New Inspection Regime for Foreign Owned Enterprises

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam’s Ministry of Finance (MoF) has issued Decision 1381/QD-BTC introducing a new inspection regime for Foreign-invested enterprises (FIEs). The decision is already in effect since 24 July 2017. The MoF will be coordinating with other departments such as General Department of Customs, Department of Tax Policy, Department of Finance, Department of Planning and Investment, and provincial Tax and Customs Departments to supervise and audit FIEs. The new decision is being implemented to reduce malpractices by existing FDI firms.

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Vietnam: Transition from Paper Invoices to E-invoices

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam’s Ministry of Finance (MoF) has introduced a draft circular to replace paper bills with electronic invoices from the start of 2018. The new draft will replace Decree No.51/2010/ND-CP and Decree No. 04/2014/ND-CP on invoices for the sale of goods and services to facilitate the implementation of electronic invoices (e-invoices). Invoices already printed will be allowed until 2018.

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Vietnam FDI Real Estate Report- Streamlining Efficiency Part 1

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By Keith Hilden, Squawk Advisors

Southeast Asia is a region that is encountering solid growth with little roadblocks in terms of political instability which has gripped northern Asian economies in recent months. This is manifesting in blanket risk considerations for new capital projects across the potentially imperiled region. One economy in particular is what some call the new China. I am of course talking about Vietnam. As per Xinhua, Vietnam is currently leading Southeast Asia this year in real GDP, with an expected GDP post of 6.8 percent for the year of 2017.

Despite fast paced growth, rapid privatization of state-owned enterprises, and swift reforms to investment laws under the pro-business and investment focused PM Nguyen Xuan Phuc, Vietnam’s economy continues to present a unique market situation with specific opportunities and challenges.

One such issue lies in Vietnam’s legal framework surrounding real estate. Legacy structures in the country’s regulations can at times present an investment bottleneck- for example, only US$1.15bn in FDI registered real estate investment capital mobilized in the first half of 2017 in Vietnam. This is not because of the lack of real estate opportunities- quite the contrary.

However, the current pathways for investment and development in Vietnam are time consuming- so much so to the point that the Vietnam government during recent meetings has definitively identified the need to streamline investment processes in order to facilitate greater investment flows into suitable projects in the country.

This revamping of the investment laws is being done in order to achieve targets of not only standalone real estate projects, but also of integrated townships such as from VSIP as well as entire new additions to Ho Chi Minh City. For example, the now-widely promoted flagship Thu Thiem Urban Area project, slated to replace Ho Chi Minh City’s District 1 as the new downtown area of the city, has a total investment target of roughly US$50 billion in total, which is approximately a whopping 25 percent of the country’s GDP (albeit to be registered and disbursed over a number of years in order to realize the scale of this critical national project).

Further coverage and details are available from our early investor alert back in 2015.  This is particularly crucial for the coming infrastructure investment boom, in which Vietnam’s infrastructure investments will exceed those of neighboring countries, while also requiring a heavy proportion of FDI investment into these projects. 

A surge in tourism has also been very supportive of Vietnam real estate projects, particularly ones that are poised to benefit from such a surge in tourism. During the first four months of 2017, tourism arrivals spiked over 30 percent from last year, making Vietnam Southeast Asia’s fastest growing tourism destination. Airlines, airports, and the government are all making preparations to increase this number further to expand Vietnam’s tourism potential to the fullest. And in Danang, the “Las Vegas” of Vietnam is starting development, with the flagship project Cocobay Danang leading the initiative to transform the city into the entertainment hub of the country.

Indebted consumer or public debt in a market typically does its part to take the sheen off an otherwise glossy market, and we certainly see this in developed OECD markets with high debt levels weighing down on future gains. However, in Vietnam’s case, the debt situation is quite sustainable and is not at levels that would trigger a slowdown in the capital markets or the real estate markets as a whole.

Vietnam’s household debt stands at just 20 percent GDP at the end of 2016, while regional peers such as Malaysia and Thailand have clocked in about 80 percent of GDP, which has acted as a brake pad for the growth of various sectors in the Thai and Malaysian economy respectively. While Vietnam as a whole was thrown a bit off-kilter from the US withdrawal of the TPP upon Donald Trump’s election, Vietnam has a whole gotten back on their feet and maintains the target of 6.8 percent GDP for 2017. This is a comparatively far better situation than not only Southeast Asian peers, but also from China grappling with its own debt issues.

With neighboring China’s fixed capital investment at nearly 90 percent of GDP, the search is on for unsaturated markets with plenty of room for growth such as Vietnam. Public debt to GDP as well as the investment component to GDP are currently at sustainable levels. We are currently seeing this search for Chinese investor yield abroad in the form of a higher proportion of total sales coming from China, as well as our observation of increased Korean investment in real estate projects in Vietnam in general. Furthermore, consensus agrees that Vietnam real estate is a safe bet for the foreseeable future. Jones Lang LaSalle forecasts 8 to 10 percent annual growth in residential values in the country’s major cities this year. This consensus indicates a solid trajectory for the 2017-2018 period and the foreseeable future. The nation, however, does have a debt banking issue, which is a double-edged sword that leads us to the next point, which in coordination with Dezan Shira we will release Part 2 shortly.


