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DCPA https://dcpa.com.vn/ Audit Tax Consulting Vietnam Tue, 07 Nov 2023 07:34:58 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.4 Vietnam’s industries have taken various sustainabililty initiatives https://dcpa.com.vn/industries/vietnams-industries-have-taken-various-sustainablilty-initiatives Wed, 14 Jun 2023 07:43:44 +0000 https://dcpa.com.vn/?p=8287 Various industries in Vietnam have been taking sustainability initiatives and measures with a view to realializing COP26 goals and in line with the global trends and requirements.

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VIETNAM’S INDUSTRIES GOING GREEN

Various industries in Vietnam have been taking sustainability initiatives toward COP26 goals and in line with the global trends and requirements.

Overview

At the COP26 climate conference taking place in Scotland in Nov 2021, Vietnam made a commitment to bring net emissions to zero by 2050, joined the pledge to reduce global methane emissions by 2030. In reality, Vietnam is gradually shifting from a linear economy toward a circular economy, targeting sustainable economic development for a more competitive economy. To realize that goal, the government recently issued Decision 687 on circular economy development which was followed earlier by the revised Law on Environmental Protection (LEP). In response to recent government measures,  various industries and their respective players have taken numerous sustainability initiatives and endeavors.

Retail

Since AEON Vietnam launched its first shopping mall in Vietnam back in 2014, all of the retailer’s department stores and supermarkets have been using biodegradable plastic (PHSH) carrier-bags. By the end of 2022, the rate of PHSH bags in AEON Vietnam was expected to reach 100%.  Central Group (Go) and Bach Hoa Xanh (part of The Gioi Di Dong Group) have also taken similar steps.

Annam Gourmet offers a range of eco-friendly recycled bags, including traditional paper wine and grocery bags, bags made of cavas and jute for hauling the weekly shop, mesh bags for fruit and vegetables and aluminium foil ziplock bags to keep extra-perishable food such as seafood or icecream from spoiling.

They also have a bottle recycling program where you can bring back any empty glass bottles from selected brands as well as e-gift cards in conjunction with giftee Mekong Vietnam.

Classic Fine Foods officially announced it’s now distributing eco-friendly packaging made in Vietnam. Most recently (August 2022), Classic Fine Foods also launched its own in-house cutting, packaging and vacuuming room with the ultimate goal of bringing valued B2B customers the precise size (100g to 1kg) for their needs to eliminate food waste and stock par level concerns. Best part? The packaging is 0% plastic, 100% compostable and eco-friendly.

ByNature has exacting environmental standards that it requires from its suppliers. All produce is seasonal, organic and delivered directly to the customer in recyclable boxes. They also vet and frequently visit their partner farms, and test all new fruits and vegetables to ensure that organic methods are used. For Vietnamese local pantry products, they visit the production sites to verify that they meet ByNature standards as well. ByNature also sells ethically sourced meat.

F&B

Say hello to Vietnam’s first-ever coffee compostable packaging brought to you by the good guys at HRK Group, who is behind some of the most eco-friendly packaging in Vietnam including water-soluble eco-”plastic” and 0% plastic biodegradable and compostable Mulch Films and fruit and vegetable bags.

Last year, Pepsi Vietnam announced it has launched 100% recycled PET bottles in Vietnam, with the caps and labels to follow soon. This is on the back of its commitment to go fully recycled in 9 countries across the EU, and reduce the average carbon emissions of each bottle by 40%. Its other soft drinks such as 7Up, Mountain Dew and Lipton Ice Tea are also being considered.

Also last year, Heineken Vietnam was recognized as one of the “Top 50 most sustainable companies in Vietnam”, in the 2022 Corporate Sustainability Awards, which celebrates commitment and practices in sustainable development. In line with Heineken’s mission – ‘Brewing a Better Vietnam’, all Heineken beers are currently brewed from 52% renewable energy, and 100% of our waste and by-products across 6 breweries are reused and recycled.

Plus, 100% of Heineken Vietnam’s bottles are returned for reuse before eventually being recycled, while materials like cardboard, aluminum, plastic and paper are likewise reused or recycled; 100% of its wastewater is treated to Grade A so it can be reused or returned safely to the environment.

On August 19th, Heineken Vietnam, WWF-Viet Nam, the Ministry of Agriculture and Rural Development and local partners launched a water conservation program in critical river basins to strengthen water governance in Vietnam.

Upcycled, recycled, and made in Vietnam. Mashed Up Gin is a craft gin and one of a handful of gins upcycled from beer and bottled in recycled beer bottles. These bottles are hand-cast to resemble ancient beer bottles with a circular top, square bottom, and a flip-top lid on top of that. Distilled herbs are also given to local farms for pig food and the heads and tails go toward alcohol production in pharmacies.

Pizza4Ps has long been one of the standard bearers for sustainability in Vietnam, leading the way long before sustainability was a talked-about issue. 66% of its buying is from renewable sources – including its ingredients, napkins, cutlery and even the string on Pizza4Ps  burrata cheese. However, it has struggled to go entirely plastic-free, due to the lack of food-safe alternatives.

Pizza4Ps’ new partnership with TONTOTON tracks the plastic packaging used in 4Ps retail products, then empowers local communities in Phu Quoc Island and Hon Son Island to rescue the same amount of non-recyclable plastic from the coastline. The collected plastic is then used as an alternative fuel at a cement manufacturing factory, replacing fossil fuel.

Here’s another reason to pick up a bar of Marou chocolate. Maison Marou buys from local Vietnamese farmers, then makes the chocolate locally at their factories. Their commitment ensures that their “cacao-to-chocolate value chain is strong, socially responsible and environmentally sustainable”. Their annual reports also showcase the work they do to make chocolate an ethical and sustainable choice for consumers. As local Vietnamese chocolate, these bars have the added benefit of low food miles, in addition to their eco-friendly ethos.

Another chocolate player in Vietnam making the chocolate industry a more ethical and sustainable one is The Cocoa Project, which sources all its chocolate beans locally and uses recycled paper for all its bean-to-bar chocolate packaging.

Pendolasco regards the eco-impact of their takeaways seriously. All takeaway pastas are served in a claypot, and there are no plastic bags, instead, Pendolasco ferries their takeaways in reusable bags. They also encourage users to exchange two claypots, or 10 of their reusable bags, for a chocolate mousse.

Pendolasco regards the eco-impact of their takeaways seriously. All takeaway pastas are served in a claypot, and there are no plastic bags, instead, Pendolasco ferries their takeaways in reusable bags. They also encourage users to exchange two claypots, or 10 of their reusable bags, for a chocolate mousse.

Agriculture

Various stakeholders have initiated and implemented green agriculture, an agricultural approach that both serves people’s food demands while being environmentally and health-friendly. Ministries, provinces or municipalities, enterprises, and farmers have pushed the implementation of scientific and technological advances, erecting several models in the direction of green – clean – sustainable development. Typically, rice production has used models such as “flower-side rice fields”, “1 must 5 reductions” and “big sample fields” using VietGAP. In addition, GAP farming practices and biogas in livestock models are used for fruit farming. According to COP26 pledges, Vietnam has finally finished the plan for a biogas program for the cattle sector.

