Vietnam Government Seeks Domestic Market Development: Implications for E-Commerce

Vietnam’s Prime Minister issued a directive to boost demand, support production, and promote market development, including in e-commerce, to strengthen the domestic economy.

Directive 29/CT-TTg, dated August 27, 2027 (hereinafter, “Directive 29”), focuses on boosting demand, supporting production and business, and developing the domestic market in Vietnam. The directive marks another effort by the export-dependent economy to enhance the role of its own market for Vietnam-based firms.

Vietnam’s growing focus on domestic market

For decades, Vietnam’s economic growth has largely been driven by export-oriented industrialization. However, this reliance on external demand has made the country vulnerable to global economic fluctuations. Experts have long urged Vietnam to reduce its export dependency and strengthen its domestic market.

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Earlier this year, local experts called on both enterprises and the government to prioritize the domestic market. They emphasized that alongside public investment and exports, local consumer demand is critical for sustained economic growth. With a population of over 100 million and significant purchasing power, Vietnam’s domestic market is an attractive opportunity for both local and foreign businesses. According to Nguyen Quoc Viet, Vice Director of the Vietnam Institute for Economic and Policy Research (VEPR), domestic consumption and the service sector contributed 75-80 percent to Vietnam’s 5.33 percent GDP growth in Q3 2023.

Directive 29’s main goals

Directive 29 promulgates specific tasks for competent ministries and agencies to implement necessary policies to support the growth of local markets, achieving the below goals:

• Promptly implementing investment projects creating new production capacity: The government will focus on reviewing and prioritizing solutions to remove difficulties in disbursing public investment capital, credit packages, land, and policies to attract social resources to participate in projects appropriate to market scale and signals.
• Facilitating the domestic markets: New policies will encourage consumption and investment in areas where domestic production has advantages and the domestic market has demand.
• Reviewing and promulgating policies to support domestic businesses: Firms will receive help to further integrate into the supply chain of supporting industrial products for foreign-invested production and export enterprises in Vietnam.
• Initiating regional connectivity solutions: These solutions aim to reduce transportation costs, create favorable conditions for the circulation of goods among regions, and support enterprises in shifting their investments to regions with advantages in factors such as business premises, abundant labor supply, and low labor costs to reduce production costs.
• Applying new technologies: Ministries, agencies, and localities to implement digital transformation technology, artificial intelligence (AI), big data, and blockchain technology to continue promoting administrative reform and procedure simplification.
• Promoting domestic market trade: Competent agencies tasked with implementing trade promotion activities to connect supply and demand, as well as market information and legal advice for small and medium enterprises.
• Highlighting the “Vietnamese people prioritize using Vietnamese goods” campaign: Vietnam’s government will continue to strictly implement Directive 03-CT/TW Directive 28/CT-TTg on enhancing the campaign “Vietnamese people prioritize using Vietnamese goods” in the new situation.

The involved ministries, agencies, and businesses are:

• The Ministry of Industries and Trade;
• The Ministry of Finance;
• State Bank of Vietnam;
• The Ministry of Agriculture and Rural Development;
• The Ministry of Construction;
• The Ministry of Planning and Investment;
• People’s Committees of provinces and centrally run cities; and
• Industry Associations, corporations, general companies

Implications for Vietnam’s e-commerce

With respect to the general goals, Directive 29 sketched out more specific objectives for what the government wants to achieve through its efforts. Many of these mean a more prominent role for e-commerce, accompanied by more stringent regulations.

Building a domestic product-focused e-commerce

The Ministry of Industry and Trade (MIT) will promote the implementation of solutions to link production with the distribution of goods, strengthen linkages in the value chain of goods, and form chains of purely Vietnamese goods. The MIT is also responsible for coordinating with localities to strengthen activities connecting supply and demand, as well as bringing goods to remote areas and industrial parks to stimulate domestic consumption.

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E-commerce is considered a critical part of these efforts, as the ministry is tasked with encouraging the e-commerce platforms operating in Vietnam to implement support programs for the domestic consumption of local goods. The ministry will also organize activities to promote regional linkages in e-commerce and cross-border e-commerce promotion activities with countries in the region and major import markets.

Stricter rules over imported goods through e-commerce platforms

One of the most impactful provisions under Directive 29 related to e-commerce activities is potentially more stringent regulations on imported goods.

Accordingly, the Ministry of Finance (MoF) is directed to:

• Coordinate with the MIT to explore new solutions for tightening the control over imported goods through e-commerce platforms, aligned with Vietnam’s international commitments;
• Collaborate with relevant ministries and agencies to review and propose tax policies for projects attracting investment in producing goods to replace imported goods; and
• Accelerate disbursement procedures for trade promotion programs to promote the consumption of domestically produced goods.

The MoF shall proceed with these tasks and implement a plausible expansionary fiscal policy in coordination with Vietnam’s monetary and other macroeconomic policies.

Key takeaways

Vietnam’s most noticeable recent action to stimulate its domestic purchasing power was extending a 2 percent reduction in the value-added tax (VAT). With the issuance of Directive 29, the country’s government has clearly indicated its determination to implement more valid policies and support for the domestic market, with greater emphasis on consumption of local made goods.

The dynamic will require businesses, including foreign invested firms, to reconsider their production plans and sales strategies to maximize their benefits and potential policy and incentive updates. Foreign exporters and local importers must closely monitor upcoming regulation changes, especially those planning to gain access to or further expand presence in Vietnam’s market via e-commerce platforms.

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