The Vietnamese government has issued Decree 69/2018/ND-CP (“Decree 69”) to regulate the temporary import and re-export of goods in Vietnam. The two major stipulations focus on Vietnamese traders processing goods for foreign merchants and the time limit for temporary import and re-export of goods. Decree 69 is already in effect.
Economy & Trade
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.
The growth in foreign direct investment in Vietnam, driven by its strategic location, low wages, and improvement in the business environment, is the major factor that transformed Vietnam into a manufacturing hub in the region. In the long-term, this trend is expected to continue if Vietnam is able to maintain its competitive advantages. In addition, FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam FTA (EVFTA) will diversify the export markets for Vietnam.
Hanoi, Ho Chi Minh City, and Da Nang will be joining the ASEAN Smart Cities Network (ASCN), which was proposed earlier in April by Singapore. The ASCN aims to facilitate cooperation in the region on smart cities for sustainable development. A total of 26 cities from member states will be joining the network.
The consumer lending market in Vietnam, driven by a rise in consumption and favorable demographics, offers huge growth opportunities for investors. Consumer lending grew by 65 percent in 2017, compared to 50.2 percent in 2016. The market is predicted to grow from the current VND 600 trillion (US$26.45 billion) to VND 1 quadrillion (US$44 billion) by 2019.
The Vietnamese government has issued Decree 63/2018 (Decree 63) to replace Decree 15/2015 specifying the areas, investment conditions, and procedures for public-private partnership (PPP) projects in Vietnam. The major change is in the investor equity ratio for PPP projects, which has been increased to 20 percent. PPP is a form of investment that includes a project contract between a government agency and an investor for projects in construction, renovation, operation, business, management of infrastructure works, and provision of public services. Decree 63 will be in effect from June 19th, 2018.
From January 2019, Vietnamese exporters exporting goods to the European Union (EU) need to self-verify their product origin, if they want to qualify for the Generalized System of Preferences (GSP), the tariff preference for developing countries.
This would shift the responsibility for self-certification from the Import and Export Agency which is under the Ministry of Industry and Trade to the exporters, which will increase the exporter’s liability for authenticity. From 2019, exporters have to issue their own Certificate of Origin (C/O) by adding, “this product is qualified for GSP” in their invoices and documents.
In 2017, VN-Index, a capitalization-weighted index of all the companies listed on the Ho Chi Minh City Stock Exchange closed at 984.24, a 47 percent gain, which was the highest in 10 years, making Vietnam Asia’s best-performing stock market. For 2018, the outlook is positive, mostly driven by similar conditions which were prevalent in 2017 such as high GDP growth rate, increase in FDI, and easing of regulations.
In the last 10 years, the production growth in Vietnam has led to a significant increase in freight traffic, highlighting the importance of ports and the need for further investments in its infrastructure to reduce logistics costs, which currently accounts for 21 percent of the GDP.
Mekong Delta, composed of 13 provinces, 20 percent of the country’s population, and 18 percent of the national GDP, has consistently recorded one of the highest average provincial competitiveness indexes amongst all provinces since 2014.