Vietnam Market Watch: EAEU FTA Implementation, e-Commerce Development Targets, and Uptakes in Business Registration
EAEU-Vietnam FTA to be Implemented in October
A Free Trade Agreement (FTA) between the Eurasian Economic Union (EAEU) and Vietnam will be implemented on October 5. The announcement was made at the second Eastern Economic Forum which was held in Vladivostok, Russia by the Minister for Trade at the Eurasian Economic Commission Board, Veronika Nikishina. The EAEU consists of Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan, and features reductions of tariffs in sectors such as trade, services and investment. Analysts have suggested that EAEU exporters can save up to US$40 million in tax during the FTA’s first year of operation alone.
Under the terms of the agreement, Vietnam will remove import tariffs on 59 percent of goods imported from the EAEU, including products such as meat, wheat flour, alcohol, mechanical equipment and steel. Tariffs on the other 30 percent of goods will be gradually reduced to zero in a transitional period. The EAEU-Vietnam FTA was signed on May 29, 2015 after eight rounds of negotiations. Foreign investors that are part of the EAEU countries could take advantage of the upcoming FTA to further their businesses in Vietnam.
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Business Registrations on a High
According to the Ministry of Planning and Investment (MPI), new enterprises showed strong growth in the first eight months of the year. 73,404 companies were registered, an increase of 19.7 percent compared to last year. Registered capital of those enterprises for production and business reached US$25.5 billion. The average registered capital for each enterprise rose 26 percent year-on-year.
The real estate industry had the highest growth of new registrants. Other industries that showed high growth were mining, manufacturing and processing followed by information and telecommunications. The MPI also reported that 2,005 enterprises restarted their businesses in August, a month-by-month increase of 11.1 percent. Businesses that stopped operations in the first eight months reached 7,479, a year-on-year increase of 18.9 percent, of which 93.2 percent were businesses with capital under CND 19 billion. This was attributed to high competition.
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Government Sets Targets for e-Commerce Industry
The Vietnamese government has developed a plan for the e-commerce industry with set targets for the 2016-2020 period, focusing on increasing market share and improving the efficiency of government administrative services. Online systems will be built to facilitate business models such as business-to-consumer (B2C), business-to-business (B2B), government-to-citizen (G2C) and government-to-business (G2B). One of the government’s targets is increasing the percentage of the population buying goods online with average annual spending of US$350 per person to 30 percent.
The government has proposed four levels of e-commerce application:
- Level 1: Websites of authorities have sufficient information on how services are provided, documents needed, steps required, and the duration and cost of services.
- Level 2: Including Level 1. Additionally, users will be allowed to download documents to print or complete.
- Level 3: Including Levels 1 and 2. Additionally, users will be allowed to submit documents online and conduct related transactions.
- Level 4: Including Levels 1, 2, and 3. Additionally, users will be allowed to pay online, with services being returned online or delivered by post.
The government wants all ministries and central authorities to be at Level 3 by this year. In addition, it wants 50 percent of services related to exports at Level 4 by 2020. While the targets are a big push by the government and the benefits are high, implementation will be a challenge. Analysts suggest that the majority of the population remain suspicious of online transactions. Many are not accustomed to online banking and they are concerned about transaction security. Nevertheless, Vietnam remains a fast growing market and foreign investors should consider investing as the industry gains government support.
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