HOW TO EXPORT GUIDE: VIETNAM

HOW TO EXPORT GUIDE:

VIETNAM

All rights reserved to The Blue Ocean Vietnam Business Consulting and Ventures -

Prepared for Brazilian Embassy

November 2021

HOW TO EXPORT GUIDE: VIETNAM

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TABLE OF CONTENTS

TABLE OF CONTENTS ....................................................................................................... 1

LIST OF TABLES ................................................................................................................. 4

LIST OF FIGURES ............................................................................................................... 6

LIST OF CHARTS ................................................................................................................ 8

ABBREVIATIONS ................................................................................................................ 9

INTRODUCTION ................................................................................................................ 10

WHY VIETNAM? ............................................................................................................... 11

PART 1: VIETNAM OVERVIEW...................................................................................... 14

1.1. Country Profile .............................................................................................................. 14

1.1.1. Geography of Vietnam .............................................................................................. 14

1.1.2. The government organization .................................................................................... 19

1.1.3. The Vietnamese people ............................................................................................. 22

1.1.4. Transformation of Vietnam ....................................................................................... 25

1.1.5. The opening of Vietnam ............................................................................................ 27

1.2. Vietnamese Foreign Policy ........................................................................................... 29

1.2.1. Vietnam's External Relations ................................................................................... 29

1.2.2. General aspects of Vietnam's international policy...................................................... 32

1.3. The Vietnamese Economy ............................................................................................. 37

1.3.1. Main Macroeconomic Indicators ............................................................................... 38

1.3.2. Vietnam Social - Economic Development Strategy ................................................... 45

1.3.3. Vietnam Trade .......................................................................................................... 47

1.3.4. Commercial Disputes ................................................................................................ 54

1.3.5. Currency and Finance ............................................................................................... 56

1.4. Understanding the Vietnamese Consumer ................................................................... 61

1.4.1. A growing middle class ............................................................................................. 62

1.4.2. Consumer segments .................................................................................................. 63

1.4.3. Consumer standard.................................................................................................... 66

1.5. Vietnam Channels landscape ........................................................................................ 68

PART 2: VIETNAM AND BRAZIL ................................................................................... 81


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2.1. Relationship between Brazil and Vietnam ................................................................... 81

2.1.1. Relationship between Brazil and Asian countries ...................................................... 81

2.1.2. Bilateral Diplomatic Relationships between Vietnam and Brazil ............................... 83

2.1.3. Bilateral Trade .......................................................................................................... 85

2.1.3. Bilateral Investments................................................................................................. 90

2.1.4. Institutions for export promotion ............................................................................... 92

2.2. Opportunities and Challenges in Vietnam ................................................................... 93

2.2.1. Opportunities ............................................................................................................ 94

2.2.2. Challenges .............................................................................................................. 103

PART 3: HOW TO EXPORT TO VIETNAM ................................................................. 106

3.1. Common Route-to-market of Brazilian exporters in Vietnam .................................. 106

3.2. How to export to Vietnam ........................................................................................... 109

3.2.1. Exporting/Selling directly to customers in Vietnam (Direct commerce)................... 109

3.2.2. Exporting through a Vietnamese intermediary ......................................................... 111

3.2.3. Exporting through a Brazilian commercial presence in Vietnam .............................. 112

3.3. Payment terms ............................................................................................................. 129

3.4. Selling to the Vietnamese Consumer .......................................................................... 132

3.4.1. Distribution strategies ............................................................................................. 132

3.4.2. Highlighted challenges in the Vietnam market ........................................................ 136

3.4.3. Transport options .................................................................................................... 138

3.4.4. Advertising ............................................................................................................. 147

3.5. Dealing with Government ........................................................................................... 154

3.5.1. Customs .................................................................................................................. 154

3.5.2. Import Policies and Regulation ............................................................................... 166

3.5.3 Intellectual Property ................................................................................................. 168

PART 4: HOW TO INVEST IN VIETNAM .................................................................... 176

4.1. Investment Environment ............................................................................................. 176

4.1.1. Highlight project in 2020: ....................................................................................... 182

4.1.2. Some major projects in the 6 months of 2021: ......................................................... 183

4.1.3. The Government orientation in the next five years (2021 – 2025):........................... 184

4.1.4. Case study............................................................................................................... 185

4.2. Investment sectors ....................................................................................................... 197


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4.2.1. The manufacturing and processing sectors .............................................................. 197

4.2.2. The electricity production and distribution sector: ................................................... 198

4.2.3. Investment situation in renewable energy industry in Vietnam (up to 2020): ........... 199

4.3. Geographical Considerations ...................................................................................... 202

4.3.1. FDI situation across Vietnam: ................................................................................. 204

4.3.2. Other types of Economic zone in Vietnam: ............................................................. 205

4.4. State agencies related to Investment ........................................................................... 206

4.5. Main tax policies .......................................................................................................... 212

4.5.1. License tax (license fee) .......................................................................................... 212

4.5.2. Value Added Tax: ................................................................................................... 214

4.6. Human resources in Vietnam...................................................................................... 223

4.6.1. Human Resource Policies:....................................................................................... 227

4.6.2. Recruitment channels .............................................................................................. 231

PART 5. DOING BUSINESS IN VIETNAM .................................................................... 234

5.1. Common business customs in Vietnam ...................................................................... 234

5.2. A Typical Vietnamese Business Meeting .................................................................... 238

5.3. Trading techniques ...................................................................................................... 242

APPENDIX 2: .................................................................................................................... 247

APPENDIX 3: .................................................................................................................... 250

APPENDIX 4: .................................................................................................................... 252

APPENDIX 5: .................................................................................................................... 255

APPENDIX 6: .................................................................................................................... 259


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LIST OF TABLES

Table 1: Vietnam Overview ................................................................................................... 15

Table 2: Human Development Index of Vietnam .................................................................... 25

Table 3: Summary of Vietnam's FTAs as of May 2021........................................................... 33

Table 4: Number of free trade agreements in effect, which Vietnam has joined, by type ......... 37

Table 5: Main indicators......................................................................................................... 39

Table 6: Vietnamese inflation Rate by years(%) ..................................................................... 40

Table 7: Vietnamese Interest rate by years (%) ....................................................................... 40

Table 8: Vietnamese international trade indicators ................................................................. 41

Table 9: Foreign Direct Investment in Vietnam ...................................................................... 42

Table 10: Retail industry in Vietnam (annual) ........................................................................ 44

Table 11: Unemployment rate (% of the Labour Force) .......................................................... 45

Table 12: Top 10 most goods for exportation in Vietnam 2016 - 2020 (USD billion) ............. 50

Table 13: Vietnam export by principal areas and countries 2016 - 2020 (%) ........................... 51

Table 14: Top 10 most imported products in Vietnam 2016 - 2020 (USD billion) .................. 52

Table 15: Vietnam import by principal areas and countries 2016 - 2020 (%) .......................... 53

Table 16: Top countries which initiated trade remedy lawsuits with Vietnam up to 2020 ....... 55

Table 17: Main products be investigated in 2020 .................................................................... 55

Table 18: Rates of VND versus several major foreign currencies for the purpose of tax evaluation

for the period from 08/19/2021 to 08/25/2021: ....................................................................... 57

Table 19: Consumer group impacts ........................................................................................ 66

Table 20: Bilateral conventions signed between Vietnam and Brazil ...................................... 83

Table 21: Institutions for export promotion ............................................................................ 92

Table 22: Group of merchandise having limited import value from Brazil in 2020 ................. 95

Table 23: Group of merchandise having potential import value from Brazil in 2020 ............... 97

Table 24: Group of merchandise having high import value from Brazil in 2020 ..................... 99

Table 25: Advantages and Disadvantages of Distribution strategy with a local distributor .... 133

Table 26: Advantages and Disadvantages of distribution strategy as a Joint-venture ............. 134

Table 27: Distribution strategy as a Brazilian commercial presence ...................................... 135

Table 28: An average timeline for importing a standardized cargo of goods into Vietnam .... 154


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Table 29: Documents required for import include ................................................................. 155

Table 30: Common tariffs of imported goods in Vietnam ..................................................... 163

Table 31: Taxes are eligible to Group of merchandise having potential and high import value

from Brazil ........................................................................................................................... 164

Table 32: Group of merchandise having high import value from Brazil ................................ 165

Table 33: Top 11 countries invested into Vietnam most in 2020 and first half of 2021 ......... 177

Table 34: Total foreign direct investment inflow by sectors in Vietnam from 2017 - 2020 & First

half of 2021 (Million USD) .................................................................................................. 179

Table 35: Top 10 sectors having most newly registered foreign direct investment inflow in 2020

............................................................................................................................................ 182

Table 36: Government targets 2020-2030 for its energy needs:............................................. 198

Table 37: License Tax rates for economic Entities ................................................................ 213

Table 38: License Tax rates for Households and Individuals ................................................ 214

Table 39: CIT incentive based on specific condition ............................................................. 218

Table 40: Tax rates applicable to worldwide employment income in Vietnam ..................... 220

Table 41: Other taxes ........................................................................................................... 221

Table 42: Overtime rates in Vietnam .................................................................................... 228

Table 43: Holiday Calendar in Vietnam ............................................................................... 238


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LIST OF FIGURES

Figure 1: 8 geographical regions of Vietnam .......................................................................... 17

Figure 2: Vietnamese political system .................................................................................... 21

Figure 3: Timeline of Vietnam’s Major Economic Reforms Since 1986 ................................. 28

Figure 4: Vietnam Exports and Imports of Goods Overview 2020 .......................................... 48

Figure 5: The exchange rate of some currencies against the USD from January to September,

2021 ....................................................................................................................................... 58

Figure 6: Vietnam Banking System ........................................................................................ 60

Figure 7: Vietnam's region ..................................................................................................... 65

Figure 8: Constrained and Insulated consumer groups - Global .............................................. 66

Figure 9: Toad Market in Vietnam ......................................................................................... 70

Figure 10: Traditional Grocery in Vietnam ............................................................................. 71

Figure 11: One of the top Convenience Store in Vietnam - Circle K ....................................... 73

Figure 12: The biggest hypermarket chain in Vietnam GO! .................................................... 75

Figure 13: The leading local minimart chain - Bach Hoa Xanh ............................................... 76

Figure 14: Top eCommerce site web visits throughout 2019 of Vietnamese users .................. 77

Figure 15: Common Route-to-market of OEM’s goods ........................................................ 107

Figure 16: Common Route-to-market of raw material goods ................................................ 107

Figure 17: Common Route-to-market of final product goods ................................................ 108

Figure 18: Fado Vietnam ...................................................................................................... 111

Figure 19: Process of registration of RO Establishment License ........................................... 117

Figure 20: Process of registration of Branch Establishment License ..................................... 121

Figure 21: Road Transport in Vietnam ................................................................................. 139

Figure 22: Railway Transport in Vietnam ............................................................................. 139

Figure 23: Tan Cang – Cai Mep International Terminal ........................................................ 141

Figure 24: Noi Bai (Ha Noi) International Airport ................................................................ 142

Figure 25: Tan Son Nhat (Ho Chi Minh) International Airport ............................................. 143

Figure 26: Airports and main flight routes in Vietnam .......................................................... 147

Figure 27: A broad picture of media landscape ..................................................................... 149

Figure 28: Vietnam top social media platform in 2020 ......................................................... 150


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Figure 29: Outdoor Advertising in Vietnam ......................................................................... 151

Figure 30: Digital Outdoor Advertising in Vietnam .............................................................. 152

Figure 31: Trade Fair in Vietnam ......................................................................................... 153

Figure 32: Summary of Customs Clearance Procedures for general imported goods ............. 158

Figure 33: Summary of Customs Clearance Procedures for imported goods requiring technical

inspection (Pre-custom inspection) ....................................................................................... 160

Figure 34: Summary of Customs Clearance Procedures for imported goods requiring technical

inspection (post-customs inspection) .................................................................................... 161

Figure 35: Intellectual Property Registration Process ............................................................ 170

Figure 36: Handling intellectual property infringement process ............................................ 171

Figure 37: Four key economic regions of Vietnam ............................................................... 202

Figure 38: Top provinces receipt most foreign direct investment in Vietam .......................... 204

Figure 39: Procedure to apply for Investment Registration Certificate in Vietnam for Foreign

Investors .............................................................................................................................. 211


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LIST OF CHARTS

Chart 1: Vietnam population pyramid by age in 2009 and 2019 (%) ....................................... 23

Chart 2: Vietnam Consumer Confidence Index ....................................................................... 44

Chart 3:Vietnam Trade Balance 2016 - 2020 (USD billion) .................................................... 47

Chart 4: Import and Export turnover over month in 2021 (Billion USD)................................. 49

Chart 5: Economic class distribution ...................................................................................... 63

Chart 6: What are the behaviors that you think you're most likely to maintain once the lockdown

is over? .................................................................................................................................. 68

Chart 7: Vietnam Retail Sales contribution % ......................................................................... 69

Chart 8: Number of convenience stores by key players ........................................................... 72

Chart 9: Number of Hypermarkets and Supermarkets by key players ..................................... 74

Chart 10: Number of Minimart by key players ....................................................................... 74

Chart 11: Top 10 online shopping categories according to online shoppers in Vietnam in 2020

.............................................................................................................................................. 78

Chart 13: Trade balance between Vietnam and Brazil............................................................. 86

Chart 14: Value of top 10 merchandises Brazil exported most to Vietnam in 2020 ................. 87

Chart 15: Value of top 10 merchandises Brazil imported most from Vietnam in 2020 (million

USD) ..................................................................................................................................... 90

Chart 16: Volume of cargos across ports from 2015-2020 (Billion tons) ............................... 145

Chart 17: Vietnam's air transport and supply market share 2019 ........................................... 146

Chart 18: The major foreign direct investment recipient sectors of Vietnam in 2020............. 181

Chart 19: Number of people employed in thousand by sectors in Vietnam 2021 ................... 224


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ABBREVIATIONS

TERM DEFINITION

GDP Gross Domestic Product

Mil. Million

Bil. Billion

ASEAN Association of South East Asian Nations

B2B Business to Business

B2B2C Business to Business to Consumers

B2C Business to consumers

COD Cash On Delivery

VAT Value Added Tax

GSO General Statistics Office of Vietnam

MOFA Ministry of Foreign Affairs

MOIT Ministry of Industry and Trade

MARD Ministry of Agriculture and Rural Development

GDC General Department of Customs

AFS Agency of Food Safety

SBV The State Bank of Vietnam

WHO World Health Organization

HDI The Human Development Index

MPI Vietnam’s Ministry of Planning and Investment

HS The Harmonized System


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INTRODUCTION

Brazil is one of Vietnam’s top partners in South America. The two countries have been

supporting each other to boost socio-economic development in each country and working closely

in international organizations and multilateral forums. Brazilian exports to Vietnam have

recorded steady growth in various product categories based on different degrees of

industrialization, with benefits for both Vietnamese importers and Brazilian suppliers.

Vietnam and Brazil have much room for developing bilateral trade thanks to the similarities in

culture, geographical variety as well as climate and multiculturalism of the population. Yet, to

start doing business in Vietnam, Brazilians may need to understand various aspects of Vietnam,

which could be the major obstacle that many Brazilian businesses have to face due to the physical

and cultural distance. Understanding the differences between the way Vietnamese people and

Brazilians do business increases the opportunities for Brazilian exporters’ success in the

Vietnamese market.

This brief guide serves as an introduction to this market that is still so astonishing for many

Brazilians – you will find lots of helpful information which gives you an overview of the country,

the Vietnamese people, and the economy. Besides, the details on opportunities and challenges

consulted in this guide will help Brazilian businesses, as well as investors, understand and

prepare properly for a suitable way to enter the Vietnamese market.

Despite being called “Hoed to export guide - Vietnam” (title of the series of publications by the

Department of Trade Promotion and Investment of the Itamaraty on various markets), the guide

incorporates a fundamental chapter on “How to invest in Vietnam”, in order to subsidize

companies with an interest in the Vietnamese market.

The last section provides you with some indications and relevant contacts when doing business

in Vietnam which are essential for those who first explore this country’s market.


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WHY VIETNAM?

In the eyes of the foreigners, Vietnam is well-known as a country with a rich culture and history

spanning over 4,000 years. In the past, Vietnam’s economy was greatly affected by wars and

even embargoes from other countries. However, with the resilient nature of the Vietnamese

people and the continuous efforts of the Government, Vietnam has gradually re-integrated into

the world economy, and up to now, Vietnam is proud to be one of the stars of the emerging

markets universe.

Many years after the Renovation (Doi Moi) in 1986, Vietnam has changed in many aspects and

is now known as the country of dramatic development, the destination of foreign investors.

According to analysts from the World Bank and the think tank Brookings, Viet Nam’s economic

development can be explained by three main factors: “First, Vietnam has embraced trade

liberalization with gusto. Second, the country has complemented external liberalization with

domestic reforms through deregulation and lowering the cost of doing business. Finally, Vietnam

has invested heavily in human and physical capital, predominantly through public investments.”

The potential of the Vietnamese market is shown through the development of citizen’s living

standards, and the need of consumers is much higher than in the past. It is proven that Vietnamese

consumer spending is growing steadily from 2010 to 2020. Vietnam is currently categorized in

the group of lower-middle-income countries, according to the World Bank. This is the

opportunity for foreign companies to expand their business.

In addition, Vietnam is rising as a Foreign Direct Investment destination. Vietnam meets three

fundamental needs which every business always seeks when investing in one country are: Labour

force, socio-political stability, and legal system.

Firstly, Vietnam is now in a period of golden population structure – 68.94% of its population

were in working age, from 15 to 64 years old, in 2020, according to Statista. Besides, Vietnam

is strategically located in the center of Southeast Asia. It is also worth noting that Vietnam shares

borders with China. The country has a long coastline and is close to many international shipping

routes. These make Vietnam a prime location for trading. Additionally, Vietnam’s major cities

are also strategically located. Foreign businesses will find Hanoi - the capital, political and


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administrative hub in the north and Ho Chi Minh City - key economic hub of Vietnam in the

south. Having major cities on opposite ends of the country makes it easy to do business within

and outside the country. Furthermore, the country is a market economy, a member of the WTO,

and a party to multiple frameworks for international economic integration, including free trade

agreements with partners both within and outside the region. In particular, the country is part of

the Trans-Pacific Partnership negotiations. These factors all go some way to explaining why so

many choose to invest in Vietnam – and should draw in more foreign investors.

Secondly, Vietnam has been securing socio-political stability and is known to be one of the most

dynamic economies. Given its deep integration with the global economy, the Vietnamese

economy has been hit by the ongoing COVID-19 pandemic but has shown remarkable resilience.

GDP grew by 2.9% in 2020.

Last but not least, the Vietnamese government is committed to creating a fair and attractive

business environment for foreign investors, and constantly improving its legal framework and

institutions related to business and investment. The government has been working hard on

restructuring the economy and its model for growth, as well as enhancing national

competitiveness.

In the medium and long term, Vietnam will continue in its efforts to attract and use FDI inflows

to advance socio-economic development. The country will target “high quality” FDI inflows,

focusing on FDI projects that use advanced and friendly technologies, and use natural resources

in a sustainable way. It will also target projects with competitive products that could be part of

the global production network and value chain. This is an ample opportunity for Brazilian

businesses to consider when choosing to expand business abroad.


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PART 1: VIETNAM OVERVIEW


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PART 1: VIETNAM OVERVIEW

1.1. Country Profile

Vietnam is a rising country in Southeast Asia, witnessing significant GDP growth milestones,

especially when Vietnam's GDP receives positive growth in the context of the world economy

being stalled by Covid-19. Vietnam is undeniably an attractive destination for investors and

exporters from abroad, and Brazil is no exception.

Bilateral trade between Vietnam and Brazil has been growing since the two countries established

diplomatic relations in 1989. Brazil was the second largest exporter of soybeans and corn to

Vietnam in 2020. Major Brazil’s agricultural products exported to Vietnam include soybeans,

corn, wheat, timber, cotton, coffee, pepper, cashew nuts, tobacco, vegetables, fruits and products

originating from livestock. There are many similarities between Brazil and Vietnam: the natural

beauty, geographical variety, climate, and multiculturalism of the population. (Source: Vietnam

trade in 2020, the Ministry of Industry and Trade)

The relatively large distance that must be traveled for freight may have been the major

determinant of the level of trade between the two countries. However, these distances are no

greater than among many other trading partners.

There is potential for the current volume of trade between Vietnam and Brazil to be intensified,

especially given the encouragement of trade and the cooperation efforts between the Brazilian

and Vietnamese governments.

This first chapter will help Brazilian exporters have the most basic view of Vietnam: from basic

economic indicators to political institutions and the country's transformation after the war to the

present.

1.1.1. Geography of Vietnam

Officially named the Socialist Republic of Vietnam, Vietnam is located in the east of the

Indochina Peninsula in Southeast Asia. Vietnam lies in the tropical zone with a total area of

331,230 km2. The S-shaped country has a north-to-south distance of 1,650 kilometers and is

about 50 kilometers wide at the narrowest point. Vietnam is bordered by China to the north,


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Laos, and Cambodia to the west, the East Sea, and the Pacific Ocean to the east and south.

Vietnam's eastern border consists of over 3,444 km of beautiful coastline, which is ideal for the

development of maritime industries, trade and tourism and for its emergence as a shipping hub

for South East Asia and the world in general.

Table 1: Vietnam Overview

Official name Socialist Republic of Vietnam

Form of State One-party rule

Economic system Socialist-oriented market economy

Total Land area (sq. km) 331,230 sq. km

Local government 58 provinces and 5 centrally-controlled

municipalities

Total population (person) 97,338,583 (2020)

Climate Southern Vietnam has a tropical climate with 2

seasons (dry and rainy); while Northern

Vietnam (from Hai Van Pass onwards) has a

tropical monsoon climate, with 4 distinct

seasons (spring - summer - autumn - winter).

Main cities Hanoi (Capital), Ho Chi Minh City

(Commercial hub), Can Tho, Hai Phong, Da

Nang

Urbanization Urban population: 37.3% of total population

(2020)

Rate of urbanization: 2.98% annual rate of

change (2015-2020)

GDP (Nominal GDP) (2020) USD 271.2 billion


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GDP - composition, by sector (2020) Agriculture: 13.6%

Industry: 36.6%

Services: 38.7%

Labor force 56.5 million (2020)

Major export partners (2020) US, China, European Union (EU), ASEAN,

Japan, South Korea

Major import partners (2020) China, South Korea, ASEAN, Japan, Taiwan,

EU

Main exports (2020) Consumer electronics, machinery and

mechanical appliances, garments and

footwears

Main Agricultural products for 2020

exportation

Rice, coffee, rubber, tea, pepper, soybeans,

cashews, sugar cane, peanuts, bananas, pork,

poultry, seafood

Main Agricultural products for 2020

importation

Animal feed, Corn, Vegetables, Wheat,

Soybeans

Main imports (2020) Electronics, fuels, fabrics, plastics, chemical

products

Major sources of FDI Singapore, China, Taiwan, HongKong, South

Korea, Japan

Source: CEIC, WorldBank IMF World Economic Outlook Database (April 2021), Knoema,

GSO Vietnam

Data aggregated by TBO


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Figure 1: 8 geographical regions of

Vietnam

Vietnam is a country of tropical lowlands, hills,

and densely forested highlands, with level land

covering no more than 20% of the area. The

country is divided into 8 geographical regions:

The Northern Vietnam has Northern Midlands

and Mountains (including Northeast and

Northwest), Red River Delta; The Central of

Vietnam has North Central Coast; South

Central Coast, and Central Highlands; The

Southern Vietnam has Southeast and Mekong

River Delta. The highest point in Vietnam is

Fansipan, at 3.143 km above sea level, in the

northwest.

The country has 58 provinces and 5 centrally-controlled municipalities which are Hanoi, Hai

Phong, Da Nang, Ho Chi Minh City, and Can Tho. Lying on the right bank of the Red River in

northern Vietnam, approximately 137 km inland from the South China Sea, is the capital city of

Vietnam, Ha Noi. Located in the country's Southeast region, Ho Chi Minh City - the country's

economic center, is an area that has long been a focus of foreign investment inflows thanks to

impressive growth fueled by a massive energy sector and thriving manufacturing industry.

Vietnam is located in the tropical belt which imparts high temperatures and humidity to the

country all year round. Therefore, the climate between regions of Vietnam is also very different:

(1) The Northern region is a tropical monsoon which bears four distinct seasons (spring,

summer, autumn, and winter) and is influenced by the northeastern and southeastern

monsoon.

(2) The Southern region is less influenced by monsoons, so the climate is quite stable,

being hot all year round and divided into two distinct seasons (dry and rainy season).


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(3) The Central of Vietnam is surrounded by mountain ranges stretching from the west

to the east. For this position, the climate in Central Vietnam is harsher than that in

Northern Vietnam and Southern Vietnam. In winter the whole area is affected by cold

weather with rain. This is different from the dry weather in the Northern region. Another

characteristic feature of the central climate is the southwest monsoon (also known as Lao

wind). In summer, the southwest monsoon blows up, causing hot and dry weather. During

this time, the daily temperature can reach over 40 degrees Celsius while the air humidity

is very low.

The average temperature in Vietnam ranges from 21ºC to 27ºC and increases gradually from

north to south. In the summer, the average temperature is 25ºC (Hanoi 23ºC, Hue 25ºC, Ho Chi

Minh City 26ºC). Regarding winter in the North, the lowest temperature occurs in December and

January, at about 5ºC. In the northern mountainous areas (Sa Pa, Tam Dao, Hoang Lien Son)

temperatures can drop to 0ºC, with snowfall.

Vietnam absorbs large amounts of solar radiation with the amount of sunny time ranging from

1,400 to 3,000 hours per year. Humidity is approximately 80% or even increases to above 90%

in the rainy season and drizzly period.

The total annual rainfall of Vietnam is about 700 - 5,000mm which often falls into the range of

1,400 - 2,400mm. The monthly rainfall is unevenly distributed, mainly focusing on the rainy

season. In the North, the rainy season usually starts in April and ends in mid-October. In the

South, the rainy season lasts from early May to the end of November. Each year, particularly

from July to November, there is an average of 5-7 storms hitting Vietnam coastal areas, which

affect the lives and assets of Vietnamese people as well as their economic activities.

Although many westerners still imagine Vietnam through the lens of war, it is in reality a country

filled with captivating natural beauty and tranquil village life. Vietnam’s highlands and rainforest

regions, far from being devastated, continue to yield new species and team with exotic wildlife.

Its islands and beaches are among the finest in all of Southeast Asia. Those beautiful landscapes

make Vietnam an attractive destination to visit among Southeast Asian countries.


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1.1.2. The government organization

The political structure of Vietnam consists of three main pillars:

The Vietnam Communist Party

Vietnam is a socialist country under the leadership of the Vietnam Communist Party. The Party

holds a National congress every five years to outline the country's overall direction and future

course as well as to formalize policies.

The most powerful body is the National Congress of Delegates. The National Congress of

Deputies is held every 5 years, during which the Party Central Committee will be elected and

the Central Committee will continue to elect the Politburo and General Secretary.

The Party Central Committee is responsible for organizing and directing the implementation of

the Political Platform, the Party Charter, and resolutions of the National Congress of Deputies;

deciding on guidelines and policies on domestic and foreign affairs, social work and party

building work; preparing the National Congress of Deputies for the next term, the Extraordinary

National Congress of Deputies (if any).

The General Secretary is the head of the Party Central Committee, presides over the work of the

Party Central Committee, the Politburo, the Secretariat and has other powers according to the

Party's regulations.

The Politburo's responsibilities are specified in Clause 2, Article 17 of the Party's Charter,

specifically as follows: "The Politburo leads, inspects and supervises the implementation of

resolutions of the National Congress, resolutions of the Central Executive Committee; decides

on matters on guidelines, policies, organization and personnel; decides to convene and prepare

the contents of meetings of the Central Committee; reports to the meeting of the Central

Committee or at the request of the Central Committee."

Under the management of the National Congress of Delegates is the Party Committee at the

provincial/city, district, commune/ward levels.

State – includes the National Assembly, the President, the Government, the Supreme People's

Court and the Supreme People's Procuracy.


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The National Assembly, which includes 498 members and is open to non-Party members, is the

supreme organ of state and the only body with constitutional and legislative power. The President

and the Prime Minister are elected by the National Assembly.

According to the Constitution of the Socialist Republic of Vietnam 2013, the President is the

Head of State and shall represent the Socialist Republic of Vietnam internally and externally.

The current President has been Nguyen Xuan Phuc since July 2021 and Secretary General has

been Nguyen Phu Trong since 23 October 2018.

The Government is the highest state administrative organ of the Socialist Republic of Vietnam,

exercising the executive power. The Prime Minister is the head of the Government. Below are

the Deputy Prime Ministers, the Ministers, and the Heads of ministerial-level agencies. The

current Prime Minister Pham Minh Chinh has served since July 2021. The Government manages

the country through the People's Committees at all levels. Ministers and Heads of ministerial-

level agencies perform their duties through their respective departments, divisions, and boards

corresponding to the province/city, district, commune/ward.

The Supreme People's Court, the local People's Courts established by law, are the judicial organs

of the Socialist Republic of Vietnam. Under special circumstances, the National Assembly may

decide to set up a Special Tribunal. At the grassroots, appropriate popular organizations shall be

set up to deal with minor offenses and disputes among the people according to the provisions of

the law.

The Supreme People's Procuracy supervises and controls obedience to the law by Ministries,

organ of ministerial rank, other organs under the Government, local organs of power, economic

bodies, social organizations, people's and armed units and citizens. It exercises the right to

initiate public prosecution, ensures a serious and uniform implementation of the law.

Vietnam Fatherland Front

The Vietnam Fatherland Front is an organization of political alliances which are the Ho Chi

Minh Communist Youth Union, the Labor Confederation, the Vietnam Women's Union, the

Vietnam Farmers' Union, Veterans Association, ... These organizations have local branches to


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carry out their responsibilities. The Vietnam Fatherland Front also organizes management

through its local divisions.

Figure 2: Vietnamese political system

Source: Data aggregated by TBO

The Council of State commands 22 ministries and ministerial-level agencies, along with

numerous regulatory committees, and understanding these agencies is of great importance for

Brazilian exporters.

The most relevant ministries and departments are:

● Ministry of Foreign Affairs (MOFA) - carrying out diplomatic work related to the border,

national territory, overseas Vietnamese community; signing and implementing international

treaties and agreements; managing the representative missions of the Socialist Republic of

Vietnam abroad and the operation of foreign representative missions in Vietnam; managing

public services in the fields under the State management of the Ministry of Foreign Affairs

in accordance with law.


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● Ministry of Industry and Trade (MOIT) - performing the function of State management

of industry, commerce and domestic commerce; import and export, border trade activities;

development of foreign markets; market management; trade promotion commercial

services; international economic integration; competition, consumer protection, trade

defense; public services in sectors and fields under the ministry's State management.

● Ministry of Agriculture and Rural Development (MARD)- performing the function of

State management in the following sectors and fields: Agriculture, forestry, salt production,

fisheries, irrigation, natural disaster prevention and control, rural development; performing

State management of public services in the branches and domains under the management of

the ministry in accordance with law; carrying out international cooperation and international

economic integration in the branches and domains under the ministry's State management

in accordance with law.

● General Department of Customs (GDC) - carrying out the inspection and supervision of

goods and means of transport; preventing and combating smuggling and illegal cross-border

transportation of goods; organizing the implementation of the tax law on imported and

exported goods; making statistics of exported and imported goods; proposing policies and

measures for State management of customs over export, import, exit, entry and transit

activities and tax policies for exported and imported goods.

● Agency of Food Safety (AFS) is a specialized department under the Ministry of Health,

performing the function of advising and assisting the Minister of Health in State

management and organizing law enforcement in the field of food safety under the

responsibility of the Ministry of Health as assigned nationwide.

● The State Bank of Vietnam (SBV) - acting as the Central Bank of the country, having the

same function as other central banks in countries around the world, influencing the entire

economy through the financial system.

1.1.3. The Vietnamese people

Vietnam today is experiencing rapid demographic and social change. The population reached

97.3 million in 2020 (up from about 60 million in 1986) and is expected to expand to 120 million

people by 2050. According to the 2019 Population Census Report, there was 55.5% of the

population in Vietnam under 35 years of age, with a life expectancy of 76 years, the highest


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among countries at similar income levels. Vietnam enjoys what is known as the “golden

population structure”, which means for every two people or more working, there is only one

dependent person. This demographic bonus provides Vietnam with a unique socio-economic

development opportunity to take advantage of the young labor force and push its economic

growth. And Vietnam’s emerging middle class, currently accounting for 13% of the population,

is expected to reach 26% by 2026. (Source: Worldbank)

Chart 1: Vietnam population pyramid by age in 2009 and 2019 (%)

Source: GSO Vietnam

Although witnessing a golden population period, Brazilian exporters should also pay attention

to the aging of Vietnam's population. With birth rates dropping and life expectancy rising,

Vietnam is among the world's most rapidly aging societies. The aging index in 2019 was 48.8%,

an increase of 13.3 percentage points compared to 2009. This shows that in the coming time, the

consumption trend of Vietnamese people will also change significantly. However, aging also

presents economic opportunities, as demographic shifts result in changing consumption patterns,

with services associated with the elderly offering avenues for market expansion. Observing this

point carefully will help Brazilian exporters planning well when entering Vietnam.

Health outcomes have improved in tandem with rising living standards. According to the World

Health Organization (WHO), in 2020, 90.85% of the population was covered under Social health

insurance - which is the main public financing method for healthcare in Vietnam. This is a


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remarkable number when compared to 2015 - when the revised Law on Health Insurance took

effect, only 76.5% of the population was covered under Social health insurance. The COVID-19

outbreak has proven that health is a priority for most Vietnamese. During Covid pandemic in

2020, many pharmaceutical companies registered positive results. Vietnam’s largest

pharmaceutical firm, DHG Pharmaceutical Joint Stock Company, had a USD 5 million profit,

which represented a 31% year-on-year increase. (Source: Worldbank)

Language and Religion

The national language is Vietnamese, which is widely spoken throughout the country. In 2018,

more than 95% of the Vietnamese population aged 15 and older was literate. English is the most

popular foreign language and is commonly used in major urban areas. English study is obligatory

in most schools. Other common foreign languages are French, Chinese, and Japanese. Vietnam’s

population practices a variety of religions. These include religions based on popular beliefs,

religions brought to Vietnam from other countries, and several indigenous religious groups.

Buddhism is the largest of the major world religions in Vietnam, followed by Protestantism,

Catholicism, Caodaism, Hoahaoism and others.

The Vietnamese living in the territory of Vietnam today are mainly Kinh people (87%) and 54

ethnic minority communities. The Kinh people are not a homogeneous ethnic community in

origin, but rather a collection of dozens of ethnic groups that have been assimilated since ancient

times of three major communities, but today all share a common identity.

Education and training

According to the results of the EPI survey conducted annually by EF, a multinational language

training company, which interviewed over 910,000 adults in 88 countries and territories that did

not use English as a native language, Vietnamese is in the group of moderately proficient English

users whose EPI reached 53.12/100, ranked 7/21 in Asia and 41/88 in the world.

The Human Development Index (HDI) of Vietnam has continuously improved, making Vietnam

belong to the world's group of countries with high average human development. Between 1990

and 2019, Viet Nam’s HDI value increased from 0.483 to 0.704, an increase of 45.8%.


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Table 2: Human Development Index of Vietnam

Indicators 2016 2017 2018 2019

Human Development Index (HDI) (Value) 0.693 0.696 0.70 0.704

Source: UNDP Report 2020

1.1.4. Transformation of Vietnam

Vietnam after the war from 1975 to 1986

When the Americans left in 1975 and Vietnam was shut off from trade with many Western

nations, goods stopped flowing into the country. Many Vietnamese have compensated by

purchasing goods on the black market (the informal, unregulated, and illegal economy).

Close to 80% of the Vietnamese population lived in rural areas, primarily in small villages.

American bombing during the Vietnam War destroyed many roads, bridges, rails, and ports, and

the country continued to struggle with modern transportation. The poor condition of the

railroads, ports, and roads continued to hamper Vietnam's ability to increase industrial

productivity.

Motorbikes were a popular means of transportation for successful Vietnamese. Most families

used bicycles, and traveled longer distances by bus, ferry, or boat.

35 years of Renovation - Doi Moi (from 1986 to now)

The economic and political reform policies, launched in Vietnam in 1986 known as Doi Moi,

translated literally as "Renovation", have spurred rapid economic growth, transforming what was

then one of the world’s poorest nations into a lower-middle-income country. Vietnam now is

one of the most dynamic emerging countries in the East Asia region. Between 2002 and 2018,

GDP per capita increased by 2.7 times, which then reached USD 2,785 in 2020, and over 45

million people were lifted out of poverty. Poverty rates declined sharply from over 70% to below

6% (USD 3.2/day PPP). Over the past 35 years, the provision of basic services has improved

significantly. Access of households to infrastructure services has increased dramatically.

Vietnam’s energy sector is among the most noticeable success stories in the developing world.


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Power losses in transmission and distribution were at or close to best-practice international

standards, and rates of consumers' access to electricity were almost 100% (World Bank 2019).

Rural household electrification increased from below 50% in 1990 to almost 100% today.

However, Vietnam’s rapid growth and industrialization have had detrimental impacts on the

environment and natural assets. Electricity consumption has tripled over the past decade,

growing faster than output. Given the increasing reliance of fossil fuels, the power sector itself

accounts for nearly two-thirds of the country’s greenhouse gas emissions. There is an urgent

need to accelerate the clean energy transition. Over the past two decades, Vietnam has emerged

as the fastest growing per-capita greenhouse gas emitters in the world – growing at about 5%

annually. Demand for water continues to increase, while water productivity is low, about 12%

of global benchmarks. Unsustainable exploitation of natural assets such as sand, fisheries, and

timber could negatively affect prospects for long-term growth. Compounding the problem is the

reality that much of Vietnam’s population and economy is highly vulnerable to climate impacts.

Urbanization and substantial economic and population growth are causing rapidly increasing

waste management and pollution challenges. Waste generation in Vietnam is expected to double

in less than 15 years. Linked to this is the issue of marine plastics. 90% of global marine plastic

pollution is estimated to come from just 10 in-land rivers, and the Mekong River is one of them.

Vietnam is among the 10 countries worldwide that are most affected by air pollution. Besides,

water pollution is also one of the top concerns in Vietnam, and it causes high costs on the

productivity of critical sectors and human health.

The government is working to lower the environmental footprint of the country’s growth and

effectively mitigate and adapt to climate change. Key strategies and plans to stimulate green

growth and sustainable use of its natural assets are in place.

Given its deep integration with the global economy, the Vietnamese economy has been hit by

the ongoing COVID-19 pandemic but has shown remarkable resilience. GDP grew by 2.9% in

2020. It was one of the few countries in the world to do so. However, the crisis also left a lasting

impact on households, with 45% of households reporting lower household income in January

2021 than in January 2020. Vietnam’s economy is expected to have a better recovery and grow

3.8% in 2021 in the context that COVID-19 still impacts worldwide.


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1.1.5. The opening of Vietnam

Since the late 1970s and mid-1980s, all socialist countries in general and Vietnam especially

have carried out the reforming, opening up and implemented policies that are suitable for the

development trend of humankind. Thus, has achieved many significant achievements in all fields

of politics, economy, culture, society, national defense, and other fields.


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Figure 3: Timeline of Vietnam’s Major Economic Reforms Since 1986


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1.2. Vietnamese Foreign Policy

Vietnam is today a responsible member of the international community, it proved through

Vietnam’s proactiveness in contributing to global organizations. Vietnamese foreign policy is

aimed primarily at promoting economic development in the country. Vietnam today has

established diplomatic relations with nearly 189 countries, including all world great powers.

Vietnam has started trade relations with 221 countries and territories, signed trade agreements

with 76 countries and Most Favored Nation status with 72 countries and territories. Apart from

strengthening bilateral relations, Vietnam also continuously improves its relations with

international and regional organizations such as the United Nations, European Union, ASEAN,

APEC, and ASEM, thus making positive contributions to the activities of these organizations in

accordance with Vietnam's national strengths and interests.

1.2.1. Vietnam's External Relations

Vietnam is a country with a diverse international relationship which enhances Vietnam’s

international prestige.

In terms of foreign policy, Vietnam always aims to become a friendly and reliable partner of all

countries in the international community, to take part in international and regional cooperation

processes. The Vietnamese government has consistently implemented the foreign policy line of

independence, self-reliance, peace, cooperation and development, the foreign policy of openness

and diversification and multilateralization of international relations. Vietnam works toward

proactively and actively engaging in international economic integration while expanding

international cooperation in other fields.

In the current Covid context worldwide, Vietnam’s authorities have focused on the core line of

Foreign Policy, and taken flexible actions to overcome hard times:

- Firstly, Vietnam’s cooperation with other countries, especially with neighboring

countries and important partners, has been continuously strengthened and promoted.

Despite facing difficulties caused by the pandemic, Vietnam’s authorities still promoted


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many diplomatic exchanges and cooperation with other countries, especially online

exchanges at all levels.

- Secondly, the year 2020 made an important mark in promoting and raising the level of

Vietnam's multilateral foreign policy. Vietnam’s authorities took success on many

international responsibilities, including the 2020 ASEAN Chair and 41st General

Assembly of the ASEAN Inter-Parliamentary Assembly (AIPA-41), Non-Permanent

Member of the United Nations Security Council in the first year of the term 2020-2021.

- Thirdly, Vietnam’s international economic integration has achieved breakthrough

progress, creating an additional driving force for rapid and sustainable growth of the

economy. The effective implementation of many FTAs makes a significant contribution

to Vietnam’s achievement in maintaining one of the highest growth rates in the world. In

2020, Vietnam's export value increased by 6.5% compared to 2019. Vietnam has become

one of the potential destinations for investment in the world.

- Fourthly, the work on the border and territory demarcation had many positive results.

Vietnam and Cambodia exchanged ratification documents, including the approval of two

2019 Supplementary Treaty, and the Protocol on land border demarcation and marker

planting, recognizing 84% of the demarcation’s achievement. Vietnam and China

celebrated the 20th anniversary of Land Border Treaty signing and 10 years of

implementing 3 legal documents on land borders, which are Protocol on border

demarcation and marker planting, the Agreement on border management regulations, and

the Agreement on border gates and land border gate management regulations. These were

achievements of great significance, contributing to building a border line of peace,

friendship, cooperation, and development with neighboring countries.

- Fifthly, the work of cultural statecraft and foreign information were actively

implemented, especially the use of digital technology to promote Vietnam to the world

via many innovative products and ways.

The Vietnam Communist Party National Congress, held once every five years, is the biggest

exercise of collective policy-making, including foreign policy, in Vietnam. The latest national

congress - The 13th National party congress was held in Hanoi from January 25th to Feb 1st,

2021.


