At the beginning of 2022, the Vietnamese Government took the first initiative to reinstate international flight routes and open more than 20 ones later

.

On March 15, the Vietnamese government issued Resolution 32/NQ-CP 2022 whereby visa exemptions shall be applied to citizens from 13 countries with a temporary residence period of up to 15 days from the entry date.

This Resolution marks a milestone in fully opening borders with foreigners for both business and travel purposes. The list of countries is as follows: Belarus, Denmark, Finland, France, Germany, Italy, Japan, Norway, Russia, South Korea, Spain, Sweden, and the United Kingdom. Noticeably, citizens from these nations will get visa-free travel regardless of immigration purposes and types of passports.

The temporary residence period with some countries in ASIA could last more. In particular :

• ​​Brunei, Myanmar - 14 days.
• Japan, South Korea (ROK) - 15 days.
• The Philippines - 21 days.
• Cambodia, Indonesia, Laos, Malaysia, Singapore, Thailand - 30 days.

Foreigners can simply apply online for a tourist E-visa, valid for 30 days with a fee of 25 USD.

In addition, quarantine measures for foreigners were removed. Foreign visitors are now able to travel freely with a negative COVID test upon arrival

according to the latest rule issued by the Vietnamese government. Under the new normal conditions, most international visitors to Vietnam only need the following requirements

• A negative result for the Covid-19 test before boarding (within 24 hours for the rapid test method, 72 hours for the RT-PCR method)
• Proof of valid medical/travel insurance covering Covid-19 treatment
• Downloaded PC-Covid mobile app (Apple/Google Play) which must be presented to enter all VN establishments.

Recognition of vaccine passport

Up to March 17th, 2022, Vietnam has reached an agreement on mutual vaccine passport recognition with 17 countries, including the USA, the UK, Japan, Australia, Republic of Belarus, India, Cambodia, the Philippines, Republic of Maldives, Palestine, Turkey, the Egypt Arab Republic, Sri Lanka, Singapore, Saint Lucia, and Korea. Accordingly, foreign visitors to Vietnam with vaccine passports or vice versa may be applied to the same medical measures as those vaccinated in their home country.

This recognition includes exemption from the consular certification/legalization procedure when using the vaccine passport in the destination country. Foreign vaccine passports are considered valid and can be used directly in the territory of Vietnam if officially or temporarily recognized by the Vietnam Vietnamese Government.

How to apply an E-visa

Step 1:  Prepare the required materials:

·     One 4x6 passport photo in .jpg format with a white background, without glasses.

·     One photo in .jpg format of your passport data page.

·     A passport is valid for at least six months.

·     Your temporary address in Vietnam and points of entry and exit.

·     Debit or credit card for payment.

Step 2: Click this link or access https://immigration.gov.vn/ and go to 'E-visa Issuance' then click on the link for 'Outside Vietnam foreigners'.

Step 3:  Upload your .jpg images (passport data page and passport photo) and fill out the required fields on the form completely. Submit your form.

Step 4: Pay the e-Visa fee of 25 USD. Copy down the document code provided.

Step 5: Within three working days you should receive news of your e-Visa application via email. If not, you can also run a search for your e-Visa at this link.

Step 6: Use your document code to locate your e-Visa online. Download and print the e-Visa in two copies for extra safety.

Viettonkin Manpower is pleased to provide assistance for foreign travelers and investors who want to travel to Vietnam during the post-pandemic period. Should you need further information, please feel free to contact us for further information.

As of April 20, 2022, foreign investors have “poured” nearly 11 billion USD in newly registered capital, adjusted and contributed capital for shares purchase, and purchase of capital contribution, which is equivalent to 88.3% compared to the same period of 2021. 

In terms of FDI host country, 72 countries have made direct investments in Vietnam in the first 4 months of 2022, which Singapore led the team with the largest total investment of over 3.1 billion USD, comprising 28.8% of the total investment in Vietnam. Korea came second with over 1.82 billion USD, increasing 53.9% from the same period of 2021. Meanwhile, the 1.3 billion USD LEGO project on a large scale drove Denmark to be the third-largest investor, accounting for 12.2% of the total investment. 

When it comes to the investment destination, out of 44 invested regions in Vietnam, Binh Duong received the most considerable amount of newly registered capital with nearly 2.35 billion USD, 5 times higher than the 2021 registered capital of the same period. Bac Ninh claimed second place with 1.57 billion USD while Ho Chi Minh City (HCMC) attracted 1.28 billion USD, which are equivalent to 14.5% and 11.8% of the total invested capital, respectively. Yet, regarding new investment projects, foreign investors mostly focused on large cities with developed infrastructure and favorable investment environments, namely HCMC and Hanoi. 

The current Vietnamese FDI trends 

The positive situation has marked a potential flourishing in the Vietnam FDI environment. Without a doubt, this prospect outlook has revealed continuous and effective support from the Government towards the business community, along with relentless efforts of domestic and foreign enterprises to overcome the pandemic and adapt to the new normal. In this way, enterprises have made a steady, yet firm recovery, maintaining and expanding their production and business activities.  

In particular, adjustment and contribution of capital, purchase of shares, and purchase of contributed capital by foreign investors all showed an upswing over the same period in both investment quantity and capital amount. Though newly registered capital decreased sharply, further reducing total investment in the first four months (down 11.7%), the number of new investment projects still increased slightly (0.7%). Specifically, diverse projects on electronic and high-tech products manufacturing and processing have expanded their capital on a large scale. Despite the adverse effects of the Covid-19 pandemic, foreign investors have put their faith and confidence in the economy and investment environment of Vietnam, thereby making new investment decisions as well as expanding existing investments.

In 2021, the Northern key economic zone in Vietnam recorded a significant amount of FDI inflow, yet in the first months of 2022, this capital flow shifted its direction towards Southern provinces, which accounts for over 80% of the total registered capital. In addition, the Southern key economic zone is leading the country in total newly registered capital in processing and manufacturing plant projects with $1.9 billion (as of the first quarter), nearly 4 times higher than in the North. According to economic experts, FDI firms find attraction in the Southern key economic zone because of abundant young labor resources, competitively cheap wages, and a large consumption market. 

Meanwhile, the Northern key economic zone continues to develop in the manufacturing of high value-added products. Albeit the insignificant number of newly registered projects in the first three months of this year, the South has enjoyed substantial amounts of increased capital from under-going projects. Remarkably, Singapore adjusted to increase investment capital by nearly 941 million USD on the construction of VSIP urban infrastructure and services. Furthermore, Hong Kong has made commitments to increase the capital amount in Goertek Vina by 206 million USD, further promoting the manufacturing process of electronic components and network equipment. From Korea, an additional 920 million USD was also additionally invested into Samsung Electro-Mechanics in Thai Nguyen. 

What future holds for foreign investors in Vietnam?

