New Regulations on E-Commerce Impacting Foreign Enterprises
The E-Commerce Sector in Vietnam
E-commerce is booming in Vietnam, with platforms such as Lazada, Tiki, and Shopee selling goods to consumers in ever-increasing value and volume. Online retail sales grew 20 per cent in 2020 alone, reaching USD 11.8 billion, according to the Ministry of Industry and Trade (MOIT).
This trend is set to continue, with an expected annual growth rate of 30 per cent between 2021 and 2025, when the value of the e-commerce sector is set to reach around USD 32 billion.
The drivers behind this trend include high smartphone penetration, strong economic growth, and a supportive legal framework. For instance, back in 2020, the Vietnamese government launched a national e-commerce masterplan, including a 2025 target of 50 per cent cashless transactions. The use of digital wallets like Momo is now widespread in cities like Hanoi and HCMC. The masterplan also aimed to close the gap in digital uptake between major cities and rural areas and increase cross-border online trade.
The government predicts that over half of the population will be shopping online in 2025. So, it is no surprise that Vietnam is soon set to become one of the top-three most attractive e-commerce markets for international investors, according to Google. Meanwhile, McKinsey predicts that e-commerce in Vietnam will soon match the value of the traditional retail sector.
Cross-border Trade in E-Commerce
This trend points to significant export potential for Vietnamese enterprises, with cross-border e-commerce transactions rising to meet global demand for consumer goods.
The export value of Vietnamese business-to-consumer (B2C) sales was estimated at VND 80 trillion (USD 3.5 billion) in 2023, according to the tech advisory firm Access Partnership. However, Access Partners predicts that this could rise as high as VND 296 trillion (USD 13 billion) if micro, small, and medium-sized enterprises (MSMEs) accelerate their adoption of e-commerce to export their products.
To put this in perspective, Vietnamese enterprises sold over 17 million products on US e-commerce platform Amazon in the 12 months to 31 August 2023 – representing a 50 per cent annual rise in export value – according to the US e-commerce giant’s ‘2023 Vietnam’s SMEs Empowerment’ report.
And over 60 per cent of sales on the platform come from independent retailers, most of which are MSMEs, with the most popular goods including homeware, kitchenware, health and personal care, apparel, and beauty products.
A Changing Legal Landscape
In September 2021, Decree No. 85/2021/ND-CP amended the previous regulations (2013’s Decree No. 52/2013/ND-CP) on e-commerce. For the first time, this brought the cross-border e-commerce activities of foreign enterprises under the scope of Vietnamese regulations.
Once Decree 85 entered into force in 2022, these foreign enterprises were required to register with MOIT and establish a representative office in Vietnam if their activities met specific conditions, e.g., recording over 100,000 annual transactions in Vietnam.
Decree 85 also introduced a clearer definition of those e-commerce activities which were now subject to registration. These could also include social networks, if those platforms meet certain criteria.
Now, two new regulations will have a renewed impact on foreign companies operating in the e-commerce space in Vietnam.
- First, the Law on the Protection of Consumer Rights, published on 20 June 2023 and entering into force on 1 July 2024, will now cover onshore and offshore entities in respect of consumer rights. In particular, this will include a new definition of ‘remote transactions’ and a requirement that enterprises selling goods online must provide accurate information on consumer rights and complaints handling procedures to their customers.
- Second, the 2023 Law on E-Transactions defines, for the first time, ‘digital platforms servicing e-transactions’ as well as ‘intermediary digital platforms servicing e-transactions.’ It also sets out the responsibilities of large digital platform administrators. These include the need to publish mechanisms to handle content which violates Vietnamese law in online transactions and report these to the Ministry of Information and Communications (MOIC) on an annual basis.
It is clear from the above that e-commerce is a fast-moving and fast-growing sector. Therefore, both enterprises and investors need to be aware of their obligations when selling goods online or hosting companies that do so. This is essential in order to remain compliant with Vietnamese law and to operate within the market.
For more information about the Law on the Protection of Consumer Rights or the Law on E-Transactions, please contact our team on: contact@apflpartners.com
