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English Version
August 2024 marks a period of significant economic progress for Vietnam. This Business News section highlights the country's robust growth, evolving market indicators, and strategic investments across various sectors. From record GDP figures to advancements in emerging industries, Vietnam continues to strengthen its position in the global economy. We explore key market trends, government initiatives, and major foreign investments shaping the nation's economic landscape.
I. Business News:
1. Market Outlook
Vietnamese GDP Hits 7-Quarter Peak in Q2
Vietnam's economy showed strong growth in Q2 2024, with GDP expanding 6.93% year-over-year, up from 5.87% in Q1. This marks the 11th consecutive quarter of growth and the strongest expansion since Q3 2022. The growth was driven by robust exports (12.5%), a thriving services sector (7.06%), and strong performance in industry and construction (8.29%). Agriculture continued to grow steadily at 3.34%. For the first half of 2024, the economy grew 6.42%, the second-highest level for this period since 2020. The government is targeting 6-6.5% growth for 2024, while the IMF projects 5.8%. To achieve these goals, the government plans to implement flexible policies, including cutting lending rates, lowering fees, and boosting public investment. However, they remain aware of potential external risks. This performance represents a significant improvement from 2023, when the economy grew 5.05%, falling short of the 6.5% target.
2. Vietnam Key Indicators
Vietnamese Manufacturing Expansion Slows to 3-month Low
Vietnam's manufacturing sector showed continued growth in August 2024, albeit at a slower pace than the previous month. The S&P Global Vietnam Manufacturing PMI decreased to 52.4 from July's 54.7, marking the softest expansion since May. While new orders and output growth moderated, purchasing activity increased at its fastest rate since May 2022. Employment fell for the first time in three months due to resignations and contract endings, leading to a rise in backlogs. Input prices increased because of higher material costs, though inflation eased to a four-month low. Output cost inflation also slowed amid competitive pressures. Suppliers' delivery times improved marginally despite international shipping delays. However, business sentiment declined for the second consecutive month, reaching a seven-month low.
Vietnam Inflation Rate Hits Lowest Point Since February
Vietnam's inflation rate dropped to 3.45% in August 2024, the lowest since January, down from 4.36% in July. This decline was broad-based, with slower price increases in food, housing, textiles, education, and drinks. Transport prices fell by 1.46%, reversing July's increase. Core inflation eased to 2.53%. The monthly CPI remained unchanged, compared to July's 0.48% rise.
Eight-Month Foreign Investment in Vietnam Rises by 8%
Foreign direct investment (FDI) in Vietnam showed robust growth in the first eight months of 2024, with actual FDI disbursements rising 8% year-on-year to USD 14.15 billion. FDI pledges, an indicator of future investments, increased by 7% to USD 20.52 billion compared to the same period last year. The manufacturing and processing sector attracted the largest share of pledged investments at 69%, followed by real estate at 16.4%. Singapore remained the top source of foreign investment pledges, followed by Japan, Hong Kong, Mainland China, and South Korea.
Vietnam Key Indicators' figures within a recent year
3. Government Direction & Public Infrastructure
Prime Minister Urges Swift Conclusion of Vietnam-UAE Comprehensive Economic Partnership Agreement Negotiations
Prime Minister Pham Minh Chinh urged the prompt conclusion of negotiations for the Comprehensive Economic Partnership Agreement (CEPA) between Vietnam and the UAE during a meeting with UAE Minister of State for Foreign Trade, Thani bin Ahmed Al Zeyoudi. Both sides emphasized their commitment to enhancing bilateral relations, particularly in areas such as economics, energy, Halal food production, and labor cooperation. The Prime Minister also proposed increasing high-level exchanges and encouraging investment to achieve the goal of $10 billion in bilateral trade.
