BUSINESS NEWS 25/7
Experts have high hopes for inflation scenarios
The 2019 average inflation set to jump by 3.17 - 3.41 per cent would yield a number of positive effects on the country’s macro-economic stability, experts have said.
According to the General Statistic Office of Vietnam, consumer price index (CPI) for the first half of the year upped by 2.64 per cent, the lowest rate seen during the past three years and at an inconsiderable high against with the inflation ratio of 1.87 per cent seen during the six-month period.
The CPI indicator would facilitate the implementation of macro-economic stability and inflation control.
The Government’s Steering Committee on Price Management has sketched out two scenarios for the inflation rate during the remainder of the year, which is predicted to stretch between 3.17 to 3.41 per cent.
Nguyen Ba Minh, head of the Economics and Finance Institute under the Academy of Finance, said food prices are set to soar during the remaining months of the year, while the price of pork could skyrocket due to supply shortages stricken by the ongoing African swine fever.
The monthly basic salary for civil servants, public employees, and those working in the armed forces rose from VND1.39 million (US$59.77) to VND1.49 million (US$64.07) as of July 1. This puts additional pressures on CPI. Another threat to CPI comes from the increasing prices of materials worldwide.
However, the continued sluggish export of farm produce along with its subsequent slowdown in domestic consumption would help narrow CPI growth, Minh noted.
A wide range of measures could be taken to stabilize commodity prices, regulate the monetary policy for macro-economic stability, and curb inflation; all of which would aid in the control of CPI growth, the expert added.
Ngo Tri Long, former head of the Price and Market Research Institute under the Ministry of Finance, said that in order to curb CPI within the projected limit of 4 per cent for this year, more efforts should be exerted to tighten controls on inflation and ensure the effective implementation of macro-economic stability goals.
Inflation control should keep up with market rules instead of following rigid administrative decisions. The price adjustment of an essential commodity must be scrutinized to minimize spillover effects on other goods, Long noted.
The prices of petrol and oil in particular must be adjusted in line with the national petroleum price stabilization fund and its proper scenarios outlined in response to price hikes.
A closer watch should be made into the price of construction materials and properties along with the supply, demand, and price of properties in major urban areas, in order to put forth measures on stabilizing the domestic market.
Rubber exports rake in US$841 million in H1
Vietnam reaped more than US$841 million from rubber exports during the first half of this year, an annual rise of 2.6 per cent, according to Vietnam Customs.
Statistics released by the General Department of Vietnam Customs show that rubber exports amounted to 614,300 tons during the first six months of the year, totally valued US$841.83 million, an annual hikes of 8.9 per cent and 2.6 per cent, respectively.
In June alone, the country racked up US$174.45 million from exporting 122,750 tons of rubber, up 56.1 per cent in value and 58.4 per cent in volume against with the previous month.
China topped the list of importers of Vietnamese rubber while making up 64.3 per cent of the country’s total rubber exports for the first half of 2019 with the purchase of 387,100 tons, worth US$523.9 million, up 6.56 per cent and 0.77 per cent, respectively.
Following the Asian giant was the EU with a proportion of 7.4 per cent of the country’s total rubber exports, and Southeast Asian countries with 4.8 per cent.
Rubber shipments to India, the Republic of Korea, and Malaysia rebounded in the reviewed period.
The list of rubber importers was filled with new comers, including Sri Lanka, Bangladesh, and Peru, which bought in 3,900 tons, 3,400 tons, and 793 tons, respectively from Vietnam during the six-month period.
This diversification could be seen as the initial effects of the implementation of a strategy to expand export markets and lessen the reliance on major traders and relevant risks.
Cashew export volume up more than 21 per cent in June
Viet Nam exported 39,200 tonnes of cashew nuts in June, earning US$275.6 million, according to the General Department of Customs, up 21.4 per cent in volume but down 6 per cent in value year on year.
In the first six months of this year, cashew nut exports reached 195,700 tonnes, worth about $1.5 billion, up 12.2 per cent in volume, but down 12.1 per cent in value year on year.
