Vietnam, with timely and effective support from the Government in controlling Covid-19, does not face significant disadvantages compared to other countries, but still has some changes related to Business Operations. Thus, in this article, we will provide you with the latest update on Vietnam’s pandemic controlling results, some emerging trends impacting the Vietnam business operation, and legal changes.
Overview of Vietnam’s Covid-19 controlling results (Until Jan 2021)
- Vietnam has controlled the epidemic well, created favourable conditions for recovery and development of socio-economic activities. According to the World Health Organization, Vietnam is among the few countries with good disease control and has had a right, timely, effective and low-cost way.
- As of December 29, Vietnam’s Ministry of Health confirmed a total of 1,451 cases of COVID-19. However, 1,318 of the affected patients have recovered and been discharged from hospitals, 35 deaths till now.
- Three of the confirmed cases are attributed to illegal entering with health authorities contract tracing and quarantining all F1 and F2 contacts.
- Vietnam has agreed to allow South Korean business travelers to fly between both countries without completing the 14-day quarantine. The agreement is expected to take effect on January 1, 2021, though details are yet to be finalized.
- The macroeconomy remains stable; inflation is controlled, great balances are guaranteed; achieved a positive growth rate in the context of a severe global economic recession. The annual growth rate (GDP rate) is estimated at over 2%, striving to reach about 3%. This makes Vietnam the highest positive growth rate country compared to 5 major economies in Southeast Asia, is in the top 16 most successful emerging economies in the world
- Agriculture affirms its role as the pillar of the economy in difficult times. Growth for the whole year is estimated at 2.6% (higher than the 2.01% in 2019). The agricultural sector is restructured more practically and efficiently, especially rice production to increase both productivities, output, and selling price, and firmly ensure national food security.
- The industrial sector faces many difficulties but still achieved a growth rate of 2.5%. The structure of the internal industry continued to change positively; the proportion of processing and manufacturing industries increased, including electronics, pharmaceuticals, medical supplies, food processing, chemicals, wood processing …
- Institutional improvement, administrative reform, e-Government development, towards digital Government and digital economy has been focused and implemented drastically, achieving many positive results.
- Foreign affairs and international integration have achieved many important achievements. The position and prestige of Vietnam in the international arena has been increasingly enhanced.
Major trends impacting the Vietnam business operation post-Covid
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The results from trusted reports show that although the pandemic has had a serious impact on many industries, the impact on the financial services industry is still quite limited. There are seven main trends affecting the Business Operations post-Covid-19, which are:
- Low interest rates will continue to have a strong impact on margins and business operation models.
- The pandemic recession and the decline in asset value will impair risk tolerance for state-managed sectors to support the economy as it enters the recovery phase in the next year.
- Non-traditional funding agencies will play an important role in the global financial system.
- The Covid-19 pandemic will not delay, but may even promote the implementation of existing or planned regulatory measures in many countries and regions.
- The reversal of globalization will continue to adjust the size of financial institutions relative to the GDP growth of the host country, while maintaining production and exports. Going abroad will increase business operational risks across the industry.
- Companies are constantly facing the pressure to increase productivity through the digitization of business operations and workforce.
- To meet customer needs, the shift of the financial services industry to operating on platforms and ecosystems will create a new wave, reduce intermediaries and create breakthroughs.
*Source: Viettonkin Research Team
Legal highlights latest updates 2021
- Vietnam’s National Assembly passed the revised Law on Enterprises, and the Law on Investment aimed to make doing business in Vietnam less cumbersome.
- Both laws will take effect on January 1, 2021, and are timely given the passage of the new free trade agreements such as the EVFTA and the CPTPP.
- While the government is likely to issue forthcoming circulars and decrees on implementation, Vietnam Briefing highlights the main points on the revised laws.
