VietNamNet Bridge – The Thai Nguyen provincial People’s Committee has asked the provincial People’s Council to give huge investment incentives to Samsung in exchange for the South Korean investor’s project worth $3 billion.

If the suggested investment incentives get approval, Samsung will enjoy preferential corporate income tax rate of 10 percent for 30 years, including tax exemption for the first four years, 50 percent tax reduction for the next nine years, and 50 percent tax reduction for another three-year period.

Local authorities also plan to exempt the investor from land rents for the whole life of the project, prop up 50 percent of the rents Samsung has to pay for using the infrastructure items in the industrial zone, and ask for the lowering of the requirements for research and development (R&D) at Samsung.

If Samsung can get the incentives, it will invest $3 billion more in Vietnam. It will not only make mobile phones, but also laptops, digital cameras, smart TVs and medical equipments in Thai Nguyen province.

As such, following Bac Ninh, it is now Thai Nguyen province which plans huge investment incentives, which “go beyond the current laws” as described by economists, for the investor from South Korea.

The leaders of the province hope that the huge investment incentives can help persuade the big investor to set up the factory in the locality, which will help turn Thai Nguyen into a technology base in the world’s technology map.

The same thing was expected by the Bac Ninh provincial authorities when luring Samsung to the province to set up an electronics manufacturing factory. They hoped Samsung will help bring other investors, who come to the locality to produce components to provide to Samsung.

Analysts commented that Bac Ninh and Thai Nguyen, like other provinces and cities, have been competing with each other by offering investment incentives which are higher than ones stipulated by current laws.

However, the analysts have warned that huge investments are unlikely to attract more investments.

They pointed out that if the two provinces offer investment incentives within the framework set by the State, they both will get benefits, but if they “break the framework”, the benefits will be much lower.

In principle, real investors will spend money to develop projects in places with a good investment environment, where they can see great potential, even if they cannot enjoy special treatment.

Meanwhile, overly high incentives and low requirements can only attract the kind of investors who lean on incentives to exist.

An economist said local authorities should learn lessons from Ha Tinh province, which offers huge investment incentives to Formosa, the investor from Taiwan.

At first, Formosa promised that it will make steel products which cannot be made domestically. Later, the investor asked to put one million tons of long steel on the market, products which can be made in Vietnam, thus creating major concern for domestic steel manufacturers.

“Give him an inch and he will take a yard, this is what Formosa is doing in Vietnam,” he said.

Tran Thuy