However, according to the infectious disease specialist, vaccination is of great important strategy in the fight against coronavirus pandemic.
By Thanh An – Translated by Anh Quan
However, according to the infectious disease specialist, vaccination is of great important strategy in the fight against coronavirus pandemic.
By Thanh An – Translated by Anh Quan
|Pham Chi Nhu, co-founder and CEO of Coolmate|
Established in February 2019, the Coolmate startup specialises in selling “Made in Vietnam” apparel products directly to end-users. The startup aims to generate VND139 billion ($6 million) in revenue in 2021 after posting a revenue of VND39 billion ($1.7 million) last year.
STIC Investment is an investment fund based in Korea that manages nearly $1.4 billion in capital and has invested in more than 450 companies in Asia. STIC Investment is an early investor of Tiki, Grab, and Jo2Yoy. Prior to Coolmate, STIC has most recently poured $2 million in EcoTruck, a logistics startup.
Coolmate will use the fresh funds to develop its key areas of operation, including expanding its product portfolio to serve the demand for men’s clothing and focus on materials to bring unique experiences to customers. Also, it will invest in technology to take autonomy of its sales, operation, and customer care.
Part of the fund will be invested in human resources to improve team capacity. Meanwhile, it will expand new business models such as Print-on-Demand and Subscription packages.
In 2020, Coolmate secured seed round investment from 500 Startups Vietnam.
The representative of Coolmate said that at the time of the pre-A round its revenue has exceeded last year’s results. The startup also maintains a growth rate of 15-20 per cent per month and aims to stage an initial public offering in 2025.
By Thanh Van
|By Ta Hong Thai – Partner, head of Corporate Tax KPMG Vietnam|
The prime minister’s view is not just his desire as the leader of the government but is also an expectation of enterprises when almost all of us feel disappointment after a statement was made elsewhere that Vietnamese enterprises “are not competent enough to produce screws”.
The Ministry of Science and Technology (MoST) has proposed several initiatives aiming to improve the legal system in terms of mechanisms and policies for promoting science and technology activities and innovation, including investment regulations, public investment, state budget, and tax regulations.
Specifically, it requested to make the Science and Technology Development Fund an obstacle-free source of capital towards investment in innovation in technology. It is requested that the Ministry of Finance (MoF) promptly amend the joint Circular No.12/2016/TTLT-BKH&CNBTC guiding on the spending content and management of the fund.
Many enterprises have not been aware of the fund nor understand its benefits. In a way, the attempt to reach the businesses and bring these regulations into force have not been very effective.
The Law on Science and Technology was passed in Vietnam in 2000. It is a set of codes that specify the state’s policies to ensure that science and technology development constitutes a primary national policy.
The state encourages the establishment of such a fund on a national, local, and organisational scale. At the same time, the state commits to provide tax incentives in accordance with the regulations to enterprises that engage in the innovation and improvement of technologies. Therefore, businesses can benefit from tax incentives when participating in the activities of technology innovation and enhancement through the science and technology development fund.
The spirit of the laws is clear, but what about the tax regulations? According to the Law on Corporate Income Tax (CIT), enterprises can provide up to 10 per cent of their annual income before tax to establish the science and technology fund.
With this provision, the CIT law provided further details to implement the Law on Science and Technology and allowed enterprises to spare their taxable incomes for establishing the fund, meaning the enterprises do not have to pay tax supposed to be levied on the amount spared for this fund. At prima facie, this regulation seems to give great benefit to enterprises when they do not have to pay CIT and enjoy the tax saving amount, but this is not actually the case.
The CIT law also stipulates that enterprises are not allowed to claim expenditures spent from their science and technology funds as deductible operating expenses when determining taxable incomes during the period that the expenses incurred.
The reality is that when the enterprise incurs technology research and development (R&D) expenses, and if the expenses are spent from the fund, these expenses are not considered as deductible when calculating CIT liability. The government’s encouragement seems to be a temporary deferral of tax when contributing to the fund, the enterprise will pay back tax to the government later by not claiming deductible expenses when they actually incur science and technology development expenses.
It seems illogical if an enterprise is enjoying incentives like tax exemptions and reductions as result from investment in industrial parks, economic zones, or funding in difficult areas or encouraged industries.
In addition, the CIT law also stipulates that within five years from the starting date of the fund, if an enterprise does not utilise it, utilise less than 70 per cent, or utilise it for inappropriate purposes, it will be subjected to the collection of CIT, which is calculated based on the actual amount contributed to the fund plus interests on such collected amount. Obviously, the time period for enterprises to enjoy the benefit of tax deferral as a cash advance for this fund is not much.
