The benefits of recent trade agreements, low labour costs, and highly appealing incentives are amplifying the nation's appeal and encouraging manufacturers hit by US tariffs to relocate out of China.

Local developers are planning more industrial parks to capture this increasing foreign investment and ramp up Vietnam's appeal.

Savills Vietnam's recent Industrial Whitepaper showed how Vietnam has become a major alternative manufacturing destination with quantifiable gains for businesses wanting to diversify supply chains.

Hoang Nguyet Minh, associate director of Investment of Savills Hanoi, commenting on the growing trend: “Vietnam is clearly benefiting. Developing fresh industrial real estate is a smart long-term play, especially considering the clear advantages Vietnam offers from trade agreements, tax regimes, and low labour costs. Adding further appeal is the ongoing national infrastructure development which is now ranked second in ASEAN after Indonesia.”

There are two critical factors of this tipping point. First, it is one of the most competitive commercial tax regimes in Asia. There are corporate income tax (CIT) incentives, fixed asset import duty exemptions, and exempted land rental fees. Notable incentives include zero profit tax for the first two years – instead of the usual 20 per cent, followed by a 50 per cent reduction for the next four years.

The government provides even more preferential CIT incentives for prioritised industries, such as those in Industry 4.0 and hi-tech manufacturing, projects in special economic zones (SEZs) or in socioeconomically challenged regions, and large scale projects that meet minimum requirements for investment capital, revenue, and headcount. Projects qualifying for any of the above will have a 10 per cent CIT rate for 15 years, four years of CIT exemption, and a 50 per cent tax reduction for the next nine years.

Vietnam is also one of the most cost-efficient markets for industrial building costs, according to Turner & Townsend’s 2019 Construction Costs Survey. In Ho Chi Minh City, the average construction cost of basic factory and warehousing is $352 per square metre while factory units and larger distribution centers cost $412 per sq.m and hi-tech factories $618 per sq.m.

Next, multinationals producing high value-add products such as electronics will be under mounting cost-cutting pressure to offset pandemic-induced revenue disruption. Establishing production facilities in Vietnam represents immediate gains and the longer-term strategic benefits of diversifying and developing local supply chains.

Historically, wage inflation tends to happen after the global crisis abates. Labour costs in China already being three times higher than in Vietnam will further prompt multinational manufacturers to consider relocating to more cost-effective Southeast Asian markets.

During the first outbreak, 15 multinational manufacturers announced expansions or planned relocations to Vietnam, such as Apple Computers suppliers Pegatron and Foxconn from Taiwan; Sharp, Nintendo, and Komatsu from Japan; and Lenovo from Hong Kong.

These 15 enterprisescomprise nine SMEs and six large-scale projects. The majority produce medical equipment, semiconductors, mobile phones and parts, and air conditioners. The Japan External Trade Organization (JETRO) confirmed that these moves were encouraged to improve supply chain efficiencies, plug gaps caused by pandemic effects, while strengthening economic and industrial ties with ASEAN.

Local manufacturing salaries of $252 per month remained regionally competitive, after rising from $237 per month in 2018. By comparison, China manufacturing salaries are $968 and $766 per month in Malaysia. While labour costs do not drive sustainable industrial growth, they remain important for lower value-add industries such as textiles and furniture.

However, as Vietnam turns its manufacturing focus to higher value-add industries such as high-tech or supporting high-tech manufacturing, these companies may be forced to relocate elsewhere in Southeast Asia. While the transition to higher-value industries continues, the focus will switch from the labour force to the quality of labour.

To effectively accommodate higher-value projects it is essential to continue investing in education, notably IT, mathematics, and the sciences. This issue has been recognised with the government committing to create a national skills development plan as part of FDI Strategic Recommendations 2020 to 2030.

Sector reliance on supply chains migrating out of China is increasingly evident with many landlords anticipating a busy year once restrictions are lifted.

Over 120,000 firms newly established in Jan-Nov

Residents carry out procedures for business establishment at the Department of Planning and Investment of Binh Duong Province. Some 124,300 firms were newly established between January and November – PHOTO: VNA

Some 124,300 firms were newly established between January and November, pledged capital of over VND1,870 trillion, inching down 1.9% in number and up 19.3% in capital year-on-year, according to the General Statistics Office.

During the 11-month period, the newly established companies had an average registered capital of VND15.1 billion, up 21.7% year-on-year. They also registered to recruit a total of 970,000 employees, down 14.7% year-on-year.

Besides, the number of firms that resumed operations rose by 10.7% year-on-year at 40,800. However, the period also witnessed a 15.6% rise in the number of enterprises suspending their operations, reaching some 93,500. Of the total, 15,400 companies completed procedures for dissolution, a year-on-year rise of 3.1%.

