WEF ASEAN 2018: Solutions to challenges in future of jobs in ASEAN

Electricity demand in Vietnam is forecast to continue increasing at an average rate of 9% per annum, driven by rising industrialization, urbanization and affluence, according to Fitch Ratings.

Vietnam Electricity (EVN), the sole distributor of electricity in the country, posted a revised pre-tax profit of VND8.14 trillion (US$349.8 million) for 2017, VND1.5 trillion (US$64.48 million) higher than the previously announced figure and up 58% year-on-year, the power company said on its website.  

EVN's revenue in 2017 reached VND300 trillion (US$12.89 billion), up nearly 8% year-on-year, while the company contributed VND19.66 trillion (US$844.8 million) to the state budget, down 7.3% year-on-year, according to EVN's latest report on its business performance result in the 2015 - 2017 period. 

Last year, the state-run company set aside VND118.23 trillion (US$5.07 billion) for development investment, down from the previous number of VND133.36 trillion (US$5.72 billion) in 2016. 

By the end of 2017, EVN had invested VND126.1 trillion (US$5.45 billion) in nine wholly-owned enterprises, including VND43.5 trillion (US$1.86 billion) in three power generation companies, VND24.6 trillion (US$1.05 billion) in National Power Transmission Corporation, and the remaining in five power distribution companies. 

In 2018, EVN set revenue target of VND328.9 trillion (US$14.13 billion), up 8.8% year-on-year and VND117.84 trillion (US$5.06 trillion) for development investment. 

Additionally, two EVN projects, namely the Duyen Hai 3 Extension Thermal Power Plant and the Song Bung 2 Hydropower are expected to become operational in 2018. 

Electricity demand in Vietnam is forecast to continue increasing at an average rate of 9% per annum, driven by rising industrialization, urbanization and affluence, according to Fitch Ratings. 

EVN is currently the largest electricity generator in Vietnam, which owns and operates about 61% of the country's total installed generation capacity, followed by PV Power with 12%. 

Vietnam has a solid national electrification ratio of 99.2%, with the ratio reaching almost 100% in urban areas, stated the rating firm. According to management, all electricity consumers are billed regularly and collection rates are between 99% and 100% across EVN's five power distribution companies. 

In early June, Fitch Ratings assigned EVN a Long-Term Foreign-Currency Issuer Default Rating (IDR) of `BB` with a stable outlook, marking the first government-linked non-financial corporate in Vietnam rated by Fitch. 

The move means EVN is one step closer to issuing USD bonds and strengthening its financing capacity. 

New private airlines boost Vietnam aviation industry development

Vietnam will face a severe shortage of electricity in the next few years as domestic demand is surging rapidly while investment in the industry isn`t attractive due to low retail price.

According to experts, the country's robust industrialization process has fueled demand for electricity. The government estimated electricity consumption to grow by 10-12 percent annually through 2020, thus power shortages are expected during this period if adequate measures are not taken to increase the supply accordingly.

In the revised Power Development Plan VII (PDP 7) released in 2017, installed power-generation capacity in Vietnam amounts to 42.13 GW, of which 37.6 percent is hydropower and 34.3 percent is coal-fired thermal power.

It also sets out US$148 billion worth of investments to increase power generation and develop the electricity network, with US$40 billion to be spent in the 2016-2020 period, of which 75 percent is to be directed to power sources and 25 percent to grid development.

Deputy Minister of Industry and Trade Hoang Quoc Vuong said that the country will need to generate an addition of 6,000-7,000 MW of power yearly to meet the nation's GDP growth of 7 percent in the next few years.

It means the country will need US$10 billion per year for the construction of power plants, exclusive funding for power transmission and distribution, Vuong estimated.

Head of the Party Central Committee for Economics Affairs Nguyen Van Binh said that the state budget cannot afford the whopping investment capital amount amidst the nation's high public debts.

As the country's largest electricity producer Electricity of Vietnam (EVN)'s self-financing and other sources of debt financing only meet about 66 percent of the total investment requirement, independent power producers are expected to carry a large portion of the investment in the country's power generation sector, including those to be developed by foreign investors. 

However, the country currently has only 4 BOT power plants invested by foreign firms in operation while 14 projects are still under negotiation, far behind schedules according to the Power Development Plan VII. Among them, AES Corporation from the US has invested in the US$2.1 billion Mong Duong 2 Power Plant in Quang Ninh Province, which has a designed capacity of 1,240 MW. 

