By Francesco Guarascio
HANOI (Reuters) -South Korean companies, including Samsung Electronics, are worried about Vietnam’s plan to reform incentives for the high-tech sector, warning it could lead to higher costs for foreign investors and potentially undermine new investment, Korean officials have said.
The warning comes amid continued uncertainty about Vietnam’s trade relations with the U.S., its biggest export market. In addition to a 20% duty on imports from Vietnam applied since August, the White House has threatened 40% duties on goods relying on foreign components and possible tariffs on electronics, a sector dominated in Vietnam by Korean manufacturers.
For decades, South Korea has been one of the biggest investors in Vietnam, with total investment worth $92 billion at the end of 2024, roughly one-fifth of Vietnam’s gross domestic product. Samsung, the largest investor, accounts for more than one-tenth of Vietnam’s exports, and makes 60% of the phones it sells globally in Vietnam.
In an address to Vietnam’s Prime Minister Pham Minh Chinh at a public event on Monday, the head of the Korean Chamber of Commerce (Kocham) in Vietnam raised concerns about changes to a high-tech law which “may substantially affect the investment incentives previously granted.”
IMPACT ON ‘INVESTMENT EXPANSION’
“This could have adverse implications for Vietnam’s medium- and long-term development goals, including investment expansion, technology transfer, and human resource development,” said Ko Tae Yeon, according to a published copy of his speech.
The revised law scraps existing provisions granting some high-tech companies the “highest incentives” on taxes, duties and land, according to a draft under discussion in the Vietnamese National Assembly. It is scheduled for adoption in December.
For years, Samsung incurred effective taxes as low as 5% in the Southeast Asian country, but Vietnam last year introduced the 15% Global Minimum Tax on large multinationals, an initiative shepherded by the Organisation for Economic Cooperation and Development (OECD), undercutting earlier low-tax arrangements.
Hanoi has pledged compensation for top investors, but companies have repeatedly voiced concerns about access to it.
A Korean official, who declined to be named so that he could speak more freely, said Samsung was among the companies raising concerns about the reforms, although he said it had not threatened to freeze investments.
A second Korean official, who declined to be identified because he was not allowed to speak to the media, said the possible reduction in incentives might result in a heavier tax burden for Korean investors.
Samsung declined to comment.
Investment pledged by Korean companies rose 15% to $3.7 billion in the first 10 months of this year compared to a year earlier, according to data from Vietnam’s government. It stopped publishing figures on divestments earlier this year.
TRADE WORRIES
Amid global trade tensions, export-reliant Vietnam has embarked in wide-ranging reforms that are aimed at boosting national champions with preferential policies.
Kocham also called for “a fair and reasonable transshipment rule” to be agreed in trade talks between Vietnam and the U.S. to allow investors “to operate within a stable and predictable business environment,” according to the published statement.
Washington has threatened tariffs of 40% on its imports of Vietnamese goods, and from other Southeast Asian countries, which it has said rely excessively on components imported from China and other third countries. However, no clear criteria have been established to define which goods would face the higher duty.
(Reporting by Francesco Guarascio; Additional reporting by Phuong Nguyen and Khanh Vu; Editing by Kate Mayberry)
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