Green agriculture now recognizes a great deal of efforts from both businesses and farmers, with several exceptional projects:

  • The Sustainable Agriculture Transformation Project in Vietnam (VnSAT Project) began in Tay Nguyen and the Mekong Delta in 2017, with 13 provinces and cities participating in the implementation of two key commodities: coffee and rice. The project’s entire capital is 288,237 million USD, which is equivalent to 6,629 billion VND. The VnSAT project has four components: strengthening institutional capacity for agricultural restructuring, sustainable rice development, sustainable coffee development, and project management.
  • The GIC Vietnam project is the German Government’s next technical assistance commitment package, implemented in collaboration with the Department of Economic Cooperation and Rural Development, GIZ, and the six provinces with a total investment capital of 7 million euros. The project will help to improve farming systems toward sustainability, thereby improving the efficiency of natural resource management and use while enhancing the ability of the Mekong Delta’s two main agricultural value chains, rice, and mango, to adapt to and withstand the effects of climate change.
  • Tan Thanh Holdings Investment Joint Stock Company has also offered to invest in the building of the project “Medical value chain related with sustainable forest development in the Central Highlands – Point model in Dak Lak” through the Institute of Green Economy Connection. The project spans more than 1,000 hectares, with a total investment of up to 3,000 billion VND in phase 1. This is believed to be Vietnam’s first closed pharmaceutical production chain that matches international quality and norms.

Cement Manufacturing

Prompted by operational and financial efficiencies as well as legal compliance, cement manufacturers have been proactive in adopting the decarbonization techniques or best practices, the most noticeable and feasible of which are Waste Heat Recovery and Waste Co-processing. Players have been ahead of schedule in terms of WHR installation (the end of 2025 is the deadline set by the Government). As of December 2022, three years head of the timeline, about 44% of the cement producers have their plants installed or are being installed with WHR, some doing it as early as 2002 (Vicem Ha Tien 2) . As for co-processing, things are still at the beginning (with ten co-processing projects so far), even though the first one was licensed and put in operation as far as in 2007 by the industry’s pioneer Holcim (now known as Insee).

Steelmaking

In the steel industry, despite less rigid guidelines and less well-defined regulations, so much more has been done in terms of diversification of initiatives, thanks to the already available exhaustive EU BAT (Best Available Techniques) guidelines. A series of decarbonization techniques/ practices have been researched and put in place, namely: Oxy – Gas Furnace, Consteel, Endless Rolling Technology, Furnace Power Recovery Turbine (for EAF technology); Coke Dry Quenching, Closed-recirculating Production Process , Top Pressure Recovery Turbine (for BOF technology), Environmental Management System, Reactive Power Compensation (for both EAF and BOF). It’s worth noting that none of the players can apply all the techniques available for their chosen technology (EAF/ BOF). A player that is a pioneer in this technique (e.g. Consteel) can fall behind in other techniques (such as Closed-recirculating Production Process) or vice versa. Knowledge sharing among players so that they can learn these techniques from one another is limited. The top applicants for decarbonization efforts in BOF technology are Hoa Phat and Formosa. Leading adopters of sustainability practices in EAF technology can be named such as Pomina and Vina Kyoei.

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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Vietnam has emerged as new global manufacturing hub https://dcpa.com.vn/an-pham-va-cap-nhat/vietnam-new-manufacturing-hub Fri, 09 Jun 2023 05:03:11 +0000 https://dcpa.com.vn/an-pham-va-cap-nhat/vietnam-new-manufacturing-hub Vietnam is rapidly emerging as a new global manufacturing hub as per "China plus one" or switch-from-China strategy adopted by many leading multinationals notably electronics giants.

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NEW GLOBAL MANUFACTURING HUB vie

Vietnam is rapidly emerging as a new global manufacturing hub as per “China plus one” or switch-from-China strategy adopted by many leading multinationals.

Overview

In light of the continued US-China trade disputes (and previously China’s unresponsive Covid-19 policies), manufacturing businesses are looking for the next best option to set up their factories or move their current China-based manufacturing facilities. Vietnam has emerged as one of the best options, besides India. Vietnam is popular for being a manufacturing center, particularly for higher-income countries pursuing the “China plus one” approach. This approach is a business strategy in which corporations diversify or switch their investments outside of China to lessen their dependency.

Vietnam – numerous advantages & strengths

Vietnam has been playing an increasingly significant role in global supply chains, as the nation has huge advantages in the era of alleged de-globalization. Since 2000, Vietnam’s GDP has grown at a faster rate than in any other Asian country bar China, averaging 6.2% annually (for the entire 20-year period).

Vietnam possesses numerous advantages in terms of geography (central location in Asia, proximate to China, long coastline of 3,260 km), demography (abundant labor force of 52 mil people, relatively young, well-educated, and skillful), massive infrastructure development (new highways, deep sea ports, industrial parks, electronics clusters), and reasonable cost base (minimal capex and overheads such as land, buildings, and labor compared to peer countries).

On the macro level, Vietnam has appropriate policies to encourage FDI and puts more emphasis on creating a liberal, impartial environment. It also fosters the assistance of supporting industries and deeper interaction with existing and future investors by creating the essential circumstances for efficient decentralization of FDI administration.

Only a handful of economies like Vietnam have a combination of all above factors to provide such ground for shifting manufacturing destinations in Asia.

Nikkei Asia said Vietnam has earned its status as a global production hub, adding that it is already the only economy of its size and growth level to have cracked the top six in Apple’s coveted supplier list. Vietnam has emerged as an important link in the global supply chain when it has recorded technology merchandise export growth that no substantial Asian rival has matched. In specifics, high-tech goods as a share of exports hit 19.4% in 2022, up from 13% in 2010. The total export turnover of computers, phones and electronic devices reached US$71.93bn in 2022, up 25% from the previous year.

Compal Vietnam (Taiwanese-invested), based in Vinh Phuc province with a US$500mn laptop factory, with 15,000 workers, is a manufacturer for Dell, Google and Amazon. Compal was striving to increase its export turnover to 1.5-2 billion USD per year.

With Compal’s supplies for Dell, Google and Amazon for export, it can be seen that Vietnam is really becoming a manufacturing center of the world, at least in the field of electronics. Along with big manufacturers that have their own factories such as Samsung, Intel and LG, there are more and more manufacturers specializing in outsourcing for world-famous electronic brands in Vietnam. Foxconn, Luxshare, Winston, Pegatron and Goertek are typical examples. The presence of the big names has made Vietnam a base for the production of electronics and mobile phone components, which are mostly targeted for export.

Despite continued global turbulences (i.e. the US-China trade war, the Russia-Ukrain war and Russia-Western conflicts and the Covid-19), Vietnam’s FDI attraction has not shown much of decline (US$27.7 bn in 2022), which demonstrated consistent confidence from investors, including Foxconn, Pegatron, Wistron, LEGO and Nike, in the country’s economic prospects.

India versus Vietnam in key parameters

One of the fastest-growing economies, India, had been another promising candidate. However, according to Bloomberg, since 2014, the country has recorded one of the worst worker participation rates anywhere in the world. On top of that, the Indian government has signed no FTAs in its tenure of eight years and has yet to give much attention to improving its industrial policy.

India is squandering a US$28 trillion potential in global commerce by adopting a more nationalistic approach. This inward tendency stems from the notion that a 1.4 billion-people economy can be sustained only by internal demand. Even before Covid-19, only around 1% to 2% of India’s population could be classified as middle class, compared to 25% in China. Several well-known economists believe that the overall objective of a “self-reliant economy” is relatively tough to attain for India.

On the contrary, Vietnam is adopting the East Asian Tiger countries’ success formula: open and frictionless trade. The country is gaining a greater market share in international commerce than India, despite a fraction of the population (about 1/14 or 7%).

Final remarks

Vietnam’s manufacturing landscape offers many opportunities for businesses seeking cost-effective production, abundant skilled labor, and a favorable business environment. The major manufacturing industries, strategic hubs, and favorable cost comparisons with China make Vietnam an attractive destination for manufacturing investment. Chinese investment in Vietnam’s manufacturing sector further strengthens its growth trajectory. Understanding the driving forces behind the shift to Vietnam, including advantages in cost, trade agreements, political stability, and skilled labor availability, is crucial for businesses considering manufacturing relocation or expansion.