Mr. Nguyen Hai Minh - Vice President of the European Business Association in Vietnam (Eurocham) assessed the prospects of FDI attraction in Vietnam in the upcoming time. He confidently emphasized that foreign investors consider Vietnam as a spotlight full of potential opportunities.

Similarly, Mr. Phan Huu Thang - Former Director of the Foreign Investment Department (the Ministry of Planning and Investment) firmly believes Vietnam to be a long-term destination for foreign investors with promising new projects under the new normal situation. He also informed that the Government has been perfecting the FDI policy systems and improving FDI management quality in the orientation of digital government. Thus, they can realize the goals for foreign investment in 2022, as well as in the period 2025-2030 in accordance with Resolution 50-NQ/TW. 

Currently, the escalation of tension between Russia and Ukraine has a negligible direct impact on the FDI environment in Vietnam as investment from these two countries only accounts for a small proportion of Vietnam's total investment capital (0.23%). However, in the middle- and long-term, the conflicts might lead to a trend of investments shifting out of Russia and Ukraine, and into Asian countries where the political environment is more stable. Hence, this probably can benefit Vietnam.

Apart from that, the disruption of the supply chain due to the Covid-29 has been exacerbated by the Russia-Ukraine crisis, negatively affecting the supply of raw materials used for Vietnam manufacturing and directly upsetting inflation and growth. Thus, foreign investors in manufacturing should take careful preparation to confront the worst situation. 

In short…

Under the VUCA (Volatility, Uncertainty, Complexity, and Ambiguity), foreign investors will face lots of challenges and unexpected events which can turn the table around beside the huge potential. Therefore, how can investors in Vietnam overcome and navigate themselves through this fast-changing environment? It is much better if you have a trustworthy, knowledgeable, and professional companion go through with you. Confident in the high-profiled team of experts in the Vietnam market and legal system, Viettonkin willingly helps you to start your new business journey. Contact us now for more information! 

As a developing country, aviation development has been playing a critical role in promoting Vietnam's integration into the global, supporting its economic growth. The growth rate of Vietnam's aviation industry (AAGR) is the highest in the Asia - Pacific region with an average increase of 14% from 2018 to2023, compared to 5.5% of the whole region. However, the Covid-19 pandemic has had a profound impact on the airline industry, requiring directional strategies from the government and businesses. 

Market perspectives 

After the unprecedented COVID-19 shock, the aviation industry in Vietnam is in the stage of revival.  In particular, the industry grew by 441% in the first quarter of 2022, compared to the same period of 2021, while the number of domestic passengers decreased significantly (Civil Aviation Authority of Vietnam - CAAV, 2022). As of March 2022, the international aviation market has 23 foreign and domestic airlines (including Vietnam Airlines, Vietjet Air, and Bamboo Airways) operating to and from 20 countries and territories. Yet, in comparison to the pre-pandemic period, there are currently 8 countries that have not reopened regular flights to and from Vietnam, including Brunei, India, Indonesia, Myanmar, Macau, Finland, Italy, and Switzerland. 

In response to this situation, Dr. Bui Doan Ne - Vice President and General Secretary of the Vietnam Aviation Business Association (VABA) - stated the phenomenal recovery of the aviation sector as a result of the accelerated vaccination plans by the government and localities. Management strategies for Covid-19 and solutions to support economic rebound are critical factors in recuperating the Vietnamese aviation industry to its pre-epidemic growth rate. Dr. Ne also forecasted that with the growth of the airline industry in the upcoming time, Vietnam's economic growth in 2022 will potentially reach 15-20% compared with the one in 2021. What's more, if the pandemic situation is fully contained and the economy is re-opened, the aviation sector will recover sustainably in the year 2022. 

Supporting policies from the Vietnamese Government

Aware of the Covid 19 pandemic’s adverse effect on the global economy, the MOT has decided to reduce the price of take-off and landing services by 50 percent and remove charges for many aviation services, along with cutting down jet fuel fees and relaxing capital market conditions to support the airline industry. 

According to Circular 04/2021/TT-NHNN, the State Bank of Vietnam has refinanced credit institutions that offered loans to Vietnam Airlines and reschedule the debt payment period, keeping the same debt group, and setting up risk provisions for debts of the Airports Corporations of Vietnam (ACV). In addition, Resolution No. 135/2020/QH14 of Congress also allows the ACV to sell more stocks to increase charter capital. Environmental protection tax imposed on aviation fuel as well as other general taxes and fees is also lowered to support airline businesses. With the recovery in process, along with the government’s incentive and supporting policies, the aviation industry still has plenty of potential for development, especially in infrastructure and cargo transportation.   

Upcoming Opportunities

Aviation infrastructure 

To meet the demand of expected 275.9 million passengers and approximately 4.1 tons of cargo in 2030, the Ministry of Transport (MOT) has prioritized investing in several airports that are of great importance in the Hanoi Capital region and Ho Chi Minh City region like Noi Bai, Tan Son Nhat, and Long Thanh International Airport. The demand for aviation is estimated to spike with 275.9 million passengers and nearly 4.1 tons of cargo by 2030. Thus, the Ministry of Transport (MoF) has prioritized investing in several key airport infrastructures in Hanoi and Ho Chi Minh City namely Noi Bai, Tan Son Nhat, and Long Thanh. Simultaneously, 22 existing airports are being gradually upgraded and effectively operating, of which 6 new airports are under construction and investment. Additionally, authorities in some districts as well as “giant” corporations, notablyVietjet, Vingroup, FLC Group, and Sun Group, have also addressed their interests in investing in airports such as Chu Lai, Cat Bi, Tuy Hoa, Dien Bien, Dong Hoi, Quang Tri, and Van Don. 

On the other hand, according to Professor Dang Dinh Dao, while some large airports are operating efficiently, many local airports are only operating at one-third of their designed capacity. The total productivity of 22 airports in Vietnam lies at about 75 million passengers per year, comparable to that of a single Changi airport in Singapore. This reality indicates that the aviation sector in Vietnam still has room for improvement and presents potential opportunities. Thus, the ministries and departments are paying more attention to private participation instead of solely state contribution. Particularly, the Prime Minister has recently approved to invest in Quang Tri airport and Sapa airport under PPP, promising to increase the participation of private enterprises in airport infrastructure investment. The Ministry of Transport has also proposed mobilizing public capital resources to invest in the entire airport in the form of PPP. Overall,  bright prospects for investment are waiting for the private sector and foreign investors.  

Airfreight 

As of airfreight, it has been playing an important role in supporting the global trading system, conducting an estimated 35 percent of global trade. According to the CAAV, the approximate number of international passengers by air decreased by 93% in 2021. Meanwhile, freight transport increased dramatically by 21.3 percent compared to 2020, reaching approximately 1.1 million tons of cargo. The upturn in cargo freight can be attributed to Decision No. 318/QD - TTg dated March 4, 2014, in which the Prime Minister plans to develop 8-10 cargo aircraft. This rising trend is maintained steadily, with cargo airlines' gain in the frequency of flights to and from Vietnam. For example, DHL express, an international express delivery service provider, officially opened a new route operated by Kalitta Air between Ho Chi Minh City and the United States last February. DHL Express representative announced that the opening of this new route is to meet the increasing transportation needs for the e-commerce sector between the two countries.