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After the 13th Congress, Vietnamese authorities have planned and unified the next priorities in

later years. According to the new Minister of Foreign Affairs Bui Thanh Son, Vietnam will

continue to have a foreign policy of independence, sovereignty, peace, cooperation and

development, diversification and multi-lateralization, proactive and active in-depth and

comprehensive international integration. Vietnam stands ready to be a trusted friend and partner

to all countries in the international community, with the spirit of cooperation, respect for

international law, fairness and win-win policies.

In the next few years, the Party’s foreign policy could be materialized into four priorities, as

below:

● Before all else, Vietnam focuses on deepening the relations with all important partners

of the country, especially neighboring countries, countries with which Vietnam’s

authorities have strategic partnership and comprehensive partnership, and traditional

friends. This priority is consistent with the government’s foreign policy so far.

● Next in order, Vietnamese authorities will focus on national development, also keep in

mind that political and cultural diplomacy, or overseas Vietnamese policies all serve the

goal of contributing to national development. Economic diplomacy will naturally be a

key pillar, attracting foreign resources to either add to or complement domestic resources

and factors. On the authority of this statement, Brazilian companies have so many

favorable conditions when doing business in Vietnam.

● Furthermore, Vietnam continues to proactively and actively participate in multilateral

forums and organizations, which will allow authorities to take part in the shaping and

development of rules. Also, as a responsible member of the international community,

Vietnam’s authorities would propose initiatives to help further promote the standing of

the country.

● In closing, the government considers citizen protection work a key task to maintain the

connection between overseas and the homeland. This is also the State’s policy towards

the Vietnamese overseas community. Vietnamese people have a high sense of national

pride, this is the noticeable characteristic that foreign investors should be aware of when

doing business with Vietnamese people.


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1.2.2. General aspects of Vietnam's international policy

Vietnam started focusing on breaking the embargo of Western countries, from after being unified

in 1975 up to 1990. The country at that time not only maintained relations with countries in the

socialist bloc but also gradually expanded economic cooperation to the outside. Typical events

may refer to as Vietnam opened an ODA with Japan, established diplomatic relations with many

countries, normalized and established relations with international economic organizations such

as the IMF, World Bank. In February 1994, the US announced its decision to lift the trade

embargo against Vietnam.

The year 1995 is considered an important milestone in the country's international integration

process. In July 1995, Vietnam officially became the seventh member of ASEAN. Joining

ASEAN was a historic and strategic decision, which created great benefits for Vietnam and made

an important contribution to the development of the bloc including expanding ASEAN into a 10-

nation bloc. Also in July 1995, the US and Vietnam announced their decision to normalize

diplomatic relations between the two countries. And in the same year, Vietnam signed a

Framework Agreement on Cooperation with the European Community in Belgium. Thus, in

1995, Vietnam simultaneously carried out three major external events, which opened the stage

of international integration.

In 2000, Vietnam and the US signed a Bilateral Trade Agreement (BTA) and had the first official

visit of the 42nd President of the United States - Mr. Bill Clinton.

In 2004, Vietnam was the host country of the Asia-Europe Meeting (ASEM) after participating

as a founding member for 8 years (1996). In 2006, Vietnam hosted the APEC Summit Week,

also 8 years after joining (1998). In 2007, Vietnam joined the World Trade Organization (WTO).

The years 2006, 2007 marked a higher stage of Vietnam's integration with the world.

International integration contributes to breaking the siege, embargo, and enhancing Vietnam's

position in the international arena. This is reflected in the fact that Vietnam has established

diplomatic, economic - trade relations with most countries, regions, and territories and has been

a member of many international organizations in the region and the world.


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For trade relations with countries and regions, international trade policy plays an important role

because it affects taxes and quotas of exported or imported goods. Vietnam has shown its

willingness to trade with other countries through many signed FTAs.

Table 3: Summary of Vietnam's FTAs as of May 2021

No. Free trade agreements Status Partners

Free trade agreements in force

1 AFTA In force since 1993 ASEAN

2 ACFTA In force since 2003 ASEAN, China

3 AKFTA In force since 2007 ASEAN, Korea

4 AJCEP In force since 2008 ASEAN, Japan

5 VJEPA In force since 2009 Vietnam, Japan

6 AIFTA In force since 2010 ASEAN, India

7 AANZFTA In force since 2010 ASEAN, Australia, New

Zealand

8 VCFTA In force since 2014 Vietnam, Chile

9 VKFTA In force since 2015 Vietnam, Korea

10 VN – EAEU FTA In force since 2016 Vietnam, Russia, Belarus,

Armenia, Kazakhstan,

Kyrgyzstan

11 CPTPP

(Formerly TPP)

In force since

December 30, 2018

In force in Vietnam

since January 14, 2019

Vietnam, Canada, Mexico, Peru,

Chile, New Zealand, Australia,

Japan, Singapore, Brunei,

Malaysia


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12

AHKFTA

In force in Hong Kong

(China), Laos,

Myanmar, Thailand,

Singapore, and Vietnam

since June 11, 2019

ASEAN, Hong Kong (China)

13 EVFTA In force since August 1,

2020

Vietnam, EU (27 members)

14 UKVFTA In force since May 1,

2021

Vietnam, United Kingdom

FTA has not been ratified, coming into effect soon

15 RCEP Signed in November

15, 2020

ASEAN, China, Korea, Japan,

Australia, New Zealand

Free trade agreements in negotiation

16 Vietnam – EFTA FTA Commencement of

negotiations in May

2012

Vietnam, EFTA (Switzerland,

Norway, Iceland, Liechtenstein)

17 Vietnam - Israel FTA Commencement of

negotiations in

December 2015

Vietnam, Israel

Source: Vietnam Chamber of Commerce and Industry

Over the past time, Vietnam has joined many regional and bilateral Free Trade Agreements

(FTAs), such as signing FTAs between ASEAN and China (2004), ASEAN - Korea (2006),

ASEAN - Japan (2008), ASEAN - India (2010), ASEAN - Australia & New Zealand (2010).

Among them, the Comprehensive Economic Partnership Agreement with Japan has eliminated

tariffs on 1,261 lines of agricultural products from Vietnam by 2019. By the end of the roadmap

by 2026, Japan will have been committing to eliminating tariffs on 96.45% of the total tariff lines


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for Vietnamese goods (mainly agricultural products, seafood, textiles, footwear, and wooden

furniture, electronic components…).

Vietnam signed a bilateral FTA between Vietnam and Chile in 2011. This is Vietnam's first FTA

with a Latin - American country. This FTA includes commitments on goods and goods-related

issues, excluding commitments on services and investment... In terms of Mercosul countries,

Vietnam and this group of countries have shown interest in negotiating an FTA. An exploratory

dialogue on possible negotiations was finalized in 2020 with positive results. Currently, impact

studies and public consultations are ongoing in Mercosul countries on a possible FTA, and the

issue is expected to remain in the group's agenda.

Besides the ASEAN - Korea FTA (AKFTA), Vietnam also signed the Vietnam - Korea Free

Trade Agreement (VKFTA) in 2015, in which Korea gives more incentives in the fields of goods,

services and investment. VKFTA does not replace AKFTA, but both of these FTAs are in effect

and companies can choose to use the FTA which is more beneficial to them.

Free Trade Agreement Vietnam - Eurasian Economic Union (VN-EAEU FTA) which currently

includes the Russian Federation, the Republic of Belarus, the Republic of Kazakhstan, the

Republic of Armenia, and the Kyrgyz Republic, was signed on May 29, 2015 and took effect

from October 5, 2016. Through this agreement, Vietnam and the EAEU would increase the types

of commodities exported to one another market.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),

formerly known as the Trans-Pacific Partnership (TPP), was officially signed in March 2018 by

11 TPP member countries (excluding the US). The CPTPP was signed on March 8, 2018 in

Santiago, Chile, and officially entered into force on December 30, 2018 for the first group of 6

countries to complete the Agreement ratification procedures including Mexico, Japan,

Singapore, New Zealand, Canada and Australia. For Vietnam, the Agreement took effect on

January 14, 2019.

The EVFTA Agreement took effect on August 1st, 2020. As soon as the Agreement came into

effect, the EU eliminated import taxes on about 85.6% of tariff lines, equivalent to 70.3% of

Vietnam's export turnover to the EU. According to the Agreement, after 7 years from the date of

entry into force, the EU will eliminate import tax on 99.2% of tariff lines, equivalent to 99.7%


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of Vietnam's export turnover. For the remaining 0.3% of export turnover, the EU will allow a

tariff quota with an import tax within the quota of 0%.

The Free Trade Agreement between Vietnam and the United Kingdom (UKVFTA) was officially

signed in London on December 29, 2020. The Agreement took effect temporarily on January 1,

2021, and officially took effect from May 1, 2021.

The Regional Comprehensive Economic Partnership (RCEP - also known as ASEAN+6) was

signed by ASEAN, and six partners that already have FTAs with ASEAN including China,

Korea, Japan, India, Australia, and New Zealand. RCEP, which was signed on November 15,

2020, is the largest-scale free trade agreement (FTA) that Vietnam has participated in up to now.

RCEP covers 30% of the world's population, accounting for 32% of global GDP. This agreement

has not yet come into force, as it needs to be ratified by at least six ASEAN countries and three

outside the bloc. Just like the recently ratified EVFTA and the CPTPP, the RCEP will reduce

tariffs and set trade rules, and help link supply chains, particularly as governments grapple with

COVID-19 effects. The FTA is expected to cover all aspects of the business including trade,

services, e-commerce, telecommunications, and copyright though negotiations over some

aspects still need to be finalized. Tariffs are expected to be reduced within 20 years.

In addition, Vietnam is still making efforts in the process of negotiating other trade agreements.

The FTA between Vietnam and the EFTA bloc (including 4 countries Switzerland, Norway,

Iceland, Liechtenstein) started negotiations in May 2012. Currently, this FTA is still in the

negotiation process.

Regarding the FTA between Vietnam and Israel (VIFTA) and with the EFTA bloc: The Ministry

of Industry and Trade has coordinated with ministries and sectors to promote negotiations,

especially in key negotiation areas such as trade in goods and services, thereby creating a

favorable basis for promoting the negotiation process.


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Table 4: Number of free trade agreements in effect, which Vietnam has joined, by type

Type of Free trade

agreement Free trade agreement Quantity

Bilateral Agreement

VJEPA (2009), VCFTA (2014), VKFTA

(2015), VN – EAEU FTA (2016),

UKVFTA (2021), EVFTA (2020)

6

Multilateral Agreement

AFTA (1993), ACFTA (2003), AKFTA

(2007), AJCEP (2008), AIFTA (2010),

AANZFTA (2010), CPTPP (2019),

AHKFTA (2019)

8


As of May 2021, Vietnam officially joined 14 FTAs (including 8 FTAs signed as a member of

ASEAN and 6 FTAs signed as an independent party). In addition, Vietnam is negotiating 2

FTAs; and there is 1 more FTA that was officially signed and will come into effect soon.

Vietnam’s signing of bilateral and multilateral FTAs has enabled Vietnamese enterprises to

expand their markets, gaining access to regional and global markets.

Thus, in the context of ongoing international trade conflicts, Vietnam has taken quite solid steps

to diversify markets and products, helping the economy be more resilient to fluctuations on a

global scale.

1.3. The Vietnamese Economy

Vietnam is considered one of the fastest and relatively steadily growing economies in Asia over

the past few years. In 2008, the country overcame the global financial crisis well with many

promising macroeconomic indicators.

Recent years have observed the effort of the Vietnamese Government in boosting international

economic integration through participation in many free trade agreements/ communities such as

the World Trade Organization (WTO), the Eurasian Economic Union, the European Union, and


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the ASEAN Economic Community (AEC), The EU - Vietnam Free Trade Agreement (EVFTA).

This led to a significantly increasing FDI year on year. With a stable political environment, low

labor and operating costs, as well as promising economic prospects, Vietnam is a dynamic

market and an attractive destination for both foreign and private investors to participate in the

economy.

1.3.1. Main Macroeconomic Indicators

GDP

Vietnam’s real GDP achieved an average growth rate of 7.3% from 2005 to 2009 before

declining to 5.3% in 2009. The recovery began in 2012, with GDP growth gradually increasing

and reaching 6% in 2014. Despite the global trade recession and China’s economic growth

slowdown, which impacted most Southeast Asia countries, Vietnam proved to be resilient to the

turbulence and still scored a growth rate of 7.1% in 2018, the highest rate in nearly 10 years since

the global financial crisis.

In 2020, Vietnam's GDP grew by 2.9%, the slowest pace in a decade. However, the country still

was among the few countries globally to achieve positive economic growth during the COVID-

19 pandemic. With China and Myanmar, Vietnam is one of three countries in Asia with a positive

growth rate in 2020 during the COVID-19 pandemic.

According to the state bank of Vietnam, government debt reached 46.6% of GDP in 2020, well

below the 65% statutory limit. Around 40% of Vietnam's debt has medium or long-term maturity,

a significant risk considering 40% of said debt is denominated in foreign currencies and

represents a currency risk. Nonetheless, public authorities continue to intervene in both

directions to keep the Dong within a narrow band against major international currencies and

accrue foreign reserves. Tax reforms and privatization of state-owned companies helped

compensate for the budget deficit in 2019.


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Table 5: Main indicators

Main Indicators 2016 2017 2018 2019 2020 Forecast

2021

Forecast

2022

GDP (billions USD) 205.3 223.8 245.2 261.9 271.2 - -

GDP (Constant Prices,

Annual % Change)

6.2 6.8 7.1 7.0 2.9 3 - 3.5 6.5

GDP per Capita (USD) 2192.1 2365.5 2566.5 2715.3 2785.7 - -

General Government

Gross Debt (in % of GDP)

47.5 46.3 43.6 43.5 46.7 47 -

Source: The State Bank of Vietnam, WorldBank, Asian Development Bank, the Ministry of

Planning and Investment, 2021

As strict coronavirus restrictions had caused significant disruption to production and business

activities in the first 9 months of 2021, Vietnam's gross domestic product is estimated to grow 3

- 3.5% (according to the Ministry of Planning and Investment), well below the government's

earlier target of 6.5% for 2021 and expected to be recovered strongly in 2022 with 6.5% target.

Inflation

The inflation rate of Vietnam in 2020 was directly affected by the Covid pandemic. This high

ratio is mainly due to the rising of consumer prices over the same period a year ago. The increase

in CPI can be explained by 3 factors. Firstly, at the beginning of 2020, Vietnam witnessed

African swine fever causing domestic pork prices to skyrocket. Vietnam even had to import meat

to increase supply and lower the price of pork. The volume of imported pork of Vietnam in 2020

has increased by 383% compared to 2019, a significant jump. The main pork import markets of

Vietnam are Brazil, Russia, and Canada. Secondly, in 2020 Vietnam had 2 outbreaks of Covid

that forced the whole country to implement a social distancing. When the social isolation period

ended and the market started showing signs of recovery, CPI suddenly increased high because

demand this time was higher than supply. Finally, in the last months of 2020, the rising of oil

prices also affected the rise of domestic CPI.


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The Vietnam Government has implemented a series of packages to support businesses and

employees, overcome the negative impacts of the COVID-19 epidemic such as reducing

electricity prices, ensuring the supply and demand of pork, curbing the price increase, etc. That

significantly contributed to the goal of controlling inflation at below 4% as set out in the plan

from the beginning of the year.

Table 6: Vietnamese inflation Rate by years(%)

Main Indicators 2016 2017 2018 2019 2020 Forecast

2021

Forecast

2022

Inflation Rate (%) 2.7 3.5 3.6 2.8 3.2 2.8 3.5

Source: WorldBank, Asian Development Bank 2021

Inflation is forecasted to be contained in 2021 due to the decreasing domestic demand, thereby

lowering the prices of goods and services. This is the result of the 4th wave of COVID-19

pandemic that happened in mid-2021. Inflation in 2022 is forecasted to increase to 3.5% due to

a sharp increase in Vietnamese consumption demand after a long time of social distancing, while

supply is limited as a result of a tight lockdown in 2021. (data forecast based on performance of

CPI in the first 6 months of 2021)

Interest rate

Deposit Interest Rate in Vietnam decreased to 4.12% in 2020 from 4.98% in 2019, which is the

deepest decline in 5 years since 2016. The fact that inflation increases but interest rates tend to

decrease is explained that this is one of the State's policies to reduce cost pressure on businesses

in the context of difficult production due to the impact of the Covid-19 pandemic.

Table 7: Vietnamese Interest rate by years (%)

Main Indicators 2016 2017 2018 2019 2020

Interest Rate (%) 4.8 4.78 4.74 4.98 4.12

Source: WorldBank


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Trade Balance

The balance of trade in goods in 2020 has gained a trade surplus of USD 19.95 billion, which is

the largest trade surplus ever. Import and export turnover in Vietnam in the first 6 months of

2021 was experiencing a trade deficit, which was explained by this was the period when

production enterprises returned and recovered after Covid in 2020, so the demand for imported

goods of spare parts and raw materials for production was huge.

Table 8: Vietnamese international trade indicators

Main

Indicators 2016 2017 2018 2019 2020

First half

2021

Exports (USD

billion)

176.58 215.12 243.70 264.27 282.63 157,6

Imports (USD

billion)

174.98 213.22 237.24 253.70 262.69 159,1

Trade Balance

(USD billion)

1.60 1.90 6.46 10.57 19.94 -1,47

Source: GSO Vietnam

Foreign Direct Investment

Total foreign direct investment (FDI) in Vietnam in 2020, including newly registered capital,

adjusted registered capital and value of capital contribution and share purchase of foreign

investors reached 28.5 billion USD, down 25% compared to 2019. In which, there were 2,523

newly licensed projects with the registered capital of 14.6 billion USD, down 35% in the number

of projects and 12.5% in the registered capital compared to the last year.


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Table 9: Foreign Direct Investment in Vietnam

2016 2017 2018 2019 2020

First

half

2021

Registered capital (USD

billion) 24.4 35.9 18 38 28.5 15.2

Disbursement capital

(USD billion) 15.8 17.5 19.1 20.4 20 9.2

% Disbursement 65% 49% 106% 54% 70% 60%

Source: Economist Intelligence Unit; World Bank; GSO Vietnam

FDI was hit hard in 2020. However, given the successful containment of COVID-19 in Vietnam

together with the vaccine rollout plan at global level, Vietnam remains a potential destination to

invest in. In the first 6 months of 2021, the registered capital reached USD 15.2 billion, while

the newly registered FDI capital reached USD 9.24 billion, up 6.8% over the same period last

year. This represents a positive signal of recovery for Vietnam's economy.

Retail sales

Retail sales in Vietnam in 2020 reached the lowest growth rate in 5 years due to the impact of

Covid-19:

1. A decrease in spending on non-essential products;

2. The number of visitors to the store decreased;

3. Non-essential stores have been forced to close during the lockdown; and

4. Disruption to the global supply chain.

However, by the first half of 2021, retail sales showed a recovery: the total retail sales of goods

and services reached 108.5 billion USD, an increase of 4.9% compared with the same period in

2020. Taking advantage of online shopping channels, retail businesses can easily meet


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Vietnamese consumption needs. Therefore, the retail industry was not negatively affected when

the epidemic broke out again at the end of Quarter 2/2021.


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Table 10: Retail industry in Vietnam (annual)

2016 2017 2018 2019 2020 First half

2021

Retail sale (USD

billion) 156.1 174.2 193.4 215 219 108.5

Retail sale Growth

rate (%) 12% 11.6% 11.0% 11.2% 1.9% -

Source: GSO Vietnam

Consumer Confidence Index

Besides, despite the ongoing economic fluctuations, Vietnamese consumers are generally still

optimistic about the economy. The consumer confidence index has decreased deeply during the

time when Vietnam implements social distancing. However, this index will recover again after

the lockdown is eased/removed.

Chart 2: Vietnam Consumer Confidence Index

Source: The Conference Board

Unemployment rate


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The unemployment rate reached 2.39% in 2020 from 2.04% in 2019. The ratio remains

particularly low. The Covid-19 has affected a large share of the labor force, either by the

destruction of full-time jobs or cuts in wages and working hours. Low-skilled workers and those

working in Vietnam’s sizable informal economy with limited social insurance buffers were

initially hit hardest. However, informal employment rebounded quickly as mobility restrictions

were eased, serving as cushions for formal jobs.

Table 11: Unemployment rate (% of the Labour Force)

Main Indicators 2016 2017 2018 2019 2020 First half 2021

Unemployment Rate (%

of the Labor Force)

1.85 1.87 1.16 2.04 2.39 2.58

Source: WorldBank, IMF - April 2021, GSO Vietnam

Due to the impact of the 4th wave of COVID-19 pandemic, the unemployment rate in the first

half of 2021 increased. The employed workers decreased relatively. Informal employment

continued to increase making the second quarter of 2021 the one with the highest prevalence of

informal employment compared to other quarters within the past three years.

1.3.2. Vietnam Social - Economic Development Strategy

In the process of development and renovation for nearly 35 years, Vietnam has gone from a "less

developed country" to a "developing country"; from "low income, backward level" to "lower -

middle income". Vietnam is moving up step by step in the world's economic map.

Vietnam in the past decade, and expected in the next decade, has always adhered and remained

consistent with the strategy:

1. Developing fast and sustainable;

2. Harmonizing the economy with cultural development;

3. Constantly improving people's quality of life;

4. Attaching importance to environmental protection and improvement;

5. And proactively responding to climate change.


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Looking back on nearly 10 years of implementing the Socio-Economic Development Strategy

2011-2020, despite a number of shortcomings and challenges, Vietnam has achieved many

important outcomes.

Economic development

Despite being affected by the COVID-19 pandemic in 2020, GDP growth for the whole period

of Strategy (2011-2020) reached 5.9%/year, making Vietnam belong to the group of high-growth

economies in the region and in the world. Not only the quantity and quality of growth have

improved, but labor productivity has improved markedly. The contribution of total factor

productivity (TFP) is about 39%, exceeding the strategic target (35%); Labor productivity in the

period 2016 - 2020 increased by 5.8%/year on average.

Macroeconomics is controlled stably. The consumer price index (CPI) decreased from 18.6% in

2011 to less than 4% in the 2016-2020 period. Major balances in the state budget, trade,

investment, energy, food security continue to be guaranteed and improved. Total export and

import turnover has increased sharply; the balance of trade and the balance of international

payments have improved markedly; foreign exchange reserves have reached the highest ever.

Mobilization of resources for development investment is promoted; investment in the non-state

sector increases rapidly; investment quality and efficiency are improved. Total social

development investment capital has grown by 10.6%/year on average; it has attracted many

large-scale, high-tech foreign direct investment projects.

Social Development

During the period of strategy, cultural and people development achieved positive results; social

security was guaranteed. Vietnamese people's lives have continuously improved. The

Government has well-implemented policies towards people with meritorious services, social

protection, job creation, sustainable poverty reduction. The rate of participation in social

insurance, health insurance, and unemployment insurance increased rapidly; the rate of poor

households reduced to less than 3% in 2020.

The fields of education and health have achieved many significant achievements. In 2018, the

adult literacy rate for Vietnam reached 95%, up from 87.6% in 1989. The Human Development


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Index (HDI) of Vietnam has continuously improved, making Vietnam belong to the world's

group of countries with high average human development. According to the World Bank, health

outcomes have improved greatly. Between 1990 and 2016, life expectancy increased from 70.5

to 76.3 years, and is the highest in the region for countries at a similar income level. In 2020,

90.85% of the population is covered under Social health insurance.

Vietnam has completed many Millennium Development Goals ahead of time and therefore is

considered as a bright spot in poverty reduction, health care, and education. Currently, Vietnam

actively implements the national action plan for development sustainability under the United

Nations 2030 Agenda.

1.3.3. Vietnam Trade

2020 is the last year of implementing the 5-year socio-economic development plan 2016-2020,

so Vietnam was making efforts to achieve the goals as planned. Covid-19 epidemic has caused

adverse effects on economic activities, in which the import and export of goods have been

seriously affected. Nevertheless, with the strategy to ensure "both disease prevention and socio-

economic development", Vietnam’s import and export activities have been stable, able to

maintain its growth momentum and create significant traction for the entire economy.

Chart 3:Vietnam Trade Balance 2016 - 2020 (USD billion)

Source: gso.gov.vn


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The total import-export turnover of goods in 2020 reached USD 545.3 billion, an increase of

5.1% compared to the previous year. The export turnover of goods reached USD 282.6 billion,

an increase of 6.5%; goods import reached USD 262.7 billion, up 3.6%. The balance of trade in

goods in 2020 gained a trade surplus of USD 19.95 billion, which is the largest trade surplus

ever.

Figure 4: Vietnam Exports and Imports of Goods Overview 2020

Source: gso.gov.vn

In 2021, under the return of domestic production after Covid-19 in 2020, which increased the

demand in importing the spare parts and raw materials as mentioned in the Trade Balance

section, and the appearance of the 4th Covid wave since May 2021, which had a negative impact

on the production and business activities of the country, Vietnam's trade balance continuously

witnessed a trade deficit from April to August 2021. Until September 2021, after the lockdown,

movement and travel restrictions were eased, the trade balance had just seen the first trade

surplus since the 4th wave pandemic outbreak. However, in the first 9 months of 2021, Viet

Nam’s import and export still achieved some encouraging results: Total export and import

turnover in the first 9 months reached 483 billion USD, rose by 24.3% over the same period in

2020. (Source: General Statistic Office - gso.gov.vn and Data aggregated by TBO)

This is a good sign showing the beginning of the country's recovery after almost half a year

against the epidemic.


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Chart 4: Import and Export turnover over month in 2021 (Billion USD)

Source: gso.gov.vn

Trade Surplus

The country's merchandise trade balance in 2020 had a surplus of USD 19.1 billion, being the

highest level in five consecutive years of trade surplus since 2016.

In 2020, there were 31 items with export turnover of over USD 1 billion, of which 24 items had

export turnover of over USD 2 billion, 4 items had export turnover of over USD 5 billion and 6

items had over USD 10 billion in turnover. The items that contributed the most to the growth of

export turnover in 2020 were phones and components with the immense export value of USD

51.2 billion, accounting for 18.1% of total export turnover, down 1% compared to the previous

year; electronics, computers, and components reached USD 44.6 billion, up 24.4% compared to

the previous year. In recent years, electronics, computers, phones, and components have taken

the dominant role in total Vietnam exports. The export value of these two commodity groups is

gradually approaching the milestone of USD 100 billion (about USD 87 billion in 2019 and USD

96 billion in 2020) with an increasing proportion, accounting for 33.9% of the total exports

turnover in 2020.


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Table 12: Top 10 most goods for exportation in Vietnam 2016 - 2020 (USD billion)

2016 2017 2018 2019 2020

Phones all of kinds and their parts 34.49 45.61 49.53 51.97 51.18

Electronic goods, computers and

their parts

18.96 26.28 29.56 36.31 44.58

Textile, sewing products 23.82 26.12 30.48 32.83 29.81

Machinery, instrument, accessory 10.48 12.91 16.36 18.30 27.19

Footwear 13.00 14.68 16.24 18.32 16.79

Wood and wooden products 6.96 7.70 8.91 10.65 12.37

Means of transport and components 6.06 6.84 8.02 8.74 9.09

Fishery products 7.04 8.35 8.77 8.51 8.41

Iron, steel 2.04 3.15 4.55 4.20 5.26

Fibers of all kinds 2.94 3.59 4.02 4.18 3.74

Source: gso.gov.vn

Vietnamese goods have already been available in most markets around the world. In 2020, the

United States, China, EU, ASEAN, and Japan remained top 5 largest countries for exportation

of Vietnam. Specifically, the United States was still Vietnam's largest export market, with a

turnover of USD 77.1 billion, up 24.5% over the previous year. The following country was

China, with USD 48.9 billion, up 17.1% compared to the previous year. Export to the EU market

reached USD 35.8 billion, down 2.7%; ASEAN market reached USD 23.1 billion, down 8.7%;

Japan reached USD 19.3 billion, down 5.7%; Korea reached USD 19.1 billion, down 5.1%.

Vietnam's trade surplus largely came from developed countries that have high-quality inspection

requirements for imported goods such as the United States (the trade surplus was nearly USD

62.7 billion); EU (export surplus of nearly USD 20.3 billion). For the EU market alone, after 5


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months of implementing the EVFTA, exports to the EU market reached USD 15.38 billion,

increasing 1.6% over the same period in 2019. Many of Vietnam's export products have had

positive changes when entering the EU market after EVFTA took effect, typically seafood,

shrimp, rice…

Table 13: Vietnam export by principal areas and countries 2016 - 2020 (%)

2016 2017 2018 2019 2020

United States 21.8% 19.3% 19.5% 23.2% 27.3%

China 12.4% 16.5% 17.0% 15.7% 17.3%

EU 19.3% 17.8% 17.2% 13.5% 12.4%

ASEAN 9.9% 10.1% 10.2% 9.6% 8.2%

Japan 8.3% 7.8% 7.7% 7.7% 6.8%

Korea, Rep. 6.5% 6.9% 7.5% 7.5% 6.8%

Hong Kong SAR (China) 3.4% 3.5% 3.3% 2.7% 3.7%

Netherlands 3.4% 3.3% 2.9% 2.6% 2.5%

Germany 3.4% 3.0% 2.8% 2.5% 2.4%

OPEC 3.4% 2.8% 2.6% 2.2% 2.0%

Source: gso.gov.vn

It must be said that in 2020 Vietnam has effectively taken advantage of FTAs such as EVFTA,

CPTPP. For CPTPP countries, since the agreement took effect, export turnover to markets that

are members of CPTPP has increased positively. In 2020, exports to Canada maintained a

positive growth rate, reaching USD 4.35 billion, up 11.9%; exports to Mexico reached USD 3.17

billion, up 12.2%.

Trade Deficit


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Import turnover in 2020 reached USD 262.4 billion, up 3.6% compared to 2019. Imports focused

mainly on the group of goods necessary for production and export, including machinery,

equipment, and raw materials for production and export. Import turnover of this group of goods

reached USD 245.6 billion, up 4.1% compared to 2019, accounting for 93.6% of the total import

turnover. This proves that the economy is having a strong recovery in production while imports

for consumption have decreased, accounting for only 6.4%, down 0.5 percentage points

compared to 2019.

Table 14: Top 10 most imported products in Vietnam 2016 - 2020 (USD billion)

2016 2017 2018 2019 2020

Electronic goods, computers, and their

parts 28.05 37.77 43.23 51.60 63.97

Phones all of kinds and their parts 11.14 17.09 16.78 15.60 16.65

Textile fabrics 10.57 11.42 12.79 13.29 11.88

Plastic in primary form 6.26 7.58 9.09 9.02 8.40

Iron, steel 8.06 9.08 9.90 9.51 8.07

Product of plastic 4.41 5.47 5.92 6.54 7.27

Chemical products 3.81 4.60 5.04 5.42 5.74

Auxiliary materials for textile,

footwear 5.06 5.38 5.71 5.85 5.38

Chemicals 3.21 4.12 5.16 5.13 5.02

Iron, steel products 2.97 3.21 3.68 4.09 4.54

Source: gso.gov.vn


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The main importing countries of Vietnam are still the countries in Asia and ASEAN with the

advantage of transportation distance, thereby saving cost and delivery time. In 2020, China was

still Vietnam's largest import market, with a turnover of USD 83.9 billion, up 11.2% over the

previous year. The following country was South Korea, with USD 46.3 billion, down 1.5%.

Export to the ASEAN market reached USD 30 billion, down 6.9%; Japan reached USD 20.5

billion, up 5%; the EU market reached USD 14.5 billion, up 3.5%; The United States reached

USD 13.7 billion, down 4.9%.

Table 15: Vietnam import by principal areas and countries 2016 - 2020 (%)

2016 2017 2018 2019 2020

China 28.6% 27.5% 27.6% 29.8% 32.0%

South Korea 18.4% 22.0% 20.1% 18.5% 17.9%

ASEAN 13.8% 13.3% 13.4% 12.7% 11.6%

Japan 8.6% 7.9% 8.1% 7.7% 7.7%

Taiwan 6.4% 6.0% 5.6% 6.0% 6.4%

EU 6.4% 5.7% 5.9% 5.6% 5.6%

United States 5.0% 4.4% 5.4% 5.7% 5.2%

OPEC 1.2% 1.3% 2.2% 2.3% 2.0%

Australia 1.4% 1.5% 1.6% 1.8% 1.8%

India 1.6% 1.9% 1.7% 1.8% 1.7%

Source: gso.gov.vn

In 2020, some of Vietnam's main imports from Brazil, such as animal feed and raw materials,

soybeans, ores, other minerals, cotton, and corn, were maintained. Up to June 2021, the growth

rate of import turnover from Brazil to Vietnam has shown a spectacular growth. Statistics

released by the General Department of Customs showed that till June 2021, the entire country


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spent about USD 400 million importing goods from Brazil, thereby bringing the total turnover

from the beginning of the year to the end of June to nearly USD 2.2 billion. Currently, Brazil has

surpassed Argentina to become Vietnam's largest import market in South America.

1.3.4. Commercial Disputes

As Vietnam has expanded its participation in international trade, there is a parallel increase in

trade disputes involving the country. Any problems can be resolved bilaterally, based on the

rules of the agreements signed by Vietnam or the disciplines of the multilateral agreements that

Vietnam is legally obliged to comply with since its accession to the World Trade Organization

(WTO) in 2007.

The WTO agreements cover a wide variety of themes that affect international trade: tariff issues,

technical barriers, phytosanitary measures, intellectual property, subsidies, trade defense

measures among countries. Questions are brought to the organization through governments to

analyze the feasibility of presenting them within the scope of regular committees. The purpose

of this dispute settlement mechanism is to ensure a positive solution that is acceptable to the

disputing parties and is consistent with the relevant agreements.

Vietnam has joined the WTO for 14 years and is currently among the largest developing

economies in global trade, along with 14 others such as China, South Korea, Hong Kong,

Mexico, Singapore, the United Arab Emirates, India, Thailand, Saudi Arabia, Malaysia, Brazil,

Indonesia, Turkey, and South Africa. These 15 economies account for about three-quarters of all

developing country merchandise exports. Along with the rapid increase in trade efficiency, the

potential for conflicts and disputes of the above countries is also high. Between 1995 and October

2019, developing countries participated in 45% of all disputes as claimants and 43% as

defendants. In terms of the results of participating in the WTO's dispute settlement mechanism,

when developing countries participate as claimants, the rate of winning cases is higher than when

they are defendants.

Vietnam still often faces Commercial Disputes with some countries, especially the US market.

According to the Trade Remedies Department (Ministry of Industry and Trade) statistics, up to

the first quarter 2021, Vietnam's export goods coped with 203 trade remedy lawsuits from 19

countries and territories. In which, the number of cases in 2020 is 39 cases, 2.5 times higher than


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in 2019. The fact that countries have investigated and applied trade remedies with goods

exported from Vietnam has significantly affected the export turnover of many Vietnamese

products, especially seafood and steel.

Table 16: Top countries which initiated trade remedy lawsuits with Vietnam up to 2020

United States India Turkey EU

Cases 41 (20%) 28 (13%) 23 (12%) 14 (9%)

Source: The Trade Remedies Department

Table 17: Main products be investigated in 2020

United States India Turkey EU

Main Products Catfish, Basa

fish, Shrimp,

Wood, Stainless

Steel, Stretch

yarn, Lawn

mower, etc

The products

investigated by

India are quite

diverse,

including steel,

copper, and

wood-fiber

boards

Steel, yarn, Inner

tube, Belt,

telephone, etc

The products

investigated by

India are quite

diverse,

including

footwear, steel,

fluorescent

lamps, metal

rings, gas

lighters, etc

Source: The Trade Remedies Department

On the contrary, during this time, Vietnam initiated a trade remedy investigation into 15 cases

(with China goods were the most investigated, followed by Southeast Asian countries such as

Thailand, Malaysia, Indonesia) – a relatively modest number compared to the 154 lawsuits the

country had to face. The number of cases initiated by Vietnam is low because the government

has implemented a policy of encouraging trade liberalization, so trade remedies are only applied

when indispensable.


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It can be said that Vietnam is actively participating in and using the WTO dispute settlement

mechanism, so it has achieved certain victories. Vietnam has also grasped the WTO's dispute

settlement mechanism to protect the interests of the country and Vietnamese enterprises

exporting goods abroad.

1.3.5. Currency and Finance

Fitch Ratings has revised Vietnam's Outlook from Stable to Positive and affirmed the Long-

Term Foreign-Currency Issuer Default Rating (IDR) at 'BB'. Along with this event, Moody's

recently upgraded the Outlook of Vietnam by two levels, which is unprecedented in its outlook

rating globally since the COVID-19 pandemic.

The Positive Outlook reflected Vietnam's growth and public finances' resilience to the Covid-19

pandemic shock and continued strengthening of external finances due to persistent current

account surpluses and rising international reserves. This improvement results from the active

implementation to stabilize the macro-economy and strengthen the financial-banking system by

the Vietnamese Party, the National Assembly, and the Government.

This section will get Brazilian exporters through the fundamental information of the Vietnamese

currency and financial banking system before doing business in Vietnam.

Currency

Standard currency

The official currency of Vietnam is Vietnam Dong, usually abbreviated as Dong or VND.

Current regulations require enterprises to quote in VND. Any business that requires the use of

foreign currency in business may have to apply for a license. When coming to Vietnam, people

should bring foreign currency, usually USD. Foreign currencies with larger denominations may

be converted at a better rate.

Convertibility

The foreign exchange rate is set by averaging rates from the previous day’s inter-bank

transactions. This crawling peg system has established a trading band that allows VND/USD

exchange deals to be executed within a tight band. The Government is, however, planning to


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move towards a more market-determined exchange rate in coming years. The SBV used to

announce daily spot exchange rates based on the previous day’s average rate on the interbank

market. However, the SBV has announced a new policy on foreign exchange purchases from

commercial banks, which took effect from December 31, 2020. Under the policy, the country’s

central bank has stopped announcing foreign currency buying prices and its USD purchases in

the spot market. From January 4, the length of USD forward contracts dealt by the SBV would

be extended to six months, from three months previously.

Table 18: Rates of VND versus several major foreign currencies for the purpose of tax

evaluation for the period from 08/19/2021 to 08/25/2021:

No Abbr. Currency Exchange rate

1 USD United States Dollar 23,166

2 EUR Euro 27,131

3 BRL Brazilian Real 4,374

4 JPY Japanese Yen 211

5 GBP Great Britain Pound 31,843

6 AUD Australian dollar 16,807

7 SGD Singapore dollar 17,013

8 CNY Chinese Yuan 3,571

9 KRW South Korean Won 19

10 CAD Canadian dollar 18,344

Source: The State Bank of Vietnam


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Figure 5: The exchange rate of some currencies against the USD from January to

September, 2021

Source: KB Security

In the first 9 months of 2021, the VND increased by 1.5% against the USD. This was the

government's effort to control the exchange rate to clear the US's suspicions about Vietnam's

devaluation of its currency to gain trade achievements. According to KB Securities Vietnam

(KBSV), the exchange rate is expected to move sideways in late 2021 as the supply of USD

continues to remain stable thanks to remittances and disbursements of FDI.

Throughout the country, only USD and certain other currencies are accepted for transactions

with Credit Institutions and other transactions in big cities and provinces permitted by the Prime

Minister. In general, the inflow of foreign currency into Vietnam is welcome with minimum

restrictions, while the transfer of foreign currency abroad has also been significantly liberalized.

Foreign investors and foreigners working in Vietnam are permitted to transfer their earnings

abroad after completing all their financial liabilities to the Vietnamese Government. However,

on leaving Vietnam, individuals are not allowed to take more than USD 5,000 or equivalent in

other currencies in cash (including debit notes and traveler's cheques) without declaration to the

Vietnamese Customs and permission from the State Bank of Vietnam or another eligible bank.


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Banking system

The banking system of Vietnam has been divided into two levels since 1988, including state-

owned banks and specialized banking systems (commercial banks and credit institutions).

The State Bank (SBV) plays the role of a central bank and is a state agency, operating under the

strict guidance of the Government.

Vietnam's credit institutions include state-owned commercial banks, joint-stock commercial

banks, joint venture banks, banks with 100% foreign-owned capital, branches of foreign banks,

cooperative credit institutions, financial leasing companies, and finance companies.

The main activity driving the banking system is the Vietnamese commercial bank which includes

4 state-owned commercial banks, 31 joint-stock commercial banks, 2 joint venture commercial

banks, and 9 wholly foreign-owned banks. State-owned commercial banks (SOCB) account for

more than 40% of the market share. The largest bank in terms of total assets, network, and still

100% state-owned share is Agribank. And three other SOCBs are Vietcombank, Vietinbank, The

Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV).

Joint-stock commercial banks (JSCB) have a small capital/deposit base and more diversified

shareholding structure compared to state-owned commercial banks. There are currently 31

JSCB, which the leading ones are Saigon Joint Stock Commercial Bank (SCB), Military Joint

Stock Commercial Bank (MB), Vietnam Export Import Commercial Joint Stock Bank (EIB),

Asia Commercial Bank (ACB), and Saigon Thuong Tin Commercial Joint Stock Bank (STB).

Over the last few decades, foreign banks have continued to develop their operations in Vietnam.

By the end of 2020, Vietnam had about 49 branches of foreign banks, 2 joint-venture banks, and

9 wholly foreign-owned banks. Also, SBV granted 5 licenses to permit HSBC, Standard

Chartered Bank, ANZ Bank, Shinhan Bank, and Hong Leong Bank to establish wholly foreign-

owned subsidiary banks incorporated in Vietnam. Currently, there are no branches of Brazilian

banks in Vietnam.

Under current law, foreign ownership in Vietnamese banks must not exceed 30% of authorized

capital. The shareholding percentage of a foreign strategic investor must not exceed 20%, and

for ordinary foreign investors, the ratio must not exceed 15%. The ownership ratio of an


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individual must not exceed 5%. The government also encourages foreign investors to hold shares

for a 5-year period and partner with the local bank to enhance management, capacity, or new

development. With the 30% limit of overseas ownership to domestic banks, the strategic foreign

investors are allowed to acquire up to 15% of shares in a bank, and up to 20% with Prime

Ministerial approval. At present, some Vietnamese banks have had their foreign ownership ratio

increase to a ceiling of 30%. Many proposals have been made, suggesting that the state should

increase the foreign ownership in domestic commercial banks to over 30%. This is to enhance

the attractiveness of foreign investors, and on the other hand, increase the motivation for banks

to accelerate restructuring and improve financial capacity. Though, for various reasons, up to

now, this proposal has not been considered by the state.

Figure 6: Vietnam Banking System


After the second phase of banking restructuring (2016-2020), Vietnam’s banking sector has

shown significant improvement, resulting from a stable inflation and interest rate, a favorable

environment for foreign direct investment, and a shift from deficit to a surplus of the country’s

current account.

Along with the explosion of the industrial revolution 4.0 in Vietnam, a digital transformation is

an approach toward sustainable development for Vietnamese commercial banks. In particular,

The Government’s Decision No. 2545/QD-TTG on issuing the non-cash payment development

scheme is the motivation for Vietnamese commercial banks to apply digital technology in their

operations. Currently, all commercial banks have joined the online payment service fee


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exemption and reduction program. In 2021, the SBV will establish a modern retail payment

operation, connecting with many different industries and fields. In particular, public service

payments are paid special attention to continue promoting the growth of non-cash payments.