Moreover, Vietnam’s skilled labor force, infrastructure development, efficient supply chain management, and favorable tax incentives create a conducive environment for manufacturing success. Navigating the regulatory landscape and understanding the future prospects of Vietnam’s manufacturing industry are key considerations for businesses looking to establish or expand their operations.

As Vietnam continues to evolve as a manufacturing hub, embracing technological advancements and focusing on sustainability will be essential for long-term growth. By staying informed about emerging trends, challenges, and opportunities, businesses can position themselves for success in Vietnam’s dynamic manufacturing landscape.

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

The post Vietnam has emerged as new global manufacturing hub appeared first on DCPA.

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Vietnam has emerged as new global manufacturing hub https://dcpa.com.vn/industries/vietnam-new-manufacturing-hub Fri, 09 Jun 2023 05:03:11 +0000 https://dcpa.com.vn/?p=8248 Vietnam is rapidly emerging as a new global manufacturing hub as per "China plus one" or switch-from-China strategy adopted by many leading multinationals notably electronics giants.

The post Vietnam has emerged as new global manufacturing hub appeared first on DCPA.

]]>

NEW GLOBAL MANUFACTURING HUB

Vietnam is rapidly emerging as a new global manufacturing hub as per “China plus one” or switch-from-China strategy adopted by many leading multinationals.

Overview

In light of the continued US-China trade disputes (and previously China’s unresponsive Covid-19 policies), manufacturing businesses are looking for the next best option to set up their factories or move their current China-based manufacturing facilities. Vietnam has emerged as one of the best options, besides India. Vietnam is popular for being a manufacturing center, particularly for higher-income countries pursuing the “China plus one” approach. This approach is a business strategy in which corporations diversify or switch their investments outside of China to lessen their dependency.

Vietnam – numerous advantages & strengths

Vietnam has been playing an increasingly significant role in global supply chains, as the nation has huge advantages in the era of alleged de-globalization. Since 2000, Vietnam’s GDP has grown at a faster rate than in any other Asian country bar China, averaging 6.2% annually (for the entire 20-year period).

Vietnam possesses numerous advantages in terms of geography (central location in Asia, proximate to China, long coastline of 3,260 km), demography (abundant labor force of 52 mil people, relatively young, well-educated, and skillful), massive infrastructure development (new highways, deep sea ports, industrial parks, electronics clusters), and reasonable cost base (minimal capex and overheads such as land, buildings, and labor compared to peer countries).

On the macro level, Vietnam has appropriate policies to encourage FDI and puts more emphasis on creating a liberal, impartial environment. It also fosters the assistance of supporting industries and deeper interaction with existing and future investors by creating the essential circumstances for efficient decentralization of FDI administration.

Only a handful of economies like Vietnam have a combination of all above factors to provide such ground for shifting manufacturing destinations in Asia.

Nikkei Asia said Vietnam has earned its status as a global production hub, adding that it is already the only economy of its size and growth level to have cracked the top six in Apple’s coveted supplier list. Vietnam has emerged as an important link in the global supply chain when it has recorded technology merchandise export growth that no substantial Asian rival has matched. In specifics, high-tech goods as a share of exports hit 19.4% in 2022, up from 13% in 2010. The total export turnover of computers, phones and electronic devices reached US$71.93bn in 2022, up 25% from the previous year.

Compal Vietnam (Taiwanese-invested), based in Vinh Phuc province with a US$500mn laptop factory, with 15,000 workers, is a manufacturer for Dell, Google and Amazon. Compal was striving to increase its export turnover to 1.5-2 billion USD per year.

With Compal’s supplies for Dell, Google and Amazon for export, it can be seen that Vietnam is really becoming a manufacturing center of the world, at least in the field of electronics. Along with big manufacturers that have their own factories such as Samsung, Intel and LG, there are more and more manufacturers specializing in outsourcing for world-famous electronic brands in Vietnam. Foxconn, Luxshare, Winston, Pegatron and Goertek are typical examples. The presence of the big names has made Vietnam a base for the production of electronics and mobile phone components, which are mostly targeted for export.

Despite continued global turbulences (i.e. the US-China trade war, the Russia-Ukrain war and Russia-Western conflicts and the Covid-19), Vietnam’s FDI attraction has not shown much of decline (US$27.7 bn in 2022), which demonstrated consistent confidence from investors, including Foxconn, Pegatron, Wistron, LEGO and Nike, in the country’s economic prospects.

India versus Vietnam in key parameters

One of the fastest-growing economies, India, had been another promising candidate. However, according to Bloomberg, since 2014, the country has recorded one of the worst worker participation rates anywhere in the world. On top of that, the Indian government has signed no FTAs in its tenure of eight years and has yet to give much attention to improving its industrial policy.

India is squandering a US$28 trillion potential in global commerce by adopting a more nationalistic approach. This inward tendency stems from the notion that a 1.4 billion-people economy can be sustained only by internal demand. Even before Covid-19, only around 1% to 2% of India’s population could be classified as middle class, compared to 25% in China. Several well-known economists believe that the overall objective of a “self-reliant economy” is relatively tough to attain for India.

On the contrary, Vietnam is adopting the East Asian Tiger countries’ success formula: open and frictionless trade. The country is gaining a greater market share in international commerce than India, despite a fraction of the population (about 1/14 or 7%).

Final remarks

Vietnam’s manufacturing landscape offers many opportunities for businesses seeking cost-effective production, abundant skilled labor, and a favorable business environment. The major manufacturing industries, strategic hubs, and favorable cost comparisons with China make Vietnam an attractive destination for manufacturing investment. Chinese investment in Vietnam’s manufacturing sector further strengthens its growth trajectory. Understanding the driving forces behind the shift to Vietnam, including advantages in cost, trade agreements, political stability, and skilled labor availability, is crucial for businesses considering manufacturing relocation or expansion.

Moreover, Vietnam’s skilled labor force, infrastructure development, efficient supply chain management, and favorable tax incentives create a conducive environment for manufacturing success. Navigating the regulatory landscape and understanding the future prospects of Vietnam’s manufacturing industry are key considerations for businesses looking to establish or expand their operations.

As Vietnam continues to evolve as a manufacturing hub, embracing technological advancements and focusing on sustainability will be essential for long-term growth. By staying informed about emerging trends, challenges, and opportunities, businesses can position themselves for success in Vietnam’s dynamic manufacturing landscape.

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

The post Vietnam has emerged as new global manufacturing hub appeared first on DCPA.

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Digital transformation reshaping the economy and its key industries https://dcpa.com.vn/industries/digital-transformation-vietnam Sat, 03 Jun 2023 07:10:17 +0000 https://dcpa.com.vn/?p=7867 Digitalization is greatly reshaping the Vietnamese economy and its key industry sectors, typically banking, retail, logistics and manufacturing which affect hundreds of businesses and millions of people.

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DIGITAL TRANSFORMATION

Digital transformation is greatly reshaping the Vietnamese economy and its key industry sectors, typically banking, retail, logistics and manufacturing.

Overview

From the acute need to overcome the Covid=19 restrictions, digital transformation has emerged strongly to be likely to change the whole business landscape of any organization, regardless of industry, size, maturity, or market. Vietnam’s digital transformation is regarded by the Vietnamese Government as an essential aspect in maintaining growth and prosperity.  With an estimated Gross Merchandise Volume (GMV) rise of 28% in 2022, Vietnam is said to be one of the fastest growing digital economies in Southeast Asia. By 2030, it is predicted that Vietnam’s digital sector would contribute 30% to the country’s GDP.

Drivers of digital transformation in Vietnam

Covid-19

The abrupt nature of the COVID lockdowns was one of the biggest driving forces of the quick expansion of Vietnam’s digitalization. At first, digital transformation came as a reaction to the social distancing regulations, and as a result, e-commerce flourished in the country. This partly made  Vietnam one of Asia’s best-performing economies in 2020 and 2021.