The reduction in value was due to a plunge in the export price of cashew nuts in the first six months of the year. The average price dropped by 21.5 per cent year on year to $7,613 per tonne.
Now, the three largest cashew export markets of Vietnamese cashew nuts are the US, China and the Netherlands, accounting for 32.3 per cent, 14.1 per cent and 9.5 per cent of the total export value, respectively.
The General Department of Customs said cashew nut exports to the US in the first six months of the year reached 63,700 tonnes, worth $480.7 million. Those figures fell 4 per cent in volume and 25.7 per cent in value compared to the same period of 2018.
Meanwhile, during the first six months, Viet Nam gained strong growth in cashew nut exports to China, the second largest export market of local cashew nut, at 53.2 per cent to 28,200 tonnes year on year. The export value of cashew nuts rose 24.8 per cent year on year to $221.5 million.
In June, exports of cashew nuts to China increased by 143.8 per cent in volume to 6,600 tonnes and 104.2 per cent in value to $51 million compared with June 2018.
Ta Quang Huyen, General Director of Hoang Son 1 Company, said walnuts and almonds, the two main competitors of cashew nuts in China, have faced high tariffs so are very expensive. This has pushed cashew nut consumption up sharply. It is expected China will buy a huge volume of cashew nuts from Viet Nam this year.
He also said Viet Nam’s total export volume of cashew nuts this year end would surge strongly because of the world’s high demand for cashew nuts for holidays.
PVN facing difficulties in ensuring national energy reserves
The Vietnam Oil and Gas Group (PVN) needs to set up a national energy reserve centre to deal with emergencies when there are interruptions in the supply source, said Deputy General Director of Vietnam Petroleum Institute Nguyen Hong Minh.
Speaking at the seminar entitled ‘Ensuring National Energy – The Role of the Petroleum Industry’ held in Ha Noi on Thursday, Minh said the establishment of the energy reserve centre would go along with the country’s energy savings solutions.
“In addition, the promotion of exploring energy resources, including oil and gas, will be a regular solution to enhance the exploration capacity of primary resources and reduce the dependence on the other suppliers,” Minh said.
In recent years, Minh said PVN has signed very few petroleum contracts, reducing drilling activities, with investment capital at only 25 per cent compared to previous years.
“While PVN's resources are still limited, the call for foreign investment in this risky sector is also greatly entangled by policies, which are not appropriate in the current context,” Minh said.
Chairman of PVN Tran Sy Thanh said the oil and gas industry had made an important contribution of oil, gas and power to ensuring national energy security as well as the country’s GDP growth, creating many jobs.
Thanh said for many years, the petroleum industry had contributed to GDP growth with a proportion of over 20 per cent, accounting for over 30 per cent of the total State budget revenue and about 20 per cent of the country's total export value.
“Even with many changes around the world and the domestic economy, with many industries and fields of domestic production declining, the oil and gas industry maintains growth and ensures national energy security, contributing to macroeconomic stability, curbing inflation and stabilising the market,” Thanh said.
He said the goals for the oil and gas industry were set in the Party’s Resolution 41-NQ/TU on strategic direction and development of the oil and gas industry until 2025 on July 23, 2015. However, after nearly four years of implementation, it lacks specific solutions and policies to turn these goals into reality.
Thanh said the biggest challenge was that PVN had not yet approved the financial management regulation of its parent company, so its activities were very risky.
In addition, Thanh said the current financial mechanism for oil and gas drilling had many overlaps, leading to difficulties in increasing reserves.
“This is the biggest concern for ensuring the country's energy security.”
Speaking of the difficulties and challenges that the industry is facing, former Minister of Trade and Industry Truong Dinh Tuyen said that energy security had a great impact on food and financial security.
Tuyen said the Law on Petroleum should be amended soon to suit the new context, creating motivation for an important industry.
At the seminar, participants also focused on clarifying the requirements of ensuring national energy security on the basis of studying opportunities and challenges of the oil and gas industry in Viet Nam.
They also recommended solutions to ensure national energy security in the future, especially in the context of integration, globalisation and the trend of developing renewable energy.
