Stronger legal commitments from the Vietnamese government are expected to increase investors’ confidence and maintain the country’s attractiveness and competitiveness.

Some producers are seeking policy clarity when it comes to VAT refunds and customs issues, photo Le Toan

At a dialogue between Prime Minister Pham Minh Chinh and the EU business community on March 3, Deputy Minister of Finance Nguyen Thi Bich Ngoc said the ministry was working with local authorities to expedite investment certification issuance and adjust tax policies to better align with the needs of businesses.

Ngoc made the statement in response to customs and tax policy proposals raised by investors, including Hung Yen Textile & Dyeing Co., Ltd. and HEINEKEN Vietnam.

The latter called for regulations to support wastewater reuse and circularity, including enabling cans to be recycled for the same application.

As Vietnam continues to assert its position as a global investment hub, enhancing trade facilitation has become critical. Claudia Anselmi, CEO of Hung Yen Textile & Dyeing, emphasised the need to clarify policies to support on-the-spot import-export. She also pointed out the issues in the current VAT refund system, which increases costs and impacts business competitiveness.

“Addressing these issues will help ensure that Vietnam remains an attractive destination for high-value manufacturing investments,” she said.

Review and reform

Together with tax policy, energy, healthcare and technology were among the big issues which foreign-invested enterprises (FIEs) are looking for further advancements.

Deputy Minister of Science and Technology Bui Hoang Phuong said, “Vietnam will prioritise development of AI, semiconductor tech, and cloud computing. The government will offer personal income tax exemptions and a five-year visa extension to engage high-tech professionals.”

He elaborated that the development direction for the aforementioned priority areas is stipulated in the draft Digital Technology Industry Law and the Science and Technology and Innovation Law, which are expected to be presented by the Ministry of Science and Technology to the National Assembly in May this year.

The draft Science and Technology and Innovation Law is scheduled for review and feedback at a National Assembly session in mid-2025, and is expected to be passed at the next session at the year’s end. The Digital Technology Industry Law is expected to be passed in May.

In the healthcare sector, Minister of Health Dao Hong Lan confirmed that the new Pharma Law, effective from July 1, will shorten the drug and vaccine approval process from five years to just eight months.

“The government is also actively working on drafting relevant decrees and circulars, and the minister encourages businesses to actively collaborate closely with the Ministry of Health,” she said, emphasising the need to harmonise standards with European regulations to accelerate the approval process for medical products.

Deputy Minister of Industry and Trade Nguyen Hoang Long responded positively to the business recommendations regarding stable access to green power.

“The government plans to issue new decrees aimed at developing between 80,000 and 100,000MW of renewable energy, while also promoting the self-produced, self-consumed electricity model to optimise clean energy capacity,” he said.

These commitments are expected to be driving forces for the EU business community and FIEs amid new challenges that are going to come from US trade tariffs. This has raised fresh concerns about a global trade war, which could increase difficulties for struggling economies.

As shown in a survey conducted in February by the American Chamber of Commerce (AmCham) in Vietnam, close to four-fifths of US companies operating in Vietnam are concerned about the possibility of the US imposing tariffs on imports from the Southeast Asian nation.

And more than 85 per cent fear the proposed US tariffs will reduce trade volume, disrupt business relationships and affect the Vietnamese economy.

“If the US imposes tariffs on products originating from Vietnam, the consequences will not only be limited to domestic enterprises but will also have strong impacts on FIEs. For example, a multinational corporation may have a component manufacturing factory in Vietnam, assemble it in Europe or Japan, and then export it to the US. When the US adjusts tariffs on a link in this chain, businesses will have to re-evaluate their production strategies, posing a problem for Vietnam in retaining investment,” said Le Net, lawyer at LNT & Partners.

Legal refinements

Some experts said that facing external tariff pressure, legal reform will continue to be an important tool for a country to retain its attractiveness and competitiveness. The Vietnamese government has made significant strides in improving the business climate. However, further refinements are being sought to create a more favourable business climate for the business community.

The Vietnam Chamber of Commerce and Industry vice president Nguyen Quang Vinh told VIR, “Policy stability is key, as large investors need a low-risk and predictable business environment. Countries in the region such as Indonesia, Malaysia, and the Philippines are actively improving the investment environment to engage foreign investment inflows. With increasingly fierce competition from these countries, Vietnam faces the risk of foreign investment capital shifting if it does not have appropriate policies.”

Vinh suggested that enhancing the legal environment was required, via ensuring consistency and transparency in policy issuance and implementation, and creating trust for businesses to make long-term investment. “Vietnam needs to continuously improve its investment environment and have a flexible foreign investment attraction strategy to maintain its position in the region,” Vinh further addded.

