The Vietnamese government has assigned the Ministry of Industry and Trade (MoIT), the Ministry of Planning and Investment (MPI), the Ministry of Science and Technology, the Ministry of Finance (MoF), and others, to proactively work with its peers in ASEAN on initiatives to review and amend tariff policies and investment attraction policies, as part of the bloc’s efforts to lure in more investment and facilitate intra-bloc trade.
The ministries have also been assigned to jointly work on incentives for foreign direct investment (FDI) with ASEAN member states, especially in the context of the global minimum tax (GMT), which will take effect early next year. In Vietnam, a draft resolution on the GMT policy is currently under preparation by the MoF, to be submitted to the National Assembly next month.
The GMT rule was initiated by the Organisation for Economic Co-operation and Development (OECD). Accordingly, multinational enterprises with revenue above 750 million EUR (821.7 million USD) will be subject to a minimum tax rate of 15%. Many members of the OECD announced that they will apply the rule from 2024.
ASEAN member states have vowed to have a shared mechanism for harmonised tariffs, as they aim to make the region a more attractive investment destination. They are studying the latest FDI trends and emerging developments, such as international supply chain restructuring, international minimum tax, and energy transition investment, including investment in the electric vehicle industry in the region.
“We looked forward to a thorough study on the impact of international minimum tax towards the FDI flows to the region and strategy to bolster ASEAN’s investment competitiveness,” stated the chairman’s statement of the 43rd ASEAN Summit and Related Summits organised in Indonesia two weeks ago. “We also look forward to the publication of the Special ASEAN Investment Report 2023, prepared by the United Nations Conference on Trade and Development and with the support from the Indonesian government, at the earliest opportunity.”
According to the statement, the regional nations stressed the importance of promoting investment that contributes to sustainable development goals as mandated by the ASEAN Comprehensive Recovery Framework and the importance of enhancing ASEAN’s attractiveness as a sustainable investment destination. Therefore, they looked forward to the development of the ASEAN Sustainable Investment Guidelines for a conclusion in 2024. “We were also of the view that investment in higher added-value industries is central to achieving ASEAN as a seamlessly integrated single market, and production base,” read the statement.
Currently, ASEAN member states are also working on the ASEAN Trade in Goods Agreement (ATIGA) upgrade negotiations, which has held five rounds of negotiations since its launch in March 2022 and has entered into text-based negotiations since the third round of negotiations. They have just concluded two chapters, namely the micro, small, and medium-sized enterprises and the economic and technical cooperation, and are looking forward to the conclusion of the negotiations on most of the chapters in 2024.
The bloc aims to upgrade the ATIGA to be comprehensive in scope and cover not only traditional trade-in-goods elements but also emerging and future issues to ensure that the upgraded ATIGA will be a modern, comprehensive, forward-looking agreement and relevant to business communities and more responsive to regional and global developments.
Over a week ago, they also substantially concluded the Fifth Protocol to Amend the ASEAN Comprehensive Investment Agreement (ACIA) to provide greater certainty and transparency to investors on the investment regime in ASEAN, as well as to ensure ASEAN’s internal agreement for investment has continued relevance vis-à-vis its external agreements. It is expected that the protocol will be signed in 2024.
In addition to boosting the implementation of the Regional Comprehensive Economic Partnership (RCEP) Agreement, ASEAN member states have also signed the Second Protocol to Amend the Agreement on establishing the ASEAN-Australia-New Zealand Free Trade Area. They have also finalised the First Protocol to Amend the ASEAN Hong Kong, China Free Trade Agreement FTA (AHKFTA) and noted the progress made in ASEAN’s Free Trade Agreements (FTAs) with other external partners, in particular, the ASEAN-China Free Trade Area (ACFTA) 3.0 Upgrade Negotiations, the Review of the ASEAN-India Trade in Goods Agreement (AITIGA), the Work Programme of ASEAN-Hong Kong (China) Investment Agreement, and the ASEAN-Canada Free Trade Agreement, as well as the implementation of ASEAN’s various FTAs with its major trading partners, as part of the effort to ensure that ASEAN’s FTAs remain relevant and fully beneficial to businesses in the region.
The ASEAN economy is projected to maintain positive momentum, with growth rates of 4.6% in 2023 and 4.9% in 2024, total merchandise on trade and investments rose to record levels of 3.8 trillion USD and 224.4 billion USD, respectively, and total trade volume grew by 14.9% and FDI inflows growing by 5.5%.
Notably, the ASEAN region’s share in global trade and FDI last year hit 22.3 and 12.3%, respectively.
Vietnam’s Prime Minister Pham Minh Chinh underlined the advantages of ASEAN for investors. Specifically, the bloc covers eight FTAs, including the ASEAN Free Trade Area and the seven FTAs with seven important partners – consisting of the Regional Comprehensive Economic Partnership, which currently covers a market of 2.3 billion people and 26.2 trillion USD in global output, accounting for 32% of the world’s total GDP.
According to PM Chinh, many new initiatives are being boosted for ASEAN to seize opportunities from global development trends, such as the ASEAN Digital Framework, ASEAN Circular Economy Framework, ASEAN Blue Economy Framework, and ASEAN Carbon Neutrality Strategy. Additionally, ASEAN is now also upgrading its ATIGA and negotiating upgraded versions of its FTAs with China, the Republic of Korea, Japan, and India.
“This will make ASEAN a more lucrative shared market. ASEAN also needs to make long-term commitments on market opening and facilitating trade and investment,” PM Chinh stated. “For its part, Vietnam always create the most favourable conditions for investors in the spirit of benefit harmonisation and risk sharing.”
The ASEAN Secretariat said ASEAN’s trade and investment reforms will benefit Vietnam, while highly appreciating the investment facilitation in Vietnam, which it said has great potential to lure in more FDI both inside and outside ASEAN.
“The investment environment in Vietnam has improved over the years, as corroborated by survey findings from foreign chambers of commerce based in the country,” the secretariat said. “The government has introduced measures to simplify requirements, reduce steps and streamline processes to facilitate investment.”
For example, it continued, the government publishes information and updates on reforms, laws, policies and regulations relating to investment. Websites and online systems for enquiries have been established and are in the process of being upgraded. The government has mandated the Foreign Investment Agency under the MPI, to manage the National Foreign Investment Information System of web portals. Moreover, the Vietnam Business Forum in Vietnam also provides a channel for public-private sector consultation and attention to the concerns of investors, including bureaucratic matters.
According to the MPI, cumulatively as of August 20, 2023, ASEAN nations have poured a great deal of investment into Vietnam, including Singapore, with total registered capital of about 72.7 billion USD, followed by Thailand (13.6 billion USD), Malaysia (13 billion USD), Brunei (949.8 million USD), Indonesia (646.5 million USD), the Philippines (607.6 million USD), Laos (71.1 million USD), and Cambodia (70 million USD).
Investment from ASEAN partner countries also remains huge, with registered investment from Australia, China, Japan, the Republic of Korea, and New Zealand reaching 2 billion USD, 25.8 billion USD, 71 billion USD, more than 83 billion USD, and 208.3 million USD, respectively.
