Overview of the Logistics Industry in Vietnam

The current situation 

Competitive status in service provision

Due to Vietnam's trade deficit, this is an appealing market for Vietnamese logistics businesses. However, because many international corporations invest directly in Vietnam and are also the major importers, a substantial portion of this market remains in the hands of foreign logistics firms. Furthermore, most Vietnamese businesses are still not fully aware of the need to invest in good supply chain management. This makes it difficult for Vietnamese logistics firms to provide value-added logistics services.

Infrastructure deficiencies

Among Southeast Asia's essential economies, Vietnam has the poorest freight infrastructure. Most of Vietnam's seaports are not suited for loading and unloading specialist ships. Domestic airports, on the other hand, lack adequate equipment for loading and unloading products. The country's present warehouse infrastructure is unsuitable for the quick loading and unloading of products, not to mention a lack of energy and information transmission support services (telecommunications).

High cost of logistics services

Vietnam's logistics costs are estimated to be over 25% of GDP, far more than in wealthy nations. This affected Vietnam's ambitions to the high-value chain and increase exports. The fundamental reason for this predicament is that Vietnam's transportation infrastructure is too old and overburdened, the administrative system is difficult, and Vietnamese manufacturers do not actively employ international leasing services 3 PL (third party logistics).

According to the General Statistics Office, Vietnam has more than 98.1% of SMEs, with 99% of these businesses experiencing capital constraints. Financial resources to engage in digital conversion and IT infrastructure development are also significant barriers for logistics organizations. With 90% of firms having less than 10 billion VND in capital and 5% having between 10 and 20 billion VND in the capital, it is difficult to implement expensive technological solutions.

State policies in applying technology in logistics 

The Prime Minister issued Decision No. 221/QD-TTg on February 22, 2021, revising and supplementing Decision No. 200/QD-TTg dated February 14, 2017, authorizing the Action Plan to promote energy efficiency, competitiveness, and growth of Vietnam's logistics services by 2025. As a result, the Ministry of Industry and Trade has released an action plan to boost competitiveness and grow logistics services in Vietnam by 2025. In this regard, the Ministry identifies scientific research and technology transfer as forerunners in the integration trend. 

The Department of Science and Technology designed and implemented the Project "Research, assess, and propose national standards for logistics" to enhance the standardization of the logistics industry in the context of Vietnam's international integration.

Benefits of Digital Transformation for the Logistics Industry

Automation conserves both money and time.

Automation simplifies overall goods transportation, ensuring that commodities are traceable and arrive on schedule while reducing other financial risks. When there is an issue that creates delays in the transportation process, technology applications are employed to maximize resources and develop backup alternatives.

The palletizing robot, for example, will verify that all items are packaged and ready to export. As a result, the time spent loading and unloading items is reduced, saving firms money on labor costs.

Improve the abilities to assure order progress.

Businesses can use technology apps to track the real travel time of commodities. Because parameters and data are shown in detail from start to end, firms may completely foresee any risks associated with order progress.

Furthermore, digital transformation in logistics assists logistics organizations in optimizing the time spent loading and unloading items, hence reducing the transit route.  With this technology, the order progress is also optimized to the greatest extent possible.

Increase the transparency of shipping operations.

Transparency in the delivery process is a fundamental aim that business managers want to accomplish by incorporating IoT logistics solutions. The ability to trace items from the warehouse to the customer's door gives management assurance that all steps of the supply chain are running properly. It also increases client faith in the brand and saves support personnel a lot of time.

Key Trends in Applying Technology in Logistics in Vietnam

Blockchain technology is being used in logistics.

With the advent of Blockchain technology, logistics businesses can now complete digital contracts in the most secure manner possible. Using forthcoming technology will enable all logistics players to establish the most transparent and efficient system for documenting all transactions, tracking assets, and maintaining all papers relevant to the transport sector's activities.

The supply chain's digitalized logistics trend

Digitalization will touch practically all businesses internationally, including the logistics industry. Increasing consumer understanding of digital technology and use of all online channels will assist policymakers in making the best business decisions possible. The use of digitalization in the logistics sector is always anticipated to assist lower the cost of acquiring machinery as well as the cost of the whole supply chain in order to promote revenue development.

The door-to-door delivery of products is a logistics trend.

The field of distribution via information technology has grown in popularity, particularly in large cities. Customers may place orders anytime, anywhere, thanks to this easy application, which requires just smart devices such as phones or PCs with an Internet connection. Delivery work has become more flexible and speedier as a result of advances in information technology.

The trend of safe logistics has risen to the top of the priority list.

With the growth of the internet, there have been increasing worries regarding improved security in logistics firms. All assaults always target business websites such as Amazon, Walmart, and others, exposing cyber security problems. As a result, logistics service providers have been encouraged to focus even more on delivering safe transportation and freight solutions.

Trends in drone and robot delivery

This technology is now available in many nations worldwide. Delivery by delivery plane robots will overcome problems that traditional delivery frequently confronts, such as geography, weather, and so on. Delivery has gotten much easier and more convenient as a result of this technology.

In Vietnam, using technology in Logistics is still a relatively young industry. Viettonkin, as a prominent specialist in this industry, is willing to give consumers up-to-date information and sound financial recommendations. Contact us right away to improve your chances of success!

Attracting investment from overseas Vietnamese entrepreneurs has always been one of the top priorities for the Vietnamese government's foreign direct investment (FDI) and economic development policies.

Vietnam as a Global FDI Destination

FDI is playing a very important role in the socio-economic development of Vietnam. According to the Foreign Investment Agency (Ministry of Planning and Investment), up to now, Vietnam has attracted 34,700 FDI projects with a total registered capital of 418.8 billion USD from 141 countries and territories around the world, of which Vietnam's major FDI partners are South Korea, Singapore, and Japan. FDI contributes significantly to the economy, accounting for approximately 25% of total social investment and 23% of GDP, as well as contributing 21-23% of budget revenue and employing approximately 6 million people. In addition, FDI inflows now account for 68-70% of Vietnam's export value and 55% of its industrial production value.

Among Vietnam's FDI projects, there are 376 FDI projects of expatriates living in 29 countries around the world investing back home with a total registered capital of about $1.72 billion USD in 42/63 provinces and cities of Vietnam and focus on many fields such as energy, processing industry, manufacturing, and services, in which manufacturing and processing account for the majority.

According to a representative of the Ministry of Planning and Investment, the opportunity for Vietnam to attract more FDI inflows from overseas Vietnamese is still very large. Moreover, Vietnam's economy has now begun to reopen under the new normal, and the country maintains its image as a safe, attractive, and promising destination for foreign investors.

Despite the negative effects of COVID-19 on the global economy, Vietnam's selective investment attraction policy that prioritizes high-quality projects has proven effective. Nguyen Van Toan, Vice Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), agreed that Vietnam's advantages of favorable geographic location, improving business and investment environment, and better infrastructure system have made it appealing to foreign investors.

Supporting Overseas Vietnamese Entrepreneurs

Attracting investment from overseas Vietnamese entrepreneurs has always been one of the top priorities for the Vietnamese government's foreign direct investment and economic development policies.

Overseas Vietnamese have always been considered an integral part and driving force of the Vietnamese ethnic community, an important factor contributing to strengthening cooperation and friendship between our country and other countries. 

Right from documents such as Resolution No. 36-NQ/TW issued in 2004, the Party and State have set out key tasks for ministries and agencies at all levels for the overseas Vietnamese community. In which, it is necessary to complete and build a new system of policies to attract and use talents, promote the contribution of overseas intellectuals to the development of the country; as well as complete and develop new policies to attract overseas Vietnamese to invest and do business in the country.