The rate of non-cash payments in Vietnam has improved significantly since the Covid pandemic

took place in 2020. By the end of 2020, the number of payment transactions via mobile phones

reached more than 1,044 billion transactions with a value of nearly VND 10.9 million billion,

continuing to increase 118.5% in quantity and 121% in value compared to a year earlier. The

number of payment transactions via the Internet also reached nearly 421.8 million transactions

with a total value of more than VND 24.6 million billion, an increase of more than 10% in

quantity and more than 24% in transaction value.

Compared to 5 years ago, the number and value of payments via Internet channels increased by

more than 3 times; the number and value of payments via mobile phone channels increased more

than 10 times. At the same time, payment via banks for public services has been promoted,

meeting the needs of budget revenue and expenditure of people and businesses quickly and in a

timely manner. Up to now, 99% of enterprises have registered for electronic tax payment; more

than 98% of the total revenue of the Customs sector has been done electronically; Electricity bill

revenue of Vietnam Electricity Group paid through banks is also up to 90%.

Despite some barriers still exist for banks in the digital transformation process, Vietnam’s push

toward digital banking and promoting cashless payments is in line with global trends. It will help

the banking industry grow and provide new convenience for customers.

1.4. Understanding the Vietnamese Consumer

Vietnam’s consumer market is constantly evolving, driven by changing consumer lifestyles,

income, and behavior. The country has experienced a steady progression of disposable income

in recent years, which can be seen in its rapid growth of total consumer expenditure from 80

billion USD to over 219 billion USD between 2010 and 2020 - according to the General Statistics

Office (GSO).

This shows that Vietnamese consumers have more money to spend. Although in 2020, the

country experienced a 2.6% increase in spending, such growth is the lowest during the past 10


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years but remains a positive result for Vietnam as the country continues to pursue the dual target

of both containing the pandemic and boosting economic recovery. This growth in consumer

activity has undoubtedly created openings for businesses to provide new services and products

that are available for consumers.

Moreover, the steady flow of foreign investment into Vietnam has, and will continue to, propel

economic growth. This growth has significantly increased local spending power, with an increase

in the expenditure on both urban and rural consumers.

It is essential for Brazilian companies to get more understanding about the particularities of the

Vietnamese consumer, in order to be successful in this market.

This section aims to give Brazilian businesses an overall view of Vietnamese consumer

segmentation, behaviors, and trends.

1.4.1. A growing middle class

According to the Vietnam BMI Market Report, the middle class is the group of people who earn

714 USD a month or more in Vietnam. In 2020, the average monthly income per capita at current

prices reached 186.22 USD, up 37.2% against 2016, down 1% again 2019 due to impact of

Covid; the national rate of multi-dimensional poverty household was 4.8%, down 4.4% points,

of which figures for the urban and the rural areas were 1.1%, and 7.1%, decrease of 2.3 and 4.8%

points, against 2019.

According to the Cimigo Consumer report, in 2020, there was 44% of households on an income

of greater than or equal to USD 439.3, while 20% of households earned greater than or equal to

USD 658.95. Of note, there were 27,488,281 households in Vietnam.

A report released by United Kingdom - based analytical NGO and data refinery World Data Lab

forecasts that Vietnam will leap up eight places from the current 26th position to 18th in the

global ranking of 30 economies with the largest middle-class population by 2030. The middle-

class earning USD 714 a month or more in Vietnam was doubled to 33 million people, about a

third of the population, between 2014 and 2020, according to Boston Consulting Group.


63 | Page

Meanwhile, market research firm Nielsen has estimated that the number of middle-class

Vietnamese will reach 95 million by 2030.

According to the Cimigo report in 2020, there were 12,148,729 consuming class households,

who were able to buy goods and services other than those that satisfied their basic needs, with

an average of 3.57 individuals per household. The households having a sufficient income for

discretionary expenditure, represented 44% of all households and had a monthly household

income above USD 429.

Chart 5: Economic class distribution

Source: Cimigo Vietnam

1.4.2. Consumer segments

Income and expenditure clearly reflect the living standard of living. That means, economic

development influences the culture and social sides. Due to the differences in standard of living

between economic regions, as well as group of population, expenditure and consumers’ behavior

are different among regions of Vietnam.

310,826 72,526

1,864,954

279,743 352,269

113,969

169,744 509,231

1,867,180 3,904,104

8,147,696

2,376,411 2% 4%

14%

24%

43%

13%

0%

10%

20%

30%

40%

50%

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

A class: 1072 and

above

B class: From 858 to

below 1072

C class: From 644 to

below 858

D class: From 429 to

below 644

E class: From 251 to

below 429

F class: Below 215

27,355,221 households

Urban households Rural households 2020 % of households


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In 2020, per capita expenditure per month in urban areas was approximately USD 171, while it

was just only at USD 108 in rural areas, stated by the General Statistics Office of Vietnam -

GSO. Urban consumers spend 27.1% on fresh good and fast-moving consumer goods and 11.9%

on education. Moreover, inhabitants of some metropolises, such as Ho Chi Minh, Danang, Hanoi

disburse an amount of money in leisure, housing, or lifestyle goods. In rural areas, consumers

spend the most on fresh food and fast-moving consumer goods at 26.9%, although they also

spend 26.1% on investments and farming. There is an increase in the tendency of rural consumers

to shift from traditional to modern retailers while Mini markets are winning over rural consumers

with the aggressive expansion of many players.

Not only are there differences between Urban and Rural Vietnam, but also many differences

between the North, Central, and the South. There are some differences in the lifestyle, culture,

and family portrait of consumers. Businesses should spend time to understand these regional

differences and make use of them to create a localized strategy in order to win Vietnamese

consumers across the nation.


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Figure 7: Vietnam's region

The Northern part of the country has a higher

concentration of government ministries and regulatory

agencies. Habitants in the north tend to notice what

other people think and bias the premium image. Family

value is priority. In the North of Vietnam, habitants are

more loyal and prefer products that they have

experienced rather than new one.

In the Central of Vietnam, habitants prefer local brands,

they are also thoughtful in consumption.

The Southern part is significantly different, citizens in

the south have an open-heart and mind in consuming.

They are willing to try a new range of products, new

brands, ... Due to the busy lifestyle of the dominant

industry hub, Modern trade channels are preferred.

Especially in the Mekong Delta, products at low prices

are valued.

In 2020, Vietnamese authorities controlled covid impact successfully. But Covid has changed

the consumers’ behavior as well as segmentation in some ways. As reported by Nielsen IQ

Unlocking Consumption global survey, Global consumer can be segmented into 4 groups after

covid pandemic in 2020, which can be used to make reference to Vietnam:

● Existing constrained - Streamline consumption and spending

● Newly constrained - Shrink spend in all areas

● Cautions insulated - Make more savvy choices to conserve spending

● Unrestricted insulated - Switch up to counter savings from other areas


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Figure 8: Constrained and Insulated consumer groups - Global

Source: Nielsen Global

Each segmentation has different characteristics above and beyond consuming behavior. Below

is the summary table of consumer segmentation’s characteristics:

Table 19: Consumer group impacts

Existing

constrained

Newly

constrained

Cautions

insulated

Unrestricted

insulated

Employment

reduction 31% 79% 34% 11%

Worse financial

situation 30% 90% 6% No change

Ability to spend 41% basics 48% basics

53%

comfortable 42% freely

Watch spend 100% continue 100% 93% 0%

Source: Nielsen Global

1.4.3. Consumer standard

To research the potential of one market, the consumers’ psychology is one of essential factors.

With the rapid evolution of technology and the Internet, consumers are changing their thoughts,


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perceptions, and behaviors. As such, current brands and products should take action to

understand and capture changes in consumer demands.

According to Deloitte Vietnamese consumers survey in 2020, quality perceptions and

considerations drove most of the Vietnamese consumer’s purchasing preferences, including their

specific brand preferences for different product categories. As stated by Kantar Worldpanel,

more Vietnamese consumers prefer international and imported products. Most Vietnamese

consumers claim that international products are generally of higher quality and they are willing

to buy international brands if the price is the same as the local ones. This information proves that

Vietnam is the place for any foreign brands (including Brazilian brands) to expand their

businesses.

Health concerns are likely to grow in importance as Vietnam’s middle class continues to gain

affluence and look towards more premium products. This is evidenced by over 60% of

Vietnamese households now opt for sugar-free or low-sugar drinks. Dairy-free milk alternatives

have also been growing in popularity, as consumers increasingly prefer “nut milk” products –

beverages made from nuts such as almonds, walnuts, and hazelnuts – as an alternative to dairy

milk, as these products are perceived to be more nutritious and better for cardiovascular health.

In response to this increasing demand, leading dairy producers in Vietnam have also begun to

expand their range of nut milk products in the market. Similarly, there is a growing interest in

natural ingredients and products in the Household Cleaning Products and Personal Hygiene

Products categories, as consumers seek to avoid negative side effects associated with

conventional products, limit environmental impacts, and promote a more sustainable

environment.

According to the latest research from Kantar World Panel, consumers' trends relevant to health

care, mental wellness, and hygiene will continue to be maintained even after 4th-wave covid-19

in Vietnam is over, and the lockdown is lifted.


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Chart 6: What are the behaviors that you think you're most likely to maintain once the

lockdown is over?

Source: Kantar WorldPannel

1.5. Vietnam Channels landscape

Vietnam’s increasing global economic integration and market-oriented reforms have generated

broad development gains over the past two decades. The distribution channel system in Vietnam

is booming and becoming increasingly complicated in recent years.

Vietnam remains a complex and heavy Traditional Trade Market with almost 1.5 Million stores

throughout Vietnam in 2019, making it the second most complicated distribution landscape in

Southeast Asia (behind Indonesia). The challenge of the distribution landscape in this country is

that it is going against the format consolidation trend seen in other countries. The store formats

in Vietnam are getting more and more fragmented with emerging channels such as Convenient

Store, E-commerce, etc.

In 2020, traditional trade consisting of wet markets and independent neighborhood stores was

still the biggest sales channel with 74% contribution to retail sales. The following channel was

Modern Trade with 22% contribution; and finally, E-commerce accounted for 4.3% in retail sales

contribution. However, in contrast to % contribution to retail sales, in 2020, Ecommerce showed

5955

5249

40

3533

3129

24

0

10

20

30

40

50

60

70

Increased

overall

hygiene

Eat healthy Spending

time with the

people in

household

Online

shopping

Using online

media

Focus on my

personal

development

Working

from home

Connecting

virtually

Social media

apps usage

Reading

Wave 4


69 | Page

spectacular growth as sales grew by 54% compared to 2019. This is due to the impact of Covid

19 making customers shift to online shopping.

Chart 7: Vietnam Retail Sales contribution %

Source: Cimigo

Today there are multiple channels available in Vietnam Market, the options for Brazilian

exporters are essentially the following:

1. Offline channel:

● Traditional Trade;

● Modern Trade.

2. Online channel - Ecommerce.

1.5.1. Offline channel

Vietnam is becoming a free trading playground with significant changes supporting international

players investing in the country. The government has eliminated laws restricting the number of

outlets/shares a typical foreign company can own, which is leading to a significant emergence

of new players in Vietnam.

Vietnam’s offline channel is a combination of traditional trade and modern trade. In Vietnam, it

is common to see street hawkers selling various items ranging from groceries to non-grocery

items such as fruit, tissues, chewing gum, and books. “Toad” markets (little neighborhood

markets, down narrow side streets, in alleyways, wherever there is some unused space) around


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industrial zones are also a popular retailing channel in Vietnam, where blue-collar workers can

do their daily shopping as they can get a reasonable price there and do the shopping quickly after

finishing work.

Figure 9: Toad Market in Vietnam

Source: Internet

Today, with the development of the economy as well as the increase in income, Vietnamese

people prefer to shop at supermarkets or convenience stores - the so-called Modern Trade

channel, more than to shop at the traditional store.

Traditional Trade

Despite the rapid expansion of modern trade outlets across Vietnam, traditional grocery retailers

still play an essential role in the overall retail market and continue to grow steadily. According

to Euromonitor, in 2019, traditional grocery sales increased by 4% to reach a total value of USD

44.3 million. Among all Off-premise channels, traditional trade including Traditional Grocery

(Street shops) and Wet market stores accounts for >60% of total Sales. For many rural consumers

and lower-income urban consumers who need to budget daily for food and make purchases in

small quantities, traditional grocery retailers are more convenient and affordable compared to

modern trade outlets, which are typically perceived to be more expensive. Recent observations


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show that many traditional grocery retailers have also started to improve their store infrastructure

and increase their product assortment to include a higher quality of products, to appeal to

consumers who desire an experience of modern retail.

Figure 10: Traditional Grocery in Vietnam

Source: Internet

Modern Trade

Modern Trade channel is expanding with a healthy growth rate thanks to the expansion in the

number of stores driven by big local retailers such as VinCommerce (including Vinmart

(supermarket); Vinmart + (minimart)) , Saigon Coop (including Co.Op Food (Minimart); Co.Op

Mart (Supermarket); Co.OpXtra (Hypermarket)), Bach Hoa Xanh. The detailed Vietnamese

Modern Trade channels are listed in Appendix 6.

a. Convenience stores

Convenience stores are relatively small outlets that are open long hours (usually 24/7) and carry

a limited line of high-turnover convenience products at high prices, located primarily near


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residential areas, Although many have added food services, consumers use them mainly for “fill-

in” purchases, such as bread, milk, or miscellaneous goods.

Convenience stores have rapidly expanded across Vietnam in recent years, reaching a market

size of USD 193.3 million on the back of a healthy sales growth rate of 18% in 2019. Key players

include Family Mart, Circle K, and B’s Mart, with market shares of 21.4%, 20.7%, and 9.6%,

respectively. Having a location in an area with high footfall is critical for both convenience stores

and traditional trade retailers (such as mom-and-pop stores and other traditional markets).

However, convenience stores differentiate themselves from traditional trade retailers with a more

“trendy” perception, offering modern facilities, an assortment of ready-to-eat meals, and digital

payment methods, such as e-wallets, that appeal to young urban consumers. (data by

Euromonitor and “Retail in Vietnam: An accelerated shift towards omnichannel retailing” report

by Deloitte).

Chart 8: Number of convenience stores by key players

Source: MT Chains Evolution, February 2021, Nielsen IQ Vietnam

In a report from Nielsen IQ Vietnam, as of February 2021, CircleK was the leading convenience

store chain in Vietnam with over 402 stores, followed by Family Mart with 153 outlets.


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Figure 11: One of the top Convenience Store in Vietnam - Circle K

Source: Internet

b. Minimarts, Supermarkets and Hypermarkets

Among the modern channels, the group of Minimarts, Supermarkets and Hypermarkets have

become more and more popular for modern grocery shopping.

Supermarkets had an expansion rate of 16% (YoY) while hypermarkets and minimarts shopping

appeared to stabilize in 2019. The supermarket segment is dominated by local players, such as

Co.op Mart (Saigon Co.op) and Vinmart. The minimart’s key players are also mainly local

players such as Vinmart +, Bach Hoa Xanh, CoopFood, etc. Within the Hypermarket segment,

GO! (Big C) is the biggest chain with 57.6% market share, followed by Lotte Mart, AEON, and

Co.op Xtra (Saigon Co.op).


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Chart 9: Number of Hypermarkets and Supermarkets by key players


Chart 10: Number of Minimart by key players



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Figure 12: The biggest hypermarket chain in Vietnam GO!

Source: Internet

After COVID-19, the growth of Minimarts, Hypermarkets, and Supermarkets has taken away

more market share of traditional trade formats. This is due to the wide variety of products, brands,

and pack sizes that they offer. Moreover, those modern trade formats also provide fresh corners

in the store. Even minimarts, a small sales area, also offer fresh products such as meat, fish, fruit,

etc in the store to meet all shopping needs of customers. This gives Vietnamese consumers the

confidence that they can purchase everything they need in a single shop, thereby reducing travel

and contact.

During this time of uncertainty, Vietnamese consumers visited hypermarkets and supermarkets

more often than before, making a purchase every 10 days on average. Minimarts, with the

advantage of being compact and densely distributed near residential areas, are the number 1

choice for customers during the pandemic to replace traditional wet markets when those markets

are locked down.


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Figure 13: The leading local minimart chain - Bach Hoa Xanh

Source: Internet

In addition to their brick-and-mortar stores, modern trade retailers also saw their other channels

facing a surge in demand: supermarket operator, Saigon Co.op, for instance, saw its telephone

orders surge upwards by four to five times, and visits to its e-commerce platform increased

tenfold since January 2020. This suggests an overall shift towards greater omnichannel shopping,

a behavior that can be expected to persist even after the pandemic subsides.

1.5.2. Online channel - Ecommerce

Under Decree 52/2013/ND-CP (Law on E-Commerce) effective from July 1, 2013, the

government prohibited taking advantage of e-commerce to trade in counterfeit goods or trade in

goods or provide services infringing upon intellectual property rights, or trade-in goods or

provide services in the list of goods and services banned. Domain names are also protected under

this law. The Inspectorate of the Ministry of Industry and Trade, the market management office,

inspectorates of provincial-level Industry and Trade Departments, and other state agencies may

sanction administrative violations in e-commerce according to their responsibilities provided in

the Law on Handling of Administrative Violations and relevant documents. This proves that E-

Commerce has started to become an official channel that is respected by the state.

E-Commerce in Vietnam has made significant progress during Covid-19. Previously,

Vietnamese consumers who interacted and used online tools for shopping were mainly young

people. However, when the Covid-19 epidemic broke out, online shopping habits increased

rapidly, spreading to all classes and ages.


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As one of the fastest-growing digital economies in the region, Vietnam has a dynamic e-

commerce market that has attracted the attention of both local and foreign players, who had

poured an estimated USD 1 billion into the sector over four years from 2016 to 2019. Currently,

Vietnam’s two largest cities – Hanoi and Ho Chi Minh City – account for about 70% of e-

commerce transactions.

In Vietnam, customers can shop at e-commerce channels like Shopee, Tiki, Lazada, and even

shop at foreign e-commerce channels like Amazon or Taobao, as introduced in the section:

Export direct to final customers. In addition, Vietnamese users also have the habit of shopping

on social networking sites such as Facebook, etc - even before these social networking sites have

their official marketplaces. Vietnamese people can quickly close deals and make transactions

with sellers through social networks, they can even close deals on the seller's live stream.

Key players include Lazada, Shopee, Sendo, Tiki, Thegioididong, with Shopee occupying the

number one spot with about 16.8% share of combined monthly web traffic.

Figure 14: Top eCommerce site web visits throughout 2019 of Vietnamese users

Source: Iprice


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In 2020, food products were the most popular online product categories according to online

shoppers in Vietnam with 52% of respondents having purchased these items online. Clothing,

footwear, and cosmetics ranked second with 43% of respondents having purchased these items

online (according to the survey conducted by Statista). This is due to the fact that during the

Covid lockdown in 2020, Vietnamese people were restricted from going out, resulting in a surge

in online demand for food, which are normally not key products for the e-commerce sector. For

example, on Shopee’s platform, the time that Vietnamese consumers spent for shopping

increased by more than 25% after the COVID-19 outbreak, as they looked to purchase groceries

and other daily essentials.

Chart 11: Top 10 online shopping categories according to online shoppers in Vietnam in

2020

Source: Statista

Key trend to watch - Retail in Vietnam accelerated shift towards omnichannel retailing

A survey conducted by Kantar found that Covid-19 pushed Vietnamese people to have new

experiences. A significant number of consumers who hadn’t shopped FMCG products online or

minimart before were starting to make their first transactions. Both online shopping and minimart


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format reached a peak in terms of shopper base versus any historical four-week period. Though

these channels had already shown good progress in Vietnam in recent years, Covid-19 really

made it explode when presenting a chance for them to further expand.

Kantar witnessed that shopping behaviors were changing with various modern retailers

benefiting from this like Big C, Bach Hoa Xanh, and Mega Market.

In terms of online shopping, total FMCG transactions came from both social commerce and e-

commerce. Facebook - the most popular social media platform remained the most chosen

platform for online FMCG purchases, followed by Shopee - the pure e-commerce player. Both

of them recorded triple-digit growth.

These things prove that Omnichannel is the future retailing of Vietnam, and Brazilian exporters

need to prepare carefully in terms of channel strategy to win in the Vietnam market.


80 | Page

PART 2: VIETNAM AND BRAZIL


81 | Page

PART 2: VIETNAM AND BRAZIL Vietnam is one of the outstanding markets in Asian region. In recent years, the achievements of

economic growth have contributed to improving the Vietnamese consumer's living standards,

that means Vietnam is going to increase the demands in many industries. From the beginning of

establishing bilateral relations between Vietnam and Brazil to recent years, Vietnam has mainly

imported agricultural materials, animal feed or agricultural products for the domestic breeding

industry. In the future, with the higher demand of consumers and the improvement of consumer

income, bilateral trade between Brazil and Vietnam is going to grow more in other industries

and merchandise.

2.1. Relationship between Brazil and Vietnam

Bilateral relations play an important role in developing bilateral trade between two countries.

Relations between Brazil and Asia countries, in general and bilateral relations between Brazil

and Vietnam are continuously improving with the significant efforts of the governments.

Although Vietnam and Brazil have not had any free trade agreement yet, the two countries still

maintain bilateral trade competently. This part aims to help Brazilian companies gain knowledge

of the context and general information of bilateral relationships between the two countries. By

understanding the general situation, businesses are totally able to find and catch the opportunities

proactively and prepare for challenges.

2.1.1. Relationship between Brazil and Asian countries

According to the United Nations, Asia includes 48 countries and is divided into 5 regions:

Central Asia, East Asia, South Asia, Southeast Asia, and Western Asia. Vietnam belongs to

Southeast Asia (SEA), which is composed of eleven countries of impressive diversity in religion,

culture and history: Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos,

Malaysia, the Philippines, Singapore, Thailand and Vietnam. It is also one of the most dynamic

areas of the world economically, a factor which largely accounts for its growing international

significance.


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In Asia, China is the largest trade partner of Brazil. Moreover, China is the largest individual

trade partner of Brazil in the world. According to China Briefing, the total trade transacted

between Brazil and China in 2021 may be greater than 2020, which was around USD 102.5

billion. In the first half of 2021, Brazilian exports to primary global trading partners totaled USD

46.747 billion and China contributed 34.4% of Brazil’s global exports. In 2020, this share was

32.4%, according to Comex Brasil.

Japan is another noticeable trading partner of Brazil in Asia. Japan is the second largest trading

partner in Asia (after China) of Brazil. In 2020, Japan’s import from Brazil was USD 7.49 billion,

according to the United Nations Comtrade database on international trade. Crucial products that

Japan imported from Brazil are iron ore, steel, aluminum, and agricultural commodities. On the

contrary, Brazil also is Japan’s largest trading partner in Latin America.

In terms of Southeast Asia, Brazil is the largest trading partner of Malaysia. In 2020, Brazil’s

export to Malaysia was USD 3.2 billion, according to the United Nations Comtrade database on

international trade.

Besides, Singapore is also one of the largest trading partners of Brazil in SEA. According to

OEC data, in July 2021 Brazil exported USD 612 million and imported USD 51.3 million from

Singapore, resulting in a positive trade balance of USD 560 million. Between July 2020 and July

2021, the exports of Brazil increased by USD 311 million (103%), while imports increased by

USD 4.1 million (8.68%).

Not only Singapore and Malaysia, other countries in Southeast Asia, such as Myanmar, Thailand,

etc. have shown good trends in bilateral trade with Brazil.

To sum up, despite obstacles related to physical distance between Asian countries and Brazil,

Asia, specifically Southeast Asia, is one of the most potential markets for Brazilian businesses.

The significant trading result in China as well as Japan, Singapore or Malaysia is prompt that

distance between Latin America and Asia doesn’t limit international trade between the two

regions. As a result, Vietnam and Brazil are totally able to promote their bilateral trade more

effectively.


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2.1.2. Bilateral Diplomatic Relationships between Vietnam and Brazil

Vietnam and Brazil started diplomatic relations on May 8th, 1989. Vietnam opened a Consulate

General in São Paulo (January 1998) and upgraded it to an Embassy (August 2000). Brazil

opened an Embassy in Hanoi in September 1994 and was the first South American country

opening an embassy in Hanoi.

Up to now, the relationship between the two countries has continued to develop positively and

there is much more potential for cooperation in many fields on the basis of the framework of the

Global Partnership.

Even though Vietnam and Brazil have not had any official Economic Partnership Agreement

yet, the relationship between the two countries is diverse in many fields, which is proven via

bilateral convention signed between the two countries.

Table 20: Bilateral conventions signed between Vietnam and Brazil

Agreements Agreement

signed

Agreement between the Government of the Federative Republic of Brazil

and the Government of the Socialist Republic of Vietnam on Visa

Exemption for Holders of Official or Service Passports

November, 2008

Agreement on Cooperation in Health and Medical Sciences between the

Government of the Federative Republic of Brazil and the Government of

the Socialist Republic of Vietnam

May, 2007

Agreement on Cultural Cooperation between the Government of the

Federative Republic of Brazil and the Government of the Socialist Republic

of Vietnam

October, 2003

Agreement on Scientific and Technological Cooperation between the

Government of the Federative Republic of Brazil and the Government of

the Socialist Republic of Vietnam

July, 2008


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Agreement, by Exchange of Notes, on the Establishment of Diplomatic

Relations between the Federative Republic of Brazil and the Socialist

Republic of Vietnam.

May, 1989

Agreement, by Exchange of Notes, on Visa Exemption for Holders of

Diplomatic Passports November, 2004

Agreement, by Exchange of Notes, to strengthen Commercial Relations November, 2004

Memorandum of Understanding between the Government of the Republic

of Brazil and the Government of the Socialist Republic of Vietnam on the

Fight against Hunger and Poverty

July, 2008

Memorandum of Understanding between the Ministry of Foreign Affairs of

the Federative Republic of Brazil and the Ministry of Foreign Affairs of the

Socialist Republic of Vietnam on Consultations on Matters of Common

Interest.

October, 1995

Memorandum of Understanding between the Rio Branco Institute of the

Ministry of Foreign Affairs of the Federative Republic of Brazil and the

Diplomatic Academy of Vietnam of the Ministry of Foreign Affairs of the

Socialist Republic of Vietnam on Mutual Cooperation for the Training of

Diplomats

May, 2018

Memorandum of Understanding on Sports Cooperation between the

Ministry of Sport of the Federative Republic of Brazil and the Ministry of

Culture, Sports and Tourism of the Socialist Republic of Vietnam

July, 2008

Memorandum of Understanding on the Establishment of a Joint

Commission between the Government of the Federative Republic of Brazil

and the Government of the Socialist Republic of Vietnam

July, 2008

Protocol of Intentions between the Government of the Federative Republic

of Brazil and the Government of the Socialist Republic of Vietnam on February, 2008


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Technical Cooperation in the Area of Production Techniques and Use of

Ethanol Fuel

Agreement on Air Services between the Government of the Federative

Republic of Brazil and the Government of the Socialist Republic of

Vietnam

July, 2018

Agreement on Maritime Transport between the Government of the

Federative Republic of Brazil and the Government of the Socialist Republic

of Vietnam

September, 2017

Source: Brazil’s Ministry of Foreign Affairs

2.1.3. Bilateral Trade

The two economies are very much supplementary. Vietnam is exporting to Brazil consumer

products to fulfill the market demands. Meanwhile, Vietnam is in need of Brazilian agriculture

products such as corn, soybean, cotton, and also minerals and machineries, chemicals to feed its

growing demand for materials.

During the past few years, two-way trade turnover of two countries has steadily grown. In 2020,

bilateral trade value reached USD 4.61 billion, according to Brazilian Ministry of Economy. In

July 2021, Vietnam became Brazil’s leading trade partner in ASEAN, with two-way trade

exceeding 3 billion USD, according to the secretary for Bilateral Negotiations in Asia, the

Pacific, and Russia at the Ministry of Foreign Affairs of Brazil.

Statistical Discrepancies in Data

It should be noted that there are differences in the value of trade reported by Brazilian and

Vietnamese statistics. According to Vietnamese statistics, the country consistently has a trade

deficit with Brazil, while the data of Brazil showed that Vietnam surplused in 2018, 2019 and

2020. Currently, there is no method to resolve these statistical discrepancies between the two

countries yet. Therefore, in this section, to be suitable to Brazilian readers, the data used are

those reported by the Brazilian Ministry of Economy.


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Chart 12: Trade balance between Vietnam and Brazil

USD Billion

Source: Brazilian Ministry of Economy

● Brazil exports to Vietnam:

Brazil is a noticeable market in exporting agricultural products to Vietnam. According to

Comex Brazil, the top 10 commodities Brazil exported most to Vietnam in 2020 mainly

belong to raw materials and agriculture products. Below are top 10 specific products that

Brazilian business export most to Vietnam:

2.192.32

2.54

2.35

1.73

1.932.03

2.26

0

1

2

3

2017 2018 2019 2020

Brazil imports from Vietnam Brazil exports to Vietnam


87 | Page

Chart 13: Value of top 10 merchandises Brazil exported most to Vietnam in 2020

Source: Comex Brazil

a. Corn

In 2020, the volume and turnover of corn imports of Vietnam both increased, compared to 2019.

The quantity of corn imports achieved about 12.1 million tons (increasing 5%), equivalent to

2.39 billion USD (rising 2.8%). In particular, ungrounded corn ranked 1st product Vietnam

imported most from Brazil, which is used in the livestock industry of Vietnam, according to

Comex Brazil.

b. Cotton

The garment and textile industry is one of the key industries in Vietnam. In 2020, the industry’s

export value reached USD 29.8 billion. Along with the development of this industry, Vietnam

highly depends on imports of raw materials such as cotton, fiber, yarn, textiles, and garments for

clothing production, as domestic supply has not been sufficient. Vietnam's top five cotton

suppliers are the United States, Brazil, India, Australia, and Cote d'Ivoire, supplying over 90%

of cotton for the country's production.

c. Soybean (including soy)

519

286240

81 58.8 58.2 58.2 51.3 49.40

100

200

300

400

500

600

Raw cotton Soy Bran Soy Pork meat(fresh,

chilled andfrozen)

Otheragriculturalproduction

goods

Leather Wheat andrye

Wood Poultrymeat


88 | Page

Import volume and import turnover of soybean of Vietnam in 2020 achieved 1.87 million tons,

equivalent to 774 million USD, increased 11.1 % in volume and 14.8% in turnover vs 2019. Here

in Brazil contributed 37.1% with 286 million USD, an increase of 11.9%.

d. Meat (including pork and poultry meat)

According to the Animal Husbandry Association Of Vietnam, in 2020 Pork meat imports

increased by 404%, poultry meat by 15%, buffalo meat by 44%, compared to 2019. In the first

eight months of 2021, Pork imports reached more than 256.8 thousand tons, up 62.2% over the

same period in 2020.

Brazil was the largest exporter of pork to Vietnam in 2020, accounting for 24.5% of the import

volume. According to Vietnam Customs, Vietnam imported more than 141,000 tonnes of pork

worth 334.4 million USD in 2020, representing a rise of 382% in volume and a 500% rise in

value over the previous year, customs statistics showed. The increase in imports was to make up

for the shortage in pork supply caused by African swine fever, which pushed up domestic prices

in the first months of 2020. The pork was mainly imported from Brazil, Russia, Poland, the US,

and Canada. Besides, Vietnam also imported a significant amount of poultry meat, with the value

of USD 49.4 million, from Brazil in 2020.

e. Wheat (including wheat and rye)

In 2020, Vietnam imported 2.94 million tons of wheat, increasing 6.6% compared to 2019.

Wheat import turnover achieved USD 755 million, a rise of 4.9% compared to 2019. Australia,

Russia, Canada, The United States and Brazil are the five-major countries exporting wheat to

Vietnam. Brazil wheat import turnover in 2020 achieved USD 58.2 million, up 149.5%

compared to 2019, stated by the General of Statistic Vietnam .

f. Animal feed (including Soy bran)

In recent years, the animal husbandry industry has grown rapidly, putting heavy pressure on the

domestic animal feed production industry. As a result, animal feed imports of Vietnam increased

by 3.9% compared to 2019, reaching 3.84 billion USD in 2020. Argentina, the United States and

Brazil accounted for 63.2% of import turnover in 2020. Herein, animal feed imported from Brazil

accounted for 10.2% of this merchandise’s import turnover of Vietnam, reaching USD 391.7


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billion in turnover (increasing 83.3% compared to the previous year), according to the General

of Statistic Vietnam.

g. Wood

Wood & Wood Products import turnover to Vietnam in 2020 reached USD 2.56 billion, up 0.6%

compared to 2019. Imports of logs and sawn timber in 2020 both decreased, while imports of

boards tended to increase. Brazil is one of Vietnam's common wood exporters, with the export

value to Vietnam of USD 51.3 million, contributing 2% of Vietnam's total wood import,

according to Comex Brazil.

h. Leather

Vietnam imports leather aiming to support the leather footwear and bag manufacturing domestic

industry. Along with the development of footwear and bag export, the demand for leather is

totally able to increase more in the future. In particular, in 2020, Vietnam's footwear exports

reached USD 16.75 billion and handbag exports reached 3.11 billion USD. The total export

turnover of the whole industry reached USD 19.86 billion. In the future, the efficiency of the

Free Trade Agreement between Vietnam and the EU as well as the United Kingdom is the

opportunities for footwear and bag exports.

● Brazil imports from Vietnam:

In specific, processed goods are the most products Vietnam exports to Brazil.

Telecommunications equipment, including parts and accessories and Thermionic valves and

tubes, are the two groups of merchandise which lead Vietnam’s export. Not only in trading with

Brazil, Vietnam is known as one of the global manufacturing hubs thanks to the development of

Foreign corporations and local corporations.


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Chart 14: Value of top 10 merchandises Brazil imported most from Vietnam in 2020

(million USD)

Source: Comex Brasil

2.1.3. Bilateral Investments

Vietnam and Brazil are the two countries that received noticeable foreign direct investment.

Brazil is one of the largest Foreign Direct Investment - FDI recipients and preferred investment

destinations in Latin America. Vietnam is now among Asia’s most favored foreign investment

destinations. FDI has been a key driver of recent economic success in both countries. However,

the number of FDI projects from each other is limited due to lack of information and distance

difficulty.

On the bright side, Vietnam and Brazil’s governments have shown their desire in pushing the

investment cooperation between the two countries. In a virtual meeting between the ASEAN

Committee in Brasilia (ACB) and the Brazilian Trade and Investment Promotion Agency (Apex-

Brasil) which discussed opportunities for trade and investment and ways to develop economic

relations between ASEAN member states and the Latin American country, Vietnamese

Ambassador to Brazil Pham Thi Kim Hoa briefed about Vietnam’s incentives for foreign

investment and called on Brazilian firms to invest in Vietnam’s areas of priority, such as

logistics, pharmaceuticals, IT, textile and garment, agriculture and biofuel. For the Brazilian

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representative part, the Apex-Brasil organized a number of virtual business-matching events and

webinars on food, beverages and information technology with enterprises from Southeast Asia,

adding that the agency also released market research reports, including one for Vietnam focusing

on foods and drinks industries.

The total inward foreign direct investment of Vietnam in the five years 2016-2020 had a positive

trend compared to that in the period 2011-2015, with 15,139 newly licensed projects with a total

of newly registered capital, adjusted registered capital and capital contribution and purchasing

shares by foreign investors reached USD 170.4 billion, of which the figure in 2016 reached 26.9

billion USD, USD 37.1 billion in 2017, USD 36.4 billion in 2018; 38.9 billion USD in 2019 and

approximately USD 28.53 billion in 2020. COVID-19 buffeted Vietnam’s economy in early

2020, resulting in layoffs and unemployment, decreased consumption, and a projected decrease

in the country’s growth rate, causing declining FDI.

As of November 20th, 2020, Brazil ranked 85th (4 projects) among 136 countries, territories

investing in Vietnam, with a total investment capital of 2.81 million dollars.

In terms of Vietnam’s FDI outflow, Vietnam has invested into 29 countries and territories in

2020. The countries which received the most investment from Vietnam in 2020, were listed in

order from largest to smallest as: PDR Lao, Germany, US, and Myanmar. The first 4 months of

2021 recorded a breakthrough investment abroad of Vietnam which saw a triple increase

compared to the same period of 2020. The country which received the most investment from

Vietnam in this period was the US, followed by Cambodia, Germany, France and Canada.

According to the General of Statistic of Vietnam in 2020, there were 119 newly Foreign Direct

Investment outflow projects with the total capital of Vietnam side, reaching USD 590 million.

Accumulated until Dec 2019, Vietnam has a total of 10 main enterprises, which contribute the

whole proportion of FDI outflow of Vietnam. In terms of enterprises with overseas investment

capital from 1 billion USD, there were 3 state-owned businesses and 2 private corporations. Petro

Vietnam is the largest state-owned investor with 27 projects, reaching USD 7.1 billion

investment capital, followed by Viettel (with 10 projects in information and telecommunication,

valuing 3 billion USD investment capital) and Vietnam Rubber Group (23 projects, valuing 1,3

billion USD investment capital)


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Even though foreign investment situation between Vietnam and Brazil is still limited, the

Vietnamese government is always willing to welcome Brazilian investment projects and hope

that both sides will increase information exchanges on each other's markets to boost bilateral

investment.

Telecommunications, information technology, oil and gas exploration, power generation,

transportation infrastructure construction, environmental project management and technology,

aviation and education will continue to offer the most promising opportunities for international

companies over the next few years as infrastructure needs continue to expand with Vietnam’s

pursuit of rapid and sustainable economic growth, based on the Industrial Revolution 4.0 and

market institutions. Health care will also be a growing sector as the government expands

programs and an increasingly wealthy population spends more on medical treatment.

2.1.4. Institutions for export promotion

Increasing export value is the priority of the governments. As a result, Brazilian exporters are

totally able to find supports from these institutes, as below:

Table 21: Institutions for export promotion

Institutions Description

DPR - Department of Trade and

Investment Promotion

Telephone: +55 (61) 2030-

8794/8798

Email: [email protected]

Website:

https://investexportbrasil.dpr.gov

.br/

The Ministry of Foreign Affairs (MRE’s) - Department of

Trade and Investment Promotion (DPR) supports

companies in exporting products and expanding business

abroad. DPR’s Trade Intelligence Division (DIC), Trade

Promotion Operations Division (DOC), and Investment

Division (DINV) work together to generate commercial

opportunities.

CIN - International Business

Centers

Telephone: (+55 11) 3040 3860

Administered by the National Confederation of Industry

(CNI), the International Business Centers (CIN) network

helps Brazilian enterprises expand into international


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Website: http://www.cin.org.br markets. CINs advise companies on strengthening their

businesses and increasing export potential.

Chambers of commerce

Telephone: +55 61 3321 1311

Email: [email protected]

Website: www.cacb.org.br

Encouraging commerce between Brazil and the world

Chambers of commerce to develop and sustain commercial

ties between Brazil and countries across the globe. They

help Brazilian enterprises connect with international

markets, by providing information on companies and

business conditions abroad and trade regulations in force.

Apex-Brazil Trade Sectors

Projects

Telephone: +55 61 2027-0202

Website:

http://www.apexbrasil.com.br/en

/trade-sectors

Aiming for fostering Brazilian exports, Apex-Brazil Trade

Sectors Projects develops and supports activities to develop

companies’ exporting abilities, thus contributing to the

promotion of Brazilian industries on the international

market. The Trade Sector Projects work with business

sectors or productive chains, comprising some of Apex-

Brazil's main initiatives for stimulating the exports of

Brazilian products.

Source: www.investexportbrasil.gov

2.2. Opportunities and Challenges in Vietnam

Vietnam and Brazil have been making efforts to develop bilateral relations in all aspects,

particularly in economics, trade, and culture. There has been a remarkable development between

the two countries in the past few years. In the near future, there will be much potential for

expanding and diversifying trade between Vietnam and Brazil. Besides, especially in the early

stages, there will be many challenges that businesses in both countries need to understand in

order to have a thorough preparation. Those challenges can be overcome when companies are

provided with the right information and guidance.


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2.2.1. Opportunities

In general, the Vietnamese economy is the market having high demands with 97.58 million

people in 2020 and is also a member of many regional free trade agreements. The Gross domestic

product (GDP) per capita at current prices in 2020 reached 2,779 USD per person, 1.33 times

higher than the Gross domestic product (GDP) per capita in 2015, which means Vietnamese

people will spend more for their living, seek more products to fulfil their demands.

Economic openness of Vietnam has been relatively high with a rapid growth rate in recent years.

According to the Statistic Yearbook of Vietnam, Vietnam belongs to the group of high economic

openness, ranked in second place only after Singapore, compared to other countries in the

ASEAN sub-region. In the Economic freedom index report of Heritage 2021, Vietnam’s

economic freedom score is 61.7, making its economy the 90th freest in the 2021 Index. Its overall

score has increased by 2.9 points above the regional and world averages, primarily because of

an improvement in fiscal health. And in the Asia–Pacific region, Vietnam ranks 17th among 40

countries. The Index of Economic Freedom is based on 12 criteria separated into four groups.

Vietnam scored especially high in Public Expenditure, National Budget, Providing Tax Relief,

Free Trade, and Monetary Freedom. That means businesses in Vietnam operate more and more

openly and conveniently, creating golden opportunities for Brazilian investors.

Brazilian companies will be offered promising advances when doing business or investing in

Vietnam, attributable to Vietnam’s pursuit of rapid economic development in

telecommunications, information technology, power generation, transportation infrastructure

construction, environmental project management and technology, aviation, defense, and

education. Healthcare is a growing sector as the government expands programs and an

increasingly wealthy population spends more on medical treatment. Health remains the top

concern of Vietnamese consumers, 49% of Vietnamese consumers indicated health as their top

concern in the first quarter of 2020, up 4% compared to the last quarter of 2019, which is the

highest level globally, according to the latest report from Nielsen Vietnam.

The World Bank’s Doing Business index is an aggregate figure that includes different parameters

which define the ease of doing business in a country. In the World Bank’s Doing Business 2020

report, Vietnam was ranked 70 among 190 countries regarding the World Bank’s Doing Business


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index, putting it ahead of the regional average. Of note, the World Bank reported that reforms in

trading across borders and enforcing contracts were making it easier to do business in Vietnam.

Vietnam and Brazil have many rooms for developing bilateral trade in the future. Brazil’s export

merchandise strength is nearly identical to Vietnam's needs.

In general, bilateral trade between Vietnam and Brazil has different levels of potential in

distinctive groups of merchandise. For instance, in some merchandise groups Vietnam has huge

demands but bilateral trade with Brazil is still limited. In the following section, we group

different merchandise which is Vietnam’s high demand import into three major categories based

on current status of trading.

