Vietnam Market Watch: FDI Inflows, Da Nang Startups, and Aquaculture Exports

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Vietnam’s FDI Inflows Rise to US$4.8 Billion in April

FDI disbursed in the first four months of 2017 shows a strong year on year growth with inflows rising to US$4.8 billion, up 3.2 percent from the same period last year for a total of 734 newly registered projects. The total registered and additional capital in the first four months witnessed a jump of 40.5 percent, reaching US$10.95 billion. The growing numbers prove the increasing confidence of foreign investors in the country’s investment climate.

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Payroll Management in Vietnam – New Issue of Vietnam Briefing Magazine

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VB_2017_05_Payroll_Management_in_Vietnam_-_ImageThe latest issue of Vietnam Briefing Magazine, titled “Payroll Management in Vietnam”, is out now and currently available to subscribers as a complimentary download in the Asia Briefing Publication Store.

In this issue:

  • Vietnam’s Statutory Payroll Requirements
  • Emerging Challenges in Vietnamese Payroll
  • Expert Commentary: Understanding the Benefits of Payroll Outsourcing in Vietnam

As companies establish new operations in Vietnam, one of the first tasks for businesses is to put employees on the new entity’s payroll.

This will allow new market entrants to engage local workers and bring in managerial staff from overseas. But payroll administration can quickly become a significant undertaking, even for those who are well versed in market expansion. Payroll compliance and the ever-changing regulatory environment are a challenge for any expanding business.

From individual income tax calculation to ensuring proper social security contributions, companies are required to conduct a variety of monthly compliance tasks to ensure that they are up to take with their statutory obligations. These areas of compliance can often be quite complex and take significant time to master, navigate, and implement effectively.

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Vietnam’s Aquaculture Exports to Reach US$13 billion by 2020

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By: Koushan Das, Business Intelligence Associate at Dezan Shira & Associates

According to the Vietnam Sea Culture Association, exports of marine aquaculture produce are predicted to reach US$12-13 billion (VND 276-299 trillion) by 2020 and US$30-35 billion (VND 690-805 trillion) by 2030. To achieve their goals, the Ministry of Agriculture and Rural Development (MARD) has approved a project to increase competitiveness in seafood sector with financial support from the State Budget and foreign businesses, to restructure the sector towards improving its value added products.

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Industrial Zones in HCMC: Land of Opportunity

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By: Maxfield Brown, Business Intelligence Associate at Dezan Shira & Associates

Ho Chi Minh City has long stood as a hub for economic activity and a primary attractor of foreign direct investment (FDI) in Vietnam, and guess what? This hasn’t changed. Here are the big numbers: in the first quarter of 2017, FDI investments in the city were up 51 percent over the year prior, amounting to nearly US$600 million total.

There are many reasons for HCMC’s success: an array of logistics links, demographic trends and trade agreements with other countries are all coming together to attract investment. On top of this, and perhaps most importantly, are HCMC’s industrial zones. Right now the city has 19 industrial parks with another eight on the way.

For domestic or international investors setting up in HCMC, industrial parks offer a wide variety of advantages: personal and corporate income tax incentives; improved infrastructure; streamlined compliance requirements; and a range of prefabricated or tailor-made facilities are just some benefits.

Although most industrial zone tenants are domestic companies, today these areas are also highly sought after by multinational enterprises seeking large-scale bases for manufacturing within Vietnam. Some of the heavy hitters? For one, there’s Samsung, which set up a US$2 billion components facility in the Saigon High- tech Park in 2016. And then there’s intel, which established a production facility in 2009 at the same location with a current value topping US$1 billion.

Industrial zones and HCMC’s real estate market

Besides providing good conditions for investment, industrial zones, and the parks within them, often provide opportunities for real estate professionals. After all, building an industrial park also means building roads, utilities networks and other infrastructures. Plus there’s the fact that by supporting investment from small and large investors alike, industrial zones play a significant role in driving demand for residential housing.

With unemployment in HCMC hovering around 2 percent and managerial skills in high demand, new projects in industrial zones are often dependent on workers from other Vietnamese provinces and on managerial staff from abroad. Everyone needs a place to live, and now developers are working to build these affordable housing blocks.

At present, while industrial parks in districts such as tan Phu, district 2 and district 9 are all at full capacity, other areas such as Cu Chi still provide significant potential for future investment.

Keeping costs under control: a constant struggle

If you’re a real estate investor and you want to tap into these opportunities, you should remember: always consider the supply of leasable land in conjunction with the cost of basic materials, wages and the going sale price for real estate within specific districts.

While certain areas within HCMC may be at a relatively low capacity, Vietnam remains one of the most sought-after destinations for investment in the country. As such, leasable land as a whole is in low supply compared to other provinces such as Dong Nai and Binh Duong. Because of this, the minimum leasing rate within HCMC, even within low capacity areas, is near the maximum rate found within other provinces.

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While this certainly allows for increased profit for the landlord, the intense demand for materials and personnel has led to higher wages and price inflation for building materials in recent years. These are constantly shifting and should be monitored closely if you’re looking to construct a new factory or housing complex within the city lines.

Districts to watch

With several new industrial projects in the planning stages in HCMC, we’re expecting to see industrial zones play an even bigger part in the city’s future soon enough. Keep an eye on Binh Chanh, Cu Chi and Nha Be districts, which all have projects in various states of planning.