Many commentators are of the view that the growth of e-commerce along with some recent maritime incidents, e.g., the 2021 Suez Canal obstruction, will likely boost the demand for air freight in the future. Additionally, 5 airlines are operating simultaneously in Vietnam, yet the nation still lacks a cargo-specialized airline. 

Seeing this opportunity, IPP - Air Cargo by Mr. Jonathan Hanh Nguyen is in its final preparation stages to become the first Vietnamese airline that provides specialized freight services. It is waiting for the operating license to finish its legal process. The IPP's prompt actions are considered compatible with the country's development orientation and e-commerce trend. Therefore, the MOT has proposed to the Prime Minister to speed up the procedures, granting IPP Air Cargo a business license for air freight transportation. As of now, the IPP has signed a Memorandum of Understanding with the Boeing Company to purchase ten  B10 B777 Freighters that are worth 3.5 billion USD. If this deal is completed successfully, IPP Air Cargo will become the cargo airline with the largest capacity in Southeast Asia. 

Existing problems 

Despite the untapped potential and the government's recovery policies, unexpected global crises are having significant impacts on Vietnam’s aviation industry. Under the impact of the conflict between Russia and Ukraine, the abrupt increase in fuel prices has had a great influence on airlines since fuel costs account for the largest proportion of the operating expenses. Not to mention, some airlines also have to adjust their flight route to ensure safe operation for the crew and customers. Rerouting of flights has significant impacts on costs, leading to higher fuel prices and consequently higher fares, which directly reduce the demand recovery. For example, the Hanoi - Paris route has had to alter its flight path to avoid flying through China and Kazakhstan, making the flight time longer by 2 hours and 5 minutes and increasing the operating cost by 20,000 USD for each flight. To reduce input costs, the flight control department would have to recalculate and reevaluate more optimal alternative routes. The industry is making a great effort to emerge into a ‘new normal' 

Conclusion

All things considered, although operational challenges and concerns about the Covid epidemic are still causing difficult times for the aviation industry, Vietnamese airlines are still experiencing a rebound in demand due to their determination to speed up the recovery process and the government's supportive policies. For further insights about the Vietnamese aviation sector's chances and challenges in this critical time, please contact Viettonkin's proficient consultants. With more than 10 years of experience in consulting, our professional team will provide you with thorough analysis and detailed advice to help you navigate from a global perspective.  

Singapore has long earned a reputation as one of the world’s most advanced economies in the Asia Pacific region. The Singapore economy is mainly driven by exports in electronics manufacturing and machinery, financial services, tourism, and the world’s busiest cargo seaport. Additionally, Singapore’s largest industry is the manufacturing sector, which contributes 20%-25% of the country’s annual GDP.

Hence, this article will provide you with information that is related to the manufacturing business in Singapore, and what are the opportunities for foreign investors in the area. Let’s find out!

The Manufacturing Business in Singapore

Singapore is located off the coast of the southern tip of the Malay Peninsula in Southeast Asia, making the country become one of the world’s leading manufacturing sites. Singapore has built a strong and diverse manufacturing base, with leadership positions in sectors such as aerospace, electronics, biomedical sciences, and precision engineering. Yet, in recent times, the Singaporean Government has directed the manufacturing industry towards the main focus on advanced manufacturing development.  As robotics, artificial intelligence, 3D printing, smart sensor and the Internet of Things are transforming the manufacturing sector, advanced manufacturing is a burgeoning market expected to reach US$156.6 billion by 2024, growing at a rate of 16.9 percent a year

The manufacturing sector remains a significant contributor to Singapore’s economy, as it contributes about 20% to its GDP. Furthermore, manufacturing will remain a key part of the country’s economy as well. Singapore is also the sixth-largest global exporter of high-tech products. Particularly, Singapore's manufacturing production grew 17.6% YoY in February 2022, exceeding market estimates of 6.3% and sharply picking up from an upwardly revised 2.4% rise in the prior month. The manufacturing sector is projected to continue to expand, albeit at a more moderate pace following the strong outturn last year, supported by sustained global demand for semiconductors and semiconductor equipment.

Singaporean Minister for Trade and Industry Gan Kim Yong has unveiled a new plan to strengthen local businesses in various sectors, with an aim to significantly grow the city-state’s trade volumes by 2030. In more detail, Mr. Gan Kim Yong noted the plan will be driven by separate strategies that will provide direction and coordinate actions across the four key pillars of the economy – services, manufacturing, trade, and enterprises. The Singapore Economy 2030 vision will continue to build upon the Manufacturing 2030 plan launched last year, increasing manufacturing value-added by 50% in 10 years. Especially, the vision emphasizes the development of advanced manufacturing, thereby introducing multiple initiatives to promote this sector. Mr. Chan Chun Sing - former Minister of Industry and Trade commented that “In the past, many of the older generations of manufacturing that depends on cost competitiveness will increasingly be displaced by cheaper alternatives in other countries,” He affirmed, “Instead, beyond the 50 percent increase in value, we want to see a greater proportion of our manufacturing going into advanced manufacturing, where the competition is not based on cost but based on the intellectual property that we can generate, the quality of the products and the precision that we can provide for the sector.” Thus, the evolving nature of the industry will change the composition of manufacturing to one of low-volume but high-quality products that will require greater skills to produce. Furthermore, Singapore’s strengths in innovation, its skilled workforce, and well-developed infrastructure position will bolster its role as a global manufacturing hub.

In addition, the manufacturing sector can continue to expand if the industry is closely tied to research and development (R&D) because the process would also enrich the country after all. Hence, Singapore has to get its intellectual property protection regime right and gives investors the confidence that they will be safeguarded here in Singapore.

Besides, Singapore has already embarked on a series of initiatives to ensure the economy is prepared for the future. For instance, Singapore has established the leading technology and solutions providers, and it offers the necessary technical expertise to maintain Industry 4.0 adoption. There are some biggest industrial names in the world that are now operating in Singapore, such as ABB’s robotics packaging center to Accenture’s IoT Centre of Excellence, and Siemens’s digitalization hub.

Singapore has invested 3.2 billion Singapore USD (2 billion euros) in R&D in Advanced Manufacturing and Engineering, to build up the innovation capacity of companies embarking on Industry 4.0. 

In 2018, Singapore’s research institutions opened two model factories that will help companies accelerate the adoption of Industry 4.0 technologies by implementing a collaborative environment to research and test-bed solutions before deploying them. However, through this initiative, the industrial equipment supplier Feinmetall has successfully achieved productivity improvements of 10 to 15%.

The pursuit of advanced manufacturing itself is not about achieving a one-off boost in productivity, but it is about equipping companies with the right tools and mindset to meet future challenges. It is indeed an evolution rather than a revolution because the companies can go beyond traditional costs to continue reorientation, refine and innovate their products.