In response to the COVID-19 outbreak, Vietnam’s use of digital platforms such as cloud computing, e-commerce websites, social networks, and specialized applications has expanded significantly – from 41.1% in 2018 to 60.6% in 2022. The ratio of businesses spending in digital solutions, such as setting up hardware and software for corporate operations, has been soaring – as revealed by leading technology solution and software providers.

Moreover, the Vietnamese government has also increased its attempts to automate processes and offer citizens public services via digital means (usually web portals) As of June 2022, 45.8% of administrative services are conducted online, a 1.6-fold increase from the same time period in 2021. As for plans for the near future, Vietnam’s Prime Minister, Pham Minh Chinh, said that by the end of 2023, the proportion of individuals using online public services must increase from the current 18% to 50%.

On the other hand, despite support for the emerging trend of using digital technology in wake of the epidemic, the Vietnamese adoption of key industry 4.0 technologies is still in its very early stages. For now, digital platforms are mostly used to simplify straightforward commercial processes including sales, accounting, and payment methods or front-end banking (bank account opening, money transfers and payment).

Overall, Vietnam was one of the few nations that handled COVID-19 reasonably effectively thanks partly to the fact that the country’s digital push has been accelerated. Yet Vietnam still has a long way to go in order to establish the right conditions for domestic organizations to adapt to the newest global digital technology if the country wants to become a digital powerhouse in the future.

Free trade agreements notably EVFTA

Vietnam recently entered into several free trade agreement particularly EVFTA, effective from 1 Nov 2021. Through the EU-Vietnam Free Trade Agreement (EVFTA), the European Union has a major influence on the development of the digital economy. Indeed, the agreement establishes cross-sectoral initiatives covering increased investment, updating to EU regulations, adoption of non-legislative measures to improve quality of life, etc.

The EVFTA will help to boost Vietnam’s digital economy by encouraging the development of electronic commerce between EU and Vietnam by enhancing Vietnam’s regulatory environment for digital transformation. This will be accomplished through consistent and productive discussion of the regulatory concerns brought up by e-commerce and digitalization. The legal frameworks governing e-commerce in Vietnam will be gradually improved, advancing and enabling the country’s digital transformation, with the input from the EU leaders.

Moreover, under the opportunities created by the EVFTA, Vietnamese businesses will even undertake digital transformation in order to meet the standards of the EU markets. With that being said, Vietnamese manufacturers must invest in better technology to more effectively control the – product quality. As a result, their customer satisfaction will also be improved and their operating procedures optimized accordingly; all to be able to compete with EU e-commerce. For instance, as proof of origin for goods made in Vietnam and exported to the EU remains one of the biggest obstacles posed by the EVFTA, Vietnamese exporters are pushed to go digital such as using blockchain, for the tracking of their exported agriculture products’ origin.

Vietnam’s stategic goals and master plans

By the middle of this century, Vietnam wants to accomplish two major goals. One is to achieve net-zero carbon emissions by 2050 as pledged by Prime Minister Pham Minh Chinh at the COP26. And the other is to become a high-income country by 2045 in accordance with a resolution of the 13th   Through alterations in perception, business strategies, and incentives for the digitalization of firms, administration, and industrial operations. The program will be directed towards cooperatives, businesses, and households that wish to reform their operations to be more productive, efficient, and competitive by digital means.

Additionally, the Ministry of Planning and Investment (MPI) has proactively released a program to assist companies with their digital transformation for the years 2021–2025, designating the Enterprise Development Department as the focal point and cooperating with the relevant ministries, sectors, localities, associations, and partners to implement.

Moreover, the 13th National Party Congress sets national digital transformation as of utmost importance, with digital society, economics, and governance as its three fundamental foundations. Vietnam has given the digital transformation a strong focus by introducing numerous initiatives and measures to generate innovations for Vietnam to become a successful nation. As an example, the National Digital Transformation Day is observed on October 10 with the goal of accelerating digital transformation tasks, increasing public awareness toward their importance and mobilizing the entire political system and populace to ensure the success of the work.

Key industry sectors impacted by digital transformation

The National Master Plan prioritises 8 different sectors for this digital transformation, including banking & financial services, healthcare, education, agriculture, logistics & transportation, energy, natural resources, environment and manufacturing. We are now going to focus on the 4 most promising sectors.

Banking & Financial Services

The new culture of digital banking and fintech is spreading across Vietnam, especially among the younger generations and more technologically adept population. Vietnamese citizens often register bank account opening and conduct online banking transactions using mobile applications, making the country’s banking and financial services sector great opportunities for digital transformation. Currently, digital platforms are used for 95% of payment services and deposits, enabling Vietnam to rank the 4th country among Southeast Asia in terms of cashless payment adoption in 2021.

The State Bank of Vietnam (the central bank) sets out digital transformation as a goal for 2025 to have 50% digitized banking and 70% client transactions made via digital channels. In order to digitalize, modernize, and provide better digital services, 95% of Vietnamese banks have formulated strategies and plans of digital transformation and have continued to actively integrate digital technologies typically cloud computing and big data. There are three basic approaches to the digital transformation of banking in Vietnam: i) digitalization of front-end channels; (account opening; money transfers, online payments) ii) digital transformation in the internal processes, and iii) a combination of the two. along with the development of standalone, digital-only banks. Going along with these trends, branch-based expansion has no longer been a target strategy of most banks. Bank branches or outlets are now more targeted as cornerstone locations served mostly for marketing and advertising purposes.

Vietnam’s fintech market is expanding, and at an impressive pace for such a nascent sector. Digital payments accounted for 93% of the venture capital invested in Vietnam in 2021. The country’s strong internet penetration, high percentage of smarter phone users, and fast expanding e-commerce all attributable to fintech’s robust growth.

Additionally, the government implements a certain number of actions to encourage the cashless society with a pilot program for mobile money services (MMS) in 2021. This pilot program will last for two years from the time the first company is given permission to test the MMS, and authorities will utilize the results of the experiment to create specific regulations.

Retail

Digital transformation has made e-commerce an important element of retail that has kept expanding even in post-Covid context.  The nation’s e-commerce market is expanding by 35% annually, which is 2.5 times faster than Japan, according to the Vietnam E-commerce and Information Technology Agency (VECITA). Vietnam’s e-commerce was estimated to generate revenues of US$16.4bn in 2022 (equivalent to 7.5% of the country’s total retail sales of goods and services), up 20% from the previous year.

In 2022, foreign direct investments will still be flooding Vietnam’s e-commerce market. On regional e-commerce platforms, businesses from China, Japan, South Korea, and the United States have started increasing their online presence. Lazada, Shopee, Tiki, Sendo, and The Gioi Di Dong are five of Southeast Asia’s most popular e-commerce platforms, and Vietnam is one of their strongest markets.

Currently, the number of people participating in online shopping in Vietnam has grown steadily, reaching 57.6 million people in 2022 (or about 58% of the population). This industry is expected to continually grow, expecting to gain 70 million users by 2025.

Logistics

The logistics industry having growing rapidly, Vietnam was ranked #11 among 50 countries worldwide in the volume of logistics and transportation in 2022. In recent years, Vietnam’s logistics sector has entered an unprecedented boom, with 14–17% growth rate and over US$bn 40–42 in annual sales. The Vietnamese government aims to achieve a 20% yearly growth of the logistics sector in 2025. There has been a rise in infrastructure, technology, and investment attraction from foreign investors to support the expansion of logistics.

