Economy & Trade

Vietnam Market Watch: Foreign Firms Join e-Commerce, Vietnam Ranks High as Expat Destination, and HCMC to Attract More FDI

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Foreign firms join e-commerce bandwagon

Japanese retail company Aeon entered Vietnam’s e-commerce market through its website on January 1st. The website named AeonEshop.com is designed as a business-to-consumer (B2C) platform with most of the products imported from Japan. The company started operations in Ho Chi Minh City and will later expand throughout the rest of country. An English version of the site is expected along with a mobile app version by mid-2017. Apart from its home country Japan, Aeon also has a presence in Malaysia.

Additionally, Lotte also recently launched its e-commerce website in Vietnam and plans to invest US$25 million per year; by 2020, it targets a 20 percent market share in the country. Similarly, Thai based Central Group has taken over e-commerce site Zalora, while Chinese based Alibaba has entered the market by taking a controlling stake in online retailer Lazada Group for US$1 billion. While several foreign retailers still operate through traditional brick and mortar stores, Vietnamese consumers increasingly prefer to shop at grocery stores to make orders and have it delivered to their homes, as this helps in saving time and eliminates the necessity to carry large packages themselves. Analysts have stated that businesses will have to pursue an omnichannel retailing experience, which combines online shopping with traditional stores.

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Vietnam Market Watch: Government Contracts, E-Visa Services, and Tax Competitiveness

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Can Tho Officials Award Contract for US$47 million Waste plant

Can Tho city officials have granted China Everbright International Limited, a Hong Kong based environmental services firm, the rights to build a US$47 million waste-to-energy plant. The solid waste disposal plant is being designed to process 400 tons of daily household waste and generate electricity for the national grid. The company would implement its in-house technology including a grate furnace system, gas emission treatment system and leachate treatment system. The construction of the 53 hectare plant in Truong Xuan commune (to be located in Thoi Lai District) will commence from February 2017 with operations starting from February 2018. This is the first project in Vietnam funded by China Everbright International.

Vo Thanh Thong, Chairman of the Municipal People’s Committee stated that the company was selected from seven other investors after a visit by the city’s delegation of their Chinese projects. According to Chen Xiao Ping, Director General of China Everbright International, the company currently has 68 waste-to-energy plants with a capacity of 55,000 tons garbage per day and is committed to making this an environmentally friendly project following Vietnam’s environmental standards.

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Vietnam – Eurasia Economic Union Free Trade Agreement Comes into Force

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By: Harry Handley

In May 2015, Vietnam became the first nation to sign a free trade agreement (FTA) with the Russian-led Eurasian Economic Union (EEU) – which also includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.  Over a year after it was signed, the FTA finally came into force on October 6th, 2016. Previous Russia Briefing and Vietnam Briefing articles have discussed the background of the deal; now, it is important to assess the impact the FTA is having and will have in future.

Which goods does the FTA cover?

At its core, the Vietnam – EEU FTA will reduce tariffs on 90 percent of goods, with the tariff on 56 percent of goods already having been removed completely as soon as the agreement came into effect. Remaining tariffs will be reduced gradually over a number of years.  The table below highlights the reductions in a number of key export categories for Vietnamese companies.  All changes are effective immediately unless otherwise stated.

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Vietnam Market Watch: Prospects for Big Steel, New SEZs, and Open Bidding for a State Beer Manufacturer

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Steel industry to continue on its growth trajectory

The Vietnam Steel Association (VSA) announced that the steel industry is projected to grow at a rate of 10-12 percent in 2017. The association stated that steel consumption depends on the country’s GDP; with a GDP growth rate of 6.2 percent this year and the operation of 10 steel projects next year the industry is likely to further expand. However, the local industry faces competition from Chinese steel imports, which are cheaper. The industry also faces strict technical standards for exporting steel. To counter Chinese imports, the VSA has asked the government to impose anti-dumping measures.

The VSA has sent amendments to Vietnam’s Ministry of Industry and Trade (MoIT), which has made a draft plan of the steel sector until 2025 and extendable to 2035. The VSA has proposed a slew of measures, including less government intervention in the industry. The issuance of investment certificates, it said, should also be done with the relevant ministries rather than just the MoIT. In addition, it noted that the draft is not complete as it does not have a development plan for hot rolled and high quality steel, as these are 100 percent imported. Reports say that Vietnam will need to spend approximately US$15 billion a year to import steel.

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Vietnam Market Watch: E-tax Refunds, Low Cost Housing, and Vietnamese Airline Expansion

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E-tax Refund to Debut in More Cities, Provinces

The government has come up with an online tax refund project which will be put in place in 13 municipal tax departments and further expanded the following year. The 13 areas include Hanoi, Ho Chi Minh City, Hai Phong, Dong Nai, Binh Duong, Da Nang, Can Tho, Quang Ninh, Kon Tum, Khanh Hoa, Vinh Phuc, Binh THuan and Thai Nguyen. The move is projected to speed up refunds in value added tax and will be strictly reviewed as it uses the state budget.

Tax payers will be able to access the online portal at any time and can see their application status. The service is expected to reduce time and money for tax payers and the tax departments. The online tax refund project has been submitted by the General Department of Taxation to the Finance Ministry for approval and if approved will be implemented in the next month.