The MTI will also help to develop human capital for the manufacturing sector through an M2030 Careers Initiative announced in 2021 to train polytechnic and Institute of Technical Education (ITE) graduates. The initiative will offer at least 200 internships for ITE students from 60 companies by the end-2022, as well as a pilot grant to hire ITE graduates for critical technician and assistant engineer roles.

The initiative will see collaboration among companies, Polytechnics, and technical institutes to identify young graduates in engineering or technical education with relevant skills to the industry.

The Opportunities for Foreign Investors

In 2021, Singapore acquired investments committing 11.8 billion USD in fixed asset investments, fostered by large manufacturing projects from semiconductor and biotech firms despite the ravage of the Covid-19 pandemic. Investments from semiconductor and biotech companies accounted for more than half the commitments secured, which exceeded the Singapore Economic Development Board's (EDB) medium- to long-term yearly target of between $8 billion and $10 billion. Hence, Singapore attracted 5.2 billion USD in total business expenditure (TBE) per annum in 2021, lower than the 6.8 billion USD TBE per year garnered in 2020, but within EDB's medium- to long-term target of $5 billion to $7 billion. 

If these projects are fully implemented, the commitments secured in 2021 are expected to create 17,376 jobs in the coming years, with an estimated contribution of 16.8 billion USD in value-added annually. Thus, foreign investors are presented with more opportunities to venture into advanced manufacturing in Singapore. 

The Singaporean government is focusing on the key priorities to bolster the manufacturing business. Furthermore, the Singapore Economic Development Board (EDB) aims to strengthen two areas of the digital economy and work to attract leading manufacturers to invest in advanced manufacturing. 

EDB also wants the country to become a regional platform for Singapore-based companies to export technologies and services through the Industrial Transformation Asia Pacific event.

More than that, Singapore will also look to become the digital hub for non-manufacturing companies, where people can learn best practices, access world-class capabilities, and embark on their digital transformation journey.

Singapore has become a part of Singapore’s shift toward a value-creating, innovation-led economy, and that means it will continue to connect companies with Institutes of Higher Learning to establish corporate labs. In addition, it will help companies that are looking to create new products, services, and businesses, and support them on the journey of experimentation, commercialization, and scaling out of Singapore.

The disruptive technology that happens recently will open up new possibilities. Some industries that were previously considered unviable are now becoming potential growth areas for Singapore, for example, mobility. The country can play a leading role in autonomous vehicles and smart mobility, which is supported by its advanced manufacturing capabilities and highly skilled workforce.

The investment in such areas will surely attract foreign investors for expanding their businesses here. The possibility to venture into the business of manufacturing is flourishing this year, and even in the future. Thus, the government keeps pouring incentives to impress more and more investors. In the end, it is always the right time to open up a business in Singapore, especially in the manufacturing business. If you intend to start your business journey in Singapore, Viettonkin will always stand by your side and help you navigate through the legal process. Our experienced professionals, who are insightful of the Singapore market and legal system, will assist you every step of the way! Contact us now for a better understanding! 

Tourism contributes a significant share to Vietnam's GDP, yet during the ravage of Covid-19, the country closed down the international flight routes, limited the number of foreign investors, and shifted to domestic travel to buoy the sector. Under the new normal, Vietnam’s travel sector has bounced back and prospects of international travel become increasingly feasible with vaccination rollouts. Thus, the recovery of all tourism activities has opened up new opportunities for foreign investment in the tourism sector. 

The recovery of international arrivals

After the re-opening of international flight routes, the tourism sector has shown signs of flourishing. In particular, the search volume of international tourists on Vietnam’s airlines and accommodations has increased by over 75% since December 2021, being the highest figure globally. From the beginning of 2022, the number of foreign searches for aviation to Vietnam has been rising rapidly with an upturn of about 247% year on year, climbing to 425% in early February and peaking at 654% in the middle of the same month. The surge in the searches has shown a bright picture for the promising increase in Vietnam tourism demand. 

Thanks to effective and efficient control measures of Covid-19 of the Vietnamese Government,  Vietnam still leaves its mark on the international media. Most recently, British travel magazine - Wanderlust - listed Vietnam as the 20 most worth-visiting destinations in March. Thus, with the positive perspective of foreign investors on Vietnam, in the first two months of 2022, international visitors to Vietnam were estimated at 49,200 arrivals, up 71.7% over the same period last year. Of this figure, the number of arrivals by air reached 43,200, accounting for 87.8% of international arrivals to Vietnam (the General Statistics Office, March 2022). In this way, the increase in the number of tourists will lead to the full revival of tourism, the resort real estate market, and aviation.  “When the number of tourists increases again and the industry regains its previous growth momentum, investment promotion opportunities will be ample,” said Nguyen Trung Khanh - General director of the Vietnam National Administration of Tourism.  

Government action 

The Vietnamese Government has issued several policies to boost the recovery of the travel sector. In particular, resolution 08-NQ/TW of the Politburo on Vietnam's tourism development strategy identifies multiple potentials and advantages. Following the Resolution, by 2030, tourism will become a spearhead economic sector, becoming an indispensable engine of economic growth.

Hence, from the end of 2021, the Ministry of Culture, Sports and Tourism (MCST) has issued a program with the theme of “Safe travel-Full experience”, focusing on launching safe, flexible, and adaptive domestic tourism, effectively controlling the COVID-19 epidemic and rolling the program out across the country. After that, the MCST gradually piloted international tourist arrival programs in accordance with the temporary guidance on piloting international tourist arrivals to Vietnam. According to the Vietnam National Administration of Tourism, since the implementation of the pilot program from November 2021 to February 8th, 2022, Vietnam has welcomed more than 8,900 international tourists.

Mobility

At the beginning of 2022, the Vietnamese Government took the first initiative to reinstate international flight routes and open more than 20 ones later. From March 15, the Vietnamese government issued Resolution 32/NQ-CP 2022 whereby visa exemptions shall be applied to citizens from 13 countries with a temporary residence period of up to 15 days from the entry date. This Resolution marks a milestone in fully opening borders with foreigners for both business and travel purposes. The list of countries, five of which have reopened flights with Vietnam beforehand, are as follows: Belarus, Denmark, Finland, France, Germany, Italy, Japan, Norway, Russia, South Korea, Spain, Sweden, and the United Kingdom. Noticeably, citizens from these nations will get visa-free travel regardless of immigration purposes and types of passports. 

In addition, quarantine measures for foreigners were removed. Foreign visitors are now able to travel freely with a negative COVID test upon arrival, according to the latest rule issued by the Vietnamese government. Under the new normal conditions, most international visitors to Vietnam only need to be tested for Covid-19 before boarding (within 24 hours for the rapid test method, 72 hours for the RT-PCR method) with self-paid testing costs and pay an insurance premium of about 30 USD. 

