Briefing

06 May 2020

Vietnam Spotlight - Covid 19

BUSINESS UPDATES

• Vietnam among safe economies after COVID-19. The Economist listed Vietnam as the 12th strongest economy among 66 economies in its report on financial strength in the wake of the COVID-19 fallout. Source: The Economist and Vietnam News
• Vietnam to fully resume rice exports from 1 May 2020. Source: Reuters
• Schools across the country reopened for classes from May 4 but in gradual phases. Source: Vietnamnet
• Vietnamese optimistic about post-Covid-19 economic recovery. Vietnamese people are optimistic about a post-Covid 19 scenario, with 80% believing the economy will recover quickly. Source: Vnexpress International
• Vietnam healthcare market, a big draw for investors, foreign and local. The healthcare sector is becoming more and more attractive to both domestic and foreign investors since demand for quality medical care is increasing. Meanwhile, the Government has outlined plans to divest from many pharmaceutical companies. Source: Bizhub 
• Foreign groups step up plans to enter or expand in Vietnam. Vietnam is appreciated by the international community for its firm and timely actions to deal with the pandemic while maintaining its economic growth momentum and ensuring social security. Source: Vietnam Investment Review
• Online business a lifeline for retail amidst COVID-19 disruptions. While the COVID-19 pandemic has dealt a terrible blow to the Vietnamese retail market in the first quarter of 2020, the market has recorded positive performance in e-commerce, online shopping, and delivery services. Source: Vietnam Investment Review
• Vietnam’s exports surge 4.7 percent in four months. Vietnam's export value saw a year-on-year increase of 4.7 percent to an estimated $82.9 billion in the first four months of this year. Source: VietnamNet
• Many sectors will recover quickly due to high market demand. When the social distancing ended, restaurants, cafes, hotels and travel firms were expected to recover more quickly than other industrial sectors and agriculture that depend on the global supply chain. Source: Vietnam Investment Review
• Rumours that Apple could open a factory in Vietnam. Tech giant Apple has been stepping up recruitment for a number of positions in both Hanoi and Ho Chi Minh City, raising the possibility that they are seeking to set up a factory in Vietnam. Source: VietnamNet 
• 295 South Korean experts isolated upon entering Vietnam for work. Vietnam suspended foreign nationals from entering the country starting March 22. In certain cases, those coming with diplomatic or official passports, or for special economic projects, are allowed to enter, but they need to present a Covid 19-free certificate from a recognised authority in their home country. All persons are put into 14-day quarantine upon arrival and tested for the corona virus. Source: Vnexpress International

 

VIETNAM - COVID-19 REGULATORY RESPONSE - NEW MEASURES SINCE PREVIOUS SUMMARY

New guidelines on social distancing measures

Vietnam has eased social distancing orders and reopened the economy, but limits on immigration remain unchanged. Under Directive 19 signed by Prime Minister Nguyen Xuan Phuc on 24 April 2020 (Directive 19), a number of sectors are allowed to resume operations:

• Service establishments (wholesaling, retailing, lottery, hotels, lodging, restaurants, among others), gyms and tourist attractions may reopen, provided epidemic prevention and control are fully implemented;
• Inter-provincial and inner-provincial passenger transport is permitted, provided that epidemic prevention and control measures established by Ministry of Transport are fully implemented;
• Air passenger transport can be resumed, if measures specific to air transport are implemented to ensure safety for passengers, and to prevent transmission of the disease;
• Factories can continue operation as long as workers are protected from infection;
• Schools must reduce the quantity or density of students in classrooms.

Heads of organisations, units and factories are responsible for preparing the plan for protection of their employees.

Meanwhile, a ban remains in place on the following services/activities:

• Festivals, religious rituals, sports events, events that are crowded in public places and stadiums, and major events that are not necessary at the moment.
• Non-essential service establishments (amusement centers, beauty salons, karaoke bars, massage parlor, dance clubs, etc.) and other service establishments if so decided by the chairman of each provincial people’s committee.

Under Directive 19, localities are divided into three types:

1. High-risk provinces/districts will have to continue to implement strict epidemic prevention and control measures specified in the Prime Minister’s Directive 16.
2. At-risk provinces:
   1. People are advised to avoid going outside unless necessary and to implement preventive measures while doing so.
   2. Crowds of more than 20 people are banned in public places (other than offices, schools, hospitals); a safety distance of one metre from other people must be maintained.
3. Low-risk provinces:
   1. People are advised to avoid going outside unless necessary and to implement preventive measures while doing so.
   2. Crowds of more than 30 people are banned in public places (other than offices, schools, hospitals); a safety distance of one metre from other people must be maintained.

Public investment

The Government of Vietnam plans to disburse VND 700,000 billion (or US$ 30 billion) for public investment.

Reduction of the power price

The Ministry of Industry decided to reduce the power price for customers which are adversely affected by Covid-19 for 3 months.

Corporate – operations

In the light of Directive 16 of the PM dated 31 March on social distancing, many public companies decided to postpone their annual general meeting of shareholders (AGM).  

Under Directive 19 of the Prime Minister, Vietnam has now adopted a more relaxed social distancing policy under which the strict limitations under Directive 16 shall only be applicable to areas categorised as "high risk" areas. Since 23 April, HCMC and most of Hanoi have been re-categorised from "high risk" areas to the lesser "at risk" status.  This may still cause issues for companies that yet to hold their AGMs.

At law, postponing an AGM may need to be notified to the competent government authorities such as the provincial Department of Planning and Investment and/or the SSC. Public companies that have appropriate digital technology to organise an AGM online should not be affected by the social distancing policy.