The implementation of Resolution No. 36-NQ/TW is further strengthened by Directive 45/CT-TW issued in 2015, in which the Politburo directed to focus on promoting administrative reform in order to remove obstacles and create favorable conditions for Vietnamese people living in Vietnam. foreigners when returning to Vietnam to live and do business; early re-grant of citizenship to eligible persons; further facilitate home ownership in Vietnam; simplify immigration procedures, investment, transfer, receipt and use of remittances. In addition, it is also necessary to focus on reviewing, supplementing, and perfecting mechanisms, policies, and laws to create a favorable legal corridor for overseas Vietnamese to invest, produce, and do business, thus contributing to attracting foreign investment and technology transfer from other countries to Vietnam and promoting exports to support Vietnam's investment abroad.

Another important factor that is also being considered by the Government is the maintenance and improvement of overseas Vietnamese communities and associations. The Vietnam Fatherland Front, the Ministry of Foreign Affairs, the Central Mass Agitation Commission, as well as socio-political organizations, have worked closely and effectively in recent years to direct and guide Vietnamese overseas associations, which has resulted in the positive growth of these associations. They have strongly developed a wider scope of operation through the successful application of comprehensive measures to mobilize, rally, and assist Vietnamese nationals in foreign countries, thus actively contributing to enhancing and promoting national unity, heightening national pride and sense of national dignity, as well as attachment to the native land.

The Vietnam Innovation Network was officially launched in August 2018 under the management of the National Innovation Center (NIC) under the Ministry of Planning and Investment. With a network of more than 300 members in 14 countries and territories, the Vietnam Innovation Network is expected to contribute to innovation activities in Vietnam, connect and promote two-way cooperation between Vietnam and host countries such as the US, Germany, Australia, Korea and Japan. Not only that, the Network's activities are also deployed towards the goal of connecting corporations, investment funds, and domestic start-ups wishing to develop business activities in other countries and in Vietnam.

Currently, overseas Vietnamese receive many more incentives and policy support on immigration, foreign currency transfer, land and housing ownership, and business registration in Vietnam compared to foreign investors. 

In recent years, the government and the National Assembly have introduced many policies to create favorable conditions for foreign investors to do business in Vietnam. Vietnam recently approved a VND 350-trillion economic recovery and development program for two years (2022-2023) to speed up post-pandemic recovery, providing an additional favorable opportunity to attract FDI in general and overseas Vietnamese investment in particular.

Localities and big cities have also been taking initiatives to attract overseas Vietnamese investors. At a recent seminar in August, the Da Nang Investment Promotion Agency called on overseas Vietnamese investors to explore some of Da Nang's major projects. The seminar included presentations on some significant projects, including Lien Chieu Port, a complex of financial, commercial, entertainment, and luxury apartments; the Da Nang Creative Space; an international trade center; an international hospital; a nursing home; and an international intercollegiate school.

In particular, the start-up phase for the building of Lien Chieu Port has a total estimated investment of nearly 6,484 billion VND, under the authority of the Prime Minister to approve the investment policy. Cash contributions from the investors total $2,269 billion, with credit institutions covering the remaining amount. 

Conclusion

Vietnam will continue to build a favorable investment climate for overseas Vietnamese entrepreneurs to invest in and develop their businesses in the coming years. This, along with other appealing conditions in Vietnam, will surely attract more investment from the overseas communities and contribute to a more dynamic and developed market. As a company with 12 years of experience in FDI consulting, Viettonkin understands the thoughts and desires of investors interested in the Vietnamese market. With a team of experienced experts, we are proud and honored to accompany overseas Vietnamese investors as they explore this potential market. Please contact us right away for more investment recommendations and in-depth information.

The Situation of Logistics Disruption 

China's Zero Covid policy affects the global supply chain

Vietnam's export volume to China is substantial

The first reason is that China accounts for about 12% of world imports. When products enter there, there is a difficulty with customs clearance, generating congestion, which would damage import and export firms' account receivable turnover.

According to purchasing managers index (PMI) polls, suppliers are experiencing the greatest delays in supplying raw materials to their clients in more than two years. Finished goods inventories reached their highest level in almost a decade, but export and import indices declined dramatically. The exporting country's current account is also impacted. As a result, firms lack the capital to reproduce or sustain operations, and the country's trade balance suffers.

Vietnam exports around 17% of its commodities to China (2021). Many organizations have reduced their projection for China's economic development to about 4.5% from the intended level of 5.5%, implying that consumer demand in this big market would fall. As a result, the resumption of export growth to the Chinese market may encounter challenges in the coming months.

According to Nguoi Lao Dong Newspaper, numerous business executives in Vietnam have expressed concerns over China's "zero Covid-19" policy. Textiles, garments, footwear, electronics, plastics, and other industries that rely heavily on Chinese raw materials are suffering greatly. They even risk having to cancel orders because they are unable to supply them, despite the fact that they are in the midst of a period of rapid recovery and orders are plentiful. Reduced capacity is typical, with the possibility of extending manufacturing time and causing delivery delays.

According to the Vietnam Fruit and Vegetable Association, exports to China continued to fall in the first months of the year. The value of fruit and vegetable shipments to China in the first quarter was slightly over $455 million, a decrease of more than 25% from the same time in 2021. 

China is Vietnam's main source of raw materials for manufacturing

Chinese imports account for more than 33% of overall imports (2021). Supply chain disruption caused by China's partial blockade strategy is anticipated to harm the likelihood of importing raw materials, prolonging delivery time and so limiting local product development.

As a result, if the embargo in China is extended, the manufacturing sector's development rate may decline in the near future. In turn, the previous year's low base level and the recovery of domestic consumer demand, as well as the chance to encourage public investment in the second half of the year, remain the foundation for Vietnam's economic development to meet the government's objective.

Global supply chains are impacted by geopolitical instability

Geopolitical instability and the tendency toward trade protection hamper global economic development and have a negative impact on macro stability, investment capital flows, business sector production, and business, and international trade. Trade conflicts between the United States and China, as well as between other economies, have both positive and negative effects on Vietnam's ability to attract foreign direct investment capital.

In this scenario, Vietnam can profit from the flow of investment from China to nearby nations, particularly in Southeast Asia. However, due to the possible hazards of trade wars, Vietnam faces the possibility of diminishing foreign investment and a movement of investment capital back to the US, prompting investors to be concerned. This offers several hazards, prompting investors to be more cautious, even withdrawing cash from developing countries and reinvesting it in less hazardous, safer markets. As a result, indirect capital flows into Vietnam are also impacted. 

Reshaping the Global Supply Chain - Supply Chain Diversity Affects Global Supply Chains

The Covid-19 epidemic, geopolitical volatility, and other unpredictability have resulted in five themes that will restructure and manage the global supply chain.

First, a flexible and adaptive supply chain, the use of digital technology, and the promotion of transparent e-commerce are all inextricably linked to the trend of sustainable development. Currently, suppliers in the global supply chain leverage digital technology and platform business models to create an environment in which manufacturers and consumers may engage directly with one another, enabling information sharing. The exchange of commodities, services, and currency creates value for all parties involved. This underlines the fact that, in the face of global uncertainty, digital technology and e-commerce will remain mainstream and crucial solutions for managing the supply chain and international trade.

