While people here and there are talking about difficulties and challenges facing us in the aftermath of Covid-19, we would rather take a positive perspective – discussing about the opportunities arising out of those challenges. These opportunities are even more evident in countries like Vietnam where the resilience is much stronger and the recovery is by far faster.
As a consequence of halted production and disrupted supply chains Vietnam’s GDP suffered a slash of 6.17 percent in 3Q2022 – the first time its economy recorded negative growth since 2000. Nevertheless, right in the following quarters, Vietnam recorded a robust, quick recovery in GDP growth, positive 5.22 pct in 4Q2022 and 5.03 pct in 1Q2022. Things are really looking up. Economic activity resumed in October as Vietnam opted for a ‘living with the pandemic’ approach. Government authorities also announced a phased plan to reopen the economy. Vietnam’s Ministry of Planning and Investment (MPI) consistently targeted an annual average GDP growth rate of 6.5-7 percent during the 2021-2025 period, even after Covid-19 took place.
In addition, AmCham Vietnam has noted that Vietnam’s role in global supply chains is only expected to grow. The business chamber also noted that Vietnam remains an attractive investment destination, including for further relocations out of China. As with last year, Vietnam’s market fundamentals remain strong, and its economy appears resilient to overcome the recent disruptions to production and trade. Plus, Vietnam has already fully vaccinated more than 95 pct of its population. Foreign investors remain bullish on Vietnam’s long-term prospects. Businesses remain confident though despite certain short-term difficulties and constraints.
Vietnam’s strong recovery has so far been partly attributed to the stimulus packages which represent numerous opportunities for foreign as well as domestic investors and business people:
- Available tax breaks – CIT and VAT
Corporate Income Tax (CIT) is reduced by 30% to certain eligible businesses.
Value Added Tax (VAT) rate is reduced to 8% (from the standard 10%) for most common goods and services.
- Various government support packages
Land rent rebate
Land rent is slashed by 30% if the employer rents directly from the government in the form of annual land rent payment.
Social security contribution rebates
The rate of contribution by employers to the Labor Accidents & Hazards funds (a minor constituent of social security or social insurance in Vietnam) is reduced by half (from 1% of monthly salary to 0.5%) for a period of one year (from July 2021 to June 2022). Besides, employers are exempt from paying to the Unemployment Insurance fund, which is 1% of the monthly salary) for a period of on year (from October 2021 to September 2022).
- Government stimulus packages for infrastructure development
The Government is poised to spend/ disperse more as part of the stimulus packages in infrastructure development (ring roads and national highways, airports, bridges).
- Cheaper or cost-free unsecured debt financing
Policy short-term loans with 0% interest rates and without required security are available to certain eligible businesses to serve the following purposes: i) to pay furlough wages; ii) to pay wages to resume/ maintain production and trade.
- More availability of and cheaper human resources
As many businesses lay off their staff due to business difficulties, human resources become more abundant and possibly cheaper.
Fore more info on the above, please contact us for appropriate and thorough advice.