Province action

Provinces across the whole country also promulgate incentivized policies for enhancing tourism. Especially, tourism stimulus packages reduce the traveling cost at several famous places by 50%. Along with that, provincial financial support has also been implemented in some localities namely Quang Ninh, Thua Thien Hue, Quang Nam, Khanh Hoa, Ninh Thuan, and Ba Ria Vung Tau, among others. The packages have attracted domestic and international visitors to Vietnam, fostering the increasing demand for Vietnam tourism 

Regarding tourism infrastructure, several provinces in different parts of Vietnam have made moves for the infrastructure development of tourism, thus offering tremendous investment opportunities for foreign investors. Notably, the Ho Chi Minh City-Moc Bai expressway project (Tay Ninh) is being implemented with expected completion in the next 5 years. The expressway will solve traffic problems for Tay Ninh province and Ho Chi Minh City, thereby contributing to the socio-economic development and tourism in the whole region.

Additionally, Kien Giang mobilizes resources for investment in transport infrastructure namely roads, waterways, and seaways, and takes advantage of the central budget support under the target tourism infrastructure development program in the 2016-2020 period. The province has added a number of tourism infrastructure projects and implemented sub-projects to support the comprehensive growth of the Greater Mekong Sub-region. Plus, Kien Giang implements specific guidelines, mechanisms, and policies, creating favorable conditions for foreign investors in Phu Quoc city.  The province also invests and calls for investment in eco-tourism, sea-island resorts, and experience tourism in combination with conferences, seminars, history, and spiritual tourism. In this way, the investment potentials are tremendous, thus, the investors can take tourism infrastructure into consideration

In short, the resumption of international tourism has stirred hopes of a recovery, yet it will be a long time before the industry returns to pre-pandemic levels. However, under our analysis, Viettonkin firmly believes that the current policies of the Government and the burgeoning demand of visitors have revived the travel sector in no time. Once tourism regains its momentum, investment opportunities will be wide open, thus, investors should promptly capture the chances to obtain a sizable market share. With our professional and comprehensive insight into the Vietnam market and legislation, Viettonkin is always in companion with you along the investment journey. Let’s start your business now!

The Cold Chain has gained increasing interest in Vietnam in the past few years. The term was coined to define the ability of a supply chain to control and maintain the appropriate temperature for separate goods with different cold storage requirements, thereby ensuring the quality and prolonging the usable duration of the goods. Currently, the cold chain is applied to pharmaceutical and chemical industries, retail, and food industries namely fresh agricultural products, seafood, frozen food, and fresh-cut flowers, among others.   

Demand

As the cold chain is currently the most attractive segment in the logistics industry, the demand for it is burgeoning. According to the Ministry of Industry and Trade (MIT), the majority of cold storage services are in operation at over 90% of their capacity. Several Vietnam market reports also confirmed that the demand for cold chains will continue to grow tremendously at least in the next half-century. This can be attributed to the outburst of e-commerce along with the significant change in customer behavior towards organic consumption.  Undoubtedly,  the market space contains plenty of room as well as potential opportunities to attract investment in the cold chain under the new normal situation. 

In addition, the rise in export volume of Vietnam post-Covid-19 contributes to the growth of the cold chain. Cross-border bilateral trade between Laos/Cambodia and Vietnam - a potential agricultural processing/logistics center for suppliers will promote the promising growth of the cold chain. Hence, new-generation free trade agreements namely EVFTA, CPTPP, and UKVFTA will stimulate export demand for agricultural and aquatic products to fastidious European markets along with increasing demand for cold storage systems. 

When it comes to seafood export, Vietnam seafood stands third in export volume in the world, accounting for the largest area of cold storage. According to Mr. Truong Dinh Hoe - General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), the cold storage system is a core link for both the production and export chain of Vietnamese seafood. Currently, this system in Vietnam meets only 30-35% of the demand for food, agricultural and aquatic products preservation (Ministry of Agriculture and Rural Development). Especially in the prime period of Covid-19, approximately 30-50% of seafood export orders were canceled, leading to the dramatic increase in inventory and the maximum capacity of cold storage. Under such a situation, several seafood manufacturers had the intention of investing in cold storage for better production and preservation. However, in reality, few enterprises with large-scale manufacturing and abundant reciprocal capital actually implement the plan, while the majority of SMEs seek out cold chain services from suppliers. Sadly, the supply of these services is in dire shortage.   

Regarding fruit and vegetables, Vietnam is recognized as one of the biggest vegetable and fruits exporters in the world thanks to strong demands from China, Japan, the USA, Russia, Indonesia, Taiwan, and Korea. Recent studies show that slightly above 8% of producers and suppliers for the domestic market apply cold chains to preserve the products. This figure is insignificant, implying the high rate of post-harvest spoilage of agricultural products in Vietnam which accounts for 25.4% of the total output. During the fourth outbreak of Covid-19, Vietnamese cold chains were always overloaded, sometimes operating at over 110% of capacity. Thus, the demand for cold supply chains is constantly increasing.

Supply

Vietnam's cold chain market supply is in its infancy and fragmented. The cold chain supply currently provides 48 facilities, divided into 2 main branches: cold storage with about 600,000 shelves and cold transport with more than 700 refrigerated trucks. This figure is marginal compared to the increasing amount of demand. 

Most of the cold storage is mainly located in the Southern region of Vietnam in which 60% of the market share is in the hands of foreign investors, yet, the chances remain open to domestic potential firms. According to Mrs. Nguyen Hong Van - Hanoi Market Manager, JLL Vietnam Company, the domestic investors have advantages over land reserves and a good-term relationship with local authorities, boosting the project implementation. However, foreign investors excel at product development, operation, and financial potential. Thus, the combination of these two groups of investors is the driving force for the development of the cold storage market in the near future.

Opportunities

The rising demand and the undeveloped cold chain system in Vietnam have created great opportunities for investors in this sector. According to CUSHMAN & WAKEFIELD, Vietnam's cold chain market reached nearly 169 million USD in 2019 and is estimated to gain 295 million USD in 2025 with a CARG of 12%. Yet, this growth rate is modest compared to the current growing demand. Additionally, Mr. Dao Trong Khoa - Vice Chairman of the Vietnam Logistics Service Business Association - commented that cold logistics (including cold storage) in Vietnam is a niche segment of the logistics industry in which the key players in this segment are SMEs. Therefore, investment in cold chains is promising.  

While the cold chain industry is nascent and still considered a niche market, the status of the industry is likely to change in the next few years and will become a key sector. Due to the scarcity of each type of specialized cold storage, demand is likely to exceed supply, thereby increasing the price. In this way, the first comers in the market expect to harvest higher capital returns. In particular, if used to buying stable assets, prudent investors can buy cold storage with a long-term lease. Meanwhile, if investors aim for a higher rate of return, they can explore development opportunities in both greenfield and brownfield projects to earn a return on investment. Besides, building partnerships with existing operators and tenants prior to the start of the project will help limit the risk of vacancy upon completion of the project. Investors and property owners can also consider converting conventional warehouses into cold storage to exploit the difference in rental fees. 

