Netherlands-Vietnam Chamber of Commerce (NVCC)

FDI into Vietnam hits four-year high

Saigon Times, 1 June 2019 – Foreign direct investment (FDI) approvals in Vietnam last month reached US$2. 15 billion, bring in the total FDI pledges in the first five months to US$16.75 billion, surging 69.1% year-on-year and the highest Jan.-May FDI over the past four year

According to the Foreign Investment Agency under the Ministry o Planning and Investment, 1,363 FDI projects with total registered capital of US$6.46 billion were licensed in the period, up 38.7% year-on-year. In addition, 505 operational projects were allowed to increase capital by a combined US$2.63 billion, up 5.5%. Meanwhile, foreign capita! inflow from 3,160 mergers and acquisitions deals amounted to US$7.65 billion, 2.8 times higher than the figure a year ago.

FDI capital disbursement in the five-month period was reported a US$7.3 billion, up 7.8% from a year earlier.

New FDI capital was mainly poured into the processing and manufacturing sector, at over US$10.5 billion the real estate sector at US$1.1 billion, and wholesale and retail US$74 million.

Among the 88 countries and territories making fresh investment in Vietnam, China, including Hong Kong, took first place, with US$7.1 billion. South Korea carne second with US$2.62 billion, and Singapore third with US$2.09 billion.

Hanoi attracted the largest FDI capital, at some US$4.8 billion, followed by HCMC, at US$2.7 billion, and the Southern province of Binh Duong US$1.25 billion.

Joost Vrancken Peeters: Vietnam is the One in China plus One.

Nowadays I receive many questions from companies about the so-called “China plus One” strategy. In this article I will explain the concept of the China plus One strategy, the reasons why more companies are looking into it and the reasons why Vietnam is such a popular destination. In a next article I tell more about how to implement such a strategy.

Over the past three decades China has become a major production center and also a very important consumer market. Today the Chinese economy is still growing and offers many opportunities for companies to expand and grow. However,  more companies nowadays are looking more closely to their China operations. The obvious reasons for US companies of course being the growing tension between the US and China and the resulting trade war and tariff increases. But I US companies are not the only ones approaching me, , more and more European companies too want to discuss the China plus One strategy.

The China plus One strategy can best be described as the strategy whereby companies with an existing investment in China are also setting up a company or production facility in a ‘nearby’ location. The most popular nearby locations are Vietnam, Cambodia, Thailand and Indonesia. But why do international companies want to spread their investment across multiple countries, next to China. As stated above China still offers a lot of advantages as manufacturing base and of course as soon to be biggest consumer market it the world.

When asked about their motives, most companies mention a concern about the rising costs in China, predominantly labor costs. Many investments in China were driven by getting access to low labor costs and there is no doubt that China is no longer the lowest cost source. The minimum wages in most countries around it are lower. However, lower costs are not the only reason. Many companies also mention the risk of being active in a transitional economy.  China faces political, economic and social changes, which may bring pressures. Another motive is the changing business climate in China. Although China still welcomes foreign investment, it has also become more selective. And last but not least, some companies do not wish to be depended on one market and one production location. They want to take advantage of the growing middle class in most countries that are a member of the Association of Southeast Asian Countries (ASEAN).

What explains the popularity of Vietnam in the China plus One strategy? Most companies mention five reasons.

The first being the Vietnamese labour force. Not only because the wages are lower. Due to China’s ageing population, it is not so easy to find enough workers. Vietnam offers a young and dynamic workforce, even if this workforce  still needs to be developed into a skilled one. Another reason is that Vietnam is close to China. This means lower costs of transport and since production is nearby, manufacturers can limit delay times. A third reason is  that Vietnam is close to regional shipping lines, is rapidly improving its infrastructure and has more than 100 ports, many of them capable of handling deep sea ships. Vietnam also offers a relatively stable government and the government has worked hard to improve the business laws. Last but not least Vietnam is very active in free trade agreements.

As a member of ASEAN, Vietnam has access to several agreements ASEAN has signed. In August 2018, the EU and Vietnam agreed on the final texts for the EU-Vietnam trade and investment agreements (EVFTA). This EVFTA is expected to be ratified soon. The EVFTA contains full dismantling of nearly all tariffs except for a few tariff lines that are subject to duty-free tariff rate quotas. Moreover, the EVFTA also offers a modern and reformed investment dispute resolution mechanism which guarantees the respect of the substantive investment protection rules applicable to European and Vietnamese investors.

So, based on the above, it is not surprising that many companies set up a second facility in Vietnam. How to set up such a facility and the factors to consider will be the topic of my second article on Vietnam the one in China plus one.

This article was written by Joost Vrancken Peeters, chairman of the NVCC and partner Asia Practice at law firm Kneppelhout & Korthals.

