In March 2018, the Vietnamese President Tran Dai Quang met South Korean President Moon Jae-in in Hanoi, the capital of Vietnam. The meeting was to promote the Vietnam Korea Free Trade Agreement (VKFTA) of 2015, increasing the original goal of US$70 billion of bilateral trade by 2020 to US$100 billion.
Following an alleged fraud of VND 15 trillion (US$ 658 million) related to cryptocurrency that scammed 32,000 investors, the Prime Minister signed a directive asking the Ministry of Finance and the State Bank of Vietnam (SBV) to strengthen the management of cryptocurrency activities. In addition, the government has also asked the Ministry of Justice to study and develop a legal framework for regulating digital currencies and assets.
In the last few months, the US and China have been going back and forth over tariffs on numerous products, such as agricultural goods, automobile, chemicals, machinery, metals, and medical equipment. Further retaliatory tariffs are under consideration by both countries. This trade dispute between the two biggest economies in the world would have a cascading effect on other countries, including Vietnam, which already faces higher tariffs on steel from the US. The US and China are amongst the top trading partners for Vietnam, and the trade war could have a direct or an indirect impact, as Vietnam’s products are part of China’s value chain.
Vietnam’s pharmaceutical sector has grown significantly in the last decade with positive changes in government policies and an increase in domestic regulations of imported drugs. Regulations on advertising and clinical trials can create obstacles for sellers looking to break into the market, but with the right information, Vietnam offers many opportunities for potential suppliers.
Over the past year, Vietnam’s pharmaceutical market has grown by 10 percent to US$5.2 billion and the growth momentum is projected to continue with the rising expectations of a better quality of life.
Understanding the rules regarding the ownership and use of land in Vietnam can be confusing as neither citizens nor foreigners, can actually own land. However, there are still many opportunities that foreign buyers and investors can tap into as land prices in Vietnam remain relatively low.
Vietnamese Prime Minister, Nguyen Xuan Phuc, has announced plans to reduce Vietnam’s corporate income tax (CIT) in a recent speech. Phuc’s announcement, made at the GMS Business Summit in late March, remains limited in detail but is widely expected to follow draft legislation issued by Vietnam’s Ministry of Finance (MoF) in August of 2017.
Foreign companies outsourcing operations to reduce costs and improve market share is nothing new. The only things that seem to change are the companies changing the way that operations are relocated, and the countries that manage to attract capital inflows.
Among nations competing for investment over the last decade, Vietnam has rapidly emerged as a highly effective location for future relocation in Southeast Asia.
Capitalising on rising costs and increasingly complex regulatory compliance requirements in neighboring China—the former “factory of the world”, the Vietnamese government’s accession to the WTO, competitive costs and receptive investment environment have made it an ideal location for Chinese-based investors seeking to reduce costs and diversify supply chains.
By: Dezan Shira & Associates
Editor: Bao Chi Huynh
Vietnam has undergone a substantial change in its economic structure in the last decade, shifting from agriculture to the industry and services sector. Since 2006, the service sector has had the highest share in the GDP distribution, followed by industry and construction, and agriculture.
The recently released 2017 Provincial Competitiveness Index (PCI) report, a collaborative effort between the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID), has revealed a high level of confidence among private firms and foreign investors in the country’s business and economic environment. The resurgence in confidence has been largely driven by a combination of economic reforms, a decrease in corruption, reduced regulatory burden, improved labor relations, and a consistent improvement in the infrastructure quality.
On March 8, 2018, U.S. imposed a 25 percent tariff on steel imports and a 10 percent tariff of aluminum imports under Section 232 of the Trade Expansion Act of 1962 citing national security issues. In a similar move in December 2017, the U.S. Commerce Department increased import duties on steel products specifically from Vietnam that originated from China as they evaded anti-dumping and anti-subsidy rules. The rise in tariffs will impact the steel industry in Vietnam, but steel companies in Vietnam believe that it will not have a major effect on the overall economy.