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Vietnam’s market size attracts foreign investors

By the end of February 2022, the registered capital for project adjustment of foreign investors in Vietnam has increased by US$3.59 billion, a year on year increase of 123.8 percent.

 Moreover, foreign investors’ registered capital and share purchase value reached $769.6 million, up 41.7 percent over the same period last year. Explaining this issue, many businesses affirmed that Vietnam's market size is attractive to foreign investors.

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Talking about business activities in Vietnam, President and CEO of Siam Cement Group Roongrote Rangsiyopash, said that in the last three years, SCG's sales revenue has always reached impressive milestones. Specifically, sales in 2019 reached VND29,516 billion (US$ 1,271 billion) while it was VND26,574 billion (US$ 1.144 billion) in 2020. In particular, in 2021, despite the difficult economic situation in Vietnam, SCG's sales in Vietnam reached VND35,001 billion (US$ 1,526 billion), up 32 percent over the same period last year.

Mr. Roongrote Rangsiyopash revealed that SCG's sales in Vietnam mainly come from the sales of newly merged businesses such as Vina Kraft Paper Company Limited (VKPC), Plastic Company Limited - TPCVINA chemicals, as well as export sales from Thailand and Southeast Asian countries to Vietnam. Particularly in 2021, the group's total assets was supplemented by the operation of Long Son Petrochemical Company Limited (LSP). Currently, SCG's total assets in Vietnam reach VND146,794 billion ($6.442 billion).

Furthermore, many Japanese enterprises have stepped up efforts to accelerate production expansion as well as opened more stores to sell Japanese goods in the Vietnamese market. Mr. Hirai Shinji, Chief Representative of the Japan Trade Promotion Organization (JETRO) in Ho Chi Minh City, said that in the domestic market, the market size of 100 million people with income levels having been gradually improving in recent years as attractive to the non-manufacturing industry.

Currently, the Japanese Government has ranked Vietnam as the top five most attractive markets for retailers. Therefore, in the next one to three years, businesses in industries such as retail, seafood, agricultural products and real estate, resorts, health care in Japan will flock to the Southeast Asian country.

Simultaneously, enterprises in the processing and manufacturing industry are constantly expanding their existing investment scale in Vietnam to take advantage of tax rates and increase their ability to export to markets that Vietnam has signed Free Trade Agreement (FTA).

In 2021 alone, 59.7 percent of Japanese enterprises in Vietnam used FTA/EPA (Vietnam - Japan Economic Partnership Agreement), an increase of 1.3 points compared to the previous year. Japanese enterprises in Vietnam often use FTA/EPA with Japan and ASEAN countries, half of them use FTAs for import and export to the EU. 

 

HUBA Vice Chairman Nguyen Ngoc Hoa said that currently, domestic enterprises face many challenges including an increase in the prices of raw materials and fuel affecting the other products' prices, the service and logistics industries are still disrupted due to the impact of the epidemic. All these factors negatively affect the competitiveness and growth of businesses. In order to support businesses, the Ho Chi Minh City Business Association will actively contribute ideas and consult policies on laws, decrees. Along with that, local administrations will work directly with businesses to understand businesses’ difficulties especially those with long-standing problems to help them remove.

Currently, Vietnamese products are present in 200 countries and territories and 50 countries and territories have been identified as traditional and strategic export markets.

  

More than 60 percent of 1,400 Japanese enterprises operating in Vietnam alone confirmed that business profits in 2022 would be improved and more than 55.3 percent of enterprises said they were planning to expand the scale of investment and production in Vietnam within the next one or two years. Compared with other countries and regions, Vietnam is among the top choice in Asean, after India, Bangladesh, and Pakistan.

According to the Ministry of Planning and Investment’s latest report, foreign direct investment capital realized in Vietnam in the first two months of 2022 increased compared to the same period last year. However, many domestic enterprises are concerned that the strong investment from foreign enterprises through capital contribution and share purchase may affect domestic enterprises.

Because from 2020 until now, many domestic businesses have been exhausted because of the epidemic and the pandemic fatigue has lasted until the beginning of this year, so foreign enterprises are easy to acquire or creating competitive pressure to be forced local businesses to leave the market.

The coronavirus pandemic has had a devastating impact on many small businesses, forcing hundreds of thousands of them to shut down. Only in the first two months of the year, nearly 45,000 businesses have shut down. Previously, in 2021, more than 100,000 businesses were closed or dissolved.

Faced with this situation, many businesspeople believe that, on the one hand, the Government should improve the investment environment to increase the ability to attract foreign capital flows, but on the other hand, the government should create more favorable conditions for domestic enterprises to recover and develop.

Vice Chairman of the Ho Chi Minh City Union of Business Associations (HUBA) Nguyen Phuoc Hung said that businesses recommend to authorities to quickly tackle these matters namely complicated administrative procedures, the incomplete legal system and the obscure operation. Worse, enterprises still suffer from unreasonable requests from authorities to pay fines.

Last but not least, the complicated tax system and tax procedures lead to unreasonable requirements in tax and customs inspection as well as fines beyond the prescribed level. In particular, businesses are very frustrated because they have to pay too many unofficial fees. 

Source: Sai Gon Giai Phong

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