NVCC Visit to Royal IHC Great Success

More than twenty members and guests of the Netherlands Vietnam Chamber of Commerce joined an interesting and sunny visit to the Royal IHC shipyards in Krimpen aan den IJssel and Kinderdijk on Friday 24th May 2019.

Chairman Joost Vrancken Peeters was delighted to welcome, as special guests of the Chamber, H.E. Ambassador Ngo Thi Hoa and Mr. Nguyen Hai Tinh, Commercial Counsellor of the Embassy of Vietnam.

At the Royal IHC shipyard in Krimpen aan den IJssel, the NVCC delegation was warmly received by Mr. Dingeman van Woerden, Area Sales Manager of Royal IHC.

After donning special safety vests, shoes and spectacles, the delegation made a tour around the yard, where, in a huge hall, the reel lay vessel SEVEN VEGA was nearing completion for the launch, one day later.

Click here to read more about the launch.

Click here to see a video of the launch

After the visit in Krimpen aan den IJssel, the delegation moved by watertaxi to the Royal IHC location in Kinderdijk. After lunch, Ambassador Ngo Thi Hoa updated the NVCC members and guests about the developments in Vietnam.

Mr Dingeman van Woerden gave a fascinating presentation about the history of Royal IHC and its current projects.

During the afternoon, the delegation was split up in two groups who toured the Kinderdijk wharf where, at present, the largest cutter suction dredger in the world, the Spartacus, is moored for final fittings.

Click here to see a video of the launch of the Spartacus.

In the training centre, Mme Ngo thi Hoa and others had the opportunity to try out the dredging simulator and ‘virtually’ deepened the River Maas in the Centre of Rotterdam.

to have a look at the photo album of the visit, click here.

Note about photo album: The NVCC cannot publish, due to legal restrictions, photos showing the Seven Vega and the Spartacus.

NVCC Chairman Meets Party Secretary Ho Chi Minh City

Center left Mr Vrancken Peeters; Center right Mr Nguyen Thien Nhan

The Hague, 19 May 2019.

The Chairman of the Netherlands Vietnam Chamber of Commerce, Mr Joost Vrancken Peeters, had a meeting on 19 May with the Party Secretary of Ho Chi Minh City, Mr Nguyen Thien Nhan. The Ambassador of the Socialist Republic of Vietnam, H.E. Madame Hoa, Economic Counsellor Mr Tinh and NVCC Board Member Hanh Do were also present at the meeting.

Key topic of the meeting: the importance of co-operation between Vietnamese and Dutch companies. Mr Nhan endorsed the importance of the role the NVCC plays in this co-operation.

Q1: FDI sector in Vietnam exports over US$ 41 bln

VGP

In Q1, FDI enterprises made an estimated export turnover of US$ 58.51 billion, representing a year-on-year rise of 4.7 pc, the Ministry of Industry and Trade (MoIT) reported.

Including crude oil, the FDI sector earned US$41.46 billion of export turnover, occupying 70.9pc of total export volume.

Overseas shipment of the processing and manufacturing industry grew 6.1pc in Q1, contributing 83.8pc of total export turnover.

Nine commodities earned over US$ 1 billion of export turnover of which seven gained over US$ 2 billion of export turnover.

The MoIT reported that in Q1, FDI enterprises engaged in 18 sectors especially the processing and manufacturing industry which absorbed US$ 8.4 billion, accounting for 77.7pc of total registered capital.

On the other hand, in Q1, the FDI sector imported US$ 33.89 billion of goods, up 6pc against the same period last year.

Hence, in the first three months, the sector ran a trade surplus of US$ 7.57 billion.

 

 

World Bank forecasts Vietnam’s economy to grow by 6.6 pct in 2019

VNA

The World Bank predicts Vietnam’s economic growth rate would reach 6.6 percent in 2019 in its Managing Headwinds report released on April 24.

For the medium term, the growth is projected to stay around 6.5 percent, due to the impact of current cyclical uptick dissipates, the report said, adding that poverty may decline further as labour market conditions remain favourable.The growth rate will be driven by credit tightening, slower private consumption and weaker external demand.

In its report, the World Bank advised Vietnam to stay ready to respond to changes in the global economy and to continue managing its macro-economy actively and carefully.

It forecasts growth in other developing countries in East Asia and the Pacific to soften to 6.0 percent in 2019 and 2020, down from 6.3 percent in 2018.

 

Friday 24 May, NVCC Visit to Royal IHC Shipyards in Krimpen a/d IJssel and Kinderdijk

The board of the NVCC and Royal IHC cordially invite you and/or colleagues, for an exciting visit on Friday 24th May to the shipyards and offices of Royal IHC in Krimpen aan den IJssel and Kinderdijk.