Experts attributed the less attraction of the country's power industry to the uncompetitive power retail price. Currently, the government strictly regulates the retail price, which is recommended by the Ministry of Industry and Trade and then requires approval by the prime minister. A unified tariff is applicable across the country and is low in comparison with other countries in the region. The government has so far also decided not to increase the power retail price this year to control inflation under 4 percent as targeted.

To attract investors to the country's power industry, Deputy minister of Industry and Trade Hoang Quoc Vuong proposed that special regulations should be applied for billion-dollar power plants to speed up its construction, of which price policy should follow market mechanism.

The MoIT and EVN have been also working on a roadmap for electricity price hike and the gradual elimination of government control in the sector, Vuong said. 

World Bank expert Dilip R.Limaye also expected that a higher power retail price will force consumers to save energy as in other countries such as China and India. 

In Vietnam, despite the government's efforts, the energy saving rate has remained modest with only 6 percent in the 2011-2015 period, the expert said.

Japan's KAO reports accumulated losses of US$43 million in Vietnam in 20 years

In the past, large multinational companies such as Coca Cola, Pepsi, or Metro had been in the tax agency`s list of suspects of transfer pricing for their losses for years.

KAO Vietnam's US$1-trillion (US$43 million) losses in its 20 year-presence in Vietnam have taken many by surprise, as companies operating in similar fields such as Diana or Kimberly-Clark stay profitable every year, according to financial newswire CafeF. 
 
In 2016, KAO Vietnam's revenue reached VND1.07 trillion (US$45.91 million) posted of over VND1 trillion (US$43 million) for the first time since its establishment, according to CafeF. 

The company's cost of goods sold accounted for 65 - 70% of the total revenue, leading to its gross profit margin of over 30%. 

KAO Vietnam's gross profit margin in 2016 stood at 34%, which was lower than that of its competitors including Kimberly-Clack or Diana, whose figures are at over 40%. 

Nevertheless, KAO Vietnam's recurring costs were quite high, of which sale expenses accounted for over 30% of the revenue and caused losses for the company. 

The company reported loss of VND23 billion (US$986,930) in 2016, while the figure reached nearly VND80 billion (US$3.43 million) in 2015.

The incident was not a one-off, but has been going for nearly 20 years of its operation in Vietnam, raising the question of transfer pricing. 

In the past, large multinational companies such as Coca Cola, Pepsi, or Metro had been in the tax agency's list of suspects of transfer pricing for its losses for years. 

Under this circumstance, in 2013, a number of FIEs, including KAO Vietnam came under scrutiny for reporting losses in a long period of time. Afterwards, KAO Vietnam reported a loss of VND23 billion (US$986,930) in 2016, down 70% year-on-year.

Although private enterprises only invested in 14% of the number of airports in the world, those airports are serving 41% of international air passengers, according to aviation experts.

Many experts are of the opinion that the private sector will have a more important role in Vietnam's aviation industry development in particular, and economic growth in general.  

On the global scale, the aviation industry contributes 3% to the world's GDP, said Huynh The Du, Fulbright Economics Teaching Program's senior lecturer at a conference held by BizLIVE on July 26. 

In 2014, the world had a total of 1,400 airlines with 26,000 commercial planes, operating over 32 million flights, Du added. 

"As of 2017, the aviation industry generated revenue of US$754 billion and profit of US$34.2 billion. In this context, Vietnam is one of the most dynamic aviation markets with a similar growth rate to the Philippines'," said Du. 

By 2036, it is projected that the number of air passengers will double with countries in the Asia - Pacific region as the driving force for growth in the next 20 years, reaching 2.1 billion at the growth rate of 4.6% per annum, he added. 

In case of Vietnam, the country's population in 2034 is expected to reach 105 million, while the GDP per capita will be US$18,000 - US$22,000, Du continued. With this level of income, the amount of air passenger is calculated at 58 million per year, which can go up to 110 million per year for an income level equivalent to Thailand's. 

The International Air Transport Association (IATA) estimated that between now and 2020, passenger transportation in Vietnam is expected to rise by 16%, and from 2020 to 2030, by 8%. Cargo transportation will increase by around 18% until 2020, and 12% between 2020 and 2030. The growth will make Vietnam the world's fifth fastest-growing aviation market by 2035.

