Supply Chains: Vietnam
Vietnam is in the midst of a multi-decade economic restructuring as its government focuses on opening, deregulating, and privatizing its economy to drive growth. As part of this process, Vietnam has created a more welcoming climate for foreign investment by simplifying and streamlining its legal and bureaucratic processes. In 2020, it received US$15.8 billion of inbound foreign direct investment (FDI) versus US$11.8 billion five years earlier, an increase of 34 percent. This rapid inflow of FDI has played an important role in boosting growth. In 2020, Vietnam’s real GDP grew by 2.9 percent despite COVID-19 headwinds, making it one of the few economies in the Asia-Pacific region to register positive economic growth.
A combination of a relatively low-wage and a young workforce, ongoing economic reforms, an expanding middle class, and political stability has played an instrumental role in Vietnam’s attractiveness as an FDI destination. However, challenges remain, including weak infrastructure, lack of uniform interpretation and application of regulations among agencies, and insufficient enforcement of intellectual property rights. In recent years, foreign investment into the country has also faced a capacity issue, as Vietnam lacks the infrastructure and workforce skills to absorb the amounts of FDI destined for its borders. Vietnam currently ranks 65 out of 146 economies in 2019 for its economic complexity.
To attract FDI, the Vietnamese government continues to implement policies that attempt to address FDI capacity and absorption bottlenecks, in addition to improving labor force capabilities. It is aiming to attract an additional US$50 billion in inbound FDI by 2030 through regulatory reforms and by prioritizing the development of an efficient renewable energy market. Top foreign sources of investment in recent years include Japan, South Korea, and Singapore.
Recent Investment/Supply Chain Policies
On April 19, 2021, Deputy Prime Minister Le Minh Khai approved Decree No. 52/2020/ND-CP, which extends time limits for tax and land rental payments to support businesses affected by the COVID-19 pandemic. According to state press, the extension of time limits applies to (1) enterprises, organizations, business households and individuals in certain sectors; (2) enterprises, organizations, business households and individuals which “engage in production of supporting industrial products prioritized for development”; (3) certain small and micro enterprises; and (4) certain credit institutions and foreign bank branches.
On September 25, 2020, Prime Minister Nguyen Xuan Phuc approved Government Decree No.114/2020/ND-CP, which cuts Vietnam's corporate income tax by 30 percent for all businesses earning less than VN$200 billion (US$8.61 million) in 2020.
On April 8, 2020, Prime Minister Nguyen Xuan Phuc approved Decree No. 41/2020/ND-CP, which extends time limits for tax and land rental payments to support businesses affected by the COVID-19 pandemic. According to the decree, "The extension of time limits for payments of value-added tax, enterprise income tax, personal income tax and land rentals shall be applied to: enterprises, organizations, households, and individuals engaged in business and production activities; products of supporting industries prioritized for development; key mechanical engineering products; small and super small enterprises; credit institutions, branches of foreign banks shall conduct measures to support customers being enterprises, organizations and individuals affected by the COVID-19 epidemic."
- On August 21, 2020, Prime Minister Nguyen Xuan Phuc approved Decree No.94/2020/ND-CP, which enables the national government to cover the cost and use of infrastructure in the Hoa Lac Hi-Tech Park in Hanoi and fund land clearances.
- On January 1, 2020, Prime Minister Nguyen Xuan Phuc approved Resolution No. 01/NQ-CP on major objectives and solutions guiding the realization of Vietnam’s socioeconomic development plan in 2021. Targets were set for the percentage of trained workers, GDP growth by sector, share of development investments, and so on.
On December 10, 2020, Prime Minister Nguyen Xuan Phuc approved Decree 128/2020/ND-CP, which outlines administrative penalties for customs violations.
On June 18, 2020, the National Assembly (NA) promulgated the Law on Investment in the Form of Public-Private Partnership (PPP). According to the NA Committee for Economic Affairs Chairman Vu Hong Thanh, the law aims to encourage domestic and foreign investors to participate in public private partnership projects by building a “sufficiently strong legal corridor” to regulate investment activities. It focuses on five “essential” sectors: (1) transport; (2) power grids and plants; (3) water and waste treatment; (4) healthcare and education; and (5) information technology infrastructure.
On June 17, 2020, the National Assembly promulgated the Law on Investment No. 61, which amends the Law on Investment No. 67 of 2014. The amended law seeks to increase investment activity through various measures, most notably by allowing foreign investors to “apply market access conditions as prescribed for domestic investors,” except for foreign investors “specified in the List of Industries and Trades Restricted from Market Access for Foreign Investors.”
On January 1, 2020, Prime Minister Nguyen Xuan Phuc approved Resolution No. 02/NQ-CP, which outlines “tasks and solutions” to improve the business environment and national competitiveness. Tasks include improving coordination between related agencies and units and implementing solutions around digital transformation, among others.
SPECIAL ECONOMIC ZONES
On September 24, 2020, Deputy Prime Minister Trinh Dinh Dung signed Decision No. 29/2020/QĐ-TTg, which establishes the Quang Yen Coastal Economic Zone in the northeast of Quang Ninh. According to state press, the special economic zone aims to take advantage of its strategic location “to connect economy, trade, and services with other coastal economic zones.”
On August 21, 2020, Prime Minister Nguyen Xuan Phuc approved Decree No.94/2020/ND-CP to “attract domestic and foreign talents, professionals, large technology corporations and enterprises throughout the country and from [foreign] countries.” More specifically, Decree No. 94 sets out several new tax incentives and preferential mechanisms for the National Innovation Center of Vietnam (NIC), located at the Hanoi-based Hoa Lac Hi-Tech Park. Companies operating at the NIC “may enjoy a 10% corporate income tax rate for 30 years” and “may be exempted from duties on importation of raw materials, supplies and components which cannot be produced domestically.”
SPECIAL ECONOMIC ZONES
- On September 28, 2020, the 15th Party Congress of the province of Quang Ninh announced that between 2020 and 2025, it will work towards creating a coastal “development hub” focused on the services and tourism sectors. According to state press, the initiative is part of a larger effort to “build Quang Ninh into a modern industrial and service province” and into “one of the dynamic and comprehensive development centers of the North.”
Information and Communication Technology
- On March 16, 2021, Prime Minister Nguyen Xuan Phuc approved Decision No. 10/2021/QD-TTG, which lists out the criteria for identifying "hi-tech businesses" eligible for tax incentives. These new criteria include total annual net revenue derived from hi-tech products, total annual net revenue allocated to research and development (R&D) activities, employee educational attainment, and more.
- On August 21, 2020, Prime Minister Nguyen Xuan Phuc approved Decree No. 94/2020/ND-CP to implement a program aiming to accelerate the founding of startups in the information and communication technology (ICT), clean energy, and other innovative sectors. According to the decree, the program will target telecommunications, information technology, automation, and other related businesses.
- On January 26, 2021 at the 2021 National Party Congress (NPC), Prime Minister Nguyen Xuan Phuc approved and signed the National Strategy on the 4th Industrial Revolution, which sets targets for digital innovation and increasing the digital economy's contribution to GDP by the end of the decade. The NPC aims to increase labor productivity by 7.5 percent per year and have the digital economy account for 30 percent of GDP by 2030.
- On January 6, 2021, the Ministry of Finance issued Circular 96/2020/TT-BTC, which updates government regulations on information disclosure activities of certain business entity categories in the securities industry.
- On November 15, 2019, Prime Minister Nguyen Xuan Phuc approved Decree No. 89/2019/ND-CP, which came into effect on January 1, 2020. The decree increases the foreign ownership cap for foreign-invested airlines from 30 to 34 percent.