Lending interest rate in inter-bank market hits six-month high

The interest rate for Vietnamese đồng loans in the inter-bank market has hit the highest level since the beginning of the year due to high demand.

Accordingly, the rate for overnight loans last week surged sharply by 1.96 percentage points against the previous week, closing the week at 3.22 per cent.

The rates for one-week, two-week and one-month loans were 3.5 per cent, 3.58 per cent and 3.78 per cent, up 2.11, 2.07 and 2.02 percentage points, respectively.

Last week, the State Bank of Việt Nam (SBV) also offered bills at five auctions at higher interest rates (at 1.75 per cent and 2.25 per cent for 28-day and 91-day bills) to withdraw money from commercial banks, however, no auction was successful.

In the inter-bank market, the interest rates for US dollar loans last week also inched up, ending the week at 2.13 per cent for overnight loans, 2.23 per cent for one-week loans, 2.33 per cent for two-week loans and 2.47 per cent for one-month loans.

Industry insiders attributed the decline in the đồng liquidity at commercial banks last week to banks using the đồng to buy the dollar from SBV.

Though there has been no official report on the amount of dollar sold by the SBV, it was estimated the amount was significant. This meant that the SBV withdrew a significant amount of đồng from commercial bank through the sale. — VNS

A workshop entitled “Investment Incentives, Related Party Transactions: Situation and Solutions” was co-organized in Hanoi on July 10 by Deloitte Vietnam, the Ministry of Planning and Investment, and the Ministry of Finance.

Mr. Bui Ngoc Tuan, Deputy General Director of Deloitte Vietnam, was quoted by the English-language daily Vietnam News as telling the workshop that changes in tax policy and investment incentives are the issues of the greatest concern for foreign investors in Vietnam.

“The factors impacting foreign direct investment (FDI) activities often include the fluctuation of the tax rate through the years, available incentives in the country, flexibility in the application of incentive schemes, time for investment procedures, and the advantages and disadvantages of investment administrative procedures,” he said.

The government continues to make policy adjustments with a flexible and transparent orientation to create the most favorable conditions for foreign investors to enhance their national competitiveness, he added.

Ms. Nguyen Thu Thuy from the Taxation Policy Department at the Ministry of Finance was quoted as reporting to the workshop that the tax reform strategy for the 2011-2020 period has gained achievements, creating a fair and equitable environment without discriminating between different economic sectors, forms of ownership, and taxpayers.

However, she went on, many foreign-invested enterprises (FIEs) are taking advantage of strong investment incentives, such as in land rentals and corporate income tax (CIT) and personal income tax (PIT), to conduct transfer pricing and transfer profits.

An analysis of financial statements from FIEs from 2012 to 2016 reveals that the number reporting losses stands between 44 and 51 per cent.

The increase in their scale of investment and business activities is higher than the increase in the number of FIEs reporting losses, which shows that the problem of transfer pricing in the FDI sector is increasing and becoming more complex, she said.

Besides transfer pricing there are also cases of the backwards transfer of profits from abroad to Vietnam by some large FIEs enjoying high incentives in CIT rates and CIT exemptions and reductions.

“The average return on equity (ROE) of FIEs in some sectors over the years has always remained very high, such as in electrical components, computers, peripherals, telecommunications, and software, with an ROE before tax of more than 30 per cent,” Ms. Thuy said.

There should be a control mechanism to limit FIEs reporting losses or losses in capital that still continue to invest in expanding operations in order to enjoy tax incentives, she added.

Transfer pricing is an integral part of global trade and so cannot be avoided, Mr. Thomas McClelland, General Director of Deloitte Vietnam, told the workshop.

“Transfer pricing is not only about margins and benchmarking analysis; it also requires business performance assessments,” he said.

He added that tax authorities need to understand business realities and then take an appropriate course of action. They also need to enforce basic compliance first rather than cherry-picking taxpayers for audit.

The national legal system needs to be internationalized in order to promptly catch up with international trends. For example, more bilateral treaties should be signed, he said.

“If Vietnam currently does not have mechanisms in place to measure the impact of its incentives, it is strongly advisable that a monitoring and evaluation (M&E) system be implemented,” said Mr. Wim Douw, a senior expert for trade and competitiveness policy at the World Bank.