In addition, operational companies registered an additional VND3,086 trillion to fund their expansion plans, raising the total newly pledged capital to more than VND4,965 trillion during the period, up 35.1% year-on-year.

In November, the country saw some 13,100 newly-established firms with total pledged capital of VND284 trillion, up 7.3% and 72%, respectively, month-on-month. The new enterprises registered to employ 119,000 people, up 65.3% compared with the previous month.

Each new firm reportedly registered an average of VND21.8 billion in capital in November, a month-on-month increase of 60%, VietnamPlus news site reported.

Last month, over 5,310 firms returned to the local market, up 5.4% month-on-month and 59.8% year-on-year, while over 1,940 companies completed the procedures for dissolution, a year-on-year rise of 30.6%.

US, Japan join with Vietnam to promote shared energy goals

The Trilateral Vietnam-US-Japan Commercial Liquefied Natural Gas (LNG) Forum was recently held in order to promote shared energy goals, the US Department of State announced on its website on December 3.

In attendance at the event were US Under Secretary of State for Economic Affairs Keith Krach, Assistant Secretary of State Francis Fannon, Japanese State Minister of Economy, Trade and Industry Kiyoshi Ejima, and Vietnamese Deputy Minister of Industry and Trade Dang Hoang An.

The occasion was held within the framework of the Japan – US strategic energy partnership that was originally launched in 2017 in an effort to promote a network of clean and secure energy sources, along with new technology markets which provide competitive alternatives to malign actors throughout the region.

The three countries used the platform to agree that the best way to achieve regional growth is through fair and transparent competition, including in energy markets for LNG and new fuel sources.

Krach went on to describe the growing role of LNG in developing a network of clean and secure energy markets, with the region preparing to diversify its energy resources.

In response, Fannon highlighted the importance of LNG as a flexible energy platform that will ultimately enable the nation’s energy transition.

The clean energy goals of the Vietnamese leadership and on private sector-led growth will continue to serve as an example as the country strives to works alongside its neighbours to prepare for a mid-decade surge in energy demand.  With the nation increasingly making use of newer and more efficient fuel sources and energy technologies, both the US and Japan will continue to provide support, commercial innovation, and private sector investment, he said.

According to the US Department of State, both the US and Japan commend the nation’s leadership in upholding commitments made during the Asia-Pacific Economic Cooperation (APEC) forum held three years ago. Most notably, the country’s efforts relating to the legislation to intensify private sector investment and support market-led growth. 

This indicates that the Vietnamese side has made great strides for the causes of diversification and increase investment in energy security for its future.

ST25 rice of Vietnam wins award at World's Best Rice Contest 2020

Vietnamese rice ST25 has been awarded the second prize at the World's Best Rice Contest 2020 which took place within the framework of the 12th world rice conference from December 1 to December 3 in the United States, according to local hero Ho Quang Cua, known as the 'father' of ST25 rice.

As an engineer, Cua explained that the Vietnam Food Association hosted a national rice contest earlier in the year, with ST25 rice going on to win the first prize and therefore be selected to participate in the World's Best Rice Contest 2020.

He added that as a result of the impact of the novel coronavirus (COVID-19) pandemic, only rice samples have been submitted as part of the online conference.

The agronomist added that Vietnamese rice has been the winner of high prizes at the international competition for four consecutive years, with ST25 rice winning the second place in this year’s function. Indeed, plenty of foreign partners have expressed their admiration for the country’s efforts to introduce the brand of Vietnamese rice to the wider international market.

Cua went on to reveal that the organisers will come to the nation in order to award prizes when they find a suitable in the future.

ST25 rice is unique as it is created using the ST25 rice variety by agronomist Cua and his research team from Soc Trang province, including Tran Tan Phuong, deputy director of the Soc Trang Department of Agriculture and Rural Development, and Master Nguyen Thi Thu Huong.  

The latest award comes after ST25 rice won the leading prize at the World’s Best Rice Contest which took place last year in the Philippines.

In his role as deputy director of Soc Trang Department of Agriculture and Rural Development, Phuong outlined that ST25 rice has affirmed the prestige and brand of Vietnamese rice among the international arena, whilst becoming the pride of both Soc Trang province and Vietnam as a whole.

ADB approves loans worth 70 million USD for Cambodia’s agriculture

The Asian Development Bank (ADB) has approved a 70 million USD in loan to improve the capacity of agribusinesses in six provinces across Cambodia to process key agricultural products.

In a press release, the lender said that the Agricultural Value Chain Competitiveness and Safety Enhancement Project aims to benefit about 230 agricultural cooperatives and 50 agribusinesses in Kampong Cham, Kampong Thom, Oddar Meanchey, Preah Vihear, Siem Reap and Tbong Khmum provinces.

