Over the past three decades, Vietnam has attracted over $400 billion in FDI, significantly contributing to export growth, job creation, and industrial infrastructure development.

However, most FDI projects remain concentrated in assembly and outsourcing sectors with low value-added content. Key high-tech industries - such as semiconductors, artificial intelligence, biotechnology, and advanced materials - still account for a small fraction of total investment.

This reality poses a serious challenge to Vietnam’s ambition of transitioning from a labor-intensive economy to one driven by innovation and cutting-edge technology.

The revised High-Tech Law seeks to address this gap.

According to a report from the Center for Science and Technology Communication, one of the proposed reforms is raising the bar for classifying a company as “high-tech.” Firms must now own or adopt core technologies at a level that qualifies as “innovative and developmental” or “mastered and improved.” This ensures that only projects with genuine technological depth receive preferential treatment, moving away from criteria based solely on capital investment or factory size.

The draft also splits high-tech enterprises into two groups with different tax incentives.

Group 1 includes companies with at least 30% domestic ownership. These firms will enjoy the most favorable tax treatment: a four-year corporate income tax exemption, a 50% reduction over the next nine years, and a 10% preferential tax rate for 15 years.

Group 2, consisting mainly of 100% foreign-owned FDI companies, will receive a two-year tax exemption, a 50% reduction for the next four years, and a 15% preferential tax rate.

This tiered structure aims to balance the need to attract FDI while encouraging Vietnamese firms to engage more deeply in high-tech value chains. It also prevents the misuse of state incentives that deliver little real technological benefit.

The draft law further proposes abolishing the existing certification process for high-tech enterprises, replacing it with a self-assessment mechanism based on clear criteria. While this is expected to reduce red tape and speed up incentive access, it also demands greater transparency and oversight. Transitional rules will be essential to ensure that eligible companies do not lose benefits under the new framework.

Double-impact reform: Beyond FDI attraction

The revised law is also designed to foster a more cohesive high-tech ecosystem, enabling foreign capital to better disseminate technology to local firms.

High-tech FDI brings more than just capital. It comes with advanced technologies, modern management practices, global technical standards, and training for human resources - especially in technology transfer. These elements are vital to building a strong domestic supply chain.

Experiences from South Korea, Singapore, and India show that attracting tech giants like Samsung, Intel, or Google depends not only on tax incentives but also on stable legal environments, advanced research infrastructure, and robust linkages between foreign investors, local companies, and research institutions.

Vietnam holds clear advantages, such as a large, young workforce, a sizeable domestic market, and a strategic geographic position. However, to turn these into real competitive strengths, comprehensive and aligned support policies are needed.

Experts suggest that to make the new law truly magnetic for strategic FDI, Vietnam must first measure the technological absorption capacity of domestic enterprises. This would allow for better-designed support mechanisms to elevate local players.

Moreover, FDI should be encouraged based on clear commitments to technology transfer, workforce training, or joint R&D projects.

Linkages between FDI firms, local businesses, and academic institutions must be strengthened through co-funded research programs, innovation hubs, and collaborative development clusters.

If implemented effectively, the amended High-Tech Law will create a dual impact: attracting higher-quality FDI and boosting the capacity of local enterprises. Together, these dynamics will help build a sustainable innovation ecosystem.

Such a shift is crucial not only for drawing in global tech giants but also for empowering Vietnam to independently conduct research, produce advanced technologies, and transform its growth model - from resource-based to innovation-driven and sustainable.

Tam An