Few manufacturers of and service providers for vessels and equipment for specialist maritime service providers in the dredging, mining and offshore industries have the worldwide reputation and success of Royal IHC. This multinational company, with 3000 staff members and 39 locations around the world, has its head office in Kinderdijk, the Netherlands.

Royal IHC is offering a fantastic programme!

 

Programme:

09.45 – 10.00                    Arrival at Royal IHC location Krimpen aan den IJssel – general parking place.

Coffee served in the Maas/IJssel meeting room with excellent view of ship under construction. Safety instructions!

10:15 hrs                            Start tour – Krimpen Shipyard

11.45 hrs                            Transfer by water taxi to Royal IHC location Kinderdijk

12.15 hrs                            Arrival in Kinderdijk, walk to yard.

12:30 hrs                           Word of welcome and thanks by NVCC Chairman Joost Vrancken Peeters (tbc)

Presentation by Dingeman van Woerden, Area Sales Manager, Royal IHC

Lunch Buffet

13.15 hrs                            Tour of the Shipyard and facility

Group Photo (tbc)

14:30 hrs                            Walk to the watertaxi

14:45 hrs                            Transfer by water taxi back to Krimpen aan den IJssel

15:15 hrs                            End of Programme

 

 

Important information:

 

  • Participation is free of charge to members and special guests of the NVCC.

 

  • Registrations are handled on a first-come-first-served basis. The maximum number of participants is 30. Please register before Friday 17 May.

 

  • Participants are urged to arrive on time (the traffic in the Rotterdam area can be congested).

 

  • Taking photographs is only allowed in designated areas. Please comply with all instructions given by royal IHC staff.

 

A route description and additional information will be sent to you after you have registered.

 

 

Pre-meet Handelsmissie Rutte en Borrel vanwege Tết, 21 februari

Past Event

Vol Huis bij Pre-meet Handelsmissie MP Rutte naar Vietnam

&

 Aansluitend Borrel vanwege Têt
21 februari Den Haag 

Ruim 70 personen namen deel aan de  “Pre-Meet” voor de handelsmissie met minister-president Rutte, Hans de Boer, minister Van Nieuwenhuizen en directeur-generaal Agro Sonnema naar Vietnam (7-12 april) en de aansluitende receptie ter gelegenheid van de start van het Vietnamees Nieuwjaar (Têt Nguyên Đán). De bijeenkomst werd georganiseerd door NLinBusiness, de Rijksdienst voor Ondernemend Nederland (RVO.nl), het Ministerie van Buitenlandse Zaken en de Netherlands Vietnam Chamber of Commerce (NVCC).

Vanuit Vietnam was Pauline Eizema, hoofd van de economische afdeling van de Nederlandse ambassade te Hanoi, aanwezig om te spreken over de kansen in Vietnam.

Wanneer:          Donderdag 21 februari, 15.30-18.00

Waar:                  New Babylon Meeting Center, Anna van Buerenplein 29, Den Haag

Programma:    

15.00-15.30 Inloop en registratie

15.30-15.40 Opening door Edo Offerhaus, Directeur NLinBusiness

15.40 -16.10: “Zaken doen in Vietnam” en “Programma handelsmissie” door Pauline Eizema, Hoofd van de economische afdeling van de Nederlandse ambassade in Vietnam en Karin Schipper, missiecoördinator RVO

16.10 – 16.25: “Het opzetten van een fabriek en duurzaam ondernemen in Vietnam” door Jeannine Butzelaar, CEO Clean Dye

16.25 – 16.40: “Zakencultuur Vietnam”, Erik Mattijssen, Directeur van Peja (S.E.A.) B.V. en vice-voorzitter van de NVCC

16.40 – 16.55  “Investeren in Vietnam, waar moet je aan denken?” Hanh Do, Directeur Vietnam Consult & Trading BV

17.00 – 18.30  Têt Borrel

Links naar de presentaties (voor zover beschikbaar) vindt u hieronder:

Cultuur van zaken doen in Vietnam E Mattijssen 201902

Vietnam Investments 201902 Hanh Do

 

Een link naar het fotoalbum vindt u hier.

 

 

 

Successfull Meeting with the Ambassador

8 November 2018, The Hague

The board of the Netherlands Vietnam Chamber of Commerce had the pleasure of receiving NVCC members and special guests at a special luncheon meeting with and hosted by H.E. Mme Ngo Thi Hoa, Ambassador Extraordinary and Plenipotentiary to the Netherlands on 8 November at the Embassy in The Hague.

During the luncheon, Mme Ngo answered questions from her guests on the developments in the Socialist Republic of Vietnam and the Vietnamese – Dutch relations.