ADB principal natural resources and agriculture economist Ueda Takeshi said agriculture can contribute to Cambodia’s economic growth and diversification if local small- and medium-sized agribusinesses can improve their abilities to process high-value agricultural products and market them domestically and overseas.

Private investment in agriculture, along with better access to credit and high-quality raw materials, will help Cambodian agribusinesses unleash their growth potential, create jobs and improve rural livelihoods, he said.

With 76 percent of Cambodia’s population living in rural areas, agriculture accounted for 20.7 percent of gross domestic product and 31.2 percent of total employment last year. The industry grew an average of 1.7 percent annually from 2010 to last year.

The COVID-19 pandemic has disrupted supply chains and reduced incomes and market opportunities for farmers and agribusinesses, according to the ADB.

It said the project will enhance access to credit for the industries. Additionally, it will support initiatives to strengthen food safety and quality across the value chains for cassava, cashew nut, mango, vegetables and free-range poultry.

Support for research and development of crop varieties will help agricultural cooperatives access high-yield, drought and disease-resistant seeds, the ADB said.

Infrastructure projects will revamp 110km of rural roads, helping connect producers to markets./.

Thai conglomerate values potential of Vietnamese market

Thai conglomerate B.Grimm Group is studying the feasibility of an additional 3,000MW in Vietnam and a partnership with a US firm for 2,000MW of supply, according to B.Grimm chairman Harald Link.

Bangkok Post newspaper quoted Link as saying that Vietnam is a high potential market and B.Grimm is the largest power operator in the country and has projects from 1,000-3,000MW in the pipeline. The firm has also received a licence to import 650,000 tonnes of LNG annually from Vietnam.

B.Grimm operates power businesses in Thailand, Laos and Vietnam, with a transmission system in Cambodia. It has a total capacity in operation of 3,019 MW supplied from co-generation, solar, energy storage backup for power trading and waste to energy.

The company also has 1,200MW worth of projects in development, which include 16MW of wind power and 95MW of hydropower.

B.Grimm recently signed deals for an additional 3,000MW of liquid natural gas (LNG) projects.

Link said B.Grimm Group's power business will be a key driver of revenue over the next eight years, aiming to reach total revenue of 150 billion baht (about US$5 billion) by 2028.

This year, 70% of the group's total projected revenue of 60 billion baht came from its energy arm B.Grimm Power Plc, which is listed in the Stock Exchange of Thailand.

Ho Chi Minh City invests US$4 billion for development of logistics sector

Standing Vice Chairman of Ho Chi Minh City People’s Committee Le Thanh Liem approved the project of developing logistics sector in Ho Chi Minh City by 2025, a vision to 2030.  

The project will be implemented in in the period 2020-2030 with a total investment capital of VND95,800 billion (US$4 billion).

This is one of 45 projects under the strategic breakthrough programs of the Resolution of the 11th City Party Congress for the 2020-2025 term, carried out by the HCMC Department of Industry and Trade in coordination with the Vietnam Logistics Research and Development Institute.

With its strategic target, the growth rate of logistics service revenue from the HCMC enterprises is expected to reach 15 percent by 2025 and 20 percent by 2030, contributing to 10 percent and 12 percent of Gross regional domestic product (GRDP) in 2025 and 2030 respectively; thereby the country’s average logistics cost will fall to 10 percent to 15percent in 2025.

Additionally, the project will contribute to promoting construction progress of ring roads and expressways connecting Ho Chi Minh City with the Southern provinces, promoting freight transport by waterways and railways, enhancing multimodal transport connectivity to logistics hubs. 

Vietnamese fruits confidently go abroad

Despite trade disruption due to the Covid-19 pandemic, many Vietnamese fruits have been continuously welcomed by several countries. 

Lately, in mid-October this year, Chile announced that it accepts the import of fresh pomelos (citrus maxima) from Vietnam. Earlier, at the end of June, for the first time, Hai Duong and Bac Giang provinces exported nearly 5 tons of lychee to Japan by air, marking an open opportunity for lychees to access major and fastidious markets, as well as meet the expectations of farmers in the well-known lychee-growing areas of Thanh Ha and Luc Ngan districts.

Not only waiting for partners to come and learn, but many provinces have also planned quite methodical fruit offers. Recently, Cao Phong orange - the main agricultural product brand of Hoa Binh Province, with four main varieties of orange, including Citrus sinensis, Citrus myrtifolia, and Valencia orange, was evaluated and ranked as 3-star OCOP products. The province has determined to upgrade Cao Phong orange to 4-star and 5-star OCOP products to create favorable conditions to advertise for export. At the end of last November, Bac Giang Province held a trade fair on oranges, pomelos, and typical products of the Luc Ngan District. The focus of the fair is the association with Stars Logistics Joint Stock Company to open an electronic trading floor to bring oranges, pomelos, and typical products of Luc Ngan District to the electronic trading floor to invite domestic and foreign partners.

