China-Vietnam Business Update: Apr. 19

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Apr. 19 – Welcome to our biweekly China-Vietnam roundup in which we examine the latest bilateral news and commentary affecting foreign investment in the two countries.

The China Alternative – Vietnam
While China is currently transforming its economy to a higher level of production development in more technical sectors such as IT and value-added services sectors, Vietnam has a significantly large unskilled labor force, which plays competitively well for low-skilled production in industries such as retail and apparel.

And while Vietnam lags behind China in its offerings for proximity to experienced suppliers, customers, complex rail, air, and ship networks, it may prove to be a valuable sea-bordering country for investment, especially in the manufacturing of exported goods, as China increases efforts to move manufacturing hubs and its labor population inland and westward by increasing costs in coastal regions.

New CIT Payment Deferral Incentives for SMEs in Vietnam
A decision concerning small and medium-sized enterprises’ corporate income tax was published, and thereby become effective, on April 6, 2011. This decision from the Vietnamese prime minister allows SMEs to defer their CIT settlements of one year. This new incentive should help the SMEs to overcome their hardships and also stimulate economic development in 2011.

New Decree Detailing Telecom Law of Vietnam
Decree No.25/2011/ND-CP of the government which was issued on April 6, 2011 provides enterprises, including domestic and foreign owned ones, some new regulations in the lucrative field of telecom. The decree stipulates details and specifies new guidelines for the execution of several articles of Telecom Law relating to ratio of ownership, foreign investment, commercial right fees and authorized capital.

Vietnam’s MoF Targets FIEs in New Tax Inspection Plan
Vietnam’s Ministry of Finance has set up an important tax inspection plan for the year 2011. The objective of the plan is to ensure that enterprises do not commit any tax law violations in Vietnam and might allow to collect tax arrears and to uncover transfer pricing cases.

Cavico Corporation to Build New Hydropower Station in Ninh Thuan
Vietnam’s NYSE-listed heavy construction firm Cavico Corporation has secured an investment license, allowing it to build and operate a 6-megawatt hydroelectric station downstream from the Tan My irrigation reservoir in Ninh Thuan.

Vietnam to Invest in Water-Related Infrastructure
Vietnam’s government aims to boost the nation’s shipping volume by more than 400 percent over the next 10 years by investing heavily in its ports.

Dezan Shira & Associates maintain offices in Hanoi and Ho Chi Minh City and can advise foreign investors on establishing operations in the country. The firm also provides due diligence, tax and accounting advice. Please email vietnam@dezshira.com, visit the practice at www.dezshira.com, or download the firm’s brochure here.

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