Such a system should be based on clearly-defined policy objectives and would track the performance of both the costs and benefits of the incentives offered.

Employees experienced in blockchain in short supply

There is a shortage of local employees experienced in blockchain technology, according to the latest report from the Navigos Group on recruitment demands for senior management in Vietnam in the second quarter of 2018, based on the hiring needs of Navigos Search’s clients.

Blockchain is a new technology that has developed dramatically in Vietnam recently, applied in finance and banking, fintech, logistics, healthcare, and many other areas, and has captured the interest of the government as well as businesses in Vietnam. Working with its clients, Navigos has identified that the current labor market is in considerable need of workers experienced in the technology.

Businesses are therefore willing to recruit engineers in general information technology, who then spend three months studying the technology before implementing product development. Despite their young age and high interest in new technology, however, engineers are still relatively cautious in making the decision to move to this new field.

Due to the difficulties in recruiting local IT engineers, businesses are willing to engage foreign experts (mainly from Russia, Ukraine, and the US), given that there is little difference between salaries paid to Vietnamese candidates and their foreign counterparts (around $2,000 to $3,000 per month). In the second quarter, the northern region also saw rising recruitment demand for IT engineers in banking and finance and fintech. This is mainly explained by the fact that those enterprises want to build a team of internal IT engineers focused on product development in digital technology in the banking and finance industry.

The report also reflected on senior human resources in other sectors. Many textile enterprises have doubled their production scale, causing challenges in filling vacancies. According to Navigos Search, a number of textile and garment enterprises in the northern region doubled the size their plants in the second quarter. Demand for human resources at all levels has therefore been rising notably.

The industry is facing a shortage of workers and many in the north try to attract workers in the south. Regarding managerial positions, recruitment also encounters problems due to high demands on meeting international standards in regard to compliance and discipline, and despite their managerial experience, a great many candidates at this level are not fluent in English, which again is a shortcoming of many Vietnamese mid-level staff, particularly in manufacturing.

Electrical engineers, meanwhile, have many job opportunities in the field of clean energy. Including wind power and solar energy, clean energy, has received considerable investment, primarily in joint ventures between Vietnamese companies and partners from Europe such as Denmark and Germany, which has led to high demand for electrical engineers. Clean energy is still relatively new to Vietnam, so a large number of job vacancies in the sector have not been filled. To tackle this scarcity, businesses accept recruiting experienced electrical engineers who work in thermal or hydroelectric power plants, and then train them. These positions all require professional skills and English proficiency.

Navigos Group is Vietnam’s leading recruitment service provider and owner of VietnamWorks, an online job-search platform, and Navigos Search, providing mid-level and executive search services.

Vietnam Airlines signs maintenance service agreement

Vietnam Airlines has signed a three-year maintenance services agreement with IAE International Aero Engines AG. The non-exclusive agreement will cover engine overhauls for the airline’s V2500 engines.

The V2500 engine is offered through IAE International Aero Engines AG, a multinational aero engine consortium whose shareholders comprise Pratt & Whitney, a division of United Technologies Corporation (NYSE: UTX), Pratt & Whitney Aero Engines International GmbH, the Japanese Aero Engines Corporation, and MTU Aero Engines.

“It is important to Vietnam Airlines that we have the highest quality maintenance services performed on our fleet of V2500-powered aircraft,” said Mr. Dang Ngoc Hoa, Executive Vice President of the national flag carrier.

“We are thrilled to sign our first V2500 engine aftermarket agreement with Vietnam Airlines and help the airline manage their fleet more efficiently,” said Mr. Dan Kirk, Senior Director, Aftermarket Sales, at Pratt & Whitney. “We are committed to delivering world-class aftermarket services to our customers around the world.”

Vietnam Airlines and Pratt & Whitney signed a contract last year on the selection of aircraft engines and support services for 20 Airbus A321neo aircraft. The signing ceremony was held within the framework of US President Donald Trump’s official State visit to Vietnam. The two parties also signed a memorandum of understanding on maintenance contracts covering these engines.

The deal between Vietnam Airlines and Pratt & Whitney is valued at more than $1.5 billion and includes 44 Pure Power Geared Turbofan (GTF) engines and comprehensive terms on warranty, maintenance and repair.