1. Group of merchandise having limited import value from Brazil in 2020

Table 22: Group of merchandise having limited import value from Brazil in 2020

Product Categories Vietnam Imports

(USD)

Vietnam Imports

from Brazil

(USD)

Brazil Exports

(USD)

Mineral fuels, oils, distillation

products 12,930,000,000 8,540 24,870,000,000

Vehicles other than railway,

tramway 5,320,000,000 347,880 6,790,000,000

Edible fruits, nuts, peel of citrus

fruit, melons 2,320,000,000 206,820 935,390,000

Inorganic chemicals, precious

metal compound, isotope 1,470,000,000 98,460 3,380,000,000

Source: Tradingeconomics

Regarding the above group of product categories, bilateral trade between Vietnam and Brazil is

still limited, while Vietnam has high demand and Brazil has great export potential.


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About Mineral fuels, oils, distillation products, having The Harmonized System code (HS code)

27, due to the shortage in domestic production, Vietnam often imports from neighbor countries

in the region such as Korea, Singapore, etc.

Vehicles other than railway tramways (HS code 87) were imported most from countries in the

region, such as Thailand (28% in import value); Indonesia and China both contributed 16% in

import value.

With Edible fruits, nuts, peels of citrus fruit, melons, the largest exporter to Vietnam is Côte

d'Ivoire. In 2020, the value of Edible fruits, nuts, peels of citrus fruit, melons Vietnam imported

from Côte d'Ivoire was USD 581,424 thousand.

In terms of Vehicles other than railway, tramway, product labels, which Vietnam imported the

most, were groups of “Parts and accessories for tractors, motor vehicles for the transport of ten

or more persons”… (HS code: 8708). This group of products was ranked 2nd in Top 10 export

products of Brazil in 2020. Similarly, motor cars and other motor vehicles principally designed

for the transport of persons (other than those of heading 8702), including station wagons and

racing cars, which is currently ranked 3rd in Vietnam's top import products, was the group of

products Brazil exported the most in 2020. That means this group is one of potential products

which Brazil has the ability to discover in Vietnam’s market.

The need is there and here are the opportunities to improve the bilateral trade between the two

countries and generate higher revenue for Brazil exporters in Vietnam.

2. Group of merchandise having potential import value from Brazil in 2020


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Table 23: Group of merchandise having potential import value from Brazil in 2020

Product Categories Vietnam

Imports (USD)

Vietnam

Imports from

Brazil (USD)

Brazil Exports

(USD)

Electrical, electronic equipment 95,440,000,000 35,840,000 2,960,000,000

Machinery, nuclear reactors, boilers 21,570,000,000 8,280,000 8,340,000,000

Plastics and articles thereof 15,900,000,000 30,410,000 2,590,000,000

Iron and steel 9,900,000,000 18,760,000 8,670,000,000

Organic chemicals 3,800,000,000 5,850,000 1,470,000,000

Pharmaceutical products 3,550,000,000 3,650,000 1,080,000,000

Miscellaneous chemical products 2,960,000,000 1,080,000 953,470,000

Rubbers 2,710,000,000 3,850,000 1,270,000,000

Paper and paperboard, articles of

pulp, paper, and board 2,420,000,000 7,590,000 1,750,000,000

Wood and articles of wood, wood

charcoal 1,990,000,000 66,090,000 3,140,000,000

Tanning, dyeing extracts, tannins,

derivatives, pigments 1,770,000,000 2,040,000 307,060,000

Raw hides and skins (other than

furskins) and leather 1,340,000,000 58,500,000 976,000,000

Meat and edible meat offal 1,240,000,000 141,890,000 15,820,000,000

Articles of iron or steel 4,520,000,000 755,830 1,150,000,000


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The Vietnamese market does have high needs in importing the above product categories. This

merchandise group is also Brazil’s strength, proved by the remarkable value of their export.

There is still plenty of room for Brazilian exporters to explore in the Vietnamese market and

improve their export value to Vietnam within this group of merchandise.

Electrical, electronic equipment (HS code: 85)

In 2020, Vietnam imported a total of USD 95 billion in electrical and electronic equipment (HS

code: 85). Import value from Brazil of Electronic integrated circuits; parts thereof (HS code:

8542) reached USD 21 million, accounting for 30% export value to the world of Brazil. Electrical

insulators of any material (excluding insulating fittings) was the group of products accounting

most in product lines Vietnam imported from Brazil. In 2020, Vietnam imported USD 910

thousand Electrical insulators of any material (excluding insulating fittings), accounting for 2%

import value from the world, which reached USD 57 billion.

Machinery, nuclear reactors, boilers (HS code: 84)

Self-propelled bulldozers, angledozers, graders, levelers, scrapers, mechanical shovels,

excavators, shovel loaders, tamping machines and road rollers was the group of products

Vietnam imported most from Brazil in 2020, reaching USD 3 million.

Plastics and articles thereof (HS code: 39)

In terms of Plastics and articles thereof, the product label, which Vietnam imported most from

Brazil in 2020 was Polymers of ethylene, in primary forms (HS code: 3901), reaching USD 26

million (accounted for 4% export value to the world of Brazil and 1% import value of Vietnam)

Woods and articles of woods (HS code 09)

Logs, timber, and wooden panels account for over 80 percent of Vietnam’s total imports of wood

and non-wood materials. In 2019, Vietnam’s imports of wood materials totaled USD 2.2 billion,

including 2.6 million cubic meters of timber worth approximately USD 928 million, 2.3 million

cubic meters of logs worth approximately USD 650 million, and about USD 660 million worth

of wood panels. Vietnam's major suppliers of logs and timber include the United States, the EU,


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Cameroon, Angola, the Democratic Republic of Congo, Chile, and Brazil, China, Thailand, and

Malaysia. The proportion of Vietnam's wood imports from Brazil accounted for 2%, according

to the General of Statistic Vietnam.Despite the current downturn due to COVID-19, Vietnam’s

wood processing industry will continue to grow in the medium and long term and offer more

opportunities for Brazil logs and timber due to the shortage of domestic materials and the

abovementioned legality requirements. The growth in the wood processing industry is

sustainable, as the country has a skilled workforce and historically strong capital investment. In

addition, Vietnam is currently a member of the Comprehensive and Progressive Trans-Pacific

Partnership (CPTPP) and just ratified the EVFTA in June 2020. Vietnam’s exports of forest

products, mostly furniture, to CPTPP members rose from USD 964 million in 2018 to USD 1.1

billion in 2019, a 14% increase. Likewise, tariff reductions under the EVFTA are expected to

boost Vietnam’s exports of furniture to the EU.

3. Group of merchandise having high import value from Brazil in 2020

Table 24: Group of merchandise having high import value from Brazil in 2020

Product Categories Vietnam Imports

(USD)

Vietnam Imports

from Brazil (USD)

Brazil Exports

(USD)

Residues, wastes of food

industry, animal fodder 3,820,000,000 391,680,000 6,450,000,000

Cotton 3,690,000,000 540,310,000 3,320,000,000

Cereals 3,410,000,000 643,110,000 6,470,000,000

Ores slag and ash 1,620,000,000 485,270,000 28,890,000,000

Oil seed, oleagic fruits,

grain, seed, fruits 1,150,000,000 288,330,000 29,040,000,000


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This group includes top merchandise Vietnam imported from Brazil with impressive total import

values. Abundant supply, competitive prices, and continuous improvement in quality will

continue to help Brazil increase its market share in Vietnam.

Residues and waste from the food industries; prepared animal fodder (HS23)

Livestock industry of Vietnam has had impressive progress, in particular, increasing on average

5-6% per year. Along with the development of the livestock industry, Vietnam’s animal feed

manufacturing industry has increased significantly, recording 13-15% per year on average. Total

production of industrial animal feed from 10.8 million tons in 2010 was almost double in 2020,

reaching 20.3 million tons. However, domestic corn production currently meets only about 40%

of demand, so Vietnam has to import corn as well as other materials supporting animal feed

manufacturing.

According to the forecast of the Vietnam Poultry Breeding Association, the demand for industrial

animal feed in the country will need about 28-30 million tons/year in the next 5 years, from 2019,

with a value of 12-13 billion USD at a rate of USD 12 billion, an average growth rate of 11%-

12%/year. Of that, more than half of the feed production will go to poultry. That means, the

demand of Vietnam in importing prepared animal fodder merchandise will continuously

increase.

Cotton (HS code: 52)

In 2020, Vietnam imported 2.17 billion USD cotton (HS code:52) from the world. Therein,

cotton, neither carded nor combed (HS code: 5201), was the group imported most. The United

States, Brazil and India are currently the top 3 exporting groups of “cotton, neither carded nor

combed” countries to Vietnam. The cotton import value of Vietnam from Brazil in 2020 reached

USD 539,942 million (accounted for 17% export value to the world of Brazil and 25% import

value of Vietnam).

Cereals (HS code: 10)

About the cereal group, the top 4 products imported most by Vietnam were “Maize and corn”

(HS code: 1005), Wheat and meslin (HS code: 1001), Barley (1003) and rice (1006). Except for


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“Maize and corn” and “Wheat and meslin” were the two products that Brazil exported to Vietnam

most, accounting for 24% and 7% of Vietnam import value in 2020, respectively, Barley and

rice are products that Brazilian businesses can focus more in Vietnam.

Ores, slag, and ash (HS code: 26)

Despite the COVID-19 pandemic, Vietnam exported 9.86 million tons of steel, worth USD 5.26

billion in 2020, up 47.9% on-year, according to statistics published by the General Department

of Vietnam Customs. However, domestic steel production heavily depends on imported raw

materials.

Vietnam’s steel exports in the first half of 2021 rose 50% from a year earlier to 5.88 million

tons, while steel imports were up 5.9% at 7.09 million tons, according to official customs data.

As the steel demand in the world keeps increasing, the corresponding raw material demand of

Vietnam will also increase, leading to more opportunities for Ores, slag, and ash merchandise

import into Vietnam.

According to the Prime Minister's Decision No. 2471/QD-TTg dated December 28, 2011

approving the Commodity Import-Export Strategy for the 2011-2020 period, with a vision to

2030, clearly states:

- Developing export following the model of sustainable and reasonable growth between

width and depth, both expanding the export scale and focusing on enhancing the added

value of exports;

- Rationally restructuring export goods towards industrialization and modernization,

focusing on rapidly increasing the proportion of export products with high added value,

deeply processed products, and products with high added value, high-tech quality,

environmentally friendly products in the structure of export goods. In which, for the

group of fuels and minerals - which have advantages in natural resources but are limited

in supply, it is necessary to have a roadmap to gradually reduce the export of raw

minerals;

- Investing in technology to increase exports of processed products, take advantage of

favorable market and price opportunities to increase export value.


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- Orienting the proportion of this commodity group in the structure of export goods from

11.2% in 2010 to 4.4% in 2020.

In a word, the strength of Brazil is mainly focused on agricultural products (Cereals, Oil seeds,

etc.), agricultural inputs (Residues and waste from the food industries; prepared animal fodder)

and raw materials (Mineral fuels, mineral oils and products of their distillation; bituminous

substances; mineral, etc.) used in the manufacturing industry. These advantages meet with the

plan of Vietnamese authorities, which aims to execute Economic Restructuring. In particular,

when Vietnam focuses on transforming from agriculture to industry, Vietnam has to increase the

amount of agricultural inputs, such as animal food, providing domestic animal husbandry. Along

with this, Vietnam has to import raw materials for industry. Economic restructuring was defined

at the 11th Party Congress, then initially concretized at the 3rd plenum of the Party Central

Committee of the tenure; and planned explicitly in the relevant schemes of the Government,

including the Overall Scheme of Economic Restructuring Associated with Shifting Growth

Model towards Improving Quality, Efficiency and Competitiveness for the 2013 - 2020 period.

Vietnam’s economic restructure has been carried out for more than eight years now.

Bilateral trade between Vietnam and Brazil is diverse in many fields, most of those concur with

Vietnam’s demand. To promote trading for those merchandise, Brazilian businesses should focus

on eliminating some obstacles that Vietnamese importers are facing. Below is the typical

example: Latin America in general and Brazil in particular, is known as the high-quality leather

providers with a bargain price in the world. The quality of Brazilian leather is totally able to

compete with European leather. Vietnam is having a buoyant demand on importing leather across

medium and small size businesses. Some quick In-depth-interviews with Vietnamese businesses,

specializing in leather business, shows that they have been watching out for leather, especially

leather in big size from Brazil as well as other countries in Latin America. However, language

barrier and distance difficulty, and lack of information are hampering Vietnamese importers'

approach.


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2.2.2. Challenges

Apart from opportunities brought by the government and potential of the market, there are some

highlighted areas that Brazilian should pay more attention to when planning to enter the Vietnam

market:

● Laws and regulations

● Legal system and contract sanctity

● Tax structure

● Infrastructure

● Intellectual property

● Employing skilled workers

The evolving nature of regulatory regimes and commercial law in Vietnam, combined with

overlapping jurisdiction among government ministries, often results in a lack of transparency,

uniformity, and consistency in government policies and decisions on commercial projects.

Although, Vietnam’s authorities have been attempting to enhance the legal system. In particular,

in the coming time, Vietnam’s investment and business environment will be substantially

improved in a bid to further raise the country’s competitiveness. Such was highlighted in

Government Resolution 02 inked by Prime Minister Nguyen Xuan Phuc on the first day of 2020.

Worthy of note, the newly issued resolution focuses on solutions to simplify investment and

business conditions, raise the country’s rankings in international indexes, and lessen

requirements on specialized inspection.

Although Vietnam has reduced tariffs on many products in line with its WTO commitments,

high tariffs on selected products, which are listed in a group of merchandise subjected to Anti-

dumping duties; Environmental Protection tax, etc., remain.

Foreign investors, when entering the Vietnam market, may run into challenges in limited

infrastructure development, high start-up costs, unexpected tax assessments, arcane land

acquisition and transfer regulations and procedures, and a shortage of skilled personnel, etc.

Many firms operating in Vietnam, both foreign and domestic, found ineffective protection of

intellectual property to be a significant challenge. Currently, manufacturing, importing,


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marketing, and trading counterfeiting products, invaded Intellectual property in Vietnam, tends

to increase. While fake products become more and more delicate, Vietnamese consumers are

still limited in the ability to distinguish them.

The skill level of Vietnamese workers is increasing thanks to higher levels of secondary

education completion. Notwithstanding this advantage, Vietnamese workers still have some

shortages of skills in some areas. To address shortages, the Government has set out several

policies and programs to improve the number of skilled workers to be ready for the future growth

of the economy. One highlighted achievement, according to the Asialink Business Report in

April 2019, around 10% had received a tertiary education currently.

Furthermore, Vietnam’s Fourth Wave of the Pandemic and restrictions have brought more

challenges to businesses given that active cases have been increasing and the government has

gradually ramped up movement restrictions. In case, the Covid-19 in Vietnam is still in a

complicated situation, businesses should ensure that they are up to date with the latest

government directives and restrictions as these can change frequently. Some source of

information that Brazilian companies are able to update more information, such as:

- Website of Vietnam’s government, such as: Chinhphu.vn.

- English website version of some official news of Vietnam, namely, VTVnews; Nhandan

news,etc.


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PART 3: HOW TO EXPORT TO VIETNAM


106 | Page

PART 3: HOW TO EXPORT TO VIETNAM

Since China is no longer the top go-to destination for a lot of businesses because of its rising

manufacturing costs, the relevant policies for foreign enterprises as well as the trade war between

the US and China. In this current context, Vietnam has arisen as a serious competitor.

Vietnam is one of the leading investment destinations in Southeast Asia. With the advantages of

geography, natural resources, and an affordable labor force, Vietnam attracts a large amount of

capital each year. Vietnam also has a number of unexplored sectors and a growing consumer

market.

In addition, the Vietnam government currently implements an open-door policy to better access

international trade; therefore, exporting goods to Vietnam is also somewhat more accessible.

However, to succeed in the Vietnam market, Brazilian traders must not be neglected, they need

to understand correctly and completely the processes to make the integration into the market

easier and neater.

3.1. Common Route-to-market of Brazilian exporters in Vietnam

There would be three common types of exporters to the Vietnamese market:

1. OEM - Original Equipment Manufacturer;

2. Raw Materials Suppliers;

3. Manufacturers.

They would have different types of products and targeted customers in the Vietnamese market.

This section will introduce the Route to market for each of those 3 types so that Brazilian

exporters can have a rough picture of their goods' path to penetrate the Vietnamese market.

For OEM - Original Equipment Manufacturer:

According to the Vietnamese import experts, Vietnam rarely has this type of corporation because

Vietnam itself is also a famous processing country, and there are just a few cases where Vietnam

orders processing from other countries (except China).


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Figure 15: Common Route-to-market of OEM’s goods


Assembled products manufactured by Brazilian OEMs will be exported directly to Vietnamese

customers using the Traditional export method - through Air or Ocean Freight depending on the

agreements between the 2 parties.

For Raw Materials Suppliers/Exporters:

Figure 16: Common Route-to-market of raw material goods


In this case, Brazilian exporters sell materials to manufacturing companies in Vietnam to produce

the final product for export purposes or domestic consumption. This is a fairly common form in

the Vietnamese market. In recent years, Vietnam has developed in the direction of

industrialization - modernization, so the needs of raw material import to serve the production

and export of Vietnam is very high. Moreover, Vietnam is also a famous country in the field of


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export processing, the import of raw materials for production is also a factor that makes this form

popular.

For Brazilian raw material suppliers, exporting directly to Vietnamese customers is a common

type. However, according to some Brazilian import partners in Vietnam, they still want Brazilian

exporters to have an agent or a commercial presence in Vietnam to make it easier for them to

test new products and place orders, furthermore, to build long-term relationships with each other.

On the contrary, an agent or a commercial presence will also help Brazilian exporters easily

access and introduce goods to Vietnamese manufacturers.

For Manufacturers

Figure 17: Common Route-to-market of final product goods


This is the Route-to-market in which Brazilian exporters bring the final products to the

Vietnamese market to distribute to end-consumers. This type has grown strongly in recent years

because Vietnam's economy has continuously achieved positive growth, accompanied by an

increase in the income and lifestyle of people. More and more Vietnamese people prefer to

consume foreign goods than ever before.

However, this type has a certain challenge for Brazilian exporters, which is the complex retail

market. Therefore, if Brazilian exporters are contemplating selling to end-consumers in Vietnam,

it is advised to have a clear understanding of the retail market in Vietnam in order to choose the

right distribution channels to sell your products.


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Similar to Raw Material Suppliers, Brazilian Manufacturers also have 3 approaches to export

products to the Vietnamese market: (1) Selling directly to Vietnamese end consumers; (2)

Distributing goods in Vietnam through a Vietnamese intermediary, or (3) Setting up a

commercial presence in Vietnam.

3.2. How to export to Vietnam

This section will give Brazilian exporters a detailed description of 3 methods to export to

Vietnam as introduced in the previous section:

1. Exporting/Selling directly to customers in Vietnam;

2. Exporting through a Vietnamese intermediary;

3. Exporting through a Brazilian commercial presence in Vietnam.

3.2.1. Exporting/Selling directly to customers in Vietnam (Direct commerce)

3.2.1.1. Exporting directly to customers - Traditional Export Channel

A direct export is commonly used by businessmen who have customers in the Vietnam market

that are already authorized to import, which means they have an import license granted by the

Vietnamese government. Those customers can be a trading company, a distributor, or a company

that uses the Brazilian producers to supply certain raw materials. Those Vietnamese customers

are often medium to large-scale businesses, have reputable operations across Vietnam, and have

many years been in the industry. They have the necessary licenses to carry out the import of

goods from Brazil to Vietnam. Some of them have a separate department specializing in customs

clearance of goods at Vietnamese customs. A small part of these direct customers are small-scale

companies, and of course, they do not have a specialized department to handle import and export,

they often entrust an agent (often an import-export company) to outsource the import operation

service. Nevertheless, the negotiation about any terms in contract: payment method, shipping,

etc. all decided by the owner without going through a third party.

When doing a direct import, all shipping terms, payment methods, and other terms are agreed by

both the seller in Brazil and the buyer in Vietnam, using the INCOTERM as the guideline.

Usually, the Brazilian side will be responsible for the goods until it reaches the port of origin or

the designated destination; the Vietnamese customer will be responsible for clearing the goods


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at Vietnamese customs. However, in reality, the parties' responsibility is not restricted; it depends

on the discussion between 2 parties, the contract signed, and the agreed INCOTERM chosen.

Brazilian exporters can approach Vietnamese customers by joining International trade fairs.

Once Brazilian exporters identify the Vietnamese market as their desired destination, they can

directly approach the Ministry of Industry and Trade and Vietnam's Trade Promotion Agency to

find long-term local customers/ partners. In addition, Vietnamese small and medium importers

say that they also often find partners by searching on Google. Having a user-friendly and

informative website in English will help Brazilian exporters reach customers in Vietnam more

easily.

3.2.1.2. Exporting directly to customers - Global E-commerce channel

According to a report by the Ministry of Industry and Trade's Department of E-commerce and

Digital Economy, in 2020, 53% of the Vietnam population joined the online retail market,

boosting the growth of Vietnam’s e-commerce sector by 18% to USD 11.8 billion, accounting

for 5.5% of the total retail sales. This means that in 2020, Vietnamese people spent about USD

11.8 billion on online shopping. The number proves that selling through E-commerce into

Vietnam is among one of the most potential channels in the near future.

Sellers in Brazil can reach the final customers in Vietnam through world-famous e-commerce

platforms such as Amazon, eBay, Alibaba, Lazada, Shopee... Vietnamese users, both businesses

and individuals, can buy Brazilian goods directly from those sites. Currently, to make it easier

for Vietnamese people to buy goods internationally, many startups provide services in this sector.

Those businesses help ensure the quality of goods, shipping processes, and payment methods for

customers in Vietnam, thereby creating trust and encouraging Vietnamese people to order

products from foreign channels, mostly foreign E-commerce channels. One of the most typical

examples is Fado. Fado (Website fado.vn) is a startup specializing in providing shipping services

from the US, Japan... (international goods) to Vietnam (Cross-Border E-Commerce). In 2011,

Fado initially cooperated with Amazon to synchronize Amazon's data on the Fado.vn website

and currently provide a Vietnamese interface specifically for the Vietnamese market. Products

listed by sellers on Amazon, thanks to Fado, are also accessible and easily purchased by

Vietnamese users.


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Figure 18: Fado Vietnam

Source: Internet

3.2.2. Exporting through a Vietnamese intermediary

3.2.2.1. Entrusted export – fiduciary partner of Vietnamese buyers

This kind of export in terms of processes and procedures is similar to direct export. The

difference is that the Brazilian exporter will work and negotiate the deal through an intermediary

authorized by the importer in Vietnam, not directly with the buyer.

This entrusted export is often used by small and medium enterprises or businessmen

(individuals) in Vietnam. In other words, when domestic enterprises necessitate importing goods

from Brazil but are not allowed to import directly (do not have the license to import), or have

difficulty in researching, dealing with foreign partners. They will hire a third party to implement

an international trade service for them.

With this method of export, Brazilian exporters can take advantage of working with professional

negotiators and therefore perform import operations quickly.


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3.2.2.2. Entrusted export – fiduciary partner of Brazilian sellers

According to current Vietnamese regulations, unless a foreign company has an investment

license permitting it to directly distribute goods in Vietnam, which includes invoicing in local

currency, a foreign company must appoint an authorized agent or distributor.

The possibility of having a local Vietnamese partner in the operation will help expand the

Brazilian businessman's ability to enter the Vietnam market. The local partner can be an agent,

a distributor, who will handle the product through the Vietnamese customs and, finally, distribute

goods to Vietnamese end consumers. Partnering with Vietnamese local agents/distributors can

help Brazilian exporters take advantage of local custom knowledge, experience with local

distribution channels, language barriers, and exposure to constantly evolving legislation.

Agents

A Vietnamese agent sells a foreign supplier’s goods in Vietnam for commission. In this case, the

sale is normally transacted between the Brazilian exporter and a local customer in Vietnam while

the Vietnamese agent typically performs the following responsibilities: market intelligence, sales

leads identification, sales leads pursuit, sales promotions, and often after-sales services. The

specific responsibilities of a Vietnamese agent depend on the agency agreement between the

agent and the Brazilian exporters. Vietnam’s Trade Law recognizes the right of foreign

companies to appoint agents if the Vietnamese agent's registered scope of business includes such

activities.

3.2.3. Exporting through a Brazilian commercial presence in Vietnam

Owning a company in Vietnam allows Brazilian entrepreneurs to have greater control over the

process of sales, distribution, and marketing for the product in Vietnam. The company may also

register the intellectual property of its product in Vietnam, obtaining legal protection against

eventual competition from Vietnamese producers. These determinants are essential to expanding

operations in the Vietnamese market, especially in a long-term strategy.

Establishing a physical presence in the Vietnamese market requires more significant investment

in both financial resources and time. The Brazilian companies incorporated in Vietnamese

territory will be required to obtain specific licenses, added to the Vietnam Government's


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constitution requirements. The entrepreneurs will have to manage their business following

Vietnamese law.

When the Brazilian exporters desire to make a long-term investment in expanding in the

Vietnamese market, it is advisable to have strategic consulting partners accompany from the very

first step entering the market. This will help Brazilian exporters determine the right strategy

when penetrating this market, reduce risks and increase the winning chances. Brazilian exporters

can find a list of reliable Strategic Consulting firms and Market Research companies from the

Appendix 1.

General regulation when import into Vietnam

When owning a company in Vietnam and strictly managing the process of exporting and

importing goods into this country, Brazilian businesses need to pay attention to some important

regulations on importing goods into the territory of Vietnam.

General policy on imports:

The Foreign Trade Management Law, effective since January 1, 2018, is a new policy that has

many outstanding regulations on foreign trade management, foreign trade development, dispute

settlement, trade defense measures, including anti-dumping measures, anti-subsidy measures

and safeguard measures.

The Foreign Trade Management Law stipulates that foreign traders, who are not present in

Vietnam but belong to countries that are members of World Trade Organization (WTO) and/or

countries signing bilateral agreements with Vietnam, then have the right to export or import

according to the provisions of Vietnamese law and treaties to which Vietnam is a contracting

party.

The Law also specifies administrative measures such as export and import prohibition; export

and import suspension; export and import restriction; license provision according to export or

import conditions, etc.

Licensing:

Brazilian Traders that wish to import into Vietnam need to obtain an investment license and a

business registration certificate from the Department of Planning and Investment (DPI). There


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is no separate import license in Vietnam – the investment license already allows you to import

or export products.

Goods that export to Vietnam must ensure food safety, implement quarantine if required, and

ensure quality and satisfy technical regulations. Those requirements must comply with the

Vietnam Law (including Law on Product and Goods Quality, the Law on Standards and

Technical Regulations, the Law on Food Safety, the Law on Prevention and Control of Infectious

Diseases, and documents guiding the implementation of these Laws).

Generally, the Brazilian businessman interested in establishing a physical presence in Vietnam

has the following options:

1. Representative Office;

2. Branch Office;

3. Joint-Venture;

4. Wholly foreign-owned enterprise;

3.2.3.1. Representative office

Brazilian companies with business relations or investment projects in Vietnam may apply to

open representative offices in Viet Nam. An RO is the simplest form of establishing a legal

presence in Vietnam. It is governed by separate regulations and licensed by the relevant

provincial Service of Industry and Trade (“SoIT”). A representative office is only permitted to

carry out the following activities:

1. Acting as a liaison office for its parent company;

2. Conducting market research;

3. Promoting the activities of its head office through meetings, and other activities, that

leads to business at later stages.

As mentioned, a representative office cannot participate in any profit-generating commercial

activities in Vietnam. So the main functions of a representative office are to promote the products

of its parent company, supervise and control the quality of products, and communicate

information to its parent company. A representative office can only deal with the clients of its

parent company.


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Vietnam’s Ministry of Planning and Investment (MPI) does not currently specify required capital

for ROs. While the MPI does not impose specific capital requirements, companies will be

required to show that their capital contributions are sufficient to fund the activities of their

operations. As a result, potential investors should prepare to commit a minimum of USD 10,000

to fund their operations.

Establishing an RO will help Brazilian businesses have a presence and observe the reality of the

Vietnam market without putting too much investment in finance and human resources. This is a

common form of registered legal presence in Vietnam, particularly for those in the first stage of

a market entry strategy.

Conditions for RO Establishment

To be granted an RO license, the Brazilian Business Entity (BBE) must satisfy the following

conditions:

1. The BBE must be lawfully recognized in accordance with the law of a country or territory

participating in an international treaty of which Vietnam is a member;

2. The BBE must have been operating for at least one year from the date of establishment

or registration;

3. If the business registration certificate or equivalent document of the BBE stipulates an

operational term, then the residual term must be at least one year as from the date of

lodging the application file;

4. The operational contents of the RO must be consistent with Vietnam's undertakings in

international treaties of which Vietnam is a member;

5. In case the scope of operation of the RO is inconsistent with Vietnam’s Commitments,

the establishment of the RO must be accepted by the Minister of relevant Ministry.

Heads of representative office of foreign traders must meet the following conditions

according to Article 33 of Decree 07/2016/ND-CP:

1. A foreign national, who is appointed as the Head of the Representative Office, must apply

for a work permit before working in Vietnam.

2. A Head of representative office must not concurrently hold the following positions:

● Head of Branch Office of another foreign trader;


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● Head of Brand Office of the same foreign trader;

● Legal representative of the same foreign trader or others;

● Legal representative of an economic organization established under the laws of

Vietnam.

Documents to prepare to set up RO in Vietnam according to Article 10 of Decree

07/2016/ND-CP:

1. Application letter for Establishment License of representative office;

2. Copies of the foreign trader’s Business Registration Certificate or equivalent documents

certified by competent authority where the foreign trader is founded;

3. The foreign trader’s operation duration, if stated in the Business Registration Certificate

or equivalent documents, should be at least 1 year.

4. Copies of the audited financial statements or documents of equal value proving real

existence and operation of the foreign traders in the latest fiscal year;

5. A letter of appointment of the Chief Representative;

6. Copies of the passport or ID card (for Vietnamese) or copies of the passport (for

foreigners) of the Chief Representative;

7. Documents on the expected location of the representative office, including:

● Memorandum of understanding or lease agreement or photocopy of the

documents proving the rights of foreign traders to exploit and use the place for

locating the representative office‘s head office;

● Copies of documents on the expected location of the representative office in

accordance with the law.

Any foreign documents or supporting information provided will need to be notarized, legalized

by consular officials, and translated into Vietnamese by competent authorities.

How long does it take to obtain an RO License?

Process of registration of RO Establishment License

Step 1: Prepare the documents and submit to competent agencies

Step 2: The Ministry process the application

Within 03 working days, from the date of receiving the dossier, the Ministry shall examine the

application and request to provide additional documents if the dossier is incomplete and invalid.


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The request for additional records is made up to a maximum of once during the application

process.

Within 7 working days from the date of receipt of a complete and valid dossier, the Ministry

shall decide to grant or not to grant an RO Establishment License to a foreign company. In case

of refusing to grant a license, the competent agency must issue a document stating the reason.

Figure 19: Process of registration of RO Establishment License

Source: Data agregated by TBO

In reality, it might take more time to obtain an RO license. The RO license is valid for a fixed

term of five years from the date of issuance but shall not exceed the residual term of the business

registration certificate or equivalent document of the BBE. The RO license can be extended for

the same operation term as the first issuance.

3.2.3.2. Branch Office

According to the current provisions of Vietnamese law, Brazilian companies may set up their

branch in Vietnam under conditions and procedures prescribed by Vietnamese law.

The current Enterprise Law of Vietnam defines a branch of an enterprise as a dependent unit of

the enterprise, which is responsible for implementing all or parts of the functions of the

enterprise, including the function of authorized representative. Accordingly, the concept of a

branch of a foreign company in Vietnam can be understood as a dependent unit of the foreign

company, being established, and operating in Vietnam under the provisions of Vietnamese law

or Treaties of which The Socialist Republic of Vietnam is a member.


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A Branch Office (BO) can conduct business activities in Vietnam within the parent company’s

business scope. To set up a BO, a parent company must have operated the business for at least

five years in its home country. The BO will need to obtain an establishment license and have a

seal with the parent company’s name. The BO can hire Vietnamese staff directly, make it easier

to proceed contracts between the parent company and Vietnam companies, and serve similarly

to a liaison office.

This is not really a common form of foreign direct investment and is only permitted in a few

sectors (e.g. banking and foreign law firms). A branch is not an independent legal entity.

Branches of foreign companies are different from representative offices in that it is permitted to

conduct commercial activities in Viet Nam, following that, are permitted to engage in the

following activities:

1. Renting offices, renting, and purchasing necessary facilities and equipment for the

branch's operations.

2. Recruiting employees who are Vietnamese and foreigners to work at the Branch in

accordance with Vietnamese law.

3. Entering into contracts in Vietnam in conformity with the operation contents prescribed

in the branch establishment licenses and the provisions of the law.

4. Opening accounts in Vietnam dong and foreign currencies at banks licensed to operate

in Vietnam.

5. Transferring profits abroad according to the provisions of Vietnamese law.

6. Having a seal bearing the branch's name in accordance with Vietnamese law.

7. Carrying out activities of buying and selling goods and other commercial activities in

accordance with the establishment license, provisions of the laws of Vietnam and

international treaties of which the Socialist Republic of Vietnam is a member.

Conditions for Establishment

The BBE must be lawfully recognized in accordance with the law of a country or territory

participating in an international treaty of which Vietnam is a member;

1. The BBE has been operated at least 05 years from the date of establishment or

registration;


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2. In case the certificate of establishment or registration or any equivalent document of the

BBE regulates the validity, then the certificate must be still valid for at least 01 year from

the date of submission;

3. The scope of operation of the branch must be consistent with Vietnam's undertakings in

international treaties of which Vietnam is a member; and conformable with business lines

of the BBE;

4. In case the scope of operation of the branch is inconsistent with Vietnam’s Commitments,

the establishment of the branch must be accepted by the Minister of relevant Ministry.

Point 4 and 5 above are new conditions confirmable with treaties to which Vietnam is a member

and were signed after June 14th 2005 (the day the Law on Commerce 2005 was enacted).

Aforesaid conditions ensure the establishment of the branch complying with general conditions

of those treaties.

Heads of branches of foreign traders must meet the following conditions according to

Article 33 of Decree 07/2016/ND-CP

1. A foreign national, who is appointed as the Branch Head, must apply for a work permit

before working in Vietnam.

2. A Branch Head must not concurrently hold the following positions:

● Head of Representative Office of another foreign trader;

● Head of Representative Office of the same foreign trader;

● The legal representative of an economic organization established under the laws

of Vietnam.

Documents to prepare to set up BO in Vietnam

1. An application form for a branch establishment license, signed by a competent

representative of the foreign company;

2. Copies of the business registration certificate or equivalent paper of the foreign company;

3. Documents of the foreign company appointing the head of the Branch;

4. Copies of audited financial statements or documents certifying the performance of tax or

financial obligations in the latest fiscal year or equivalent papers of competent agencies


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or organizations where the foreign company established issue or certify the existence and

operation of the foreign company in the latest fiscal year;

5. Copies of the operation charter of the branch;

6. Copies of passport or identity card or citizen identification card (if Vietnamese) or copies

of passport (if foreigner) of the head of the Branch;

7. Documents about the expected location of the Branch office.

8. Signed leasing contract.



How long does it take to obtain a Branch License?

Process of registration of Branch Establishment License

Step 1: Prepare the documents and submit to competent agencies

Step 2: The Ministry process the application

Within 03 working days, from the date of receiving the dossier, the Ministry shall examine the

application and request to provide additional documents if the dossier is incomplete and invalid.

The request for additional records is made up to a maximum of once during the application

process.

Within 7 working days from the date of receipt of a complete and valid dossier, the Ministry

shall decide to grant or not to grant a Branch Establishment License to a foreign company. In

case of refusing to grant a license, the competent agency must issue a document stating the

reason.


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Figure 20: Process of registration of Branch Establishment License

Source: Data agregated by TBO

The following cases must seek approval from the Ministers of specialized Ministries according

to Article 13 Decree 07/2016/ND-CP:

1. The branch’s operation contents are inconsistent with Vietnam’s commitments.

2. Foreign traders are not from the countries participating in treaties to which Vietnam is a

contracting party.

3. The establishment of the branch is yet to be regulated in a specialized legal document.

In regards of the 3 cases mentioned above, the granting of an Establishment License shall be

carried out as follows:

1. The Licensing agency shall submit a written request for directions to the relevant

Ministry within 3 working days from the date of receipt of the valid application.

2. Within 5 working days from the date of receipt of the written response from the relevant

Ministry, the Licensing agency shall proceed to grant the Branch Establishment License

to the foreign traders.

In reality, the Ministry of Industry and Trade approves the registration of the BO after the

company submits all the documents with the process taking 10 working days or more. The branch

license is valid for a fixed term of five years from the date of issuance but shall not exceed the

residual term of the business registration certificate or equivalent document of the BBE. The

branch license can be extended for the same operation term as the first issuance.

In practice, the Vietnamese authorities do not issue licenses to branches, except in a limited

number of specific business sectors as below:


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1. Legal services;

2. Computer and related services;

3. Management consulting services;

4. Management consulting-related services;

5. Construction and related engineering services;

6. Franchise services;

7. Financial services:

● Insurance services and insurance-related services;

● Banking and other financial services;

● Securities services.

3.2.3.3. Joint-venture (JV)

A joint venture (JV) entails the partnership of companies or individuals for a specific business

purpose. JV is not a unique corporate structuring option; partners usually establish an LLC for

standard JVs and a Joint Stock Company (JSC) if there is a desire to list on Vietnam’s stock

exchanges. For investors purchasing stakes in state-owned enterprises equitized on Vietnam’s

exchanges, the JSC structure is required. When entering the Vietnamese market, the Brazilian

Business Entity (BBE) can choose to enter into joint ventures as a majority (ownership more

than 50%) or minority (ownership less than 50%) stakeholder. The capital requirements for JVs

are the same as for 100% WFOEs.

There are two main reasons for using the form of joint venture when exporting to Vietnam. The

first is to create a mutually beneficial partnership between two parties. Another reason foreign

investors set up this type of company is to comply with foreign ownership regulations in

Vietnam. In business lines that limit foreign ownership, the BBE will need a local partner. If one

BBE is planning on establishing a company in the following business lines, they will need to set

up a joint venture with a local entity:

1. Entertainment services;

2. Advertising services;

3. Telecommunication services;

4. Electronic game businesses;

5. Agriculture, forestry, and hunting-related services;


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6. Tour operator services and travel agencies;

7. Customs clearance services;

8. Container handling services;

9. Auxiliary transport services;

10. Road, rail, and internal waterways transport services.

Procedure for Establishing a Joint Venture in Vietnam

The process to register a business entity in Vietnam is the same whether you are a sole investor

or part of a joint venture. The process of setting up a joint venture in Vietnam is as follows:

Step 1: Obtain an Investment Registration Certificate (IRC)

The first step in the process is to acquire an Investment Registration Certificate in Vietnam from

the Department of Planning and Investment (DPI). Specific instructions have been mentioned in

the section General Procedure for the establishment of WFOEs.

Step 2: Get a Business Registration Certificate (BRC)

After getting the IRC, the next step is to get a Business Registration Certificate (BRC). This is

also known as Enterprise Registration Certificate (ERC). The DPI also issues this certificate.

Specific instructions have been mentioned in the section General Procedure for the

establishment of WFOEs.

Step 3: Register for Tax

The BBE must then register for a tax identification number and submit the payment for the

annual business license tax within 30 days upon the receipt of BRC or ERC. BBE can register

for tax at the tax office where the company headquarter is located or can register for tax online.

For new entering business in the Vietnam market, finding a reputable agency to consult and

implement tax registration is advisable.

Step 4: Contribute to the Capital

The BBE’s joint venture company must inject the capital contribution within 90 days upon

receipt of BRC or ERC as well.

Step 5: Apply for Any Supplementary Licenses

Certain business lines in Vietnam will have to obtain supplementary licenses before they can

start running legally. For instance, a trading company in Vietnam will need a trading license.

Similarly, to set up a manufacturing company in Vietnam, it is a must to have a construction


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permit and a fire safety license, among others. Thus, check if your business line requires any

additional licenses and proceed with the application.

The timeline to obtain licenses varies depending on the specific license. It can take a few weeks

to a few months.

3.2.3.4. Wholly Foreign Owned Enterprise

A wholly foreign-owned enterprise (“WFOE”) (also known as a 100 Percent Foreign Owned

Company) is a legal entity established by one or more foreign investors either in the form of a

limited liability company (“LLC”) or a joint-stock company (“JSC”).

Except for particular business sectors, i.e. banking, insurance, real estate, WFOEs do not require

a minimum charter capital.

Limited-liability company

Limited Liability Companies (LLC) are the most common form of investment for foreign

investors due to their reduced liability and capital requirements.

LLCs can be broken down into single member LLCs, where there will only be one owner, and

multiple member LLCs, where there will be more than one stakeholder. These owners can be

private individuals or companies, depending on the requirements of a given investor.

The management structure of a limited-liability company would normally consist of the

“members’ council”, the chairman of the members’ council, the (general) director and a

controller (or board of supervisors where the limited-liability company has more than 11

members).

A limited-liability company established by foreign investors may take either of the following

forms:

1. A 100% foreign-owned enterprise (where all members are foreign investors) - which is

introduced in this part.

2. A foreign-invested joint-venture enterprise between foreign investors and at least one

domestic investor - which was introduced in the previous part.

Joint-stock company


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A joint-stock company is a limited liability legal entity established through a subscription for

shares in the company.

Under Vietnamese law, this is the only type of company that can issue shares. The charter capital

of a joint-stock company is divided into shares and each founding shareholder holds shares

corresponding to the amount of capital the shareholder has contributed to the company.

A joint-stock company is required to have at least three shareholders. There is no limit on the

maximum number of shareholders in such companies.

The governance of a joint-stock company includes the general meeting of shareholders, the board

of management, the chairman of the board of management, the general director and a board of

supervisors (not compulsory if the joint stock company has less than 11 shareholders, or if a

corporate shareholder holds less than 50% of the shares of the joint-stock company).

A joint-stock company may either be 100% foreign owned or may take the form of a joint venture

between both foreign and domestic investors. The type of joint venture was described in the

previous part.

General Procedure for the establishment of WFOEs

While RO and BO have a relatively easy process for licensing and incorporation, forming a

Wholly Foreign-Owned Company requires more formalities and paperwork for the business to

prepare.

Step 1 – Pre-investment approval

The following projects are subject to the authority of the provincial People’s Committees:

1. Projects to which the State allocates or leases out land without auction, tendering or

transfer; and projects requiring conversion of land use purpose;

2. Projects where one of the technologies to be used is restricted in terms of technology

transfer laws.

For those types of investment above, Brazilian companies need to seek the approval of the

Provincial People’s Committees prior to starting establishment procedures.