The workshop also reviewed the development of Viet Nam’s oil and gas industry after 60 years of implementing Ho Chi Minh's testament (July 23, 1959 – July 23, 2019), which clarifies the role of the oil and gas industry in ensuring national energy security.
HCM City sets scorching economic pace in first half
HCM City’s economy grew by 7.86 per cent year-on-year in the first half of the year to VND611.5 trillion (US$26.3 billion).
The city People’s Committee announced this on July 19 at a meeting held to review the socio-economic performance in the first six months and finalise plans for the remaining months.
During the period the service sector grew at 8.06 per cent, industry and construction at 6.7 per cent and agriculture at 6.01 per cent.
Retail sales increased by 12.2 per cent to VND558.5 trillion ($23.99 billion).
Exports grew an estimated 9.2 per cent to $19.6 billion.
Foreign direct investment was worth $3.21 billion, up 20 per cent.
A total of 4.25 million international tourists visited the city, an increase of 10.9 per cent, with revenues from tourism topping VND73 trillion ($3.13 billion).
Speaking at the meeting, People’s Committee chairman Nguyen Thanh Phong said the city must make greater efforts to achieve its target of 8.3-8.5 per cent economic growth this year.
The city still faces many challenges such as illegal constructions; shortcomings in resolving cases related to land, site clearance and compensation; problems related to waste management and environmental protection, African swine fever; and rising drug crimes.
He called on the heads of government agencies and district leaders to focus on accomplishing eight major missions this year.
They include administrative reform, investment promotion, equitisation of State-owned enterprises, urban planning and management, clearing obstacles to speed up the progress of key projects, science-technology-innovation development, international cooperation, and ensuring national defence and security and maintaining social order and safety.
The city would continue two projects on developing logistics and e-commerce, he added.
Vietnam’s cashew export to China strongly rises
Vietnam raked in 221.47 million USD from exporting over 28,000 tonnes of cashew nut to China in the first half of this year, up 24.8 percent in value and 53.2 percent in volume year-on-year, according to the General Department of Customs.
In June alone, the country exported 6.6 million tonnes of the nut to China, earning 51 million USD, up 143.8 percent in volume and 104.2 percent in value compared to the same period last year.
According to Pham Van Cong, Chairman of the Vietnam Cashew Association, the Chinese Government is tightening regulations on export-import via borders between the two countries.
Vietnamese cashew is popular in choosy markets such as the US and the EU, and this is paving the way for domestic exporters to expand markets.
Along with seeking new markets, Vietnam aims to maintain major ones such as China, the Netherlands, and especially the US,which consumes up to 40 percent of the country’s cashew nuts.
Vietjet cooperates with Google to double utility for travellers
As a pioneering airline to cooperate with Google for Vietnam’s tourism promotion programme, Vietjet has announced a super promotion by offering 1,500,000 tickets priced only from 0 VND, applied to all international and domestic routes.
Promotional tickets are available during three golden days from July 23- 25, 2019 at website www.vietjetair.com, Vietjet Air application or found on Google Flights.
Aiming to become a “Consumer Airline”, Vietjet connects with major partners to create a diversified ecosystem based on modern technology platform to bring more attractive and quality service products that meet customer’s demand. Together with Google Flights, Vietjet will coordinate to promote and introduce Vietnamese images, people and tourism to the world, while offering convenient travel opportunities for Vietnamese and international travelers.
To mark this partnership with Google, the new age carrier Vietjet offers 1,500,000 tickets for flying around Asia from only0 VND and other surprising gifts. Promotional tickets are up for grabs from July 23-25, 2019 during golden hours between 12:00 – 14:00 and applied to all Vietjet’s routes.
Especially, flights connecting Vietnam and Japan will be in promotion at all time within the 3 golden days. The promotional tickets’ travel time is from September 5, 2019 to December 31, 2019 for domestic routes and from September 5, 2019 to June 25, 2020 for all international routes. This is a perfect chance to hunt your promotional tickets to enjoy a get-away trip around Asia and more opportunities for international travelers to explore Vietnam.
The partnership with Google Flights does not only introduce destinations that Vietjet has direct flights to, but also promise to offer exclusive, comfortable and best flying experience to passengers. With just a few simple steps, users can easily look up for detailed information such as flight times, flight numbers and tickets.
