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Sep 1, 2010 (Vol. 30, No. 15)

Vietnam on Path to Free Market Economy

Economic Liberalization Has Produced Some Results, but Much Work Remains to Be Done

  • Commercial Opportunities

    The promulgated tax incentives include:

    • a 10% corporate income tax, tax exemption for the first four years of profit-making operations, and a 50% tax exemption for the following nine years,
    • exemption for duties on goods that will be fixed assets,
    • exemption of VAT for imported machinery needed for production, and
    • low rates for land rental.

    Several Vietnam-headquartered biotech firms that are making names for themselves are affiliated with local institutes. Hanoi-based Vabiotech is affiliated with the National Institute of Hygiene and Epidemiology. It produces vaccines against hepatitis A and B, Japanese encephalitis, cholera, avian flu, and rabies. 

    Mekostem, reportedly the country’s first stem cell bank, is located in Ho Chi Minh City. It is a collaboration between MekoPhar, which produces OTC products and antibiotics, and the Ministry of Science and Technology.

    The Saigon Hi-Tech Park has managed to attract a number of foreign biotechnology firms.

    • NuGen is setting up a plant in Vietnam to manufacture diagnostic kits for pregnancy, HIV, hepatitis, cancer, and addictive drugs. 
    • Mamprotech Vietnam is a JV with Australia’s Mamprotech for the production of fully glycosylated recombinant human proteins and the creation of cell clones.
    • Novatek International and Teguh Pharma are collaborating to provide expertise in planning and engineering.
    • Quintiles opened an office in Hanoi in 2005 to work with the Ministry Health to increase the number of sites that will meet GCP standards.

    Commercialization of biotechnology in Vietnam is still at an early stage. Government-sponsored agricultural and public health projects currently only address domestic needs. Nascent companies are unlikely to be profitable if their products are intended solely for the Vietnamese market.

    In the short term, Vietnam is most attractive as a manufacturing site for diagnostics and certain pharmaceuticals (possibly vaccines). Its low cost structure, a motivated and cheap labor force, and a location close to China and other important southeast Asia markets are also advantageous.

    Disadvantages are just as abundant and include the fact that the government is trying to combine tight Communist rule with a free market economy. In addition, both foreign residents and Vietnamese alike point to the lack of transparency of the political/economic system, which leads to a high level of corruption.

    Equally detrimental are the Vietnamese leaders’ poor grasp of the characteristics of high technology development, the country’s limited R&D infrastructure, and the lack of technical expertise and investment capital. Although labor costs are low, skill levels are significantly lower than in neighboring Asian countries.

    While university programs are being expanded, they are still mostly unable to meet the needs of modern biotech firms. This will not be remedied any time soon as the academic leadership in Vietnam does not seem to fully comprehend the extent of reforms necessary.

    Another area where a broader perspective is necessary, and where China has excelled, is making effective use of expatriates. Chinese expats have been actively encouraged to return to China to share their technical expertise and investment capital. Unfortunately, there is little evidence that Vietnam is willing to do the same.

    One cannot help but note a sense of pent-up energy in Vietnam and the desire to become part of the high-tech industrial world. This is particularly noticeable in Ho Chi Minh City and the south, which had been much more open to the outside world than the far more cloistered environment of Hanoi and the north.

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