European Union Ambassador to Vietnam Julien Guerrier highlighted the need for clear and predictable regulations, uniform application of the law across all levels of administration and provinces and alignment with international standards. This will help Vietnam to unlock the full potential of EU-Vietnam trade and investment cooperation.

He reaffirmed Europe’s readiness to bring more investment, tech, and opportunities to Vietnam. EU-Vietnam trade has already reached €68 billion in 2024, with the EU-Vietnam Free Trade Agreement. Further progress means securing an inviting environment for investors in Vietnam with clear and predictable rules, consistent application including across provinces, and faster decision-making,” Guerrier said.

According to the Foreign Investment Agency under the Ministry of Finance, Vietnam enjoys big growth in foreign direct investment in the first two months of this year. Specifically, 516 new investment projects were registered, totaling more than $2.19 billion. This represented a 10 per cent increase in the number of projects, but a 48.4 per cent decrease in registered capital.

On the other hand, 256 ongoing projects received additional investment capital of $4.18 billion, marking a 42.2 per cent rise in project numbers and nearly a 7.4-fold increase in capital.

Wood businesses are closely monitoring market developments to swiftly craft solutions in response to volatile tariff policies on a global scale.

In 2025, Vietnam’s wood industry is targeting $18-18.5 billion in total export value, up 10-15 per cent on-year.

Photo: baodautu.vn

In a talk with VIR, Ngo Sy Hoai, vice chairman of the Vietnam Timber and Forest Products Association (Viforest), revealed that under normal conditions, the goal would be achievable. However, in the current context of global trade turbulence, it is hard to determine whether the target will be realised.

US President Donald Trump recently instructed the Department of Commerce to investigate under Section 232 of the 1962 Trade Expansion Act regarding wood and wood products. This could result in tariffs of up to 25 per cent on sawn wood and forestry products, effective as of April 2.

The US is accounts for over half of Vietnam’s wood exports, primarily furniture, interior and exterior wood products, carpentry, and refined products, with some plywood, laminated boards, and several other products also being exported.

Hoai noted, “In light of these changes in tax policies, Vietnamese wood businesses are on tenterhooks about the impact on Vietnam’s wood export performance.”

Huynh Quang Thanh, chairman of Hiep Long Fine Furniture Company, noted that the US has recently announced the imposition of countervailing tariffs on all goods imported from India, which will take effect from April 2. This raises concerns that President Trump may impose similar tariffs on Vietnam’s wood industry.

“If the US imposes a 25 per cent countervailing tariff on Vietnam’s wood industry, it could badly affect domestic companies, including Hiep Long. We have just received orders through April,” Thanh said.

As of now, many businesses are reporting confirmed orders until April-May, with lower production volumes compared to the same period last year.

The reason is that US buyers are hesitant, fearing that tariffs would lead to inventory build-up, they therefore have not finalised orders.

In response, Viforest and businesses in the sector have been preparing to participate in hearings if the US requests proof that the trade relationship between Vietnam and the US in the wood sector is mutually beneficial.

In this respect, Hoai argued, “We do not compete or disrupt US production. Vietnam not only exports to the US but is also the second-largest market in the world, after China, for the consumption of US’ logs and sawn timber.

The imported wood volume is used to meet domestic demand, and it is also processed and exported to various markets. Many products using US wood are also exported back to this country. This is a mutually beneficial trade relationship that adds value for both sides.”

Amid reduced buyer confidence due to market tensions, Hiep Long is striving to expand into new markets, including the Middle East- a promising market with an increasing number of resort projects.

Hiep Long has secured a few orders in this market, and the company is focusing on participating in international trade fairs to promote and directly reach Middle Eastern customers.

“We hope the government will reduce import taxes on US furniture to zero per cent to mitigate risks in the forthcoming period,” Thanh proposed.

Sharing the difficulties of the wood industry, Do Ngoc Hung, trade counsellor and head of the Vietnam Trade Office in the US, noted, “The biggest challenge right now is that Vietnam is not yet considered a fully market-oriented economy, which leads to disadvantages in US anti-dumping and countervailing investigations. Meanwhile, the US is also concerned about the trend of shifting production and investment from some countries to Vietnam to take advantage of labour cost benefits and a competitive environment.”

Hung therefore suggested relevant ministries, industries, and business associations to consider importing raw wood materials from the US to reduce the trade deficit and avoid origin-related lawsuits.

On the side of firms, caution needs to be exercised regarding raw material imports from countries that are subject to US tariffs.

At the same time, it is important to develop flexible production and business plans, as countries subject to US tariffs may strengthen trade protection measures, placing greater pressure on Vietnam.

In 2024, Vietnam’s wood and wood product export value surpassed $16.2 billion, up 20.9 per cent on-year, equivalent to $2.81 billion, further establishing Vietnam as one of the world’s leading exporters of wood and furniture products.