About
 Us

Squawkonomics is a crowdfunded frontier market investment research firm that handles investment into over 10 industrial areas in Cambodia and Vietnam, and provides a wide array of investment research reports concerning the Asia Pacific and Latin American investment opportunities. Squawkonomics also assists investors with our portfolio of private equity investments, laying out promising opportunities throughout the APAC and LATAM regions. For investors in need of finding their next investment destination in Southeast Asia, contact us for details.

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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dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_Cover (1)

Managing Contracts and Severance in Vietnam
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.

Korean Investment in Vietnam

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VB- Korean Investment in Vietnam

By: Dezan Shira & Associates
Editor: Koushan Das

The year 2017 marks 25 years of Vietnam and South Korea’s diplomatic relations. During this period, the focus of trade and investments has shifted from labour intensive sectors such as garments and textiles, to capital intensive sectors such as electronic goods, and finally at present to consumer goods and services. Bilateral trade jumped from US$0.5 billion in 1992 to US$45 billion in 2016, while in terms of investments, South Korea has emerged as the largest foreign investor in Vietnam.

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Vietnam to Introduce Customs Bond to Facilitate Customs Clearance

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam will be introducing a customs bond system to facilitate customs clearance and reform import and export procedures. The joint project launched by the Global Alliance for Trade Facilitation (GATF) and Vietnam Private Sector Forum (VPSF) on 1st September will help in modernizing the import and export administrative procedures. GATF will work with local government agencies and monitor the Vietnam Automated Cargo and Port Consolidated System (VNACCS) and Vietnam Customs Information System (VCIS) to assist in implementing the new system.

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State Divestment: Exciting Opportunities for Investors

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VB- State Divestment- Exciting Opportunities For Investors

By: Dezan Shira & Associates
Editor: Koushan Das

For the last few years, equitisation continues to be a focus for the Vietnamese government. The government hopes that equitisation will increase the efficiency and improve the management of the State-owned enterprises (SOE) which have been suffering from inefficiency for years. In addition, the much required capital raised from divestments will also assist the government to reduce its growing debt and fund infrastructure projects. In August 2017, the government released Decision No.1232/2017/QD-TTg approving a list of 406 state-owned enterprises to be divested during 2017-2020.

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Education in Vietnam: Opportunities and Challenges for Investment

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Vietnam’s New Solar Power Policy

By: Chau Pham & Trang Le 

Vietnam is currently one of the best destination for foreign investment in Southeast Asia. The country’s GDP is forecast to grow by 6.5 percent in 2017 and, among a variety of sectors, the demand for a high-quality education is reaching new heights, providing favorable opportunities for foreign investors to enter the market.  Data provided by the Ministry of Planning and Investment’s Foreign Investment Agency (FIA) for the first half of 2017 indicates that Vietnam attracted over US$701.69 million in FDI via 336 projects in the education and training sector.

However, in spite of opportunities, investment in education remains quite challenging as the government’s control over the sector remains high. Interested parties should therefore carefully study Vietnam’s complex regulatory environment when considering their options for market entry.

DZS RELATED: Pre-Investment Advisory Services from Dezan Shira & Associates

Drivers of opportunity in Vietnam’s education sector

The rise of the Vietnamese consumer

Underlying the demand for education in Vietnam is a rapidly emerging middle class. Reporting from Boston Consulting Group (BCG) in 2013 showed that Vietnam had the fastest growing middle class in Southeast Asia. The report projected the middle and affluent classes (MAC) in Vietnam to double in size between 2014 and 2020, from 12 million to 33 million. Accompanying MAC growth is a clear uptick in confidence from those within Vietnam’s current middle class. Survey data provided as part of the BCG report indicated that 90 percent of MAC respondents believe their living conditions are higher than that of their parents. On top of this, respondents in the report confidence that conditions will continue to improve for their children.

Demographic tailwinds

On top of growing incomes and confidence in the future, Vietnam’s demographics also stand to have a positive impact on the education market. As of 2017, nearly 60 percent of Vietnam’s population of nearly 90 million is under 35 years of age. With more disposable income than in years prior, young Vietnamese, with the support of their parents, are eager to obtain the skills and knowledge which meet the ever-increasing demands of the labor market.

Talent shortages

As investment in children’s education is given increased priority, the demand of sending children to an international learning environment for a higher quality of education is on the rise, making the market more attractive to step into. Vietnam is facing major skills gaps, and local qualifications in many fields are not well acknowledged. International qualifications are therefore seen as a valuable advantage, and in some fields, they are almost essential.

Government support initiatives

In addition to the rising demand of for international education providers, investors can also find new opportunities offered by the government, especially after the country’s participation in WTO. Education institutions registered to operate for less than 20 years are no longer obligated to build their own facilities and are allowed to rent suitable schools, buildings or workshop areas for at least 5 years. Investors are also allowed to expand their brand by opening other campuses in the same city or in other cities.