The MoF has issued very strict regulations on the use of the fund under joint Circular 12 regarding the organising, managing, registering, reporting, and other necessary internal procedures for project approval, expenses approval, and fund transferring to other affiliated enterprises. This could reasonably be a mandatory requirement applicable to state-owned enterprises while for the remaining private enterprises, it should not be acceptable as there are many complications hindering flexibility in using internal resources with the benefit are not clear and not significant, as mentioned above.
It is prominent that the incentive policies through the mechanism of setting up and using the fund is not appropriate or practical. Therefore, for many years, these policies have not been widely applied by enterprises.
Not only Vietnam, other countries also have strong focus on science and technology development and providing incentives for the R&D activities of enterprises.
Many governments encourage enterprises to invest in the R&D activities with a range of support, especially tax policies like tax credit mechanism, double expense deduction, or super tax deduction.
For the tax credit mechanism, if an enterprise incurs R&D expenses, this enterprise has the right to use a percentage of the expenses to directly offset against their payable tax amount when declaring annual tax.
In Taiwan, for example, businesses can deduct from 10-15 per cent of their total R&D expenses against their annual income tax payable amount, although the government restricts the deduction to be no more than 30 per cent of the tax payable in the year. However, this is the actual amount of funds that businesses can be subsidised by the state. Japan, South Korea, New Zealand, Australia, and many other markets also apply the same policy.
Malaysia allows a deduction up to 200 per cent, which means that for one dollar expense incurred, two dollars of taxable income will be deducted. The state then subsidises the tax amount associated with the additional deductible expenses. Singapore even gives a deduction for up to 250 per cent, and China 175 per cent.
Tax incentives are an effective instrument when one government implements policies to encourage science and technology development. In fact, the current tax laws have provided tax incentives for high-tech businesses, businesses applying high-tech, software manufacturing businesses, and supporting product manufacturing businesses, etc.
However, R&D costs are incurred at many different stages of different businesses at different scales, and more importantly, these costs are significantly important when reviewing the objective of the laws on science and technology which is to improve the national scientific and technological capability.
In Vietnam, the limited state budget makes it challenging to provide effective support as in other countries. Nonetheless, given the reality of practice that enterprises are not interested in the policies despite availability for many years, it is essential to review these policies and consider amendments.
Many Vietnamese tycoons regret that the largest beer company in Vietnam, the Saigon Alcohol Beer and Beverage Joint Stock Corporation (Sabeco), has fallen into the hands of Thai investors.
When the state divested capital from Sabeco, many Vietnamese enterprises wanted to acquire it, but no Vietnamese corporation qualified to enter the final list.
Small and weak
Human resources of private enterprises are also weak. Many managers of Vietnamese private enterprises only graduated from high school, started a business career from a household or moved up as an employee in state-owned enterprises.
According to a recent survey by the VCCI, up to 55.63% of the bosses of small and medium businesses have an intermediate or lower level of education. As for the workforce, up to 75% have not received any technical or professional training.
Regarding the EU-Vietnam Free Trade Agreement (EVFTA), according to a survey, up to 70% of small and medium enterprises in the EU said they would benefit immediately, while 30% said they would benefit from this agreement after 3-5 years. For Vietnam, small and medium-sized businesses face the risk of not catching up with this opportunity.
Experts say that the business environment in Vietnam is still unfavorable. The most pressing issue is discrimination. According to a recent VCCI survey, 39.5% of private enterprises said that local officials still prioritize attracting foreign investment and state-owned enterprises rather than developing the private sector.
According to VCCI, barriers to the development of private enterprises include the legal burden, access to finance and land, lack of transparency, and informal costs. These factors have improved year by year, but have not really contributed to creating international-scale enterprises.
Today, in developed countries, the private sector often contributes over 85% of GDP, which is the foundation to ensure the strong development of the economy. Any rich and powerful country has a team of powerful entrepreneurs and businesses. It is the leading corporations and private companies in industrialized countries that play the leading role in turning the country into economic powers.
According to experts, to become a developed country by 2045, Vietnam’s minimum income per capita must reach at least $20,000 per year. With a current per capita income of about $3,000/year, Vietnam must achieve a GDP growth rate of 7.5-8% per year for the next 25 consecutive years. This goal cannot be realized without the important contributions of private enterprises.
Experts also said that it is necessary to further reform the business environment to reach a fair treatment between private and FDI enterprises and state-owned enterprises.
Implementing transparent and effective policies; supporting the development of small and medium enterprises, expanding market participation and promoting fair competition; supporting innovation, technology modernization and human resource development … are extremely important solutions, to create a team of strong private enterprises. Then, Vietnam can become a developed country by 2045.
Hanoi Creative City is the largest creative complex in Hanoi. Launched in September 2015, it brings together organisations, businesses, individuals, products and services as well as creative activities.