Contents of dossier of application to seek for the approval include:

1. Application for implementation of investment project (this should include details of the

project in Vietnam);

2. For individuals as foreign investors:


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● Passport;

● Head office lease contract;

● Confirmation of the bank with the same amount of capital as the investment

charter capital in Vietnam;

3. For organizations as foreign investors:

● Business registration certificate. (This document must be consular legalized when

brought back to Vietnam for use);

● Profitable financial statements or Bank confirmation equal to the amount to be

invested in Vietnam;

● Head office lease contract;

● Decision on appointment of legal representative for enterprises in Vietnam;

4. Financial statements - A copy of one of the following documents:

● Financial statements of the last 2 years of the investor;

● Commitment of the parent company to provide financial support;

● Commitment of a financial institution to provide financial support;

● Guarantee on the investor’s financial capacity;

● Documents explaining financial capacity of the investor;

5. Proposal of investment project (should include the details of the investment project,

including Detailed use of restricted technology or Land use needs if had);



Step 2 – Investment registration certificate application

The second step in the Vietnamese corporate establishment process is to apply for an Investment

Registration Certificate (IRC). An IRC is required of all 100 percent foreign-owned investment

projects, it helps establish the right of the foreign enterprise to invest within Vietnam.

According to Clause 1 Article 37, Clause 1 Article 33 of 2014 Investment Law, Article 29 of

Decree No. 118/2015/ND-CP, to apply for the IRC an investor must prepare the following

documents:

1. An application for implementation of investment project (this should include details of

the project in Vietnam);

2. For the investor being an individual: a copy of the ID card or passport;


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3. For the investor being an organization: a copy of the Certificate of Establishment or an

equivalent document certifying the legal status of the investor;

4. Proposal of the investment project (should include the details of the investment project,

including lease agreements or land use needs);

5. Financial statements - A copy of one of the following documents:

● Financial statements of the last 2 years of the investor;

● Commitment of the parent company to provide financial support;

● Commitment of a financial institution to provide financial support;

● Guarantee on the investor’s financial capacity;

● Documents explaining financial capacity of the investor;

6. Explanation for technology application consisting of: names of technologies, their

origins, technology process diagram; primary specifications, condition of machinery,

equipment and primary technological chains for projects using technologies on the list of

technologies restricted from transfer;

7. A Business Cooperation Contract (BCC) if the investment project is executed in the form

of a BCC.



Step 3 – Enterprise registration certificate application

The Enterprise Registration Certificate (ERC) is required for all projects that seek to set up new

entities within Vietnam. When being obtained, the ERC will be accompanied by a number that

will double as the tax registration number of the entity.

As part of the application process and according to Article 22 and 23 of the 2014 Law on

Enterprises, Clause 1 Article 28 of Decree No. 78/2015/ND-CP, the following information

should be prepared:

1. Written application for enterprise registration;

2. Company charter;

3. A list of members (only required for LLC with 2 or more members; founding

shareholders and shareholders being foreign investors for joint stock companies, a list of

authorized representatives for foreign shareholders being organizations);

4. Copies of the following documents:


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● Copy of the citizen identification card, passport, or other legal personal

identifications of members being individuals;

● Establishment decision, Business Registration Certificate, or an equivalent

document of the organization and a letter of authorization; Copy of the citizen

identification card, passport, or other legal personal identifications of the

authorized representatives of shareholders being organizations;

● If the members are foreign organizations, the copy of the Business Registration

Certificate or an equivalent document must be consular legalized.

5. A Certificate of Investment Registration for foreign investors as regulated by the

Investment Law.



Step 4 – Post licensing procedures

Once the IRC and ERC have been issued, additional steps have to be taken to complete the

procedure and start business operations. This includes:

1. Seal carving;

2. Bank account opening;

3. Labor registration;

4. Business license tax payment;

5. Charter capital contribution;

6. Apply for Any Supplementary Licenses needed;

7. Public announcement of company establishment.



How long does it take to set up WFOE

In general, step 1 will take about 35 days, step 2 will take 15 days and step 3 will take about 3

days. However, in reality, the setup time for a WFOE ranges between two to four months on

average.


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3.3. Payment terms

Currently, there are many different payment methods used between the buyer (importer) and the

seller (exporter), in which the T/T (Telegraphic Transfer) payment method accounts for about

70% of the transaction volume. Using Letter of Credit (L/C) accounts for about 20% and the rest

is D/P and other payment methods. However, for high value transactions (for example, the

transaction of some specific industries: steel, petroleum ...), the L/C payment method is mostly

used.

T/T (Telegraphic Transfer) payment is one of the most popular payment methods today. This

method is used a lot because of its convenience in trading activities and is often suitable for

small-value contracts, transactions between two partners who trust each other and have had a

long business relationship, or a parent company and its subsidiary. For this payment method,

normally the seller will ask to pay a deposit of 30 - 50% of the contract value. The importer in

Vietnam will base on factors such as the seller's reputation, the level of the need for immediate

availability, the size of the contract to consider adjusting this amount. For transactions that are

partially paid under this payment method, the Exporter may be at risk of not being able to receive

the remainder due to the buyer's financial shortfall, resulting in the cancellation of the order. As

a precaution, this type of agreement is recommended to be used by Brazilian exporters in

transactions with trusted business relationships.

Letter of Credit (L/C) is a form where the Bank on behalf of the Importer commits to the

Exporter/Supplier of goods to pay within the specified time, when the Exporter/Supplier of goods

presents documents in accordance with the provisions of the L/C opened by the Bank at the

request of the importer. Time to open L/C depends a lot on the assessment of the application

procedure, it can take 21 days or more. When making payment on behalf of its customer, the

issuing bank must verify that all documents and drafts conform precisely to the terms and

conditions of the letter of credit. Preparing a complete and accurate set of documents will help

businesses and business partners save time. Although the credit can require an array of

documents, the most common documents that must accompany the draft include:

● Commercial Invoice

● Bill of Lading


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● Warranty of Title

● Letter of Indemnity

When opening L/C, or performing payment procedures, it is necessary to pay attention to

important dates on L/C:

● The delivery date must be within the validity period of the L/C and must not coincide

with the effective expiry date of the L/C.

● The date of issuance of the L/C must be a reasonable time before the delivery date and

must not coincide with the delivery date. This reasonable time is calculated as a minimum

of the total number of days required to notify the opening of the L/C, the number of days

to keep the L/C at the Advising Bank, and the number of days to prepare the goods for

delivery to the Importer.

● The expiry date of the L/C must be a reasonable time after the date of shipment. This

time includes the number of days to prepare the set of documents, the number of days to

transport the documents to the Issuing Bank of the L/C or to the place of presentation of

documents specified in the L/C, the number of days to keep the documents at the

Advising Bank and time for the Bank to check the documents.

Currently, the Importer can easily make payment by T/T or L/C method at many different banks

in Vietnam.

Alternative payment methods:

D/P payment method (DAP: Document against payment)

While the L/C payment method is used nowadays primarily in international trade transactions of

significant value, for deals between a supplier in one country and a wholesale customer in

another, the D/P payment method (DAP: Document against payment) is preferred among

partners who have mutual trust because of its convenience, speed, and low cost, but still, ensure

that payment is made when handing documents.

L/C payment method is the preferred payment method for high value orders because of its safety

assurance, but it has some disadvantages in terms of cost and time, procedures. On the contrary,


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T/T payment method is quick and easy to implement, but the risk is very high, especially in case

the seller and buyer have not established a trusting relationship in trade.

To ensure safety, some businesses still use the D/P (DAP) method to replace L/C. The exporter

appoints the presenting bank to deliver the documents to the importer only if the importer has

fully paid the accompanying invoice or draft. In other words, the importer can only receive the

documents at the time they have paid the bank. The risk in D/P payment, which makes few

Vietnamese importers choose this method, occurs mainly for the buyer because he cannot check

the condition of the goods and check the documents while the goods have been delivered to the

port of import. In general, this method is quite safe and ensures the maximum benefit of the

exporter. However, that is only in case the compliant exporter sends the set of documents within

the validity period of the D/P.

Open account

Open account payment method is also used by some importers in Vietnam. Because most of the

transactions made with Open account are for the activities of importing goods on e-commerce

platforms. Therefore, this form of payment is used through payment services provided by

international e-commerce platforms (e.g. Alibaba) instead of banks.

The development trend of international payment methods in Vietnam moves closer to the

common development of the world. The Vietnamese banking system is increasingly developed

in terms of the number of domestic branches and they have also expanded their agency

relationships abroad to participate in the international payment system. The banking system in

Vietnam is becoming more modern, besides, many reputable banks in the world also have

established systems and branches in Vietnam. In addition, the human resources being in charge

of international payments in banks in Vietnam, are continuously trained to improve their

capacity, professional knowledge, and skills in order to provide the best customer experience.

The bank's document review process has also been improved significantly. That creates

favorable conditions for domestic and foreign enterprises to conduct international transactions.


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3.4. Selling to the Vietnamese Consumer

The Vietnamese market is growing at a fast pace, offering huge potential for Brazilian exporters.

However, this can be a highly challenging task. In other words, a small market does not mean

easy access.

This section will look at options for Brazilian exporters to distribute products in Vietnam - from

using local agents and distributors to developing joint ventures with a distributor, then

establishing and maintaining significant relationships, and owning a distribution network.

3.4.1. Distribution strategies

The decision of distribution strategy for Brazilian companies in Vietnam will mainly depend on

their strategy to develop in the Vietnamese market. For example, exporters who are relatively

new to the market may need to consider partnering with local distributors to utilize their network

and experience. While exporters with existing sales or production activities in the market may

be willing to take more risks and set up their distribution to expand their scale.

In general, there are 3 main ways to distribute products into Vietnam, include:

1. Distribution strategy with a local distributor;

2. Distribution strategy as a Joint-venture;

3. Distribution strategy as a Brazilian-owned company.

Distribution strategy with a local distributor

Using a local distributor to sell products directly to Vietnamese consumers is the simplest method

a Brazilian exporter can take. This method allows Brazilian exporters to realize their intentions

immediately - distribute products to the Vietnamese market, without carrying too much import

paperwork and knowledge to distribute the product in Vietnam. At this time, Brazilian exporters

rely entirely on local Vietnamese distributors, trusting in their market distribution capacity and

knowledge, and are confident that they will intensively sell their products.

For this method, Brazilian businesses will not be much involved in the sale of goods in the

Vietnam market resulting in a lack of knowledge of the current market and consumers in

Vietnam. In some cases, domestic distributors can even sell Brazilian products under their

company's label. As mentioned at the beginning, it is challenging for Brazilian exporters to


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control the domestic market using this type of distribution. To deal with this challenge, Brazilian

exporters can choose to open ROs as it allows them to keep their cost low, still, understand the

market, and coordinate activities with existing distributors.

Table 25: Advantages and Disadvantages of Distribution strategy with a local distributor

Pros Cons

- No investment cost for product

distribution in the Vietnamese

market.

- Utilizing the market knowledge,

distribution system from the local

distributors

- Lacking knowledge of the current

market and consumer.

- Lacking connection with target

customers.

- Unable to control the quality of

products and brands (products can be

modified; labels can be changed

during the distribution process).

Source:Data aggregated by TBO

In conclusion, this form of distribution is the best option for companies with low-cost strategies,

companies with trading purposes only or companies that are still at the entry level and want to

test the market and observe how responsive the market is to their products. Suppose Brazilian

exporters plan to have a long-term strategy, in that case, it is necessary to use another form of

distribution in which Brazilian exporters can create connections with end-users in Vietnam.

Distribution strategy as a Joint-venture

Participating in a "joint-venture" is another possible strategy for Brazilian companies in

Vietnam. This is also the most popular method of foreign enterprises when they want to penetrate

and distribute products in the Vietnam market. This method will give Brazilian exporters many

outstanding advantages. First, Brazilian exporters do not need to invest too much like self-

distribution methods in terms of capital. They only need to contribute a certain amount of capital

with local businesses - who already have production lines and product distribution systems, as

well as the market and consumer knowledge. Business risks will also be divided equally between

the parties, which minimizes the loss for Brazilian companies when doing business in Vietnam,


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just in case. Moreover, distribution as a joint venture helps Brazilian exporters have better control

over the marketing and distribution process to end-consumers, thereby developing an

understanding of the Vietnamese consumers to improve the products accordingly.

Despite many advantages, the joint venture also has a disadvantage that Brazilian exporters need

to pay attention to when implementing: the conflict between the Brazilian exporter and the local

joint venture enterprise. This is the result of differences in culture, knowledge between parties,

and thus will easily cause conflict, which may lead to making wrong business decisions.

Table 26: Advantages and Disadvantages of distribution strategy as a Joint-venture

Pros Cons

- Depending on the agreement of the

two parties, Brazilian exporters can

choose a reasonable investment level

for them.

- Sharing the Business risks with

partners.

- Allowing Brazilian exporters to make

decisions (together with partners) in

strategic planning for brand

development and distribution of goods

to the market.



partners

- There have been many successful joint

venture cases between foreign

exporters and domestic enterprises.

However, if partners cannot handle the

cooperation well, it is easy to cause

conflicts and disagreements and

therefore affect the relationship and

strategic direction between partners.


Distribution strategy as a Brazilian commercial presence

This strategy is used when the Brazilian exporter has a specific commitment to the Vietnamese

market and wants to invest in long-term development. Self-distribution of products is the most

challenging distribution method for Brazilian exporters because they have to develop their own


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distribution channel and take steps from exporting to importing and distributing goods. Of

course, Brazilian exporters can solve the difficulty of understanding the market by acquiring a

local company operating in the relevant field, thereby assisting them in penetrating the market

well and reducing operational risks. Furthermore, this strategy also requires the Brazilian

company to spend a lot of money on the investment, whether it is to establish an entirely new

legal entity or to acquire a local company.

On the other hand, establishing a company and self-distribution of products allows Brazilian

companies to strictly control the whole process of selling goods in the Vietnam market, from

production, strategy formulation, to product distribution. This tight control is necessary with a

long-term development strategy in Vietnam. It helps Brazilian exporters understand the market

and build long-term relationships with target customers.

Table 27: Distribution strategy as a Brazilian commercial presence

Pros Cons

- Allowing Brazilian exporters to

control the whole process: from

production, strategy formulation, to

product distribution.

- With the commercial presence in the

market, Brazilian exporters are able to

get connected with target customers

and build long-term relationships with

them.

- Brazilian exporters are able to make

every decision in business, avoid

conflicts.



partners (through M&A or local staff)

- Establishing a business entity in

Vietnam will require a huge initial

investment level compared to 2 types

of strategy above.

- Requiring much effort in building the

knowledge of the Vietnamese market,

distribution system, and consumers, as

well as the limitation of business

partnerships could become a big

challenge for Brazilian enterprises to

win this market.



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3.4.2. Highlighted challenges in the Vietnam market

Along with being a country with potential development and stable political institutions, Vietnam

also has many challenges that Brazilian exporters need to be aware of before and while doing

business. This section will list some outstanding issues for Brazilian exporters to consult before

doing business in Vietnam.

Fragmented market

Specifically, the domestic trade in goods and the number of people doing business in trading and

services increase rapidly. Still, it is spontaneous, scattered, small-scale, and traded through many

layers of intermediaries.

Measures to manage the market through standards, regulations, and business conditions have not

been effectively implemented, causing disadvantages to other participants in the market and

penalties to consumers.

Incomplete Infrastructure

Although Vietnam's infrastructure has been developed in recent years, there is still a big gap

between urban and rural areas. In some places in mountainous or remote areas, the facilities are

still weak and backward. This leads to an unevenly distributed commercial infrastructure.

Modern Trade channels like supermarkets, convenience stores, specialized stores, etc., are

mainly concentrated and thrive in the urban area. In the rural area, there are still places where

people have to travel half an hour to get to the market (which is the only market in town) to buy

daily food.

The government has understood this challenge well and has implemented a number of reforms

over the past year. Much progress has been made in building critical hard infrastructure - roads,

harbors, and airports. The government is always trying to build infrastructure to the farthest

places so that all Vietnamese people can access modern commerce.

Intellectual Property (IP)

IPRs are territorial, which means they are protected only within the country where they are

registered. Brazilian exporters should therefore consider registering IPR rights (if necessary) in

all of the export markets.


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Vietnam was ranked 77th out of 140 countries for IPR protection in the World Economic Forum's

Global Competitiveness Report 2018. Vietnam has regulations on IPR protection. Nevertheless,

implementation is not yet vigorous. Vietnamese people still do not have a high awareness of

intellectual property. The domestic trade and use of counterfeit goods are still very high, mainly

because of competitive prices.

The Vietnamese Government has always encouraged Enterprises in specific industrial sectors to

research information on IP issues relevant to them and implement defensive measures early when

planning to enter the Vietnam market.

Natural disasters

Tropical cyclones can occur along the eastern coastal regions, usually from May to November,

although they may happen outside this season. The resultant rainfall and strong winds can cause

flooding and travel disruption.

Localized flooding, flash floods, and landslides are relatively frequent occurrences due to

Vietnam’s tropical monsoon climate, which produces large amounts of rainfall in a short time.

Natural disasters in Vietnam not only hinder the circulation of goods but sometimes also cause

damage to people and property of businesses, in the case of Brazilian companies having factories

or other constructions in Vietnam.

Brazilian exporters should monitor climate on the National Center for Hydro-Meteorological

Forecasting website and follow the advice of the local authorities, including any evacuation

orders.

Restrictions of foreign currency

Foreign currency capital for indirect investment in Vietnam is required to be exchanged into

Vietnam dong, the official currency in Vietnam. Also, transactions relating to offerings,

payments, quotations, advertisements, and other forms alike should be done in the Vietnamese

currency as well.

However, the inflow of foreign currency into Vietnam is to date open with minimum restrictions.

Similarly, transferring foreign currency overseas has also been considerably made less severe.

Suppose Brazilian exporters are residing in Vietnam for employment purposes. In that case, they


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are allowed to transfer their gains abroad provided that they have completed all related finance

liabilities to the government of Vietnam.

3.4.3. Transport options

Vietnam is well-positioned to become a dominant regional transportation center when occupying

a unique position along the Pacific Ocean, Gulf of Thailand, and Gulf of Tonkin, along with

shared land borders with China, Laos, and Cambodia. However, rapid economic and population

growth have led to unprecedented strains in the country’s existing transportation network. Many

of its ports, highways, and airports are experiencing congestion and capacity constraints after

decades of under-investment. In a bid to close its widening infrastructure gap and bolster regional

competitiveness, the government has outlined significant upgrades to its road networks.

Additionally, the government has also put a lot of effort into airway development. Many airport

development plans have been conducted and are expected to absorb most international passenger

arrivals in the coming decades.

This section will give a brief introduction to the transport option in Vietnam so that Brazilian

Exporters can have the most preliminary view of this aspect.

3.5.3.1. Domestic infrastructure

Road Transport

With its geography in the shape of the letter “S” stretching vertically from North to South,

Vietnam’s total length of roads is about 270,000 km, including 24,866 km of over 90 national

highways, 28,142 km of provincial highways, 57,032 km of district highways, the remaining

more than 160,000 km of commune roads. Total bridge length of national highways and

provincial roads is about 711 km. (Data updated March 2020, by the Directorate for road of

Vietnam)

Vietnam’s road infrastructure has been expanding significantly for the past few years, with many

expressways currently in service. According to the Ministry of Transport, the completion of

1,074 expressway kilometers during the 2011-2020 period had increased the total length of the

national expressway in operation to 1,163 kilometers. And as said by Mordor Intelligence, a plan


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to construct a 1,372 km North-South highway by 2030 expected to cost USD 14 billion was

recently authorized.

Figure 21: Road Transport in Vietnam

Source: Internet

Railway Transport

The Vietnamese century-old North-South railway network has remained relatively unchanged

for over a hundred years of history regardless of the incredible breakthrough of other means of

transport. This is mainly because of limited funding capital sourced from the national

government and the restrictions in attracting the private sector’s investment due to the existing

complex mechanisms and policies.

Figure 22: Railway Transport in Vietnam

Source: Internet

Vietnam has 3,142.7 km of railway, including 9 main lines of 2,632 km in length, 402.7 km

station lines, and 108km branch lines. All these are single lines. Railroads, whose gauge is 1000


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mm, is 2,251 km, accounting for 85.5%, while that of 1435 mm is 161 km, accounting for 6.1%,

and dual gauge is 220 km, accounting for 8.4%. There are 1,790 railway bridges with a total

length of 45.4 km and 31 combined bridges of 11.8 km, and 39 tunnels of nearly 11.5 km.

Hanoi - Ho Chi Minh City and Ha Noi - Hai Phong, the two main railway lines, connect almost

all major economic centers in Vietnam except for the Mekong river delta.

Given that the local experts and planners have long emphasized the essential role of national-

wide modernization of its railway system, the construction of the North-South high-speed

railway project that would replace the current rail lines and potentially reduce travel time

between Ha Noi and Ho Chi Minh City, continues to delay due to the feasibility of various

options in terms of train speed.

Vietnam’s first urban railway projects, currently under construction in two dominant cities – Ho

Chi Minh city and Ha Noi, are conducted with the intention to transform these areas and reduce

the overload on the local transport infrastructure. The development of 8 metro lines in Ha Noi

and 8 lines in Ho Chi Minh City is estimated to cost USD 13 billion. The Metro Line No.1 in Ho

Chi Minh city will be fully into commercial operation in 2022. Private developers are being

engaged to construct and develop these metro projects. The Vietnamese government is

considering financial resources from the private sector since the local lawmakers expect the

private investors to associate with the capabilities of developing the national high-value railway

projects more efficiently than state-owned firms. Opportunities are open for foreign

corporations.

Inland Waterway Transport

Vietnam’s Inland Waterway system is quite diversified. There are more than 2,360 rivers and

canals (capable of exploiting transportation) with a total length of 42,000 km. Out of which,

11,000 km of the inland waterway are being exploited, mainly in the delta areas of Red River

(2,500 km) and Mekong River (4,500 km). (Source: Word Bank, 2014)

Waterway lines in Vietnam have been affected a lot by hydrographic factors. Climate change

and sea-level rise, flood flows increase, affecting the circulation of large ships. In the rainy

season, many harbors are flooded, affecting the exploitability of irrigation works. Trade and

travel between the domestic sea and abroad have stalled. In the dry season, rivers and lakes dry


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up, resulting in affected navigation. The phenomenon of saltwater intrusion has increased. This

creates a strong impact to infrastructure, especially ports, even needing to rebuild, renovate,

upgrade, or relocate.

In spite of many limitations, waterway transport is still a favorite choice because it is inexpensive

and suitable for certain kinds of goods. Vietnam is now carrying out a program on the upgrade

of river ports as well as riverbed dredge to improve waterway transportability.

Currently, Vietnam has more than 100 seaports of different sizes. There are 22 seaports in the

North (from Quang Ninh province to Ninh Binh province) of which Cai Lan and Hai Phong

seaport complexes are the most important ones. The number of seaports in the Central of

Vietnam (from Thanh Hoa province to Binh Thuan province) is 37 of which seaport complexes

of Da Nang (general) and Nghi Son, Dung Quat (specialized) are the most important ones. The

seaport system in the South comprises 45. This is now the country’s biggest entrance port,

especially the area of Sai Gon - Thi Vai - Vung Tau seaport area. All of the most significant

inland water lines originate from the above-mentioned ones.

The most important international sea routes start from Hai Phong/Ho Chi Minh City to the

Eastern Asia regions (Russia, Japan, South Korea, Hong Kong, etc.).

Figure 23: Tan Cang – Cai Mep International Terminal

Source: Internet


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Airway Transport

Vietnam has a favorable geographical location to develop airway transport and has become a

center for passenger and goods transportation in the region. Currently, Vietnam has 22 airports

including 5 in the North (the major entrepot is Noi Bai international airport in Hanoi), 8 in the

central area (the most important destination is the newly built Da Nang international airport),

and 9 in the South (major entrepot is Tan Son Nhat international airport in Ho Chi Minh city).

Airports in Ha Noi and Ho Chi Minh city are capable of receiving the world’s biggest passenger

airplanes such as Airbus A380 and Boeing 747-8. (Data aggregated by TBO, from Airport

Corporation of Vietnam)

Figure 24: Noi Bai (Ha Noi) International Airport

Source: Internet


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Figure 25: Tan Son Nhat (Ho Chi Minh) International Airport

Source: Internet

Airports Corporation of Vietnam (ACV) reports that USD 1 billion has been invested in

expanding airport infrastructure over the past five years to support passenger and cargo growth,

but that it will need approximately USD 5.2 billion from 2021 to 2025 to complete infrastructure

projects. The value of those projects, the biggest of which are at the Hanoi and existing Ho Chi

Minh City airports, collectively amounts to USD 9.6 billion, with completion dates ranging from

the end of 2021 through to 2030.

3.5.4.2. Import/Export Infrastructure

Maritime ports

Vietnam is located near the East Sea, which plays a substantial role in global maritime traffic.

The East Sea is an important sea route where freights from Asia are shipped to other areas in the

world.

The Northern ports area plays a role as the gateway to Northeastern countries such as China,

Japan, Korea, and Hong Kong from Vietnam. Meanwhile, the Southern ports area links Asian

countries with other continents. According to the General Statistics Office of Vietnam (GSO),


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as of April 2021, Viet Nam has 286 ports, of which Hai Phong is the locality with the most ports

(50 ports), followed by Ba Ria – Vung Tau province (45 ports) and Ho Chi Minh City ranked

third (43 ports).

The current seaport system is synchronously planned in association with major economic centers

and regions of the country. In particular, large seaports as a focal point serving import and export

of goods and creating a driving force for the development of the whole region, have clearly

formed and contributed significantly to the growth of the economy such as: Quang Ninh and Hai

Phong seaports are associated with the northern key economic region; seaports of Thua Thien-

Hue, Da Nang, Dung Quat, Quy Nhon are associated with the central key economic region; Ho

Chi Minh City seaport, Ba Ria-Vung Tau seaport and Dong Nai seaport are associated with the

South key economic region; Can Tho and An Giang seaports are associated with the Mekong

River Delta key economic region. Some seaports have been invested with modern international

scale such as Cai Mep International Port (CMIT) – Ba Ria – Vung Tau and Tan Cang

International Container Terminal (HICT) – Hai Phong. Those international ports are ranked into

deep-water container ports to receive super-long and super-heavy ships on the world voyage.

Regarding transport routes, Viet Nam has now established 32 sea transport routes, including 25

international transport routes and 7 domestic transport routes.

Along with the rapid growth in quantity, Viet Nam’s seaport system is constantly improving in

capacity and service quality, so the volume of goods through the seaport system is increasing

day by day. In 2015, the volume of goods through the seaport reached 427.8 million tons,

accounting for 81.8% of the volume of goods through the ports (including seaports, inland

waterway ports and airports). By 2020, despite being significantly affected by Covid-19, the

volume of goods through seaport reached 692.3 million tons, accounting for 78.7% of the volume

of goods through the ports. In the period 2016-2020, the volume of goods through the seaport

increased by 61.8%, an average annual increase of about 10%. According to Statista, in 2020,

Ho Chi Minh City port was among the top 20 Asian container ports in terms of cargo capacity.


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Chart 15: Volume of cargos across ports from 2015-2020 (Billion tons)

Source: gso.gov.vn

Airports and international connections

According to the Civil Aviation Authority of Vietnam, Vietnam had four major domestic

airlines: Vietnam Airlines (official airlines), Vietjet, Jetstar Pacific and Bamboo Airways. In

December 2019, Vietjet accounted for 42.2% of the supply load market share compared to 41.2%

in January 2019. Vietnam Airlines accounted for 33.3% market share, compared with

approximately 34.5% at the beginning of the year. Jetstar Pacific and VASCO (an airline

belonging to Vietnam Airlines) accounted for 10.6% and respectively 1.9% decreased in the

supply market share ranking.

Meanwhile, in contrast to the decrease in the supply load market share of 3 airlines belonging to

Vietnam Airlines Group (including Vietnam Airlines, Jetstar Pacific, VASCO), "rookie"

Bamboo Airways has officially taken off since January 2019, and is having significant progress.

In December 2019, Bamboo Airways accounted for over 12.3% of the market share, 6 times

higher than 2% in January 2019.


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Chart 16: Vietnam's air transport and supply market share 2019

Source: the Civil Aviation Authority of Vietnam


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Figure 26: Airports and main flight routes in Vietnam

Source: Investar Vietnam

3.4.4. Advertising

Brazilian exporters should also consider having an effective market promotion strategy when

initiating sales to the Vietnamese market. To increase sales and raise brand awareness, exporters

must be prepared to integrate brand-advertising and generic-advertising strategies. The latter

helps Brazilian products face intense competition from international suppliers, especially

ASEAN members, China, Korea, Japan, and Australia. The ASEAN countries’ proximity to

Vietnam results in faster delivery and lower transportation cost. Additionally, lower import

tariffs obtained from free trade agreements make products from ASEAN countries more

competitive than non-ASEAN countries, including Brazil. Recently, goods imported from

Europe have also become a formidable competitor due to the high quality and benefit from the

signed EU-Vietnam Free Trade Agreement. Therefore, to enter the market or maintain and

expand market shares in Vietnam, Brazilian exporters may have to dedicate extra time and effort


148 | Page

to enhance marketing and sales activities. Supporting in-store promotions, product

demonstrations, and consumer education are always welcomed and are desirable opportunities

to add value to existing marketing initiatives.

The choice of advertising channels depends much on the company's strategy, products, and target

audience. This section will introduce Brazilian exporters with an overview of the main

advertising channels in the Vietnamese market. It may help Brazilian exporters determine the

most suitable advertising channel to utilize.

The advertising channels which can help Brazilian exporters in marketing products include:

1. Television;

2. Internet;

3. Print Media;

4. Outdoor Advertising;

5. Radio;

6. Trade Fair.

Television

In Vietnam, television is still one of the leading and the most powerful, effective forms of mass

media with 85% of the national population watching TV daily based on the research carried out

by Kantar Media’s TNS Media Vietnam from July 2019 to June 2020. In the same report, Kantar

noted the television was also the most common household appliance and communications

vehicle in Vietnamese families. Despite the slight decrease since December 2019, Tv is still the

flavored means of media among other competitors such as online, print newspaper, and radio.

There are 64 local and one national broadcaster (VTV). With the emergence of satellite dishes

and cable networks, many households also watch international networks (CNBC, CNN, StarTV).


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Figure 27: A broad picture of media landscape

Source: Kantar’s WorldPanel, Jun 2020

Internet

According to Vietnam Digital Landscape, in 2020, the total population of Vietnam was around

97.3 million people, with Internet penetration up to 70%. Vietnamese people spent more than 6

hours per day on the Internet: watching videos was the most popular online content activity in

which 95% of users watch online videos each month.

With high internet penetration and ubiquitous smartphone usage, social media usage has been

large and growing. Nearly 63% of Vietnamese internet users visited social networks to research

brands while 56% use social media for work purposes. Vietnam had 68 million Facebook users

in 2020, up 4.6% from a year prior, placing it seventh worldwide. Ho Chi Minh City was also

named among the top 10 cities globally with the most Facebookers, with 11 million users.


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Figure 28: Vietnam top social media platform in 2020

Source: We are social & Hootsuite

In the same report, 97% of Vietnamese internet users accessed the internet via any type of mobile

device, 96.9% via smartphones, 66.1% by their laptops or desktops, and 31.9% by tablets. This

number highlights the importance of digital advertising which can have a big effect on the

successful marketing strategy of businesses.

Print Media

There are over 400 newspapers and other publications in Vietnam, but just a few of them have

nationwide circulation. Among the more popular publications are Thanh Nien (Young Adult),

Nhan Dan (The People), Tuoi Tre (Youth), and Lao Dong (Labor). There are also quite a few

international quality publications in circulation, including Nha Dep (Beautiful Home), Dinh Cao

(Sports and Fitness), M (Fashion) and The Gioi Phu Nu (Woman's World), Gia Dinh & Tiep Thi

(Family and Marketing). These latest publications are setting new standards for the quality of

publishing in Vietnam. English newspapers and publications include the Saigon Times Daily,

Vietnam News, Vietnam Economic Times, Thanh Nien English News, and Vietnam Investment

Review.

In 2020, with stiff competition from social media in the advertising sector, print media in

Vietnam showed a decline in ad revenue. This is compounded by the economic difficulties due


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to the impact of COVID-19. At the National Press Conference in December 2020, some print

media outlets reported a 70% drop in revenue. This is explained because user behavior in

Vietnam has been shifting to online, causing traditional media to reduce interaction, thereby

reducing advertising performance.

However, Print Media still has its advantages, making this remain one of the good choices for

businesses to do advertising. Magazines always have a loyal customer base, who always prefers

reading the physical version. Besides, advertising in magazines can stay in the market for a long

time. Those things make magazine advertising an effective choice for many brands. In addition,

the cost for Print Media is much lower than TV or Internet, therefore it also fits companies that

have a low budget for advertisement.

Outdoor Advertising

Outdoor advertising ranges from billboards and signboards to public transport, building walls,

bus stations, and wash and service stations, among others. Firms should confirm that the

advertising agency has proper permits to lease the space. For example, billboard advertising in

Ho Chi Minh City is restricted to the vicinity of the airport (per Circular 19/2013/TT-BXD dated

Oct. 31, 2013). Advertising on articles such as umbrellas, scooters, etc. does not require a permit;

however, it must comply with advertising regulations.

Figure 29: Outdoor Advertising in Vietnam

Source: Internet

Outdoor advertising in Vietnam has the advantage of low cost/amount of access and

geographical access, but the amount of information that can be provided is too low compared to


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other media channels. Therefore, the connection between Offline and Online is a concept that is

gradually gaining popularity to bring high effect on media (mix media). The motivation of this

growth comes from information technology (QR Code, Internet, Camera identification, sync

content online, …) as well as learning from advertising campaigns that have been successful

abroad and quickly introduced to Vietnam.

Figure 30: Digital Outdoor Advertising in Vietnam

Source: Internet

Radio

Radio advertising is perhaps not as widely used for product promotion. Still, if Brazilian

exporters know how to take advantage of it, it can turn into an effective channel to hit niche

markets.

According to a survey by the Voice of Ho Chi Minh City (VOH) of over 4,000 people (who lived

in Ho Chi Minh City, the South Central Coast, the Southeast, and the Mekong Delta), the

audience focused on young people from 15 to 30 years old, accounting for up to 56.6% of total

listeners. Regarding income, 72.3% of listeners who regularly listened to radio had a gain of 7

million/month.

Thus, if calculated by income, businesses can completely reach the middle and low-income

target audience. However, there is an exciting thing that up to 36.1% of the survey respondents

said that they listened to radio via mobile phones, 28.8% listened to the radio while driving and


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16.4% listened to internet radio. This shows that modern technology has contributed to the

development of radio and thus, radio advertising has also increased.

Trade Fair

Article 129 of the 2005 Commercial Law stipulates: A trade fair or exhibition is a trade

promotion activity held for a period of time. And at a certain location, traders can display and

introduce products and goods to promote and seek opportunities to enter into sales contracts.

Businesses join trade fairs to introduce their products and services and create opportunities to

approach, exchange, negotiate and even sign contracts with partners/customers. In trade

promotion fairs, product exhibitors can sell goods directly on the spot to offset the cost of

participating in the fair.

Figure 31: Trade Fair in Vietnam

Source: Internet

Vietnam now has quality Trade Fairs organized by Vietnam Trade Promotion Agency -

VIETRADE. Some of the major fairs are VIETFOOD & PROPACK VIETNAM 2021 - Food

Industry; VIETNAM MEDI-PHARM EXPO 2021 - Medicine and Pharmacy Industry;

VIETNAM EXPO 2021 - International Trade; etc. Brazilian exporters can register with Vietrade

if they want to participate in those fairs.


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3.5. Dealing with Government

Brazilian enterprises that want to enter or start trading in Vietnam should study Vietnamese

customs and some requirements for imported goods to be aware of and minimize the barriers

that hinder the access of the products to the Vietnamese market. These barriers may occur due

to the differences in application of tariffs, technical regulations.

3.5.1. Customs

3.5.1.1 Timeline

In the report of World Bank “Doing Business 2020 - Vietnam”, the following is an average

timeline for importing a standardized cargo of goods into Vietnam:

Table 28: An average timeline for importing a standardized cargo of goods into Vietnam

▪ Document Compliance

1. Obtaining, preparing, and submitting document required by destination

economy and any transit economies

2. Covering all documents required by law and in practice, including

electronic submission of information

76 hours

▪ Border Compliance

1. Customs clearance and inspections

2. Inspections by other agencies (if applied to more than 20% of shipment)

3. Handling and inspections that take place at Vietnam’s port or border

56 hours

▪ Domestic transport

1. Loading & unloading of the shipment at the warehouse or port/border

2. Transport between the warehouse and port/border

3. Traffic delays and road police checks while shipment is end route

07 hours

Source: Doing Business 2020 - Vietnam


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3.5.1.2 Documents required for import include

Table 29: Documents required for import include

Documents Prepared by

Customs declaration form for import goods

(original)

Importer

Commercial invoice Exporter

Purchase and sale contract or equivalent

documents (copy)

Importer

Import Permit (License) Importer

Bill of lading (copy) Carrier/Exporter

Detailed packing list (original) Exporter

Certificate of origin (original) Exporter

Inspection report Importer

Cargo release order Importer

Delivery Order (for goods imported through

seaports)

Importer

Terminal handling receipts Importer


3.5.1.3 Customs Procedures

Customs procedure is crucial because all goods imported or exported in Vietnam are subject to

the Vietnam customs clearance standards, which effectively check the goods’ quality,

specifications, quantity, and volume. Customs procedures are completed at customs offices

established at international seaports, international river ports, international civil airports,


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international railway stations, international post offices, or land border gates or customs offices

established elsewhere under the decision of the Minister of Finance.

Customs Declaration

According to Circular No. 38/2015/TT-BTC by the Ministry of Finance, the customs declaration

form must be submitted in advance or within 30 days of shipment arrival. There are ways to

submit customs declaration through:

1. The electronic data processing system of the Vietnam Automated Cargo and Port

Consolidated System/ Vietnam Customs Information System (VNACCS/VCIS);

2. Customs Declaration Software provided by companies authorized by the minister, some

common use software such as Ecus of Thai Son and FPT.TQDT of FPT, or other software

developed by Softech, G.O.L.

Examination

The head of the customs office that receives customs declaration shall determine whether to

examine the merchandise or the extent of examination. Vietnam has adopted a system of

minimum customs inspection. Under the newly amended Law on Customs, whether a

consignment of goods is examined or not depends on the result of an analysis of information,

records of compliance with the law by the owner, and the level of risk of breach of the customs

law. Instead of actual customs examination before clearance of goods, the customs now rely

more on post-entry auditing to enforce the law.

Customs Clearance

In general, goods are released after customs procedures have been completed and taxes have

been paid. However, there are some exceptions to this rule. For example, where there is an

appropriate reason, declarers may be allowed to submit certain documents in delay. Deferred tax

payment may also apply to a certain type of merchandise such as inputs imported for export

manufacturing etc. Goods imported in emergency cases are released immediately without

waiting to complete customs procedures or pay taxes.


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For import or export goods that must be appraised to ascertain if they are permitted to be

imported or exported, if the goods owner requests to hold the goods for preservation, the customs

office shall accept such requests only if all conditions for customs control have been satisfied.

For goods which are permitted to be imported or exported but their value must be verified or

they must be appraised, analyzed and classified in order to determine the amount of duty payable,

such goods shall be cleared by Customs only after the goods owner has discharged the obligation

to pay duty on the basis of a self –declaration and assessment of duty and has provided sufficient

guarantee in the form of a surety, a deposit or some other appropriate instrument, covering the

ultimate payment of customs duties for which the goods may be liable as the results of the

verification of the value of the goods and of the appraisal, analysis and classification of the

goods.

Customs Clearance Procedures occur in 5 steps:

▪ Step 1 - Receipt of Application File, Customs Declaration, Primary Inspection, and

Examination

▪ Step 2 - Detailed Inspection of Application File; pricing and taxation

▪ Step 3 - Actual Inspection of Goods by customs authorities

▪ Step 4 - Customs Fees, Tax, Tariff, Import duty compliance

▪ Step 5 - Receipt and transportation to premises of imported goods


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Figure 32: Summary of Customs Clearance Procedures for general imported goods

Source: www.vietnamtradeportal.gov.vn


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However, the procedure for imported goods that require some technical standards inspection is

different from the regular customs clearance procedure. It is divided into 02 types: pre-customs

inspection and post-customs inspection. The authority will determine which goods are pre-

inspection or post-inspection. Then, based on the announced list from the authority, the importers

check the appropriate inspection type and which technical standards to comply with. Below are

the illustrations of the procedures for pre-customs inspection and post-customs inspection.

There are many benefits of using a pre-customs inspection. For example, it helps maintain the

brand image by ensuring the shipment arrives on time, it saves products from a potentially

lengthy customs checking process. It ensures hassle-free delivery of the shipment from customs

and receives positive ratings from customs officials. Furthermore, a pre-custom inspection can

gain and grow the business reputation as it prevents any last-minute troubles that could cause the

business a substantial fine. Using a pre-customs clearance inspection will help businesses

accurately calculate the taxes and tariffs to avoid under or over-payment. Nevertheless, as

mentioned above, each kind of imported goods requires different types of inspection. In order to

leverage the advantages of pre-customs inspection enterprises should contact an experienced

trading partner or use legal advice for a better result.


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Figure 33: Summary of Customs Clearance Procedures for imported goods requiring

technical inspection (Pre-custom inspection)



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Figure 34: Summary of Customs Clearance Procedures for imported goods requiring

technical inspection (post-customs inspection)



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Customs Dispute Resolution Mechanism

The Decree No.08/2015/ND-CP, Article 30 (Handling of the result of customs examination)

clearly states that:

“1. If customs declarants agree to customs authorities’ conclusion as to commodity name, code,

origin, weight, type, quality, and customs value, further information must be provided at the

request of customs authorities, and the result of customs examination shall be handled in

accordance with the legislation on taxation, penalties for administrative violations or other

relevant laws.

If customs declarants disagree with customs authorities about the conclusion as to commodity

name, code, origin, weight, type, quality, and customs value, they can file their petitions or shall

be entitled to choose assessment service providers to carry out the commodity assessment in

accordance with laws. In such a case, customs authorities shall refer to the conclusion drawn by

such assessment service providers to make a decision on customs clearance.

2. In case customs authorities disagree about the result of such an assessment submitted by

customs declarants, customs authorities shall have the right to choose other assessment service

providers and refer to the result of this assessment to make a decision on customs clearance.

If customs declarants disagree about the result of the customs examination announced by

customs authorities, a petition must be filed, or a lawsuit must be filed in accordance with legal

regulations.”

3.5.1.4. Tariff

Vietnam has neither signed nor been in negotiation for any FTAs with Brazil or MERCOSUR,

therefore, the maximum application of import tariffs for Brazilian exporters are consolidated by

Vietnam in the WTO. Since the import tariff varies according to the goods, it is important for

Brazilian exporter to identify the classification of the goods by the HS code ("Harmonized

System'') before customs clearance, which may help to reduce the amount of taxation. Moreover,

Vietnam possesses some preferential tariff policies for some goods and industries so in some

cases exporters can apply a lower tariff for their cargo.