Pratt & Whitney is a world leader in the design, manufacture and service of aircraft and helicopter engines and auxiliary power units. United Technologies Corp., based in Farmington, Connecticut, provides high-tech systems and services to the building and aerospace industries.

Vina Kraft Paper a pioneer in green packaging

Vina Kraft Paper (VKPC), a subsidiary of ASEAN’s leading conglomerate SCG, is spearheading the green trend in Vietnam’s packaging industry by attaining the prestigious FSC (Forest Stewardship Council) certificate. This is the result of the company’s efforts to minimize the impact on the environment by applying the 3Gs concept, focusing on “Green Product”, “Green Process”, and “Green Mind” and implementing environmentally-friendly management systems throughout the organization.

FSC is considered the most rigorous and credible forest certification recognized globally. In many countries, FSC has become a compulsory qualification for wood-related manufacturers and a sought-after trademark among consumers.

The kraft paper and packaging industry depends on forests to provide the raw materials for production. About 11 per cent of the wood extracted from forests around the world are used by the paper industry, which annually produces 400 tons of paper. Hence, long-term management and a halt in deforestation are crucial in maintaining a sustainable future.

The FSC Chain-of-Custody certification system traces the path of products from forests through the supply chain, verifying that FSC-certified materials are identified or kept separate from non-certified materials throughout the chain. Any company in this supply chain, including harvesters, processors, manufacturers, distributors, printers, retailers, or anyone that is taking ownership of the forest product before the end user, needs to be FSC certified to be able to label or promote their products as FSC certified.

Though compliance with environmental regulations is still a challenge in Vietnam, many other markets have regulations and targets in place to minimize the environmental impact and increase the recycling of waste from packaging. Packaging companies are therefore under pressure to demonstrate the highest environmental credentials. The FSC label on packaging shows that the paper and board used are responsibly sourced. Compared to other packaging materials, paper and board have the advantage of being renewable, reusable and recyclable.

“In Vietnam, the need for forest preservation is increasing as the country has faced many environmental challenges while developing,” said Mr. Sangchai Wiriyaumpaiwong, General Director of VKPC. “Following SCG’s sustainable principles, VKPC is making our best effort to contribute to the country’s development in a sustainable manner. Our kraft paper products are environmentally-friendly in materials and do not cause pollution during and after use. We have used over 95 per cent of fibrous raw materials from recycled paper or waste paper, which will help reduce waste and impact on the environment. The fact that our products are FSC certified once again affirms our commitment to the environment and consumers’ welfare. It also helps us to be at the forefront of Vietnam’s packaging industry, which is still in the early stages of green development.”

Alongside “Green Product”, VKPC is also implementing “Green Process” to ensure low levels of consumption, high levels of recycling, and optimal management of by-products and waste from production. The company has invested over $10 million in an effluent treatment plant that can treat wastewater to achieve Level A Standard before being discharged, together with other major investments in high efficiency paper machinery and power plans to optimize the use of natural resources.

“In order to reinforce a green approach throughout the organization, we have also introduced the ‘Green Mind’ concept, to make sure that all VKPC’s staff have awareness and a commitment to protecting and preserving the environment,” Mr. Wiriyaumpaiwong said.

Financial transparency key to small firms’ credit

Financial transparency is one of the keys for small firms to access credit, heard a seminar titled “Where can small firms find capital?” held in HCM City on Wednesday.

According to the General Statistics Office, as of 2016 Việt Nam had around 500,000 companies, 60 per cent of them small or micro-sized.

Lack of access to bank finance has for long been a challenge for small firms and one of the main hurdles to their development.

Nguyễn Hoàng Minh, deputy director of the State Bank of Việt Nam (SBV)’s HCM City office, said the SBV and commercial banks have made many efforts to help small and medium-sized enterprises (SMEs) get loans.

HCM City banks-enterprises link-up programme under which firms get soft loans from lenders is an example of that, he said.

Since the programme’s launch in 2012 more than 50,000 SMEs have borrowed more than VNĐ900 trillion (US$38.7 billion).

Minh said the central bank has encouraged its offices in other cities and provinces to adopt this efficient link-up programme.

But he confessed that one of the problems with the programme is that borrowers need to have assets to pledge and this was a major challenge for small firms.