VIETNAM - COVID-19 REGULATORY RESPONSE - EXISTING MEASURES

Deferrals of VAT, CIT and land rental payments

The government issued Decree 41/2020/ND-CP dated 8 April 2020, with immediate effect, on deferral of VAT, CIT and land rental payments for businesses impacted by COVID-19. Enterprises entitled to payment deferrals include, among others, those operating in agriculture, forestry, fishery, food processing, textiles, construction, transportation, warehouses, real estate, hospitality and catering, tourism, education, medical services and entertainment. In addition, credit institutions and branches of foreign banks providing support to customers affected by the COVID-19 pandemic shall also be entitled to payment deferrals under this decree. In general, payment deferrals are as follows:

• For VAT: 5-month extension for payments in respect of the tax period of Mar-June 2020 for enterprises declaring VAT on a monthly basis, or of the first and second quarters for enterprise declaring VAT on quarterly basis;
• For CIT: 5-month extension for payments in respect of CIT for 2019 and provisional CIT amounts for the first and second quarters of 2020; and
• For land rental: enterprises leasing land from the state and paying land rental on a bi-annual basis are entitled to a 5-month extension from 31 May 2020 in respect of the first payment for 2020.

Enterprises are required to submit an application to the tax authorities no later than 30 July 2020 in order to be entitled to such extensions.

Emergency support package

On 9 April 2020, the Government issued a Resolution with a three-month emergency response package for the period starting April through June.

Pursuant to this Resolution, employers affected by COVID-19 can borrow from the Vietnam Social Policy Bank at 0% interest over 12 months to pay salaries to their employees. Furthermore, employers and employees affected by COVID-19 will also temporarily be exempt from their obligatory contributions to the retirement and survivors’ fund (part of the Government-sponsored insurance programme).

Under the resolution, employees who take unpaid leave and those who have their labour contracts suspended for at least one month will receive 1.8 million VND (77 USD) each month.

Banking – loan restructuring

In Circular 01/2020/TT-NHNN dated 13 March 2020, the State Bank of Vietnam (SBV) instructed commercial banks to delay, extend, and reschedule debt payments as well as reduce interest rates and fees for customers impacted by Covid-19.

Banking – interest rates

The SBV adjusted certain interest rates starting from 17 March 2020.  The reductions depend on how the loans are categorised.

Banking – operations

In Directive 02/CT-NHNN, the SBV requested credit institutions to follow the SBV's instructions and guidance to support customers affected by Covid-19, establish business plans in response to complicated developments of the epidemic. In addition, credit institutions are not allowed to pay cash dividends for the time being.

Securities-related fees

The Ministry of Finance issued Circular 14/2020/TT-BTC dated 18 March 2020 to exempt certain fees, such as fees for listing and registration, and to reduce certain other fees by 10%-50% for services such as securities custody, derivative transactions and position management. These exemptions and reductions are applicable until 31 August 2020.

Payment of wages and benefits for employees during work suspension due to Covid-19 pandemic.

Official Correspondence 1064 of the Ministry of Labour, War Invalids and Social Affairs. Because a number of enterprises have to suspend their operations or scale down, numerous employees have been suspended from work for various reasons. Payment for employees during work suspension is as follows:

• Option 1: Suspension pay shall be determined in accordance with Article 98 of the Labor Code, with consideration taken of the causes of work suspension (at the employer’s or employee’s fault or for an objective reason).
• Option 2: For employees who are suspended due to direct impacts of Covid-19 pandemic such as: (i) employees who are not allowed to return to work as requested by competent authorities; (ii) employees who are suspended from work during quarantine as requested by competent authorities; (iii) employees who are suspended from work because their employer is being quarantined or other employees in the same enterprise or department are being quarantined or not allowed to return to work, the suspension pay shall be in accordance with Clause 3 Article 98 of the Labor Code (the pay shall be agreed upon by both parties but must not be lower than the region-based minimum wages prescribed by the Government).
• Option 3: Enterprises that cannot provide adequate employment due to supply shortages or market reductions may temporarily reassign the employees against their employment contracts in accordance with Article 31 of the Labor Code. In case an employer is not able to pay the suspended employees due to prolonged work suspension, they may reach an agreement on suspension of the employment contracts in accordance with Article 32 of the Labor Code. Employers that have to scale down can arrange employment in accordance with Article 38 or Article 44 of the Labor Code.

Visa/work permit suspension

Directive 18 of the Government Office dated 21 March 2020: Vietnam temporarily suspended the entry of all foreigners into Vietnam except for (i) certain foreign affairs personnel, (ii) experts, (iii) corporate managers and (iv) high-skilled workers. Foreign experts, corporate managers and high-skilled workers have to obtain COVID-19 negative certificates issued by their home country and approved by Vietnam prior to their arrival. They will be subject to tight quarantine at their place of residence while in Vietnam. In addition, the issuance of work permits for foreign employees has also been temporarily suspended.

Social insurance contributions

On 17 March 2020, the Social Security Authority issued Official Letter 860/BHXH-BT on the suspension of contributions to retirement and survivorship funds for enterprises in difficulty due to COVID-19. This suspension is applicable to enterprises in passenger transport, tourism, accommodation, restaurant and other special industries experiencing difficulties due to COVID-19, which fall under either of the following circumstances:

1. Enterprises cannot provide work for employees, in which the number of employees who are subject to social insurance contribution but must be temporarily suspended from working is 50% or more of the total number of available employees before the business suspension; or
2. Enterprises suffer losses greater than 50% of the total value of assets due to COVID-19 (excluding land use right value).

Such enterprises are eligible to suspend contributions until June 2020. If the COVID-19 pandemic has not been alleviated by the end of June 2020, the enterprises can continue suspending contributions until December 2020. After the suspension period, employers and employees still have to make payment for such period, but without having to pay interest on late payments.