For all goods imported to Vietnam may be subjected to the following common tariffs as below:


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Table 30: Common tariffs of imported goods in Vietnam

Types of Tax

Compulsory

(For a majority of goods)

Import tariff

● Preferential Import Tariff is applicable to

imported goods from countries that have most-

favored-nation (MFN, also known as normal trade

relations) status with Vietnam

● Special Preferential Import Tariff is applicable to

imported goods from countries that have a special

preferential trade agreement (or Free Trade

Agreement -FTA) with Vietnam

● Normal Import Tariff

Value Added Tax - VAT

Additional (base on the categories

of imported goods)

Special Consumption Tax

Environmental Protection tax

Anti-dumping duty

Countervailing duties

Safeguarding duties



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Table 31: Taxes are eligible to Group of merchandise having potential and high import

value from Brazil

Product Categories HS Code Duties

Electrical, electronic equipment 85

Import tariff

VAT

Machinery, nuclear reactors, boilers 84

Import tariff

VAT

Plastics and articles thereof 39

Import tariff

VAT

Iron and steel 72

Import tariff

VAT

Organic chemicals 29

Import tariff

VAT

Pharmaceutical products 30

Import tariff

VAT

Miscellaneous chemical products 38

Import tariff

VAT

Rubbers 40

Import tariff

VAT

Paper and paperboard, articles of pulp, paper

and board 48

Import tariff

VAT

Wood and articles of wood, wood charcoal 09

Import tariff

VAT

Tanning, dyeing extracts, tannins,

derivatives, pigments 32

Import tariff

VAT


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Raw hides and skins (other than furskins)

and leather 41

Import tariff

VAT

Meat and edible meat offal 02

Import tariff

VAT

Articles of iron or steel 73 Import tariff

VAT


Table 32: Group of merchandise having high import value from Brazil

Product Categories HS Code Duties

Residues, wastes of food industry, animal

fodder 23

Import tariff

VAT

Cotton 52 Import tariff

VAT

Cereals 10 Import tariff

VAT

Ores slag and ash 26 Import tariff

VAT

Oil seed, oleagic fruits, grain, seed, fruits 12 Import tariff

VAT



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3.5.2. Import Policies and Regulation

3.5.2.1 Labeling Requirements

Under Decree No. 43/2017/NĐ-CP on Goods Labeling, goods imported into Vietnam of which

the [original] labels have not represented or have insufficiently represented mandatory

information in Vietnamese must be accompanied by a supplementary label before putting such

goods into circulation.

Language: The supplementary label contains the mandatory information in Vietnamese, keeping

the original labels unchanged. The Vietnamese contents shall be consistent with the original label

contents (excluding the international or scientific name if such name is impossible to be

translated into Vietnamese or possible to be translated, but would be unintelligible; Name and

address of the foreign enterprise relating to the manufacture of the commodity);

Position of labels: Labels must be displayed on goods and commercial packing of goods in

positions that enable the observation of required contents of labels easily without having to

disassemble details and parts of the goods.

Mandatory contents to be shown on a label include the following information: a) Name of

goods; b) Name and address of entity responsible for the goods; c) Origin of goods; d)

Quantity/Volume; e) Ingredient list; f) Manufacturing date and Expiry date; g) Storage and Use

instructions; h) Specifications and warnings;

The Importers take responsibility for the contents shown on goods labels, including

supplementary labels. The content must be truthful, clear, precise, and correctly reflect the

substance of the goods. And the Ministry of Science and Technology is accountable for the

coordination with authorities in revising the labeling content.

3.5.2.2 Standards, Technical standards, and inspections

Some import categories are subject to inspections that aim at verifying the safety, as well as

guaranteeing the quality of the product. The Ministry of Science and Technology has the primary

responsibility of coordinating with specialized management ministries in managing the quality

inspection of imported goods.

Technical standards are one of the ways that help the Vietnam Government to manage and ensure

the quality of the product imported into Vietnam, include: phytosanitary or zoo-sanitary,


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environmental, safety, quality, metrology, consumer protection, products encompassed, legal

requirements, and documentation; requirements in connection with issuance or approval by

official Brazilian bodies. Among the technical standards that are mandatory are:

Inspection on the safety of imported food

All foods, food materials, food additives, processing supporting substances, tools, materials for

packaging, food containers imported into Vietnam must be inspected at the competent state

inspection agency appointed by the ministry managing sectors, except for the cases:

● Food brought along with upon entry for private consumption within the norms is

exempted from import duties;

● Food in diplomatic bags, consular bags;

● Food in transit and transshipment;

● Food sent in bonded warehouses;

● Food as the prototype or research sample;

● Food as samples displayed in the fairs, exhibitions.

Quarantine of animals before importation:

Law on Animal Health 2015 specifies that the types of animals and animal products on the list

of animals, products of land animals or aquatic products before importing, temporary import for

re-export, border-gate transfer, or bonded warehouse must be quarantined when transiting in

Vietnam.

For import of terrestrial animal products: Submitting documents to the Department of Animal

Health - Ministry of Agriculture and Rural Development.

For aquatic animal products: Submitting documents to the National Fisheries Quality Assurance

Department - Ministry of Agriculture and Rural Development.

When importing animal products of foreign origin into Vietnam, the importer must register for

the purpose of importation and must obtain the approval of the two agencies above.

Environmental protection in import of scrap

Circular 41/2015/TT-BTNMT dated 09/09/2015 stipulates in detail environmental protection in

the import of scrap for use as raw production materials. Size, quantity, and HS code of imported

scrap are issued in Annex 1 of Circular. In 2019, Vietnam government released Decree No.


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40/2019/ND-CP amending and supplementing some of the articles of the decrees detailing and

guiding the implementation of the Law on Environmental Protection. Whereby, scrap imports

are only allowed to be unloaded at the port when they meet the following requirements:

● The person or organization as consignee on the e-manifest has the valid Certificate of

Eligibility for Environmental Protection in importing scraps as raw materials with a

particular allowed volume of scraps;

● The person or organization as consignee on the e-manifest has the Letter of Confirmation

on the deposit to ensure importing the volume of scraps indicated in the e-manifest.

Under Decree 40, only organizations and individuals with production facilities using scrap

imports that meet the following requirements are eligible to import scraps as production

materials:

● (i) meeting the requirements and responsibility for environmental protection;

● (ii) having the environmental impact assessment report approved by the Ministry of

Natural Resources and Environment, in which there are the contents indicating the use

of scrap imports as production materials and being granted the certificate for completion

of the environmental protection work or hazardous waste disposal permits, including

contents on using scraps as production materials for projects already in operation;

● (iii) having the Certificate of Eligibility for environmental protection in importing scraps

as production materials.

3.5.3 Intellectual Property

According to the World Intellectual Property Organization - WIPO defines Intellectual Property

(IP) as a term referring to the creation of the mind, such as inventions; literary and artistic works;

designs; and symbols, names and images used in commerce. Common types of IP include:

● Copyright - this protects written or published works such as books, songs, films, web

content and artistic works;

● Patents - this protects commercial inventions, eg a new business product or process;

● Designs - this protects designs, such as drawings or computer models;

● Trademarks - this protects signs, symbols, logos, words, or sounds that distinguish your

products and services from those of your competitors


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In 2005, Vietnam’s National Assembly passed the Law on Intellectual Property Rights (IPRs)

which was later amended and supplemented in 2009.

In September 2010, in an effort to strengthen the protection of Intellectual Property Rights after

entering into the Bilateral Trade Agreement (BTA) with the United States and participation in

the World Trade Organization (WTO), Vietnam’s government issued stricter administrative

sanctions for violations of industrial property rights, along with some important changes to IP

regulations in Vietnam.

Aside from local IP legislation, Vietnam also participates in international IP conventions such

as the Paris Convention for the Protection of Industrial Property, the Berne Convention for the

Protection of Literary and Artistic Works, the Rome Convention, the Trade-Related Aspects of

Intellectual Property Rights (TRIPS) Agreement, the World Intellectual Property Organization,

the Patent Cooperation Treaty, the Madrid Protocol and the recently signed Hague agreement.

Vietnam has divided its IP system into three areas:

● Copyright and related rights – administered by the Copyright Office of Vietnam;

● Industrial property rights (includes Patents, Designs, Trademarks, Commercial names

and designations, Trade secrets, Protection against Unfair Competition, Layout/designs

of integrated circuits) – administered by the National Office of Intellectual

Property (NOIP);

● Rights to plant varieties – administered by the Plant Variety Protection Office.

The NOIP holds the role of chief coordinator and is the agency that, under the aegis of

the Ministry of Science and Technology, assumes the functions of exercising state management

and providing services in the field of IP. This includes administering the registration of industrial

designs, trademarks, brand names, and other industrial property rights, and conducting basic

legal appraisals to settle intellectual property disputes.


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Figure 35: Intellectual Property Registration Process


IP rights enforcement

Companies seeking to enforce their IP rights in Vietnam have three options:

● Administrative action;

● Civil action;

● Criminal action

Most IP disputes are handled through administrative action. Possible actions that can be taken

by the relevant government authorities include the issuance of warnings, fines, the seizure, or

destruction of counterfeit goods, etc.


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Figure 36: Handling intellectual property infringement process


Note: Authorities with the jurisdiction to conduct are as follow:

Administrative action


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● The Police for Corruption, Smuggling and Economic Crimes under Vietnam People's

Public Security (Economic Police – “EP”

● Police Unit for High-Tech Crime Prevention

● Customs

● The Market Management Bureau

● Inspectorate of the Ministry of Science and Technology (MoST) and Department of

Science and Technology (DoST)

● Inspectorate of the Ministry of Information and Communications (MoIC) and

Department of Information and Communications (DoIC)

● People’s Committees

Civil action

● District-level civil courts: disputes related to non-commercial purposes

● Provincial-level Civil Courts: disputes related to non-commercial purposes and

involving foreign factors, which would be settled under the jurisdiction

● Provincial-level Economic Courts: disputes related to commercial purposes

Criminal action:

● Courts

When detecting signs of IP infringement in a consignment at customs border, customs will stop

the customs procedures and send a notice on suspected infringing goods to the right holders. The

enforcement measure of these violations is an administrative action. Customs will issue a

decision to accept the case, issue a decision on detention of goods, impose sanctions and

remedies if there are sufficient grounds to determine the suspended infringing goods, or transfer

the case to the EP for investigation and criminal prosecution if the value of counterfeits meets

the threshold for criminal prosecution.

Notice that IP infringement (e.g. online piracy and counterfeit products) has been rising

considerably across online trading websites and e-commerce platforms in recent years. Such IP

violations arising from in postal services, telecommunications, radio frequencies, information

technology, and electronic transactions shall be enforced specific administrative penalties as

described in Decree No. 15/2020/ND-CP. As for e-commerce platforms there are rules aimed at

tackling online infringement of IP rights. In practice, IPR holders normally rely on the take-down


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mechanisms available on such platforms instead of any official administrative enforcement or

civil actions.

However, Vietnam’s government agencies have struggled to keep pace with the changes taking

place within the laws. Therefore, many of the best ways to deal with IP issues in Vietnam is to

have a good defense so that offensive action will only need to be rarely taken. The most

important way to avoid problems when defending IP rights in Vietnam is to be prepared. To

make sure that you can anticipate any potential issues, Brazilian exporter should:

● Register to grant intellectual property as soon as exporters have plans to enter the

Vietnam market. It is recommended to register before the 1st shipment;

● Make it harder for infringers to copy product design or reproduce with seeing the original

designs;

● Ensure there are no ‘leakages’ of packaging that might be used by counterfeiters to pass

off a fake product;

● Be on the lookout for production overruns (which could be a sign that products are being

sold elsewhere);

● Have clear IP-related clauses in employment contracts, and make sure that employees

are well educated about IP rights and protection;

● Talk with other foreign businesses in the same operating field to learn best practices, and

register your IP rights; talk to other businesses already doing similar business in Vietnam;

● Take advice from Vietnamese IP rights experts;

● Consult publications and websites on Vietnamese IP rights and protection in general;

● Carry out a risk assessment and due diligence checks on any organizations and

individuals you deal with;

● Take professional advice from other experts - e.g. lawyers, local diplomatic posts,

Chambers of Commerce, and the British Business Group in Vietnam;

● Consult agents, distributors, and suppliers on how best to safeguard your rights;

● Check with a trademark or patent attorneys to see whether there have been previous

registrations of your own marks, or other IP, in Vietnam;

● Stick to familiar business methods - don’t be tempted to do things differently because

you’re trading in a different country

Vietnam Intellectual Property Development


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Recently, in a new context with many drastic changes affecting all aspects of the economy -

society, as well as the deeper and broader international integration process, especially Vietnam’s

participation in the new generation of Free Trade Agreements (FTAs), the wave of the Industrial

Revolution 4.0, the rising trends of trade protectionism, Vietnam Government and Ministries

have taken huge effort on amending and supplying several articles on Intellectual Property Law

to create optimal conditions for individuals and enterprises protecting their gray matter. The

comprehensive IP Law was approved and released in 2022.

Indicating that Vietnam is taking IP issues seriously, the country issued Decree No 22/2018/ND-

CP in April 2018, updating guidelines and numerous articles focusing on copyright under the

Civil Code and the Law on Intellectual Property. More recently, in April 2020, the IP office

issued Official Letter No 5360/SHTT-NDHT on assistance to individuals filing international

patent applications.

In August 2019, the Vietnamese government also issued Decision No. 1068/QD-TTg or National

IP Strategy on Intellectual Property Strategy with a Vision to 2030. The document has been

serving as a guideline for ministries, sectors, and state agencies to adopt IP rights – the first time

Vietnam has done this as a national strategy.


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PART 4: HOW TO INVEST IN VIETNAM


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PART 4: HOW TO INVEST IN VIETNAM

4.1. Investment Environment

Attracting foreign direct investment (FDI) has always been a key part of Vietnam’s external

economic relationship.

In the year 1980, Vietnam became more open to the other economies of the world. The country

declared that it would introduce a foreign investment reform in Vietnam, which would fan the

ambitions of the foreign investors interested to invest in Vietnam. After launching the

Renovation - “Doi Moi” reform policy, the country made little advances in most of the spheres

of the economy. As Vietnam had announced that the country would build up an economy, which

would assist foreigners to invest, most of the foreigners had flocked here, but to their

disappointment, the government reforms did not actually help the investor at the first time after

reforming as the government lacked experience. After that time, the Vietnamese government has

continuously taken many lessons from other countries, improved regulation as well as the legal

system in foreign direct investment, and as a result, Vietnam now becomes the destination of

investment in Asia.

Up to June 2021, Vietnam has shown a dramatic result after 40 years of reform and development:

● Notwithstanding some interval recorded a dramatic fall in 1997 - 1999 (due to the East

Asian financial crisis) and in 2009 (due to the Global crisis), Foreign direct investment,

since starting the Doi Moi (Renovation) reform process in 1986, has had significant and

stable growth, compared to neighbor countries.

● In 2020, due to the negative impact of the Covid-19 pandemic, global foreign direct

investment was estimated to decrease by 30% to 40% in the period 2020-2021. Vietnam

was also impacted with a decrease of 2% in total FDI. The total newly registered

investment of Vietnam in 2020 was USD 14.6 billion. The decrease was mainly because

of significant investment contractions in manufacturing (the largest recipients last year)

but was cushioned by a rise in investment in electricity projects. This is an outstanding

result in covid pandemic time.


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● As of June 2021, total newly registered, adjusted, and paid-in capital for share purchase

by foreign investors reached approximately USD 15.27 billion, equal to 97.4% compared

to the same period last year. Newly registered and adjusted capital made a rise in the first

6 months of the year while foreign investors’ paid-in capital continued to fall. The total

newly registered investment of Vietnam in the first half of 2021 achieved USD 9.55

billion.

Table 33: Top 11 countries invested into Vietnam most in 2020 and first half of 2021

Country

Newly registered capital (Million USD)

2020 2021

Singapore 6157.2 4736.9

China 1582.1 678.1

Taiwan 1505.7 110.5

Hongkong 1271.0 856.4

South Korea 1205.8 573.0

Japan 786.0 1656.8

British Virgin Islands 310.8 141.9

Philippines 295.4 54.7

Netherlands 293.7 89.3

Thailand 292.4 105.7

United States 180.5 300.6

Source: Minister of planning and investing of Vietnam

In 2020, Singapore led the list with newly registered investment capital of almost USD 6,157.2

million, accounting for 42% of total newly registered investment capital in Vietnam; China


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ranked second with newly registered investment capital of USD 1,582.1 million, accounting for

11% of total investment capital. Taiwan ranked third with newly registered investment capital

of USD 1,505.7 million, accounting for 10% of total newly registered investment capital. Next

were Hongkong, South Korea, Thailand, etc.

Compared to 2019, Singapore ranked up from third to the first country investing in Vietnam

while South Korea downgraded to fourth in terms of newly registered investment capital. Taiwan

moved from sixth up to third in 2020, with Project Pegatron Vietnam (Taiwan), built in Hai

Phong, investment capital of USD 481 million with the goal of manufacturing gaming

equipment, phone accessories, smart speakers, game controllers.

In terms of the number of new projects, South Korea ranked first (609 projects); China ranked

second (342 projects); Japan ranked third (272 projects); followed by Singapore (248 projects).

In the first 6 months of 2021, Singapore was still the largest foreign investor in Vietnam with a

total investment capital of USD 5.64 billion, accounting for 36.9% of total foreign direct

investment (FDI) in Vietnam. Japan ranked second with investment of USD 2.4 billion,

accounting for 16% of total investment capital (in which, investment capital of Singapore and

Japan was mainly in the form of new investment, accounting for 84% and 68% of total

investment capital of each country subsequently). South Korea ranked third with registered

investment capital of over USD 2 billion, accounting for 13.4% of total investment capital. Next

were China, Hong Kong, Taiwan, and so on.

Singapore's largest project to invest in Vietnam in the first 6 months of 2021 was in the energy

sector. Specifically, the Long An LNG Power Plant Project I and II, with a total registered capital

of over USD 3.1 billion, was aimed at transmitting and distributing electricity and producing

electricity in Long An province. Previously, in 2020, Singaporean investors also invested in Bac

Lieu Liquefied Natural Gas (LNG) Power Plant Project with a total registered investment capital

of up to USD 4 billion with the goal of producing electricity from natural gas Liquefied

Petroleum Gas (LNG). Besides projects related to energy, Singapore’s investors are also

interested in the manufacturing and real estate industry.

China's FDI is present in most of Vietnam's provinces and cities, but it is mainly concentrated in

border provinces with border-gate economic zones, coastal areas, and densely populated cities


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with strong labor attraction. good infrastructure, convenient for import and export of goods as

well as travel between the two countries. China's FDI inflows often focus on areas such as

textiles, footwear, fiber, thermal power, and mining.

In terms of investment fields in Vietnam, the manufacturing and processing industry is the most

invested by Japanese enterprises, second is the real estate business. Third is the construction

sector with a total investment capital.

Table 34: Total foreign direct investment inflow by sectors in Vietnam from 2017 - 2020

& First half of 2021 (Million USD)

Industries 2017 2018 2019 2020 First half

of 2021

Manufacturing, processing 15,876 16,588 24,561.8 13,601.1 6,977.8

Production, electricity, gas,

steam, and air conditioning

supply

8,374.1 1,627.7 1,010.1 5,142.6 5,340.9

Real estate activities 3,053.6 6,615.3 3,876 4,185 1,150.9

Wholesale and retail trade; repair

of motor vehicles, and

motorcycles

2,163.7 3,672.9 2,588.1 1,645.6 420.6

Mining 1,288.9 25.4 35.6 6.4 1.4

Construction 1,133 1,183.1 979 559.9 108.1

Professional, Scientific

Activities 1,028.1 2,147.4 1,566.6 1,346.6 476.0

Water supply, sewage and waste

disposal 568 259.2 249.3 88 83.11

Accommodation, and food 513.2 578.5 488.9 341.5 92.7


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service activities

Health and social service 387.5 132.8 211.5 32.6 1.4

Transportation and storage 386.6 405.5 346.1 611.9 368.8

Information and communication 236.7 560.9 536.6 271.3 77.2

Agriculture, forestry, and fishing 191.6 140.9 99.3 210.6 78.7

Education and training 116.8 90.7 64.6 108.3 20.7

Administrative activities and

support services 109 214 123.6 40.4 13.5

Financial, banking, and

insurance activities 88.2 81.84 1,171.9 286.8 56.6

Art, entertainment, and leisure 37.7 1,133.6 62.7 5.2 0.4

Others 49.2 7.8 47.5 46.5 2.28



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Chart 17: The major foreign direct investment recipient sectors of Vietnam in 2020


In 2020, foreign investors invested in 19 sectors. The processing and manufacturing ranked first

position in newly registered investment capital with almost USD 7.1 billion, accounting for 48%

of the total newly registered investment capital. Electricity production and distribution ranked

second with investment capital of over USD 5.08 billion, accounting for 18% of total registered

investment capital. It is followed by the real estate business, wholesale and retail with the total

newly registered capital of nearly USD 0.98 billion and USD 0.43 billion. The rest are other

sectors.


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Table 35: Top 10 sectors having most newly registered foreign direct investment inflow in

2020

No. Industry Number of

new projects

Newly registered

investment capital

Value

(Mil. USD)

Value

(%)

1 Manufacturing, processing 800 7,190.77 49%

2 Production, electricity, gas, steam,

and air conditioning supply 20 5,080.81 35%

3 Real estate activities 70 987.41 6.74%

4 Wholesale and retail trade; repair of

motor vehicles and motorcycles 704 431.18 2.9%

5 Construction 79 237.24 1.6%

6 Professional, Scientific Activities 376 169.30 1.2%

7 Transportation and storage 59 169.23 1.2%

8 Accommodation and food service

activities 57 106.13 0.7%

9 Agriculture, forestry, and fishing 12 103.1 0.7%

10 Water supply, sewage, and waste

disposal 4 64.42 0.4%


4.1.1. Highlight project in 2020:

Below are some new projects having significant Foreign Direct Investment in 2020. In a word,

the emerging area in Vietnam in 2020 was renewable energy, which had received a lot of interest


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from foreign investors. Besides, manufacturing and real estate industries were still attractive

thanks to the labor force and stable economic factors.

● Liquefied Natural Gas (LNG) Plant Project under the operation of Bac Lieu LNG

Thermal Power Centre (invested by Singaporean investors), having total registered

investment capital of USD 4 billion with the goal of producing electricity from liquefied

natural gas (granted with a certificate of competency on January 16th, 2020).

● The South Vietnam Petrochemical Complex Project (invested by Thai investors) in

Ba Ria - Vung Tau with an increase of adjusted investment capital by USD 1,386 billion

(adjusted Investment Certificate dated April 18th, 2020).

● Project of West of West Lake Urban Residence Centre (invested by South Korean

investors) with expanded investment capital by USD 774 million (adjusted Investment

Certificate issued on June 29th, 2020).

● Pegatron Vietnam (invested by Taiwanese investors) project having a capital of USD

481 million with the goal of manufacturing gaming devices, phone accessories, smart

speakers, game controllers, and computers of all kinds in Hai Phong (granted with a

certificate of investment on October 30th, 2020).

● Radian Jinyu Tire Manufacturing Plant Project (Vietnam) with a total investment of

USD 300 million aimed at producing full steel TBR tires invested by Chinese investors

in Tay Ninh (granted with a certificate of investment on January 21st, 2020).

4.1.2. Some major projects in the 6 months of 2021:

● Long An I and II LNG Power Plant Project (invested by Singaporean investors) having

total registered capital of more than USD 3.1 billion, with the goal of transmitting,

distributing, and producing electricity in Long An (granted with a certificate of

investment on March 19th, 2021).

● O Mon II Thermal Power Plant Factory (invested by Japanese investors) in Can Tho,

with total investment capital of USD 1.31 billion, aimed to create a thermal power factory

for electricity supply for the regional and national power system (granted with a

certificate of investment on January 22nd, 2021)


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● LG Display Project (invested by Korean investors) in Hai Phong with investment capital

adjusted to increase by about USD 750 million (granted with an amended investment

certificate on February 4th, 2021).

● Polytex Far Eastern Vietnam Co., Ltd Factory Project (invested by Taiwanese investors)

with investment capital adjusted to increase by USD 610 million (granted with an

amended investment certificate on May 13th, 2021).

● Jinko Solar PV Vietnam Solar Cell Technology Project (invested by Hong Kong

investors) in Quang Ninh, having total investment capital of USD 498 million, with the

goal of producing solar panels and electrical equipment (granted with a certificate of

investment on March 29th, 2021).

4.1.3. The Government orientation in the next five years (2021 – 2025):

The Politburo issued Resolution No. 50-NQ / TW dated August 20, 2019, on the orientation to

perfect institutions, policies, and improve the quality and efficiency of foreign investment

cooperation to 2030. There are many orientations and major solutions to enhance the attraction

and promote the efficiency of foreign investment, which will create more favorable conditions

for attracting quality foreign investment in the coming time.

Regarding the industrial development orientation, the Politburo issued Resolution No. 23-NQ /

TW dated March 23, 2018, on the orientation to formulate national industrial development

policies to 2030, with a vision to 2045. Resolution No. 23 sets out general and determined goals,

including:

(i) By 2030, Vietnam will have completed its industrialization and modernization goals,

essentially becoming an industrialized country in the current direction, belong to the

group of three leading ASEAN countries in industry, of which a number of industries

are internationally competitive and deeply involved in the global value chain;

(ii) Vision to 2045, Vietnam will become a modern industrialized country. Regarding the

policy orientation to attract foreign investment in a new context, especially in

Industry 4.0, Resolution 23 also shows the determination to adjust the attraction of

“high-quality” foreign investment, shifting from quantity to quality and importance,

focus, friendly with the environment, promote technology transfer and link with


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domestic businesses through 03 priority orientations: (i) technology; (ii) investment

form; and (iii) partner.

In addition, Resolution 10-NQ / TW of the 12th Central Committee of 2017 on the development

of the private economy into an important driving force of a socialist-oriented market economy

(Resolution 10) proposed a viewpoint on “Promoting the development of all forms of linking

production, trading, supplying goods and services according to the production network, the

market value chain between the private economy and enterprises with capital. foreign investment

aimed at receiving, transferring, creating a widespread of advanced technology and modern

governance, enhancing added value and expanding consumption markets”.

Currently, Vietnam is building a Socio-Economic Development Strategy to 2030, with a vision

of 2045 – two very important milestones, 100 years of Party establishment (2030) and 100 years

of founding a country (2045). Accordingly, the economy will grow on the basis of high labor

productivity, research, and application of modern technology, and define innovation as a new

driving force and a fulcrum for breakthroughs.

4.1.4. Case study

4.1.4.1. Case study of Carlsberg

Background

Carlsberg A/S traces its roots to 1847 when brewer J.C. Jacobsen introduced Bavarian-style lager

beer and new brewing technologies. Carlsberg Breweries soon became one of the most

successful Danish businesses, first establishing the leading brand domestically, and later in many

surrounding European markets. Over the last two decades of the 20th century, Carlsberg acquired

a number of breweries in both Western Europe and the emerging markets, and it established

‘Carlsberg’ as one of the best-known brands worldwide with the very effective slogan, “Probably

the best beer in the world”.

Carlsberg was the first large Danish multi-national to enter Vietnam in 1993. For the first 20

years, Carlsberg’s JV partners managed their Vietnamese holdings under Carlsberg Indochina.

In 2013, a fully dedicated Carlsberg management team was established and merged operations


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into a single unit with two legal entities (Carlsberg Vietnam Trading and Carlsberg Vietnam

Breweries)

Key milestones of Carlsberg in Vietnam:

● 1993: Established Southeast Asia Brewery JV in Hanoi (Carlsberg and Halida brands)

(joint venture with Viet Ha Beer Company)

● 1994: Entered JV with Hue Brewery Limited (Huda brand) in Central Vietnam ;

● 2008: Became strategic investor to Habeco Joint Stock Company and establish Vungtau

Brewery as a JV between Habeco and Carlsberg;

● 2009: Acquired minority stake in Halong Beer Beverage Joint Stock Company, Halong

brand;

● 2011: Became sole owner of Hue Brewery Limited;

● 2012: The decision to establish a dedicated Vietnam management team was taken;

● 2013: Established Carlsberg Vietnam Limited, injecting Hue brewery into the new entity:

divested Halong brewery interests and launched Huda Gold (premium extension of

Huda);

● 2016: Divested Vung Tau Brewery and launched Tuborg brand in the premium segment;

● 2018: Launched Carlsberg Smooth Draught, Hud Ice Blast and Halida Export;

● 2021: Launched comprehensive revamp of Halida to better beer experience.

Why Vietnam?

In the 90’s, given the stagnant situation in their traditional markets, finding new markets was the

main motive for Carlsberg to expand further into Asia, with their large populations and low per

capita beer consumption levels at that time. In this aspect, Vietnam was not an exception.

With a predominantly young population of about 70 million people by the early 1990s, low

annual per capita beer consumption (3 liters), no cultural restrictions on beer consumption, out-

of-date local production facilities, and positive expectation of economic growth, Vietnam was

considered a prominent potential market.

Moreover, the relationship between Vietnam and Nordic countries has been developing since the

1970s, beginning with the support by Sweden during the Vietnam War and the years that


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followed. Typical of this was the Swedes’ building the Bai Bang Paper Mill in Vinh Phu

Province. This was one of the many reasons for the very positive attitude of the Vietnamese

towards the Nordic countries.

Entry into Vietnam was also part of Carlsberg’s competition strategy to maintain their image in

Asia, a high growth region where Carlsberg had always been in a strong position in competition

with their international rivals.

The strategy of Carlsberg

The beer business is an advertising-intensive industry, especially for premium brands like

Carlsberg and Heineken. Access to (or control of) a distribution network is considered critical

for beer sales, and a deep understanding of the local market with its various cultural mores is

also very important.

From Carlsberg’s viewpoint, they would enter the market in the way they had been pursuing

during that time, making joint ventures with local companies to acquire the necessary local

knowledge. The ownership of the joint venture was split 35/25/40 between Carlsberg Breweries,

the Industrialization Fund for Developing Countries (IFU - a Danish State-owned investment

fund) and Viet Ha Beer Company, respectively. This was a popular formula and was typical of

Carlsberg initiatives in developing countries.

As mentioned earlier, Carlsberg considered having a partner with local knowledge of tastes,

distribution networks, and political support as crucial for their operation anywhere in Asia, so

building a joint venture with local partners was the entry mode of choice. However, why

Carlsberg ended up having a joint venture with Viet Ha Beer Company in Hanoi is worth further

study because (1) the largest beer market (70%) is in the South, and (2) Viet Ha Beer Company

was a relative newcomer to the beer business at that time. In explaining this decision, it has to

be noted that by the end of 1991, Asia Pacific Breweries, Singapore, which produces Tiger and

Heineken beer, had obtained a license to build their brewery in Ho Chi Minh City, at a scale

three times larger than SEAB later reached. Given the presence of their main competitors in the

South, going North became a natural decision for Carlsberg. Viet Ha Beer Company was not the

largest brewery in the North at that time. Hanoi Brewery was the largest and the oldest in the


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North; however, Viet Ha Beer Company was seen as having the ability, skills, and know-how to

grow into a large brewery business, conscious of quality.

The Local Partner Viet Ha Beer Company (under the Hanoi Union of Microbiological Products

Enterprises) was a state-run enterprise established in 1966, formerly the Sauce Factory. At that

time, Viet Ha was a group of enterprises producing several types of foodstuffs for local

consumption, including baker’s yeast, soy sauce, frozen meat, instant noodles, and later, beer

and soft drinks.

In the joint venture between Carlsberg and Viet Ha, generally speaking, the local side contributed

the land, their initial production facility including the building, equipment, distribution network,

labor force, political connections, local brand prestige of Halida, and marketing know-how for

this local brand. The foreign side provided capital, technical and management training for the

workforce, some critical knowhow in production, international brand prestige (Carlsberg) and

marketing know-how for the Carlsberg brand. Other than just capital, the investor also

transferred technical, marketing and management knowledge by means of training. Training was

an important investment, required to maintain the quality of products and efficiency of operation.

Training occurred both in Vietnam, within the factory by on-the-job training, and also overseas.

Right 1 year after the joint venture with Viet Ha, Carlsberg continued to expand into the Central

region market through a joint venture with Hue Beer Company (Huda). At that time, in the mid-

90s, the local beer companies were in a difficult situation. They find a way out by turning to

focus on producing draft beer, or merging with large, well-known beer companies to process

products for them. In 1994, Carlsberg cooperated with Hue Beer in the form of a joint venture,

with each party contributing 50% of the capital. Huda Beer quickly became a big brand in the

Central region and Hue Beer Company is now considered as one of the four giants of the

Vietnamese beer village (the remaining three are Sabeco, Habeco and Vietnam Beer). After

nearly 2 decades of operation in the form of joint ventures and associates, by the end of 2011,

Carlsberg acquired the capital part of their Vietnamese partner, the People's Committee of Thua

Thien - Hue province, to become a 100% foreign-owned company. Carlsberg's acquisition of a

stake in Huda Beer was considered a solid step for this foreign giant to gradually move towards

acquiring the entire central beer market.


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“Acquisition for mutual benefit”

In addition, in 2008, 2009, Carlsberg continued the joint venture strategy with local players such

as: became the strategic investor to Habeco Joint Stock Company and established Vungtau

Brewery as a JV between Habeco and Carlsberg; acquired minority stake in Halong Beer

Beverage Joint Stock Company (Halong brand).

The acquisition of Vietnamese beer brands was an important step to expand the market to the

South because although they had occupied most of the beer market in the North and North

Central, Carlsberg's market share in the southern market was still quite modest.

“Efforts towards preserving and promoting socio cultural values”

Besides ensuring product quality and user experience, Carlsberg has initiated multi-aspect

investments to improve the local communities, reflected through diverse humanitarian and

cultural promotions in the Central region. Over the span of three decades, Carlsberg Vietnam

has engaged in several long-term programs, accompanying Vietnam in enriching its local culture,

most remarkably in Central Vietnam. In the last 20 years, Carlsberg Vietnam has been the

platinum sponsor of Festival Hue, the largest nation-wide festival to honor traditional and

contemporary cultural values of the ancient capital ever since the first season in 2000. Besides,

with the aim of promoting Vietnam’s diverse cultural heritages, Carlsberg has also assisted local

communities in organizing provincial activities, such as Den Con Festival (Nghe An) and Minh

Hoa Full Moon Festival (Quang Binh), uplifting the spirits of locals in their daily lives.

“Community contributions”

Together with taking care of the locals’ spiritual well-being, Carlsberg Vietnam has allocated

resources to understand and address the daily struggles of communities in Central Vietnam. A

prime example would be the establishment of the corporate’s long-term Corporate Social

Responsibility (CSR) program, “Fresh water for beloved Central” with the local brand – Huda

in 2019, aiming at tackling water shortage in Vietnam's central region.

Achievement in Vietnam’s market


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The entry of Carlsberg into Vietnam's market is considered to have had an important influence

on the development of the beer industry in the country. Among these influences, one can mention

things like competition between breweries, both local and international, and raised standards of

product quality and production practices.

Until now, with firm steps on the journey of "pursuing perfection" in Vietnam as well as around

the world, Carlsberg continues to receive support from millions of users and is one of the top 4

leading breweries in Vietnam.

Conclusion

Over the first half of the 1990s, as a result of regulations, joint ventures were the only choice for

entry into the beer market in Vietnam. However, this is also the strategy that Carlsberg has been

pursuing in Asia generally. Under the above condition, selecting a local partner and a location

for the new affiliate becomes a strategic decision. Competition dynamics and past relationships

seem to be the decisive factors. With their rivals occupying the Southern market and with a past

relationship with Viet Ha Beer Company (via the turnkey project with Danbrew), developing a

joint venture with Viet Ha became a natural move when Carlsberg considered entering Vietnam.

Unlike the majority of joint ventures in Vietnam where the foreign partners aim effectively to

control the joint venture, management of SEAB was shared between the two partners. Carlsberg

contributed capital, equipment, technical knowledge, knowhow and international brand and

training, whilst Viet Ha contributed access to land, machines, a distribution network, the local

brand and political ties. After that, Carlsberg continued to conquer the Vietnamese market,

expanding to the Central and Southern regions with the strategy of joint ventures with domestic

beer companies.

4.1.4.2. Case study of Samsung

Background

Samsung was founded in 1938 as a trading company in South Korea. In 1969, Samsung first

entered the electronics industry with several electronics-focused divisions. Their first products

were black-and-white televisions. During the 1970s the company began to export home


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electronics products overseas. At that time Samsung was already a major manufacturer in Korea,

and it had acquired a 50% stake in Korea Semiconductor.

Samsung Electronics Co. Ltd was the world's largest manufacturer of consumer electronics by

revenue in 2018. As of 2020, Samsung Electronics reported a 29.62% increase in operating

profit, achieving the company’s fourth-largest profit despite the pandemic situation. Samsung

Electronics is now a major manufacturer of electronic components such as lithium-ion batteries,

semiconductors, image sensors, camera modules and displays for clients such as Apple, Sony,

HTC and Nokia.

Key Samsung milestones in Vietnam:

● 1996: Samsung started penetrating into Vietnam through a joint venture with the TIE

company.

● 2008: Samsung officially received the investment license and started construction of

Samsung Electronics Vietnam (SEV) mobile phone factory in Bac Ninh.

● 2009: Samsung Electronics Vietnam (SEV) mobile phone factory in Bac Ninh

commenced operations.

● 2014: Samsung Electronics Vietnam Thai Nguyen (SEVT) was put into operation.

● 2016: Samsung Electronics Ho Chi Minh Complex - SEHC (Ho Chi Minh City) started

to operate.

● 2020: Research & Development (R&D) Center in Hanoi was started building.

Why Vietnam?

● Production Factors:

Besides the availability of cheap and good quality labor pools, proximity to China also

made Vietnam more attractive when Samsung aimed to reduce the concentration in

Chinese factories. Previously, MNEs flocked into China to take advantage of the low-

cost laborers. Then, with the development of the economy, it was becoming costlier to

operate in China and MNEs had taken the trend to invest in China’s neighboring countries

as it was much easier and cheaper to move the production.


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Moreover, the Vietnamese government's interest in continuously improving

infrastructure was another key factor facilitating the shift of MNEs to Vietnam.

According to the World Bank (2006), around 9 - 10% of GDP was used for investment

in transport, telecommunications, energy, water, and sanitation. “The road network has

more than doubled in length since 1990, and its quality has improved substantially… The

number of fixed and mobile phones per 100 people has multiplied nine- fold since 1995.”

(World Bank, 2006).

● Government Support:

Despite the ambiguous empirical evidence of the impacts of MNEs and FDI in

knowledge creation and technology spillovers, the Vietnamese government has had a

number of preferential policies to attract FDI. As part of its WTO accession, Vietnam

has removed all requirements inconsistent with the TRIMS agreement. Besides, foreign

investors in Vietnam could also take advantage of many attractive investment incentives.

Furthermore, remote and mountainous provinces could provide additional tax preference

and other incentives to draw prospective investors. In particular, Thai Nguyen province

has offered an extra 3 years of paying half of corporate income tax. This means that

Samsung should pay no tax for the first four years of operation and half of the full rate

for the following 12 years.

In addition, political stability has made a considerable contribution to the increase of FDI

in Vietnam. The political stability index by the World Bank can be used to measure it,

with the values ranging from -2.5 (weak) to 2.5 (strong). The average value for Vietnam

during the period from 1996 to 2013 was 0.24 points with a minimum of 0.1 points in

2003 and a maximum of 0.46 points in 2005.

The strategy of Samsung

a. The corporate level strategy:

Full Vertical integration


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Samsung operates like many other Asian producers, such as NEC Corporation or Sony

Corporation, with an emphasis on vertical integration and a flood of products. Samsung is present

in dozens of product lines, including flat panels, sensors, LED lights, batteries, gaming systems,

cameras, TVs, appliances, cell phone carriers, tablets, smartphones, and even medical

electronics.

Diversification

The global strength of Samsung provides flexibility – being a global organization enables it to

find the best sources of raw materials, together with the best locations in which to manufacture

and assemble its products. Samsung has had 26 factories across the world, therefore its global

nature has also resulted in an internationally recognizable brand name. Because Samsung

operates in so many product and market areas, it combines all its expertise, technology, and

facilities in order to improve product development. This is known as synergy.

In Vietnam, Samsung Electronics Co. has been the most renowned representative of Samsung

Group. They are now one of the main mobile phone sellers in Vietnam, along with household

appliances and electronic equipment.

b. Market entry strategy in Vietnam:

Samsung has been in Vietnam since 1996 through a joint venture with the TIE company - a

Vietnamese partner, originally producing color Televisions. Its presence has been boosted since

2007 by a number of large investments in mobile phones and related activities, of which the

largest is the USD 7.5 billion complex in Bac Ninh Province. Since then Samsung and mobile

phones have played a major role in Vietnam’s exports and led the evaluation of the country’s

participation in electronics GVCs.

Prior to 2007, Samsung manufactured mobile phones in six facilities: two in China, two in Brazil,

one in India and one in the Republic of Korea. In 2007, the company considered locations for

new facilities to meet global demand and to reduce the concentration in Chinese factories, and

Vietnam was chosen. Samsung Electronics Vietnam (SEV) was established in 2008 and

commenced operations in 2009. Then in 2013, they opened the second largest mobile phone

factory in Thai Nguyen (SEVT) with a USD 2 billion investment. By 2015, Viet Nam had


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accounted for 50% of all Samsung mobile phone production. The process was disrupted in 2016

by a manufacturing defect related to faulty batteries in Galaxy Note 7 smartphones, assembled

in Vietnam, which led to a multi-billion dollar recall and discontinuation of the top-end model.

In 2017, 30% of Samsung mobile phones were being assembled in Vietnam. In 2018, Samsung,

particularly Samsung Display, invested in the USD 2.5 billion project in Bac Ninh, which was a

project specializing in the production of new generation screens of Samsung, to supply

Samsung's mobile device factories in Vietnam as well as for export. In 2020, Vietnam remained

a major production hub for Samsung, as revenue from Samsung Vietnam made up 30% of that

of Samsung Global.

SEV’s early market entry strategy

Firstly, Samsung did not establish a factory immediately when emerging to Vietnam, but they

chose to have a joint venture with one Vietnamese firm (TIE) in 1996. By this strategy, Samsung

limited their risk in the Vietnamese market, and had time to research more in the market and

Vietnamese consumers. By 2000, although Samsung had not officially invested in Vietnam, this

brand was familiar with Vietnamese families with product lines, notable is “super horn”

television.