According to the Department of Crop Production under the MARD, the Mekong Delta provinces currently have more than 362,000 hectares of fruit trees, accounting for more than 34 percent of the total area of fruit trees in the country. Tien Giang Province has the largest area of fruit trees with more than 78,000 hectares, followed by Vinh Long with over 47,000 hectares, Hau Giang with more than 36,000 hectares, and Dong Thap with 31,000 hectares. The remaining provinces have an area of from 6,000 to 28,000 hectares of fruit trees.

Types of fruit trees in the Mekong Delta provinces include mango, banana, dragon fruit, orange, tangerine, pomelo, longan, durian, jackfruit, rambutan, custard apple, mangosteen, guava, plum, Manilkara zapota, soursop, and pineapple. Many types of fruit trees with an area of over 10,000 hectares, such as citrus, mango, longan, durian, banana, dragon fruit, pineapple, jackfruit, and rambutan. Every year, provinces in the Mekong Delta alone provide the market with over 4 million tons of fruit for export and domestic consumption.

However, whether in the form of inviting foreign partners or being accepted by official agencies for import, Vietnamese fruits still must pass technical barriers if we want to export sustainably.

As for lychee products, in 2014, the Department of Plant Protection under the MARD started negotiations with the Ministry of Agriculture, Forestry, and Fisheries of Japan to promote and open the market for Vietnamese lychees to enter the Japanese market. Several strict experiments were then carried out to ensure the thorough removal and destruction of microorganisms that can exist on the litchi fruits.

The Vietnam Trade Office in Japan also arranged to bring partners from Japan to Bac Giang Province to learn about Luc Ngan lychee fruit and fresh litchi preservation technology three times in 2018 and 2019. And on December 15 last year, after more than five years of negotiation between the two sides, the Ministry of Agriculture, Forestry, and Fisheries of Japan officially announced the door opening for Vietnamese lychee fruit to be exported directly to Japan under three conditions, including being grown in orchards directly inspected, supervised, and granted growing-area codes by the Department of Plant Protection, meeting Japanese regulations on phytosanitary and food safety. Batches of exported lychees must be packed and fumigated with methyl bromide at facilities recognized by the Department of Plant Protection and the Ministry of Agriculture, Forestry, and Fisheries of Japan, with a minimum dose of 32 grams per cubic meters for two hours under the supervision of Vietnamese and Japanese plant quarantine officers. The batches of lychees must be attached with a phytosanitary certificate issued by the Department of Plant Protection.

Recognizing the importance of technical barriers to each country, Vietnamese enterprises and farmers have started to join and participate in more and more methodical export. For instance, although Cao Phong orange obtained geographical indication since 2017, Cao Phong Orange 3T Farm Cooperative continues to standardize the production and care process following the GlobalGAP. Nearly 30 hectares of orange trees are carrying out well the use of organic agricultural materials for fertilization. When harvested, oranges are carefully selected, only about 8-10 percent of total fruit yield meets the standards of color, size, and quality. After sorting, oranges are sent to the washing division, disinfected by ultraviolet radiation, and stamped traceability on each orange before packing into beautifully-designed gift boxes.

These efforts aim to reach the lowest level of technical barriers so that when being accepted by a certain market, Cao Phong orange will easily fulfill the specific requirements of that market.

Similarly, for the export of pomelos to Chile, bananas to Japan, or dragon fruit, passion fruit to the EU market, the lowest standards are being granted the codes of growing areas under the GlobalGAP standards; each batch of fruits must be treated with irradiation and issued an export certificate. Next is to meet the standards on phytosanitary and animal quarantine, depending on the requirements of each specific market. With the above necessary and sufficient conditions, Vietnamese fruits will confidently export to foreign countries.

Opportunities for Vietnamese rice to strengthen position in global market

At the end of the year, the weather in the South has started getting cold. This is also the time when the water in the fields downstream began to recede. Many farmers along the National Highway 61C, which connects Hau Giang and Can Tho provinces, are rushing to plow the soil to sow the winter-spring rice crop. 

Mr. Thieu Van Hai, Director of Hai Thanh Agricultural Cooperative in Hau Giang Province, and farmers have continued to choose fragrant rice varieties for production. This is also an important highlight of Mekong Delta farmers, opening up opportunities to polish the brand of Western rice.

It is not a coincidence that Mr. Thieu Van Hai was hired by farmers in Chau Thanh A District in Hau Giang Province to be the director of Hai Thanh Cooperative. Mr. Hai has been the pioneer in growing fragrant rice for the past 15 years. With 1.5 hectares of land, the income from fragrant rice is 20-30 percent higher than regular rice varieties, helping him to accumulate to expand the growing area of fragrant rice to 6.6 hectares. Mr. Hai has become a good example for farmers in the cooperative to produce fragrant rice unanimously.