Second, as the Global Production Network continues to shape the future of the supply chain, the regional production network will expand. The tendency of global economic fragmentation is the topic of debate at the World Economic Forum 2022, which has concluded in Davos, Switzerland (Davos Forum). Along with it, a new issue - geoeconomics - was heavily debated during the Davos Forum. Economic cooperation is highly dependent on the physical location of partners according to present realities. The danger of supply chain interruption will be reduced if they are geographically adjacent to one other. Globalization has also swung considerably in favor of collaboration among friendly countries in order to minimize political considerations hurting commerce.

Third, China remains the world's industrial powerhouse. In comparison to other Asia-Pacific countries, China still has excellent competitiveness in terms of markets, the efficiency of scale, infrastructure, logistics system, supporting industrial network, and supply of trained people.

Fourth, increasing service globalization. Competition for high-skilled labor between developing and mature markets will provide new opportunities for utilizing global talent over the coming decade. However, when wages in emerging economies rise, this door will eventually close. Demographic limits, along with growing global salaries, will drive automation, with machines and robots taking the place of people. 

Fifth, the growth of regional supply chains will drive higher inflation during the coming decade. Over the coming decade, supply chain rearrangement will raise inflationary pressures. The implications of supply chain disruption are reflected in a swift and significant increase in producer prices in 2021, resulting in high inflation that exceeds the 2% objective in Europe, the United States, and the United Kingdom. Brazil, Russia, Turkey, and Argentina will all experience significant inflation in 2021.

Government’s Policies to Deal with Logistics Disruption 

In 2021, the Minister of Transport released Decision 2240/QD-BGTVT on the Ministry of Transport's Action Program to Implement the Master Strategy for Development of Vietnam's Service Sector in the 2021-2030 Period, with a Vision to 2050. This decision intends to essentially complete the national transportation network while also boosting transportation and logistics services. Since then, the shared objective has been for Vietnam to eventually become a regional and global hub for the transshipment of commodities and passengers.

Regionally, ASEAN is advocating the expansion of non-tariff measures on important products as part of the Hanoi Action Plan to promote ASEAN economic cooperation and supply chain connectivity in the context of the Covid-19 outbreak, as well as increasing ASEAN's list of vital items. Furthermore, ASEAN countries have accelerated the safe return of travel activities in the area. 

Thanks to the Government's, Ministries', and Sectors' proactive risk response measures, as well as the recovery of Vietnamese companies' production and export, import and export turnover of products remained positive in the first quarter of 2022. Export turnover was 89.1 billion USD, up 13.6 percent from the same time in 2021, import turnover was 87.6 billion USD, up 15.8 percent, and the trade balance was 1.5 billion USD in excess. 

Logistics disruption has caused a lot of negative effects on the Vietnamese economy. However, with the efforts of the Government and businesses, the situation is gradually getting better. As a top-notch expert in this field, Viettonkin is ready to advise you and keep you up to date on the current situation as well as policies to address Logistics Disruption. Contact us right now to increase exponentially!

In 2021, the complex Covid-19 outbreak had a significant impact on all sectors of the economy, including the building industry, particularly contractors and construction firms. However, with the government's adaptive management, construction firms were able to combat the Covid-19 epidemic pretty well. The construction sector now has promising forecast signals for the second half of 2022.

Overview of Vietnam’s Construction Industry 

The Vietnamese construction sector grew by 0.6 percent in real terms in 2021, owing to a severe decline in the third quarter of 2021 due to stringent lockdowns in Vietnam's main cities and provinces. Construction activity is predicted to increase in 2022, driven by increased economic activity and government investment in transportation infrastructure and renewable energy projects. 

About the Government

In addition to institutional enhancements, the Ministry of Construction (MOC) has enhanced grasping, monitoring, guiding, and inspecting in order to eliminate obstacles in construction investment operations. Furthermore, the Ministry is working to develop instruments for managing building investment costs and performing specialized activities in accordance with decentralization.

About the businesses

They are now experiencing some business issues. The first issue is the congestion and legal issues that continue to restrict the number of projects performed in 2022. The present fact is that construction firms do not want to conduct domestic projects and are particularly wary of public investment initiatives. The reason for this is that all construction sector input costs, such as iron, steel, cement, sand, or transportation expenses have risen significantly.

The second issue is that existing construction labor is extremely scarce. The third issue is the contract delivery method. Furthermore, building companies are subject to fire prevention and fighting regulations. Because our country's fire prevention and fighting requirements are on par with those of industrialized nations. So we must import some items, such as fireproof paint and fireproof glass, we pay several times more.

The audit and inspection procedure comes next. This procedure is still quite complicated and time-consuming in Vietnam, posing challenges for enterprises. The final concern is financial. Investors and contractors struggle to raise funds due to a lack of credit room. Due to the arrears situation, the price of building supplies grew, and the price was not reimbursed, causing the firm to incur increasing losses.

Forecast of Development Trends of Construction Industry in Second Half of 2022

Price of input materials

The construction material price storm is becoming a "nightmare" for firms and contractors, as they confront several problems in terms of progress and capital in the first six months of 2022. According to experts, the construction industry's status at the end of the year will not be very favorable because capital flows into this sector are severely limited.

According to several securities firms, raw materials account for 65-70% of the building cost estimate in the cost structure. Steel and cement are the two most essential elements in this context. Steel costs have recently dropped, allowing construction companies to gain greatly.  Steel makers, including Hoa Phat Group, Vietnam - Italy Steel, and Vietnam - Germany Steel Pipe, cut steel prices for the eighth time in two months on July 9.

However, the cost of input resources like coal, power, gasoline, gypsum, additives, packaging, freight, and labor caused the cement price to rise to 1.65 - 1.7 million VND/ton. As a result, businesses are unable to remedy the situation.

In response to the aforementioned issue, specialists from Vietnam Assessment Report Joint Stock Company stated that, while construction businesses have made the initiative to respond, development remains modest. This shows that a crisis management strategy may be insufficient.

Government's support

The Minister of Construction proposed that the Ministry's units collaborate with companies, particularly while dealing with the Association of Contractors. This is the genuine voice in policy formation, state management, increased interchange, and the content listening process. The units agreed to increase contractor protection by conducting research and advising Ministry officials on specific suggestions, reasonable levels, and suitable restrictions that are compatible with legal obligations.

The MOC will engage with the General Associations and Associations on an annual basis to make adjustments and enhancements to reflect the current situation. The Minister recently collaborated with the General Association, the Association of Architects, and the Association of Contractors...

The MOC has also been made aware of the issue in terms of overdue debt. In the fixed unit price contract, the package contract, the law does not allow adjustment, unless the adjustment is required due to force majeure...

In terms of norms, the evaluation of norms is old, low, and new jobs are not available; there are more than 3,000 norms, of which 1,500 are from the MOC, the ministries, and the Provincial People's Committee; 1,800 are from the Provincial People's Committee. Over 1,000 old and obsolete standards have been examined and eliminated by the MOC. Hopefully, the Association will actively engage in the development of new standards in collaboration with the MOC.

Concerning fire prevention and fighting standards and regulations, the Science and Technology Department was tasked with continuing to engage with the Ministry of Public Security to urge them to resolve the issues presented by the Association.

Many new contracts signed by businesses

The new contract value at Coteccons Construction Joint Stock Company (Coteccons, stock code CTD) in 2021 is approximately 25,000 billion VND, which is 3.6 times greater than in 2020. Coteccons received many contracts for projects totaling more than 10,000 billion VND in the first quarter of 2022. The company won the Diamond Crown Hai Phong project in May 2022.

