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Samsung licensed despite concerns

South Korean tech giant Samsung Group’s recent investment certificate for a large-scale research and development centre in Hanoi has been met with mixed sentiments as many believe that the company’s investment demands may outweigh the benefits to Vietnam.

South Korean tech giant Samsung Group’s recent investment certificate for a large-scale research and development centre in Hanoi has been met with mixed sentiments as many believe that the company’s investment demands may outweigh the benefits to Vietnam.

 

 

This $300-million project, which would be Vietnam’s largest ever research and development (R&D) centre, also marks the first time a global tech giant has chosen Vietnam as an R&D hub.

Foreign tech firms such as Bosch, HP, Intel, and Samsung have previously funnelled considerable funds into R&D activities in Vietnam. These investments, however, are project components – not independent projects as is Samsung case.

Once completed, the 116,000-square metre R&D centre will consist of 21 stories, as well as two basements, and is set to start operations in the first half of 2020, employing a workforce of about 4,000.

A Samsung Electronics Vietnam (SEV) representative said that the project may begin construction late this year, in accordance with Korean quality standards.

Despite the benefits that this centre will engender in terms of employment and raising the profile of Vietnam as an R&D hub, recent media reports have questioned what long-term gains Vietnam will enjoy from it. This suspicious interpretation of the project is due, at least in part, to the 12 demands that the Korean tech giant presented to the Vietnamese government before it would invest in the project. Some include land rent exemption for 50 years; tax exemption for machinery and equipment imports, building materials, and facilities serving R&D activities, and the right to transfer assets established on site, as well as granting land use rights to other parties without any limitations, provided that there is a reasonable cause.

However, Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, noted that interpreting Samsung’s proposals as “demands” is somewhat unfair as many of the proposals are already enshrined in current Vietnamese laws, including the transfer of assets established on site and land use rights for another party.

“For every investor, the more incentives they are given the better. Their proposals and what we can accept are two different stories. Saying that Samsung has demanded too much would be unfair,” Mai commented.

Mai, a noted economist, cited a previous example concerning US chip-making giant Intel. He noted that before it would invest in Vietnam, the company presented the Vietnamese government with a list of 28 “demands”. The Vietnamese government accepted 22 of its demands, including the provision of financial support for the project, which is still an unprecedented privilege enjoyed by any foreign investor.

Mai said that this decision was justified because “at that time Intel’s arrival was of great importance to help Vietnam appeal to other global players”.

Indeed, a raft of global tech giants followed in Intel’s footsteps, including Samsung, LG, and Microsoft.

“The Vietnamese government has poured a lot of money into building national R&D centres which have generated below-expected results. Now, Samsung willingly brings $300 million into Vietnam, then recruits and trains 4,000 hi-tech staff members. This alone is encouraging and worth the high incentives,” Mai added.

Nguyen Duc

 

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