Time for high tech investment looks to Thailand and Vietnam

Thailand and Vietnam have been the top destinations for travelers from the United States and Europe.  Their beautiful natural views, good weather, friendly people and relevant low prices are all the reasons enough to attract anyone who wants a good travel experience.  However, these nations have much more to offer than tourism. 

As seen from the chart above from World Bank, the population of Vietnam and Thailand has been stable for the pass twenty years, and Vietnam is growing more rapidly. They used to look to China as a role model for fast development into world’s manufacturer, now that many plants move to India, some wen to other South East Asian countries including Thailand and Vietnam, they have learned that the technology can transform them into a great manufacturing base much quicker than before, and without bearing the pollution deficit.

Vietnam – More Investment Friendly Policy

Vietnam continues to welcome foreign direct investment (FDI), and the government has policies in place that are broadly conducive to U.S. investment. Factors that attract foreign investment include recently-signed free trade agreements, political stability, ongoing economic reforms, a young and increasingly urbanized population, and competitive labor costs. Vietnam has received USD 231 billion in FDI from 1988 through 2020, per the Ministry of Public Affairs (MPI), which oversees foreign investments.

On January 1, 2021, Vietnam’s Securities Law and new Labor Code Law came into force. The Securities Law formally states the government’s intention to remove foreign ownership limits for investments in most industries, and the new Labor Code provides more contract flexibility – including provisions that make it easier for an employer to dismiss an employee and allow workers to join independent trade unions – although no such independent trade unions yet exist in Vietnam. On June 17, 2020, Vietnam passed a revised Investment Law and a new Public Private Partnership Law, both designed to encourage foreign investment into large infrastructure projects, reduce the burden on the government to finance such projects, and increase linkages between foreign investors and the Vietnamese private sector.

Thailand – R&D, Education First

Thailand has had an impressive economic development trajectory over the past decades, with annual growth rates at around 8% before the Asian Financial Crisis, and more moderate growth since then. Incomes have been increasing rapidly throughout the past half century due to rapid demographic transition, moving agricultural workers into manufacturing. Thailand joined the group of upper middle-income countries in the early 2010s. Foreign direct investment (FDI) and integration in global value chains have been key in Thailand’s development process. Inward FDI’s share in GDP increased to 50% by 2017.

More recently, outward investments have become an important pillar in Thailand’s upgrading in global and regional value chains. The emerging global economic crisis related to the COVID-19 pandemic is expected to bring this long period of growth to a sudden halt. The economy is predicted to contract by approximately 7% in 2020, where exports and FDI are expected to slow even more.

In terms of innovation capacity, important progress is being made. Research and development (R&D) has increased in recent years (Figure 1.5), resulting in a patenting surge of Thailand-based inventions. Nonetheless, total innovation output need to be accelerated to catch up with comparator countries, such
as Malaysia or Singapore.

Thailand’s investment promotion policy aims to attract investment into research and development (R&D) projects in the 10 target sectors and particularly in the area of four core technologies in which Thailand is considered to have potential to enhance the country’s overall competitiveness, namely biotechnology,
nanotechnology, advanced material technology and digital technology. Projects must involve a component on technology transfer by cooperating with educational and research institutions, for example via programs of the National Science and Technology Development Agency (NSTDA) or the Thailand Institute of Scientific and Technological Research, under MHESI. Technology-based projects can receive a corporate income tax exemption of up to 13 years from the BOI. If considered as high-impact investments under the newly enforced Competitiveness Enhancement Act 2017, tax exemptions may be granted for up to 15 years. Beyond programs of the BOI and MHESI, other government agencies – such as the Revenue Department – are also providing support and incentives to improve innovation capacity.

Reference:
1. Trade.Gov https://www.trade.gov/country-commercial-guides/vietnam-investment-climate-statement
2. OECD Investment Policy Review https://www.oecd.org/countries/thailand/OECD-Investment-Policy-Review-Thailand-Highlights.pdf

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