Vietnam is attracting foreign investors, leading to a significant surge in FDI

Published at 14 Nov 2023

Foreign direct investment (FDI) in Vietnam is experiencing a surge as the country becomes increasingly attractive to foreign investors. According to M&A experts, investors from Europe, Japan, the U.K., and the U.S. are eager to enter the Vietnamese market.

Vietnam's political stability, growing consumer spending, and competitive wages are among the factors drawing the attention of European and American investors.

According to the agency, the major investment destinations in the country this year include Ho Chi Minh City, Hai Phong, Quang Ninh, Bac Giang, Hanoi, Bac Ninh, Binh Duong, and Dong Nai.

In the first 10 months of 2023, FDI reached $25.7 billion, a 14.7% increase compared to the previous year. Key sectors of interest for international investors include food, consumer goods manufacturing, retail, education, non-bank financial technology, and logistics.

This year, significant M&A deals have taken place with the participation of investors from Japan and the U.S. One notable transaction involved Sumitomo Mitsui Banking Corporation acquiring a 15% stake in VPBank through a private placement, valued at US$1.5 billion. Additionally, KKR Global Impact invested US$120 million in EQuest.

To further attract FDI, policymakers are advised to simplify the divestment process and improve regulations. The average duration of M&A transactions in Vietnam is nine months, and companies planning to sell are recommended to engage consultants at least a year in advance to identify potential buyers and negotiate prices.

"When putting money in, investors consider how they can withdraw it [later]. Company registration and acquisition are already convenient in Vietnam, but the divestment process needs to be improved and made simpler to attract investors."

Source: tradingeconomics.com

VCCI: Businesses suffer losses due to numerous invoice and document regulations.

13/11/2023

Businesses at a disadvantage due to numerous invoice and document regulations, according to VCCI.

Providing feedback on the Ministry of Finance's draft decree regarding invoice and document regulations, the Vietnam Chamber of Commerce and Industry (VCCI) has identified several points that are disadvantageous for businesses.

According to the draft, retail businesses and food service establishments in chains are not allowed to issue invoices at the end of the day but must issue them for each purchase from a cash register connected to the tax authorities' data system. Feedback from businesses indicates that this regulation increases costs significantly in terms of initial investments and system maintenance. The VCCI emphasizes that this requirement places significant pressure on certain industry sectors.

The regulation on submitting taxi invoice data to tax authorities after each trip also poses challenges in practice. The costs of software upgrades for taxi companies increase, and drivers may forget or face difficulties in handling data, leading to traffic congestion. Businesses may also face penalties for submitting data at the wrong time.

Therefore, the VCCI suggests that the Ministry of Finance reconsider and evaluate the cost-benefit impact of these regulations, with possible amendments to facilitate business operations.

Regarding commercial discount invoices, the draft stipulates that an adjusting invoice should be issued after the end of a discount program. However, businesses argue that this creates a significant workload as each adjusting invoice only applies to one invoice, while businesses may have multiple products and various promotional programs (each program applying to different products).
This significantly increases the volume of invoices, resulting in costs and resource allocation for businesses. If allowing multiple invoices to be adjusted by one adjusting invoice, listing the details on the discount invoice also burdens businesses, depending on whether the system can handle it.

In many cases, businesses can only identify customers who meet the conditions at the end of the program, while invoices can occur in multiple declaration periods, requiring constant adjustment of VAT declarations. This creates discrepancies between accounting records and tax declarations, causing difficulties in control, especially for businesses subject to financial reporting disclosure.
Therefore, the VCCI suggests that the Ministry of Finance consider adding a principle that allows businesses to issue a discount invoice (not an adjusting invoice) along with an accompanying statement.

Furthermore, the VCCI also recommends that the drafting agency remove the requirement for domestic invoices for temporary import, re-export, consignment, and returnable goods, as well as goods provided under loan, borrowing, and return arrangements. This aims to reduce administrative procedures and costs for businesses.

The expected increase in industrial land rental prices is 6-10% per year

16/10/2023

The industrial land rental prices are expected to increase by 6-10% per year in the northern region and 4-8% per year in the southern region. The optimistic demand from various industries and nationalities renting properties contributes to the growth of rental prices in localities.

According to many experts, the industrial real estate market continues to observe positive developments in the third quarter of 2023.

Information from CBRE Vietnam reveals that, despite the northern region experiencing a slight decline, with an average occupancy rate of industrial parks in the first-tier market reaching 80.2% in the third quarter of 2023, a decrease of 2.4 percentage points compared to the second quarter but an increase of 0.4 percentage points year-on-year. This decline in occupancy rate is attributed to the operation of new industrial parks in Bac Ninh and Hung Yen, leading to an additional supply of 597 hectares of industrial land.

