TEEMA Constructs a Taiwan-Vietnam Collaboration Platform

Global Enterprises Set Foot in Vietnam

Since the beginning of the US-China trade war in 2018, Northern Vietnam, which is geographically close to China, has become a main production site for foreign companies.
Because of its outstanding result in pandemic control, Vietnam, who is also a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), has become one of the top destinations for multinational enterprises in supply chain restructuring.
Although TEEMA has not been able to organize a physical delegation to visit Vietnam during the pandemic, in order to help Taiwanese companies to enter the local market, TEEMA established the Vietnam Working Group this year to strengthen contact with member manufacturers in Vietnam and to actively cooperate with local counterpart association, Vietnam Electronic Industries Association (VEIA). Through the industry information provided by VEIA and TEEMA's link with the Economic Division of Taipei Economic and Cultural Office in Vietnam and Vietnam Economic and Cultural office in Taipei, the working group is able to provide accurate and reliable trade and investment information to Taiwanese companies.

Taiwanese Companies in Vietnam

According to statistics from the Ministry of Planning and Investment of Vietnam, from 1988 to March 2021, there were 2,802 Taiwanese investment projects in Vietnam (including new investments and divestments), ranking fourth in foreign investment in Vietnam. In the past, the Southern Vietnam region, including Binh Duong Province, Dong Nai Province and Ho Chi Minh City, was a major investment destination for Taiwanese businesses. Because Northern Vietnam is close to the source of raw materials from China, many Taiwanese businesses are looking into the area. For example, Ta Ya Electric Wire & Cable, a member of TEEMA, set up a factory in Dong Nai Province in Southern Vietnam in 1995, and it set up a branch office in Hai Duong Province in Northern Vietnam in 2004. It is also the first Taiwanese company listed in Vietnam.
Taiwanese electronics manufacturers such as Foxconn, Compal, Wistron, Getac, and Pegatron have also set up production sites in Vietnam.

Investment Overview in Northern Vietnam

Since 2017, due to the increase in land and labor costs and the saturation of industrial zones, companies have shifted their investment focus from Southern Vietnam to Northern Vietnam. Northern Vietnam is geographically bordered by China, giving it easy access to imported components. In addition, under the “Made in Vietnam 2030", in order to close the gap in economic development between the North and the South, the Vietnamese government has designated Northern Vietnam as a “high-tech science park". Companies including Foxconn, Compal, and Yang Fast Optoelectronics have invested in the region.

Investment Overview in Central and Southern Vietnam

Vietnam has four major international seaports, one of which is located in Da Nang in Central Vietnam. Before the pandemic, in addition to direct flights to Ho Chi Minh City and Hanoi, the route from Taiwan to Da Nang has become popular, which has also accelerated the industry development in Central Vietnam. Southern Vietnam is an investment center for Taiwanese businesses in early years.
According to the statistic from the Ministry of Planning and Investment, there are currently about 6,000 Taiwanese companies investing in Vietnam, and the proportion of investment in Southern Vietnam is as high as 50%. The industries that Taiwanese companies invest in Southern Vietnam are mainly traditional industries, metal machinery industry, automobile and motorcycle parts, electrical equipment industry, and consumer electronics industry, focusing on Vietnam's domestic demand. For example, TEEMA member company TECO mainly produces highefficiency IE3 motors in Binh Duong Province, Vietnam.

