Vietnam – attractive destination to RoK manufacturers: report
Manufacturers from the Republic of Korea have been shifting the focus of their overseas direct investment to Vietnam from China thanks to tax benefits, cheaper labour and other favourable conditions, said a report released by the Federation of Korean Industries on November 22.
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| Mobile phone factory of RoK's Samsung Group in Thai Nguyen - Illustrative image |
According to the report, Korean manufacturing companies’ overseas investment in Vietnam accounted for 17.7% of the total in 2017, an impressive rise compared with 3.7% in 1990.
Meanwhile, the figure for China reduced significantly to 27.6% last year from 44.5% in the 2000s.
The RoK’s small- and medium-sized manufacturers moved away from the world’s second largest economy to the Southeast Asian country for direct investment. Their direct investment in Vietnam hit US$720 million in 2017, compared with US$430 million for China.
The report showed that large companies’ direct investment in China has been on the wane, but the amount was 2.7 times higher than that in Vietnam last year.
The report said Vietnam's rise as a major destination for Korean manufacturers' investment is attributable to changes in business climates and policies in both countries.
In 2008, China imposed a flat 25% corporate tax on both foreign-invested companies and domestic firms, including businesses in some high-tech sectors.
China has also expanded the list of products, in which foreign investment is banned or restricted, while the country's minimum wage has been on the steady rise.
In contrast, Vietnam has exempted foreign-invested high-tech companies from corporate taxes for four years, while lifting the cap on foreign investment.
In addition, Vietnam's minimum wage has been at a level half that in China, serving as a magnet for foreign companies, the report said.