Regarding demand, the market has witnessed significant transactions from tenants in the plastic manufacturing, textile, and eyeglass industries. Accordingly, the absorption rate of industrial land in the first-tier market reached 251 hectares in the quarter. Thus, in the first nine months of 2023, the absorption rate exceeded 700 hectares, which is more than 18% higher than the absorption rate for the entire year of 2022. Furthermore, industrial land rental prices continue to increase due to optimistic demand. Specifically, in the recent third quarter, the average rental price for the first-tier market in the northern region reached $131 USD/m2/lease term, representing a 2% quarterly increase and a 12% annual increase.

Similarly, the industrial market in the southern region has an average occupancy rate of industrial parks reaching 81.9%. The absorption rate of industrial land in the third quarter exceeded 190 hectares, a 5.9% increase compared to the previous quarter. In total, for the first nine months of 2023, the absorption rate reached over 770 hectares, nearly equal to the absorption rate for the entire year of 2022. The average rental price for the first-tier market in the southern region reached $189 USD/m2/lease term, showing a slight 1% increase compared to the previous quarter and a 13% increase from the same period last year. The market has witnessed significant transactions from Chinese and Japanese enterprises in various industries such as mechanical engineering, chemicals, plastics, rubber, and electronics.

CBRE statistics also show that in the first nine months of the year, the northern and southern markets recorded 752,000 m2 of newly operational warehouses and 450,000 m2 of newly operational ready-built factories. In the northern market, the average rental price for warehouses is around $4.6 USD/m2/month, while for factories, it is around $4.8 USD/m2/month. The occupancy rate of ready-built factory projects in the first-tier market reached 82.9%, an increase of 4.7 percentage points compared to the previous quarter.

As for the southern market, with abundant new supply, relatively stable rental prices for warehouses and ready-built factories were observed, with an average rental price of $4.5 USD/m2/month for warehouses and $4.9 USD/m2/month for factories. The occupancy rate for ready-built warehouses reached 56%, a decrease of 15 percentage points compared to the second quarter and 13 percentage points compared to the same period last year. Meanwhile, the occupancy rate for ready-built factories remained at a good level, reaching 91%, an increase of 1 percentage point compared to the second quarter.

Banks are pouring a significant amount of capital into real estate investors

Written on 12 Oct 2023

Credit flows into the real estate business have exceeded the annual growth rate of last year in the first seven months, amidst the situation where the bond market has "frozen" and the real estate sector is struggling with financial difficulties.

According to the data from the State Bank of Vietnam, the total outstanding loans for real estate reached approximately 2.7 quadrillion Vietnamese dong by the end of July, only a 5% increase compared to the beginning of the year, due to a sharp decline in demand for home and land loans. This debt balance accounted for 21% of the total credit in the economy.

In reality, credit flowing into the real estate sector consists of two components: consumer real estate loans and business real estate loans (focused on financing project investors, aiming to increase the supply in the market). Among them, the banking sector mainly disburses funds for consumer needs, such as home and land loans (accounting for 65% of total credit in the real estate sector). As of the end of July, the outstanding loans for home and land purchases decreased by 1.36% compared to the beginning of the year, reflecting the sluggish real estate market. Last year, outstanding loans for home and land purchases, as well as apartments, increased by a significant 31%.

While consumer demand for real estate has declined, banks have increased lending for real estate business, particularly focusing on the market supply by providing loans to project investors.

Data from the State Bank of Vietnam shows that the outstanding loans for real estate business reached 980 trillion Vietnamese dong by the end of July, a nearly 19% increase compared to the beginning of the year, surpassing the annual growth rate of the previous year (10.7%, equivalent to 100 trillion dong). Therefore, in the first seven months, over 150 trillion dong of banking capital flowed into the real estate business segment, accounting for nearly 30% of the total capital supplied to the economy.

The State Bank of Vietnam believes that these figures indicate that credit capital is concentrating on the supply side of the market, while the demand for credit to purchase consumer real estate for personal use is declining. This trend suggests that the legal difficulties of real estate projects are gradually being resolved, contributing to increasing the accessibility of credit for investors.

The bank increases lending to real estate investors in the context of the "frozen" bond market, as many businesses face difficulties due to poor market demand and struggle to manage their finances to repay their debts to bondholders.

According to the leadership of a bank, the sluggish corporate bond channel is one of the reasons that has led the real estate industry to turn to banks for capital in recent times. However, overall credit flow into the real estate sector in the first 7 months of the year remains relatively low due to a decrease in consumer demand.

The State Bank also stated that the non-performing loan ratio in the real estate sector is tending to increase. The non-performing loan ratio in the real estate sector at the end of July was 2.58%, significantly higher than the 1.8% recorded at the end of July last year.

