In just a short period of time since the EU – Vietnam Free Trade Agreement (EVFTA) became effective, the trade deal has brought noticeable impacts for both parties. The increased trades between Vietnam and EU will undoubtedly contribute to their respective economic recovery process during and after Covid-19.
With the U.K. leaving the European Union, its rights and obligations under the EVFTA will cease to apply after December 31, 2020. In anticipation of its departure from the EU, the UK itself concluded negotiations on a bilateral free trade pact with Vietnam that will maintain their existing relationship in the EU-Vietnam FTA.
The past week spotlight
Vietnam, UK conclude bilateral trade pact negotiations
Photo Minister of Industry and Trade Tran Tuan Anh and UK International Trade Secretary Elizabeth Truss at the signing ceremony, December 11, 2020. Photo courtesy of the MoIT.
Minister of Industry and Trade Tran Tuan Anh and U.K. International Trade Secretary Elizabeth Truss signed Friday afternoon a joint ministerial statement on the conclusion of the Vietnam - U.K. Free Trade Agreement (UKVFTA).
The bilateral deal locks in the benefits of both countries’ existing trading relationship under the EU-Vietnam FTA that took effect August 1, eliminating 99 percent of import duties for both parties after seven years.
By the time the pact begins full implementation, Vietnam stands to benefit from tariff savings of £114 million ($149.89 million) on Vietnamese exports. For U.K. exports, this figure will be £36 million ($47.33 million), Truss said.
Let’s look at some other related financial and business news during the past week:
1. Finance Ministry warns about trillion VND-losses after equitization
The Ministry of Finance (MOF) has sent a dispatch to the Ministry of Construction (MOC), the representative for the state capital in Song Hong JSC, to warn about the financial situation and the business results of the enterprise.
MOF in 2017, 2018 and 2019 released warnings about difficulties in Song Hong’s production and business activities and suggested solutions to improve the situation.
However, after analyzing its 2019 finance report, MOF realized that things have not improved.
The ministry said that Song Hong is in a difficult situation, which affects its capability to maintain operation.
2. US largest importer of Vietnam’s agro-forestry-fishery products
The US was the largest importer of Vietnamese agro-forestry-fishery products during January-November, with a turnover of $9.8 billion, up 22.3 percent year-on-year, according to the Ministry of Agriculture and Rural Development.
In the 11-month period, the US accounted for 26.2 percent of Vietnam’s total farm produce export revenue.
China came second by splashing out nearly 9.2 billion USD on the Vietnamese products, falling 6.6 percent from the same time last year, and making up of 24.6 percent of the country’s total.
According to the ministry, agro-forestry-fisheries export turnover reached 3.72 billion USD in November, raising the total figure in the first 11 months of this year to 37.42 billion USD, up 2.4 percent over the same period of 2019.
3. 2020 marks a successful year for Vietnam exports
Amid severe impacts of the Covid-19 pandemic, Vietnam’s exports remain a spotlight of the economy with an expansion of 5.3% year-on-year to US$254 billion, which resulted in a record high trade surplus of over US$20 billion.
By the end of June, Vietnam’s export turnover was estimated at US$121 billion, three months later, the figure rose to US$203 billion and US$254 billion as of late November. This showed Vietnam’s good adaptability to negative impacts from the Covid-19 pandemic.
In the January–November period, the US remained Vietnam's biggest export market, spending US$69.9 billion on Vietnamese goods, up 25.7% year-on-year, followed by China (US$43.1 billion, up 16%), and the EU (US$32.2 billion, down 2.4%).
4. EVN signs MoU to buy electricity, develop power projects in Laos
The signing of the deals took place on the occasion of the 43rd meeting of the Vietnam-Laos Inter-Governmental Committee on bilateral cooperation.
In the deals with Phongsubthavy Group, EVN will cooperate to develop 84 MW Nam Yeuang hydropower project, which will sell electricity to Vietnam from 2024-2025, and develop 300 MW Nam Phan coal-fired thermal power plant, which is expected to export power to Vietnam from 2025.
Besides, EVN will work with Kong Sup Hydro Development of Nam Neun 1 and Nam Neun 3 to develop 124 MW Nam Neun 1 hydropower plant, which will sell power to Vietnam from 2024-2025.
5. ADB forecasts Vietnam GDP growth at 2.3 per cent in 2020
Vietnam's growth accelerated from 0.4 per cent in the second quarter of 2020 to 2.6 per cent in the third quarter, lifting average growth for January-September to 2.1 per cent. The change in the growth forecast from 1.8 to 2.3 per cent was prompted by accelerated public investment, revived domestic consumption, trade expansion, and rapid recovery in China. The growth forecast for 2021 was slightly revised down to 6.1 per cent, according to a report released by the ADB today.