Changes to the Law on Enterprises 2021
|The new definition of SOE||Enterprises with more than 50 per cent of the charter capital owned by the State will be considered SOEs as compared to the current ratio of 100 percent. Article 88 of the Law on Enterprises also divides types of SOE according to the different levels of ownership.|
|Protection for minority shareholders||The revised law removes the requirement that a shareholder or a group of shareholders must hold ordinary shares for at least six consecutive months to exercise the rights of shareholders. Moreover, shareholder(s) that own five per cent or more of common shares have the following rights:Review, search, and extract the minutes’ books and resolution, decisions of the Board of Directors, financial statements, except documents related to trade and business secrets;Request a convening of a general meeting of shareholders in some specific cases; andRequest the Supervisory Board to examine each specific issue related to management and administration when deeming it necessary.|
|Private companies can be converted into limited liability companies, joint-stock companies, and partnerships||The Law on Enterprise 2020 has many regulations directly affecting M&A, such as allowing private enterprises to transform into joint-stock companies, instead of only allowing them to be converted into limited liability companies as stipulated in the current Enterprise Law. This regulation will help increase opportunities and more favourable for small and medium enterprises to participate in the M&A process.|
Changes to the Law on Investment 2021
|Conditional business lines||Among the new changes, the law makes amendments to the list of sectors and business lines requiring conditional market access. Conditional market access is business lines in which the investment must satisfy specific statutory conditions in order to gain market access. Especially, the amended law outlaw’s debt collection services, while abolishing or reducing conditions for 22 business lines, such as commercial arbitration, and franchising and logistics services.|
|The list that is subject to conditional market access||Tobacco detoxification provision services;HIV/AIDS treatment;Elderly care;Water sanitization;Architectural services;Import press distribution services;Electronic identification and authentication services;Fishing vessel registration; andFishing vessel crew training, among others.The law also contemplates a list of business lines restricted to foreign investment. The NA Standing Committee has emphasized the need to balance national security and investment attraction for socio-economic development, especially for coastal and remote areas.|
|Incentives and investment support||To ensure the quality of foreign investment, the amended law includes specific conditions for sectors that are entitled to investment incentives. These include:Innovation-related sectors such as Information Technology (IT), R&D, digital content, hi-tech, new and clean energy, and production of intermediate goods participating in value chains and industry clusters, among others;To ensure the effectiveness of incentive schemes, maintaining incentives is conditional to the performance of the previous support package. More specifically, the government would set a definite term for incentives and would extend or scrap it in accordance with the outcome of the incentive;The Prime Minister can apply special incentives to create a favourable mechanism and policies to attract FDI inflows. Notably, the law allows a maximum discount rate of more than 50 per cent compared to the highest level prescribed by the current law; andThe law also provides special incentives for projects with an investment capital of over VND 3 trillion (USD 128.4 million), and VND 10 trillion (USD 428 million), with certain conditions.|
|Investment procedures||The law removes the need for a Merger and Acquisition (M&A) approval if the transaction does not result in an increase of foreign investors’ ownership ratio in the target company. M&A transactions that result in an increase of foreign investors’ ownership ratio in the target company, and exceed the 50 per cent of shares or charter capital would be subject to an M&A approval.|
In addition, projects with an investment capital of VND 10 trillion (US$428 million) will not be required approval from the Prime Minister.
Changes to the Law on Public-private partnership (PPP)
- Vietnam’s new public-private partnership (PPP) law aims to attract more private and foreign investment by clarifying the existing legal framework.
- The changes introduced are in response to growing demands for investment, especially in the infrastructure sector.
- Though some uncertainties remain, the government has demonstrated its willingness to make Vietnam a favourable business environment.
To sum up, thanks to the Government’s well control of Covid-19, Vietnam is one of the few countries that have been less affected by the pandemic and is believed to continue to grow in 2021 while the rest of the world is projected to fall into a crisis. If you want to start your business in Vietnam and come across any challenges of doing business in Vietnam, do not hesitate to contact us – the top consulting firms in Vietnam, Viettonkin is always ready to assist you !