Vietnam
Mr Thuy Nguyen

Thuy Nguyen

By Thuy Nguyen, LNT & Partners

Covid-19’s impact on Vietnam’s economy

Covid-19 began infecting China in the latter half of December 2019. As of March 11, 2020, it spread to over 114 international jurisdictions. In Vietnam, the virus had been thought contained, but on Monday, March 9, 13 new cases appeared on a single flight to Hanoi arriving from the UK. The Government has refrained from detailing specific consequences from the disease, but it has caused severe economic damage to Vietnam in various aspects.

From early February 2020, China restricted shipping between Vietnam and China to avoid the disease’s expansion. This froze the supply chain from China to Vietnam which adversely affected many key industries, eg, textiles, electronics, and logistics.

Also, offshore demand for Vietnam’s agricultural products and tourism inflows have dropped significantly. This has not only affected those industries directly but also Vietnam’s burgeoning aviation industry.

Inside Vietnam, schools and education centres have stopped their operations, rent prices for commercial areas in Hanoi and Ho Chi Minh Cities have dropped on slack demand. Online alternatives to education and other events have only offered marginal solutions and are applied as the exception, not the rule.

The government’s action plan

To remedy the economic impacts of Covid-19 and support the country’s anticipated growth after the crises abates, Prime Minister Nguyen Xuan Phuc issued Direction No. 11/2020/CT-TTg dated March 4, 2020 addressing comprehensive solutions for economic recovery (“Direction 11”).

For monetary policy, Direction 11 proposes the following credit support solutions:

  • To stabilise interest rates, exchange rates, foreign exchange and precious metals markets, to continue to consolidate foreign exchange reserves and to provide adequate and timely credit for production and business.
  • To shorten commercial banks’ review of loan applications and to consider a reduction of borrower interest rates as well as offer exemptions and restructuring of distressed loans so that enterprises affected by the disease can recover their business activities (a “VND 250 Trillion Credit Support Package”).

For budgetary policy, the Ministry of Finance is to propose specific plans to exempt, reduce, delay and defer payment of taxes, charges, and fees. This proposal is to include the extension of due dates for enterprise income tax, land rent, social insurance, and trade union fees. In response to Direction 11, the General Department of Taxes, under the Ministry of Finance, swiftly issued its Official Letter No. 837/TCT-QLN dated March 3, 2020 providing guidance for enterprises affected by Covid-19 to apply for the extension of tax payment and the exemption of late fees.

Direction 11 also suggests national investment activities (including both public and private investments) to stimulate the economy. These suggestions include:

  • Acceleration of public investment projects, especially in the transportation sector (expansion of Tan Son Nhat and Noi Bai Airports, construction of Long Thanh Airport, new construction on the North-South Highway) and the energy sector (Thai Binh 2 thermal power plant, Long Phu I thermal power plant, Song Hau I thermal power plant, and gas power plants, renewable energy, and electricity transmission) by:
    • Converting key projects from public-private-partnership into public-investment (eg, My Thuan — Can Tho Highway and portions of the North-South Highway);
    • Considering the direct appointment of investors and contractors per relevant laws; and
    • Advancing the due date for the national master plan of electricity development for the period from 2021 — 2030 with the vision to 2045.
  • Promotion of disbursement of public investment capital (including ODA capital) of 2019 and 2020.
  • Simplification of the investment conditions and investment procedures applicable to private investment projects and foreign investment projects.

The Government will also prepare for the Free Trade Agreement between Vietnam and the European Union (“EVFTA”) which is expected to finally come into force by the middle of 2020. And the Ministry of Information and Communication is promoting digital technology enterprises to develop products in e-commerce, digital economy, transportation, delivery, fin-tech, and e-payment.

Beneficiaries under the Government’s action plan

If Prime Minister Phuc’s proposals find their way into effect, there will be many opportunities opened for investors by the efforts of the Government.

First, in the industries primarily retarded by the disease, ie, tourism, agriculture, education and logistics, local enterprises will need new capital injections to resume operations. This should be an ideal time for investors with healthy cash surpluses to acquire players weakened by the virus economy but that otherwise performed well.

Second, as the Government is considering the conversion of some PPP projects into public investment projects, private investors may have the opportunity to restructure or withdraw their investments to their advantage.

Third, real estate investors and construction enterprises may consider making new investments or enlarge current investments where transportation projects will be accelerated. The selling price of real estate near Long Thanh Airport, for example, has increased significantly since the announcement of the project.

Fourth, the national master plan of electricity development for the period from 2021 — 2030 with the vision to 2045 may offer new opportunities, new feed-in tariffs, and new projects beneficial to infrastructure investors. Current investors will gain from the acceleration of development. One need only look to recent large-scale investments in the energy sector such as the US$4 billion LNG power plant in Bac Lieu province.

Fifth, while the Government is in a good mood, investors can take advantage of regulations that may be vague and open to local application. In particular, in the M&A sector, parties have a better chance to obtain clearance for economic concentration under the competition law.