Realizing the great potential of the cold storage market, large corporations, enterprises, and even foreign investment funds have also stepped up to invest in the construction of cold storage and warehouses for export in Vietnam. In detail, in July 2021, AJ Vietnam Cold Storage Company put the highest cold storage in Vietnam into operation, which is located inside Long Hau Industrial Park, containing 31,000 pallets. It is expected that a 23,000-pallet warehouse will be put into operation in May 2022 in Pho Noi, Hung Yen. 

Many cold storages have been established in Ho Chi Minh City (HCMC) recently. In the Linh Trung Export Processing Zone (Thu Duc City), ABA Cooltrans Group has opened one more cold distribution center with a scale of 10,000 meters and a total investment of 250 billion VND. On completion, the center will have about 5,000 square meters of cold storage with a capacity of 8,000 tons and be capable of storing and transporting goods to 1,000 points around the HCMC area. 

At Tan Tao Industrial Park (Binh Tan District, Ho Chi Minh City), the largest cold storage in Vietnam and Southeast Asia of ​​​​nearly 4 hectares and a total investment of 1.300 billion VND has been put into operation by Hung Vuong Joint Stock Company (HVG). The storage is equipped with 60,000 pallets, with a capacity of 60,000-70,000 tons of goods. At the same time, the company is preparing a plan to invest in another cold storage at Hiep Phuoc port. 

The interest of the Vietnamese Government in this potential sector. 

Under the spirit of Decision 899/2013 on the necessity of agricultural transformation towards high and sustainable value, and with the support from Israel and the Netherlands, agricultural enterprises have used highly skilled labor, resulting in much higher productivity. Hence, the project of preventing post-harvest losses creates a premise for enterprises and organizations to apply modern and advanced preservation technologies namely cold and cool preservation, and modified atmosphere preservation among others, thereby prolonging the transportation time and ensuring the quality of the goods. Thus, this will become the driving force for Agriculture logistics. 

Likewise, Decree 163/2017/ND-CP on logistics development creates more opportunities for foreign investors in the logistics sector. With Decision No. 63/2010/QD-TTg, cold storage construction enterprises are eligible to apply for development investment credit interest rate and free land rent along with receiving 20% support for site clearance and 30% for technical infrastructure completion outside the investment fence. In 2022, the Ministry of Agriculture and Rural Development will propose to the Government the mechanisms and policies to support tax and loan interest rates for businesses investing in cold storage systems. Recently, the government gives ongoing support for infrastructure development in several developing regions, including the deployment of third port strategies, multimodal terminals, rail, and barge solutions, which further enhance the prospects of the cold chains. 

In the upcoming time, the Government will promote the development of cold chains through diverse incentive investment policies and preferential programs. Viettonkin assessed that it is the right time for both foreign and domestic investors to seize the chances and capture a large market share. Investment in this industry is not so challenging with the help and support from seasoned experts. Viettonkin is proud to be one of the leading consulting firms that can help you navigate through the legal process of doing business in Vietnam. Let’s start your journey right now!

The Vietnamese government recently issued several regulations to support tax collection on digital transactions conducted by non-resident foreign contractors without a permanent establishment (“PE”) in Vietnam. Announced policies give further clarification for non-PE enterprises, as well as provide timely support during the COVID-19 pandemic. 

Taxpayers affected:

 ●  Foreign contractors without a PE in Vietnam who conduct e-commerce, digital-based business, or other services with entities in Vietnam; or tax agents authorized by overseas suppliers.

●  Vietnamese organizations that purchase goods and services from overseas suppliers, in cases where the overseas suppliers have no tax registration, declaration, and payment.

●  Commercial banks or intermediary payment service providers (IPSPs) in cases of local purchasers and overseas suppliers without tax registration, declaration, and payment.

Tax liability and implications

Cross-border tax payment

The recently issued Circular 19/2021/TT-BTC stipulates that foreign e-commerce contractors and digital platform-based service providers without a PE in Vietnam must register with the Vietnamese tax authority to conduct tax declaration and payment. First, in a B2B-based digital transaction for overseas contractors without the registration to self-declare and pay taxes in Vietnam, the Vietnamese corporate customers are subject to fulfilling the withholding, filing, and VAT remittance requirements as set forth by the Vietnamese authority. Second, in B2C-based digital transactions for overseas suppliers without the registration to self-declare and pay tax in Vietnam, either Vietnamese banks or local payment intermediaries are subject to this withholding, filing, and VAT remitting on a monthly basis.

Additionally, Circular 80/2021/TT-BTC provides the tax payment allocation mechanism and principles of tax declaration and tax administration. Likewise, on January 28, 2022, the Government issued Decree 15 on the tax exemption and reduction policy according to Resolution No. 43 of the National Assembly.

The Government will apply deferred income tax with appropriate rates for corporate income tax (CIT) and value-added tax (VAT). Hence, businesses should assess the scope of the taxes applicable to the respective entity and model the financial impact. 

Tax reduction

According to the Ministry of Finance (MoF), in 2022, the VAT on goods and services will be reduced from 10% to 8% to support people and businesses facing difficulties in the COVID-19 epidemic. This policy is only applied to goods and services with the previous tax rate of 10% and regardless of the tax calculation method, so digital transactions initiated by foreign contractors as mentioned above are entitled to the same VAT rate reduction.

For new foreign contractors that are unfamiliar with current Vietnam's fiscal policies, building an effective investment strategy and figuring out appropriate actions to take might be challenging steps. To avoid undesirable problems with the taxation system, overseas businesses can reach out to Viettonkin - a professional consultant and an honored member of GGI with an unwavering commitment that you can trust. With a comprehensive understanding of Vietnam's tax system and experienced legal specialists, we are proud to serve as a bridge between firms from all around the world and the promising market economy of Vietnam. Let us help with your problems! For further information, please contact us via email or through our contact page. 

The current situation of supporting industry 

According to the Department of Industry of the Ministry of Industry and Trade (MIT), Vietnam currently has 2,000 enterprises in spare parts and components manufacturing and processing, in which only more than 300 Vietnamese SMEs are capable of supplying multinational corporations in Vietnam with location-allocation mainly in Hanoi and HCMC. This figure of Vietnamese enterprises in supporting industry is relatively humble. Plus, the linkages between foreign enterprises and domestic private firms, and between small and large enterprises, are still tenuous, indicating a shortage of domestic supply for the manufacturing and processing market. 

For another example, in Vietnam, 20 large automobile assembly enterprises are operating in the auto industry, but only 81 tier-1 suppliers and 145 tier-2 and 3 suppliers are providing input resources for the whole industry. Meanwhile, in Thailand, a modest number of 16 large car assemblers are in operation nationwide, yet the country owns 690 tier-1 suppliers and 1,700 tier-2 and 3 suppliers.