Hanoimoi’s Weekend interviews architect Doan Ky Thanh, who is one of Hanoi Creative City’s founders.
|Architect Doan Ky Thanh.|
How do you assess the creative industry in Vietnam?
The creative industry has prevailed in the world for a long time, while in Vietnam this concept is still quite new. In fact, the creative industry is not something that is far away. What people imagine is turned into a product through their hands. It is creative industry.
But to be creative it is necessary to create an environment for creativity to grow and develop. That environment requires transparency in intellectual property rights. Certain creators must be protected for the products they create. That is the motivation to encourage and acknowledge the efforts and talent of creative people.
The creative industry has been showing its great contribution to the GDP of nations. In developed countries, the creative industry even accounts for the largest proportion. Innovative industries in countries such as Japan or Singapore contribute greatly and have high growth rates.
The creative industry only appeared in Vietnam recently. Compared to other countries in the region, we have been delayed by one step.
Recently, the Ha Noi Committee’s Commission’s for Publicity and Education organised a workshop to assess and re-examine the benefits of creative spaces in urban areas and the role of creative activities in socio-economic development.
This recognition shows the changing perception of managers about the role of creative spaces in socio-economic development and their contribution to the creative industry.
What is the most important thing for creators?
It is tolerance. In the office of Hanoi Creative City, we put the word “tolerant” at the highest level to remind our colleagues that to be creative, there must be tolerance to accept the ‘new’. Only tolerance makes people accept the difference of others. Then the difference and tolerance will be the cornerstone of creativity.
So where should we start?
The first thing that can be done right now is to create hubs that connect resources together.
The Vietnamese game Flappy Bird was very successful. To be like that people need to create, write music, graphics, sales and marketing, communications, etc. There must be a lot of capacity to be together to create a product that can convince the market.
For that, first, there must be creative hubs, infrastructure, which are hubs for people to share with each other.
This is very suitable for the knowledge economy that our country and the world are pursuing. Sharing resources, opportunities or legal issues and governance will create an entrepreneurial ecosystem.
A business that starts will cost a lot but if it joins hubs it can reduce costs and spend resources investing in innovation and development.
Hanoi should create creative hubs. It can be seen that the benefits of innovative hubs are to connect the resources that inspire society and those who inspire creativity, attract tourism, and promote trade and production.
All these are socially beneficial when people; tourists and the youth in particular enjoy and consume innovative products. It also contributes to the economy. These hubs will create many other opportunities.
What role does traditional cultural heritage play in creative hub development?
In fact, creators always consider cultural heritage as an asset, an inspiration, and a material to create from.
Selling products is just a normal business. We need to sell cultural products and sell “joy”. To sell cultural products people must know how to exploit and use culture appropriately.
So what role does the creative hub play in developing the creative industry?
The art district is a place where young people have a place to play, enjoy art and interact with artists. Hanoi does not have such art districts.
Art districts are where artists show, experiment and commercialise their art products and bring them to the public faster and more efficiently.
Hoan Kiem District seems to form a creative hub with cultural heritage spaces such as book streets, walking streets or mural streets.
In addition to creating creative spaces and cultural spaces, these creative hubs also contribute to preserving heritage spaces and developing tourism.
Hanoi used to have Zone 9. It once attracted many tourists. Tourists could watch, drinking coffee, buying some items and painting and watching artists work.
In your opinion how should we connect traditional culture to youth?
Many artists around the world and in Vietnam have done that. There needs to be creative hubs or art districts to have space for the creators show their artworks.
Young people today do not have or have very few opportunities to access and transform traditional values. They don’t see and they are not inspired to get to know and like traditional culture.
I believe that if there are spaces for artists to perform surely young people will love traditional culture. VNS
The COVID-19 health crisis and resulting wide-ranging and deeply-felt economic upheaval has flipped the logistics industry on its head, leaving ill-protected freight firms in dire need of emergency State support to survive hardships.
Mandatory preventive measures among nations to contain the spread of the pandemic has resulted in disrupted trade flow and fragmented supply lines, dealing a blow to the logistics industry, which is viewed as an auxiliary for trade and commerce, enabling other industries to deliver goods and services to consumers.
Factories reducing production or suspending operations has led to a curtailment in the transportation and delivery of goods in the supply chain, greatly affecting the operation of logistics companies.
Shrinking orders, surging costs
“Right from the early stages of the COVID-19 outbreak, the number of freight orders received by logistics companies in Bac Ninh fell sharply, at the same time, the delivery of goods, storage and warehousing activity is slowed and disrupted,” Nguyen Hoai Nam, sales manager of Golden Logistic Co. Ltd. in the northern province of Bac Ninh, told Viet Nam News.