World Bank Expert: Billions of USD Will Flow into Vietnam if Stock Market Upgraded
According to experts from the World Bank (WB), Vietnam's stock market has the potential to attract billions of USD from global investment funds if it is upgraded to emerging market status. Currently, Vietnam is still classified as a frontier market, which poses challenges for international investors. To achieve this upgrade, Vietnam needs to reform several areas, such as eliminating the requirement for pre-trade deposits, improving the supply of shares, and enhancing access to information. These changes will not only attract investment but also support the long-term development goals of the economy.
Investing Heavily in Infrastructure to Build Quang Ngai into a Logistics Center
Quang Ngai province is facing infrastructure connectivity challenges, particularly the interchange connecting the Da Nang - Quang Ngai expressway with the Dung Quat Economic Zone. This affects investment attraction and economic development. VEC (Vietnam Expressway Corporation) is seeking to resolve capital issues to complete this interchange. They propose to actively arrange capital for the project.
Quang Ngai plans to develop into a logistics center, leveraging advantages from Dung Quat deep-water port and Chu Lai airport. ACV (Airports Corporation of Vietnam) commits to upgrading Chu Lai airport. The State Capital Management Committee recommends Quang Ngai focus on developing integrated infrastructure and fully exploit the advantages of the deep-water port and airport to build a regional logistics center. Enterprises like Sovico Group express interest in investing in Quang Ngai, especially in aviation fuel and logistics development.
Northwest Da Nang: A New Growth Epicenter for the City
The Northwest region of Da Nang is undergoing rapid development to become a new growth epicenter for the city, aiming to be a center for high-tech industry and marine economy. Key projects include the Da Nang Hi-Tech Park, which has attracted 30 investment projects with a total capital of 1 billion USD, the Liên Chiểu Port with an investment of over 3.4 trillion VND, and the establishment of the Da Nang Free Trade Zone to leverage trade advantages and attract international corporations. These efforts aim to transform Northwest Da Nang into a "Silicon Valley" of Vietnam, boosting the economy, attracting investment, and becoming a key hub for high-tech and logistics services in Central Vietnam.
4. Potential Industries
Taiwanese Semiconductor Companies Seek Talent from Vietnam
From August 29 to 31, a delegation from Ho Chi Minh City met with semiconductor companies in Taiwan. Firms like Tekcore and Lincotec expressed interest in recruiting Vietnamese talent, offering average monthly salaries ranging from 23 to 31 million VND. They noted a constant shortage of semiconductor workforce in Taiwan and are seeking university graduates. Additionally, these companies encourage Vietnamese students to study semiconductor technology at Taiwanese universities, exemplified by Tekcore's collaboration with Da-Yeh University for training and staffing. The businesses typically partner with local universities for education and recruitment, while also working with human resource agencies to attract international talent, including from Vietnam.
Why Vietnamese Bananas Outranked Philippine Bananas in a Major Overseas Supermarket Chain
Vietnamese bananas have replaced Philippine bananas in Aeon supermarket chains in Japan and Hong Kong due to the adoption of a circular economy model that integrates banana farming with livestock and shrimp farming, utilizing waste as fertilizer. Aeon values environmental and sustainable development factors when selecting suppliers. Additionally, Vietnamese businesses are encouraged to enhance deep processing to increase the value of exported products.
Vietnam's Carbon Credit Market: Skilled Workforce Crucial for Growth
Vietnam's emerging carbon credit market is gaining momentum, with the country successfully transferring over 10 million carbon credits and generating more than $50 million in revenue last year. To capitalize on this potential, experts emphasize the critical need for developing a skilled workforce and establishing a robust legal framework. The government is actively working on regulations and initiatives to support the market's growth. However, challenges remain, including the need for specialized expertise in various areas such as emissions assessment, green finance, and regulatory frameworks. As Vietnam prepares to pilot a carbon credit trading platform next year, there is an urgent need to train approximately 150,000 professionals with in-depth knowledge of carbon credit mechanisms. Experts stress that prioritizing human resource development will be essential for the successful growth of Vietnam's carbon credit market, despite the challenges ahead.