Hoa Binh Construction Group Joint Stock Company (Hoa Binh, stock code HBC) has a new contract value of VND 18,000 billion in 2021, which is double the amount in 2022. Hoa Binh won two bidding packages totaling VND 560 billion and VND 1,769 billion in the first six months of 2022.

Fecon Joint Stock Company (stock symbol FCN) was awarded bid packages totaling more than 1,190 billion VND in the fourth quarter of 2021. The value of Fecon's new winning bid packages reached about VND 2,288 billion from the beginning of 2022 and May 4, 2022.

Many additional companies, like Hung Thinh Incons Joint Stock Company (stock code HTN) and Ricons Construction Investment Joint Stock Company, have significant backlogs (accumulated value of newly signed contracts).

With increased backlog and steel prices predicted to continue to fall, the construction business group's financial condition is expected to improve in late 2022.

The construction industry in Vietnam remains turbulent as a result of the Covid-19 pandemic. However, there are still bright spots in the construction industry, especially in the second half of 2022. Viettonkin believes in its abilities and position in this field. We are ready to advise you and keep you up to date on changing market trends as well as government policies in the last 6 months of 2022. Contact us right now to increase exponentially!

Realizing the increasing demand for energy in Vietnam, many foreign investors are accelerating their market entry in the form of merger and acquisition (M&A) deals, especially focusing on renewable energy projects such as wind and solar power.

Increased demand for energy in Vietnam

Vietnam has been a country with a rapid growth rate, accompanied by a high demand for energy. During the 10-year period 2011-2020, Vietnam's electricity demand grew very rapidly, averaging nearly 10% per year. To meet the electricity demand, the scale of Vietnam's power sources has increased in capacity from 20,600MW in 2010 to 69,300MW in 2020. It is also expected that Vietnam needs to add 6,000-7,000 MW of electricity annually, with an estimated investment cost of $148 billion accumulated by 2030. Besides traditional energy sources, avid energy will significantly add to the electricity supply.

Additionally, the on-going Russia-Ukraine conflict, followed by an energy crisis and inflation, has caused the price of energy fuel to skyrocket. The consequences directly affect electricity prices, CPI, and many other areas around the world. 

The world today is facing environmental and energy challenges, thereby placing an urgent need to reduce carbon emissions. Vietnam's climate and topography make renewable energy, especially wind power, a significant investment prospect. Vietnam's large renewable energy production potential is due to the long and narrow geographical shape of the country, with more than 3,000 km of coastline, including hills and mountains. Over 8% of the entire area has very good wind potential with an annual average temperature of over 21 degrees Celsius, and there are typically between 2,500 and 3,000 hours of sunshine per year.

Data from the World Bank (WB) shows that Vietnam currently has the most comprehensive installed solar capacity in Southeast Asia, with 16,500 MW produced in 2020. Vietnam is also one of the top 10 countries that have the highest installed solar capacity globally.

Vietnam's commitment to achieve net zero emissions by 2050 is anticipated to open up a slew of new opportunities for investment, transforming the nation into a green manufacturing hub and facilitating the export of made-in-Vietnam goods into developed countries' markets.

Foreign Investors Flocking to Energy Projects

Although M&A activity has slowed in the first half of 2022, it has merely reset to pre-pandemic levels, which averaged around 25,000 deals per half of the calendar year. Many foreign investors are still accelerating their speed of entry into the Vietnamese market in the form of M&A for renewable energy projects such as wind and solar power projects. The continuing acceleration of the energy transition and a growing focus on supply chain security will drive M&A in the areas of critical minerals and national energy supply in the second half of 2022.

Foreign investors from Thailand, Japan, Korea, Singapore, India, the EU, and Australia have stepped up market research and invested in many energy projects. Among them, the first green certificated loan in Vietnam between the Asian Development Bank (ADB) and Phu Yen Joint Stock Company on October 9, 2020, is worth $186 million to build and operate a solar power plant with a capacity of 257 MW. Foreign investors bring to Vietnam not only capital but also technical knowledge, negotiation skills, project management, and support for investors across the entire supply chain.

The dynamism of Thai investors is one of the main factors that has increased the heat of the M&A market in recent years, especially projects related to renewable energy. Some prominent transactions in the market belong to Thai investors such as Gulf Energy Development Company, Super Energy Corporation, and Banpu Energy Corporation.

The recent exciting M&A activity in the renewable energy sector is largely thanks to the leverage from the preferential policies for renewable energy projects and the favorable legal framework for foreign investors, including regulations that allow enterprises to own 100% of renewable energy projects.

Vietnam’s Effort in Pursuing Renewable Energy

During the past 35 years of renovation and reform, Vietnam has set the overarching goal of ensuring energy security. Particularly in Resolution 55-NQ/TW on "Strategic orientation for Vietnam's national energy development to 2030, with a vision to 2045," Vietnam unequivocally states that it is necessary to link requirements to ensure environmental safety with requirements to ensure sustainable energy security in Vietnam. Resolution 55 has highlighted the crucial task of accelerating the energy transition in the direction of putting a priority on the exploitation, efficient use, comprehensive use of renewable and clean energy sources, and developing a reasonable roadmap for traditional and fossil energy sources.

Only 0.32% of Vietnam's energy consumption was from renewable sources in 2014.  The installed solar power generation capacity in 2015 was only 4 megawatts (MW). However, within five years, investment in solar power, for example, soared.

Currently, the Ministry of Industry and Trade is finalizing the National Power Development Plan for the period 2021-2030, with a vision to 2045 (National Power Development Plan VIII) and the National Energy Master Plan for the period 2021-2030, with a vision to 2050 with emphasis on strongly promoting the use of clean power sources, minimizing the impact on the environment. Due to its high level of complexity, the National Power Development Plan VIII is particularly significant and of interest to numerous agencies, units, professionals, scientists, and localities across the nation. "Putting the interests of the people and nation first" is the overarching objective that guides the Government's completion of the National Power Development Plan. So far, investment mechanisms and policies for energy projects have gradually shown more transparency and clarity.

Regarding the mechanism for transitional wind and solar power projects, the Ministry of Industry and Trade has proposed and requested the Prime Minister to approve the mechanism for investors of transitional projects to negotiate electricity prices and electricity purchase and sale contracts with the Vietnam Electricity Group (EVN) within the electricity generation price bracket and guidelines issued by the Ministry of Industry and Trade.

The power purchase agreement and electricity price negotiation mechanism will be used similarly to those mentioned above for future wind and solar power projects to ensure that the legal corridor is consistent with the projects.

Regarding the Decision on piloting the direct electricity trading mechanism between renewable energy generators and large electricity users (DPPA), a Draft Decision has been posted for comments from the public.

With the increasing demand for energy in the country and in the world, the energy industry and its M&A deals will continue to attract foreign investment in the coming years. Reach out to Viettonkin for more insights on the energy market in Vietnam.

In recent years, the prospect of attracting foreign direct investment (FDI) in Vietnam has been bright, as many large, medium, and small investors from developed countries have gradually diverted investment into Vietnam. Among them, overseas Vietnamese are receiving increasing attention and encouragement from the Vietnamese government to not only promote Vietnamese products and services but also to invest directly in Vietnam.

