Vietnam has many challenges to overcome in construction method and economic development, and also has achieved many lessons and achievements. This country started the market-oriented economic reform in the mid-1980s. In fact, the economics successful that Vietnam has achieved nearly three decades still modest. The ways of Vietnam’s economic development is not flat, and it has gone through many difficult times with the mistakes, the stumble. Surprisingly, after each stumbles, Vietnam’s economy is bigger and stronger which has become an emerging market nowadays, and foreign professors think that Vietnamese market has many potential exploitation.
DRIVERS of GROWTH IN VIETNAM
One of main factors that help Vietnam’s economy strongly develops is attract foreign direct investment. This factor is not only aims to solve scarcity of capital for investment in social development but also to create more jobs for laborers, supplying the machinery, process technology, produce more goods with high quality and technical for Vietnam. It’s also creating synergy for the industrialization – modernization of the country. Thus, Government of Vietnam applied many new methods and policies that created a new momentum for domestic and foreign enterprises. And now, I’m going to show and explain three ways: New Investment law; Decreasing of Corporate Income Tax and Motivating development of Infrastructure.
New Investment Law:
National Assembly of Vietnam issued the new investment law in 2006 which helps foreign enterprises have the benefits like the enterprises with domestic capital. Objectives of the “New Investment Law” are to improve business and investment environment, legal environment; to simplify investment procedures and to create favorable conditions to attract and efficient use of capital investment; meet the requirements of international economic integration and to enhance the State’s management of investment activities. Law has also stipulated open the investment market in line with international treaties which Vietnam is a member. Law confirmed the removal of barriers. For example “New investment law” not required to investors to buy and use goods and services in the country or provide certain services in the country … This is the important point that the WTO ‘s negotiating partners are interested. After the “New Foreign Investment Law” was issued with the application of a series of policies to encourage investment by the Government for an open economy. The results are 38 countries and hundreds of foreign companies have investment and other foreign corporate are looking for investment opportunities in Vietnam.
Decreasing of Corporate Income Tax:
Corporate income tax (CIT) is a form of tax to regulating directly results the production and business of enterprises. The standard tax rate should be reduced in order to make a favorable condition for mobilizing capital for production and businesses. Currently, due to productivity, quality and the cumulative effect of the economy of Vietnam are low, many enterprises with small scale. Thus, Government of Vietnam reduced the CIT that will help Vietnam attract more business investment; help businesses’ profits go up and to create more jobs for Vietnam. The new reduction from 28 to 25 percent which come into effect from 1 January 2009 brings more benefits to enterprises and may create competitiveness in business environment in Vietnam. The reduction of CIT has also created a fair level between domestic and foreign enterprises. This is good news for both domestic and foreign enterprises.
Motivating development of Infrastructure:
The infrastructure can promote domestic production and is also concern of foreign investors. Therefore, attracting resources for investment in infrastructure is one of important solutions that Vietnam need to do in the future. Vietnamese Deputy Minister of Planning and Investment Äáº·ng Huy Äông revealed that by 2020 Viá»‡t Nam needs US $60-70 billion for perfecting the national infrastructure network such as highways, urban roads and power stations. Meanwhile, the State’s budget cannot meet the demand of Vietnam. Vietnam is only meets about 5% of the total demand. Thus, the Vietnam government needs to find some ways to mobilize extensive domestic and foreign capital to build infrastructure. In the present, Vietnam will apply PPP form to attract investors for infrastructure. PPP stands for “Public Private Partnerships”. It was begun in England and it became effective methods in more than one hundreds countries to motivate infrastructure. PPP is a method in which the management and implementation of projects by combining the best of the public and private sectors with an emphasis on value for money and delivering quality public services. This form of cooperation will bring benefits for both the state and private sector. Britain will become a strategic partner of Vietnam and the UK will share ways and helps Vietnam in developing this model. Summary, PPP is the key to support finance. In Vietnam, the conditions about budget are still limited. By using PPP form, the State and the private sector will work together to develop the infrastructure.
Actually, Vietnamese economic is till slower than Japan China, Korea. But economic achievements that Vietnam has achieved after many challenges and difficult, we cannot deny. That was a miracle. The positive deeds of the Government of Vietnam help foreign investors see that cheap labor is not the only cause attract them. Measures to attract and maintain foreign investment by the Government of Vietnam has effectively ways.