Many logistics firms are transforming digitally to be more competitive and empower themselves in entering new markets, especially international markets. Digital transformation of the logistics industry requires the equipment to be equipped with software for order management (OMS – Order management system), warehouse management system (WMS), transportation management system (TMS), planning resources to connect information infrastructure, provide real-time dat, look up order information anytime, anywhere.  Data from the Vietnam Logistics Business Association shows that in recent years, the proportion of businesses adopting technology in their operations increased from 15–20% in 2017 to 40–50% in 2022.

At the local government level, a national strategy for the digital transformation of the local logistics sector in the years 2022–2025 and with visions to 2030 has been released by the Ho Chi Minh City People’s Committee. The creation of a digital logistics map, a centralized data warehouse, and digital platforms linking multimodal transport services will all be finished by 2025 in the city – the nation’s largest logistics hub.

Manufacturing

Vietnam’s manufacturing sector is a critical attribute of the economy, contributing to 25.1% of the nation’s GDP in 2021.

It is a significant sector that is primed and prepared for digital transformation, as 85% of the manufacturing enterprises have access to digital technologies. The production-related technologies are mostly appreciated since most of the businesses are involved in the assembling and outsourcing phases. These technologies include monitoring and control, robotics and automation technology. Most investments in digital technology done by Vietnamese businesses are on purposed to save costs, boost productivity, and improve management. In the upcoming years, nearly a 1/4 of manufacturing companies aim to invest in Industry 4.0 technology.

Final remarks

With a sharp growth in the creation of new businesses, the digital economy has made significant contributions to the economy. The key to development has been a digital society that places its citizens at its core.

The development of domestic digital technology items has been continuously aided by the government during the past several years. This is due to its awareness of the home market, consumer demands, local culture, and creativity, as such Vietnam offers a lot of potential to find innovative digital transformation solutions for sectors, locales, and organisations.

Despite significant progress, there is still a lot to be done to close the gap in the development of digital skills in Vietnam. This is to guarantee that everyone has an equal chance at achieving the successes of the country’s digital economy. Vietnam is moreover well prepared for its digital transformation.

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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F&B services – a multibillion dollar market still growing fast https://dcpa.com.vn/industries/food-beverage-vietnam Mon, 29 May 2023 09:23:13 +0000 https://dcpa.com.vn/?p=7830 A multi-billion dollar market of Vietnam, yet still growing fast, mostly driven by the beer and the retail cofee and snacks shop sub-sectors, which tend to thrive despite economic slowdown. .

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F&B SERVICES

A multi-billion dollar market of Vietnam, yet still growing fast, mostly driven by the beer and the retail cofee and snacks shop sub-sectors.

Overview

The F&B services market is forecast to grow by over 18% this year to VND720 trillion  (USD30.7bn).  The market revenue is based on a total number of nearly 340,000 restaurants, eateries and coffee/tea shops – in both online and offline formats (Ho Chi Minh City accounted for nearly half). After an impressive rebound in 2022, the F&B [services] industry is poised to achieve “sustainable growth” in 2023 and the subsequent years.

F&B is also believed to be the base for the recovery of the declining real estate market. Experts say that when an economy struggles, investors flock back to industries that have stable demand, and F&B is an example. The shrinking property market would cause owners of properties in good locations to invest in F&B businesses in a hope to attract buyers and thus push up their properties’s prices.

Key sub-sectors of the industry are retail coffee and stacks shop, beer, dining restaurants.

Retail coffee and snacks shops

Leading players are expected to gain market share this year while small ones may undergo difficulties in growing or even stabilizing (without growth) in a year with anticipated economic recession. Coffee, tea and snacks shops are the spotlight of Vietnam’s F&B industry, being the new lifestyle of the youth. Highlands Coffee and The Coffee House are the best performers, having kept expanding their store networks over the past few years, taking advantage of the strong brand equity. New brands have recently entered the market, such as Phe La, Katinat Saigon Kafe, Piko Coffee,  Uncle Tetsu, launched by established players 

According to a recent survey, Vietnamese consumers are ready to pay US$1,7-2.0  for a single non-alcohol beverage (coffee/ tea/ juice/ etc.) or snack, and 500,000 VND on special occasions. Over 77% of consumers said they would continue to spend at this rate or more in 2023.

Beer

Vietnam is Asia’s top beer consumer. The beer market alone was worth around US$8 bn in 2022 and is expected to be worth about US$10 billion in 2025. However, the pace of growth is slowing down. Annual growth between 2020-2025 is forecast to be 5.6% per annum versus 8.8 percent per year registered in 2015-2019. Heineken Vietnam (joint venture between Heineken and Satra, owner of Heinenken and Tiger brands), Sabeco (recently acquired by a Thai group, owner of Saigon Beer brand), Habeco (locally-own, owner of Hanoi Beer brand. Together, the three own more than 80% of market share.

One of the noticeable trends is the shift toward the consumption of lo-alcohol beer and craft beer with common brand names, such as Heineken, Belgo or BiaCraft. Many Vietnamese adult men drink beer at least once a week or every time they want to celebrate an occasion or share a sorrow.

Market drivers

  1. Long-standing consumption trends

The Vietnamese people spend a sizeable portion of their incomes on food and drink especially for eating out. Estimates suggest that somewhere between 20 percent to 48 percent of household income is spent on food and beverage consumption. Vietnam is also Asia’s top consumer of beer, coffee, [milk] tea.

Many adult men drink beer at least once a week or every time they want to celebrate an occasion or share a sorrow.

  1. Fast-growing middle-class population and sizeable youth demographic.

As of today, Vietnam’s middle-class population is estimated around 46 mil – equivalent to 46% of the population. This middle class is further expected to grow, spreading out geographically and becoming more diverse. And, by 2030, the size of Vietnam’s middle class is forecast to hit 95 million. 25% of Vietnam’s population (equivalent to 25 mil people) are aged between 16 and 30, and over 20 percent of the population are under 14.

As Vietnam’s middle class grows, and disposable incomes rise across all sectors of the population, greater spending power will further spur demand within the food and beverage industry, particularly eating out.

Moreover, as noted earlier Vietnam is a relatively young country, which will influence future growth prospects, such as the emergence of new culture and lifestyle trends that balance local norms with global preferences.

  1. Tourism

Tourism is another sizeable contributor to Vietnam’s food and beverage industry. Tourists spend an average of 23.7 percent of their budget on food and drink while in Vietnam. However, there is a big difference in spending between local tourists and foreign tourists. Foreign tourists comprise only a fraction of number (eg 1/10 in the first 4 months of 2023) to the tourists, but they account for more than half of tourism spending for the country. The growing tourism industry, notably the inbound tourism sector. greatly supports the food and beverage and the retail sectors.

  1. Social media impact

Given changing lifestyles and socio-cultural norms, the younger population is more inclined to eat out and share their stories and experiences on social media – as in the rest of the world.

In fact, there are 76.95 million social media users in Vietnam as of January 2022. According to a survey among internet users conducted in Vietnam in the first quarter of 2022, Facebook was the leading social media platform among all generations. Meanwhile, compared to Generation X and Y, Generation Z had higher usage of international platforms, such as Instagram, Tiktok, and Pinterest.

Photo communities like Facebook, Instagram, or Pinterest would mean endless opportunities for F&B brands to increase their presence. The F&B industry can avail of such platforms to create promotional content, interact with the foodie community, and convert likes and shares into new customers.

  1. Urbanization

We can also observe that urbanization trends and the increasing formalization of the country’s F&B industry are positively impacting the sector’s growth. It is predicted that 40 percent of Vietnamese people will live in urban areas (cities and towns) in 2025, double from 20 percent in 1990. Urbanites are more likely to eat out and are generally expected to earn more and therefore have a greater total spend on food and beverages

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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Vietnam Tourism – poised for strong bounceback and growth https://dcpa.com.vn/industries/toursim-travel-vietnam Thu, 25 May 2023 06:33:52 +0000 https://dcpa.com.vn/?p=7702 Endowed with diverse and beautiful landscape, now with storng deternination by the Government and industry players, Vietnam tourism is poised for strong bounceback and impressive growth.