Support for Overseas Vietnamese Investors

Although there is no specific investment incentive policy for overseas Vietnamese investors, according to current regulations, overseas Vietnamese investors still have advantages over foreign investors. Overseas Vietnamese have the right to choose to apply investment conditions and procedures to domestic or foreign investors. Specifically, for overseas Vietnamese, when investing and doing business in Vietnam under the Investment Law 2020, if they still have Vietnamese nationality, they are considered as Vietnamese citizens and will follow the same mechanisms, policies, and procedures as for Vietnamese. However, for overseas Vietnamese who possess both Vietnamese nationality and a foreign nationality, the Law stipulates that the investors are allowed to choose investment incentives as prescribed by law. 

Investment procedures applied to domestic investors are simpler and more convenient than those for foreign investors, as domestic investors are not required to apply for investment registration certificates in advance when setting up a business. Despite this, investors can still choose to follow investment procedures applied to foreign investors as they are accompanied by incentives such as exemptions from import duty or land rental fee exemptions. 

In addition, Vietnamese expatriates also enjoy other preferential policies such as visa exemption and are allowed to buy houses in accordance with the Housing Law.

The new Investment Support Forum for Overseas Vietnamese (Invesfov), established by the Association for Liaison with Overseas Vietnamese in early 2021, is set to materialize Conclusion No. 12-KL/TW of the Politburo on overseas Vietnamese affairs in the new context, attract more resources from Vietnamese abroad and create optimal conditions for them to contribute more to national development.

Potential Sectors for Investment

According to data from the Ministry of Planning and Investment, as of the end of 2021, overseas Vietnamese from 29 foreign countries and territories had invested in 376 investment projects in the form of foreign direct investment (FDI), with a total registered capital of 1.72 billion USD.

Overseas Vietnamese investors have invested in 42/63 localities across the country, in which Hanoi led with 79 projects and registered capital of 476.8 million USD (accounting for 21.8% of total projects and 29.7% of registered capital), followed by Long An, Binh Thuan, Hai Phong and Dong Nai. FDI projects of expatriates have operated quite effectively, significantly contributing to the socio-economic development of localities.

Most of the projects of overseas Vietnamese invested in the processing and manufacturing industry, with 143 projects and registered capital of 725.14 million USD, accounting for 39.5% of projects and 45.2% of registered capital. Next in line were real estate, accommodation services, construction, science and technology activities, and information and communication. With the goal of taking advantage of the momentum and opportunities in the 4.0 era, the Vietnamese government has had policies and initiatives to connect with the overseas Vietnamese intellectual community as well as attract investment in high-tech industries.

Food Processing

Food processing is one of the sectors that Vietnam is prioritizing to develop by 2025, with a vision to 2035. Despite the impacts of the COVID-19 pandemic, the Index of Industrial Production of the industry in 2020 still increased by 5.3% compared with 2019, as did the quality of the products and number of companies. 

Being considered as the food basket of the world, Vietnam has many advantages for the processing industry with a diverse range of products, from rice, vegetables, coffee, and pepper to cashew, tropical fruits, seafood, and many more. With many M&A cases within the sector recently, the Government expects foreign investment in general and investments from overseas Vietnamese in particular, to play a major role in enhancing the country’s food processing industry. Incentives and favorable conditions are given, with priority over projects with advanced and environment-friendly technologies and those creating high-added-value products. High-tech integrated production chains are completely tax-free. In addition, investors are entitled to a 5% lower corporate income tax compared to the normal tax rate (25%). Prioritized projects will be tax-free for up to 4 years, after which they will enjoy a 50% lower tax rate than usual over the next 9 years.

In addition, the Government also wants the overseas Vietnamese business community and businesses to play a leading role in bringing Vietnamese goods abroad and, together with domestic enterprises, to create a supply chain of Vietnamese people in the global market.

Real Estate

According to experts, the end of 2021 was the time when Vietnam witnessed high remittance flow, leading to more active real estate transactions at that time. Along with direct transactions, most expatriates can ask their relatives to buy houses or invest in real estate projects. These real estate products, in addition to being used for living and relaxation, can be bought and sold by overseas Vietnamese owners or rented as a long-term investment.

Instead of just focusing on big cities, this cash flow is now flowing to potential new markets, notably resort real estate. The sought-after resort real estate products are often located in localities with clean air, calm and clear seas, ideal temperatures, and are suitable for year-round relaxation and health recovery. 

The development of infrastructure systems, similarities in architecture in developed countries, and significantly lower prices than in foreign markets all entice more and more overseas Vietnamese to buy a home in Vietnam.

Embracing the Startup Spirit at Home

Although Vietnam's startup market was formed later than other countries in the world, Vietnam now has a complete startup ecosystem, supporting startups with component actors such as funds, investors, incubators, startup support programs, and service providers. All these factors have created opportunities for startups to form and develop. At the same time, Vietnam is one of the countries that strongly encourages the development of startups, with the spirit of entrepreneurship being adopted by the Government, as well as all ministries and agencies.

Social distancing during the Covid-19 epidemic has changed all aspects of people's lives and work. Social distancing and then the restriction of face-to-face contact have contributed to the growth of many tech-focused industries such as e-commerce, online payment, online training, online working, and so on. Now, as Vietnam moves into the new normal, this trend is likely to continue, attracting more and more foreign investors to come and write inspirational stories about entrepreneurship. Among them are the energetic and talented overseas Vietnamese, as well as Vietnamese international students.

Born in Vietnam, then adopted and raised in Sweden, having worked in many countries around the world, Denise Sanquist recently returned to her homeland, Vietnam, to realize her long-standing wish: create a safe dating and friendship platform for women, now known as Fika. The dating app was launched in the Vietnam market at a difficult time, when the Covid-19 epidemic was still raging. However, with Vietnamese youth forced to go through quarantine and find new ways to communicate and have fun, Fika quickly rose to prominence, becoming one of the most downloaded dating apps on both App Store and Google Play. After a year since its launch, Fika now has over 1 million downloads and is ranked as the #1 Free Dating app on Google Play as well as the #4 Lifestyle app on App Store in Vietnam. In particular, recently, Fika was also lucky to successfully raise $1.6 million in a seed round led by VNV Global, continuing Sanquist’s ambition to turn Fika into the #1 dating app in Vietnam.

Conclusion

With positive growth and suitable solutions during its fight against Covid-19, Vietnam continues to become a promising land for high-quality FDI inflows and ambitious overseas Vietnamese looking for a new market to invest in. As one of the country's most prestigious consulting firms for FDI projects, Viettonkin is delighted to accompany and support overseas Vietnamese investors in their search for good and suitable opportunities in Vietnam. Please send us an inquiry, and our team of experts will gladly assist you.

The real estate sector in Vietnam remains an appealing destination for foreign direct investment (FDI), with FDI flow into this sector ranking second in the first half of 2022.

FDI Continues to Pour into Real Estate

While many sectors are still suffering from the impact of the pandemic, FDI inflows into Vietnam continued to grow in the first half of 2022 thanks to solid post-Covid support policies by the Government. According to the Ministry of Planning and Investment (MPI), as of June 20, foreign investors had invested $15.27 billion in Vietnam, accounting for 97.4% of the total recorded during the same period last year. 

The real estate sector ranked second, bringing in $3.15 billion, or 22.5% of the total registered capital. Cushman and Wakefield, a leading global real estate services firm, stated that Vietnam remains an appealing destination for industrial real estate investors due to its stable currency and an increase in free trade agreements.