Being known for its core-values of “safety, happiness, affordability and punctuality”, Vietjet proudly creates memorable flying experiences for passengers on new aircraft with comfy seats, a choice of nine delicious hot meals served by beautiful and friendly cabin crews, also provides many other attractive and modern added-on services before, during and post flights.
Vietjet is the first airline in Vietnam to operate as a new-age airline offering flexible, cost-saving ticket fares and diversified services to meet customers’ demands. It provides not only transport services but also uses the latest e-commerce technologies to offer various products and services for consumers. Vietjet is a fully-fledged member of International Air Transport Association (IATA) with the IATA Operational Safety Audit (IOSA) certificate. Vietjet was named “Best Ultra Low-Cost Airline 2018 - 2019” and awarded the highest ranking for safety with 7 stars in 2018 and 2019 by the world’s only safety and product rating website AirlineRatings.com. The airline has also been listed as one of the world's 50 best airlines for healthy financing and operations by Airfinance Journal in 2018.
Currently, Vietjet operates around 400 flights daily, carrying more than 80 million passengers to date, with 120 routes covering destinations across Vietnam and international destinations such as Japan, Hong Kong, Singapore, the Republic of Korea, Taiwan, China, Thailand, Myanmar, Malaysia, Indonesia and Cambodia.
Domestic industry needs technology transfer
Vietnamese enterprises need more opportunities to get technology transfers from foreign investment activities and join ventures with foreign partners for sustainable development of the domestic industry.
Technology is important in improving global competitiveness for local manufacturers in Viet Nam, said BT Tee, general director of Informa Market Viet Nam.
The domestic industrial sector, which contributes 50 per cent of national GDP, has a strategic position in the sustainable development of the domestic economy and attraction of foreign investment.
Local enterprises must actively improve production scale and technology and connect with professional partners to develop the industry and participate in the global supply chain, said BT Tee.
To do this, some experts said local enterprises must overcome challenges in using data management systems. Viet Nam’s industrial sector and domestic enterprises face many difficulties in digitising and connecting data of enterprises as well as applying technology and smart machines in production lines.
With the development of Industry 4.0 and globalisation, local businesses need to actively take advantage of opportunities to increase competitiveness, according to the experts.
The global free trade market requires domestic enterprises to invest in research and production of smart machines that are capable of competing in many markets but not just meeting demand in the domestic market.
According to the Japan Trade Promotion Organisation (JETRO)’s branch in HCM City, foreign direct investment (FDI) from Japan to Viet Nam has increased significantly year by year, showing that the Japanese business community have always appreciated the Viet Nam market and strived to seek opportunities for cooperation with Vietnamese enterprises, reported the Vietnam News Agency.
For the industrial sector, Japanese enterprises have advantages in equipment and machinery with modern production technology to increase productivity and reduce costs.
With entry into free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the Vietnam-EU Free Trade Agreement (EVFTA), Viet Nam is a potential market for foreign businesses in almost all fields.
According to Marko Walde, Chief Representative of the Association of German Chambers of Commerce and Industry (AHK) in Viet Nam, the association wishes to connect businesses of the two countries, helping Vietnamese enterprises approach to new technologies and solutions in the manufacturing industry.
It will also help Viet Nam improve its competitiveness and sustainable development as well as support businesses in meeting the regulations of Viet Nam’s Government and the needs of modernising machinery and production lines for development of the domestic support industry.
Walde said for the manufacturing industry, effective exploitation of investment promotion channels and attraction of foreign capital is a challenge for both management agencies, as well as the business community.
According to the Ministry of Industry and Trade, the important issue for the domestic industry sector at present is to improve the low technical and technological level of enterprises. Statistics show that 59.6 per cent of local enterprises use outdated technology and only 2 per cent use high technology for production.
According to Viet Nam's industrial development strategy up to 2025, Viet Nam's industry will be more competitive and use modern technology, participate in global value chains in a number of specialties and fields as well as meet the basic requirements of the economy and export activities.
