Vietnam Fails to Secure Intel, LG Chem Projects Amid Incentive Shortfall

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Vietnam’s potential to attract significant investments from global giants like Intel and LG Chem has been hampered by a deficiency in investment incentives, as highlighted in a document from the country’s Ministry of Planning and Investment reviewed by Reuters.

According to the ministry’s assessment, U.S. chipmaker Intel had originally proposed a $3.3 billion investment in Vietnam, contingent upon receiving cash support amounting to 15% of the project’s cost. However, due to the absence of such incentives, Intel opted to relocate its project to Poland instead. Similarly, South Korea’s LG Chem Ltd intended to pursue a battery project in Vietnam but requested that the country cover 30% of the investment costs. When this support was not forthcoming, LG Chem diverted its investment to Indonesia.

Both Intel and LG Chem declined to provide immediate comment on the ministry’s assessment.

The Ministry of Planning and Investment document underlined the consequences of Vietnam’s regulatory framework on potential investments, noting that several large corporations had initially explored opportunities in Vietnam only to choose other countries that offer more robust investment supports.

Vietnam, a crucial manufacturing hub for global tech giants such as Samsung Electronics, Foxconn, and Intel, heavily relies on foreign direct investment (FDI) to fuel its economic growth. Approximately 70% of the country’s total exports stem from companies with foreign investments.

The ministry’s document corroborated an earlier Reuters report from November, which detailed Intel’s decision to shelve its planned expansion in Vietnam, a move that would have significantly expanded its operations in the Southeast Asian region.

Furthermore, the document revealed that Austria-based semiconductor manufacturer AT&S redirected its investment plans to Malaysia after failing to secure desired investment supports in Vietnam. Meanwhile, Samsung Electronics, another key player in Vietnam’s manufacturing landscape, has started shifting some of its production to India.

Neither AT&S nor Samsung Electronics responded immediately to requests for comment on these developments.

The global investment community has been closely monitoring Vietnam’s efforts to establish an investment incentive fund, particularly after the country’s parliament endorsed the OECD-led global minimum corporate tax rate of 15% last year. This policy change has effectively increased the effective tax burden on corporations operating in Vietnam.

As Vietnam continues to refine its investment policies, the outcomes of these decisions will likely shape its ability to attract and retain significant foreign investments in the coming years.