In addition, home-produced raw materials and accessories are mainly deployed by foreign-invested enterprises, while domestic firms have not yet taken advantage of the resources, thereby failing to meet the quality standards for export orders. Indeed, global corporations are seeking domestic suppliers, yet their ability to meet the requirements of home-grown businesses is humble. Global corporation Bosch has been in search of domestic supporting partners for 3 years, however, not a single Vietnamese company has qualified as a potential supplier. This can be attributed to the difficulty in accessing the capital resources of Vietnamese SMEs. The preliminary report on the three-year implementation of the Supporting Industry Development Plan in Ho Chi Minh City (period 2016-2020, with a vision to 2025) also confirmed that the majority of industrial enterprises in the area are small and medium-sized with limited capital and ability to access loans due to lack of collateral.

Solutions and policies from the Vietnamese Government

Aware of the shortcomings of the supporting industry, the Vietnamese Government has made a great attempt to improve and develop the industry through diverse policies and practical solutions, thus advancing manufacturing and processing. 

Under Resolution No.23/NQ-TW issued by The Political Bureau of the Central Committee of the Communist Party of Vietnam in 2018, the supporting industry is on the prioritized list for development. 

Supporting industries play a significant role in economic restructuring towards industrialization and modernization, improving labor productivity and competitiveness, creating added values, and increasing the contribution rate of the processing and manufacturing industry in the whole economy. Therefore, in the orientation of developing supporting industry in accordance with Resolution 115/NQ-CP dated August 6th, 2020, by 2025, Vietnamese enterprises are able to manufacture competitive supporting industrial products, meeting 45% of the necessary demand for domestic production and consumption, and accounting for 11% of industrial production value. Additionally, approximately 1,000 domestic firms have the ability to supply directly to assembly enterprises and multinational corporations in the territory of Vietnam. By 2030, supporting industrial products will meet 70% of the demand for domestic production and consumption, accounting for about 14% of industrial production value. There are about 2,000 enterprises capable of supplying directly to assembly enterprises and multinational corporations in the territory of Vietnam.

Additionally, Resolution 115/NQ-CP specifies several prioritized industries for development that may continue to receive incentivized investment policies from the Vietnamese Government. In detail, the priority includes spare parts, supporting industries for the textile-garment and footwear industry, and supporting industries for high-tech industries in which developing the manufacturing of materials, specialized supporting equipment, software, and services for high-tech industries, developing a system of domestic providers in the specialized supporting equipment, and supporting technology transfer in the high-tech industry. Under the Resolution, 7 key solutions to further develop and perfect Vietnam supporting industry are listed, including (1) Completing mechanisms and policies, (2) Ensuring and effectively mobilizing resources for the development of supporting industries, (3) Financial and credit solutions, (4) Developing domestic value chains, (5) Market development and protection, (6) Capacity building of supporting industry enterprises, and (7) Media information, statistics, and databases. In particular, developing the domestic value chain is of the most importance. The domestic value chain is fostered through effective investment attraction and linkages between Vietnamese and multinational enterprises, and domestic and foreign manufacturing and assembly companies. Furthermore, the Government encourages building concentrated supporting industrial parks, thereby increasing autonomy in input materials for manufacturing, reducing dependence on single imported sources, improving domestic added values, and enhancing the position of Vietnamese enterprises in the global value chain. Along with that, the state agencies support Vietnamese enterprises in the prioritized processing and manufacturing industries to grow into regional-sized corporations, creating spillover effects and leading supporting industry firms under the spirit of Resolution No. 23-NQ/TW.

At the same time, the Resolution also emphasizes the joint role of ministries and branches in promoting supporting industries, thus requiring tight collaboration among ministries and branches to deliver the best results. Notably, MIT has coordinated with the Ministry of Planning and Investment (MPL) to strengthen the investment attraction of major global FDI enterprises, encouraging them to invest in the manufacturing of finished products and the establishment of regional manufacturing plants in Vietnam. Therefore, domestic supporting industry enterprises are now able to participate in the global supply chains. This year, MIT will collaborate closely with multinational FDI enterprises namely Samsung, and Toyota, among others to strengthen the search and connection of domestic raw materials, components, and accessories manufacturers in the replacement of imported sources in the short term as well as in the long term.  In this way, Vietnam can enhance the localization rate of Vietnam-produced products and increase the influence of FDI enterprises in the domestic business community, aligning with the Government opinions on FDI attraction in Development Bridge Forum 2021. 

Besides, the authorities of major cities in Vietnam have created a legal framework for the development of supporting industry. Following Resolution 115/NQ-CP, Decision 504/QD-UBND 2015 was issued by Ho Chi Minh City Council, approving the Outline of the Supporting Industry Development Scheme for the period 2015 - 2020, with a vision to 2025. Hence, Resolution 16/2018/NQ-HDND stimulates investment demand in the supporting industry sector of Ho Chi Minh City for the period 2018-2020. Following suit, Hanoi People's Committee issued Plan 94/KH-UBND on the Program of Supporting Industry Development in Hanoi in 2020. A year after, Plan 49/KH-UBND on the Program of Supporting Industry Development in Hanoi in 2021 was approved to enhance and enforce the implementation of the previous plan. 

Viettonkin believes that with the majority of enterprises being SMEs, Vietnam will move up its global value chain if the country has the right policies and strategies to promote and develop supporting industries. The current situation indicates that supporting industries remains several shortcomings, yet in the upcoming time, the preferential policies and timely action plans from the Government, ministries, branches, and localities will definitely boost the industry to thrive. Thus, this will be an ideal time for foreign investors to start a business in Vietnam. With an experience of more than 10 years in consulting, Viettonkin is one of the leading firms in the industry. Our professionals, who are insightful of the Vietnam market and legislation, can provide detailed advice on helping your companies navigate through the legal processes of setting up business in Vietnam. Let’s get down to work! 

Vietnam retains its position as an FDI spotlight in the region albeit with the severe impact of Covid-19 on the whole economy. Foreign investors still maintain their positive outlook and confidence in the Vietnam economy and investment-business environment. In 2021, Vietnam attracted 408 billion USD registered FDI, securing its rank at 18th place in the world and 2nd place in SouthEast Asia. Hence, in the first two months of 2022, FDI enterprises invested approximately 5 billion USD in Vietnam. Undoubtedly, Vietnam receives a considerable amount of foreign capital resources. 

Despite recording impressive FDI inflows, Vietnam faces several challenges in assessing and selecting FDI projects. In particular, over half of the operating FDI enterprises have reported business losses. According to the Ministry of Finance, out of 25,171 FDI firms, only 10,125 firms are making profits, accounting for 40.2%. Meanwhile, the rest (14,108 firms) are reporting losses, which is equivalent to 56% of the total existing enterprise number. In 2020, the loss value of FDI firms reached up to 151.064 billion VND while the accumulated loss value of these firms was above 623.000 billion VND. Paradoxically, the total assets of FDI enterprises with losses stood at 2.47 quadrillion VND, increasing by 22% compared to 2019. 