According to the Ministry of Construction, the real estate market in the first 6 months of 2022 has shown signs of recovery and good development. Product absorption rates in most segments were high, and almost no new inventory was generated. Until the first 6 months of this year, the market has not seen an improvement in the supply of commercial housing, the supply of commercial housing is very limited with about 12,000 units. Meanwhile, the total number of transactions of apartments, individual houses, especially land plots increased sharply (estimated at 70,000 successful transactions). The market has regained its balance between investment, business activities, and buying and selling for use.

The Vietnamese market has welcomed many new projects from foreign investors right at the beginning of 2022. The highlight is Lotte E&C's $900 million investment in its new smart urban project, "Lotte Eco Smart City Thu Thiem." YSL Group is also developing an industrial land project covering nearly 300 hectares in Nam Binh Xuyen, Vinh Phuc. The project is geared toward green development and high technology, with stringent equipment and advanced science and technology requirements.

On July 14, CapitaLand Development (CLD), CapitaLand Group's real estate development arm, also acquired a potential land fund to build a complex in Thu Duc City, Ho Chi Minh City, with a total revenue of around $720 million. The project will cover approximately 8 hectares and will provide 1,100 high-class apartments and shophouses to meet the growing settlement needs of Thu Duc City, which is being developed to become an economic and technological center.

Emerging Trends in the Market

According to Savills Vietnam, the real estate market will continue to be an attractive destination for foreign businesses. Two-thirds of FDI enterprises in Vietnam's real estate sector are large enterprises, many of which focus on industrial real estate. The industrial real estate segment has many favorable factors, such as a large planned industrial land fund, competitive rental prices compared to other countries in the region, a stable political and economic environment, and FDI inflows continuing to flow strongly into Vietnam. These factors will create a driving force for the development of industrial real estate in the coming years.

It is worth noticing that resort real estate is a segment where smart investors will look for opportunities to enter, especially in markets like Phu Quoc, Nha Trang, and Phan Thiet. On July 20, a signing ceremony was held between Vietnamese realty developer Danh Khoi Group and Japanese conglomerate Tokyu Group for the development of the high-end resort project The Meraki in Ba Ria - Vung Tau. Valued at over $42.7 million, the project is part of the Aria Vung Tau resort complex in the Chi Linh urban area. The Meraki Vung Tau, featuring a 29-floor tower, is expected by Tokyu Group to be the driving force for their investment plan in Vietnam, which is considered to have the most vibrant real estate market in the region.

When it comes to popular market segments, healthcare real estate, which is still relatively new in Vietnam, offers fantastic opportunities to investors with the foresight and ability to seize opportunities. According to Forbes, the global healthcare real estate market has reportedly risen dramatically over the last two years, recording double-digit growth. According to a recent survey by Vhome, more than 10.6% of respondents in Vietnam were considering the project's utility investment rates and ecological and healthcare space quality before making a purchase decision. After the fourth wave of Covid-19, homebuyers began looking for healthy living spaces with green, safe, uncrowded architecture and low construction density as healthcare demand rose. This resulted in the current development of this new market in Vietnam.

The demand for residential real estate in Vietnam will continue to rise as a result of the middle and upper classes' rapid urbanization. Large cities like Hanoi and Ho Chi Minh City continue to attract foreign investors who are investing in residential and commercial real estate. The demand for space leasing from data centers, e-commerce, and other industries will be what drives the office market. Along with an increase in consumption and capital investment, the retail market also experiences many positive signs as the tourism sector begins to recover. Due to their still-competitive prices in comparison to nearby markets like Singapore, Shanghai, and Shenzhen (China), Hanoi and Ho Chi Minh City are enjoying a growing popularity.

However, the price level of apartments in the middle and high-end segments continues to be pushed up, especially in big cities due to new supply being increasingly scarce and the possibility of. apartment projects appearing in the future with a very high primary selling price compared to the regional average. In contrast, the real estate market in the surrounding localities such as Binh Duong, Long An, Dong Nai and Hai Phong has the opportunity to develop more vibrantly when the land fund is still large and there are many new projects. construction investment.

Considerations for Foreign Investors

Aside from opportunities, it is important to point out that FDI inflows  into the real estate market also face many difficulties and challenges. Specifically, because of numerous issues with the legal system surrounding the project development process, which caused delays in implementation, the amount of FDI registered to the market year after year was not distributed as promised.

Additionally, condotels and officetels are two examples of new real estate segments for which comprehensive and prompt legal regulations have not yet been released. This has led to a discouraging reaction from many foreign investors who showed great interest in the time before.

In the foreseeable future, the housing craze and real estate prices will continue to rise due to the scarcity of available land in big cities, where FDI is mostly invested. The fact that high-quality real estate projects are currently becoming scarcer and less well-publicized may also trouble new investors in Vietnam. Therefore, foreign investors can seek the advice of qualified advisors with in-depth knowledge of the industry to understand the market and gain access to potential projects, or even form joint ventures with Vietnamese partners.Understanding the needs and challenges that foreign investors face, Viettonkin is eager to assist and accompany you as you begin developing an investment strategy in the Vietnamese market. Contact us now to receive detailed and in-depth information from our team of investment, business, and legal experts.

Through domestic reforms, natural resources and structural advantages, Vietnam has become one of the fastest-growing economies in Southeast Asia and is on its way to becoming a global manufacturing hub by attracting more and more high-tech multinational corporations (MNCs).

Opportunities for High-Tech Manufacturing Giants

According to a recent report by the Russian news agency Sputnik, Vietnam is attracting more attention because it has the potential to become one of the world's leading manufacturers.  Vietnam's exports reached a record high as more "Made in Vietnam" products became more widely accessible and held a larger market share globally.

In recent years, the ASEAN market has seen a surge in FDI, owing largely to the region's enormous economic potential. However, it is important to note that not all ASEAN economies benefited equally from this FDI boom. In addition to Singapore, Malaysia and Vietnam appear to be two important markets based on high frequency data. While Malaysia's approved FDI value increased to 12% of GDP in the fourth quarter of 2021, Vietnam has successfully transformed into an emerging global manufacturing hub.

Initially, the majority of investment capital was directed toward low-value-added sectors such as textiles and footwear. However, in the last two decades, Vietnam has moved up the value chain, becoming a major manufacturing hub for electronic products. Electronics exports reached a record high of $100 billion in 2021, accounting for more than 30% of Vietnam's total export value, up from 5% 20 years ago.

Samsung's extensive FDI in Vietnam since the late 2000s has played a significant role in the success of the technology sector. Over the years, Samsung has invested roughly $18 billion, and as of today, it owns eight factories as well as a research and development facility in Vietnam. At the same time, Samsung's success has prompted other tech giants, such as Google and LG, to move their supply chains to Vietnam.

The presence of the big names has made Vietnam a base for the production of electronics and mobile phone components, with the export turnover of phones and components, electronics,  and computers and components exceeding $27.3 billion in the first quarter of this year. Last year, the export of phones and components alone brought in $57.54 billion.

In addition to high-tech giants like Samsung, Nokia, Google, or Intel, other production projects have been announced by large or authorized corporations such as Foxconn, Luxshare, Pegatron, Goertek, and so on, which specialize in manufacturing and assembling components for Apple, Wistron, Amazon, Microsoft, and LEGO.

Apple's OEM model in Vietnam

In Vietnam, Apple recorded 21 suppliers, up from 14 in 2018. This figure is also higher than that of Thailand (15 suppliers) and India (9 suppliers). Apple's recent decision to relocate production lines to Vietnam has created opportunities for the Southeast Asian country to participate more deeply in the global value chain.
For the first time, Apple is shifting some iPad production out of China and into Vietnam, following months of supply chain disruptions caused by strict Covid-19 lockdowns in and around Shanghai. The iPad will become the second major line of Apple products made in the Southeast Asian country, following the AirPods earbud series, which was announced in 2020.