After more than 10 years of having a brand presence in Vietnam as well as developing the

Vietnamese market knowledge, the first Samsung factory was born in Bac Ninh province,

Samsung Electronics Vietnam. By establishing a factory in Vietnam, SEV received generous tax

incentives. The Bac Ninh operations only began to pay taxes in 2013. In 2016, Samsung’s tax

bill of USD 300 million represented about 15% of SEV’s net income (reported in Samsung’s

financial statement as USD 1.9 billion on sales of USD 18.1 billion), which was less than Viet

Nam’s corporate tax rate of 20%. In 2020, Samsung established a USD 300 million R&D center

in Hanoi, employing 1,500 people and positioning SEV to expand into higher value-added

activities; it was also an instrument for obtaining added incentives accruing to “high-technology

enterprises” under Viet Nam’s Law on Investment.

SEV’s location strategy:

The first factory of Samsung is located in Bac Ninh, a Northern province. At that time, although

Bac Ninh was a poor area as well as the smallest province in the country, where people mainly


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worked in agriculture, this place was still the first choice of Samsung during the development

process in Vietnam, for the following major reasons:

● Bac Ninh has advantages in geographical location. Bac Ninh is in the neighborhood of

Hanoi, near Noi Bai airport and Hai Phong port, near China, where other Samsung

factories are located. In 2008, Vietnam’s electronic component industry mainly depended

on China because of the low development in manufacturing. Samsung’s product had to

be released 1 week after the production. Hence, in order to create favorable conditions

for electronic components import and final products export, Bac Ninh was the most

suitable choice.

● In addition, the Northern economic region was invested more strongly in infrastructure,

for instance, the number of highways was much higher than in the Southern areas. At the

same time, the province's leaders' sense of attracting and creating favorable conditions

within the framework of policies allowing investors, especially foreign investors, was

also one of the essential factors.

Thai Nguyen, Ho Chi Minh, Hanoi were the next locations selected by Samsung in 2014, 2016,

and 2020 respectively. For the second complex in Thai Nguyen, Samsung faced the issue of

exchanging vehicles and materials with the factory in Bac Ninh within 40 minutes, so Thai

Nguyen was the chosen location. Samsung's research center was also located in Hanoi for this

reason. As the research required qualified human resources, Ha Noi should be the suitable choice

for Samsung to take advantage of the highly qualified human resources at the top universities

here.

Due to the fact that many businesses in the South have their strengths in plastic injection and

large detail molding, the only factory in south Vietnam, located in Ho Chi Minh City, was

selected to produce televisions and home appliances. Furthermore, Ho Chi Minh City is also

close to airports and harbor, meeting the needs of exporting goods to Europe and North America.

In a word, over the past 10 years, Samsung has carefully considered when choosing locations to

build factories, taking advantage of specific resources in each locality. This process has not only

supported Samsung to optimize production efficiency but also promoted Vietnamese local

potential.

SEV’s Product strategy:


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At the time Samsung first joined the Vietnamese mobile phone industry, in order to control

prices, many other companies chose to launch the product models which already appeared in

Thailand, Malaysia 3 or 4 years ago. But SEV decided to bring the latest models in accordance

with the tastes of Vietnam which were really suitable for Vietnamese. This strategy helped SEV

attract the attention of Vietnamese customers through a new product with excellent design,

integrated steam technology and new features.

Regarding the television category, based on SEV’s research on Vietnamese people, the company

found that each family owned only one-color TV, it served several generations of the family,

even for neighbors, so they needed a big TV with the built-in speaker. Samsung Vina produced

and marketed product lines "Super Horn" with five times the capacity of conventional television,

released in Vietnam in 2000. This product quickly created a turning point, making TV Samsung

become one of the leading brands in terms of market share in Vietnam. By 2005 Samsung Vina

achieved a total revenue of USD 317 million, of which exports valued USD 63 million, an

increase of 35% compared to 1996.

To sum up, thanks to their strategy in prioritizing on consumer understanding and market needs,

Samsung had successfully hit the Vietnamese consumer sense. Up to now, Samsung is one of

the most familiar brands to Vietnamese people.

Achievement in Vietnam

Starting with an investment of USD 670 million for the Samsung Electronics Vietnam - SEV

factory in 2008, Samsung is now the largest foreign investor in Vietnam with a total investment

capital that has increased 26 times to USD 17.5 billion. Up to 2021, Samsung's presence in

Vietnam includes three factories and one Research & Development (R&D) Center, of which

Samsung Electronics Vietnam - SEV (Bac Ninh) and Samsung Electronics Vietnam Thai

Nguyen - SEVT (Thai Nguyen) are two power plants. Samsung's largest mobile phone factory

globally, Samsung Electronics Ho Chi Minh Complex - SEHC (Ho Chi Minh City) is the largest

home electronics factory in Southeast Asia, and Samsung Vietnam Mobile R&D Center - SVMC

is Samsung's largest R&D Center in Southeast Asia.


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According to Samsung's statistics, around 50% of Samsung's smartphones and tablets are

produced in Vietnam and exported to 128 countries and territories, including the US, Europe,

Russia, and Southeast Asia.

Conclusion

Starting with the joint-ventures form, Samsung conducted market research carefully on the

Vietnamese consumer as well as Vietnamese business environment before starting to establish

factories in Vietnam. Thanks for taking careful foundation steps, Samsung has built a solid

foundation to facilitate it’s development in this market.

4.2. Investment sectors

Highlight of some key industries in 2020 following the government plan:

4.2.1. The manufacturing and processing sectors

The manufacturing and processing sector has taken the lead in attracting foreign direct

investment (FDI) with the total FDI reaching 21,549.6 million USD (from 2016 to 2020),

contributing 49% newly registered FDI in 2020. The domination of the manufacturing and

processing sector reflects the efficiency gains offered by Vietnam to foreign firms. An increasing

number of firms have shifted their manufacturing operations to Vietnam or have adopted a China

+ 1 model. As a result, Vietnam has emerged as a global manufacturing and assembly hub,

integrated into global supply chains. Most investments are focused on light industries such as

computers, mobile phones and electronics. A large number of high technology companies

(TNCs) such as Samsung, Intel, Microsoft, Rockwell Automation have invested and decided to

expand operations in Vietnam. According to the UN Conference on Trade and Investment

(UNCTAD), 2020 World Investment Report, Vietnam’s manufacturing sector has been bolstered

by multinational enterprises (MNEs) who are attempting to sidestep trade tensions between the

US and China by using Vietnam as a less problematic alternative. In the context of Covid 19, a

few countries with low labor cost advantages (e.g. Indonesia and Vietnam) could fare relatively

better as MNEs pick up operations. They could benefit from MNE decisions to diversify

geographical risks and build more resilient supply chains. The relocation of production facilities


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to the region from East Asia, already ongoing due to trade tensions between the United States

and China, was expected to continue, stated by UNCTAD in the 2020 World Investment Report.

4.2.2. The electricity production and distribution sector:

The emerging investment sector in Vietnam currently is Energy and natural resources. Data

recorded by the Ministry of Plan and Investment, in 2020, Vietnam received 5,081 million USD

into the energy and natural resources sector, accounting for 35% of newly registered foreign

direct investment (FDI) in 2020. As a result, this sector became the second biggest FDI recipient

in 2020, pushing the sector of Real estate down to the third.

In terms of Renewable energy, with growing industrialization and economic modernization,

energy demand is predicted to increase by over eight percent per annum during the 2021-2030

period. The Vietnamese government is moving forward to develop renewable energy sources to

ensure energy security and address the growing power demand.

At present, hydropower holds the largest share amongst all renewable energy sources, followed

by wind and biomass. Solar energy, biogas, and waste-to-energy technologies are picking up

slowly while geothermal energy and tidal energy are at a very early stage.

Table 36: Government targets 2020-2030 for its energy needs:

DPD VII Targets

Type 2020 2025 2030

Wind

Total capacity

(MW) 800 2,000 6,000

Electricity

production 0.8% 1% 2.1%

Hydro power

Total capacity

(MW) 21,600 24,600 27,800

Electricity

production 29.5% 20.5% 15.5%


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Biomass

Total capacity

(MW) 750 1,824 3,281

Electricity

production 1% 1.2% 2.1%

Solar

Total capacity

(MW) 850 4,000 12,000

Electricity

production 0.5% 1.6% 3.3%

Source:Data aggregated by TBO from the following source: PDP VII - National Power

Development Master Plan (“PDP VII”)

PDP VII - National Power Development Master Plan (“PDP VII”) aims to increase the share of

renewable energy to above 10% by 2030 and reduce the use of imported coal-fired electricity to

ensure energy security, climate change mitigation, environmental protection, and sustainable

socio-economic development.

4.2.3. Investment situation in renewable energy industry in Vietnam (up to 2020):

In Solar energy sector, Major investors in Vietnam in the approval, construction, or completion

stage had included German ASEAN Power, B.Grimm Power Public Co Ltd, Trina Solar,

Schletter Group, JA Solar, Sunseap International, Nippon Sheet Glass, Ecoprogetti, Tata Power,

Shapoorji Pallonji Infrastructure Capital, Gulf Energy Development, InfraCo Asia Development,

and ACWA Power.

In the wind energy sector, the major investors had included GE Renewable Energy, Mainstream

Renewable Power, Phu Cuong Group, Blue Circle, Superblock Pcl, Siemens Gamesa, Doosan

Heavy, Egeres Enerji, and Tan Hoan Cau Corp.

4.3.2.1. The real estate sector

The real estate sector was the third biggest FDI recipient in 2020. Real estate in Vietnam has

been attractive to foreign investors thanks to the nation’s good pandemic control, political

stability and stable macroeconomic growth.


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Since 2020, FDI into Vietnam Real Estate has faced a great deal of difficulties, with two core

reasons, one the ripple effects of COVID-19, and the other development projects running into

legal issues. However, overseas investors still share the interest in Viet Nam Real Estate,

especially industrial property.

Along with the development of Vietnam’s manufacturing industry, industrial property is

developing strongly. Some typical projects are as following: the USD 4 billion LNG plant project

financed by a Singaporean investor, some other big-ticket projects in January-November include

a tire manufacturing plant worth USD 300 million by a Chinese investor in Tay Ninh province;

an additional injection of USD 138 million into a Chinese-invested radial tire production facility;

an addition of USD 75.2 million to Japan's Sews-components Vietnam manufacturing plant for

electronic and auto parts; and Hong Kong's Ce Link Vietnam 2 plant worth USD 49.8 million in

Bac Giang for electronic parts and products. Large proportion of industrial property supply, both

land and ready-built factories, located in major Southern/ Northern cities and provinces

(classified as Tier-1 area) with surging demand, supports market performance increasing rapidly.

Expansion of supply has been led by completion of critical infrastructure projects, especially

expressway networks and ports. More competitive land cost as well as lower occupancy rate are

making emerging industrial areas in surrounding provinces (classified as Tier-2 area) become

more attractive to investors and developers.

4.3.2.2.Retail and automotive industry:

Regarding the retail market, Vietnam has a great advantage with a fast-growing economy in

Southeast Asia. In the first quarter of 2021, Vietnam's GDP grew 4.5%, demonstrating its

positive economic activities amid the global pandemic.

According to the Ministry of Planning and Investment of Vietnam, in the first quarter of 2021,

the total amount of newly registered FDI capital in the wholesale, retail and engine repair sectors

was USD 22.13 million. In Hanoi - the capital of Vietnam, newly registered capital in the field

of wholesale and retail and engine repair was USD 19.69 million with 32 projects, accounting

for 40% of the total capital in Hanoi.


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In 2020, some new foreign brands such as Japanese brand MUJI also set its first footprint in

Vietnam with a store in Ho Chi Minh City and most recently a store in Hanoi. Fila sports fashion

brand had also opened two stores in Hanoi.

In terms of the automotive industry, the removal of market barriers as a result of Vietnamese

commitments under agreements, such as the Comprehensive and Progressive Agreement for

Trans-Pacific Partnership, the Regional Comprehensive Economic Partnership, and the EU-

Vietnam Free Trade Agreement, coupled with a fast-growing middle-class, promote Vietnam to

become a promising market for major automobile manufacturers from Japan, South Korea, the

United States, and the European Union.

According to the Ministry of Industry and Trade, in 2020, Vietnam boasted over 50 automotive

plants with 18 foreign-invested enterprises and 38 domestic companies. The three major auto

manufacturers of Truong Hai Auto Corporation (THACO), Toyota, and Mitsubishi Vietnam

accounted for more than 70% of the market share. THACO ranked first with 35.5% market share,

followed by Toyota at 24.9%, and Mitsubishi at 10.2%.

4.3.2.3.Building and construction industry:

More foreign participation is forecasted in Vietnam’s construction market over the coming years,

buoyed by the gradual opening up of the Vietnamese economy to foreign investors and the

Government’s emphasis on infrastructure development.

Based on data from Fitch’s proprietary Infrastructure Key Projects Database (KPD), local

Vietnamese companies unsurprisingly dominate the construction scene, holding 43% of

construction roles awarded. The proportion of local dominance is lower compared to its regional

peers – in Indonesia, local companies hold 65% of market share, Thai companies hold 56% in

Thailand, and Malaysian companies hold 62% in Malaysia. Only the Philippines has a lower

share of domestic dominance than Vietnam at 34%.

In a word, the Vietnamese building and construction industry is becoming a vibrant market for

domestic and foreign companies.


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Moreover, Vietnam’s building construction sector is expected to grow strongly at an annual

average of above 7% over the next decade, supported by strong macroeconomic conditions and

favorable demographic trends, according to Fitch Solutions.

4.3. Geographical Considerations

The Vietnamese government established three ‘Key Economic Regions’ in 2004, including

Northern KER, Central KER and Southern KER, and Mekong KER in 2009 to encourage and

promote the development of advanced industry and foreign participation in the national

economy. Each region has its own orientation as well as distinct plans to develop and attract

foreign investors. As a result, foreign investors in general, and Brazilian businesses in specific

should have a deep understanding of these plans to have suitable schemes. Four Key Economic

Region are listed below:


● Northern Key Economic Region – The Northern KER:

Figure 37: Four key economic regions of

Vietnam


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This economic region covers Hanoi, Hung Yen province, Hai Phong city, Vinh Phuc

Province, Bac Ninh Province, Quang Ninh Province, Hai Duong Province. Northern Key

Economic Region is planned to specialize in Agriculture, Technology and Industrial

Parks. As a whole, it contributes to more than 32% of the national GDP (ranked second

after the Southern KER) and accounts for 26% of the total FDI capital of the country.

The Northern KER’s economic structure has been gradually shifting towards

industrialization following a government’s plan. The industry and construction fields

continue to be the growth pillar of the region. The key sectors include electronics,

electricity, automobile, shipbuilding, textiles, and supporting industries, according to

Vietnam Briefing.

In terms of Foreign Direct Investment, following Resolution No. 128/NP-CP by the

Government on tasks and solutions to promote the development of key economic regions,

the northern key economic region shall focus on attracting hi-tech, processing,

manufacturing, electronics, service, banking, finance and logistics projects and create

research and development centers. These centers shall help stimulate the application of

technology and science and innovation.

● Central Key Economic Region – The central KER:

The central key economic region, which consists of Thua Thien – Hue, Da Nang, Quang

Nam, Quang Ngai and Binh Dinh, has made strong developments, significantly

contributing to the country’s development.

The Central Key Economic Zone has been known for its marine economy. The area aims

to increase development in sectors such as oil and gas, shipbuilding, logistics, and other

high-tech industries.

● Southern Key Economic Region - the Southern KEZ:

Consisting of Ho Chi Minh City and nearby Dong Nai, Binh Duong, Ba Ria-Vung Tau,

Binh Phuoc, Tay Ninh, Long An, and Tien Giang provinces, the Southern KEZ has made

the largest contribution to Vietnam’s economic development.

Regarding Foreign Direct Investment, the Southern KER is an outstanding zone for

advanced manufacturing and is encouraging investments in knowledge-based and high-

tech industries and services. The key sectors include electronics, software, IT, telecom,

hi-tech agriculture production, and processing, which are the primary drivers of future


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investment. Ho Chi Minh City, the most important financial and trading hub of the whole

country, focuses on service sectors such as finance, logistics, tourism, healthcare, and

education.

Investors interested in the Southern KER should consider infrastructure development

such as waterways, railway, and expressway construction, and optimization of land and

natural resources to enhance the competitiveness of their investment.

● Mekong Key Economic Region - the Mekong KEZ:

Mekong Key Economic Region is the newest key economic region which was established

in 2009 following Decision No 492/QĐ-TTg.

The Mekong KER is the leading hub in rice production, farming, fishing, and seafood

processing, contributing largely to the export value of Vietnam. Moreover, this region is

also an important zone in transferring biotechnology, providing seeds, technical services,

processing and exporting agricultural products to the whole Mekong Delta and to

Vietnam in general.

4.3.1. FDI situation across Vietnam:

Figure 38: Top provinces receipt most foreign direct investment in Vietam



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Accumulatively, in December 2020, the whole country had 33,070 valid projects with total

registered capital of USD 384,044.21 billion.

The foreign investors had invested in 60 provinces and cities nationwide up to 2020. Bac Lieu

continued to lead the list with a large project worth USD 4 billion, accounting for 27% of total

registered investment capital. Hanoi ranked second with USD 0.71 billion, accounting for 5% of

total investment capital (of which investment in the form of project expansion and capital

contribution and share purchase). Ho Chi Minh City ranked third with total registered capital of

over USD 0.637 billion, accounting for 4% of total investment capital (of which investment was

mainly in the form of capital contribution and share purchase). Next were Ba Ria - Vung Tau,

Binh Duong, Hai Phong, and so on.

4.3.2. Other types of Economic zone in Vietnam:

● Special economic zones - SEZs

In addition to these region segmented economic zones, the Vietnamese government in

recent years has sought to establish SEZs to attract foreign investment, particularly in

areas relating to high-tech and knowledge industries. Compared to coastal economic

zones, the Vietnamese government aims for SEZs to offer especially high-quality

services and economic conditions, including more efficient government institutions than

found elsewhere in the country.

However, the future of SEZs in Vietnam currently remains unclear. The government has

not formally disavowed its SEZ plans, but they have been put on the back burner due to

opposition.

● Industrial zones:

Up to 2020, Vietnam had already had industrial zones in three areas, namely:

Vietnam Industrial zone in the North:

- 125 industrial parks in 21 provinces

- Here are noticeable Industrial zones in the North: Song Khe - Noi Hoang Industrial

Park, Luong Son Industrial Park, Mai Son Industrial Park, Luong Son Industrial Park,

Song Cong Industrial Park, Phu Ninh Industrial Park, Long Binh An Industrial Park,

Dong Pho Moi Industrial Park, Southeast Industrial Park, etc.

Vietnam Industrial zone in the Central:


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- Including 56 industrial parks in 11 provinces

- Group of highlight industrial zones in 11 central provinces: Bim Son Industrial Park-

North Zone A, Lam Son Industrial Park, Cua Lo Industrial Park, Ha Vang Industrial

Park, Gia Lach Industrial Park, North Dong Hoi Quang Binh Industrial Park, Quan

Ngang Industrial Park, Tu Ha Industrial Park, Phong Thu Industrial Park, Hoa Cam

2 Industrial Park, Hoa Ninh Industrial Park, etc.

Vietnam Industrial zone in the South:

- Including 183 industrial parks in 19 provinces and cities.

- Outstanding industrial zones in the South of Vietnam: Sonadezi Chau Duc Industrial

Park, Hiep Phuoc Industrial Park, Tan Phu Trung Industrial Park, Dong Nam

Industrial Park, Phuoc Dong Industrial Park, Tan Phu Dong Nai Industrial Park, Ong

Keo Industrial Park, Bau Xeo Industrial Park, Loc An - Binh Son Industrial Park,

Long Duc Industrial Park, Long Khanh Industrial Park, Giang Dien Industrial Park,

etc.

In recent years, Vietnam has exploded in popularity for “China plus one” investors. To grasp the

opportunity, foreign investors should understand clearly the preferential endowed by the

government.

4.4. State agencies related to Investment

The State manages investment to ensure that investors carry out investment activities in

accordance with the law; investment activities are developed according to the strategies and

master plans set by the State; business investment activities are suitable to the socio-economic

situation and conditions. State agencies will be responsible for managing investment issues under

their management assignment.

The Ministry of Planning and Investment helps the Government to unify the state management

of investment in Vietnam and investment from Vietnam to abroad. The scope of responsibility

of the Ministry of Planning and Investment is as follows:

- Submitting to the Government and Prime Minister for the approval on strategies, master

plans, plans and policies on investment in Vietnam and investment from Vietnam to

abroad;


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- Promulgating or submitting to competent authorities for promulgating legal documents

on investment in Vietnam and investment from Vietnam to abroad;

- Guiding, disseminating, organizing the implementation, monitoring, examining and

evaluating the implementation of legal documents on investment;

- Hosting and coordinating with relevant agencies in supervising, evaluating and

inspecting investment activities in Vietnam and investment from Vietnam to abroad;

- Managing the investment promotion and coordinating of investment promotion activities

in Vietnam and abroad;

- Negotiating and signing international treaties related to investment activities.

Management responsibilities of Ministries and Ministerial-level agencies related to investment

activities are as follows:

Coordinating with the Ministry of Planning and Investment, other Ministries, and Ministerial-

level agencies in formulating laws and policies related to investment activities;

- Hosting and coordinating with the Ministry of Planning and Investment in formulating

master plans, plans and lists of projects attracting investment capital of the sector;

organizing specialized investment mobilization and promotion;

- Supervising, evaluating, and inspecting the satisfaction of investment conditions and

state management of investment projects within its competence;

- Hosting and coordinating with provincial-level People's Committees and Ministries and

Ministerial-level agencies in, in solving difficulties and problems of investment projects

in the field of state management; guiding the decentralization and the authorization the

Management Boards of industrial parks, export processing zones, hi-tech parks, and

economic zones to perform state management tasks in industrial parks, export processing

zones and hi-tech parks, economic sector.

Responsibilities and powers of the People's Committee of the province, the Department of

Planning and Investment, the Management Board of industrial parks, export processing zones,

hi-tech parks, and economic zones are as follows:

- Cooperating with Ministries and Ministerial-level agencies in formulating and

publicizing the list of projects attracting investment in their localities;


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- Carrying out procedures for granting, adjusting, and revoking the Investment

Registration Certificate;

- Performing the state management function of investment projects within its competence;

- Settling according to its competence or submitting to competent authorities for settlement

of difficulties and problems of investors;

- Periodically evaluating the effectiveness of investment activities in the area and report to

the Ministry of Planning and Investment;

- Maintaining and updating the National Investment Information System for the assigned

fields;

- Directing the organization, supervision, and evaluation of the implementation of the

investment reporting regime.

The Government uniformly manages investment activities both at domestic and abroad.

Agencies and sectors including the Ministry of Planning and Investment, Ministries and

Ministerial-level agencies, Provincial People's Committees, Departments of Planning and

Investment, Management Boards of Industrial Parks, Export Processing Zones, and Hi-Tech

Parks. Economic zones, economic zones, and overseas Vietnamese representative agencies have

the responsibility and authority to perform the management in their assigned fields, in their

respective management areas.

Procedure to apply for Investment Registration Certificate in Vietnam for Foreign

Investors

Investors who want to enter the Vietnamese market first need to determine whether their project

belongs to the project that must be subject to the investment policy decision.

The list of projects that the foreign investors must apply for an investment policy includes:

a. Projects under the investment policy decision of the National Assembly:

● Investment projects that greatly affect the environment or have the potential to seriously affect

the environment, including:

- Nuclear power plants;

- Investment projects that require conversion of land use purposes of special-use forests,

watershed protection forests or border protection forests of 50 hectares or more;


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protective forests against wind, flying sand and protection forests against waves and sea

encroachment of 500 ha or more; production forest of 1,000 hectares or more;

● Investment projects that require a change of land use purpose for rice cultivation from 02

crops or more with a scale of 500 hectares or more;

● Investment projects that require migration and resettlement of 20,000 people or more in

mountainous areas, and 50,000 or more people in other areas;

b. Projects under the investment policy decision of the Government:

Except for projects under the authority to decide on investment policies of the Prime Minister

according to the law on public investment and projects specified in Article 30 of the Investment

Law 2020. The Prime Minister shall decide on investment policies for the following projects:

● Investment projects, regardless of capital sources, fall into one of the following cases:

- Investment projects that require migration and resettlement of 10,000 people or more in

mountainous areas, and 20,000 or more people in other regions;

- New construction investment projects: airports, airfields; runways of airports and

airfields; passenger terminals of international airports; cargo terminals of airports or

airfields with a capacity of 01 million tons/year or more;

- New investment project for passenger transport business by air;

- New construction investment projects: wharves, port areas belonging to special seaports;

wharves and port areas with an investment capital of VND 2,300 billion or more,

belonging to class I seaports;

- Investment projects on oil and gas processing;

- Investment projects involving betting and casino business, except for the business of

prize-winning electronic games for foreigners;

- Investment projects on construction of houses (for sale, lease, lease-purchase), urban

areas in the following cases: investment projects with a land use scale of 50 hectares or

more or with a scale of less than 50 hectares with the population size is 15,000 or more

in urban areas; investment projects with a land use scale of 100 hectares or more or less

than 100 hectares with a population of 10,000 or more in non-urban areas; investment

projects regardless of the size of the land area and the population, within the protection


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scope of the relic recognized by the competent authority as a national relic or a special

national relic;

- Investment projects on construction and business of infrastructure of industrial parks and

export processing zones;

● Investment projects of foreign investors in the field of telecommunications services business

with network infrastructure, afforestation, publishing and press;

● An investment project that is concurrently under the authority to approve investment policies

of two or more provincial-level People's Committees.

c. The authority to decide on investment policies of the People's Committee of the province is

specified in Article 32 of the Law on Investment in 2020 as follows:

Except for projects under the authority to decide on investment policies of the People's

Committee of the province according to the law on public investment and the projects specified

in Articles 30 and 31 of the Law on Investment 2020,

Provincial-level People's Committees shall decide on investment policies for the following

projects:

● Investment projects that require the State to allocate or lease land without auction, bidding or

transfer; an investment project with a request for permission to change the land use purpose,

except for the case of land allocation, land lease, or permission to change the land use purpose

of households or individuals who are not required to have written approval of the People's

Committee of the province according to the provisions of the law on land;

● Investment projects on construction of houses (for sale, lease, lease-purchase), urban areas in

the following cases: investment projects with a land use scale of less than 50 hectares and a

population size of less than 15,000 people in urban areas; investment projects with a land use

scale of less than 100 hectares and a population of less than 10,000 people in non-urban areas;

investment projects regardless of land area size, population in restricted development areas or

historic inner cities (defined in urban planning projects) of special urban areas;

● Investment project on construction and business of golf course (golf);

● Investment projects of foreign investors and foreign-invested economic organizations

implemented in islands and border communes, wards and townships; coastal communes,

wards and towns; other areas affecting national defense and security.


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For these projects, if they fall under the investment policy decision of the National Assembly or

the Prime Minister, they will submit an application to the Ministry of Planning and Investment.

If the project falls under the investment policy decision of the provincial People's Committee,

the dossier will be submitted to the Investment Registration Agency.

Cases that required the issuance of an investment certificate, but not required to involve the

investment policy application, include:

● Investment projects of foreign investors;

● Investment projects of economic organizations specified in Clause 1, Article 23 of the Law

on Investment in 2020;

Figure 39: Procedure to apply for Investment Registration Certificate in Vietnam for

Foreign Investors


Depending on the location, purpose and scope of the investment project, the Investment

Registration Authority may be different agencies, specifically as follows:

● The Department of Planning and Investment shall receive and issue Investment Registration

Certificates for the following projects: Investment projects outside industrial parks,

processing zones, high-tech zones and investment projects in industrial parks, processing


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zones and high-tech zones in localities where the Management Boards of industrial parks,

processing zones and high-tech zones have not been established.

● Management boards of industrial parks, processing zones, high-tech zones and economic

zones shall access and grant investment registration certificates to investment projects in

industrial parks, processing zones and industrial parks. hi-tech, economic zones.

4.5. Main tax policies

Vietnam's taxation system has implemented and undergone many major transformations in

recent decades. The reforms have made a crucial contribution to socio-economic development.

Moreover, with the continued opening of the economy, tax policies are expected to continue

undergoing changes and take new effect to adapt to Vietnam's development. This section focuses

on the main and most relevant taxes which Brazilian investors should be aware of and subject to

when establishing themselves in Vietnam.

4.5.1. License tax (license fee)

The license tax is an indirect tax imposed on entities that conduct business activities in Vietnam

and are paid by the enterprises themselves on an annual basis.

All companies, organizations, or individuals (including branches, shops, and factories) and

foreign investors that operate businesses in Vietnam are subject to license tax charges, and the

license tax rates are different for economic entities and for households/individuals.

As per the Decree No. Decree No 22/2022/ND-CP by Vietnamese government amending the

rules on license tax, license tax is exempt in the first year of business or operations for the

following instances:

● New established businesses;

● Households, individuals doing business for the first time;

● Representatives Offices (ROs), branches and business locations established during the

exemption period;


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● Small and medium-sized businesses (SMEs) that have been converted from household

businesses will be exempt from a business license fee for three years from the date of

their initial enterprise registration certificate (ERC); and

● General education and public preschool education establishments.

In addition, under the new regulations, businesses that have just been established can file BLT

returns by January 30 of the subsequent year of establishment or operations. This can be done

online and takes less than a day.

Tax fee:

The amount of license tax that a business is obligated to pay is based on the amount of the

registered capital (as listed on the business registration certificates) as below:

Table 37: License Tax rates for economic Entities

Registered capital (billion VND) License tax/ year (VND)

Over 10 3,000,000

Under 10 2,000,000

Branches, representative offices (RO),

business premises, public service providers,

other business entities

1,000,000



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License fees for individuals and households engaged in the production and trading of goods and

services are as follows:

Table 38: License Tax rates for Households and Individuals

Monthly income (million VND) License tax/ year (VND)

Over 500 1,000,000

Over 300 to 500 500,000

Over 100 to 300 300,000


4.5.2. Value Added Tax:

4.5.2.1.Scope of Application:

Value Added Tax (VAT) applies to goods and services used for production, trading and

consumption in Vietnam (including goods and services purchased from non-residents). A

domestic business must charge VAT on the value of goods or services supplied.

In addition, VAT applies to the dutiable value of imported goods. The importer must pay VAT

to the customs authorities at the same time they pay import duties. For imported services, VAT

is levied via the Foreign Contractor Tax (FCT) mechanism .

VAT payable is calculated as the output VAT charged to customers less the input VAT suffered

on purchases of goods and services. For input VAT to be creditable, the taxpayer must obtain a

proper VAT invoice from the supplier. For VAT paid on imports, the supporting document is

the tax payment voucher, and for VAT collected via the FCT mechanism, the supporting

document is the FCT payment voucher.

4.5.2.2.Goods or Services where VAT declaration and payment are not required:


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For these supplies, no output VAT has to be charged but input VAT paid on related purchases

may be credited. These supplies include:

● Compensation, bonuses and subsidies, except those provided in exchange for certain

services;

● Transfers of emission rights and various financial revenues;

● Certain services rendered by a foreign organization that does not have a PE (Permanent

Establishments) in Vietnam where the services are rendered outside of Vietnam,

including repairs to means of transport, machinery or equipment, advertising, marketing,

promotion of investment and trade to overseas brokerage activities for the sale of goods

and services overseas, training, certain international telecommunication services;

● Sales of assets by non-business organizations or individuals not registered for VAT;

● Transfer of investment projects;

● Sale of agricultural products that have not been processed into other products or which

have only been through preliminary processing;

● Capital contributions in kind;

● Certain asset transfers between a parent company and its subsidiaries or between

subsidiaries of the same parent company;

● Collections of compensation/indemnities by insurance companies from third parties;

● Collections on behalf of other parties which are not involved in the provision of

goods/services (e.g. if company A purchases goods/services from company B, but pays

to company C and subsequently company C pays to company B, then the payment from

company C to company B is not subject to VAT); Commissions earned by (i) agents

selling services, including postal, telecommunications, lottery, airlines/bus/ship/train

tickets, at prices determined by principals; and (ii) agents for international transportation,

airlines;

● Shipping services entitled to 0% VAT; and (iii) insurance agents;

● Commissions from the sale of exempt goods/services;

● Lending or return of machinery, equipment, goods;

● Goods exported and then re-imported back to Vietnam due to sales returns by overseas

customers.


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4.5.2.3.Exempt Goods and Services:

There are stipulated categories of VAT exemption, including:

● Certain agricultural products;

● Goods/services provided by individuals, households having annual revenue of VND 100

million. or below;

● Imported or leased drilling rigs, airplanes, and ships of a type which cannot be produced

in Vietnam;

● Transfer of land use rights (subject to limitations);

● Financial derivatives and credit services (including credit card issuance, finance leasing

and factoring); sale of VAT able mortgaged assets by the borrower under the lender's

authorization in order to settle a guaranteed loan and provision of credit information;

● Various securities activities including fund management;

● Capital assignment;

● Foreign currency trading;

● Debt factoring;

● Certain insurance services (including life insurance, health insurance, agricultural

insurance and reinsurance);

● Medical services; elderly/disabled people care services;

● Teaching and training;

● Printing and publishing of newspapers, magazines and certain types of books;

● Passenger transport by public buses;

● Transfer of technology, software and software services except for exported software

which is entitled to 0% rate;

● Gold imported in pieces that have not been processed into jewelry;

● Exported natural resources are unprocessed or processed with at least 51% of their costs

being natural resources and energy. Imports of machinery, equipment and materials

which cannot be produced in Vietnam for direct use in scientific research and technology

development activities;

● Equipment, machinery, spare parts, specialized means of transport and necessary

materials which cannot be produced in Vietnam for prospecting, exploration and

development of oil and gas fields;


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● Goods imported in the following cases: international non-refundable aid, including from

Official Development Aid, foreign donations to government bodies and to individuals

(subject to limitations);

● Fertilizer, feed for livestock, poultry, seafood and other animals, machinery and

equipment specifically used for agriculture.

4.5.2.4.Tax Rates:

There are three VAT rates as follows:

0%: This rate applies to exported goods/services including goods/services sold to

overseas/non-tariff areas and consumed outside Vietnam/in the non-tariff areas, goods

processed for export or in-country export (subject to conditions), goods sold to duty-free

shops, certain exported services, construction and installation carried out for export

processing enterprises, aviation, marine and international transportation services.

5%: This rate applies generally to areas of the economy concerned with the provision of

essential goods and services. These include clean water; teaching aids; books; unprocessed

foodstuffs; medicine and medical equipment; husbandry feed; various agricultural

products and services; technical/scientific services; rubber latex; sugar and its by-products;

certain cultural, artistic, sports services/products and social housing.

10%: This "standard" rate applies to activities not specified as not subject to VAT, exempt

or subject to 0% or 5%.

When a supply cannot be readily classified based on the tax tariff, VAT must be calculated based

on the highest rate applicable for the particular range of goods that the business supplies.

a. Corporate Income Tax (“CIT”)

All companies that do business in Vietnam are subject to income tax, whether they supply

products or services. Corporate Income Tax (“CIT”) is levied on income generated by companies

incorporated under Vietnamese laws or incorporated under foreign laws and carry out business

in Vietnam or have income that is sourced from Vietnam. The general statutory CIT rate is 20%

based on the net profits of enterprises. The rate of CIT applicable to the activities of prospecting,


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exploration and mining of petroleum, gas, and other rare and precious natural resources is

different, based on the specific project.

CIT incentives:

CIT incentives are granted to a new project that:

● Is engaging in promoted sectors; or

● Has a large scale of the business; or

● Is located in areas that are promoted for investment, including special economic zones

and remote areas deemed to be underdeveloped or facing particularly difficult economic

conditions.

In general, CIT incentives can include:

● A preferential tax rate of 10%, 15% or 17%;

● Tax exemptions;

● Tax reduction.

Table 39: CIT incentive based on specific condition

Source: KPMG – Investing in Vietnam 2021

b. Personal Income Tax


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Expatriate and Vietnamese individuals working in Vietnam or having Vietnam-sourced income

are subject to Vietnamese Personal Income Tax (“PIT”). The taxation of individuals depends on

their residency status.

Residence

According to Circular 111/2013/TT-BTC; and Circular 92/2015/TT-BTC by the Ministry of

Finance,

● Residents are individuals who meet one of the following conditions:

- Individuals who are physically present in Vietnam for at least 183 days within a

calendar year or within the first 12 consecutive months from the date of arrival; or

- Individuals who have a permanent residence in Vietnam (including having a

registered residence recorded on the permanent or temporary residence card issued

by the Vietnamese immigration authorities); or

- Individuals who have leased a residence in Vietnam where the total number of leased

days according to the lease contract is at least 183 days in a calendar year. Leased

residences can include hotels, boarding houses, rest houses, lodgings and working

offices, irrespective of whether the individual concerned leases the residence or the

employer leases it on their behalf.

● Non-residents are individuals who do not meet the above conditions. An individual will

also be treated as a non-resident of Vietnam if:

- The individual has a permanent residence or leased residence but physically stays in

Vietnam for less than 183 days in a calendar year; and

- The individual proves that he or she is a tax resident of another country.

PIT rates:

For residents, the progressive tax rates applicable to worldwide employment income referring to

Circular No. 111/2013/TT-BTC are as follows:


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Table 40: Tax rates applicable to worldwide employment income in Vietnam

Average monthly income in VND (after

allowable deductions) Tax rate (%) Tax liabilities

Up to 5,000, 000 5 Income * 5%

Over 5,000,000 up to 10,000,000 10 Income * 10% - 250,000

Over 10,000,000 up to 18,000,000 15 Income * 15% - 750,000

Over 18,000,000 up to 32,000,000 20 Income * 20% - 1,650,000

Over 32,000,000 up to 52,000,000 25 Income * 25% - 3,250,000

Over 52,000,000 up to 80,000,000 30 Income * 30% - 5,850,000

Over 80,000,000 35 Income * 35% - 9,850,000

Source: Circular No. 111/2013/TT-BTC

For non-residents - Vietnam-sourced employment income is applied at a flat tax rate of 20% if

the Vietnam economy entities are the entities that pay for the payroll.

c. Foreign Contractor Tax

Foreign Contractor Tax (“FCT”) is a mechanism to collect tax on Vietnam-sourced income of

foreign entities that have no legal presence in Vietnam or non-resident individuals from the sale

of goods or supply of services to Vietnamese parties on a contractual basis. FCT consists of an

Income Tax component (i.e. CIT for companies and Personal Income Tax for individuals) and a

VAT component. The foreign entities or individuals subject to FCT are referred to as foreign

contractors.

d. Other taxes


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Table 41: Other taxes

Tax name % of tax Definition

Natural resource tax

Range from 0% to 40%

applied for 9 main groups

of natural resources

(Refer to Resolution

No.1084/2015/UBTVQH13

for detailed tax rate)

Natural resource consumption

tax is an indirect tax, this is the

amount that organizations and

individuals must pay to the state

when exploiting natural

resources

Import tariff

Variable depends on the

types of Goods

Import duty is generally

assessed on an ad valorem (on

value) basis. Import tariff fall

into three categories: normal

rates, preferential rates and

special preferential rates

Export tariff

Range from 0% to 40%

depends on the types of

Goods

Export duties are imposed on

only a few items which consist

mainly of natural resource

products such as minerals,

forestry products and scrap

metal

Environmental Protection tax

Specific amount charged

on per unit per type

(Refer to Resolution

1148/2020/UBTVQH14

for detailed tax rate)

An Environmental Protection

Tax (“EPT”) is imposed on

goods where the consumption or

utilization of those goods is


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considered to negatively impact

the environment

Special consumption tax

5% to 150%

(Refer to Appendix 5)

The tax applies to

goods/services that are

considered luxurious in

comparison with the economic

conditions of the country, or

those which are discouraged for

consumption in Vietnam

Non - Agricultural Land Use

Tax

Tax rate is charged on

charged on a square meter

basis at progressive rates

from 0.03% to 0.15%

Level 1: 0.03% on the area

within limits

level 2: 0.07% on the area

is not exceeding 3 times

the limit

Level 3: 0.15% on the area

is more than 3 times the

limit

The tax is imposed on urban and

rural residential land and land

areas that are used for non-

agricultural business


The business taxes listed above are not exhaustive but are the most relevant for Brazilian

companies which may support the development of a strategy to conquer the Vietnamese market.


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4.6. Human resources in Vietnam

According to the Statistical Summary book of Vietnam 2020, the average annual growth rate of

the labor force for 2016-2019 was estimated at 0.68%, about 0.8% points lower than the figure

in 2011-2015. In 2020, the labor force aged 15 years and above was estimated at 54.8 million

people, an increase of 360.1 thousand people in comparison with that in 2016 but it saw a year-

on-year decrease of 924.5 thousand people because of the negative impact of the COVID-19

pandemic when many workers lost their jobs, had to be layoffs and reduced working hours.

In 2020, the employed labor force aged 15 years and above working in the agriculture, forestry

and fishery sector accounted for 33.1% (down 8.5% against 2016); industry and construction

sector accounted for 30.8% (up 5.6% points); and the service sector accounted for the highest

share of 36.1% (up 2.9% points), stated by the Statistical Summary book of Vietnam 2020.


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Chart 18: Number of people employed in thousand by sectors in Vietnam 2021

Source: Statista.com

17724.6

11302.2

7290.8

4695.4

2737.8

2007.2

1967.7

1445.8

1020.3

604.4

455.2

360.4

347.2

338.7

321.2

262.3

213.5

174

171.8

165.3

4.1

0 4000 8000 12000 16000 20000

Agriculture, forestry and fishing

Manufacturing

Wholesale and retail trade; repair of motor vehicles and

motocycles

Construction

Accommodation and food service activities

Education and training

Transportation and storage

Activities of Communist party, social-political organizations;

public administration and defence; compulsory security

Other service activities

Human health and social work activities

Financial, banking and insurance activities

Admistrative and support service activities

Professional, scientific and technical activities

Information and communication

Real estate activities

Art, entertainment and recreation

Activities of households as employers; undifferentiated goods

and services producing activities of households for own use

Mining and quarying

Electricity, gas, stream and ải conditioning supply

Water supply, sewrage, waste management and remendiation

activities

Activities of extraterriorial organizations and bodies


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Vietnam has near full employment, with an unemployment rate hovering around 2% in recent

years. As a result, the availability of labor is a key attraction of doing business in Vietnam.

Vietnam’s workforce characteristic can be recapitulated as below:

● The literacy rate: With universal access to primary education and growing enrolments in

secondary education, Vietnam had a literacy rate of approximately 95.4% in 2020,

according to Statista.

● The number of employed with a technical qualification in the second quarter of 2020 was

12.3 million people, accounting for 23.8% of the total nationally employed population.

The rate of trained employed population in Q2 2020 increased by 0.4% compared to

previous quarter and increased by 1.3 percentage points compared to the same period last

year.

● “Elementary occupation” jobs attracted the most workers in the Vietnamese labor market,

accounting for 32.9% of the nationally employed population. This is explained by the

fact that elementary occupations have low recruitment requirements and employees can

quickly get used to the job, so that it is suitable for most Vietnamese workers. The

proportion of elementary occupations was still high in the context of professional and

technical training (from elementary vocation training and above) for workers is low

(about 24% for the labor force and 23.8% for employed population), according to GSO

labor report in Q2 2020.