The inflation forecast for Vietnam was revised up to 3.5 per cent as floods in Central Vietnam may put pressure on food prices.
6. Vietnam tax revenue passes 1,000 trillion-mark in 11-month period
Vietnam’s tax revenue collection in the first 11 months of 2020 reached VND1,083 trillion (US$46.7 billion), equivalent to 86.4% of the year’s estimate and down 4.1% year-on-year, according to the General Department of Taxation (GDT).
“Positive economic recovery has directly led to improvements in state budget collection, thanks to Vietnam’s effective measures against the Covid-19 pandemic and the EU – Vietnam Free Trade Agreement,” said GDT Director Cao Tuan Anh at a recent meeting, referring to a 11.9% year-on-year expansion in Vietnam’s industrial production in November and a record high trade surplus of US$20.1 billion in the January-November period.
Budget revenue, however, remains short of VND100 trillion (US$4.31 billion) to meet the year’s target with one month to go, which is “a challenging task amid the complicated Covid-19 situation globally,” stated Mr. Tuan Anh.
7. RCEP offers greater flexibility for Vietnam in exercising rules of origin
Vietnamese exporters might find it easy to meet the required rules of origin for their products as a significant portion of its production input is sourced from China and South Korea.
One of the most important benefits from the Regional Comprehensive Economic Partnership (RCEP) for Vietnam over existing free trade agreements (FTAs) is that the former offers greater flexibility on the use of raw materials sourced from member countries, according to Viet Dragon Securities Company (VDSC).
Specifically, the RCEP does reduce complexity and compliance costs for Vietnamese exporters through a single rulebook that covers the other 14 RCEP markets, stated VDSC in its latest report.
8. Vietnam jet fuel tax cut to continue through 2021
Lawmakers have decided to continue the 30-percent cut in environment tax on jet fuel through next year to support the aviation industry.
It will remain at VND2,100 (9.1 U.S. cents) per liter until the end of next year before returning to VND3,000 in 2022, the National Assembly Standing Committee decided on Thursday.
Deputies had originally approved the cut from August until the end of this year.
The government’s loss of revenues is estimated at VND360-400 billion this year, but it expects the tax break to reduce airlines’ costs and help them recover from the crisis caused by the Covid-19 pandemic.
9. Venture funds commit $815 mln to Vietnamese startups
Vietnamese startups earned pledges of $815 million over the next five years from 33 foreign and domestic venture funds.
The pledges, announced at the recent Vietnam Venture Summit, came from several foreign funds who’ve been active in Vietnam in recent years, like CyberAgent Capital, AlphaJWC, Monk’s Hill Ventures, as well as several domestic funds like VinaCapital Ventures, Do Ventures, and Viet Capital Ventures.
At the same event last year, 18 funds had committed $415 million to Vietnamese startups for three years, and $220 million of this was disbursed in the first half of this year.
10. Vietnam Covid-19 vaccine producer valued at $220 mln
Covid-19 vaccine producer Nanogen Pharmaceutical Biotechnology JSC has been evaluated higher than major pharma peers at VND5.1 trillion ($220 million).
The company, one of three Covid-19 vaccine developers in the country, is set to be the first to conduct human trials in the country. It saw its foreign ownership ratio increase by 9.4 percentage points to 25.68 earlier last year after receiving an investment from a group of South Korean companies.
One of the investors was KIS Vietnam Securities Corporation, which said in its financial statement that it had spent nearly VND11.6 billion on purchasing 162,500 shares of Nanogen, giving the company a valuation of VND5.1 trillion.
On 14 December 2020, the Government promulgated Decree No. 145/2020/ND-CP detailing and guiding the implementation of a number of articles of the Labor Code regarding labor conditions and labor relation (“Decree 145”). Such Decree provides for labor management, labor contract, labor outsourcing, dialogue at workplace, salary, working hour & rest hour, labor discipline & material liability, female employees & gender equality, domestic worker and labor dispute.
For the upcoming 2021, we are delighted to offer this “Compliance Calendar 2021” in English and Vietnamese with the hope to help enterprises not missing any important deadlines. The issues include periodic requirements of tax and labour compliance as stipulated in the latest legal documents. Please kindly find the bilingual calendar in the Downloads section below and let us know if you have any questions about the deadlines or would like assistance in meeting them.