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Vietnam Market Watch: E-Commerce, Exports to Argentina, and SME Corruption Challenges

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10 billion Dollars Worth E-commerce Sales Targeted by 2020

Vietnam’s Ministry of Industry and Trade has set an online sales target of US$10 billion, or 5 percent of total retail sales, by 2020. The ministry further stated that e-commerce sales are expected to grow significantly in the next five years. Small cities accounted for 25 percent of last year’s US$4 billion in sales, with Ha Noi and Ho Chi Minh City accounting for 75 percent. In addition, Ha Noi accounted for 5.6 percent of all websites. The revenue of e-commerce sales showed a growth of 37 percent from the previous year.

Nevertheless, the ministry stated that e-commerce turnover remains small, compared to China, South Korea and India. While urban residents are familiar with the sector, rural areas still do not do much shopping online. To achieve the US$10 billion target, the government will need to play a major role; the ministry is also developing an online marketplace with a website, with many local businesses keen to be on it. More websites are expected in the future to support local enterprises.

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Trump, Trade, and the Future of the Trans Pacific Partnership

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By: Maxfield Vandel Brown

Following weeks of campaigning, culminating in a formal concession from Hillary Clinton, Donald Trump is set to become the 45th president of the United States of America. Given the US’ formative roll in TPP negotiations, and legislative deadlock on the issue at the ratification level, Trump’s victory is likely to have a significant impact on the agreement’s ultimate outcome. In this regard, it is worth considering the specifics of Trump’s position on TPP, his view of Vietnam in particular, as well as the impact that these positions are likely to have on the status of the agreement and any future negotiations with Vietnam.

Trump’s positions

Deriving his support from a reactionary base, eager to buy into populist simplifications of trade, there is naturally an abundance of isolationist soundbites and news clips that can be attributed to Trump and his campaign. While positions of this nature must be taken into account, as Trump will likely fall back on them during a future reelection campaign, the instances where Trump, his running mate – Mike Pence, and members of the Trump team offer details on particular policy positions provide, without a doubt, the most accurate representation of how his administration would handle issues in the months to come.

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Vietnam Market Watch: Housing Tax, Garment Exports, and Investment in Quang Ninh

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Finance Ministry Considers Additional Tax for Ownership of Multiple Houses

The Ministry of Finance is proposing a policy to pay additional tax for owners of more than one house. The ministry has tasked its tax policy department with developing the plan, though it is unlikely to be implemented before 2020. Analysts have stated that homeowners should pay tax rates progressively, increasing on the second and any subsequent homes. Currently the state only gets a modest amount from its land use tax, which they say is not enough to cover expenses that maintain working public amenities.

Tax authorities have set a land use tax of 0.03-0.07 percent based on government mandated property prices while other countries levy a rate of 1 to 1.5 percent on the property’s market price. The taxing of multiple houses will be included in the Law on Asset Taxes to regulate national assets, as well as to increase the state budget. In addition to increasing government collections, the move is aimed to prevent real estate speculation.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Tax Compliance Services

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Vietnam Market Watch: Consumer Goods, Farm Exports, and Lagging Internet Speeds

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Fast Moving Consumer Goods Sector Shows Strong Growth

Vietnam’s fast moving consumer goods (FMCG) sector is showing strong growth despite slowing moderately in the first quarter of the year. Beverages, including beer, accounted for 39 percent of turnover, dominating the sector, followed by milk products at 16 percent, food at 15 percent, tobacco products at 13 percent, personal care items at 8 percent, household products at 6 percent and finally baby products at 4 percent. Statistics show that around 88 percent of Vietnamese customers bought a new item during a shopping trip compared to the other Southeast Asian shoppers at 69 percent.

FMCG is expecting to reach US$173 billion by 2020, up 23.6 percent from the US$140 billion forecast for 2016, fueled by rising incomes and a young consumer base as outlined by the Ministry of Industry and Trade. The General Statistics Office (GSO) has also stated that manufacturing and processing firms remain positive with more than 90 percent of firms expecting to either increase production or remain stable in the second half of the year. In addition, two-third of Vietnam’s population lives in rural areas with household incomes rising faster than urban centers, further expecting to contribute to FMCG growth.

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Vietnam Market Watch: Russian Relations, SME Loans, and Public Investments

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Vietnam, Russia Seek Greater Economic Ties

Government officials from Hanoi (Vietnam) and Moscow (Russia) are urging businesses from both countries to invest into both cities. This is especially after the upcoming enforcement of the Eurasian Economic Union (EAEU) trade agreement of which Russia is a member. Vietnamese officials have stated that they welcome all Russian businesses and would support them. Russian officials also responded that Moscow has a lot of potential for Vietnamese enterprises, particularly for Vietnam’s high quality goods. In addition, Moscow has been implementing infrastructure facilities and industrial parks to attract small and medium sized businesses with preferential tax rates. Officials also highlighted the fact that businesses should come into Moscow as it hosts the 2018 World Cup.

The Russian Chamber of Commerce and Industry (RCCI) wants to meet with Vietnamese officials to create plans for investment and trade in 2017. The developments come after the Hanoi Expo which was held on September 9, where around fifty Vietnamese companies showcased commodities such as bamboo, traditional toys, cosmetics, food and footwear products. The EAEU agreement will open up 175 million strong market for Vietnamese goods. Vietnam’s exports to Russia increased by 20 percent while imports rose by 48 percent in the first seven months of 2016. Bilateral trade is estimated to reach up to US$10 billion by 2020 thanks to the trade agreement.

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