Sharing is caring for Vietnam’s economy
Sharing is caring for Vietnam’s economy
Vietnam is embracing the sharing economy by connecting the dots in legislation and closing down loopholes in management to capture the tremendous gains lying in the model.
Letting strangers into your home might not sound like a good idea to all. Neither, on the flip side, is letting yourself into the home of a complete stranger.
But for tens of thousands of Vietnamese users of Airbnb, the idea is not just good, it is brilliant.
Launched in 2009, Airbnb is the world’s biggest accommodation-sharing site with five million listings across 191 countries. Letting people rent out their properties or spare rooms to guests, Airbnb takes 3 per cent commission from every booking from hosts, and 6-12 per cent from guests.
According to the Homesharing Vietnam Insights Report recently released by Outbox Consulting, a Vietnamese startup specialised in smart travel-oriented solutions, since its launch in Vietnam in 2015, Airbnb’s listings have soared by 97 per cent annually in Ho Chi Minh City, 112 per cent in Hanoi, and 111 per cent in the central city of Danang.
The total listings of Airbnb rose from 1,000 in 2015 to 6,500 in 2016, 16,000 in 2017, and 40,804 earlier this year. Currently, the once-newbie to the Vietnamese market has become a major player in the segment.
In Vietnam, Airbnb is a typical example of the sharing economy, next to a long line-up of other platforms such as Grab, GoViet, WeWork, VATO, Gonow, T.Net, Triip.me, lendbiz.vn, and tima.vn.
According to the Central Institute for Economic Management’s deputy director Nguyen Thi Tue Anh, the sharing economy is a new business model which takes advantage of digital technologies, thus reducing transaction costs and approaching a large number of customers through a digital platform.
This economic model has been gaining traction in Vietnam over the past few years, with a new wave of peer-to-peer opportunities shaking up many sectors. Whether it is borrowing goods, transport, leasing offices, or renting out homes, consumers are showing a robust interest in the sharing economy.
Market researcher Nielsen Vietnam noted that 76 per cent of Vietnamese people like using “shared products and services”, compared to 66 per cent globally, and this has created fertile grounds for the homesharing phenomena.
In fact, the sharing economy has been developing globally in the sectors of transport service (Uber, Grab, Lyft, and Zipcar), tourism and hotel (Airbnb and VRBO), labour (TaskRabbit and Upwork), and financial services (Kickstarter, Indiegogo, and Lending Club).
OFFICIAL RECOGNITION
On August 12, Prime Minister Nguyen Xuan Phuc enacted Decision No.999/QD-TTg approving Vietnam’s sharing economy project earlier compiled by the Ministry of Planning and Investment (MPI). The decision is aimed to ensure a fair business environment among enterprises in the sharing economic model and traditional companies.
The project aims to ensure the rights, responsibilities, and benefits of parties participating in the sharing economy model, including service providers, users, and platform providers.
Besides that, the project encourages innovation, the application of digital technology and the development of the digital economy.
The model has developed in recent years across the six major sectors of transportation, room sharing, e-commerce, employment, financial services, and online advertising.
Under the decision, the Ministry of Finance is required to apply new Industry 4.0 technologies to tax policy implementation and management.
The MPI will be in charge of working with ministries in amending and completing the current legal and policy system to meet the requirements on the management of the activities of the sharing economy.
Meanwhile, the Ministry of Transport will have to review and abolish unsuitable regulations on business conditions regarding traditional transport businesses.
Also, the Ministry of Industry and Trade is assigned to study and develop policies to promote sharing economy models to boost sustainable production and consumption. The State Bank of Vietnam is also tasked to build regulations on cross-border transactions through payment gates in which they grant licences.
In addition, the Ministry of Culture, Sport and Tourism will have to study regulations on condotels and officetels, and the Ministry of Science and Technology is required to review the legal system on state management on science and technology as well as innovations relating to the sharing economy.
POTENTIAL
According to the MPI, the sharing economy model has yet to develop strongly in Vietnam but it has great potential to take off.
Specifically, the sharing economy has advantages of raising tax revenue for the state coffers, contributing to the efficient use of resources and environmental protection.
In addition, consumers have more choices of services and products while encouraging enterprises and individuals to ameliorate service quality and create competition to promote the development and restructuring of management in production and business.
According to Rebecca Bryant, chargé d’affaires at the Australian Embassy in Vietnam, with a well-educated, young population, almost 70 per cent of whom possess smartphones, the country will benefit remarkably from the sharing economy.
At the Vietnam Private Sector Economic Forum themed on the digital economy held a few months ago in Hanoi, MPI Deputy Minister Vu Dai Thang said that the digital economy, coupled with the sharing economy, is surging in Vietnam, creating major changes in business methods.
“Vietnam has great opportunities to develop a digital economy because it has immense potential,” he said. “A recent survey by Google and other digital firms valued Vietnam’s digital market at $3 billion in 2015 and $9 billion in 2018, which is estimated to rise to $30 billion by 2025.”
According to the Asia Internet Coalition, Vietnam is among the few nations in Southeast Asia with high growth in digital transformation and potential for a sharing economy.
Currently the country has over 136 million mobile phone subscriptions, and 54.2 per cent of the population are connected to broadband wire-based internet.
The Outbox Consulting report stated that not only being featured by ride-hailing applications, the sharing economy has and will continue to be popular in Vietnam in many other sectors such as tourism, co-working spaces, office sharing, hotels, finance, and co-use of electronic equipment.
In a specific case, WeWork, an American company that provides shared workspaces, is looking for locations in Vietnam to open co-working spaces. Its first co-working space was opened in Ho Chi Minh City in March 2019, covering 5,000 square metres in E.Town Central in District 4. The office can house about 1,000 customers on four floors.
Bryant from the Australian Embassy said, “Shared models are being strengthened thanks to digital platforms, creating good opportunities for providers and users to co-operate with each other easily. “So, while the sharing economy remains in its infancy at the moment in Vietnam, it will inevitably become a major part of the economy – both at the national and the global levels,” he said.
WeWork Southeast Asia’s managing director Turochas T. Fuad said with Vietnam’s swift economic growth, the company is seeing immense business opportunities.
A recent study by world-class assurance, tax, and consulting services provider PwC estimated that global revenue from companies providing sharing platform applications will hit $335 billion by 2025 from $15 billion in 2014, increasing by 22 times within 10 years.
EXTENDING OVERSIGHT
Under Decision 999, the people’s committees of provinces and cities can enact business regulations under the sharing economy model, but the regulations must follow the law. According to the government, it is unnecessary to have separate policies for a shared economy model because economic sharing is not an integral part or a separate economic component in the economy. However, despite its great potential for development, managing new business models arising from the sharing economy remains a major challenge, especially in tax management. For example, despite Airbnb being present in Vietnam since 2015 and operating with profit, it is difficult for tax authorities to nail down the company as it does not yet have a business registration licence or a representative office and legal representation in the country.
At a conference on the sharing economy model for Vietnam organised earlier this year in Hanoi, Deputy Prime Minister Vuong Dinh Hue requested relevant ministries to improve the legal framework on employment and tax management, together with evaluating the impacts of the sharing economy on socio-economic issues.