Under such estimation, Vietnam would need at least 10 additional new airlines to meet growing demands. As a result, it is inevitable that new private airlines are introduced to create more traveling options for passengers. 

"The private sector has emerged as a new engine of growth for Vietnam's aviation industry," Du stressed. 

Echoing Du's view, Nguyen Thien Tong, an expert in aviation engineering of the University of Technology emphasized the growing importance of private enterprises during the development course of aviation industry. 

According to Tong, private enterprises invested in 14% of the number of airports in the world, which are serving 41% of international air passengers. Therefore, Vietnam should encourage more private enterprise to invest in the industry, Tong added. 

Tong referred to a study on the spillover effect of the aviation industry, stating a domestic traveler contributes US$100 on average to economic development, while this figure is US$500 for foreign tourists. "200 million foreign tourists would contribute US$10 billion to the economy," Tong continued. 

Economist Ngo Tri Long said air transport and tourism are "twin brothers" that complement each other. 

Long stated Vietnam remains potential for aviation industry and tourism development. "Aviation industry has the fastest growth rate among transport modes, which are placing more pressure on transport infrastructure. However, if we can address this issue, it will turn into huge development potential," Long added.

In particular, for a new airline like Bamboo Airways, a niche market is its best option, said Long.

The idea was well-received by Trinh Van Quyet, chairman of Vietnam's conglomerate FLC Group. 

"In the 2019 - 2020 period, FLC Group will have over 20 resort complexes. I believe a combination of air transport and tourism will be the way moving forward for Bamboo Airways. Our tourism infrastructures and network of resorts have brought benefits to other airlines. Thus, there is no reason for this project to fail," Quyet stressed. 

Bamboo Airways plans to provide direct international flights to destinations where FLC Group has resorts, such as Quy Nhon, Quang Ninh, Hai Phong, Phu Quoc, and Nha Trang, in addition to domestic flights connecting tourist spots in Vietnam.

"We will prioritize domestic routes which are often ignored by other airlines," Quyet concluded.

Surging demands for medicines and healthcare products in the wake of the universal health coverage expansion and the high economic growth have helped Vietnam become a fruitful market for both domestic and foreign firms.

According to Business Monitor International (BMI) Research, after gaining turnover of US$5.2 billion last year, up some 10 percent against the previous year, the country’s pharmaceutical market is continuously on track for steep growth.
 
The country’s expenditure is high compared to regional peers, and thus offer long-term benefits to innovative drug companies, BMI said, adding that the growing demand for medicines and medical treatment will be also supported by the expansion of the country’s social health insurance, rapid income growth and improvements in healthcare delivery.

BMI also forecast that Vietnam’s pharmaceutical industry is likely to be worth US$7.3 billion next year. By 2021, per capita spending on pharmaceutical products is expected to be worth US$55, nearly double the current figure of US$30. 

Forecast from Vietnam Report Company also showed that the country’s demand for drugs is expected to rise due to increasing population and income, noting that the average spending of Vietnamese people on drugs rose from US$9.85 in 2005 to US$22.25 in 2010, doubled to US$37.97 in 2015, and US$56 in 2017.

The average growth rate of spending on drugs was 14.6 percent during 2010-2015 and is set to maintain a rate of at least 14 percent until 2025. Spending is forecast to double to US$85 per person in 2020 and US$163 in 2025, the report showed.

Not surprisingly, both local and foreign firms have recently decided to jump in the country’s fruitful pharmaceutical market while drug firms are also stepping up investments to improve their competitiveness.

Vingroup, the country’s leading property developer, has recently set its sights on the sector with the launch of Vinfa JSC. The company plans to spend VND2.2 trillion (US$96.5 million) to set up a 10 hectare drug manufacturing and research centre in Gia Binh district in the northern province of Bac Ninh.

Vinfa’s first priority is research into and production of traditional medicines of Vietnamese origin for both the domestic and export markets. Besides, it will also make functional food, vaccines, and medical equipment of international standards through the collaboration with partners from the US, Europe and Australia to acquire know-how and technology.

Earlier, Vinamilk, the country’s largest dairy producer, and Hau Giang Pharmaceutical JSC (DHG Pharma) signed a deal to collaborate in pharmaceutical research and development.

