The Urgency of Green Manufacturing Continues to Grow

As Vietnam fully integrates into the global economy, attracting Foreign Direct Investment (FDI) is increasingly influenced by competition from other attractive markets. Green and high-tech manufacturing is identified as a development direction that will enhance Vietnam's competitiveness.

The Urgency of Green Manufacturing Continues to Grow
Photo by Tran Phu / Unsplash

Vietnam faces numerous challenges in continuing to attract FDI, especially when competing with "magnets" like India and Indonesia in Asia. To attract FDI post-Covid, India has offered a clean land fund of 460,000 hectares and invested $1.5 trillion in infrastructure, along with tax exemptions for new investment projects. This strategy has attracted major corporations like Samsung, Apple, Google Pegatron, increasing India's FDI annual growth rate to 9% over 2018-2022, compared to Vietnam's 4%.

Indonesia, on the other hand, has attracted significant FDI in the electric vehicle battery manufacturing, electric vehicles, and cloud computing sectors, with a recent five-year FDI growth rate of 13% annually.

A critical issue for Vietnam is ensuring a constant power supply for nationwide production, as several large FDI enterprises experienced power shortages in Northern Vietnam during the peak season of 2023. Intel, a leading semiconductor company, also expressed concerns about potential power shortages last year.

Vietnam's adoption of a global minimum tax of 15% for multinational corporations (MNCs) from January 1, 2024, poses another challenge. MNCs with revenues over 750 million euros per year enjoying Vietnam's investment incentives must now pay an additional tax to meet the global minimum tax rate, potentially diminishing the effectiveness of Vietnam's tax incentives.

Green, Sustainable Manufacturing: A Global Race
Developing green and modern industrial parks to promote sustainable growth in Vietnam is seen as a crucial and timely solution. Continuing to attract FDI into high-tech sectors is essential as traditional industrial parks with manufacturing plants have lost their competitive edge.

The development of green industrial zones is part of the move towards cleaner production and a circular economy model, aiming for carbon neutrality (Net zero) by 2050, a global trend.

VSIP Group, a joint venture between Becamex IDC in Binh Duong and Singapore's leading Sembcorp Industries, is a prime example of developing modern industrial parks with strict environmental standards. Notably, the VSIP III project in Binh Duong, a nearly 6,500 billion VND investment over 1,000 hectares, is set to house the world's first carbon-neutral Lego factory, a $1 billion investment expected to start production in late 2024.

Source: Dân Việt