In addition, the Vietnamese mechanical industry is also oriented to develop with advanced technology, international quality products and deeper participation in the global value chain.
Number of SOEs may soar by 1,300 under new legal definition: official
A revision in the concept of state-owned enterprises (SOEs) could add 1,282 joint stock companies into the category of state firms and make them subject to the Law on State Enterprises, according to Phan Duc Hieu, vice director of the Central Institute for Economic Management (CIEM).
According to the law, state enterprises are economic organisations where the state owns the entire charter capital or holds dominant shares or paid-up capital, Hieu said at a conference discussing the revised draft of the Law on Enterprises on July 15.
A government report released last October showed Viet Nam has 526 SOEs in which the state holds 100 per cent of charter capital and 294 joint stock companies with capital contributed by government agencies.
However, data from the General Statistics Office (GSO) revealed that the country has 1,204 wholly state-owned companies and 1,282 with government agencies holding over a 50 per cent stake.
This would turn these 1,282 companies into SOEs in case of a new definition of the concept of SOEs, Hieu said.
The CIEM’s report revealed four options determining the concept of state firms in the Law on Enterprises, including those with the state holding 65 per cent of charter capital and having full control of their operations.
In the second option, enterprises have 50 per cent of charter capital owned by the state and they have to seek government approval on critical issues to their operations.
The third option defines SOEs as having 35 per cent of charter capital under state control, and the government has voting rights on the vision of the enterprises.
The last option only needs enterprises to have state capital, regardless of the amount, to be considered as a state firm. However, the government would have the rights to appoint members of board and executives, as well as making major decisions of these enterprises.
Hieu said the option to take would depend on the sentiment of investors, urging the prevention of the case where private investors hold dominant shares but companies are still under state control, creating conflicts in corporate governance.
Experts at the conference urged a more cautious approach in making a new concept on state firms. After 30 years of reform, the number of SOEs has been reduced to around 500, while the new interpretation of the concept of SOEs would increase this figure significantly.
Hieu said major investors holding a 50 per cent stake in state firms may consider offloading their shares if the government still has control over these firms.
Government plans to have 100,000 enterprises in agriculture by 2030
Prime Minister Nguyen Xuan Phuc has signed a Resolution covering solutions to encourage and foster investment in sustainable and safe development of agriculture.
The Resolution aims to untap huge potential of the country’s agricultural sector, especially land and human resources.
The Government plans to increase the number of enterprises effectively investing in agriculture to 80,000-100,000 by 2030. Of the total, around 3,000-4,000 are large-scale businesses, the Resolution reads.
The Government also sets the goals to maintain growth rate of agriculture, forestry and aquaculture at 3% annually meanwhile the export value of agriculture, forestry and aquaculture is expected to increase by 6%-8% annually.
To achieve the above goals, the Government will focus on improving related institutions and administrative procedures and cutting barriers related to business conditions in the agricultural sector.
In reality, the current Government has given special attention to the development of high-tech, clean and organic agriculture since the beginning of its tenure in 2016.
Prime Minister Nguyen Xuan Phuc has attended a number of agriculture development conferences and toured typical high-tech agricultural models in Binh Phuoc, Hai Phong, Ha Nam.
In July last year, Phuc presided over the national conference to seek solutions to boost investment in agriculture, where he called for concerted efforts to make Viet Nam one of the top exporters of agricultural products.
Over the past years, the sector has enjoyed steady growth, making Viet Nam the 2nd and 15th biggest exporter of farm produce in Southeast Asia and in the world, respectively.
More than 10 categories of agricultural products have annual export value of over US$1 billion each.
The above achievements were attributed to the introduction of a series of agricultural development policies to encourage investment in agriculture.
Agricultural enterprises are taking spearhead role in accelerating the development of large-scale and high-tech farm production chain, resulting in higher competitiveness of the Vietnamese farm produce.
HCM City: Sustained growth, confidence boost retail sales
Ho Chi Minh City recorded a year-on-year rise of 12.2 percent in total retail sales and consumer service revenue to nearly 600 trillion VND (25.8 billion USD) in the first half of 2019.
Of the total, nearly 400 trillion VND came from retail sales, up 13.8 percent, according to the municipal Department of Industry and Trade.