According to the Ministry of Agriculture and Rural Development, in the 2020-2021 winter-spring rice crop, the Mekong Delta region sows over 1.55 million hectares of rice with an estimated output of 10 million tons of rice. It is most likely that in the dry season of next year, saltwater intrusion and drought will come soon and happen severely. Provinces such as Kien Giang, Hau Giang, and Tien Giang, which are heavily affected by saltwater intrusion and drought, must grow rice early to avoid saline intrusion at the end of the crop. More than five years ago, the rate of low-grade rice varieties in the Mekong Delta was quite large in the production structure, when farmers still used the IR50404 rice variety, which accounted for 30-40 percent. During that time, the prices of Vietnamese export rice were always far behind those of Thailand in the market. But now that has changed.

‘High-quality rice varieties currently account for about 80 percent of the growing area, whereas low-grade varieties like IR50404 rice variety only hold less than 8 percent. Noticeably, the proportion of ST rice varieties has risen from 3 percent to 5 percent,’ Mr. Tran Chi Hung, Director of Department of Agriculture and Rural Development of Hau Giang Province, said.

Following Tra Vinh and Dong Thap provinces, farmers in Hau Giang Province are now replicating the smart rice production model. Mr. Tran Van Dang, a member of Hai Huynh Cooperative in Vi Thuy District, is one of the Hau Giang farmers enthusiastically participating in smart rice production. After three crops under this model, Mr. Tran Van Dang said that the smart rice growing model helped him to have more knowledge and understanding of rice-growing techniques to meet the new trend in response to climate change. Profits were higher than conventional rice cultivation from 20-30 percent. His family earned over VND75 million from two hectares of rice last winter-spring rice crop.

Agricultural engineer Ho Quang Cua, the father of the ST fragrant rice varieties, optimistically commented that high-quality rice varieties currently account for 1 million hectares in the Mekong Delta, and the low-grade IR50404 rice variety has gradually shrunk. The ST24 and ST25 rice varieties, which recently won an international award, have covered one-third of the rice-growing area in the Ca Mau peninsula. Nearly one-third of farmers in the Mekong Delta are classified as the best rice farmers in Asia. That is the basis for Vietnamese rice to enhance its position.

The export prices of Vietnamese rice in December this year fluctuates around US$460-US$520 per ton. This is the first time in the past five years, the level of export prices of Vietnamese rice exceeds $450 per ton. It is expected that Vietnam's rice exports will reach 6 million tons this year.

Vietnam's rice exports are at a high level this year, due to many factors, such as the needs of the world market. However, it is important that the quality of rice has been improved and maintained stably, so it can compete with Thai rice, said Mr. Nguyen Trung Kien, General Director of Gentraco Company in Can Tho City.

Looking back on rice exports in 2020, enterprises in the Mekong Delta scored when the EU-Vietnam Free Trade Agreement (EVFTA) officially took effect in August. This is a door opening up many opportunities for Vietnamese enterprises to export to the EU market.

Accordingly, Vietnam's rice products will be exempt from export tariffs to the EU when the EVFTA takes effect. Of which, 80,000 tons of rice will enjoy tax incentives. Some enterprises, such as Loc Troi Group and Trung An High-Tech Agriculture Joint Stock Company, have quickly exported fragrant rice to the EU market. After ST24 rice, ST25 rice received the world's best rice award, creating a certain position for Vietnamese rice in the market. In the domestic market, the price of ST25 rice has reached a fairly high selling price of VND35,000 per kilogram or over $1,000 per ton. Therefore, it is not difficult to understand when the export price of ST rice variety to the EU market is above $1,000 per ton.

With diverse ecological characteristics, the Mekong Delta provides rice products, which satisfy many different segments, including specialty rice, high-quality rice, and rice for the niche market. This is a remarkable advance of Vietnamese rice. As the rice export quotas have been untied over the past years, it has helped more than 100 enterprises to participate in the export market, with many different export segments, creating a driving force for the establishment of raw material growing areas for high-quality and specialty rice.

According to rice experts, if the quality of exported rice is controlled well, shortly, not only will Vietnam's export quotas on the EU market increase, but it will also urge many partners to seek to buy Vietnamese rice. The opportunity to polish the brand is opening up for Western rice.

Unclear provisions in new tax-related Decree

Vietnamese citizens and commercial banks alike have expressed uncertainty over the new Decree 126 on Tax Administration that requires banks to provide customers’ information as well as deduct tax payables on behalf of the tax department. 