Under the strategic partnership, DHG Pharma and Vinamilk will jointly build new co-brand products or develop existing ones to serve the healthcare needs of people. The two firms will also coordinate in supplying raw material to produce supplementary food products.

Besides Vinamilk, Japan’s Taisho Pharmaceutical Holdings has recently also planned to invest more in DHG Pharma. Right after DHG Pharma announced that it had completed the procedures to lift the foreign ownership cap from its current rate of 49 percent to 100 percent from July 4, Taisho proposed to purchase an additional 7.06 percent stake in the Vietnamese firm, lifting its ownership to 32 percent in the Vietnamese firm.

DHG Pharma hopes to sustain average revenue growth of 15 percent a year and reach US$300 million by 2020, becoming Vietnam’s biggest generic drug maker and acquiring a 10 percent share of the locally made drug market.

Another major drug company, Traphaco, plans to produce foods such as probiotics for children, and upgrade some of its production facilities to meet EU-GMP/PIC/S-GMP standards this year.

With the upgraded factories, Traphaco aims to become one of the largest drug producers in Vietnam by 2020 with market capitalization of VND10 trillion (US$454.5 million), revenues of VND4 trillion (US$181.8 million).

US-China trade war shows warning signs to Vietnam: Fulbright lecturer

As the US-China trade war may escalate to such an extent that 100% of Chinese exports to the US are subject to tariff, other countries, including Vietnam, may become destinations for the US-bound exports from China, said a Fulbright lecturer.

There has been no clear impact from the US-China trade war on Vietnam's trade activities, however, it is a different story with the country's monetary market, indicating warning signs for Vietnam, according to Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program in Ho Chi Minh City.
 
In early July, Washington began the first round of its trade war with Beijing by imposing an additional 25% tariff on 818 Chinese merchandise groups worth about US$34 billion.  The second wave of 284 goods worth another US$16 billion is expected to follow suit.

Recently, President Donald Trump has ordered the US Trade Representative (USTR) to begin the process of imposing tariffs of 10% on an additional US$200 billion of Chinese imports, meaning nearly 50% of all Chinese imports to the US would be subject to a tariff. 

However, the initial figure of US$34 billion is quite low compared to a total of US$505 billion of Chinese imports to the US in 2017, which are mainly mechanical and technological products. Meanwhile, consumer goods account for only 1% of the total, which will hardly impact China's export turnover to the US. 

Among the 818 Chinese imports subject to tariff, Vietnam exported US$1.2 billion worth of similar products to the US in 2017 and of US$545 million in the first five months. Therefore, it is hardly considered an opportunity for Vietnam as those products are not its main export staples. 

Moreover, those mentioned US-bound Chinese products are not consumer goods, so it is supposed to find another destination instead of Asia, including Vietnam. 

Nevertheless, it is the monetary market that Vietnam starts feeling the heat of the US-China trade war. Since the war began, the Chinese yuan (CNY) devalued rapidly, going from the USD selling price of CNY6.3 in April to the current of over CNY6.7.

A devaluation of CNY against the USD would mean an appreciation of VND against the CNY, placing more pressure on the VND to depreciate. This led to the State Bank of Vietnam (SBV)'s decision to increase the selling price of the greenback to commercial banks.

With the nation's current foreign exchange reserves of approximately US$63 billion, the central bank has sufficient resources and instruments to stabilize the USD/VND exchange rate. However, SBV should be flexible in managing the exchange rate, as a late intervention may potentially cause disruption in the financial market, Thanh suggested. 

Accordingly, the SBV's recent increase of the USD selling price may be influenced by external factors. 

However, as the trade war may escalate to such an extent that 100% of Chinese exports to the US are subject to tariff, other countries, including Vietnam may become destinations for the US-bound exports from China. This time there will be mainly consumer products. 

More worryingly, while the USD/VND exchange rate is kept stable, CNY's further depreciation will make Vietnamese products less competitive against the Chinese. 

As Vietnam is part of the Chinese's supply chain of electronic products to the US, a higher tariff imposed will cause a negative impact on Vietnam's exports to China. 

Finally, more Chinese products are faking Vietnamese origins in a bid to enjoy preferential rates when exporting to the US. 

In May, the US slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded US anti-dumping and anti-subsidy orders.

Specifically, US customs authorities will collect anti-dumping duties of 199.76% and countervailing duties of 256.44% on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate.