 

Related-Reading-Icon-Asean Link RELATED: Industry Spotlight: Vietnam’s Growing Appetite for Education

Challenges ahead

Education is an attractive sector for investment in Vietnam as the country is in need of international standard learning environment. However, there are some legal issues that enterprises should consider before entering the market.

Vietnam has only committed to liberalizing their education sector for foreign investment in select fields. As of 2017, the following fields are currently opened for foreign investment:

  • engineering
  • natural sciences
  • technology
  • business administration and business science
  • economics
  • accounting
  • international law
  • language training

Most of these fields are for higher education level. For general education, which includes elementary schools, secondary schools, high schools, and pre-schools, opportunities for foreign investment exist but Vietnam has not yet committed to fully opening the sector. As such, there are a number of limitations that should be noted by those considering investments in general education.

Enrollment limitations

The first of these restrictions deals with the composition of education provider’s classrooms. Institutions operated by foreign investors are required to provide these services to primarily foreign students, with only a small number of Vietnamese students able to enroll in this type of school. International schools for general education have to respect the following upper limits for Vietnamese enrollment:

  • 10percent for primary and secondary international school and
  • 20percent or less for international high school).

According to Decree 73/2012ND-CP, passed on 15th November 2012, only foreign children can enroll in an international pre-school. Vietnamese children under 5 years old are not allowed to enroll in any form of general education provided by foreign investors. This decree limits international schools from getting more potential clients from the local market even when the country is getting wealthier and the demand of Vietnamese students for international learning standard are very positive. Thus, it makes the investment less attractive.

Licensing

On top of enrollment restrictions, obtaining licenses is another difficult challenge. In order to operate in the education sector in Vietnam, foreign institutions have to follow specific procedures to obtain three types of licenses:

  • the investment registration certificates
  • the decision permitting the establishment of educational institutions
  • the license for educational activities

Note: Although the processes to obtain these documents are quite similar, they must be applied for independently and sequentially.

Staffing

Regarding the requirement of teaching staff’s qualifications, the Decree 73 stipulates that foreign teachers must have at least five years of experience to be allowed to teach twinning programs at Vietnamese institutions or at foreign-invested school, colleges and universities. For tertiary education institutions, 60percent of courses must be delivered by permanent teachers, and 80percent of teaching staff must hold postgraduate degrees. The percentage of lecturers holding a doctoral degree in foreign colleges and universities must be at least 25 percent and 35 percent respectively.

Additional investment considerations

While enrollment, licensing and staffing are currently the most pressing challenges for investors in education, there are a number of other aspects to the Vietnamese investment process that should be noted and explored to ensure that investments in Vietnam can be carried out in a seamless manner. These issues are wide ranging and non-exhaustively include areas of investment such as capital requirements, the inspection of facilities of foreign-invested institutions, and the lack of a legal framework to extend the operational terms of educational institutions.

It is finally worth noting that Vietnamese officials are very aware of both the importance of foreign capital in the education sector as well as the challenges faced by the foreign investment community. The most recent example of this can be seen in a workshop set up to seek comments for a draft decree on education replacing Decree No 73 which was organized in April of 2017. According to the Ministry of Education and Training (MOET), this draft decree shows many positive changes, which favor foreign investment in the education sector, including a better climate of doing business and the removal of the prescribed ratio of Vietnamese to foreign students.


About
 Us

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

 

Related Reading Icon-VB

dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_Cover (1)

Managing Contracts and Severance in Vietnam
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.

 

Vietnam: Consumer Confidence Hits Record High

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VB- Consumer confidence at record high

By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam’s consumer confidence hits a record high according to the recent Nielsen Q2-2017 Consumer Confidence Index. The country stands as the fifth most optimistic country with an index score of 117, up five places from last quarter of 2016 and its highest score in the last five years. The Nielsen study aims to measure the consumers’ confidence, concerns, and spending intentions.

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Vietnam to Divest in 406 State Owned Enterprises by 2020

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By: Dezan Shira & Associates
Editor: Koushan Das

Vietnam is planning to divest 406 state-owned enterprises (SOE) by 2020, with 135 scheduled for 2017 alone. 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 have been hampering investor sentiment.

Some of the big-ticket divestments include Vietnam Engine and Agricultural Machinery Corporation (VEAM), Airports Corporation of Vietnam (ACV), Vietnam Airlines, PVOil, and PVTex. 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 – Singapore Trade and Investment Relations

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By: Andrea Bottega
Editor: Koushan Das

VB-Singapore and Vietnam - Trade and Investment Relations

Since the establishment of bilateral diplomatic relations in 1973, trade and investments between Singapore and Vietnam have grown immensely and has been a significant factor in forging robust bilateral ties. In addition, since the implementation of the Connectivity Framework Agreement in 2006, several steps have been taken in creating a conducive environment for Singapore companies investing in Vietnam. The seven Vietnam-Singapore Industrial Parks in Binh Duong, Hai Phong, Bac Ninh, Quang Ngai, Hai Duong and Nghe An are examples of the close economic cooperation between the two countries.

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