In addition to real estate, according to the regulatory agency, credit flowing into other sectors in the first 7 months of the year reached approximately 9.75 quadrillion Vietnamese dong, also increasing at a low rate of 4.4% compared to the beginning of the year. This increase was mainly due to production and business activities and loans for personal use.

Small and medium-sized enterprises that have a need for borrowing face challenges in meeting business plan requirements, lack of financial transparency, and limited operational capacity. These factors make them categorized as high-risk customers.

Saigonese like to meet friends at Beer Restaurant

If you go to visit Ho Chi Minh city (commonly called as Saigon), you can easily spot a beer restaurant with lots of customers at night. The Saigonese, especially men, often goes to beer restaurant in order to meet up friends.

Vietnamese often make appointments with friends at cafes or beer bars. Therefore, there are numerous cafes and beer bars that have sprouted up. These are two common and highly competitive types of businesses in Vietnam, especially in Saigon, the most populous city in Vietnam.

A typical night out for the Vietnamese people is having food and drinking coffee, milk tea, or beer. In Saigon, out for the night means the same thing. Vietnamese drinking culture will always be about toasting beer. For liquor, wine, and cocktails, it’s a different story.

"Nhậu" serves as a unifying force that brings people together.

In Saigon, the drinking culture transcends social classes. Whether it's employers, businesspeople, or laborers, they all find solace in the act of "drinking to the wharf." It doesn't take much to create a memorable drinking gathering - a few simple dishes, a small hotpot, or any type of food that can fend off boredom and foster an all-night drinking party. The people of Saigon possess a distinct personality that eschews extravagance and focuses on simply enjoying life. On their tables, what matters most is the affection, hospitality, and camaraderie shared, rather than the pomp and grandeur of the food and beverages.

During these drinking sessions, people often find the courage to express themselves more freely, unveiling aspects they would not typically reveal. The atmosphere and alcohol lend a hand in opening up, instilling bravery, and infusing a sense of humor. If you find yourself hesitant to confess your love to someone, invite them to "nhậu," and the rest will naturally fall into place.

Where you could find a place to “Nhau”?

Well-known as a sleepless city, you will be overwhelmed with beer-pubs spreading from small alleys to the big roads. Thus, the people of this lively city usually welcome friends with greeting questions at the drinking table. The culture of drinking in Saigon is outstanding and lively just like the people here. Saigon people also do not bind themselves with any standard on the drinking table. They can drink at any places, but more preferable is the spacious garden space with a simple scene. This is somehow different from the aesthetic lifestyle and sophistication of the North of Viet Nam.

There are some places you can “NHẬU” with your friends:

• Leng Keng Zone: 131 Xô Viết Nghệ Tĩnh, Ward 17, Bình Thạnh District;
• Con Bò Cười: 449 Nguyễn Thị Thập, Ward Tân Phong, District 7;
• Những người bạn: 14 Phan Văn Trị, Ward 07, Gò Vấp District;

• Ngã ba sông: 12 Nguyễn Hữu Cảnh, Bình Thạnh District;
• Xiên Khè quán: 117 Trần Khắc Chân, District 1;
• Nướng ngói 133: 86 Nguyễn Văn Khối, Ward 11, Gò Vấp District;

Or you can go along the Nhieu Loc canal, every street or alley around are hundreds of local diners with good price food and beers, you could find a place to Nhau with your friends

FDI enterprises continue to dominate exports to the EU

Tuesday, 10 Oct 2023, 07:03 (GMT+7)

After 3 years of the effective implementation of the Vietnam-EU Free Trade Agreement (EVFTA), Vietnamese businesses still mainly export raw goods to Europe, giving way to FDI enterprises. This is one of the limitations highlighted by the government in its report on the implementation of the Vietnam-EU Free Trade Agreement (EVFTA) recently submitted to the National Assembly.

Sell Over 1000 Illegal Gas Cylinder Everday

18/05/2012

Regarding to the case of illegal gas the Dong Nai province police catched red-handed, the investigation police determined the Việt company Ltd. and Xuân Hằng facility have provided to the market everyday with 1.000 - 1.200 gas cylinders by illegal extraction.

This illegal gas mainly provided to agents or companies in Dong Nai, Binh Duong provinces and Thu Duc district (HCM city).

Doan Trong Tha, head of the legal department of Vietnam Gas Association, illegal gas extraction is an uncontrollable problem. Some shops store petroleum of unknown origin in cylinders from well-known brands to trick customers. In other cases, the shops save money by using empty cylinders from other brands, sanding and modifying the cylinders for their own use and this poses a huge fire risk.