Investment in Vietnam September 17, 2008 Maria, Kwak

2 Contents 1.Introduction 2.Research Results and Analysis (a)Economic and Political Situation (b)Infrastructure (c) Business Climate (d)Tax Incentives 3. Conclusion

3 1. Introduction

4 ◆ Nationality: The socialist Republic of Vietnam ◆ Weather: North-Subtropics South-Tropical Monsoon ◆ Ethnic group: Kinh 89%,Tai 2%,Thai 1.6%,Hoa 1.5% ◆ Size: 330,000km2 ◆ Major Cities: Ho Chi Mihn City, Hanoi ◆ Population: 84million ◆ Religion: Buddhism 60%, Catholic 20%, Christian 5%,etc ◆ Currency unit: Vietnamese Dong (VND) 16,010VND=1US$ ◆ Neighboring Countries: China, Lagos, Cambodia

5 2. Research Results and Analysis

2-(a) Economic Situation  Strengths  One of the fastest-growing economies in Asia (8%)  Economic boom −Poverty rate decreased from 58% in 1993 to 20% in 2004‏  Weaknesses  Shortage of skilled labours  One of the world’s most corrupt countries

2-(a) Economic Situation  Opportunities  Member of WTO and APEC  Transition from a centrally planned economy to a market oriented one  Returning labours from overseas  Threats  Bureaucracy and corruption  Slow speed of domestic reforms‏

2-(a) Political Situation  Strengths  Government determination to push ahead with the market-oriented reforms  Good relations with the US  Weaknesses  Corruption among government officials  Public dissatisfaction with the handling of political dissent

2-(a) Political Situation  Opportunities  Public recognition of corruption as the threat to legitimacy  Political leaders responsive to private business  Threats  Tensions with ethnic minority groups  Possibility of ending of one-party-state

2-(b) Infrastructure  Strengths  Investment in transport infrastructure −$9.1bn during  Airport upgrade and construction in HCM City  Scheduled construction of two ports near the HCM City by 2010  Construction of 880 km express railway route, Hanoi- HCM City  25% Increase in power production from 2005 to 2015  Plentiful supply of water in Mekong River: very cheap

2-(b) Infrastructure  Weaknesses  Construction relying on foreign import  Private participation for only 15% of construction investment  Surging prices of construction steel and loan interest rates  Barriers exist in entry for foreign constructors  Most of large construction companies are state owned  Outbreak of bird flu  In run-down-state, but gradually improving

12 2-(c) Business Climate: Investment Licence  Strength  Foreign Investment Agency (FIA) provides One Stop Shopping to Foreign Direct Investors (FDIs)  Easy to get licence in HCM City −If investment amount is less than US$18.5mil −Register with People's Committee and Management Boards of Industrial Zones in HCM City Source:FIA

13 2-(c) Business Climate: Corruption  Weaknesses  Vietnam's transparency ranking = No.111/164 in 2006 −One of the most corrupt nations in Asia  Corruption = “A daily event” “endemic problem” −Private sector and government officials  Average “unofficial payment” =bribe is 1.8mil dong = $108.  Government efforts to fight corruption −Anti-corruption law passed in 2005 −Takes a long time to be practically effective

14 2-(d) Tax Incentives  Strengths  Corporate tax rate is 28% in Vietnam  Generous tax incentives for high-tech FDIs: −10% Standard tax rate −Tax exemption for 4 years and 50% reduction (5% effective tax rate ) for 9 years

15 3. Conclusion

16 3 Conclusion SubjectDescriptionGrade 1 Economic Situation  Fast-growing-economies in Asia  WTO and APEC membership A 2 Political Situation  Economy is driven by government  Good relationship with US B+ 3Infrastructure  Construction industry is driving force of economy  Infrastructure is gradually improving B+ 4 Business Climate  Government helps to obtain licenses quickly  Corruption is widespread and common B 5Tax  Generous tax incentivesA+ TotalA These grades are based on our subjective opinion

3 Conclusion In conclusion, We recommend Ho Chi Minh City as a favourable investment opportunity In conclusion, We recommend Ho Chi Minh City as a favourable investment opportunity