The consequence of the issue will not be restricted to Vietnamese enterprises but the whole sector and the credibility of the country. The US then may take steps to reduce trade deficit with Vietnam, which is currently at a high level, Thanh noted. 

Foreign giants start targeting Vietnam’s energy market

Foreign investment in liquefied natural gas-fuelled power projects will help Vietnam meet the increasing energy demands with reasonable prices while still ensuring the environment protection.

Vietnam has recently attracted many foreign corporations from the US, Switzerland and France to invest in gas-fired power projects.

Among them, Energy Capital Vietnam late last month reaffirmed its plan on the construction of a VND91.4 trillion (US$4 billion) gas-fired power plant in the Mekong Delta province of Bac Lieu.

Earlier, the US-based company signed a memorandum of understanding (MoU) with the Bac Lieu People’s Committee to build the 100ha plant, which has a total designed capacity of 3,200 MW. The plant will be implemented in three phases.

President of the US’s AES Group Vietnam David Stone has recently also said his company is carrying out researches for its investment in the Son My 2 gas-fired thermal power project in the form of Build-Operate-Transfer (BOT) in the central province of Binh Thuan.

Son My 2 LNG Power Plant Project is one of the nine gas thermal power projects assigned by the government to PetroVietnam as the investor and the electricity project under the VII Power Development Master Plan.

The project is expected to include three Son My 2.1, Son My 2.2 and Son My 2.3 plants with an expected capacity of 750 MW each, using imported gas for power generation at the Integrated Industrial Complex - Son My Petroleum. According to the plan, three plants under the Son My 2 LNG Power Plant Project will come into operation in 2023, 2024 and 2025 respectively.

The Son My 1 gas-fired power plant in Binh Thuan is also on the radar of France’s EDF. Meanwhile, Switzerland-based Astra Transcor Energy’s AOT Energy is also seeking cooperation with PetroVietnam to build a US$650 million LNG complex.

Another investor from the US, General Electric (GE), has recently inked a framework for co-operation with state-owned energy firm PetroVietnam to develop two gas-fired power plants with a combined capacity of 1,500MW in the central province of Quang Nam, using about 830 million cubic meters of gas from the Ca Voi Xanh (Blue Whale) gas field.

Vietnam's robust industrialization process has fueled demand for electricity in recent years. The government estimated electricity consumption to grow by 10-12 percent annually through 2020, thus power shortages are expected during this period if adequate measures are not taken to increase the supply accordingly.

Deputy Minister of Industry and Trade Hoang Quoc Vuong said that the country will need to generate an addition of 6,000-7,000 MW of power yearly to meet the nation's GDP growth of 7 percent in the next few years.

It means the country will need US$10 billion per year for the construction of power plants, exclusive funding for power transmission and distribution, Vuong estimated.

The country has so far still depended mainly on coal-fired thermal and hydropower projects which have caused many negative impacts on the environment such as flooding and deforestation.

Meanwhile, it won’t be easy to develop renewable energy sources such as wind and solar power due to its expensive investment costs. Thus, it will be reasonable to develop gas-fired power projects before the country can afford renewable energy projects.

According to experts, emissions of gas-fired power plants are much lower than coal-fueled power plants and there is also minimal waste that can pollute the environment.

Bac Lieu’s authorities have so far evaluated the gas-fired power project as feasible with reasonable prices which are lower than power produced by coal-fueled plants, wind and solar farms.

In Vietnam’s new FDI attraction strategy in the next five years, Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), also suggested that among priority sectors, Vietnam should choose modern and high-tech investors to develop gas-fired thermal power projects.

Connectivity gives boost to Hanoi's neighboring real estate

Hanoi real estate market is witnessing a strong shift from the inner city to the outskirts and beyond.

Many areas on the outskirts of Hanoi have awaken up and emerged as new real estate spots thanks to the advantage of large land funds and more synchronized connectivity with the inner city.
 
The Ecopark urban area, located in Hung Yen province adjacent to Hanoi, has attracted buyers becasue it spans on a large area and is well connected to the center of Hanoi through new brigdes across the Red river. 

Ecopark's real estate products are ussualy highly demanded, even at the time the local real estate market was in the doldrums.

Representatives of Viet Hung Urban Development and Investment JSC, the investor of Ecopark, said that the attraction of Ecopark stems from not only the green design and synchronous infrastructure, but also from the varierty of products that range from low-cost to high-end and luxury.