Apple is not the only tech MNC to develop a massive production line in Vietnam. Samsung has recently increased its investment in Vietnam, which produces half of its global smartphone output, by $920 million to manufacture circuit boards, camera modules, and other parts.

However, in reality, Apple's supply chain model is not the same as Samsung's. Apple does not directly manage any manufacturing plants. Instead, Apple works with suppliers around the world to manufacture and assemble Apple products. These suppliers are referred to as original equipment manufacturers (OEMs). Up to now, Apple has moved 11 factories owned by Taiwanese enterprises in its supply chain to Vietnam. The increase in investment activities of Apple's suppliers in Vietnam is mainly due to Apple's request. This also reflects the growing importance of Vietnam in the global value chain of Apple.

Vietnam was mentioned by Apple CEO Tim Cook as one of the three markets with the best business results for the company globally during the meeting to announce the financial results for the second quarter of fiscal year 2022. The CEO also declared that he will seriously take into account the Vietnamese Prime Minister's Pham Minh Chinh suggestion to increase the number of domestic suppliers and the percentage of domestic services and goods used in Apple products in the near future. Apple hopes that the Vietnamese government will continue to have preferential policies to encourage American high-tech enterprises to develop businesses and invest in Vietnam.

This firm also sent notices to a number of supply partners at the end of May 2022, announcing that the company would increase production of its product lines outside of China. As a result, this tech giant has chosen to focus on developing new assembly facilities in Vietnam and India.

Apple’s increasing interest in the supply chain from Vietnam is good news, demonstrating Vietnam’s efforts over the years to be on the world technology map, to become a “base of electronics production” for MNCs. That is an achievement, a spectacular shift by Vietnam in attracting quality FDI inflows, even though Vietnam can in fact do better and make better use of the pervasive value of this capital inflow.

However, it should be noted that Vietnam has been accepting projects at the low value-added stage of the global supply chain, assembly, in order to take advantage of low labor cost. Stages requiring higher added value are still not completed in Vietnam.

Domestic firms are struggling to become suppliers to foreign-invested companies. Because most domestic companies are small and lack competitiveness, foreign investors frequently bring their own satellites to Vietnam.

Conclusion

Vietnam is currently one of the safest destinations and offers the most favorable conditions for the world's high-tech giants to manufacture their products and related parts.

Apple’s story in Vietnam shows that the opportunity for the Southeast Asian country to receive large capital flows from MNCs is getting closer. Vietnam has the potential to become an important link in this global trade movement.

The ongoing trend of high-tech MNCs will also push Vietnam to work more on its domestic competitiveness by improving its level of manpower and infrastructure and creating a more favorable environment to achieve its goal. This also brings positive conditions for FDI enterprises at all levels. For more insights on FDI projects and trends in Vietnam, contact us now.

The Vietnam freight and logistics market is classified according to function (Freight Transport, Freight Forwarding, Warehousing, Value-added Services, and Other Functions) and end user (Manufacturing and Automotive, Oil and Gas, Mining and Quarrying, Agriculture, Fishing, and Forestry, Construction, Distributive Trade (Wholesale and Retail Segments - FMCG Included), and Other End Users (Telecommunications, Pharmaceuticals, etc.).

Market Overview

During the forecast period (2022-2027), the Vietnam freight and logistics market is predicted to grow at a CAGR of more than 5.5 percent. Vietnam is an emerging manufacturing powerhouse. As a result of China's trade war with the United States, Vietnam has welcomed firms looking to relocate manufacturing away from China. It received its largest annual influx of foreign direct investment (FDI) in 2019 and gained prominence as an alternative center when COVID-19 disrupted China's industrial systems and wreaked havoc on supply chains.

Aside from barriers and constraints, Vietnam's logistics industry benefits from free trade agreements and the rapid rise of e-commerce. The Vietnamese freight and logistics industry is being propelled by rapid economic growth, growing domestic production, expanding consumption, and brisk e-commerce. A lack of transportation infrastructure and high logistical costs are two market constraints. Contract logistics is one of the most prominent developments in the Vietnamese freight and logistics industry.

The country's growing e-commerce enables the creation of start-ups with match technologies that necessitate more efficient logistics services, notably in the last-mile delivery and value-added services sectors. Vietnam's logistics economy is becoming more liberalized, allowing new enterprises to capitalize on increased demand. Vietnam has also signed the Regional Comprehensive Economic Partnership Agreement. It expands the scope of its trade agreements to include practically all of the world's major economies. As a result, Vietnam is well positioned to serve as a global industrial and commercial hub.

Market Trends

High Economic Growth and Rising Consumption Lead to an Increase in Trade

Vietnam's economy is one of the fastest growing in the area, and the country has become a hub for investment and trade. Vietnam is a member of the ASEAN Economic Community (AEC) as well as the ASEAN Free Trade Area (AFTA). As part of AFTA, ASEAN countries (Brunei, the Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand, and Cambodia) are committed to making the region a competitive trade area. All of the country's industries are expanding rapidly and attracting international investment. Aside from that, the rise in consumption has resulted in an increase in the flow of goods into the country.

On December 29, 2021, the General Statistics Office issued socioeconomic statistics for 2021. As a result, despite the increase in COVID cases, GDP was predicted to improve favorably in 2021. In 2021, the industry's added value increased by 4.82 percent compared to 2020, with the processing and manufacturing industries expanding by 6.37 percent.

According to a survey, Vietnam's e-commerce sector would be the fastest-growing in Southeast Asia by 2026. Despite travel limitations and social isolation during the CVID-19 epidemic, e-commerce increased by roughly 18 percent.

Health Sector Requires Logistics Facilities

Vietnam has a thriving pharmaceutical market, with growing earnings among its rapidly aging population. As life expectancy rises, an increasing proportion of the Vietnamese population is expected to suffer from chronic illnesses associated with old age, which is expected to raise the demand for medicines. Despite the demand, domestic medication manufacturing is still in its infancy.

Greater demand for healthcare services, along with limited public government resources, creates potential for the Vietnamese healthcare business to expand. The European Union-Vietnam Free Trade Agreement (EVFTA) and the revised Investment Law will help international producers and suppliers looking to enter the Vietnamese market, which is still heavily reliant on imported medical equipment and medications.

Businesses Ultilize to 4.0 Technologies in Freight and Logistics

Many uses of science and technology in logistics activities have emerged as a result of the 4.0 revolution's rapid growth. Developed countries are currently gradually implementing E-Logistics, green logistics, E-Documents, etc., and applying cloud computing technology, Blockchain technology, artificial intelligence, or robotics to some implementations services, such as packing or unloading services, loading and unloading goods in warehouses and yards.

Currently, Vietnam's logistics service providers use technology at a minimal level in their company operations, mostly through electronic customs declaration software, vehicle locating technology, email, and rudimentary internet… However, over 80% of experts polled by the Vietnam Report believe that enterprises in Vietnam's transportation and logistics industry would steadily adopt and encourage technology research and application in logistical activities.

Rise of Online Purchasing Creates New Opportunities for Transportation and Logistics Companies

With 70% of Vietnam's population accessing the Internet, the average access time per person is roughly 28 hours per week, fostering a suitable environment for the e-commerce business to develop. The evolution of e-commerce has resulted in many consumers shifting to online purchasing and the creation of new business models for delivery service providers. To suit the demands of their customers, many e-commerce companies spend on developing technological platforms and logistical systems, expanding warehouses, and boosting distribution locations.

