Vietnam is facing a big question in the global investment attraction competition: will we be bold enough to build a breakthrough investment support mechanism or will we continue to choose a safe and prudent path to limit risks to the state budget?
If Decree 182/2024/ND-CP is the first step, the new draft Decree shows efforts to improve this mechanism after a period of actual implementation.
This question is clearly raised in the Draft Decree on the establishment, management and use of the Investment Support Fund developed by the Ministry of Finance to replace Decree No. 182/2024/ND-CP.[1] This is not only a technical document guiding the implementation of the Law on Investment 2025 but also reflects Vietnam's policy thinking in a period of competition to attract high-tech projects, research and development (R&D) centers, semiconductors, artificial intelligence and strategic technology industries that are taking place increasingly fiercely on a scale Global.
From "tax incentives" to "monetary assistance"
For decades, investment incentives in Vietnam have been largely based on traditional instruments such as corporate income tax incentives, land rent exemptions or other indirect financial policies. However, the emergence of the Global Minimum Tax has significantly changed the effectiveness of this preferential model.
When multinational corporations covered by the Global Minimum Tax must ensure an effective tax rate of at least 15%, most of the tax incentives that the host country offers to investors can be invalidated. In other words, the tax exempted in Vietnam can simply be collected additionally in the country where the parent company is located.
In this context, many countries have turned to forms of direct cash support, investment cost subsidies, or research and development support. The establishment of the Investment Support Fund in Vietnam is a policy response to this trend.
According to the Ministry of Finance, the Fund is designed to stabilize the investment environment, encourage multinational corporations to expand investment, attract strategic investors and support the development of high-tech and strategic technology fields in Vietnam. At the same time, this is also a tool to maintain Vietnam's investment attractiveness in the context of the application of the Global Minimum Tax.
If Decree 182/2024/ND-CP is the first step, the new draft Decree shows efforts to improve this mechanism after a period of actual implementation.
The new draft is choosing caution
It is worth noting that this draft does not expand the scope of support in a stronger direction, but on the contrary, tends to tighten and standardize the conditions for enjoying support. For example, the Ministry of Science and Technology proposes to add enterprises manufacturing, packaging and testing semiconductor chips and enterprises producing key digital technology products to the category of support from the Fund. However, the Ministry of Finance believes that these subjects have enjoyed special incentives and supports under the Law on Investment and other specialized policies, so the Investment Support Fund should only focus on high-tech enterprises and strategic technologies. This is an important signal that the Ministry of Finance is choosing an approach to control the scope of support instead of expanding too quickly.
Similarly, the draft also removes a number of support items that used to exist in Decree 182/2024/ND-CP, especially support for investment costs to create fixed assets. According to the drafting agency's explanation, maintaining this item may lead to the risk of duplicate support with depreciation costs and create difficulties in controlling the obligation to maintain assets of enterprises. In terms of budget management, this is an affordable option. However, from the perspective of international investment competition, the narrowing of direct support may reduce the attractiveness of the policy for corporations considering new investment locations.
Why do many people want the Fund to expand its subjects?
From the perspective of international practice, the race to attract high-tech investment is no longer a race on taxes but has become a race for subsidies.
The United States has the CHIPS and Science Act with tens of billions of US dollars in support for the semiconductor industry. The European Union implements the European Chips Act. South Korea, Japan, Singapore and many other countries all apply direct financial support programs for high-tech enterprises. In that context, many experts believe that if the Investment Support Fund only focuses on a narrow group of subjects, it is very difficult to create a real competitive advantage.
The proposal of the Ministry of Science and Technology to supplement enterprises producing semiconductor chips, packaging, testing semiconductors or key digital technology products comes from this very fact. These industries are the focus of strategic competition between countries and are areas where Vietnam wishes to participate more deeply in the global value chain.
Risks of an overly generous policy
While the desire to make a breakthrough is understandable, a mechanism to support cash investment always comes with significant risks.
The first is the risk of budget efficiency.
Unlike tax incentives that only arise when businesses generate profits, monetary support from the Fund is an actual budget expenditure. If the wrong target is selected or the project does not achieve the expected efficiency, the State may have to bear significant costs.
The second is the risk of policy competition between sectors.
Once the Fund expands its support for semiconductors, digital technology, green energy, or other sectors, pressure to expand to other priority industries will emerge. This can disperse resources and cause the Fund to lose its focus.
The third is governance risk.
The current draft has designed a relatively tight support reimbursement mechanism in case enterprises do not meet the conditions, make incorrect declarations or receive duplicate support. Businesses may have to repay the entire support along with the corresponding interest and penalties.
The addition of support recovery mechanisms shows that the drafting agency pays great attention to budget risk control factors. However, international experience shows that the recovery of subsidies after disbursement is not simple in practice, especially for multinational corporations with complex investment structures.
Source: Government News
What does Vietnam need more: breakthrough or safety?
From the perspective of public financial management, the current draft can be considered quite reasonable. The fund continues to exist as a new investment support tool, while the support criteria are clarified, the budget management mechanism is tighter, and the scope of support is better controlled. But from the perspective of international investment competition, the draft is still more defensive than offensive.
While other countries are actively designing large-scale support packages to bring strategic technology projects back to their homes, Vietnam still seems to prioritize the goal of ensuring budget safety and avoiding implementation risks. The problem is that global technology corporations often make investment decisions based on relative comparisons between countries.
If Vietnam's level of support is too cautious while competing countries are willing to provide more attractive support packages, its ability to attract high-value-added projects will be affected. Conversely, if support is expanded too quickly without a mechanism to evaluate investment efficiency after support, Vietnam may fall into a costly and inefficient subsidy competition spiral.
A harmonious direction
Perhaps the optimal choice does not lie in the two extremes of "breakthrough" or "safety". What Vietnam needs is a mechanism that is flexible enough to make breakthroughs in truly strategic areas while maintaining fiscal discipline and accountability.
In this direction, the Investment Support Fund may continue to maintain a relatively narrow scope of support at the initial stage but should design a mechanism that allows the Government or the Prime Minister to proactively extend support to some particularly important areas when necessary. such as semiconductors, artificial intelligence, quantum computing, or dual-use defense technologies.
At the same time, the evaluation of the effectiveness of support needs to shift from the mindset of "how much to spend" to "what to achieve". Criteria such as added value created in Vietnam, the level of technology transfer, the number of high-quality jobs, research and development capacity and contribution to the domestic supply chain should become central measures of the policy.
Conclusion
The draft Decree on the Investment Support Fund is reflecting a remarkable policy choice of Vietnam: to continue to maintain new investment support instruments but in the direction of tighter control over the scope, conditions and responsibilities of budget use. This is a well-founded choice in the context of limited public resources and the mechanism to support cash investment is still a relatively new policy in Vietnam. However, as the competition to attract strategic technology projects around the world intensifies, questions about the boldness of the policy will continue to be raised.
In the end, the success of the Investment Support Fund may not lie in more or less support, but in the ability to select the right projects that can create the highest added value for the Vietnamese economy in the long term. That is the real line between a "safe" policy and a "breakthrough" policy.
Lawyer Nguyen Van Phuc
HM&P Law Firm
