Vietnam begins 2021 with strong growth expectation underpinned by robust exports and FDI flows after having successfully contained the Covid-19 pandemic. Free trade agreements signed are also expected to be another driver of growth making Vietnam becoming one of the few economies in the world to record positive growth this time.
It’s noticeable that the UK – Vietnam Trade Agreement (UKVFTA) was signed on December 29 in London, following the conclusion of the negotiation process early this month.
The past week spotlight
Vietnam, UK sign trade deal
Due to the Covid-19 situation, ambassadors of the two countries were authorized to sign the UKVFTA on behalf of government leaders, with the trade deal set to take place at 11.00 p.m on December 31, 2020.
As the UK is set to leave the EU-Vietnam Free Trade Agreement (EVFTA) after the Brexit’s transitional period ends on December 31, 2020, a new FTA between Vietnam and the UK will help ensure the continuity in bilateral trade relations.
The fact that most of the clauses stipulated in the UKVFTA are similar to those in the EVFTA, significantly shortening the negotiation process for the two sides, which began in August 2018.
Let’s look at some other related financial and business news during the past week:
1. Singapore climbs to become biggest investor in Vietnam
The Island nation was followed by the Republic of Korea, China, Japan, Taiwan (China), and Hong Kong (China).
Ho Chi Minh City ranked first among the country’s 60 provinces and cities in terms of foreign direct investment attraction this year with a total registered investment capital of US$4.36 billion, thereby making up 15.3% of the total.
Bac Lieu province was notable for attracting one major project worth US$4 billion, while Hanoi came third in terms of projects with US$3.6 billion. This was trailed by Ba Ria-Vung Tau, Binh Duong, and Hai Phong.
2. Vietnam finance ministry extends 50-100% cut in 29 fees to aid businesses
The Ministry of Finance (MoF) has released a new circular stipulating the extension of validity period of the existing cut of 50-100% in 29 fees and expenses, set to take effect on January 1, 2021.
As the Covid-19 pandemic continues to wreak havoc on global and local economies, the MoF has been providing supporting programs for businesses and people affected by the pandemic, including the removal and reduction of 29 fees and expenses until the end of 2020.
While the pandemic is set to continue persisting for a longer period, with the approval of Prime Minster Nguyen Xuan Phuc, the MoF has decided to extend the validity period of current supporting programs until June 30, 2021.
3. USAID and the MPI in tandem to push SME development
The Ministry of Planning and Investment has been carrying out its task as the foremost economic advisor and key policymaker of Vietnam with potent support from the US Agency for International Development (USAID). In a talk with VIR’s Nguyen Huong, USAID/Vietnam mission director Ann Marie Yastishock highlighted that innovation, along with science and technology, will be the backbone of the economy and a major content of the two bodies’ cooperation moving ahead.
4. Vietnam, S.Korea tighten cooperation to diversify supply chains
Enterprises from Vietnam and South Korea should enhance cooperation to diversify their supply chains and avoid the over-reliance on a single source for both input materials.
Deputy Head of the International Cooperation Department under the Vietnam Chamber of Commerce and Industry (VCCI) Truong Bich Ngoc made the statement at a conference discussing trade promotion between Vietnam and South Korea on December 30.
“Vietnam gives priority to its relations with South Korea on all spheres, which is also in line with South Korean’s New Southern Policy, in which Vietnam is seen as a key partner,” noted Ms. Ngoc.
6. Vietnam attracts over $28.5 billion of FDI in 2020
The Ministry of Planning and Investment reported that over 19.9 billion USD of the capital had been disbursed, down only 2 percent compared to the same time last year despite impact of COVID-19 pandemic.
Many FDI firms have recovered, maintained and expanded their production, the ministry said.
Notably, 6.4 billion USD of FDI was injected into underway projects, up 10.6 percent compared to the same period of 2019.
In the year, foreign investors focused on 19 sectors, led by processing-manufacturing.
7. New tax policy for ride-hailing services sets off storm
Earlier this month the Government’s amendment of tax regulations for ride-hailing services, which increases the tax they actually pay, was a topic of hot debate in the media.
With effect from December 5 ride-hailing firms have to pay value added tax (VAT) of 10 per cent on the fares passengers pay for a ride unlike earlier, when they only had to pay the 10 per cent on their revenue after paying the drivers’ 80 per cent share of the fare.
The drivers then paid 3 per cent VAT on their 80 per cent share.
Under the new tax regime, the effective rate is more than double the old one of around 4.4 per cent.
9. 2020 a year of challenges for commercial real estate
Vietnam’s commercial real estate went through a rough year with occupancy rates and rents plunging as businesses struggled to survive the Covid-19 pandemic.
Troy Griffiths, deputy managing director of Savills Vietnam, said the pandemic has had a direct impact on the shophouse market, with difficulties starting to arise in February when the first Covid-19 cases were confirmed, and social distancing measures imposed in April and July dealing a further blow to businesses.
In downtown District 1, many landlords reduced rents by 25-40 percent, even in prime areas, but yet realtors said the number of vacancy listings increased through 2020 since business was uncertain.
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.