News Bulletin 17 - Week 2 June, 2020

As the Vietnam economy continues to move on post Covid-19, there are optimistic signs that Vietnam’s economy is gradually recovering and regaining its growth momentum. In other news last week, Minister of Industry and Trade Tran Tuan Anh and EU Trade Commissioner Phil Hogan reached consensus on the point of time for the EU-Vietnam Free Trade Agreement (EVFTA) to take effect during their phone call on June 8. Accordingly, both sides plan to have EVFTA take effect on August 1.

The past week spotlight

EVFTA hoped to take effect on August 1

Photo:  Minister of Industry and Trade Tran Tuan Anh talks over the phone with EU Trade Commissioner Phil Hogan on June 8 

The EVFTA sailed through the Vietnamese NA on June 8 with the support of all lawmakers present at the plenum.

Under Article 17.16 of this deal, the EVFTA will take effect on the first day of the second month after the month when both sides inform each other about the completion of corresponding legal procedures for the enforcement, or another date agreed on by both sides.

As the EU already gave the notification to Vietnam in April, Vietnam’s coming announcement will also set the date for the EVFTA to take effect for both sides, August 1 as expected.

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Let’s look at some other related financial and business news during the past week:

1. Transfer pricing among FDI firms in Vietnam at alarming rate: State Audit

While FDI firms continue to report losses, they keep expanding operations in the country.

Transfer pricing among foreign-invested firms operating in Vietnam is increasing at an alarming rate, evidenced by the fact that while foreign-invested companies report losses, the majority of their Vietnamese peers in the same fields are generating profits, especially in garment and footwear, according to Doan Xuan Tien, deputy State Auditor General.

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2. COVID-19 to create an M&A wave in Viet Nam

Weak financial stability and a lack of capital are forcing many businesses to seek M&A deals amid the COVID-19 pandemic.

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3. Gov’t proposes reducing income tax by 30% for small firms

Authorized by the prime minister, Minister of Finance Dinh Tien Dung on June 11 submitted a draft resolution to the National Assembly (NA) to offer a 30% corporate income tax cut for small businesses and cooperatives in 2020.

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4. Australia initiates anti-dumping investigation on painted steel trapping from Viet Nam

Australia’s Anti-dumping Commission has initiated an investigation into alleged dumping and subsidisation on painted steel trapping exported to Australia from China and Vietnam, according to the Trade Remedies Authority of Vietnam.

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5. Tax relief stimulus may inflate Vietnam's fiscal deficit in 2020: Fitch

Fitch Solutions, a subsidiary of Fitch Group, has revised its forecast for Vietnam’s fiscal deficit (excluding debt principal repayments) to be 6.4% of GDP in 2020 (from 6.0% of GDP previously), almost double of 3.4% in 2019.

Fitch Solutions’ deficit forecast is wider than the Ministry of Finance (MoF)’s 5.0-5.1% deficit estimate, which already reflects the authorities’ view for a wider deficit versus their initial 3.4% target set for 2020 back in December 2019.

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6. Finance ministry wants to cut 30 per cent of environment protection tax on jet fuel

The Ministry of Finance has proposed to cut environmental protection tax on jet fuel by 30 per cent, from VND3,000 to VND2,100 per litre.

The reduction is expected to help remove difficulties for the aviation industry due to the serious impact of the COVID-19 pandemic.

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7. UK to start post-Brexit trade talks with Japan

Britain is embarking on negotiations over trade deals with countries around the world including the US.

The UK and Japan are set to begin talks on Tuesday aimed at reaching agreement on a post-Brexit trade deal.

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8. PM: Ensuring Vietnam is a safe destination the top priority

Ensuring that Vietnam is viewed as a safe destination for sustainable development is the primary goal of the country’s post-COVID-19 response in the new normal, Prime Minister Nguyen Xuan Phuc told a meeting with permanent government members on June 9 in Hanoi.

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9. HCM City attracts 1.6 billion USD in FDI in first five months

Ho Chi Minh City attracted a combined 1.6 billion USD in foreign direct investment (FDI) in the first five months of 2020, or 57.67 percent compared to the same period last year.

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10. Experts see golden opportunities for Vietnam as the US’s preferred partner

Vietnam needs to grab opportunities to reduce its trade surplus with the US.

Adam Boehler, CEO of the Development Finance Corporation (DFC), at the working session with the Vietnamese Ambassador to the US Ha Kim Ngoc on June 2, said that DFC is implementing a series of plans to support investment projects in developing countries, especially projects in the fields of energy, infrastructure and digital economy.

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