To resolve this problem, the SBV has worked with banks in the programme to allow small firms without assets to use their cash flow as collateral, he said.

He also pointed out that one of the main obstacles to SMEs getting loans is the lack of transparency in their financial statements.

“Many small firms are usually household businesses and do not have a chief accountant professionally taking care of financial matters.”

He said some businesses even use two sets of books to evade tax, which also makes banks reluctant to lend to them.

“Only when banks can learn about firms’ business performance through transparent audited financial statements can the two go with each other over the long term.”

Đặng Đức Huy, director of retail banking at Saigon Commercial Bank, said despite their need for credit some small firms are reluctant to apply for a loan due to their fear of lengthy and complex lending procedures.

"But since banks are now caught up in fierce competition to find customers, they have simplified lending procedures and are constantly improving their services to serve customers better," he said.

He said his bank has several mechanisms to get feedback from customers and staff to prevent any “cheating in lending activities.”

At the moment the bank is lending at 6.5 per cent interest to priority sectors such as high-tech agriculture and services. It also offers loans at 8 per cent interest to other firms, he said.

Apart from bank loans, small firms can also apply for financial assistance from the city’s Credit Guarantee Fund for SMEs, according to Đỗ Tấn Trúc, head of the SMEs support department under the fund.

Through these programmes, firms can get loans from banks with their interest fully subsidised or with 50 per cent subsidies, he added. 

Nestlé sets up new capsule production line

A new production line to produce NESCAFÉ Dolce Gusto capsules for the Vietnamese market and exports went on line Wednesday at Nestlé’s plant in the Amata Industrial Park in Đồng Nai Province.

Speaking at the opening ceremony, Ganesan Ampalavanar, managing director of Nestlé Vietnam, said the production line uses raw materials made from high-quality Vietnamese coffee beans.

Nestlé is the leading coffee buyer in Việt Nam, accounting for 20-25 per cent of the country’s coffee output.

The new production line is expected to process 2,500 tonnes of coffee a year (equivalent to 130 million capsules) now and more in future.

Approximately 90 per cent of the output will be exported to other markets in Asia including Thailand, the Philippines, Malaysia, Singapore, Hong Kong, Taiwan, and Indonesia.

Ampalavanar said: "The new NESCAFÉ Dolce Gusto production line will help make great coffee widely accessible to Vietnamese consumers and to 13 export markets."

Lê Văn Doanh, deputy head of the Đồng Nai Industrial Zone Authority, said Nestlé was one of the first investors in the province, and has made great contributions to creating jobs as well as the local socio-economic development.

At the opening ceremony province authorities presented a certificate of merit to the company for its contributions in the past years.

In Việt Nam the Swiss company has six factories with more than 2,500 employees and has invested US$527 million. 

PV Power Nhơn Trạch reports profit gain

PetroVietnam Power Nhơn Trạch 2 Corporation has reported that its post-tax profit for the second quarter of 2018 rose 41 per cent year on year to VNĐ269 billion (US$12 million).

The company recorded VNĐ2 trillion in net revenue, a yearly growth of 13 per cent. However, its combined profit fell by VNĐ140 billion to VNĐ261 billion compared to the same period last year due to increasing gas prices as a input cost.

PetroVietnam Power Nhơn Trạch 2 reported its financial income increase almost seven-fold over last year’s figure to VNĐ102 billion in the second quarter of 2018, including VNĐ66.7 billion received from reviewing the exchange rate between the đồng and foreign currencies.

After the first six months of 2018, the company posted VNĐ4 trillion in revenue and VNĐ504 billion in post-tax profit, fulfilling 58 per cent and 67 per cent of its full-year targets.

By July 1, the company’s total asset value stood at VNĐ10 trillion, up by VNĐ36 billion from the beginning of the year.

The company is listing on the HCM Stock Exchange as NT2, gaining 1.7 per cent to close Wednesday at VNĐ26,800 per share. Its stock has been removed from the blue-chip VN30 Index. 

Japan steel firm Kyoei to up stake in VIS

Japanese steel firm Kyoei Steel has registered to purchase two million shares in Viet-Italy Steel JSC (VIS) to increase its ownership to 70.42 per cent.