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Vietnam Tourism & Travel

Endowed with diverse and beautiful landscape, now with storng deternination by the Government and industry players, Vietnam tourism is poised for strong bounceback and impressive growth.

Overview

Strong economic growth, supportive government policies, increase in competition among market players, and adoption of attractive marketing and promotional strategies by industry players are the key factors driving the growth of the Vietnam travel & tourism market in the coming years. In addition, the solid base of the hospitality sector (hotels and resports, restaurants, bars, pubs, eateries) strongly backs the recovery and growth of the tourism industry, notably the inbound tourism (sub)sector, whose spending per pax is much higher than that of the domestic tourism. This has made inbound tourism the industry’s focus for years/ 

Domestic Tourism

As international arrivals take more time to recover in the post-Covid context, the industry is mainly dependent on domestic travel to generate significant income sources. As many foreign countries still closed their international borders for non-residents, Vietnamese people resort to domestic travel to make up for the two-year period in lockdowns and restrictions. Domestic sightseeings and tourist packages (products and prices) have more to offer to meet locals’ needs. There were believed to be 38 mil of domestic tourists in the first 4 months of 2023.

Local tourism can be boosted by focusing on developing emerging destinations with cooperation from local authorities, online travel agencies, hotels, and airlines. Outdoor tourism, which involves mountains, beaches, sunshine, nature, (cages) were among the top choices for Vietnamese travelers after the lockdowns or restrictions were relaxed.

Inbound Tourism

Despite numerous efforts of recovery to pre-Covid levels, international arrivals reached only 3.26 mil in 2022, equivalent to 20% of the pre-Covid 2019 number, and 65% of the 2022 target. The outlook was brighter for the beginning months of 2023. In the first 4 months, Vietnam recorded 3.67 mil, 45% of the 2023 goal.

International tourists comprise only a fraction of number (eg 1/10 in the first 4 months of 2023) to the local tourists, but they account for more than half of tourism spending for the country. The growing tourism industry generates a large number of job opportunities for the people and supports the food and beverage and the retail sector.

The majority of tourists visiting Vietnam are from Asian countries, with those from Japan, South Korea, Taiwan, and China, as the country has strong economic and cultural ties with these countries. The government of Vietnam is adopting a zero-case-first strategy as it covers the countries having relatively lower COVID-19 transmission rates to gain the traveler’s confidence and accelerate the number of foreign visitors in the country.

Investments by market players to boost the number of travelers from these countries and offer affordable and quality services to international tourists is expected to bolster the Vietnam travel & tourism market growth in the forecast period.

Sales and Distribution

Market players are investing in adopting the online sales platform for the consumer base by reaching a wider audience.

The presence of interactive websites and mobile applications offering lucrative traveling packages to consumers and 24*7 customer support to solve customer queries is expected to drive the Vietnam travel & tourism market growth. Travelers and tourists could avail customized travel plans according to their convenience, budget, and requirements.

Market players are also offering the tourists to visit the tourist places virtually, make the right decisions about the places they want to visit, and choose the suitable traveling mode for the destination.

Competitive Landscape

The market is highly competitive with a large number of players, the major of which can be named as follows:

  • Vietravel
  • Saigon Tourist
  • Viet Vision Travel
  • Lily’s Travel Agency
  • Hello Laos Travel
  • Amazing Tour Vietnam
  • Green Era Travel
  • Get Up and Go Vietnam Travel Company
  • Exodus Travels
  • Threeland Travel
  • Vietnam Adventure Tours
  • Phu Quoc Island Explorer

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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Heath supplements – a great alternative to pharmaceuticals https://dcpa.com.vn/industries/health-supplements-vietnam Wed, 24 May 2023 03:45:21 +0000 https://dcpa.com.vn/?p=7641 Driven by fast aging population, rising disposible income, and increasing awareness of health protection (prevention rather than treatment) and beauty care, health supplements sector has ample growth potential.

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Health Supplements

Driven by fast aging population, rising disposible income, and increasing awareness of health protection (prevention rather than treatment)

Overview

According to Vietnam’s Administration of Food Safety (under Ministry of Health), the government body in charge of product registration of health supplement or dietary supplements or functional food products (more recently also known as “neutraceuticals”), there are currently about 30,000 products licensed to be marketable, more than 70% of which are produced domestically. The portion of adult population (aged 18 and above) consuming health supplements of all kinds is about 58%. Of particular note, the people’s awareness of food supplements for health care has been greatly enhanced during and after Covid-19.

Total value of Vietnam’s health supplements is estimated at US$738.5 mn (2022) and is growing at around 13% per annum. The herbal/traditional product category is heavily dominating the market with 79% market share while the non-herbal/traditional product category is taking up the rest of 21% market share. Despite that, the herbal/traditional product segment is still expanding at a higher pace than the non-herbal/traditional, given the local people’s consistent preferences for the former.

The market is rather competitive with top 5 players accounting for less than one third of total market share. 7 out of top 10 players have a market share of less than 5% of total market share.  Top 5 players include Herbal Life, Traphaco, Amway, Nuskin, and DHG (Traphaco and DHG are locally-owned manufacturers; however, they are listed companies and the foreign ownership has kept increasing, being 46.2% and 54.1% respectively). This suggests there are in fact no leading players that are truly “local”.

Key Characteristics and Trends

  • Consumers, especially the elderly, are consuming more and more health supplements. People are more aware of preventing illnesses with health supplements rather than treating with drugs.
  • Consumers prefer products that contain mixture of ingredients rather than one single ingredient. Herbal/traditional and probiotic ingredients are most favored among various kinds of ingredients.
  • Top demand in terms of product functions are: general health (eg. assorted vitamins and minerals), beauty (eg. skin heath, anti-aging), mental health/ neuroleptics (eg brain enhancement, memory boost, sleep bills). Next major products are joint health, eye health and digestive health.

Distribution Models

Brick-and-mortar (physical-store-based) distribution channel account for 70% of total sales of health supplements. This includes: i) pharmacies; ii) drugstores; iii) beauty and health specialist retailers. More pharmacies are becoming drugstores when they try to diversify their product offerings. Beauty and health specialist retailers, mostly foreign-owned chains (Guardian, Medicare, Watson,), are becoming a trend with aggressive expansion.

Electronic retailing accounts for the remaining 30% market share, in the following formats: e-commerce platforms  (Tki, Lazada, Shoppee, etc.) , beauty specialist website (Watson, Hasaki, Chiaki, Sieuthilamdep), Personal social media channels of individual merchants on social media platforms: Zalo, Facebook. TikTok, Youtube.

Market Dynamics or Drivers

  • A gradually aging population: Vietnam is gradually transforming from a golden to an aging population, with the ratio of people aged 65 and above in 2040 being 20%.
  • The increasing disposable income: More affluent people translate to more demand for health supplement products
  • Increasing awareness of health enhancement/ illness prevention with the effects of internet and social media.

Key Challenges

  • Fierce competition with upcoming new key players: There are so many players in the marketplace, including a large number of importers. 7 out of the top 10 players have a market share of less than 5%. Local giant companies or conglomerates such as Vinamillk or Vingroup are planning to enter the market in the near term.
  • Major, compliant players have to compete with much smaller players with sub-standard, counterfeit, and illegal products that are offered at much cheaper prices.

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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Overview of Vietnam’s laws and regulations on accounting https://dcpa.com.vn/insights/vietnams-laws-and-regulations-on-accounting Wed, 10 May 2023 03:45:27 +0000 https://dcpa.com.vn/?p=6951 DCPA would like to provide you with a comprehesnive overview of prevailing laws and regulations on accounting and financial reporting in Vietnam. Should you need specific advice, do contact us.