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With high occupancy rates and the third- highest average rental prices across all districts in HCMC, Binh Chanh, in particular, is well positioned for real estate investment. With over 1000 ha of leasable land expected to come online in the years to come, the potential for this district cannot be understated. Within Binh Chanh, Le Minh Xuan Industrial Park and Vinh Loc I Industrial Park are expected to provide 580 and 466 ha of new land respectively, accounting for the vast majority of new space coming online in the district. For everyone involved, the ongoing development of new industrial park projects will present significant immediate-term contracting opportunities. 

Further downstream, once the listed projects are completed and new workers flood to these areas, we’ll see added pressure on both commercial and residential real estate markets around these areas. However, no matter the location and focus area where real estate investors choose to stake their claim, the impact of industrial zones cannot be discounted. Get ready to see these projects continue to grow HCMC in the years to come.

Editors Note: This article was first published in the May edition of City Pass’ #iAMHCMC Gazette. A full version of the Gazette can be downloaded here


About
 Us

city pass guideThe first newspaper of its kind in Vietnam, #iAMHCMC is a widely distributed print and online publication from the largest travel and living information website in the country, CityPassGuide.com. Innovo JSC, the parent company of both #iAMHCMC and CityPassGuide.com, is a Ho Chi Minh City-based media agency specializing in travel writing, local marketing and quality content creation published across multiple media platforms.

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndiaIndonesiaRussia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

 

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In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

Da Nang Emerging as Southeast Asia’s Next Startup Hub

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By: Koushan Das, Business Intelligence Associate at Dezan Shira & Associates 

According to a new JLL report, Da Nang is one of the fastest emerging startup cities in Southeast Asia. Other cities in the region include Penang in Malaysia, Chiang Mai in Thailand, and Bali and Bandung in Indonesia. Driven by low cost, a robust engineering talent pool, and government support, the port city is known for attracting established players in the tech field but increasingly is being sought out by startups looking for a foothold or base of operations in Southeast Asia.

The city hosted Startup Fair 2016 last year to highlight its capabilities and foster the startup ecosystem. The event attracted over 500 participants, including policy makers, investors, domestic and international partners, as well as local businesses and entrepreneurs. In 2016, the city also established the Danang Entrepreneurship Support Company, a US$1.3 million incubator to run incubation programs. The incubator aims to support startups through its investors and partner with local universities for skill development programs.

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Vietnam’s FDI Inflows Rise to US$4.8 Billion in April

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By: Koushan Das

FDI disbursed in the first four months of 2017 shows a strong year on year growth with inflows rising to US$4.8 billion, up 3.2 percent from the same period last year for a total of 734 newly registered projects. The total registered and additional capital in the first four months witnessed a jump of 40.5 percent, reaching US$10.95 billion. The growing numbers prove the increasing confidence of foreign investors in the country’s investment climate.

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Electronics Production in Vietnam: A Guide to Emerging Opportunties

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By: Eugenia Latova

While many industries of the Vietnamese economy are growing rapidly, perhaps the most exciting is electronics. Imports have nearly tripled from 2011 to 2016, while exports have increased by nearly 5 times — rising from US$12.8 billion to US$65.8 billion in 2015. In 2015 alone, electronics exports nearly doubled, something that took aggregate exports nearly four years to accomplish. In the years ahead, the implementation of key trade agreements, strong demographic tailwinds, and supportive government policies are likely to continue this trend and present a variety of opportunities for investors. To tap these trends effectively, it will be critical to understand recent events in electronics production, the structure of Vietnam’s electronics sector, and prepare to meet opportunities as they arise. 

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Vietnam Market Watch: GDP Growth Projections, State Divestment Plans, and Aviation Guidance

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Government to sell stakes in 137 state-owned enterprises by 2020

Vietnam’s State Capital Investment Corporation (SCIC) is planning to divest its entire capital in 137 state-owned enterprises (SOE) by 2020. Changes in foreign ownership limits, a growing economy, and a strong performing stock market have attracted considerable interest from foreign investors for earlier SOE’s divestments. However, a lack of transparency and the slow progress of divestments are affecting investor sentiment.

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Vietnam to Sell Stakes in 137 State Owned Enterprises by 2020

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By: Koushan Das 

Vietnam’s State Capital Investment Corporation (SCIC) is planning to divest its entire capital in 137 state-owned enterprises (SOE) by 2020. Changes in foreign ownership limits, a growing economy, and a strong performing stock market have attracted considerable interest from foreign investors for earlier SOE’s divestments. However, a lack of transparency and the slow progress of divestments are affecting investor sentiment.

For 2017-18, the companies under consideration for divestment are Giang Stone Exploitation & Processing One Member Company, Trang Tien Trading Co. Ltd, Hoang Quan Appraisal Co. Ltd, and the Publishing & Printing company under HCM City’s Publishing Association. However, SCIC will continue investing in SCIC Investment One Member Company Limited, Ha Giang Mineral and Mechanics Joint Stock Company, and FPT Corporation, which are already part of their portfolio. Since its inception in 2006, SCIC has divested in over 900 enterprises. In 2016, SCIC divested from 60 business and in turn achieved an impressive 2.58x return.

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Vietnam’s GDP Forecast to Grow at 6.5 Percent in 2017

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By: Koushan Das

Vietnam’s GDP is forecast to grow by 6.5 percent in 2017 and at 6.7 percent in 2018, according to the 2017 Asian Development Bank (ADB)’s Outlook report. While the results remain largely upbeat, Vietnam’s first quarter growth, which came in slightly below prevailing estimates in March, has led to a more conservative outlook from the ADB. From the perspective of investors, however, aggregate GDP figures are likely to play a less significant role than the performance of key industries within the Vietnamese economy such as agriculture and manufacturing.

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