1. The EU Vietnam Free Trade Agreement (EVFTA)
The Vietnam – EU Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA)
approved on Feb 12th 2020 have opened up a great opportunity for Vietnam to penetrate a market
with total GDP of USD 18,000 billion. For Vietnam's exporting products, as soon as the agreement is
forced into effective, the European Union will remove importing tax for about 85.6% of product lines,
equivalent to 70.3% of Vietnam exporting volume to the EU. It means that products made in Vietnam
have a huge advantage in terms of tariffs when exporting to the European market. Currently, items
exported to Europe include textiles, leather and footwear, agricultural products, etc.
Source: HOUSELINK
28
The impact of COVID-19 Epidemic
on Vietnam Construction
Tax exemption
How does the Vietnam economy bene t?
Taxable Tax exempt (Unit: %)
The Agreement comes
into effective
Vietnam exporting
products
EU exporting
products
Export Import
Vietnam – EU trading volume
(Unit: %)
Incremental GDP growth
(Unit: %)
After 7 years After 10 years
85.6 99.2
48.5 91.8 98.3
44.442.7
33.1
15.3
20
36.7
2.2-3.3
4.6-5.3
7.1-7.7
2. Shifting trend in the industrial investment to Vietnam
After the COVID – 19 epidemic, producers began recognizing the material dependency on China – the
world's largest factory. According to the research by Dun & Bradstreet, there are at least 5 million com-
panies worldwide – including 938 companies in the Fortune 1000 – at least one supplier Tier 1 or Tier
2 in China. To minimize the risk of supply chain interruptions, manufacturers will consider the develop-
ment of factories outside China, and Vietnam is an ideal destination. Therefore, foreign direct invest-
ment in processing – manufacturing activities in Vietnam is expected to leap after the COVID – 19 is
controlled.
Besides building new factories, some investors tend to lease the ready-built factories, especially inves-
tors in light manufacturing industries, logistic centers, etc.
Source: Dun & Bradstreet
At least
multinational companies
Having one Supplier
Tier 1in China
At least
multinational companies
Having one Supplier Tier 2
in China
Tier 1
Tier 2
29 The impact of COVID-19 Epidemic
on Vietnam Construction
3. Source: Bain & Company
b. Civil construction
In the near future, real estate market expects the Government to have new policies, loosing legal
difficulties hence it will be easier for real estate developers to complete the legal procedures related to
residential and commercial real estate projects.
Besides, the potentiality of Vietnam tourism after COVID – 19 epidemic must be concerned. When the
SARS is controlled in 2003, China tourism and retailing industry had been strongly recovered. The
same case is expected after COVID – 19 epidemic. After a long period of time with limited travel and
fear of disease, people tend to relex through tourism and shopping activities. With a timely grasp of the
opportunity, the Vietnam Government and the travelling service companies can attract a large amount
of international and domestic tourists, of which revenues could partially compensate for the losses
caused by the epidemic that occurred in the early periods.
This is the appropriate time for the investors with strong financial foundation to build and complete the
civil property projects which have completed legal procedures, to welcome the opportunity.
8.5%
9.3%
7.7%
4.3%
8.3%
9.8% 9.9% 9.5%
10.2% 9.7%
10.9%
11.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Growth rate of China retailing industry during SARS (%)
30 The impact of COVID-19 Epidemic
on Vietnam Construction
4. c. Infrastructure construction
(Public investment projects)
As mentioned previously, in 2020 the
Government is focusing on investing in
construction of transport systems,
irrigation systems, power distribution
systems, etc. The construction activities of
the public investment projects also
contribute to the creation of jobs,
supporting the construction industry which
is under drop in revenue due to lower
demand for industrial and civil construction.
At the same time, integrated infrastructure
development creates developing
opportunities for emerging areas. While
the land fund for the development of
commercial property and residential
property in major cities is limited, as well as
the land fund for industrial zones in many
provinces has reached the limit; companies
have to look for clean, cheap land funds
in new areas to develop residential,
commercial properties and industrial parks.
When infrastructure, especially the
transportation system is developed,
connecting economic zones, this is also the
opportunity to develop the construction
industry in the long term.
31
LONG THANH INTERNATIONAL AIRPORT
NORTH-SOUTH EXPRESSWAY TO THE EAST
(Illustration)
The impact of COVID-19 Epidemic
on Vietnam Construction
5. 32 The impact of COVID-19 Epidemic
on Vietnam Construction
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