Weekly Vietnam Economy News (18 – 24/9, 2020)
Vietnam’s attractiveness in foreign investment cooperation
Vietnam is currently home to 32,000 foreign direct investment (FDI) projects with a total registered capital of US$378 billion from 136 countries and territories.
The corporate income tax rate in Vietnam is also among the lowest in Southeast Asia and the businesses in the industrial zones enjoy tax and visa incentives.
As shown in the Foreign Investment Agency’s statistics, foreign direct investment (FDI) inflow in Viet Nam reached US$19.54 billion in the first eight months of 2020, equivalent to 86.3% of the figure from the same period last year, with disbursement estimated at US$11.35 billion, equal to 94.9%.
Tech startups stay safe bet in ASEAN
Despite market gyrations, Southeast Asia and Vietnam especially remain on the radar of high-caliber foreign investors.
According to the latest report by Singapore-based venture capital firm Cento Ventures, Southeast Asian tech startups raised $5.6 billion in the first half of 2020, down 13 percent from the year earlier. This is less steep than the 16 percent drop in India and the 21 percent decline in the European Union.
Vietnamese e-commerce platform Tiki reportedly raises US$130M in funding led by Northstar Group
Vietnam has the third-largest population in the region and has a sizeable and young consumer base with growing disposable income – 70 percent of the population is under 35 years of age and its emerging middle class is expected to reach 26 percent of the population by 2026.
Today, only Indonesia, Singapore, and Vietnam in ASEAN are home to companies valued at over $ 500 million, such as VNG, VNPay, and Tiki. Vietnam has leaped from the second inactive tech startup ecosystem to the third largest in ASEAN from 2017 to 2019.
Despite the COVID pandemic, investment flows into Vietnam’s startups were still impressive, retaining its fourth position with $166 million in the first half of 2020.
Vietnam ranks second on M&A potential list
Vietnam is ranked second after the US in the list of the most potential, dynamic and potential markets in the world for mergers and acquisitions (M&A) this year.
Hanoi – Vietnam is ranked second after the US in the list of the most potential, dynamic and potential markets in the world for mergers and acquisitions (M&A) this year.
According to the latest M&A Investment Index compiled by research firm Euromonitor, Vietnam’s standing had increased from last year.
Vietnam is classified as a group of countries with positive M&A prospects along with China, the Philippines, Taiwan, and Saudi Arabia.
Euromonitor forecasts that Vietnam will maintain its position in the top 20 countries with the highest investment M&A index in 2021.
According to the report, Vietnam is also among the top 5 markets with the fastest growth in M&A in the world.
Most economic, financial indicators prove Vietnam’s resilience amid COVID-19
Almost economic and financial indicators continue to demonstrate Vietnam’s resilience, according to the Vietnam Macro Monitoring report for September of the World Bank (WB).
The report said that the COVID-19 outbreak in Da Nang has been brought under control by the local authorities, which restricted mobility in a targeted manner and increased other mitigating measures. This targeted approach has affected the economy less than the April nation-wide lockdown, it said.
The report cited statistics of the General Statistics Office (GSO) that showed in the first eight months of the year, budget revenues reached 58.3 percent of estimated collections – down 12.4 percent year on year – due to the economic slowdown and deferred taxes for businesses and individuals designed to support economic recovery. Concurrently, public expenditure was 8.2 percent higher than during the same period in 2019, reflecting fiscal accommodations to support economic recovery.
In line with the objective to accelerate the execution of the public investment program, capital expenditure increased to 221.7 trillion VND in the first eight months of 2020, up 41.4 percent compared to the same period in 2019.
In August, Vietnam’s export performance still remained, growing 1.42% month on month, but FDI inflows moderated significantly as they reached about 720 million USD in August compared to 3.1 billion USD in July. Overall, Vietnam received 19.5 billion USD in FDI during the first eight months of 2020, a 14 percent decline compared to the same period in 2019.
Inflation remained subdued at 3.2 percent year on year in August, slightly lower than in recent months due to the stability of food prices. Credit growth continued to moderate at 9.4 percent year on year in July, reflecting the decline in economic activity despite the State Bank of Vietnam (SBV)’s policy of reducing interest rates and encouraging commercial credit.
11 areas are proposed to be restricted to foreign investors
While it will be easier for foreign investors to access many sectors, they will be banned in some sensitive sectors.
The Ministry of Planning and Investment’s Department of Legislation has just proposed the list of the 11 sectors that foreign investors are not allowed to join to the minister for approval. Once the proposal is approved, the draft will be released for public comment. The 11 sectors are:
- Trading items and services exclusive to the state;
- Media and collecting news/information in any way;
- Fishing and seafood exploitation;
- Services related to securities;
- Judicial administrative services like judicial assessment, property auction, notary services, and acting as trustees;
- Taking employees to work overseas;
- Operation of cemetery and park cemetery;
- Polling services;
- Use of explosives in mining;
- Inspection and certification of means of transport;
- Importing and scrapping used ships.
In addition to the 11 prohibited sectors, up to 40 sectors will have business conditions for foreign investors, with almost no change compared to the current conditional business lines.
Compiled from many sources by LOOKOFFICE
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