Kyoei now holds 50 million shares of the Vietnamese steel producer, or 67.7 per cent of the firm’s capital. Transactions will be carried out between July 19 and August 16, 2018.

Kyoei became the strategic partner of VIS in late 2017 after buying more than 14.7 million shares, or 20 per cent ownership, from previous shareholder of VIS – Thái Hưng Company.

In May 2018, the Japanese firm purchased another 33.2 million VIS shares from Thái Hưng Company and replaced the latter as the strategic investor of VIS with 65 per cent ownership.

In early July, Kyoei completed he purchase of another two million VIS shares via put-through method to increase its stake in VIS to the current 67.7 per cent.

Viet-Italy Steel JSC is listed on the HCM Stock Exchange under code VIS. The company shares inched up 0.3 per cent to close Wednesday at VNĐ30,000 (US$1.33) per share. 

HAGL asks for shareholders’ approval

Agriculture-farming group Hoàng Anh Gia Lai (HAGL) will finalise the list of shareholders on August 2 to collect feedback for the upcoming private share issuance, planned for six days later.

The group is listing on the HCM Stock Exchange with code HAG, soaring 6.7 per cent on Wednesday to close at VNĐ6,330 (US$0.28) per share.

The firm shares have rallied totaling 30 per cent in the last five consecutive sessions.

At its annual shareholder meeting last month, HAGL targeted VNĐ6.2 trillion in total revenue for 2018 and VNĐ200 billion in pre-tax profit.

The company plan to focus on its fruit industry, which was expected to contribute nearly VNĐ4 trillion or 64 per cent of its total revenue.

HAGL had been working with potential investors to raise funds for the second development stage of the Hoàng Anh Gia Lai Myanmar Centre project by selling parts of its ownership in the project to potential investors.

Quảng Ngãi Sugar to build new sugar plant

Quảng Ngãi Sugar JSC plans to invest VNĐ916 billion (US$40.7 million), equal to 64 per cent ownership, in a new sugar refinery project.

The project has total capital of VNĐ1.44 trillion and will be constructed on an area of 5,000m2, according to the firm’s resolution.

The new sugar refinery is expected to notch a capacity of 1,000 tonnes of sugar a day and operate for 50 years.

The preparation and construction of the new factory began in April, 2018, and will last until May, 2019. In six months, Quảng Ngãi Sugar will complete the production line and test the system.

The company also plans to make the first advance dividend payout at a 5 per cent rate in cash. It will finalise the list of beneficial shareholders on July 30 and dividend payments will be made on August 10. 

Philippine media praises Vietnam’s industrial development

The website Inquirer.net of the Philippines published an article on July 17 titled “Vietnam is Southeast Asia’s new industrial powerhouse”, affirming Vietnam has switched from an agricultural economy to one of the brightest manufacturing hotspots in the region over the last 20 years.

The article quoted the latest report from Jones Lang LaSalle, a US financial consultancy group, saying “Vietnam is establishing itself as the industrial powerhouse of Southeast Asia”.

The group forecasted that Vietnam’s industrial market will enter a new phase and move up the value chain in the near future, moving away from labour intensive to capital intensive.

According to the report, in 1986, 335 hectares of land were dedicated to industrial parks in Vietnam, and now the figure is 80,000ha.

“This phenomenal growth can be attributed to Vietnam establishing itself as an export-driven economy, dedicated industrial and economic zones, numerous free trade agreements, strong economic growth and a young, plentiful, low-cost workforce”, it added. 

With more Chinese enterprises are looking to place their factories abroad, Vietnam is one of the largest beneficiaries of this migration due to its close proximity. 

The article pointed out that Vietnam is strategically located between China and Singapore with 3,260km of coastline, providing access to the East Sea, one of the world’s major shipping routes, where 40 percent of cargo transported from the Indian Ocean to the Pacific has to cross before arriving in China, Japan, the Republic of Korea and the US.

“Many commentators predict the logistics market to be the standout performer over the next five to 10 years”, it noted, adding that the rapid growth of Vietnam’s middle-income population with more disposable income and a growing obsession with e-commerce will put significant demand on logistics facilities.

According to the Asian Development Bank, Vietnam also pays due attention to developing infrastructure as it spends 5.8 percent of its GDP on the work - the highest figure in the region.