Decree 126/2020/ND-CP, effective from December 05, 2020, stipulates that commercial banks must provide information on all customers’ account including name of the account holder, balance, and transaction data within 90 days since the Decree takes effect.

This info is submitted at the request of the Head of Tax Authorities to determine tax obligations and implement coercive measures in accordance with the law.

However, representatives of commercial banks expressed that the above regulation contradicts the Law on Credit Institutions, which states that banks are not allowed to provide information related to customer accounts unless otherwise required by authorized state agency and must be approved by the customer.

Owner of a commercial bank in HCMC demanded that the gov’t clarify whether tax departments are categorized as competent state agencies. “There’s a difference between providing customer’s account info to the police and to a tax department”, the person exclaimed.

Furthermore, most commercial banks do not have enough resources to provide mass data at the request of tax authorities, said a representative from Agribank.

There needs to be an established arrangement between the tax authority and the banking system to pinpoint the customers in question, as well as convenient and synchronized methods for providing the info and commitment to confidentiality, said a representative of VietinBank.

On the other hand, Decree 126 also obliges commercial banks to withhold income tax at the source for electronic transactions, and expenses incurred by taxpayers related to overseas e-commerce channels or social networking sites like Amazon, Facebook, or YouTube.

It also states that if the foreign supplier has not declared taxes in Vietnam, the intermediary bank must deduct payables and pay for products, goods and services incurred by Vietnamese buyers.

The intermediary bank must also keep tabs on any transaction via card payment or similar that they cannot withhold and report to the General Department of Taxation monthly.

Regarding this matter, a representative of Vietcombank said commercial banks do not have the authority and legal status to deduct or pay taxes on behalf of tax authorities, unless requested in writing to assist on a non-periodic basis.

Many spokesmen also pointed out the risk of banks making incorrect deductibles or without consent of the account holder which might lead to complaints or even lawsuits.

From another perspective, the new provisions in Decree 126 aimed to combat tax evasion from online retailers are necessary, but the question remains as to whether or not tax departments can implement them correctly.

Although a non-cash payment policy has been implemented for a long time, up to 80% of Vietnamese people still prefer using cash, which makes it difficult to trace small transactions.

Experts suggest the gov’t issue a tax reduction policy for online retailers and have all transactions done through banks to achieve effective tax collection.

Guidance for online game business in Vietnam
Linh Pham

 
 
The Hanoitimes - Vietnam ranked the most promising online game market in Asia with compound annual growth rate of 28%.
Vietnam’s online gaming is expected to post a 16% annual growth rate to US$10.1 million in 2020 in a recent study by market research company Niko Partners and Google.

Among countries in Asia, Vietnam showed the most promise with a 28% compound annual growth rate (CAGR), showed the report.

Vietnam's online game busines is promising 

The promising market has attracted a large number of foreign investors following the regulations on this industry. 

Foreign investors who wish to engage in the online games distribution service must have either a contract of business cooperation or a joint venture with a Vietnamese partner who is eligible to provide online gaming business, according to Dr. Oliver Massmann, an attorney at Duane Morris LLP, a law firm with more than 800 attorneys in offices across the US and internationally. 

In case of a joint venture, the foreign investors’ capital must not exceed 49%, the legal expert said.

The joint venture can be in the form of a limited liability company or a joint stock company. Generally, there are more options to mobilize capital in a Joint Stock Company, said Dr. Oliver Massmann who can be reached under omassmann@duanemorris.com.

Only Vietnamese enterprises can apply for G1, G2, G3 and G4 gaming licence in Vietnam. A Vietnamese enterprise is defined under Law on Enterprise 2014 as an entity established or registered to establish under Vietnam laws and has headquarter in Vietnam.

The G1 includes video games that have interaction among multiple players via the game server, meanwhile the G2 is for video games that only have interaction between the players and the game server.

The G3 contains video games that have interaction among multiple players without interaction between players and the game server, and the G4 covers video games that are downloaded from the Internet without the interaction among players and between players and the game server.

Dr. Oliver Massmann said the investors should know about licensing procedures for the G1. This gaming licence expires after 10 years and the investors can only extend it once for one extra year. The Ministry of Information and Communications is seeking to reduce the licence’s validity to only 5 years, he added.

Conditions to apply for G1 gaming licence must include a headquarter and contact number; a registered domain name to use to provide the service; at least one personnel administers two servers; at least a Bachelor’s degree obtained by the business manager; sufficient financial capacity, adequate gaming systems; backup plans for equipment and connection as well as data backup plans; professional measures to manage game forum content.

The legal expert pointed out important documents of application dossier that comprises documents proving the ownership of domain name; business location rental/ownership contract; game service payment plan; list of partners providing payment assistance service; and detailed description of host devices.

After attaining G1 gaming licence, the investors would need to obtain approval for script content for each G1 game in order to operate the G1 game.