Local officials attributed the growth to the sustained and fast economic expansion and consumer confidence of both HCM City and Vietnam, which in turn have stimulated domestic production, especially the manufacturing of essential consumer goods.
Notably, several electronics supermarket chains in the city posted revenue surge during the six months, including Dien may xanh over 100 percent or Nguyen Kim 78.5 percent compared to the same period last year.
The Industry and Trade Department said the local retail market outlook for the rest of this year stays positive, adding that supply will remain abundant and prices be relatively stable.
It predicted the growth rate of retail sales and consumer service revenue at 13 – 14 percent this year, meeting the set target.
At present, HCM City is home to 239 markets, 205 supermarkets, 46 shopping malls and 2,360 convenience stores. Vietnamese-invested supermarkets and convenience stores are dominating as they account for 73.6 percent and 67 percent of the total outlets of their types, respectively.
FLC constructs modern urban complex in Dong Thap
Real estate developer FLC Group on July 21 began the construction of 15ha hi-end urban complex La Vista Sadec in Sa Dec city of the Mekong Delta province of Dong Thap.
At a conference promoting investment in Dong Thap in 2017, FLC signed a memorandum of understanding on channeling capital into four projects in the locality in the areas of urban development, resort, and eco-tourism. La Vista Sadec is one of them and also the first to be implemented.
Aiming to become a tourism-service-entertainment site in the city, the complex is designed to include an eco-park, a public art space, a night market, and a shopping centre, among other facilities.
Dong Thap, the group’s first destination for expansion in the delta, has been selected for the project for its convenient transport, strategic location to Ho Chi Minh and Can Tho cities, and tourism potential. Sa Dec city is famous for the Sa Dec flower village that draws over 1 million visitors a year.
On the occasion, FLC donated 1 billion VND (42,900 USD) to Dong Thap’s Nguyen Sinh Sac study encouragement fund.
Measures deployed to lure more investment to agriculture
The Government has issued a resolution detailing measures to encourage businesses investing in safe, effective and sustainable agricultural development.
The resolution targets modern and sustainable growth of the agricultural sector towards large-scale production and stronger application of science and technology to improve productivity and products’ quality in 2030, thus enhancing the sector’s competitiveness and farmers’ income.
In 2030, the sector is expected to become one of the world’s top 15, while agricultural processing is hoped to enter world’s top 10.
Vietnam will strive to become a global hub for intensive processing of agricultural products, and a logistics centre of the world’s farm produce trading system, according to the resolution.
It clarifies that in 2030, Vietnam expects about 3 percent growth in agro-forestry-fishery production value annually, and 6-8 percent expansion in the export of the products.
About 80,000-100,000 businesses are expected to invest in agricultural sector, including up to 4,000 large firms and 6,000-8,000 medium-sized enterprises.
To this end, the resolution roles out a number of measures such as continuing to complete constitution and reforming administrative procedures, cutting down business conditions in agriculture, and creating attraction for the sector to lure more investment.
Vietnam will expand agricultural production, processing and selling to match the market’s demand as well as growth strategy of the sector, while reforming mechanisms to support enterprises to seek markets, stated the resolution.
The country will also complete credit policies for agricultural projects to encourage more investment in the field, it said.
The path towards Vietnam’s energy security
With its strong development, Vietnam is striving to find solutions to attract more investment into energy development. John Rockhold, chairman of the Vietnam Business Forum’s Power and Energy Working Group, writes about how Vietnam can develop towards ensuring its sustainable energy security.
Under Vietnam’s Power Development Master Plan VII, generating capacity is increasingly coal-dominated, at over 40 per cent by next year. To implement even a clean coal policy, Vietnam will have to import tens of millions of tonnes of coal.
The country’s natural coal deposits are limited, and production has fallen short of past targets. Coal will have to be purchased on the global market using US dollar reserves, and brought via the East Sea to coal terminal ports and other transport infrastructure systems.
The energy security risks are worth noting based on the predatory economics in the region. A country with unlimited dollar reserves could outbid Vietnam for years of coal supplies, leaving us nothing.