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Vietnam Laws & Regulations on Accounting

DCPA would like to provide you with a comprehesnive overview of prevailing laws and regulations on accounting and financial reporting in Vietnam

Prevailing laws and regulations on iaccounting and financial reporting in Vietnam include:

  • Law on Accounting No. 88/2015/QH13 dated November 20, 2015.
  • Decree No. 174/2016/NĐ-CP dated December 30, 2016, elaboration of some article of the Law on Accounting.
  • Circular No. 05/2019/TT-BTC dated January 25, 2019 accounting instructions for microfinance institutions.
  • Circular No.39/2020/TT-BTC dated May 15,2020, amendments to reporting regulations in the independent accounting and audit sector in some decrees.
  • Circular No. 40/2020/TT-BTC dated May 15, 2020 providing guidance on reporting regulations in the independent accounting and audit sector in Government’s Decree No. 174/2016/NĐ-CP elaborating on several articles of the Accounting Law and Government’s Decree No. 17/2012/NĐ-CP providing details and instructions about implementation of several.

Should you need a full English version of any of the above laws and regulations or need an interpretation any part thereof, please do not hesitate to contact us.

Frequently-Asked Questions

Other insights

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B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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ICT – a fast-growing sector spurred by digitalization https://dcpa.com.vn/industries/vietnam-ict-digitalization Mon, 08 May 2023 09:14:16 +0000 https://dcpa.com.vn/?p=6898 ICT is among fastest-growing sectors in Vietnam, spurred by diigital transformation at both government and business levels. Demand for IT infrastructure and services has soared.

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Information & Communication Technologies 

Among fastest-growing sectors in Vietnam, spurred by diigital transformation at both government and business levels

Overview

The government of Vietnam has identified ICT as a major industry sector and socio-economic growth driver and is urging government agencies at all levels to apply advanced ICT solutions towards the goals of improving operational efficiencies and providing better governance services. Specifically, the Vietnam government has approved the National Digital Transformation Program through 2025, with vision to 2030, which will further support the growth of the ICT sector. Meanwhile, the private sector, especially key industry stakeholders, including aviation, banking, energy, healthcare, broadcasting, telecommunications and urban infrastructure management are increasingly employing advanced ICT solutions in order to enhance operational efficiencies and support sustainable growth.

Sector drivers

Digital transformation is the biggest driver of Vietnam ICT sector’s growth. The country’s ICT sector is gaining strong momentum with robust digital infrastructure. Mobile networks (2G, 3G, and 4G) cover 99.7% of the population, making the connectivity ecosystem nationwide access. Likewise, the data infrastructure is ramping up its development, with an annual growth rate of cloud computing to be more than 30%, boasting 27 data centers of 11 domestic enterprises with 112MW of critical IT load.

Top potential ICT subsectors include: software, data center, cybersecurity

Software

The market value of Vietnam’s software sector is US$480 mil in 2022 and is expected to grow with a 5-year CAGR of 10.8% in the period 2023-2028. The market’s largest segment is Enterprise Software with a projected market volume of US$200mil in 2022. Outsouring revenues are mostly be generated in the United States.

Vietnam is growing fast to be one of the top software hubs in Southeast Asia. In recent years, the country has seen a surge in investment and development of IT-related industries. They now boast a thriving software sector that is attracting top talent and major companies from all over the world.

Let’s take a closer look at some of the factors making Vietnam a software hub in Southeast Asia.

A large, young population and low labor cost, which make Vietnam an attractive destination for outsourcing IT projects from other countries. The population is fairly young, with over 60% under 30 years old and more than half being millennials, with good education and above average English-language proficiency.

Low cost of living and operating costs. This facilitates cost savings when hiring skilled workers abroad (e.g., cheaper accommodation, food expenses) for key positions.

Strong facilities in IT-related education, with an emphasis on science, technology, engineering, and mathematics (STEM) subjects. As a result, Vietnam is now home to a number of international-standard universities that produce talented engineers and programmers. In total, Vietnam has 236 universities, 149 of which provide education for IT professionals, delivering more than 50,000 IT engineers to the labor market annually. This lands Vietnam on the list of the top 10 nations in the world for the highest number of IT students.

Fast-growing economy is another factor that has contributed to the country becoming a tech hub in Southeast Asia. Vietnam saw significant economic growth in recent years, with the country’s GDP increasing by 8% in 2022 (the first year recovering from Covid-19). Vietnam’s strong economic growth makes it an attractive location for software companies looking to expand their operations into Southeast Asia.

The global demand for software outsourcing services continues to grow, and many firms are turning to countries like Vietnam for their development needs. With a rapidly growing tech industry and a highly skilled workforce, Vietnam has established itself as a leading destination for software outsourcing. As a result, many software outsourcing companies in Vietnam have emerged strongly in recent years, providing a range of services including software development, testing, maintenance, and support. These companies have been able to tap into Vietnam’s favorable demographics.

Vietnam indeed has almost all of the ingredients necessary to become a leading software hub in Southeast Asia. The country has a large and skilled workforce, low labor costs, and a growing economy. The strong growth potential makes it an attractive location for companies looking to expand their operations in the region. With continued investment and development in the tech industry, Vietnam is poised to become one of the leading countries in Southeast Asia.

Data center

Under the impact of Covid-19, many activities have moved to online platforms and amount of data uploaded has been increasing. Asia Pacific, notably Southeast Asia, is an important region driving the growth of global data centers.

Asia Pacific data center market is the fastest growing and is on track to become the largest in the world over the next decade. The growth is mainly driven by huge tier-one markets like Tokyo, Shanghai, Singapore, Mumbai, Sydney and Seoul, and emerging Southeast Asian markets as Hanoi, Ho Chi Minh City, Bangkok, Kuala Lumpur and Jakarta.

Vietnam is one of 10 emerging markets on the global data center map. The growth drivers are believed to be the booming e-commerce market, and the growing cloud computing and financial technology (fintech) businesses. Attributed with political stability, physical security (no terrorism and relatively few natural disasters), and government commitment to IT infrastructure development, Vietnam has the necessary characteristics to become a major data center in the region.

Vietnam’s data center market grew 12.6% per year during 2019-2022 with a modest market size of approximately USD 300 mil in 2022, believed to be in a nascent stage of development. The market size is forecast to have an annual growth rate of 18.8% in the next 5 years.

As of 2022, Vietnam has 27 data centers located mostly in Hanoi and Ho Chi Minh City (except Da Nang 02 and Binh Duong 01) with diverse sizes, quality, and standards. The overall market is estimated at 112 MW of IT load (3-year CAGR of 13.3%), with several new operators and developers looking to add more supply to the market in the short to medium term.

About 80% of data centers are operated by local leading telecommunications companies such as VNPT IDC of the Vietnam Post and Telecommunications Group (VNPT), Viettel IDC of Viettel Group, FPT Telecom of FPT Group, or CMC.  Some other names include, KDDI Corporation, Hitachi Asia (Vietnam), Hewlett Packard Enterprise, SAP Vietnam, IBM Vietnam Company Ltd., Microsoft Vietnam and Amazon Web Services Vietnam.

Customers are mostly of wholesale and retail categories (occupying 68% and 24.8% market share respectively), with wholesale customers typically being businesses or organizations in the sectors of ITC, banking and finance, insurance, and government. Hyperscale customers take a modest share of 7.2%, typically being cloud service provides who normally source their DC needs in strong IT base nations/ territories such as Singapore, Hong Kong and Taiwan.

Expansion plans have been quite a few. Recently, in June 2022, Gaw Capital Partners completed the acquisition of a land plot in the HCM City High-Tech Park to develop a Tier-II data center, expected to be completed in 2024. Viettel and FPT plan to expand their data centers with investment of hundreds of million USD from now through 2030.