It should be noted some conditions to apply for approval of script content for each G1 game, namely game content (must be culturally appropriate);  the game’s age rating (must be suitable with the content); and measures to manage players’ account.

Game providers must manage time of gamers who are under 18 years old to ensure their playing time not to exceed 180 minutes in 24 hours. 

Online game business was regulated in Decree No. 72/2013/ND-CP on the management, provision and use of Internet services and online information; Decree No.103/2009/ND-CP promulgating the regulation on cultural activities and commercial provision of public cultural services; and Vietnam’s Specific Commitments to WTO in Services. 

Sweden proposes US$2-billion commercial loan for aviation projects in Vietnam

The Ministry of Transport would review this loan and report to the government.

State-owned Swedish Export Credit Corporation (SEK) proposed a US$2 billion commercial loan to build Long Thanh International Airport and terminal T3 for Tan Son Nhat International Airport.

Sweden’s Ambassador to Vietnam Ann Mawe revealed the intention at a meeting with Minister of Transport Nguyen Van The on December 4.

Mrs. Mawe added that during the visit of Prime Minister Nguyen Xuan Phuc to Sweden in May, the two countries’ prime ministers discussed a potential loan worth over US$1 billion for Long Thanh airport construction and air traffic control activities in Vietnam.

The loan would come with an interest rate of 4.2% per year, including a 1.25% of insurance fee for the loan. To be eligible for the loan, Vietnam is required to use 30% of the total investment capital to purchase Swedish technologies and equipment.

“Among 28 international airports seen as environmentally-friendly, 10 of which have the participation of Swedish enterprises in providing solutions for management and operation,” the Ambassador continued.

At the meeting, Minister The said the ministry would consider thoroughly the proposal and report back to the government.

“We support local aviation firms to access and use this credit, as well as equipment, products and services of Sweden,” stressed Mr. The.

The minister said the Vietnamese government gives priority to aviation development.

“In addition to Long Thanh and Tan Son Nhat airports, Vietnam is planning to upgrade other airports, including the Noi Bai International Airport from the current capacity of 30 million passengers per year to 100 million, and the construction and upgrade of other airports of Lao Cai, Van Dong, and Chu Lai,” stated Mr. The.

Vietnam would need more solution and equipment in the management and operation of airports, which would open up opportunities for local enterprises to cooperate with its Swedish peers, asserted Mr. The.

The construction of Long Thanh International Airport, the largest of its kind in Vietnam, is set to begin this December.

Under Vietnam’s socio-economic development plan in the 2021-25 period, the country would need around US$150-200 billion to finance infrastructure development projects, including airports, seaports, railways and express ways, among others.

Long Thanh airport remains a key investment project for Vietnam, with a capacity of serving 100 million passengers and handling 5 million tons of goods a year, with total investment capital of US$16 billion.

The short-term target of Long Thanh International Airport is to ease the overloading of Tan Son Nhat International Airport in Ho Chi Minh City, and in long-term to become one of the region’s air transportation hubs.

Vietnam textile industry to benefit from FTAs

The RCEP with flexible rule of origins is seen as a plus point for Vietnam’s textile industry to further penetrate potential markets.

Despite mounting challenges from the Covid-19 pandemic, new free trade agreements, including the recently-signed RCEP, along with local firms’ own efforts in a new circumstance, are opening up new opportunities for exports.

Chairman of the Vietnam Textile and Apparel Association (Vitas) Vu Duc Giang said this year, many textile firms have to move away from their traditional products to produce medical protective gear, especially face masks.

“Such a change would require further investment in technologies and retraining of workers to adapt to a new environment, and consequently would lead the textile sector to fall short of the export target of US$42 billion for 2020,” added Mr. Giang.

At this time of last year, Vietnamese textile firms were flooded with pre-orders even for the first half of the following year. However, the Covid-19 pandemic has changed customers behavior globally as the world is now focusing on basic necessities and health equipment. 

“Major markets for Vietnam’s textile and apparel products are currently struggling with the Covid-19 pandemic, causing declines of 80 – 90% in their purchases,” informed Mr. Giang.

This year, Vietnam’s textile exports are estimated to reach US$35.27 billion, down 9.27% year-on-year or US$3.6 billion. The contraction in growth is significantly lower compared to other countries, taking into consideration that global demand for textile products has declined by 25%.

New opportunities from RCEP

Mr. Giang noted for next year, the textile industry would face both opportunities and challenges, especially as the Covid-19 pandemic could persist for another one to two years.

“In 2021, the textile export revenue is forecast to hit US$37 – 38 billion, but on the condition that the world could contain the Covid-19 pandemic in the first quarter and purchasing power from major markets recovers,” Mr. Giang asserted.