Finally, the expansion of digital-economy businesses will ease the way for investments in e-commerce, fin-tech, and delivery businesses. For example, Tiki and Sendo, two of the biggest e-commerce platforms in Vietnam, are exploring merger possibilities and may very likely form Vietnam’s first startup unicorn.

Vietnam’s government is vitally aware of the dangers that Covid-19 poses to its economy, and if Direction 11 is a reliable signpost of what can be expected in the trenches, then the recovery promises to be a lucrative opening for investors and entrepreneurs who are willing to take risks on an economy short-changed by invasion of foreign viral occupiers.

E: Thuy.nguyen@LNTPartners.com

W: https://lntpartners.com/


 

Related Articles by Firm
Foreign Banks Allowed to Operate in Myanmar
After more than 50 years of banning, the Central Bank of Myanmar has issued the first final licenses allowing four foreign banks to operate in Myanmar.
Tanzanian Draft National Energy Policy of 2015
Highlights on the ongoing and upcoming industry developments with focus on the transition of the energy sector since the introduction of the Big Results Now! campaign
Mineral Rights Available in Tanzania
Overview of the mineral rights available in Tanzania, with specific focus on the various categories of mineral rights
The Legal Framework of the Aviation Sector in Tanzania
As attention turns to Tanzania’s trade and energy opportunities, the spotlight has fallen upon the nation’s infrastructure. This update focuses on the capabilities and issues of the Tanzanian aviation sector.
Oil price volatility - Offshore oil storage
Are there any legal concerns with tankers being used for floating storage?
Oil price volatility - risks and opportunities in 2015
While many companies can weather the oil price slide and volatility, some industry players face a real risk of insolvency.
India: Union Budget 2015
A bullet-point overview of changes in Direct Tax, Indirect Tax and Goods and Service Tax in India in light of Finance Minister Arun Jaitley’s first full-year Budget…
Prohibition against transfer of personal data outside Hong Kong
Section 33 of the Personal Data (Privacy) Ordinance (PDPO) prohibits the transfer of personal data to places outside Hong Kong, except in circumstances specified in the PDPO.
Security of payment under FIDIC contracts: more secure, for now
The High Court of Singapore recently handed down an important judgment in relation to the enforceability of Dispute Adjudication Board (DAB) decisions under the FIDIC forms of contract.
Insurance Laws (Amendment) Bill passed as Ordinance in India
The long-awaited Insurance Laws (Amendment) Bill has become a provisional law in India. The Bill amends the Insurance Act (1938), the General Insurance Business (Naturalisation) Act (1972), and the Insurance Regulatory and Development Act (1999).
SICC: now open for business
On Monday 5 January 2015, the Singapore International Commercial Court ("SICC") was officially opened...
Myanmar insurance update
Clyde & Co partner Michael Horn recently visited Myanmar's commercial capital Yangon and reports on the current state of the insurance market...
Launch of the online mining cadastre transactional portal
Plus, a summary of the key mineral rights available in Tanzania; and, a look at the manner in which mineral rights can be transferred.
Restrictions imposed on holders of mineral rights
This briefing looks at some of the restrictions imposed on holders of mineral rights in Tanzania by the Mining Act 2010
Draft local content policy for the oil & gas industry in Tanzania
The first draft of the long-awaited local content policy for the oil & gas industry in Tanzania has now been published by the Ministry of Energy and Minerals ...
Tanzania: Revocation of mining licences
The Tanzanian government recently announced the cancellation of a total of 174 mining licences. This mining update examines the key continuing obligations imposed by the Mining Act upon mining licence holders.
Mining Development Agreements
In this month’s mining briefing we look at Mining Development Agreements (MDAs) and the role that they play in the mining sector in Tanzania.
The Tanzanian railway system: current legal framework
The railway system of mainland Tanzania has a total track length of 3,676 kilometers (km) with two separate networks, run by two separate organisations ...
Related Articles
Covering Ears to Steal Bells: Ignoring insolvency at risk of liquidation
The closest Chinese equivalent to the English idiom of ‘sticking one’s head in the sand’ is ‘covering one’s ears to steal bells’ ...
JV Compliance Issues during the Transition Period under the new FIL
On 1 January 2020, the Foreign Investment Law of the People’s Republic of China came into force ...
Related Articles by Jurisdiction
Investigative Intelligence
Vietnam: ASEAN’s next emerging market
New regulation on title retention in Vietnam
The retention of title, a legal concept recognised throughout the world, has now officially become one of the security measures for the performance of obligations in Vietnam ...
Latest Articles
Watch again: “Is Covid-19 taking women lawyers’ careers back to the 1950s?”
A second chance to watch….. the opening Women In Law Dialogue Series Webinars: Asia and North America time-friendly (first aired ‘live’ in August 2020) ...
Covering Ears to Steal Bells: Ignoring insolvency at risk of liquidation
The closest Chinese equivalent to the English idiom of ‘sticking one’s head in the sand’ is ‘covering one’s ears to steal bells’ ...