The success of Ecopark is expected to attract more large developers and create a driving force for the whole region, as the Phu My Hung high-end project in District 7 Ho Chi Minh City did, said the representative.

Like Ecopark in Hung Yen province, the real estate market in Vinh Phuc province to the north of Hanoi has become increasingly bustling with a strong increase in both supply and demand. the capital town of Vinh Yen is becoming the center of the real estate market in Vinh Phuc, and holds strong potential for development in the future.

According to industry insiders, real estate in Hanoi's neighboring provinces still has large room for development. Besides Hung Yen and Vinh Phuc, Thai Nguyen and Bac Ninh have also caught investors' attention thanks to the presence of hi-tech industrial clusters and giants from South Korea and Japan.

In Thai Nguyen, by the end of the second quarter of 2018, up to 3,000 apartments, more than 400 villas, and a large number of land plots were sold.

In Bac Ninh province, more than 10,000 landed houses have been developed in new industrial zones and administrative areas such as Bac Ninh, Tu Son, Thuan Thanh, Tien Du, Que Vo, Yen Phong, with the absorption rate reaching 60%.

Connectivity in the northern region has become stronger with the government's master plans. The prime minister in 2015 approved the plan for transport development in the northern key economic region until 2020 with a vision to 2030.

In May 2016, the prime minister approved the revised zoning plan of Hanoi and its surroundings until 2030 with a vision to 2050. One of the most important goals of the new planning is to provide a basis for the elaboration and adjustment of provincial and regional construction planning along the belt roads, inter-provincial highways, special areas and functional areas, general planning of urban areas, and technical infrastructure planning.

Those plans also serve as the basis for the development of urban centers and specialized urban areas that can be a driving force in the region by strengthening the linkage and effective utilization of the ring road system and economic corridors connecting and passing by Hanoi.

Vu Dang Dung from the Hanoi Real Estate Club, a member of the Vietnam Real Estate Association, said that the real estate market in the provinces surrounding Hanoi, especially those to the east and south, are benefiting from the infrastructure projects that are well designed and synchronous.

“Strategic decisions by the government have facilitated the infrastructure system in general, especially the transport infrastructure that connects Hanoi's crowded center with areas previously thought to be remote. But the most important point is that the regional connectivity strategy has provided an opportunity for the real estate market in the provinces around Hanoi to boom,” Dung stressed.

Foreign investors step up interest in Vietnam's textile accessories

Vietnam`s export value of textile and garment materials is expected to grow as foreign investors are pouring millions of USD into the industry.

Foreign investors have been stepping up interest in Vietnam's textile accessories through the growing presence of million-dollar projects, according to Dien Dan Doanh Nghiep (Business Forum) newspaper.
 
In 2017, export turnover of textile and garment materials reached a record high of USD$1.21 billion, for which the foreign-invested sector played a major part in this achievement. 

In late July, Germany-based Amann Group started construction of Amann Vietnam sewing factory at Tam Thang Industrial Park in Quang Nam province, producing embroidery thread for garment and footwear industry. 

The project is designed to have a capacity of 2,300 tons per year with investment capital in the first phase of US$13.8 million. It is expected that the first phase will be put into operation in mid-2019 with a capacity of 1,000 tons per year.

Notably, the factory will produce high-quality sewing thread in accordance with European standards, opening the door for Vietnamese products to regional and world's markets. 

Additionally, Rio Industries from South Korea invested in a US$12-million polyester yarn production factory in Tay An Industrial Cluster in Quang Nam province. 

With capacity of 4,400 tons of products per year, the factory specializes in producing polyester, nylon and other kinds of sewing threads for local production and abroad. 

Early 2018, Japanese investors are licensed to build Ha Nam YKK Factory, specializing in producing zippers and raw materials for the garment industry with the production scale of 420 million products per year. 

The project has total investment capital of US$80 million and is located in Dong Van III Industrial Zone in Ha Nam province, aiming to meet growing demands for these kind of products in the world market. 

The growing investment activities in factories producing textile accessories in Vietnam are thanks to them being targeted as priority investment in accordance with Decision No. 68 of the Prime Minister approving the program of supporting industry development in 2016-2025, including sewing thread textiles and garments; chemicals, auxiliaries, dyes for dyeing finishing of fabrics; garment accessories: chamois, mex, zipper, ribbon, among others. 