According to Decree 53 detailing a number of articles of the Cybersecurity Law, Vietnam’s data must be stored in the country.  World suppliers like Amazon and Microsoft wanting to expand in the Vietnam market must have plans to use data storage services of domestic suppliers. Foreign suppliers are looking for investment opportunities in data center projects in Vietnam.

Cybersecurity

Vietnam’s cybersecurity market is forecasted to reach about USD 200 million in total revenue in 2022 and is projected to grow at approximately 15 percent per year in the coming years.  The World Bank estimates that Vietnam’s digital economy will exceed USD 43 billion by 2025 as the country pursues projects in e-government, internet of things, smart cities, financial technology, artificial intelligence, etc. However, with this unprecedented growth and demand for digital services throughout the country, the public and private sectors face an increase in cyber threats, and attacks, that are sophisticated and pose a true threat to private information.

In an effort to improve the cybersecurity capabilities of the public sector, in June 2019 the Government of Vietnam issued Decree 14 stating that government agencies at both the national and local levels (municipal and provincial levels), as well as state-owned enterprises, are to strengthen their cybersecurity capabilities by implementing appropriate cybersecurity solutions. In particular, Decree 14 mandated that from 2020-2025 the public sector must spend at least 10 percent of their organization’s total annual information technology expenditure on cybersecurity solutions and initiatives. On 15 August 2022, the Vietnamese Government issued Decree 53/2022/ND-CP detailing a number of articles of the 2018 Cybersecurity Law, and which sets out the requirements for such local data storage and local presence requirements. Decree 53 comes into effect from 1 October 2022.

 

Send Us an Inquiry or RFP

B17-16, Sunrise City View, 33 Nguyen Huu Tho St., Dist. 7, Ho Chi Minh City, Vietnam

2/F Helios Tower A, 75 Tam Trinh St., Hoang Mai Dist., Hanoi, Vietnam

+84 775 121 131

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Modern retail – added dynamics from e-commerce https://dcpa.com.vn/industries/vietnam-modern-retail-ecommerce Fri, 05 May 2023 07:47:43 +0000 https://dcpa.com.vn/?p=6875 Maintaining strong growth momentum, with added dynamics from e-commerce. Foreign players outperform in both physical and electronic formats.

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MODERN RETAIL

Maintaining strong growth momentum, with added dynamics from e-commerce. Foreign players outperform in both physical and electronic formats.

Overview

Vietnam’s retail sales has continued to record good growth, maintaining a 5-year CARG of 7.6% (2017-2022) despite Covid-19 in some of these years, to reach almost USD 242 billion in 2022. In particular, modern retail is growing extremely fast, though notably in big urban areas, and is taking up an increasing portion of total retail sales. The emergence of modern retail formats (including e-commerce) and the strong participation of foreign retailers have brought a breath of fresh air and greatly changed the face of retail in Vietnam, bringing more choice and convenience for consumers.

Modern retail vs. traditional retail

Although modern retail has many advantages in attracting customers and is forecast to grow strongly in the future but in general, shopping at the GT (general trade) channel still accounts for a high proportion (at least 70%). Under competitive pressure from modern retail and e-commerce coupled with the special context of Covid-19, sale revenues of local market systems and other forms of GT in Vietnam have dwindled consistently, year after year, notably in big cities where people are inclined to technology and convenience, bringing huge opportunities for e-commerce, an emerging format of modern retail.

Since 1 Jan 2009, Vietnam has opened its doors for the retail business with 100% foreign ownership. They are authorized distributors of all products made in Vietnam and other products legally imported into Vietnam; excluding a number of long-term limits as prescribed by the Government such as pharmaceuticals. Since then, quite a few foreign-owned retailers have been licensed and operated in Vietnam, led by Asian-based giants.

Foreign-owned retailers in expansion

Foreign-owned retailers are expanding in Vietnam, probably even faster than local peers. For instance, Korean retail brand GS25 achieved a significant milestone in early November last year when it extended its operations to 200 stores in Vietnam. Thai retail group Central Retail ambitiously plans to double its operations in the country by developing 70 supermarkets (now rebranded GO from Big C) in 55 out of 63 provinces and cities over the next five years. Japan’s Uniqlo also launched four new stores in Hanoi and Ho Chi Minh City in 2022, while Japan’s MUJI established its first store in Ho Chi Minh City in late 2020. Kohnan Japan is another story of quick expansion, strongly associated with AEON Mall.

Of a different category (shopping malls rather than stores therein), Japanese-owned AEON Mall has also been aggressive with 7 massive shopping malls in the densely-populated outskirts of Ho Chi Minh City, Binh Duong, Hanoi and Hai Phong and plans to reach 20 shopping malls throughout Vietnam by 2025.

Also worthy of note, Vietnam has now replaced China as the third-largest foreign market for Korean retail group Lotte, which is also seeking to increase its market share.

Challenges faced by modern trade

Squeezed purchasing power or tightened spending due to increasing unemployment or lower disposable incomes. A large part of the population have taken measures to reduce their expenses over past year. This is as a result of growing global economic uncertainty as households hold back on buying big-ticket items in favor of saving for a rainy day. The root causes of this are a strengthening US dollar, escalating commodity prices, and decreasing consumer purchasing power have had a cumulative negative impact on the retail industry. In addition, labor-intensive industries like textiles, footwear, and aquaculture are facing challenges due to decreased purchasing power in key export markets like the US, Japan, and the EU.

Increasing competition among retailers notably between local and foreign-owned in the matters of site and location, pricing, and product diversity. While foreign-owned players tend to have less advantage over local peers in having access to good site and location, they offset this with competitive pricing and diversified product offerings besides shopping experiences and aggressive promotions.  Competition among local players is not less fierce. Long-established brands such as Coopmart is striving to maintain market share.

E-commerce – new dynamics of modern retail

Although it sounds sad, the Covid-19 pandemic was the very first driver for the boom of Vietnam’s e-commerce during 2020-2021 when various heath control measures such as lockdowns and physical restrictions (social distancing) were in place. Built on that strong base,  Vietnam’s e-commerce is projected to continue thriving in the coming years, though at lower paces, aided by a series of growth drivers such as the wave of digital transformation, consumers’ trust, technological infrastructure, and favorable mechanisms and policies issued by the Government.

Boasting some 100 cross-border e-commerce platforms, Vietnam has been ranked among the top five nations with regard to the sector’s growth of 20% a year by eMarketer. Last year, the country’s top four platforms – Shopee, Lazada, Tiki, and Sendo – generated 135 trillion VND (5.73 billion USD) in revenues. Meanwhile, the scale of the country’s retail e-commerce market was estimated at 16.4 billion USD in 2022, accounting for 6.8% of the country’s aggregate retail revenues (comprising goods and services). There were approximately 58.5 million Vietnamese people shopping online, with their spending averaging about USD272.

According to the White Book on Vietnamese E-Business 2022, up to 74.8% of Vietnamese internet users purchased goods and services online, with the most consumed commodities named apparel and cosmetics, household items, and technological and electronic devices. Nguyen Thanh Hung from the Vietnam E-commerce Association (VECOM) assessed that the market sees extensive room for growth as it obtained significant attention from the Government for related institutions, policies, human resources training, and cashless payments.

In addition, Nguyen Thi Minh Huyen, Deputy Director of the Vietnam E-commerce and Digital Economy Agency, said the Government targets pushing the ratio of e-commerce in the country’s total retail sales to over 20%. The local retail market is now worth some 250 billion USD. Tran Trong Tuyen, General Director of Sapo Technology JSC, highlighted advantages of the Vietnamese market such as foreign capital inflows, domestic technology development, and a comprehensive and convenient e-commerce ecosystem, among others. He also forecast a quick and firm growth for the sector in the coming years.

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