5. Big FDIs companies News
Incheon Airport to Consult on Long Thanh Airport Management, Aiming for Smart and Green Airport Trends
On August 30, 2024, ACV signed a contract with Incheon Airport consortium for consulting on management and operation of Long Thanh Airport. The 5,000-hectare project in Dong Nai, implemented in 3 phases, has a total capacity of 100 million passengers/year. Four major packages are under construction, with the first flight expected on September 2, 2026. ACV emphasizes trends of smart airports integrating biometrics and AI, green airports reducing CO2 emissions, and increasing competition among international airports. Effective management is key to the project's success.
Google Considers Opening a Mega Data Center in Vietnam, Expected to Operate by 2027
Google is considering building a mega-scale data center near Ho Chi Minh City, Vietnam. This could be the first investment from a major U.S. tech company in Vietnam. The center is expected to be operational by 2027 if approved. This decision is driven by the large number of cloud service customers in Vietnam and the rapid development of its digital economy.
Currently, the leading data center operators in Vietnam are state-owned enterprises. Vietnam has recently relaxed regulations, allowing foreign operators to fully own data centers. Google is expanding its operations in Vietnam, including hiring staff and providing AI scholarships.
Airbus Aircraft Emergency Exit Doors Manufactured in Vietnam
Airbus has launched a new project in Vietnam to manufacture emergency exit doors for its A321neo aircraft. The project is being carried out by MHI Vietnam, a subsidiary of Mitsubishi Heavy Industries, in Hanoi. This initiative is expected to benefit Vietnam's aviation industry by creating high-skilled jobs and developing workers' skills. The doors are made using advanced 3D Product Lifecycle Management software and materials like corrosion-resistant steel, titanium, and aluminum. Airbus has sent experts from France and Germany to train Vietnamese workers. This move not only enhances Airbus's production capacity but also contributes to Vietnam's economic development and positions the country as an important player in Asia's growing aviation market.
Grab Vietnam Wishes to Collaborate with Thừa Thiên Huế Province in Digital Transformation Development
During a meeting with the Grab Vietnam delegation, Thừa Thiên Huế Province's Vice Chairman Hoang Hai Minh acknowledged Grab's proposals for digital transformation cooperation. Grab Vietnam's CEO Alejandro Osorio expressed admiration for the province's digital transformation efforts and desire to cooperate in transportation, tourism promotion, and improving digital skills for locals. Mr. Minh appreciated these ideas, considering them aligned with the province's development goals. He suggested creating a specific roadmap, ensuring legal compliance, and invited Grab to establish a branch in Thừa Thiên Huế, focusing on building a civilized and friendly image for Grab Huế while promoting green and safe transportation.
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II. Legal Updates
August 2024 has been a significant month for legal developments in Vietnam, with several important updates and draft laws emerging across various sectors. This section of our monthly report highlights key legal changes and proposed legislation that reflect the country's ongoing efforts to modernize its regulatory framework. From transportation and telecommunications to securities and digital technology, these updates demonstrate Vietnam's commitment to adapting its legal landscape to current economic and technological challenges.
Law on Road:
The Law on Road (LOR), approved by the National Assembly on June 22, 2024, will come into effect on January 1, 2025, replacing the existing Law on Road Transportation. This law establishes a comprehensive framework for the management, development, operation, and maintenance of road infrastructure, including highways, and governs activities related to road transportation.
Circular on Telecommunications Wholesale Activities:
On July 10, 2024, the Ministry of Information and Communications (MOIT) issued Circular No. 08/2024/TT-BTTT, which outlines detailed regulations on telecommunications wholesale activities. The circular, effective from August 23, 2024, requires telecommunications enterprises engaged in wholesale operations to set and publicize their prices, technical standards, network and service quality, and terms of service provision and usage. Enterprises holding dominant market positions must also prepare and publish a standard wholesale agreement template. This requirement does not apply to other telecommunications companies unless the seller and buyer are unable to reach an agreement on wholesale terms. Additionally, the circular specifies mandatory provisions for template agreements and other wholesale agreements.