Advice for Investing in Vietnam

Vietnam is becoming a rising star among foreign investments. In order to assist those interested in investing in Vietnam to understand the local investment environment, Mr. Richard Lee, Chairman of TEEMA, visited Mr. Nguyen Anh Dung, Director of Vietnam Economic and Cultural Office in Taipei, in March 2020 and participated in the “Investing in Vietnam Forum" hosted by the Ministry of Economic Affairs in February 2021. Under Chairman Lee's directive, TEEMA established the Vietnam Working Group and compiled the common problems encountered by Taiwanese companies in Vietnam and related suggestions which are as follow:
Suggestions related to local tax laws:
● Taiwanese companies must apply for change of Investment Registration Certificate (IRC) whenever there is an increase in investment or production projects. Sometimes they are faced with obstacles and delays in the process. A single contact should be provided for manufacturers to appeal and assist in resolving related disputes.
● Improve import and export regulations. The time for customs clearance is long and unpredictable, which affects production and delivery for these companies.
● The laws of the Vietnamese government should be updated in time and maintain consistency between the central and local governments, so that enterprises can accelerate and expand investment activities in Vietnam more efficiently.
● According to the Vietnamese tax law, when bad debts occur, a client's proof of liquidation is required to deduct taxes. However, it is not feasible in practice because the client has already gone bankrupt and will not handle the liquidation. Therefore, the law should be amended. When a company wins the case in court and gets no results from compulsory execution procedure, the amount should be deducted and tax credited.
● Collect and translate local laws and regulations from Vietnamese to Mandarin.
Suggestions related to local labor laws:
● Increase the number of science and engineering talents. Companies in Haiphong can only go to Hanoi to recruit or seek cooperation with education institutes, which greatly increases operating costs. A science and technology school should be established in Haiphong as soon as possible to provide professional manpower locally.
● The current regulations on overtime work are too rigid (12 hours/week, 30 hours/month, 200 hours/year). When there are new models, rush orders or during busy seasons, manufacturers are often struggling to find extra workers. It is suggested to revise the law and introduce flexible working hours to increase the competitiveness of manufacturers.
● The valid period of work visa should be extended.
Suggestions related to the pandemic:
● The pandemic measures should be more flexible. Shortterm business visits should be included in the quarantinefree mechanism (as in Singapore), and employee dormitories should be included in the quarantine premises.
● Countries with good pandemic control (such as Taiwan) should have easier entry measures.
● Improve medical services.
Assistance needed from Taiwanese government:
● Due to the large amount of foreign investment in Vietnam, the cost of land in Vietnam has risen. South Korea's Samsung received the "4 exemption and 9 reduction" tax plan from negotiations with the Vietnamese government (tax exemption for the first 4 years, tax halved for the next 9 years). Taiwanese government should assist Taiwanese businesses investing in Vietnam to gain similar preferential treatment.
● Presently, there are schools for Taiwanese children in Ho Chi Minh City, but in Northern Vietnam, there are only international schools. The tuition fees of international schools are expensive. As a result, Taiwanese expatriates often leave their children to study in Taiwan. We would recommend that a Taiwanese school be opened in Northern Vietnam.
● Taiwanese government should gather the strength of Taiwanese SMEs through industry associations and establish science and technology parks or industrial zones in Vietnam. By increasing the economies of scale, we can negotiate for better incentives to create a complete supply chain cluster.
● In the US-China trade war, the US and Japanese governments established funds to help companies move out of China. We hope that our government will provide low-interest rates to assist in the construction and relocation of factories.

TEEMA Submitted Proposals Twice to the Vietnamese Government

In 2008, the Vietnamese government were promoting industrial transformation, and it proposed more favorable tax policies for the electronic manufacturing industries that are willing to invest in Northern Vietnam. In consideration of these policies, TEEMA organized the "2008 TEEMA Delegation to Northern Vietnam". TEEMA proposed suggestions while visiting the Vietnamese government agencies, addressing issues such as exchange rate, public infrastructure, power supply system and power generation equipment, labor, etc.
TEEMA also recommended that the Vietnamese government organize regulations briefings to help Taiwanese companies to familiarize with local laws and solidify its commitments to Taiwan businesses to protect their investment rights and interests.
In 2011, TEEMA organized a delegation to visit the Vietnam's Ministry of Planning and Investment. The delegation was received by the then Minister Vu Hong Phuc.
TEEMA once again presented the "Proposal of Development in Trade and Investment" to the Vietnamese government. The delegation leader, Mr. Arthur Chiao, who was also Chairman of TEEMA at the time, said that the Vietnamese government's handling of the exchange rate has left a deep impression on TEEMA members. If other deficiencies can be improved, investor confidence will continue to grow. TEEMA also visited the production bases of member manufacturers such as Taya and Getac in Northern Vietnam, listened to high-level local Taiwanese managers sharing their experience, related laws and regulations, and learned about the factory setups and the current production line operations.
When the US-China trade war broke out in 2018-2019, in order to immediately assist Taiwanese businesses in assessing production bases transfer, TEEMA organized the "2019 TEEMA Delegation to Northern Vietnam". Despite the changes in the investment environment in Vietnam, Taiwanese companies still think that Vietnam is a great country to invest.

TEEMA Assists Its Member to Expand Sales in the Vietnamese Market

In addition to helping members to understand the local investment environment, TEEMA has been actively organizing exhibition groups to participate in Vietnamese exhibitions since 2000, such as " Electric & Power Vietnam ", "Vietnam Electronics & Telecom", " NEPCON Vietnam ", etc.
Among them, some exhibitors found that Vietnam's electrical and electronic industry was developing rapidly, and local competitions lacked management experience, therefore they entered the Vietnamese market because of the advantages of Taiwanese companies' competitiveness.