Mr. Giang also pointed to the RCEP with flexible rule of origins as a plus point for Vietnam’s textile industry, in turn opening up more opportunities for exports. As such, Vietnam’s garment products could further penetrate the Chinese and Japanese markets, which previously were limited due to requirements of the rule of origins.

“FTAs are driving forces for the local textile industry to access new customers, technologies and corporate governance, for which the sector could realize the export target of US$100 billion by 2030,” he said.

USAID strengthens Vietnam's private sector role in disaster resilience

The initiatives aim to advance private sector’s innovative solutions disaster resilience.

Vietnam has been listed in private sector engagement (PSE) pilot projects announced on December 3 by the US Agency for International Development (USAID) that aim to advance innovative solutions to reduce risk and impact of natural disasters.

The USAID’s new support for private sector engagement initiatives will help strengthen disaster preparedness and response in recipient countries, including Vietnam, according to the US Embassy in Hanoi.

These projects help the humanitarian community better understand how the private sector can invest in projects that mitigate the risk of disasters; increase businesses’ participation in community disaster preparedness plans and policies; help reduce the social and economic impacts of disasters; and support communities’ efforts to recover and rebuild after disaster strikes.

These USAID-supported pilot programs will help countries develop stronger relationships with private sector actors and develop mutually-beneficial projects that strengthen entire communities’ disaster resilience.

The programs in Vietnam will gather key private sectors, local governments, and civil society actors to collaboratively design and launch multi-stakeholder pilot projects to strengthen flood mitigation efforts and improve water network management in Quy Nhon coast city in the central province of Binh Dinh.

The Asia Foundation, in partnership with ISET International, the Vietnam Chamber of Commerce and Industry (VCCI), and the Vietnam Institute for Development Strategy (VIDS) get involved in the projects.

PSE is a strategic approach to international development through which USAID consults, strategizes, aligns, collaborates, and implements with the private sector for greater scale, sustainability, and effectiveness of development or humanitarian outcomes.

USAID responds to an average of 75 disasters in more than 70 countries every year. Through collaboration with the private sector, USAID can harness innovation, creativity, and entrepreneurship to improve the efficiency of humanitarian assistance.

As part of USAID/Vietnam’s Country Development Cooperation Strategy (CDCS) Goal Statement, PSE focuses specifically on creating shared value partnerships to identify where development challenges present business opportunities, leading to market-driven solutions.

Natural disasters cost VND10.1 trillion (US$439 million) and claimed 249 lives in Vietnam in the first ten months this year.

Land prices around Hanoi jump

Experts said the prices have been pushed up and exceeded people’s affordability.

Prices of land in Hanoi’s suburban areas have been increasing two or three times over the last few months, resulting in both positive sentiment and concerns over the suprising rise. 

The momentum becomes familiar in the outlying districts of Hoai Duc, Thach That, Dong Anh and Ba Vi where intensified investment in infrastructure, new property projects and high demand are all seen.

Some areas of Dong Truc and Thach Hoa communes in Thach That district and Yen Bai, Van Hoa, and Tan Linh communes of Ba Vi district record a two-fold increase than before, according to Kinh te & Do thi Newsppaper. 

Nguyen Quoc Tuan, a real estate broker working in Di Trach commune, Hoai Duc district, supported the idea by taking Kim Chung Di Trach New Residential Area as an example, saying that the project is invested by Vietnam Trading Engineering Construction Joint Stock Company (Vietracimex) saw a three-fold increase in the prices of shop houses compared to that in 2008.

Regarding infrastructure, Chairman of Hoai Duc district Nguyen Hoang Truong said the local authorities since mid-2019 have finished site clearance for a belt road and started building a road connecting the surrounding districts in October 2020 .

However, representatives of Vietracimex said the improved infrastructure has made no impact on the company’s property prices and surrounding projects. So far, the investor has not re-launched the project and listed the prices yet. The growing prices are merely made up by estate agents.

Some experts attributed the price hike to the supply scarcity. But they warned that the momentum persists with significant support by real estate agents, resulting in some concerns about “price bubbles” that might distort the market.

The construction, together with advantages of hospitality real estate, has been a driving force for the property market in this region and the prices will definitely increase, Van forecast.
Giving explanation for the momentum, Nguyen Van Dinh, the vice chairman of Vietnam Association of Realtors (VARS), said the suburban districts are home to affordable segment that has maintained high occupancy, around 70%. The excess demand of land is also another reason, he noted.

“The prices in some areas have been pushed up. It becomes unreal for people’s affordability and has kept investors away due to high compensation and thin profits,” Kinh te & Do thi Newspaper quoted Mr. Dinh as saying.

Source: VNA/VNN/VNS/SGGP/VOV/NDO/Dtinews/SGT/VIR