Draft Decree on Sanctioning Administrative Violations in Planning and Investment Activities:
On August 20, 2024, the Government circulated a draft decree addressing sanctions for administrative violations in the planning and investment sectors. This draft introduces several amendments to fines and remedies for such violations. Notably, it proposes reducing the liability cap for planning-related violations from VND500,000,000 to VND100,000,000.
Draft Law Amending the Law on Securities:
The Ministry of Finance (MOF) has released a draft law aimed at amending and supplementing various articles of the current Law on Securities, alongside other laws, for public consultation. Among the proposed changes are stricter conditions and rules for professional securities investors, enhanced regulations on market manipulation, prohibited insider activities, public offerings of securities and bonds, cancellation of public offerings, private placements, and the registration of public companies.
Draft Law Amending the Law on Tax Administration:
According to a draft law amending several articles of the existing Law on Tax Administration, recently issued by the MOF, all foreign-domiciled merchants conducting business on digital platforms, e-commerce platforms, and related services, regardless of whether they have a permanent establishment in Vietnam, must declare and pay income tax through the General Department of Tax’s online portal.
Draft Law on Digital Technology Industry:
This Draft represents Vietnam’s efforts to modernize its legal framework to keep pace with the rapid developments digital tech industry. Technologies like the Internet of Things (IoT) are reshaping industries by facilitating communication among machines, objects, and people, which the IT Law does not sufficiently address. The Draft DTI Law, introduced in July 2024, aims to remedy this gap by establishing new regulations for the digital economy.
Key Features the Draft:
Definition of Digital Technology and Digital Business Activities:
The Draft DTI Law defines digital technology broadly, covering a range of emerging technologies such as artificial intelligence (AI), big data, cloud computing, IoT, blockchain, and virtual/augmented reality. These technologies are seen as central to digitizing real-world environments and transforming industries.
Digital business activities are classified into two main categories:
- Production of Digital Products: This includes research, development, design, testing, and production of hardware, software, digital content, and other new digital technologies.
- Supply of Digital Services: These services encompass consulting, distribution, training, repair, and maintenance related to Digital Products, facilitating the digital transformation across industries.
Recognition of Crypto Assets
A significant aspect of the Draft DTI Law is the introduction of crypto assets (tài sản mã hóa). While crypto assets have not yet been officially recognized as legal tender or a means of payment in Vietnam, the law envisions individuals and organizations holding ownership rights over crypto assets under civil and intellectual property laws. Crypto assets are defined as electronic records authenticated through distributed ledger or blockchain technology. However, the law lacks specific regulations on crypto-related transactions, leaving these activities subject to existing regulations for movable or intangible assets until further government directives are issued.
Semiconductor Industry
The Draft DTI Law also addresses Vietnam’s semiconductor industry, which includes activities such as research and development, semiconductor material production, and the design, installation, and packaging of semiconductor devices. Recognizing the strategic importance of semiconductors in global technology supply chains, this law seeks to incentivize growth and investment in this sector. Semiconductor-related activities are considered critical for developing Vietnam's digital technology infrastructure.
Investment Incentives
The Draft DTI Law outlines a range of investment incentives aimed at promoting enterprises engaged in the production of Digital Products or provision of Digital Services. These incentives include preferential treatment related to corporate income tax, import tax, and land rental. Special incentives are granted to companies involved in the semiconductor industry (excluding material production), as well as those focusing on digital technology and AI projects. For startups in the digital and semiconductor sectors, the law proposes a five-year exemption from capital transfer taxes for individuals or entities transferring shares or capital before an initial public offering (IPO).
The legal updates and draft laws presented in this August 2024 report underscore Vietnam's proactive approach to regulatory reform. These developments, spanning road infrastructure, telecommunications, securities, taxation, and the burgeoning digital technology industry, signal important shifts in the country's legal environment. As these proposed changes move through the legislative process, they have the potential to significantly impact businesses, investors, and citizens. Stakeholders should closely monitor these developments in the coming months, as they are likely to shape Vietnam's economic and technological landscape in the near future.
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