“Following government guidelines on COVID-19 prevention and control, we businesses are making a continuing effort to realise the dual goal of maintaining production while ensuring work-related safety during the pandemic, prioritising workers’ health,” he said.
Every stage involving transportation, warehousing, regular health check-ups for workers and drivers transporting goods in pandemic-hit areas was all in strict compliance with guidelines for disinfection and sterilisation. But this had resulted in a surge in operational costs.
Travel restrictions also led to worsening shortages of truck drivers to pick up containers, he said.
“Multiple unexpected costs have pressured logistics service providers. However, it is time both manufacturing enterprises and logistics enterprises need to work together,” Nam said.
Logistics costs in Viet Nam account for about 20 per cent of the goods value, which is relatively high compared to the average costs over the world.
“However, devastating consequences caused by the prolonged pandemic, together with the rising prices of warehousing and freight services, makes logistics costs continue to increase, putting great pressure on businesses,” Nam said.
Businesses also faced a significant reduction in revenue from goods exported and imported from pandemic-affected countries. Commodities shipped to Viet Nam dropped dramatically, those undergoing customs clearance were strictly quarantined. Delivery times from suppliers in the Asian market and some other regions is reportedly longer.
According to statistics of the Viet Nam Logistics Business Association, up to 50 per cent of enterprises providing logistics services of all types experienced a downturn in activities and revenue. Air and road transportation services were hit the hardest.
Roughly 80 per cent of the association’s members are micro, small and medium enterprises, thus many of them are on the brink of collapse, meaning workers are losing their jobs.
In Viet Nam, infection cases were detected at large-scale industrial parks of Bac Ninh and Bac Giang, causing many disturbances in the production lines of enterprises, which inevitably placed a direct impact on logistics enterprises.
Tax payment postponement
A report summarising recommendations of businesses and associations in April-May 2021 has been submitted to the Prime Minister by the Private Sector Development Research Board (Board IV), under the government’s Advisory Council for Administrative Procedure Reform and Young Presidents’ Organisation (YPO).
In the report, Board IV said amid the pandemic, manufacturing enterprises in industrial parks, logistics and transportation businesses suffered, causing economic hardship and supply chain disruption.
Exporting enterprises confronted great challenges due to worsening shortages of containers and merchant ships on a global scale, as well as skyrocketing fees.
Board IV, therefore, recommended the Government consider and direct ministries, branches and localities to simplify administrative processes or consider according to priority for import and export processes, as in the priority just applied to the export of Bac Giang lychee.
This would help businesses optimise time and costs in the domestic stages to speed up the import procedures for essential goods or accelerate the export of agricultural products and other key export commodities.
Le Duy Hiep, Chairman of the Viet Nam Logistics Service Association (VLA), said in light of COVID-19 developments, in order to support logistics businesses, VLA proposed the Government grant a reduction of 50 per cent on corporate income tax for 2020 as a way to support businesses to overcome hardships.
It also proposed the extension and postponement for employers’ tax payment, their contributions to the Social Insurance Fund, Unemployment Insurance and Health Insurance Fund, Hiep told Viet Nam News.
VLA’s recommendations on tax payment extension have been approved by the Government. However, “this takes time and many procedures are required by the banks,” Hiep said.
Decisions on petrol retail price reduction benefited both businesses and the whole economy, he said.
The Viet Nam Maritime Administration in May last year decided to reduce the pilotage fee by 10 per cent for Vietnamese shipping enterprises operating on domestic routes, as a support measure amid the COVID-19 pandemic.
Hiep said Viet Nam’s logistics costs were still higher than the regional and global averages of 16-20 per cent.
“We are trying to reduce the cost to equal other countries in the region, such as Thailand at 14-15 per cent and Singapore at 8-10 per cent,” Hiep told Viet Nam News.
The government targets that by 2025, the contribution of logistics services to Viet Nam’s GDP will touch 5-6 per cent, with the growth rate of logistics industry reaching 15-20 per cent, the rate of outsourced logistics services at 50-60 per cent, achieving Global Logistics Performance Index at 50 or higher.
Logistics enterprises should urgently apply IT solutions, modernising management and operation methods, use software systems and logistics optimisation platforms to cut costs and improve service quality, Hiep said.
They should promote linkages with other logistics providers and with manufacturing enterprises in order to create competitive advantages in negotiation and improve service provision capacity, Hiep said.
VLA would actively co-ordinate with localities and manufacturing companies to devise solutions promoting the transportation and circulation of goods, ensuring safety amid the pandemic, at the same time applying supportive measures such as reducing freight, storage and warehousing costs.
Trade centres and supermarkets should consider augmenting the purchase of agricultural products from farmers in pandemic-hit localities such as Bac Giang, he said. — VNS