Invest heavily in warehouses, logistics hubs, and cold chains

With the dramatic development in the number of e-commerce firms, as well as the necessity to rent space to store, categorize items, and process orders, many businesses have recognized the trend, constructed, and invested to capitalize on it. Invest in a warehouse system, a logistics center with the duty of providing transportation services, fulfilling orders, and professionally distributing in a contemporary, high-quality manner. According to Cushman & Wakefield (C&W), one of the largest real estate service businesses, the cold storage industry in Vietnam has gained a strong attractiveness in the previous two years, driven by import and export orders. pharmaceuticals and vaccinations Food delivery and e-commerce are estimated to exceed $15 billion in revenue by 2025.

Vietnam's freight and logistics market has just experienced the Covid-19 wave, but there are still bright spots. Viettonkin is confident in its ability to be a top-notch expert in the Vietnam freight and logistics market. We are ready to advise you and keep you up to date on changing market trends as well as policies in this field. Contact us right now to increase exponentially!

A synchronously and modernly constructed infrastructure system will boost economic growth, increase productivity and efficiency, and contribute to the resolution of social issues. In many developing nations today, poor infrastructure has produced resource stagnation, difficulties in absorbing and deploying capital, and "infrastructure bottlenecks" that have a direct impact on economic growth.

Overview of the Construction Industry in Vietnam

Current Situation

The industry grew by 5.59% in the first six months of 2022, owing to the experience gained in 2020 and the good adaptation of enterprises, above the 4.54% growth rate in the same time in 2020. However, due to the fourth epidemic's extended impact and significant breakout, many communities were forced to implement social separation.

The majority of projects in remote areas had to halt building. Outside the exclusion zone, projects were also delayed owing to delays in the availability of materials and human resources. The expense of maintaining the apparatus, the cost of epidemic prevention, and the cost of deploying resources after the lockdowns… are the most evident economic losses. Over 20% of the projects/contracts were delayed or disrupted by the COVID-19 epidemic, according to 37.9% of firms polled by the Vietnam Report.

Aside from the intricate evolution of the pandemic, changes in raw material prices have proven a "nightmare" for building builders. Over the same time period, the price index for raw materials, gasoline, and building materials grew by 6.4%. The reason for this is that building material demand has grown but the supply chain has not been disrupted since 2020. Prices for steel and cement have risen by 40% and 8.4%, respectively. A rise in construction material prices has a direct impact on the cost of construction investment. Several industry analysts said that the "price storm" has wiped away any residual potential earnings, forcing many enterprises into losses.

According to the General Statistics Office, the overall industry's growth rate in 2021 will be 0.63%. This is a fairly low level when compared to the 10-year average growth rate of 7.2%. According to a Vietnam Report poll, 53.3% of firms in the industry are still growing in revenue. However, the growth rate is mostly below 25%.

In light of the industry's overall issues, this is a highly positive result. According to the majority of experts contacted by the Vietnam Report, the Government's pandemic adaptation policy is the most essential and decisive contributor to favorable business performance.

Difficulties of Business

Businesses are currently hesitant to work on government infrastructure projects. The pace of investment work in the first six months of 2022 is glacial. The fundamental objective reason for the delay is not the building companies' subjective fault.

Firstly, public investment projects such as highway projects and the operational unit price system are far too old and expose several flaws. The necessary regulations do not persist, while outdated regulations that do not reflect market conditions continue to exist.

Currently, public investment projects must use standard unit pricing (for costs, jobs, etc.). Provinces and cities, on the other hand, update and apply unit pricing of input materials. Budget money is required for public investment projects, but local authorities have curtailed or even kept a portion of their local budgets. As a result, they do not closely update pricing, and they are frequently lower than the actual market price, making it difficult for contractors.

Second, inflation has led raw material, fuel, and material input costs to skyrocket, causing transportation and logistics costs to skyrocket many times again. According to statistics from an Oil reporter, the price of diesel oil was just 12,640 VND/ liter at the beginning of 2021, but it rose to 17,570 VND/ liter by the end of 2021. The current price was 30,010 VND/liter, implying that the price of oil has climbed by around 140% from the start of 2021 and is now lower at 22,908 VND/liter, still a significant increase compared to 2021. Steel, sand, asphalt, cement, and other commodities have all seen significant price increases. As a result, the company won the offer but could not afford it.

Government Plans

Architect Le Viet Hai, a scientist with the Vietnam Construction Association (VCA), stated that collaboration with associations is required to develop an appropriate environment in the construction business. This is a prerequisite for developing a building industry ecosystem in Vietnam that achieves resonance and maximizes collaboration efficiency. Furthermore, the building sector needs the Government's and the State's attention and assistance.

VCA also recommended creating a national plan. In which policymakers identify opportunities, problems, critical tasks, and solutions to increase the overall competitiveness of the construction sector, therefore assisting the construction industry in exporting success.

The Vietnam Construction Contractors Association suggested that the Prime Minister assign the State Bank to offer recommendations on extra suitable objectives for construction finance in order to alleviate issues for member firms. Key initiatives in terms of supporting production, in particular, require increased attention.

In addition to credit and interest rate suggestions, the Vietnam Construction Contractors Association advocated wiping off all outstanding construction debts from prior years in order to permanently settle for contractors. At the same time, they requested that the Prime Minister appoint the Ministries of Planning and Investment and Construction to investigate sanctions requiring the investor to obtain a payment guarantee from a bank for 20% of the project's final payment to assure project completion.

Vietnam's transport ministry released a transportation infrastructure development plan that will cost between 43 billion USD and 65 billion USD between April 2021 and 2030. Three implementation solutions have been prepared by an industry research institute within the Ministry of Transport (MOT). Implementing the new PPP law in January 2021 is expected to play a critical role in completing major infrastructure projects. As a result, the MOT developed a plan to enhance the North-South railway infrastructure, which included the building of a dual-track broad-gauge line linking Hanoi and Ho Chi Minh City, two express railway sections, and modifications to the current railway.

In September 2021, the Vietnamese government approved the country's road construction plan for 2021-2030. The plan aims to build over 5,000 kilometers of expressways by 2030, up from 3,841 kilometers in 2021. Vietnam is to build 172 national highway networks totaling 29,795 kilometers by 2030, up from 5,474 kilometers in 2021. It also plans to build 3,034 kilometers of coastal roadways connecting 28 cities and provinces.

Prime Minister Pham Minh Chinh signed Decision No. 548/QD-TTg and established six inspection teams to handle concerns linked to public investment capital allocation. In particular, the government will adopt a number of radical measures to promote public investment in the second half of the year and next year. The frequency will be boosted with which material costs in areas are updated and maintaining project diaries to assure contractor payment.

The government is rushing to accelerate public investment distribution, most recently at the fourteenth meeting on August 15. According to the Deputy Prime Minister, the Government has submitted a medium-term public investment plan for the period 2021-2025 to the National Assembly. The Government has submitted to the National Assembly Standing Committee for comments before handing over the medium-term public investment plan (phase 3) of more than VND 100,000 billion.

To Sum Up ...

The construction market in Vietnam remains turbulent as a result of the Covid-19 pandemic. Viettonkin believes in its abilities and position in this field. We are ready to advise you and keep you up-to-date on changing market trends as well as government policies to promote the growth of infrastructure. Contact us right now to increase exponentially.