Mr. Nguyen Hai Tinh, Commercial Counsellor of the Embassy, gave a briefing on the effects of the European- Vietnamese Free Trade Agreement.

All guests were treated to a great lunch with Vietnamese specialities.

A link to the Photo album can be found here.

Boost your trade with Vietnam

By: Mr. Joost Vrancken Peeters, Partner, Attorney, Kneppelhout Korthals Lawyers

What tariff benefits does your company enjoy from the EU-Vietnam FTA?

“We now look forward to the early signature of the agreements and to the possible ratification of the trade agreement.”

– Commissioner for Trade Cecilia Malmström and Vietnam’s Minister for Industry and Trade, Tran Tuan Anh

On 19 October 2018, the EU and Vietnam reconfirmed commitment to trade and investment agreements. After the conclusion of the legal work this summer, they are looking forward to the early signature of the agreements and to the possible ratification of the trade agreement.

 

Main TARIFF benefits

In general, almost all custom duties of both sides will be cut over a transitional period. As soon as the EU-Vietnam Free Trade Agreement (EVFTA) enters into force, 65% of EU exports to Vietnam will become duty-free while the remaining trade (with a few products excepted) will be progressively liberalised in 10 years. Meanwhile, EU will liberalise 71% of Vietnamese exports from day one and 99% will become duty-free after 7 years.


Figure 1. Tariff benefits for key EU exports products

For some specific sectors, eliminating customs duties does not result in automatic access to the market of the trade partner if the EU goods do not comply with relevant Vietnam’s rules. These non-tariff barriers will also be reduced as one of the main benefits of the agreement, which will not be addressed in this article.

The EVFTA will make a significant contribution to promoting the relationship between the EU and Vietnam in terms of bilateral trade. From the perspective of Vietnam, the current benefit of preferential access enjoyed through the Generalised Scheme of Preferences (GSP) is limited, since Vietnam had access only for products unilaterally defined by the EU and the EU may change the conditions at any time. As for the EU, although having granted the GSP to developing countries, it has no preferential access to Vietnam. Therefore, the implementation will provide both economics with mutual benefits.

 

EU exports

In contrast with the GSP which was granted by the EU to developing countries, the EVFTA will provide the EU with preferential access to Vietnam.

However, EU exports cannot practically benefit from the agreement to a full extent immediately after its entry into force. Unlike textile fabric, which will be fully liberalised at the entry into force of the agreement, most EU export products which are being allowed to enter Vietnam duty free will have a transition period of 3 to 10 years. The tariff schedule of Vietnam can be found here. Such long transition periods were set forth so that Vietnam, as a developing country, is allowed to adequately adapt to the increased competitive pressures from the EU.

 

Vietnamese exports

Under the GSP, only less than half of Vietnamese exports to the EU currently enjoy a zero-percent tax rate but this will increase after the implementation of the EVFTA. Pursuant to the standard GSP agreement, Vietnam will lose its status as a GSP beneficiary country since the EVFTA provides better tariff preferences.[1] In this case, Vietnamese operators then have two years, from the date of application of the EVFTA, to adapt to the change of their status.[2]

Thanks to the EVFTA, Vietnam will be allowed to maintain its free access to the EU market in the future, even if its economic situation no longer justifies the preferential treatment reserved under the GSP. Furthermore, Vietnam can benefit from both of these two deals during the post-GSP-two-year period. In particular, companies may choose the lower preferential rate between those provided under GSP and EVFTA (an example is shown below).


Figure 2. Yearly tax rate of two Vietnamese exports to the EU pursuant to the GSP and EVFTA[3]

However, this two-year adaptation period is still limited compared with the longer liberalisation phase provided by the EVFTA. According to this new deal, a maximum period of 7 years applies to some products which are sensitive for EU producers, particularly in the sectors of textile apparel and footwear. There is an uncertainty whether a better preferential rate may be enjoyed after the two-year adaptation of GSP. The tariff schedule of the EU can be found here. It is said the EVFTA would be one of the most ambitious trade agreement which aims to set a model  of promoting trades between EU and developing countries. Before the agreements enter into enforce, there is still time to make adjustments on your trading strategy to benefit from these deals to a largest extent.

For more information contact Joost Vrancken Peeters +31620210657 or jvp@kneppelhout.nl, Anting Zhang +31634011860 or az@kneppelhout.nl.

[1] Article 4(1)(b), Regulation (EU) No. 978/2012.
[2] Paragraph 2, recital 9, Regulation (EU) No. 978/2012.
[3] The data on the base rate and GSP rate can be accessed through http://madb.europa.eu/madb/euTariffs.htm; the information on the EVFTA staging is provided in the ANNEX 2-A of the agreement.