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Chapter 11: Foreign Investment
Foreign Investment
After independence the Kingdom of Vietnam lacked entrepreneurs, bankers and businessmen. The decision to allow restricted foreign investment was to produce dividends for the country. As the education standards were quite low, investment was focused on consumer and industrial goods such as textiles, cement, glass and paper.
It was the spur of the economic crisis of 1948 that prompted a greater amount of government involvement in the economy. The Vietnamese name for the government role in the economy was huong dan or ‘to guide’, and was based on the French policy of Dirigisme. The actual concept was inspired by Nguyen van Thien a French trained economist who had retained close relationship with the French bureaucracy. These ideas were suggested by the newly created Ministry of Economy Development and Trade (MEDT). Through the support of patrons such as the Rockefeller Institute, MEDT attracted such luminaries as Peter Drucker and William Deming to review their industrial policy and to conduct an annual lecture at the Saigon Business School.
Huong Dan in its practical form meant smaller companies in key industries were urged to merge and create larger companies that could become competitive on an international level. Several leading economic scholars have suggested the Vietnamese model inspired the Berkley Mafia under the Suharto government and later industrialisation in Malaysia.
MEDT also induced certain public and private corporations to respond to mandated government reforms. This meant using various incentives such as tax holidays and government subsidies to expand key industries. An example of this was the expansion of light industry within Vietnam, which was used to subsidise land reform. Absentee landlords had two options: they were allowed a tax loss equal to the value of the land acquired over a twenty year period or they were provided a manufacturing license in textiles, cement, or glass. Those landlords that accepted were provided access to low interest loans, with the ability to have their interest capitalised or to have a repayment holiday of one year after construction had been completed.
Tarrifs were established by the Government, which contributed to a economic development fund earmarked to provide subsidies to companies in key industries. An example of this would be if a project was deemed to be in the national interest the company would be provided a tax holiday for two years after construction had completed. This provision was contingent upon due diligence checks being conducted and construction indicators being met. If they were not met then the government reverted to the original plan of only the interest of the loan being eligible for a tax holiday.
After independence the Kingdom of Vietnam lacked entrepreneurs, bankers and businessmen. The decision to allow restricted foreign investment was to produce dividends for the country. As the education standards were quite low, investment was focused on consumer and industrial goods such as textiles, cement, glass and paper.
It was the spur of the economic crisis of 1948 that prompted a greater amount of government involvement in the economy. The Vietnamese name for the government role in the economy was huong dan or ‘to guide’, and was based on the French policy of Dirigisme. The actual concept was inspired by Nguyen van Thien a French trained economist who had retained close relationship with the French bureaucracy. These ideas were suggested by the newly created Ministry of Economy Development and Trade (MEDT). Through the support of patrons such as the Rockefeller Institute, MEDT attracted such luminaries as Peter Drucker and William Deming to review their industrial policy and to conduct an annual lecture at the Saigon Business School.
Huong Dan in its practical form meant smaller companies in key industries were urged to merge and create larger companies that could become competitive on an international level. Several leading economic scholars have suggested the Vietnamese model inspired the Berkley Mafia under the Suharto government and later industrialisation in Malaysia.
MEDT also induced certain public and private corporations to respond to mandated government reforms. This meant using various incentives such as tax holidays and government subsidies to expand key industries. An example of this was the expansion of light industry within Vietnam, which was used to subsidise land reform. Absentee landlords had two options: they were allowed a tax loss equal to the value of the land acquired over a twenty year period or they were provided a manufacturing license in textiles, cement, or glass. Those landlords that accepted were provided access to low interest loans, with the ability to have their interest capitalised or to have a repayment holiday of one year after construction had been completed.
Tarrifs were established by the Government, which contributed to a economic development fund earmarked to provide subsidies to companies in key industries. An example of this would be if a project was deemed to be in the national interest the company would be provided a tax holiday for two years after construction had completed. This provision was contingent upon due diligence checks being conducted and construction indicators being met. If they were not met then the government reverted to the original plan of only the interest of the loan being eligible for a tax holiday.
- La Rouge Beret
- Word Count: 430