The question arises if it is wise to use our dollar reserves for energy needs that we can develop using our own natural resources.
There may be an alternative using Vietnam’s energy plans, and the country’s natural gas deposits are a solution. People will say it may take years to develop these gas fields but we need power now to continue our economic growth and to sustain our GDP.
The solution involves buying natural gas on the global market while we develop our own fields, building gas fire power plants now that can use imported gas and our own gas once our fields are ready. But we could run into the same problems of coal imports in the short term when buying imported gas. The country presently has a US dollar trade surplus of over $30 billion with one of the world’s biggest natural gas exporters.
There are other considerations that make this energy security solution more favourable. One is a stronger Vietnamese energy plan that places greater emphasis on the country’s domestic potential for energy efficiencies and renewable energies, to be added to other clean sources of power for consumers and enterprises.
Another is strong Vietnamese companies working with the government to build a better and faster system for energy production that meets Vietnam’s climate commitments.
Natural gas is 60 per cent cleaner than coal, and good decision-making and new technology with a gas and renewable energy mix can enable Vietnam to tackle the growing environmental concerns and avoid many of the environmental problems that countries like the United States and China have experienced.
Not many people know that you can adjust a gas power plant to work with renewable energy production, something not possible with a coal fired plant.
Increasing the share of domestic gas in the mix returns funds to the Vietnamese government and domestic enterprises. Under current fiscal terms, around 40 per cent of the revenues from sales of natural gas accrue to the government for spending in Vietnam, and up to $7 billion in revenues per one gigawatt-hour of power.
However, the International Monetary Fund has estimated the cost of health and environmental impacts of the current Power Development Master Plan VII could be as high as $15 billion annually by 2030 due to coal.
Vietnam currently ranks 20th on the list of largest global users of coal-fired plants. Vietnam under the current power plan would be burning 15 times more coal, making the country the eighth-largest coal user in the world.
Energy security is important for any country, and we look forward to supporting the government in reaching this goal, and ready to support them in negotiations for temporary gas imports that look to be coming our way in order to create a cleaner and healthier Vietnam.
Greener outlook in energy funding
The ability of solar energy developers to access capital has been questioned in recent times, but the promotion of special schemes from both lenders and investors is providing a new lease of life for the fast-rising sector. Phuong Anh reports.
In the past three years, solar energy has become the new darling of Vietnam’s financiers. Spurred by supportive government regulations, banks are noticeably more eager to lend and investors are looking at the segment with rosy eyes.
“Through the government’s open-door policy, the private sector is now investing more in renewable energy, adding to their main business lines,” said Hoang Phuong, an investment representative at Vietnam Technological and Commercial Joint Stock Bank.
The list of banks with a green financing programme is getting longer. Orient Commercial Joint Stock Bank recently partnered with TTC Energy to supplement working capital financing for the energy firm’s solar energy system for leasing. Vietnam Joint Stock Commercial Bank for Industry and Trade also announced its plans to sponsor VND1 trillion ($43.47 million), equalling 62 per cent of the solar energy project TTC 01’s capital in the southern province of Tay Ninh.
In 2017, Vietnam Bank for Agriculture and Rural Development and Vietnam Development Bank also signed an agreement to underwrite 60 per cent of capital for Phong Dien solar energy plant in the central province of Thua Thien-Hue. Similarly, Saigon-Hanoi Bank offered loan packages for mid-sized renewable energy projects.
In addition to solar energy farm projects, many banks also signed deals with power firms to offer loan packages for end customers.
Bank for Investment and Development of Vietnam (BIDV) partnered with locally-invested SolarBK to provide solar energy packages for households with the limit of maximum loan at 75 per cent of the solar energy rooftop system’s capital and capacity of 2-10 kilowatt peak. Similarly, Ho Chi Minh Development Joint Stock Commercial Bank launched a loan package for the investors of solar energy rooftop projects with the cap of lending of VND10 billion ($434,800). HSBC Vietnam also offered existing clients a preferential lending programme, in collaboration with solar panel developer GIC Corporation.
