for themselves, and is also a way for the promotion agency to manage projects that they want to implement in the future.

Sixth, build publications and documents to serve investment promotion activities. The documents and hidden notes mentioned here are similar to a way to build an image, promote investment promotion activities, documents to serve the promotion activities to take place effectively and quickly.

Seventh, training, coaching, capacity building on investment promotion. This is an activity to foster the quality of human resources directly implementing investment promotion activities in investment promotion agencies.

Eighth, domestic and international cooperation on investment promotion. Investment promotion activities, focusing on attracting foreign investment capital into Vietnam, domestic and international cooperation enhances the capacity to promote investment effectively and modernly.

Legal documents related to the article:

• Investment Law 2020.
• Decree 31/2021/ND-CP guiding the Investment Law.

II. Investment promotion mechanism under Vietnamese law

2.1. Domestic investment promotion

- Policies and incentives for domestic investors

Policies and incentives for domestic investors in Vietnam include many different forms:

• Tax incentives: Investors can enjoy a corporate income tax rate lower than the normal tax rate for a certain period of time or the entire duration of the investment project. In addition, there are other forms of incentives such as tax exemption and tax reduction.

• Financial incentives: Investors can receive financial support through forms such as import tax exemption, import tax refund, and capital provision for enterprises.

• Investment support: Investors can receive support in terms of infrastructure, services, administrative procedure support, technology transfer, training, and information.

• Incentives in selecting contractors and investors according to the 2023 Bidding Law.

- Promotion procedures for domestic investors

One of the important steps for investors to be allowed to carry out investment projects is to have the project's investment policy approved. Depending on the scale and investment sector, investors must request the National Assembly's approval of the investment policy before implementing the project.

The promotion procedures for domestic investors in Vietnam include many important steps:

• Register an account on the system.

• Declare information, post electronic documents on the system or submit a paper dossier.

• Explain the content that needs to be supplemented (if any).

• Bring your ID card (or citizen ID card, passport) and receipt to the dossier return department to receive the results.

2.2. Promoting foreign investment

- Incentive policies and mechanisms for foreign investors

Vietnam has introduced many investment incentive policies for foreign investors. These policies include

• General business investment policies: Investors are entitled to conduct business investment activities in industries and professions that are not prohibited by the Investment Law. The State recognizes and protects the ownership of assets, investment capital, income and other legitimate rights and interests of investors.
• Forms of investment incentives: Including applying corporate income tax rates lower than the normal tax rates for a limited period or for the entire duration of the investment project; exemption and reduction of corporate income tax; exemption of import tax on imported goods to create fixed assets; raw materials, supplies, components to implement investment projects; exemption and reduction of land rent, land use fees, land use tax.
• Subjects eligible for investment incentives: Including investment projects in sectors and professions eligible for investment incentives according to the provisions of the Investment Law 2020; investment projects with a capital scale of VND 6,000 billion or more and disbursing at least VND 6,000 billion within 03 years from the date of issuance of the Investment Registration Certificate or investment policy decision.

- Procedures for promoting foreign investment

Procedures and procedures for promoting foreign investors in Vietnam include:

• Registering an account on the system.
• Declare information, upload electronic documents on the system or submit a paper dossier.
• Explain the content that needs to be supplemented (if any).
• Bring your ID card (or citizen ID card, passport) and receipt to the dossier return department to receive the results.

III. Agencies and organizations supporting investment promotion under foreign law

There are a number of agencies and organizations in the United States that support investment promotion, including:

• Office of Investment Affairs (OIA): OIA is part of the U.S. Department of State, promoting sound investment policies that support American jobs, economic growth, and prosperity.
• Invest in America: This is the primary mechanism of the U.S. Government to manage the promotion of foreign direct investment.
• U.S. Department of Commerce: The U.S. Department of Commerce promotes exports and foreign direct investment (FDI), activities that have been proven to be sources of job creation

In China, the agencies and organizations supporting investment promotion include:

• China Investment Promotion Agency (CIPA): CIPA is China's investment promotion agency. It is responsible for inviting (FDI in China) and going out (investment abroad). CIPA is part of the Ministry of Commerce of China.
• Anhui Provincial Foreign Investment Promotion Center (AIPC).
• Beijing International Investment Promotion Council.
• Xiamen International Investment Promotion Center.
• Chongqing Promotion and Service Center for Foreign Investment.
• Dongguan Foreign Investment Promotion Center.
• Fujian Foreign Investment Service Center.

IV. Some notes related to foreign investment promotion

4.1. Is the embassy considered an investment promotion support agency?

According to Point b, Clause 3, Article 100 of Decree 31/2021/ND-CP, the embassy is considered an investment promotion support agency.

4.2. Currently, the incentive mechanism for foreign investors is higher than the incentive mechanism for domestic investors. Is the above view correct or incorrect?

The above view is incorrect. Depending on the factors of business sector, project scale, domestic production protection policy, and other factors, the incentive mechanism for foreign investors is different from the incentive mechanism for domestic investors. Therefore, it cannot be affirmed that the incentive mechanism for foreign investors is higher than the incentive mechanism for domestic investors.