Published on Vietnam Investment Review

Discussion between the Prime Minister Dialogue with FDI enterprises

Kenneth Atkinson OBE
By:
On behalf of BritCham, Mr Kenneth Atkinson – Chairman of BritCham, Founder and Senior Board Adviser of Grant Thornton Vietnam, attended the Prime Minister Dialogue with FDI enterprises last week. A few points highlighted throughout the meeting are the reduction in tariffs on many items such as footwear, clothing, and food products, prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment.

The British Chamber of Commerce would like to thank H.E. Prime Minister Chinh and MPI Minister Dung, fellow Ministers, Govt agencies, and related associations, for the effort to support all Businesses in the story of Vietnam's ongoing success, development, and leadership in these unprecedented times.

The UK is the European country that has maintained the most active and frequent exchanges of high-level delegations. With the coming into effect of the UKVFTA, the UK has become the 3rd largest European trade partner and the top European investor in Viet Nam. Trade volumes increased 17 percent in 2021 and a further 11 percent in 2022 over January-May, with the balance very much in Vietnam’s favor with the reduction in tariffs on many items such as footwear, clothing, and food products. Bilateral relations have never seemed stronger and there is clearly a commitment on both sides to maintain and grow this.

The Chamber would like to take this opportunity to once again highly appreciate Vietnamese commitments to zero net emissions at COP26 and the Prime Minister and the accumulated government’s effort to drive the agenda. This attracts further British investment into Vietnamese renewable energy, typically offshore wind power projects, with the UK currently being a leader in offshore wind power. BritCham, like other players in the industry, is looking for the soon finalization of PDP8 which prioritizes renewable energy sources to minimize negative impacts caused by electricity production on the environment.

To achieve the COP26 commitment, BritCham would like to emphasize the important role of green loans. They would like to suggest the Government consider designated green loans/assets removed from any bank lending growth caps for a few years to drive up an increase in green loans which currently only stand at 4% of total banking assets.

A bankable PPA is also critical to attracting investment from foreign (specifically British) investors. They propose that MOIT considers payment obligations for the buyer (EVN) in cases of failure to absorb power due to a breakdown of the transmission or distribution grid. It is also recommended to have available measures to compensate producers for force majeure conditions and contract suspension.

In the context of the COVID-19 pandemic, The Chamber, along with UK businesses in healthcare, look forward to supporting Vietnam in strengthening the healthcare system post-pandemic. They also applaud the efforts of Vietnam in managing it. 

Education has long been a priority in the UK-Vietnam strategic partnership. Nevertheless, there remain barriers impeding the sector’s growth and openness to international business. Particularly, securing permission and licenses to establish and operate new premises is subject to multiple procedures which are lengthy, unclear and complex. These are partly caused by lack of inter-government alignment, nuances between provincial authorities’ approaches and processing delays. British Council with their expansion in HCMC and International School Partnerships (ISP) with their school investment in Hanoi have been adversely impacted in recent months. Request for strengthened inter-government alignment and clear process for obtaining licenses with strict timescales and appeal lines.

As a complication of the world economy, inflation will be a key area to be addressed, BritCham believes the emphasis on this aspect of national economic policy will require constant attention, to ensure that Vietnam avoids another period of asset bubbles and high inflation as experienced between 2010 and 2012, therefore helping stabilize the economy and facilitating continued growth.

Foreign financial institutions have duly upgraded forecasts about the prospects for the Vietnamese economy with the nation’s GDP growth rate this year forecast at 6.7% according to Standard Chartered Bank and 6.9% according to HSBC, thanks to the economic recovery policies.

However, achieving the GDP target requires the Government to drastically implement solutions to strongly promote the disbursement of public investment capital. Especially speeding up the construction and development of a synchronous and modern strategic infrastructure system in terms of transport, and energy.

BritCham highly appreciates the Government's prompt action to fully reopen international tourism after almost two years of Covid. To reach the pre-Covid level, they suggest the Government to further relax the restriction on tourism with a focus on visa exemption and extensions of visa exemptions to 30 days from the current 15. In addition, they need to be able to disburse and utilize the Tourism Development Fund as VNAT does not currently have a marketing budget and they are competing with neighboring countries who are spending large sums of money on tourism promotion.

In addition, Procedures have also changed for immigration. The e-visa scheme and visa exemption scheme are granted to passport holders of only 80 countries.  Currently, many foreign entities want to send their staff to visit Vietnam for feasibility studies in order to support investment decisions.  Where those people are passport holders of jurisdictions that are not on the list for e-visa or visa-exemption they are restricted on how to apply and also for what type of visa they can apply for as many Embassies overseas are still not issuing visas.  As many of these entities are planning to establish a commercial presence in Vietnam they do not have a sponsor to obtain a visa for their employees to visit Vietnam. The Chamber asked that the PM consider extending the e-visa scheme in order to enable employees of potential investors to obtain e-visas or visa approvals online.

Another current challenge is that there is still uncertainty over the conditions and applications for work permits (WP) for foreign labor coming to work in Vietnam.  Currently, the WP application procedure is guided by Decree 152 and Resolution 105, the latter being a temporary relaxation measure during the Covid period.  Businesses are concerned about when Resolution 105 will expire and if it will be replaced by permanent lawful guidance.  Circular 35/2016/TT-BTC dated 28 Dec 2016 stipulates the identification of foreign workers who are eligible for work permit exemption and internally reassigned by enterprises operating within eleven service sectors specified in Vietnam’s WTO Commitments on services. This circular expired on 25 Nov 2021 and there is no replacement so far since decree 152 was implemented. Businesses ask if a new Circular will be issued to replace Circular 35.  In addition, and quite critically, the practice of reviewing WP applications is different among provinces while all procedures should be in-line with the guidance of Decree 152 and Resolution 105 (i.e. timing for WP application in Hanoi and HCMC are 15 days and 15 working days respectively).  It causes difficulties for businesses with commercial presences outside Hanoi and HCMC to understand where the practice is not in line with Decree 152 and Resolution 105. They also comment that this process has gone backward by 10 years because of the draconian attitude of several Molisa Departments. It is all well and good to refuse work permits because “Vietnamese can do that job” but post covid many Vietnamese are not returning to the workplace so there are in fact no qualified Vietnamese to do the job in hand. 

In general, British companies have been doing relatively well in recent times. Most British companies are recovering well from the negative impact of the pandemic and have a very positive view of the next few years in VietNam.

The UK and VietNam will celebrate half a century of diplomatic relations next year. The bilateral relations have never seemed stronger and there is clearly a commitment on both sides to maintain and grow the relationship.