Besides commercial banks, developers can now access capital from investment funds. For instance, with financial support from Dragon Capital, the Mui Ne Solar Energy Plant by Pacifico Energy Group officially began operations last month.
Moreover, Bamboo Capital Group’s VND1.09 trillion ($47.4 million) BCG-CME Long An 1 solar energy plant also received investment from Vietnam-Oman Investment and the State General Reserve Fund.
The financial sector’s embrace of green energy projects is seen as a move in a positive direction, both for the financiers themselves and solar energy developers. On one hand, banks in Vietnam can reduce their dependence on real estate lending, which has caused boom-and-bust cycles throughout the years. On the other hand, developers finally gain access to funding they need to expand solar projects, something they have been struggling to do due to lack of regulations and the banks’ unfamiliarity with green energy.
However, John Rockhold, country director of Energy Capital Vietnam, highlighted difficulties in getting bank loans for solar energy projects in Vietnam. “We hope the government gives more priority towards renewable energy, especially the incentives of switching from coal to gas energy and making the energy sector more bankable,” Rockhold told VIR.
Although the solar lending trend is just at the early stage of development, industry experts have already warned of possible risks. One particular area of concern is that commercial banks, and in many cases investment funds, are new to the sector and may find it difficult to judge the creditworthiness of each project.
Echoing this view, Le Kien Nghi, deputy manager at the Large Corporate Clients Department of BIDV, said that solar finance is challenging due to its long-term nature and lack of experience in this segment.
Tran Viet Ngai, president of the Vietnam Energy Association, emphasised that some Vietnamese solar energy firms have shown signs of blindly following trends. The herd mentality, without thorough preparation and professional help, may ruin these developers and consequently, make banks recoil from green lending.
“Firms are rushing to set up solar projects without fully understanding the technical or financial requirements of this very particular sector. Solar energy is highly dependent on the weather and also on the firm’s ability to sign with Electricity of Vietnam, the sole buyer of electricity in Vietnam” said Ngai.
According to industry experts it will take time, money, and effort for Vietnamese-based financiers to fully understand this new segment. Recommendations include working with agencies such as the International Finance Corporation, World Bank, and other global development lenders who can offer expertise and funding for young businesses. More supportive laws, from tax cuts to higher feed-in tariffs and industry benchmarks, may also be necessary.
Industrial land leasing costs rise in southern Vietnam
Rents in industrial parks in Ho Chi Minh City and neighboring localities increased 15.8 percent against the same period last year.
The average land leasing costs in the second quarter of this year at industrial zones in HCM City and the provinces of Binh Duong, Dong Nai, Long An and Ba Ria-Vung Tau climbed to $95 per square meter, says real estate firm Jones Lang LaSalle Vietnam (JLL) in its report on Vietnam’s property market for Q2, 2019.
HCM City topped the market with average rent of $162 per square meter per lease term.
The average occupancy rate in industrial and processing zones in the south was 81 percent in Q2, JLL said, adding that the rate was driven by HCM City, Binh Duong and Dong Nai.
As the first established industrial areas in the nation, Binh Duong and Dong Nai are still the most desired destinations for new manufacturers, thanks to the foundation they offer for manufacturing development, including synchronized infrastructure and well-established administrative procedures supporting companies’ operations.
The higher demand for industrial land in Vietnam can be attributed to escalating trade tensions between the US and China, JLL said.
Since last year, real estate services firm CBRE has noticed an increase in production facilities shifting from China to alternative locations in Southeast Asia, including Vietnam.
With the US poised to slap 25 percent tariffs on another $300 billion-plus of Chinese goods, no exporter in China will be unscathed, Reuters said in June.
In recent years, some Chinese manufacturers had already started to relocate some of their capacity to countries like Vietnam and Cambodia, due to high operating costs at home as a result of , rising wages and a labor crunch. The trade war is pushing more to follow suit, especially makers of low-tech and low-value goods.
As of Q2, the south of Vietnam had registered a total leasable land area of 25,060 hectares (62,000 acres), 2.5 times higher than that of the north, and additional 18,290 hectares of land is oriented for industrial development, mostly in Long An, Binh Duong and Dong Nai provinces, JLL reported.