The move is expected to support the government's effort in completing a supply chain in the garment and textile industry, with the aim of reducing the sector's dependence on imported raw materials. 

Vietnam investment ministry warns over China's ODA loans

A work used China's ODA in Hanoi

Interest rates from Chinese official development assistance (ODA) loans are nearly double those of other countries, coupled with less attractive loan terms.

Among Vietnam's ODA bilateral donors, the Ministry of Planning and Investment (MPI) has expressed concern over ODA loans from China, local media reported.  

According to the ministry, preferential credit loans from China are similar to export credit, which are conditional loans, referring to the recipient country needing to adhere to a number of project-related demands regarding the use of Chinese contractors, among others, coupled with less attractive loan terms compared to other donors. 

This would some point make the actual loan amount much higher than cases with competitive biddings. 

Chinese ODA loans carry interest rates of 3% per year, higher than that of Japan (0.4 - 1.2%), South Korea (0 - 2%), or India (1.75%). 

Moreover, Chinese loans are subject to 0.5% of commitment fee and 0.5% of administrative fee, while loan's duration and grace period are shorter than those of other donors, standing at 15 years and 5 years, respectively. 

All Chinese preferential loans are provided through the Export-Import Bank of China (Exim Bank).

"Chinese preferential loans are only suitable for projects with direct source of income and repayment capacity," the MPI stated. 

Moreover, some projects using Chinese ODA, contractors and equipment are experiencing delay, low quality and increasing investment capital. The most notorious case is the Cat Linh-Ha Dong skytrain project in Hanoi, which has four times extended the initial deadline and incurred a cost overrun of US$316 million to US$868 million.

Notably, one third of the 12 large-scale loss-making projects of the Ministry of Industry and Trade are financed by Chinese ODA loans, including Ninh Binh fertilizer plant, Ha Bac fertilizer plants, and Chemical, and Thai Nguyen Iron and Steel plant- phase 2.

Vietnam's top coffee maker posts US$34.4 million profit per year despite leadership crisis

The company remains one of the leaders in Vietnam`s food and beverage industry, despite its reputation being drowned in the conflict between the chairman and his wife for more than three years.

Vietnam's top coffee brand Trung Nguyen reported pre-tax profits of VND768 billion (US$33 million) in 2016 and VND681 billion (US$29.3 million) in 2017, respectively, despite the ongoing divorce dispute between the group's chairman and his wife, according to CafeF.vn.
 
A lower profit in 2017 was due to high sale and administrative expenses, coupled with depreciation of tens of billion VND for the group's recent acquisition of fleet of supercars, according to CafeF.

Nevertheless, the profit of around US$30 million per year helps Trung Nguyen remain one of the top companies in Vietnam's food and beverage industry. 

Trung Nguyen's net revenue over the last four years hovered around VND3.8 - 4 trillion (US$163.44 - 172 million).The flat growth was partly due to difficulties in Vietnam's coffee industry. Vinacafe Bien Hoa, Trung Nguyen's main competitor even saw a slump in its coffee revenue, down from VND2.3 trillion (US$98.87 million) in 2014 to VND1.7 trillion (US$73.06 million) in 2017. 

However, as Trung Nguyen is struggling to prevent a declining trend in its profit, Vinacafe Bien Hoa found its new engine for growth in energy drink to keep the latter's revenues in range of VND3 - 3.3 trillion (US$128.91 - 141.8 million), in turn narrowing profitability gap between the two. 

In 2014, Trung Nguyen recorded a pre-tax profit of VND1.3 trillion (US$55.86 million), four times higher than the figure posted in 2013. The company's profit has been on a declining trend since 2015, when the conflict between Trung Nguyen's Chairman Dang Le Nguyen Vu and his wife Le Hoang Diep Thao was made public. 

A year later, Vu ousted Thao from her post as deputy director and started a lengthy divorce process. The follow up was a legal battle over Trung Nguyen's ownership, as each side is accusing each other of obstructing the company's operations. 

In the latest controversial move, Thao argued that Trung Nguyen had misused nearly VND1 trillion (US$42.98 million) in marketing, buying luxury cars, and other expenses from January 1, 2015 to January 24, 2017.   

On August 13, Vu for the first time met reporters after five years staying away from the limelight. With regard to the super cars, he said it was part of the US$5-billion educational program, which will provide books for people across the country. 