Besides, though Vietnam attracts a great source of FDI, the spillover effects of FDI enterprises on domestic firms are humble. In particular, technology transfer from FDI enterprises in Vietnam is much lower than in other countries in the same region, limiting Vietnam to move up the global supply chain (Ministry of Industry and Trade, 2021).

Therefore, the Ministry of Planning and Investment (MPI) is establishing a more well-articulated and thorough set of selection criteria for FDI projects. Accordingly, the following key points will be used to evaluate and consider FDI projects for approval:

1. Investment slot/ha of land,
2. Number of employees in each investment project,
3. Commitment to technology transfer of investors,
4. High technology content of the project,
5. The ability to link with the domestic business sector,
6. Environmental Protection,
7. Ensuring national defense and security.

In detail, investment slot/ha of land was identified to reduce the number of small-scale and low-capital investment projects yet using up large areas of land, resulting in a waste of resources.  In addition, the criteria on employee number per investment project will contribute to the efficient and effective deployment of the labor force, thereby levitating the pressure on the social order and security of the localities with dense labor concentration. Overall, both of these criteria have been institutionalized in the Law on Investment 2020 and Resolution No.31/2021/ND-CP. 

Further, the MPI concretized the technological criteria for enjoying investment incentives. More specifically, the investment projects should meet the requirements on: 

• the ratio of revenue from high-tech products in the total annual net revenue of the enterprise, 
• the ratio of total expenditure on R&D activities conducted in Vietnam to total annual net revenue,
• percentage of employees, with university/college qualifications or higher, performing R&D activities of the total number of employees. 

Similarly, technology transfer is also one of the four criteria for applying special investment incentives. Yet the transferred technology shall be on the list of encouraged-for-transfer technologies in accordance with the regulations and the number of Vietnamese enterprises receiving technology transfer. 

Moreover, to strengthen the link between the FDI sector and domestic enterprises, the MPI has recommended clear criteria on connectedness and spillover effects of FDI firms through: 

• the percentage of Vietnamese enterprises over the total number of enterprises participating in the assembly, component-raw material-service supply for manufacturing finished products. 
• value to product ratio in which products are created by Vietnamese enterprises participating in the value chain. 

As the average localization rate of Vietnam is modestly from 20% to 25%, this regulation will help Vietnam overcome its biggest shortcoming in FDI attraction. 

When it comes to the environment, the criteria focus on sustainable development, following which the MPI proposed to improve standards and technical regulations on products, environment, natural resources, and energy-saving, reducing emissions in alignment with regional and world standards. Meanwhile, the criteria for ensuring national defense and security have also been closely institutionalized in the Investment Law 2020 and Decree No. 31/2021/ND-CP. Particularly, activities related to national defense and security, or projects in “sensitive” areas shall be appraised and scrutinized in each certifying phase. 

Leading economic experts assessed that Vietnam is a potential destination for foreign investors thanks to its active participation in free trade agreements, especially several recent new-generation FTAs. Other than FTAs, FDI enterprises can benefit from competitive cheap labor costs, low energy costs, and attractive investment incentives of the nation. However, Vietnam is lacking a comprehensive legal framework for FDI to harvest fruitful results and create positive spillover effects. Thus, the Government should specify and regulate strict binding standards and conditions for further development and adaptation.

To obtain a comprehensive understanding of the Vietnamese legal system and enjoy investment preferential policies, foreign investors should consult top professionals in the field. Viettonkin - one of the leading consulting firms with a deep insight of the Vietnam market and legislation - can help you and your business navigate through the legal process in Vietnam. Please do not hesitate to contact our Viettonkin consultant team via email at info@viettonkin.com.vn or contact page. 

The four prevalent methods of business dispute resolution in Vietnam include Negotiation, Mediation, Arbitration, and Court, in which the former three are commonly referred to as Alternative Dispute Resolution (ADR). According to the Ministry of Justice, Negotiation and Court are the most selected practices to resolve business conflict with 57.8% and 46.8% respectively, followed by Mediation (22.8%) and Arbitration (16.9%). In fact, businesses have not familiarized themselves with Mediation, and also have little trust in this method. As a result, they tend to opt for more certain and reassured ways, notably Court and Arbitration. 

Negotiation

Negotiation should be the first consideration to settle any commercial dispute between the parties before involving the jurisdiction, due to its resource effectiveness. However, the negotiation method is not often used by Vietnamese businesses because no binding mechanism is enforced after reaching an agreement among the parties. Consequently, the negotiation is hard to achieve. Thus, the dispute is filed up to the court or the arbitrator for resolution. 

Commercial Mediation

According to the Ministry of Justice, Vietnam has 10 Commercial Mediation Centers. Commercial mediation is implemented in one of the following ways:

1. The parties submit a request for mediation to a mediation center namely the Vietnam Mediation Center (VMC)

2. The parties submit a petition to the arbitration center, during the arbitration proceedings, the parties have the right to request the arbitration council to conduct conciliation.

Reality proves that the success or failure of the mediation depends greatly on the industry expertise, experience, mediation skills as well as the mediator's ability to persuade the parties. Therefore, from the first steps in mediation, the parties should carefully choose the right mediator with established expertise and seasoned experience.

Arbitration

According to its dispute settlement principles, Arbitration presents a number of outstanding advantages to the parties when there is a dispute in business and commercial activities. Specifically, the Arbitration method has

(i) simple procedures, 

(ii) transparency and fairness as the parties can select their own arbitrator,

(iii) confidentiality (trade secret), 

(iv) voluntary-based regardless of state power, 

(v) finality judgment as the parties are obliged to perform.

Court

In Vietnam, the litigants often choose economic dispute settlement by the Court as a last resort to effectively protect their rights and interests when they fail to negotiate or reconcile.

The most considerable benefit of this method lies in state power. The court is a judicial body that has the right to act in the will and power of the state when adjudicating disputes. The final judgments and decisions of the People's Court must be respected and complied with by state agencies, economic and social organizations, armed forces, and all citizens. In case the judgment is not voluntarily enforced, it will be coerced by state power.

However, commercial dispute resolution by the Court has several downsides. One of the principles in court adjudication is a public hearing, which is of the most concern to businesses as their trade secrets will be exposed. In addition, court procedures are complicated and cumbersome, and the division of trial procedures is time-consuming and ineffective, prolonging the time for dispute settlement. This leads to economic losses for businesses in commercial conflicts.  

For foreigners who are involved in business disputes in Vietnam, the unfamiliarity with the Vietnam legal system will cause them certain disadvantages. Therefore,  to avoid unfavorable situations and significant economic losses, foreign companies should consult domestic experts in the field and seek out the most beneficial solutions. Viettonkin - one of the leading consulting firms with a deep insight into the Vietnam market and legislation - can help you and your business navigate through the legal process in Vietnam. Please do not hesitate to contact our Vietonkin consultant team via email or contact page.