● At the national level, there were about 1% of the employed population working as

“Leaders, managers and administrators”, equivalent to 526.1 thousand employed. This

proportion for male was 2.3 times higher than female (1.4% versus 0.6%, respectively),

in urban areas 3 times higher than in rural areas (1.9% versus 0.6%) and most of these

people had professional and technical training (98.3%).(GSO labor report in Q2 2020)

● The average monthly income of male workers in Q2 2020 was 1.4 times higher than that

of female workers (USD 266.8 and USD 188.1, respectively). The average income of

workers in urban areas was 1.5 times higher than that of workers in rural areas (USD 293

and USD 196.8). Average monthly income of wage workers reached USD 293, down

USD 37.5 compared to the previous quarter and USD 7.9 compared to the same period

last year.


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● The average monthly income of wage workers of the group “Leaders, managers and

administration” was the highest (USD 498.6/month).

● The average monthly income of wage workers with university or higher degrees reached

nearly USD 398, down USD 27.6 compared to the previous quarter; the average monthly

income of those without technical and professional qualification was USD 231.8.

The labor force is concentrated in different clusters across the country such as the Hanoi metro

area, Hai Phong metro area, Da Nang metro area, and Ho Chi Minh City area. Nghe An province

in the north is also highlighted to have been receiving some attention in recent years and is a

potential investment location for investors.

Below are some noticeable clusters contributed most labor force of Vietnam:

● Hanoi – Hai Phong metro area

The Hanoi – Hai Phong metro area had an abundant labor force with a young labor structure.

This area had a total labor force of 7.08 million which accounts for 13% of the national labor

force in 2020. The labor is most concentrated in industrial clusters such as Hanoi, Bac Ninh, Bac

Giang, and Hai Phong. Nevertheless, investors should be aware of labor shortages that can occur

in the manufacturing sector due to high turnover rates, especially in the peak season.

Due to high living standards and the good quality of labor, costs are high in the area. Labor costs

are particularly high in Hanoi, followed by Bac Giang, Hai Phong.

Tax incentives have been one of the key elements, making this area become an attractive

investment destination for foreign direct investment.

● Da Nang metro area

The Da Nang metro area’s workforce accounted for 56% of the city’s population. It had a total

workforce of 0.58 million which accounted for 1% of the national labor force in 2020. It is young

and dynamic workforce has benefited due to the world-class educational facilities in the area.

Investors will find it comparatively easier to source qualified labor in the area due to well-

established universities and vocational schools.


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The local government’s pro-business policies attract investors in fishing, infrastructure, services,

and tourism industries. Incentives are also provided in specific areas such as the Da Nang High-

Tech Park.

● Nghe An province

Nghe An is one of the most densely populated provinces with the abundant labor supply in

Vietnam. The province had a total labor force of 1.9 million which accounted for 4% of the

national labor force in 2020.

While most of the labor force is involved in agriculture, forestry, and fishery, the manufacturing

sector has risen significantly in recent years. However, recruiting skilled labor can be a challenge

especially for highly skilled engineers and senior managers. Most of the labor in such positions

is from migrant labor. Labor costs in the province, as well as other provinces in central Vietnam,

are some of the lowest among others due to a low standard of living compared to the North and

the South. Most towns and districts come under the difficult to very difficult socio-economic

conditions category.

● Ho Chi Minh City metro area

The Ho Chi Minh City metro area is one of the most abundant labor supplies in Vietnam with a

high share of migrant labor. The area is known as the commercial hub of the country. Labor is

concentrated in industrial clusters such as Ho Chi Minh City, Binh Duong, and Dong Nai. The

area had over 8.2 million in total labor force, accounting for around 15% of the national labor

force in 2020.

While talent is abundant, competition is high for talent among employers. In addition, labor costs

in the Ho Chi Minh City metro area are some of the highest in the country. Within this area,

labor costs are particularly high in Ho Chi Minh City, followed by Binh Duong, and Dong Nai.

4.6.1. Human Resource Policies:

a. Labor protection laws: The Labor Law, updated in 2013, set out the safeguards for

workers in Vietnam. It also covered employee entitlements and responsibilities. Working

hours: Under Vietnamese law, the normal working week can be up to 48 hours. In

practice, the normal working week comprises five eight-hour days, totaling 40 hours.


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b. Holidays: Workers employed for more than 12 months are entitled to 12 days of paid

leave. For every 5 years of service, this entitlement increases by one day. For workers

employed for less than 12 months, annual leave is accrued on a pro-rata basis. Regardless

of how long they have been in a role, employees are entitled to all 10 paid national

holidays.

c. Overtime: Overtime is limited to 200 hours per year, or up to 300 hours per year under

special circumstances. In addition, overtime should not exceed 30 hours in any month.

Total hours worked by an employee must not exceed 12 hours in one day. Employers

have the right to request overtime, though employees can refuse to do it.

Table 42: Overtime rates in Vietnam

Standard Day Time and a half (150% of normal pay)

Weekend Double time (200% of normal pay)

Holiday/ Paid leave Triple time (300% of normal pay)

Source: The Labor Code No. 08/2019/L-CTN

d. Employment Contract

Employees can be classified into the following two categories, based on the terms of their

employment contracts:

● Employees working under indefinite term employment contracts (open-ended contracts).

● Employees working under definite term (fixed-term) employment contracts, with no

minimum term and a maximum term of 36 months in duration.

When a fixed-term employment contract expires, but the employee continues working, the

parties can sign a new fixed-term employment contract. If they fail to do so within 30 days from

the date of the fixed-term employment contract's expiry, the employment contract will

automatically convert into an indefinite term employment contract by operation of law.


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A fixed-term employment contract can only run for two successive terms. On the expiry of the

second term, an indefinite term employment contract must then be entered into, unless the fixed-

term employment contract is terminated without renewal after expiry of the second term.

Similarly to the scenario above, if the employee continues working after the expiry of two fixed-

term employment contracts, the employment contract will automatically convert into an

indefinite term employment contract by operation of law. However, this rule does not apply to

certain categories of employees, such as:

● Employees past retirement age.

● Foreign national employees (whose employment terms are limited by the duration of their

work permits).

● Directors of state-owned enterprises.

● Officers of employee representative organizations.

Any agreement under an annex which has the purpose of amending the term of an employment

contract is not permitted.

Employment contracts must be made in writing, with the exception of employment contracts for

temporary work of a duration of less than one month (in which case, an oral employment contract

can be used). An employment contract must contain provisions on all of the following:

● The employer's name and address, as well as the full name and position of the person signing

the contract on the employer's behalf.

● The full name, date of birth, gender, place of residence, and identity card number or passport

number of the employee.

● Work to be performed, job location and term of the contract.

● Wages (including rate, method and time of payment, allowances and other additional

payments, and regime for wage increases and promotion).

● Working hours, rest breaks and holidays.

● Personal protective equipment for the employee.

● Social, health and unemployment insurance for the employee.

● Training and skills improvement for the employee.


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Local employment contracts must be made in the Vietnamese language or in dual languages (for

example, Vietnamese and English). An employment contract must be entered into directly with

the company that employs the employees, and not the group company.

e. Types of employee:

Temporary Workers

In Vietnam, there is no specific type of employment contract for temporary workers, as the

recently enacted version of the Labor Code has eliminated the previous contract category of

"seasonal/specific job" employees, which had previously applied to employees with contract

terms of under 12 months.

Now, temporary workers are simply workers under fixed-term employment contracts, which

have no minimum term, and a maximum term of 36 months. Therefore, all employees (even

those on very short-term contracts) are entitled to the same wages, the same rights and

obligations, and the same opportunities, treatment and working conditions as indefinite term

employees.

An employer and employee can sign two successive fixed-term employment contracts; if the

employment relationship is not terminated after expiry of the second term, the third employment

contract must be an indefinite term contract (except for foreign national employees, elderly

employees, and officers of employee representative organizations, who can renew their fixed-

term employment contracts more than twice). Any agreement under an annex which has the

purpose of amending the term of an employment contract is not permitted.

Because employees working under fixed-term contracts are entitled to the same rights and

benefits as those working under indefinite term contracts, any unilateral termination of

employment must be with cause, and subject to the procedures provided for by the law.

Agency Workers

The outsourcing of employees is only allowed for 20 types of jobs on a specific list promulgated

by the Vietnam Government. Agency workers have the right to be paid the same wage as the

wage of an employee of the subleasing employer with the same professional qualifications and


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doing the same job or a job of the same value, and must be provided with similar labor conditions

as the employees of the subleasing employer.

Part-time Workers

Part-time employees are entitled to receive the same wages and have the same rights and

obligations as full-time employees, and are entitled to the same opportunities, treatment and

working conditions as full-time employees.

In Vietnam, all employees must have their employment contracts with the company for whom

they are providing services, and not with any other member of the group.

4.6.2. Recruitment channels

Online advertisement: Advertising a job online is a great way to get a large number of applicants.

There are a number of useful websites in Vietnam for online advertising:

● VietnamWorks is the most popular online job search portal. It can be accessed in both

English and Vietnamese. Prices to advertise a job range from AUD 80 (VND 1.5 million)

to AUD 580 (VND 10.7 million), depending on the package chosen.

http://www.vietnamworks.com/

● CareerLink is another popular job search site in Vietnam. While similar to

VietnamWorks, it is aimed more at Vietnamese professionals. Some of the websites are

in English. https://www.careerlink.vn/en

● Tim Viec Nhanh is a recruitment portal in Vietnamese. It advertises lower to middle-

level roles. http://www.timviecnhanh.com/

● Alphabet is a professional networking site like LinkedIn, tailored for Vietnam. It is a

suitable platform for finding professionals and building your network.

http://www.anphabe.com/

Executive search: For a tailored search for more senior roles, using an executive search firm may

be more appropriate. International firms such as ADECCO, Harvey Nash, Talentnet, Robert

Walters and Odgers Berndtson have offices in Vietnam. In addition, there are numerous smaller


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local firms such as Anh Duong Talent. Job fairs, employee referrals and internships can also be

useful options for finding staff in Vietnam.


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PART 5. DOING BUSINESS IN VIETNAM


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PART 5. DOING BUSINESS IN VIETNAM The culture of Vietnam is one of the oldest in Southeast Asia. While national identity can be

complex given Vietnam’s history, locals are proud of their language and its complexities, as well

as the distinctiveness of their society and culture.

Since the introduction of the ‘Renovation - Doi Moi’ policy – in 1986, Vietnam has experienced

significant changes, including the growth of the economy and a rise in people's standard of living.

These factors have in turn inspired a flurry of foreign businesses looking to start operations or

expand in the country.

For those who are eyeing Vietnam as a promised land for expanding the business, especially the

newcomer or those intending to operate a business in Vietnam for the first time, it is essential to

learn about the country’s culture and traditions. Vietnam’s traditions and culture have a long-

standing background in the region of Southeast Asia. Understanding Vietnam’s business culture

will definitely make it easier for Brazilian Exporters to do business in this country. What makes

this value is the fact that Brazilian exporters can connect well with Vietnamese partners, avoid

cultural barriers, and create a long-term business relationship as expected.

In what follows, we delve into key highlights of Vietnamese business culture, including some

common customs in Vietnamese business, business etiquette in Vietnam, communications in

business, etc.

5.1. Common business customs in Vietnam

It is always good to know about popular business customs in Vietnam to create good impressions

for your business partners in the first meetings.

Greetings in Vietnam

Vietnamese people tend to respect personal space. Instead of kissing or hugging while greeting,

they usually shake hands. This is a very common form of greeting in Vietnam, especially in the

Vietnamese business environment. The Vietnamese businessmen usually greet each other by

holding each other’s hands, shaking and bowing slightly when greetings represent appreciation

or respect to the partners.


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As stated in the first part, Vietnamese is the national language of Vietnam. Though English is

gaining in popularity and most Vietnamese businessmen can use this language to communicate

with foreign partners well, starting with “Xin Chao” (pronounced as ‘seen chow’), meaning

“Hello” in Vietnamese in the first meeting will definitely create a good impression.

Seniority and Hierarchy

The hierarchy culture is a striking feature in Vietnamese culture in general and in Vietnam

business culture in particular. Vietnamese are highly appreciated for their respect for senior

members in terms of ranking (job position, education, etc.), experience, and age.

However, Vietnam is not as hierarchical as other Asian cultures like Japan or Korea. Unlike

those 2 countries, Vietnamese language doesn’t have strict honorific and formal speech rules.

But Vietnamese people still value showing respect to older people or the higher ranks in the

workplace. And this can happen to all people, even a taxi driver, a security guard, or a vendor

on the street. Vietnamese should treat anyone who’s older than them with respect. However, it

isn’t true that younger people are not allowed to speak up due to this seniority culture. Younger

ones are welcomed to express their opinions but in a humble manner. By doing so they gain face

for themselves and give face to others, a win-win for both.

In a business environment, the highest-ranked person will also be greeted first. Decisions and

ideas are also generated at the top and the eldest person or highest-ranked has the most influence

over the final decision.

Titles

Vietnamese names are written in the order: "Family name + Given name". Typically, family

name is not widely used in both informal and formal situations and Vietnamese people expect to

be called by their given name.

Brazilian exporters may find it interesting to know that 6 out of 10 people in one group can have

the same Family name, which is “Nguyễn” or “Trần” (these are the two most popular surnames

in Vietnam). Therefore, Vietnamese people tend to expect others to call their Given name. In

formal cases, it is advised to address them with “Mr.”, “Mrs.”, and “Ms.” that precede their


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names.

Body language

Body language is a type of art. In Vietnam, the use of body language can indicate different

meanings from what it is like in a foreigner’s home country. Taking note of some body language

behaviors can help Brazilian exporters better prepare when doing business in this country.

When talking with Vietnamese people, especially the partner, it is noted that not to place one or

both hands in the pocket, which is often considered a sign of arrogance and absence of respect

to the opposite.

Another note, touching people's heads is a taboo sign in Vietnam. The top of the head is known

as the most important part to the Vietnamese, so people feel offended when someone pats or

touches their head. Besides, touching a person of the opposite sex is considered impolite, a

handshake is acceptable.

The concept of ‘face’

As with many other Asian countries, the concept of face is extremely important in Vietnam,

which can be roughly described as reflecting a person’s reputation, dignity, and prestige.

With a high-context culture, Vietnamese people often value harmony and the well-being of

others over the intended message. Pointing out others’ shortcomings without considering their

feelings isn’t the Vietnamese favored option.

While for Western people, being frank and direct is considered a good trait, direct disagreement

can be seen as making a person “lose face” in Vietnam.

Brazilian exporters should be aware of unintentionally causing a loss of face due to your words

or actions toward Vietnamese partners. Rather than openly correcting one’s mistakes, a

suggestion for improvements in a mild and supportive manner is preferred.

The different business cultures between regions

In the North of Vietnam, the businesspeople commonly tend to be more formal in their way of


237 | Page

working, given the fact that the North is the center of the government’s agencies and

administrative apparatus, therefore, the standard and accurate rules of behavior also affect their

business style. The Northern partners are regularly in their formal outfits for meetings. Actually,

suits and ties are always their first choice. The Hierarchy factor is especially high in the North.

The meeting can only begin when having the appearance of the head of the business. In addition,

while the boss speaks, his employees mostly listen to his speech during the meeting. There are

also many ceremonies in the meeting, starting from the greeting of the head of the business to

his/her opening speech, etc. The agencies in the North require more administrative procedures

and the processing speed also tends to take more time. For the most part, the companies in the

North are companies related to Government, Local Groups with many levels’ hierarchy, so it is

not easy to meet the Top levels of businesses in the North.

On the other hand, in the South of Vietnam, major companies are Multinational Corporation

(MNC) and Foreign-Invested Enterprises. The hierarchy factor of the Southern Businesses is

also simpler. All heads of departments are entitled to decide their parts in charge. This means

that depending on the needs of work, Brazilian exporters can find suitable partners in charge to

talk about the work they need rather than involving the ideas of the highest boss in their business

discussion. However, the bosses in the South are very open to meeting and communicating with

their partners. The working, processing speed of agencies in the South is also faster than in the

North’s, with less complicated procedures.

The people of Central Vietnam have the character trait of a genuine person. In fact, they are very

straightforward in their way of working. They do not have too many formal styles like the

Northerners, but also not too much open-minded in their way of working as the Southerners. The

partners from the Central region are very sincere about what they do. They are precisians,

unwilling to take risks, and very detail-oriented partners. The Central region has been considered

as a cross between the North and the South. The businesses in the North Central region will have

business culture trends closer to the Northerners. Conversely, the businesses in the South-Central

region will have cultural influences more similar to the Southerners.


238 | Page

5.2. A Typical Vietnamese Business Meeting

There are several protocols when it comes down to the culture for business meetings in Vietnam,

and it is advised to adhere to them if possible.

General Arrangement

Whenever it comes to a business meeting in Vietnam, there is always an announcement of the

meeting dates and locations beforehand via phone calls, emails, or even verbal conversation in

case of emergency. Usually, the exact date of the business meeting in Vietnam is officially

announced within 7 days prior to the meeting date. Participants should confirm their attendance

at least 1-2 days ahead for better preparation. Business meetings should avoid major public

holidays, such as Labor Day (May 1st), Vietnam Independence Day (Sep 2nd) or Tet, which is

the Vietnamese New Year celebration, etc.

Table 43: Holiday Calendar in Vietnam

HOLIDAY DATES NUMBER OF DAYS

New Year Holiday January 1st 01

Lunar New Year Flexible, usually take place

between January and February

07

Hung Kings Festival March 10 (Lunar Calendar) 01

Reunification Day April 30th 01

International Labor Day May 1st 01

Independence Day September 2nd 01


Regarding the exact holidays of the Lunar New Year, the Vietnamese Government usually


239 | Page

announces the specific schedule of this holiday at the end of the year (mainly in December).

Therefore Brazilian exporters can know the precise date and plan accordingly.

For first-time meetings, it is best for Brazilian businesses to meet at the potential partner’s office.

This avoids the possibility of a last-minute cancellation because of any travel difficulties of the

business partner.

It is best to have an agenda before the meeting so the business partners can acquaint themselves

with what will be discussed. It is also helpful to have main documents translated into Vietnamese

as not all the key stakeholders from the business partners are able to speak and understand

English well. When possible, business meetings should be done in the presence of an interpreter.

If offered tea at the reception, accept it, as this is a sign of hospitality. In the North, hot tea is

typically served, while in the South, meetings take place with iced tea or soft drinks.

Business attire

It appears to be common that the dress code in the business culture of Vietnam is conservative,

meaning that business partners should dress formally but need to be modest. For men, they

typically attend the meetings with dark-colored suits and ties. On the other hand, formal dresses,

or blouses with high necklines are customary for women in business.

On the other side, business attire will also depend on the location of the meeting. For example,

Hanoi is known for its white-collar environment- where businessmen usually dress up formally,

while Ho Chi Minh City is more casual.

Business Cards Exchange

Business cards are often exchanged at the opening of business meetings. How business cards are

designed is actually crucial since they could decide the level of impression and information to

the business partners and all those participating in the meeting.

As formality is a key in culture patterns in Vietnam, business cards should be given and received

with both hands. Time should be taken to read the name on the card – hastily stuffing a business

card or barely giving it a glance is deemed offensive.


240 | Page

“Icebreaking”

A brief informal chat usually takes place before the actual meeting starts. The subject’s classics

are the weather, past travels, or the Vietnamese landscape.

The first few meetings will involve getting to know each other, as compared to the West, where

first meetings tend to remain on a business level. Unlike the western culture where privacy is

respected and personal information should not be revealed, in Vietnam the more people share

information about their personal life such as family, hobbies, political views, etc., the closer they

are in their business relationship. Social connections are important, and Vietnamese may make

most of their business decisions based on how they see their partner as a person outside of the

business.

Many Vietnamese will ask questions that may seem personal to a foreigner. Discussing one’s

family and personal life is normal and is seen as a sign of friendliness and interest.

It is common to give gifts at the end of a business meeting. These can be small and do not need

to be expensive. A possible item could be a pen or stationery with a company logo or an item

typical of the country of origin.

Company Introduction

After all the small talk and icebreakers, Brazilian businesses need to be ready to present and

introduce the company. This step is very critical before gaining trust from each other and starting

the cooperation. This introduction is in many cases very important because it helps to convey

the value of the Brazilian company to the Vietnamese partner. Therefore, the information in the

brief introduction needs to be carefully selected and condensed. The main ideas often included:

(1) company information: development background, vision and mission; (2) product

information: describe the product and what special features does the product have compared to

the competitor, and (3) If possible, the list of major partners the company has cooperated with.

It is best for the presentation slides to be written in English. If Brazilian exporters are in a room

with few people that speak English, it is much better to bring an interpreter or a person who is

bilingual to the meeting.


241 | Page

Wrap up meeting

Knowing some steps to take at the end of each meeting will ensure the gathering achieved what

it set out to, and that future get-togethers will also prove successful. Here are some notes for

Brazilian exporters when ending the meeting with Vietnamese partners.

Confirm key decisions and next steps

The very important thing for both Vietnamese partners and Brazilian businesses is to leave the

meeting with the same understanding of what was agreed, a quick wrap-up of what was decided

in the meeting is needed. A wrap-up may include some key points like the next steps, the person

in charge of following through, milestones of time.

Send out Meeting of Minutes

Then, as soon as possible after the meeting, send out a Meeting of minutes (MoM) in which

include all the agreed-upon talking points to everyone in an email. The goal of a MoM is to

summarize key discussion points by document and archive them so that all the partners (have

joined the meeting or not) can understand the progress of the project and have a guide to follow.

Brazilian exporters should send out a MoM within 1 day after the meeting took place.

Business Entertainment after meeting

In Vietnam, after an important meeting, the partners often have lunch or dinner together to

strengthen the relationship. Usually, Vietnamese partners will invite the guest first, but Brazilian

exporters can also take the initiative in inviting. This will make a good impression and help a lot

in building the relationship with the Vietnamese partner.

When dining outside, Vietnamese people often wait to be seated. In most cases, the oldest in the

group will be seated first. Younger ones usually use both hands to pass items and never pass

anything over someone’s head.

Drinking beer, wine, or other liquor during the meal is common in Vietnam. A toast exchange

can make the atmosphere cozier, and parties will become closer, which is good for business

connections.


242 | Page

While exchanging toasts with the host, it is more appropriate to let them give the toast first.

When it is the Brazilian business’s turn, you are expected to stand, face the most senior or oldest

person in the group, and raise your glass with both hands. During the meal, people are free to

make individual toasts. Remember, a short and sweet speech will be enough and be sure to shake

hands with all Vietnamese participants and conclude by thanking the host profusely.

In addition, the Vietnamese eating manner is attached to rice bowls and chopsticks. Making noise

by tapping the chopsticks on the bowl is considered to be rude and impolite.

5.3. Trading techniques

After understanding some of Vietnam’s business customs, here, this section will introduce

further key aspects of Vietnamese business cultures that will help Brazilian exporters to build

strong business connections and close deals in Vietnam successfully.

Building Relationship before Business Negotiations

Any foreigners who have lived and worked in Vietnam for a long time will agree that investing

in relationships, building trust and mutual respect are indispensable when doing business in this

country.

For Vietnamese, comfort and respect usually come before business communication. As a result,

negotiating in Vietnam can seem a bit slow due to the time it takes to build a relationship with

potential clients. Besides, Brazilian exporters need to keep in mind that the final decision will go

through a lot of consultation in Vietnam. Therefore, remember to be patient.

In addition, relationships are based on familiarity, respect, and personal trust. Business

relationships in this country exist between individuals or groups of people, not between

companies. Even when a Brazilian exporter has gained the local business partners’ friendship

and trust, the partner will not necessarily trust others from the Brazilian company. This makes it

highly beneficial to keep the company's key contacts unchanged. Changing a key contact person

could require the relationship-building process to start over.

Another note is that bargaining is part of the business culture. Hence Brazilian businesses should

expect lots of negotiations and offer discounts to Vietnamese partners.


243 | Page

Negotiation - Attitudes and Styles

In Vietnam, the primary approach to negotiating is to employ distributive and contingency

bargaining. While the buyer is in a superior position, both sides in a business deal are responsible

for reaching an agreement. They expect long-term commitments from their business partners and

will focus mainly on long-term benefits.

Although the primary negotiation style is competitive, the Vietnamese nevertheless value long-

term relationships. Keeping relationships intact throughout the Brazilian business’s negotiation

is vital. It is best to remain calm, friendly, patient, and persistent. As stated above, the concept

of ‘saving face’ is so important in Vietnamese culture, communication is generally quite indirect.

When responding to a direct question, people may answer ‘yes’ only to signal that they heard

what you said, not that they agree with it. Open disagreement should be avoided and any kind of

direct confrontation is discouraged. People rarely respond to a question or request with a direct

‘no.’ Instead, Brazilian businesses may receive seemingly ambiguous answers, such as ‘I am not

sure,’ ‘we will think about it,’ or ‘this will require further investigation.’ Each of these could

mean ‘no.’ It is beneficial to use a similarly indirect approach, as Vietnamese people could

perceive you as rude and pushy if you are too direct.

Negotiation - Sharing of Information

Vietnamese negotiators are willing to spend considerable time gathering information and

discussing various details before the bargaining stage of negotiation can begin. Information is

rarely shared freely since the Vietnamese believe that privileged information creates bargaining

advantages.

Keep in mind that humility is a virtue in Vietnamese business culture. If Brazilian businesses

make exaggerated claims in an effort to impress the other side or to obtain concessions, they will

likely investigate your claims before responding. This could prove very embarrassing.

Negotiation - Decision Making

Organizations are usually very hierarchical here. However, decision-making is usually a

consensus-oriented group process in Vietnam. Decisions are often made through a process

involving many stakeholders who establish consensus through a series of deliberations and


244 | Page

internal politics that outsiders have minimal insight into.

This process can take a long time and requires patience. Influencing the decision-making requires

understanding the Vietnamese side’s intentions and building strong relationships with as many

influential stakeholders as you possibly can.

The role of the senior leaders is to orchestrate the process, not to make decisions themselves.

Nevertheless, their input carries a lot of weight, and they may have the final say, so do everything

you can to win their consent and support. Besides, as mentioned in the previous section, heads

of departments are entitled to decide their parts in charge, especially in the South, and they will

normally join the first meeting with the sellers. Being well-prepared for prices and samples for

the first meeting, even when the buyers are not required to do so, will bring Brazilian sellers

many advantages to convert the first meeting’s discussion into a contract.

When making decisions, Vietnamese businesspeople may not rely much on rules or laws. They

usually consider the specific situation rather than applying universal principles. Personal feelings

and experiences weigh more strongly than empirical evidence, and other objective facts do.

Exceptions exist where party rules or government objectives force them to be more dogmatic.

Agreements and Contracts

Capturing and exchanging written understandings after meetings and at key negotiation stages

is useful since oral statements are not always dependable. While these serve as tools to improve

communication and strengthen commitments, they should not be taken for final agreements. Any

part of an agreement may still change significantly before both parties sign the final contract.

Written contracts are usually kept high-level, capturing only the primary aspects, terms, and

conditions of the agreement. Writing up and signing the contract is a formality. The Vietnamese

believe that the primary strength of an agreement lies in the partners’ commitment rather than in

its written documentation.

Regarding payment, Vietnam partners often prefer installment payment or the postpaid payment

method. In some cases, Vietnam partners may delay payment of goods, so the provision of a late

payment penalty in the contract is a note for Brazilian exporters.


245 | Page

APPENDIX 1:

CONSULTING AND MARKET RESEARCH COMPANIES IN VIETNAM

Name Address Tel Email Website

The Blue Ocean

JSC

Strategy

Consulting &

Market Research

19th Floor,

Indochina Building

Office Area, 04

Nguyen Dinh Chieu

street, Da Kao Ward,

District 1, HCMC

(+84)

933900902

info.tbo@thebl

ueoceanvn.com

https://theblueoc

eanvn.com/

BambuUP JSC

Investment and

M&A Services

5th Floor - Tower 2,

Times Tower

Building HACC1,

No. 35 Le Van

Luong, Hanoi

02435381917 contact@bamb

uup.com

https://www.bam

buup.com/

Nielsen

Market Research

Center Point

Building 4th Floor,

106 Nguyen Van

Troi, Phu Nhuan

District, HCMC

(028) 3997

8088

vietnamInfo@

nielsen.com

www.nielsen.co

m

CI Research

Market Research

Loc Le Building, 6th

& 7th Floor,

Entrance A 454

Nguyen Thi Minh

Khai, Ward 5,

District 3, HCMC

(028) 66 83

5677 & (+84)

904 333 670

info@ciresearc

h.com.vn

ciresearch.com.v

n

Q&Me Vietnam 6F 506 Nguyen Dinh (028) 39100 info@qandme. www.qandme.ne


246 | Page

Market Research Chieu, Ward 4,

District 3, Ho Chi

Minh City

043 net t

Cimigo

Market Research

217 Dien Bien Phu,

Binh Thanh District,

HCMC

(028) 3822

7727

vietnam@cimi

go.com -

[email protected]

m

www.cimigo.co

m

YCP Solidiance

Vietnam

Strategy

Consulting

Suite 704, Satra

Dong Khoi Building,

58 Dong Khoi street,

District 1, Ho Chi

Minh City

(+84) 28 3521

8639

info@solidianc

e.com

https://www.soli

diance.com/


247 | Page

APPENDIX 2:

VIETNAM LEADING TRADE ASSOCIATIONS


Association of

Vietnam Retailers

(AVR)

R. 309-310, E1, the

building of Trung Tu

Diplomatic Union,

No.6 Dang Van Ngu,

Dong Da District,

Hanoi

(+84-4)

62753379/

62753258

hanoiavr@

gmail.com

www.hiephoi

banle.com

Vietnam Farm and

Agricultural

Enterprises

Association (AFAEA)

84 Nguyen Du, Ben

Nghe Ward, District

1, Ho Chi Minh City

(+84)

917879944/

(+84-243)

8244203

vfaeavn@

gmail.com

www.hiephoi

trangtrai.com

Vietnam Association

of Rural Industrial

Small and Medium

Enterprises

(VARISME)

20 (8H) Alley 1, Tran

Quoc Hoan Street,

Cau Giay District,

Hanoi

(+84-24)

62512779

hoangsam.

dnth@gma

il.com

www.varism

e.org.vn

Vietnam Trade

Promotion Center for

Agriculture

(AgriTrade)

26B Pham Van Dong,

Mai Dich Ward, Cau

Giay District, Ha Noi

(+84-24)

37555458

hoangson.

xttm@mar

d.gov.vn

www.agritrad

e.com.vn

Vietnam E-

Commerce

R. 702, HKC

Building, 285 Doi

(+84-24) 6259

8271 / (+84-

24) 6278 4479

office@ve

com.vn

www.vecom.

vn


248 | Page

Association

(VECOM)

Can, Lieu Giai, Ba

Dinh, Ha Noi

Vietnam Association

of Financial Investors

(VAFI)

6th Floor,

Multifunctions

Building, 169 Nguyen

Ngoc Vu St., Trung

Hoa Ward, Cau Giay

District, Hanoi

(+84-24)

39728133

office@vaf

i.org.vn

www.vafi.or

g.vn

Vietnam Association

of Small and Medium

Enterprises

(VINASME)

10th Floor, Building D,

Sports Hotel, 15 Le

Van Thiem Street,

Thanh Xuan District,

Hanoi

(+84-24) 355

64499

vinasme.ba

ntochuc@

gmail.com

www.vinasm

e.vn

Vietnam Association

of Seafood Exporters

and Producers

(VASEP)

218 Nguyen Quy

Canh, An Phu - An

Khanh Urban Area,

District 2,

Ho Chi Minh City

(+84-28)

628.10430

vasephcmc

ity@vasep.

com.vn

www.vasep.c

om.vn

Vietnam Coffee –

Cocoa Association

(VICOFA)

No. 5 Ong Ich Khiem,

Ba Dinh District, Ha

Noi

(+84-24) 3733

6520 - (+84-

24) 3845 2818

info.vicofa

@gmail.co

m

www.vicofa.

org.vn

Vietnam Tobacco

Association (VITA)

152 Tran Phu, District

5, Ho Chi Minh City

(+84-28)

8354546

[email protected]

pt.vn

-


249 | Page

Vietnam Cotton &

Spinning Association

(VCOSA)

2A Floor, No. 8

Nguyen Hue, Ben

Nghe Ward, District 1,

Ho Chi Minh City

(+84-28) 3911

0992/94/95

info@vcos

a.org.vn;

info.vcosa

@gmail.co

m

Facebook:

fb.com/hieph

oibongsoivn

Website:

www.vcosa.o

rg.vn


250 | Page

APPENDIX 3:

VIETNAM CONFEDERATIONS AND FEDERATIONS (INDUSTRY AND TRADE)


Vietnam Export

Support Alliance (

VESA)

R. 305, Detech

Building, No. 8 Ton

That Thuyet, My

Dinh, Ha Noi

(+84-24) 6259

8271 / (+84-

24) 6278 4479

office@veco

m.vn

www.vesa.net

.vn

Vietnam

Agricultural Policy

Forum (VAPF)

under Vietnam

Institute for

Economic and

Policy Research

(VEPR)

R. 707, E4 Building,

144 Xuan Thuy, Cau

Giay, Ha Noi

(+84-24) 3754

7506 (704)

[email protected]

rg.vn

http://vapf.org

Extractive

Industries

Transparency

Initiative (EITI)

No. 24 H2, Yen Hoa

New Urban Area, Cau

Giay, Ha Noi

(+84-24) 3556

4001

contact@nat

ure.org.vn

-

Vietnam

Cooperative

Alliance (VCA)

Duong Dinh Nghe,

Yen Hoa, Cau Giay,

Ha Noi

(+84-24) 804

9711

- http://vca.org.

vn/en/

Vietnam Business

Forum (VBF)

3B Floor, Pullman

Tower, 40 Cat Linh,

Hanoi, Vietnam

(+84-24) 3715

2223/6

[email protected]

g.vn

https://vbf.org

.vn/


251 | Page

Obtaining Documents


General

Department of

Vietnam Customs

E3, Duong Dinh Nghe

Street, Yen Hoa

Ward, Cau Giay

District, Ha Noi

(+84-24)

39440833

(ext: 8613)

webmaster

@customs.g

ov.vn

www.customs

.gov.vn


252 | Page

APPENDIX 4:

TRANSPORTATION COMPANIES WITH SERVICES TO BRAZIL

Maritime


Fado Express

Corporation

85 Thang Long, Ward

4, Tan Binh District,

Ho Chi Minh City

(+84-28) 909

931 247

xuatkhauhan

[email protected]

m

www.fadoexp

ress.com

Golden Time Posts

Joint Stock

Company

778/7 Nguyen Kiem,

Ward 4, Phu Nhuan

District, Ho Chi Minh

City

(+84-28)

19006097

info@goldti

mes.vn

www.goldtim

es.vn/

Vietship Company 155 Hai Ba Trung,

Ward 6, Distric 3, Ho

Chi Minh City

(+84-28) 6902

9161

lienhe@viet

ship.net

www.vietship.

net

Thami Shipping &

Airfreight

Corporation (TMC)

25-25A Street 81, Tan

Quy Ward, District 7,

Ho Chi Minh City

(+84-28)

37750888

info@thami

co.com

www.thamico

.com

AlphaTrans 5-7 Hoang Viet, Ward

4, Tan Binh District,

Ho Chi Minh City

(+84-28)

38113811

[email protected]

www.vantaian

pha.vn


253 | Page

Air

Airfare to Brazil

Airlines Destination Ticket price from Hanoi

(HAN)

Ticket price from Ho Chi

Minh City (SGN)

Turkish

Airlines

Sao Paulo (GRU) from USD 1,500 from USD 2,400

Brasilia (BSB) from USD 2,000 from USD 2,400

Rio de Janeiro

(GIG)

from USD 1,800 from USD 3,000

Emirates

Airlines

Sao Paulo (GRU) from USD2,200 from USD 2,000

Brasilia (BSB) from USD2,200 from USD 2,000

Rio de Janeiro

(GIG)

from USD2,500 from USD 2,200

Qatar Airway Sao Paulo (GRU) from USD1,600 from USD 1,300

Brasilia (BSB) from USD1,700 from USD 2,100

Rio de Janeiro

(GIG)

from USD2,500 from USD 1,300

Vietnam

Airlines

Sao Paulo (GRU) from USD 1,900 from USD 2,100



254 | Page

Rio de Janeiro

(GIG)


Air France Sao Paulo (GRU) from USD 1,900 from USD 1,900


Rio de Janeiro

(GIG)


Most of these flights use transshipment services. Depending on the flight time, there will be 1

or 2 transit points.

Hanoi-Brasilia route: the connecting route between the two capitals is carried out by major

airlines such as Qatar Airways; Vietnam Airlines; Emirates; Turkish Airlines; etc. On average

there are about 24 flights per day to Brasilia. It is quite far from Hanoi – Brasilia and will take

from 29 up to 50 hours for this journey, depending on the airlines, with at least 2 to 3 transit

points.

Flights to Sao Paulo and Rio De Janeiro, regardless of the departure destinations, are more

frequent and economic. However, there is still no direct flight, the minimum transit point of this

leg is 1.

Ho Chi Minh City - Sao Paulo route: there are up to 20 airlines operating this route: Qatar

Airways; Emirates; Turkish Airlines; Vietnam Airlines, Cathay Pacific; Korean Air etc. The

flight of Ho Chi Minh City - Sao Paulo will transit from 1 to 2 points such as Doha or Dubai,

Hong Kong, etc. Every day there are more than 90 flights on this leg.


255 | Page

APPENDIX 5:

Updated Special Consumption Tax rate according to 70/2014/QH13, 106/2016/QH13, and

decree 108/2015/ND-CP by the government

No. Goods, Services Tax rate of

SCT (%)

I Goods

1 Cigars/cigarettes 75

2 Wine

a) Wine more than 20% alcohol 65

b) Wine less than 20% alcohol 35

3 Beer 65

4 Automobiles with less than 24 seats

a) Passenger cars with 9 seats or less

- cylinder capacity under 1500cm3 35

- cylinder capacity from 1500cm3 to 2000cm3 40




256 | Page

- cylinder capacity from 3.000 cm3 to 4.000 cm3 90

- cylinder capacity from 4.000 cm3 to 5.000 cm3 110

- cylinder capacity from 5.000 cm3 đến 6.000 cm3 130

- cylinder capacity above 6.000 cm3 150

b) Cars carrying passengers from 10 to under 16 seats 15

c) Cars carrying passengers from 16 to under 24 seats 10

d) Cars carry both passenger and goods

- cylinder capacity under 2500cm3 15


- cylinder capacity above 3.000 cm3 25

đ) Vehicles run by gasoline combined with electric energy and

bio-energy, in which the proportion of gasoline used does not

exceed 70% of the used energy.

70% of the tax

rate applicable to

vehicles of the

same type

e) Vehicles run by biology energy

50% of the tax

rate applicable to

vehicles of the

same type


257 | Page

g) Vehicles run by electric energy

- with 9 seats or less 15

- from 10 to under 16 seats 10

- from 16 to under 24 seats 5

- carry both passengers and goods 10

h) Motorhome regardless of cylinder capacity 75

5 Two-wheeled motorcycles, three-wheeled motorcycles with a

cylinder capacity of more than 125 cm3 20

6 Airplanes 30

7 Yachts 30

8 Gasoline

a) gasoline 10

b) gasoline E5 8

c) gasoline E10 7

9 Air conditioners of 90,000 BTU or less 10

10 Cards 40

11 Joss paper 70

II Services


258 | Page

1 Discotheques 40

2 Massage parlors, Karaoke clubs 30

3 Casinos, jackpots, slots 35

4 Betting entertainment 30

5 Golf course business 20

6 Lottery business 15


259 | Page

APPENDIX 6:

List of some retailers in Vietnam’s market

Chain Sub-chain Origin Type Note

BiBoMart Vietnam Baby&Mom Specialty

Store

FPT Retail FPT Shop Vietnam Electronics Specialty

Store

BRG Hapro Mart Vietnam Supermarket

Hapro Food Vietnam Minimart

Home

Center Vietnam

Home appliance,

Electronics Specialty

Store

Intimex Vietnam Supermarket

Kid’s Plaza Vietnam Baby&Mom Specialty

Store

Media Mart Vietnam

Home appliance,


Store

Nguyen Kim Vietnam

Home appliance,


Store

In 2015, Central

Group purchased

49% stake of

Nguyen Kim

Pico Vietnam

Home appliance,


Store

Saigon

Co.Op

Co.Op Smile Vietnam Grocery Store

Co.Op Food Vietnam Minimart

Co.Op Mart Vietnam Supermarket

Co.OpXtra Vietnam Hypermarket

Satra SatraMart Vietnam Supermarket

SatraFood Vietnam Minimart


260 | Page

Thegioidido

ng (Mobile

World)

Thegioididon

g.com Store Vietnam


Store

In early 2018,

Thegioididong

completed the

acquisition of

electronics retailer

Tran Anh Digital

Bach Hoa

Xanh Vietnam Minimart

Dien May

Xanh Vietnam

Home Appliance Specialty

Store

VinCommer

ce

VinMart Vietnam Supermarket In 2017, Vinroup’s

retail arm, Vincom

Retail JSC. raised

US$ 740 million in

its IPO10.

In 2018, Vingroup

acquired

supermarket chain

FiviMart and

electronics store

chain Vien Thong A.

VinMart+ Vietnam Minimart

VinPro Vietnam Electronics Specialty

Store

VinCom Vietnam

Shopping Mall (4 Vincom

Center, 3 Vincom Mega

Mall, 30 Vincom Plaza

and 9 Vincom+)

7- Eleven Japan Convenience Store

Vietnam’s first 7-

Eleven store was

opened in Ho Chi

Minh City in 2017

AEON

AEON Mall Japan Hypermarket

In 2019, AEON Mall

will open the fifth

mall in Ha Dong

district, Ha Noi

Aeonmall Hai Phong

will go into

operation in 2020

Mini Stop Japan Minimart

AEON

Citimart Vietnam-Japan Supermarket

Since AEON

purchased 49% stake

of Citimart in 2014,


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Citimart has been

renamed

AEONCitimart

Central

Retail

Top Market Supermarket

GO! Hypermarket

B’s Mart Thailand Convenience Store

Circle K US Convenience Store

E-Mart Korea Hypermarket

Fuji Mart Japan Supermarket

FujiMart Vietnam

stores are operated

by Fujimart Vietnam

Retail - a joint

venture between

Sumitomo and local

real estate

conglomerate BrRG

Group

GS25 South Korea Convenience Store

GS25 Vietnam is a

joint venture

between Korea’s GS

Retail and Vietnam’s

Son Kim Group

Guardian

(owned by

Dairy Farm)

Singapore Health & Beauty Specialty

Store

Lotte Lotte Mart Korea Supermarket

MM Mega

Market Thailand Hypermarket

Watson Hong Kong Health & Beauty Specialty

Store