He added the super cars was a PR stunt, making the program become well-known among the public. Eventually, those cars still belong to Trung Nguyen Group, which should not be considered as a waste. 

Seminar seeks ways to boost Vietnam-Bangladesh trade

The Vietnamese Embassy in Bangladesh and the Bangladesh-Vietnam Chamber of Commerce and Industry recently co-organised a trade promotion seminar in Chittagong city.

The seminar aimed to promote bilateral trade by seeking measures to remove difficulties for businesses of both nations.

Speaking at the event, Vietnamese Ambassador Tran Van Khoa pointed out a couple of key barriers hindering bilateral trade growth. 

Firstly, the two countries’ exports currently rely on several commodities, such as Vietnam’s clinker, cement and rice and Bangladesh’s pharmaceutical products, meaning that two-way trade remains low and unstable.

Secondly, Vietnamese enterprises are facing many difficulties in shipping goods to Chittagong port – the largest of its kind in Bangladesh, where up to 90 percent of import-export activities in the country occur.

Limitations in goods loading and unloading, as well as in port infrastructure have led to congestions at the port, causing losses for Vietnamese businesses, Khoa said.

To solve these difficulties, the diplomat advised the two countries’ enterprises to intensify information sharing, step up product promotion via trade fairs and exhibitions, thus helping diversify export products.

He requested that the Chittagong Chamber of Commerce and Industry (CCCI) provide more support for Vietnamese businesses, especially in speeding up customs clearance at the port to minimise costs. This would help consolidate the Vietnamese side’s confidence when working with Bangladeshi partners, Khoa noted.

CCCI Chairman Mahbubul Alam called on Vietnamese enterprises to increase investment and set up joint ventures with Bangladeshi partners in the fields of information technology, telecommunications, and agricultural and seafood processing.

He affirmed the CCCI’s commitments to creating the most favourable conditions for Vietnamese firms who want to do business and make investment in Chittagong.

At the seminar, Bangladeshi enterprises showed their interest in expanding cooperation with Vietnamese partners, especially in aquaculture, food processing, building material production, and in establishing joint venture projects in information technology, telecommunications, and electronic spare parts.

Two-way trade enjoyed a year-on-year rise of 57 percent to reach 924 million USD in 2017, of which 869 million USD came from Vietnam’s exports. The number of Vietnamese enterprises exporting goods to Bangladesh in 2017 increase by 7.4 percent year-on-year. Vietnam ships clinker, cement, rice, fibre, mobile phones, and components to Bangladesh, while importing pharmaceutical products, seafood, and tobacco materials from the country.

Energy exhibitions open in HCMC     

Two international power generation, transmission, distribution and energy exhibitions, Electric & Power Vietnam 2018 and Renewable Energy Vietnam 2018, opened yesterday in HCM City.

The two events, both at the Saigon Exhibition and Convention Centre, feature more than 180 exhibitors from 22 countries and regions and six international group pavilions from India, Germany, Taiwan, South  Korea, Turkey, and mainland China, the organiser said.

On display are engineering equipment and technologies for power generation, distribution and transmission such as intelligent power capacitors (a new product in Asia), moulded case circuit breakers, data  voice office and industry solutions, replay test set, and others.

Renewable Energy Vietnam showcases solar cells, CIGS thin – film photovoltaic modules, testing and diagnostic equipment for solar and wind power along with optimised renewable energy solutions.

Several conferences and seminars will be held on the sidelines, including “Solutions to encourage and develop Renewable Energy in Viet Nam” and “An introduction to production processes and technical  requirements for manufacturing electric components and accessories for the renewable energy sector”.

BT Tee, general manager of UBM Vietnam, the organiser, said Viet Nam’s electricity demand is expected to grow by 10-12 per cent annually through 2020 as industrial and domestic use increases, offering  opportunities to sellers of equipment and technology for gas-fired power generation and renewable power and investors in IPP (independent power producer) and transmission and distribution projects.

Renewable energy would play a vital role in Viet Nam, and the Government has issued policies to encourage the development of renewable energy to cater to demand in future, he said.

The exhibitions are expected to “deliver new opportunities to both buyers and sellers alike in Viet Nam’s buoyant energy industry”, he said.

The events will go on until September 14 and are expected to attract 5,000 trade visitors.