The article said to enter the next phase of the industrial and logistics cycle and become more competitive than other regional countries, it is important for Vietnam to continue spending on infrastructure, including highway networks and deep-sea ports.

These initiatives have helped Vietnam attract significant investment from large foreign companies, it said, noting that the best case study is Samsung, which has reportedly invested more than 17 billion USD in Vietnam.

Vietjet offers tickets priced at 0 VND at Myanmar tourism expo

Low cost carrier Vietjet will offer hundreds of tickets priced at 0 VND along with many exciting activities at its booth at the Myanmar International Tourism Expo 2018 from July 20 to July 22 at Tatmadaw Exhibition Hall (Yangon). 

The carrier will give away 200 super promotional tickets priced only from 0 VND (excluding taxes, fees) at two time frames: between 15:00 – 16:00 on July 20, 21 and 22, and from 10:30 – 11:30 on July 21 and 22. 

The promotional tickets are applied for Hanoi – Yangon (Myanmar) route with flight period from now to December 31 (except for national holidays in Myanmar and Vietnam).

Visitors to Vietjet booth can attend the lucky draw to receive free Vietjet tickets, receive interesting gifts, play “Vietjet Skyfun” games, enjoy exciting performances and take pictures with beautiful, friendly cabin crews.

Since its first flight to Yangon in 2015, Vietjet has played an important role in connecting and promoting cooperation relationship between two countries, and met the travel and trading needs of tourists as well as people of two countries. 

Aiming to become a “Consumer Airline”, Vietjet is continually opening new routes, adding more aircraft, investing in modern technology and offering more added-on products and services to serve all demands of customers. 

Vietjet is a pioneering airline that is loved by many for its exciting promotional and entertainment programs, especially during the festive season. 

Vietjet Air is the first airline in Vietnam to follow a low-cost, modernized carrier model to provide a wide range of services to its customers. Apart from air transportation, Vietjet also provides consumer goods and services to the customers through the application of advanced E-Commerce technology. Vietjet is an official member of the International Air Transport Association (IATA) with IOSA Safety Certificate. In addition to the Best Asian Low Cost Carrier awarded by TTG Travel Award in 2015, the airline was also honoured as one of the “Top 500 Leading Brands in Asia 2016” and “Best Recruiting Brand in Asia” for many consecutive years.

Currently, Vietjet operates 60 A320, A321 aircraft with more than 380 flights daily, carrying more than 60 million passengers up to date, with 93 routes covering destinations in Vietnam as well as international destinations such as Hong Kong, Singapore, Korea, Taiwan, China, Thailand, Indonesia, Myanmar, Malaysia and Cambodia.                                                                                                                                                             

Vietjet plans to expand its network across the Asia-Pacific region and is continuing to expand its regional network.

State budget collection up 14.3 percent in H1

The total state budget revenue reached 651.7 trillion VND (28.7 billion USD) in the first half of this year, equivalent to 49.4 percent of the estimate and up 14.3 percent year-on-year, Deputy Minister of Finance Huynh Quang Hai reported at a meeting in Hanoi on July 18. 

Revenue from crude oil achieved 82.4 percent of its estimate value, which was up 25.3 percent against the same period last year. Revenue from export-import activities and domestic revenue fulfilled 54.9 percent and 47.6 percent of their estimates, representing year-on-year increases of 6.9 percent and 15.5 percent, respectively. 

However, the Ministry of Finance said revenue from state, non-state, and foreign-invested businesses remained low, accounting for only 43.7 percent, 47.8 percent, and 38.7 percent of the estimates. 

Of the total revenue, the central budget collection made up 46.2 percent of the estimate, as compared with 41.5 percent in the corresponding time last year, and the local budget collection was equivalent to 54 percent of the estimate. 

Meanwhile, budget spending stood at about 649.2 trillion VND (28.6 billion USD), or 42.6 percent of the estimate. 

Hai said the ministry will continue to build institutions and policies, and make the best use of incentives to promote production and business, thus giving a boost to the national economy in the remaining months of the year.

At the same time, the ministry will step up administrative reform and raise the efficiency of state management, especially in the tax and customs sectors, while improving the business environment and national competitiveness in line with the Government’s resolutions. 

The ministry aims to exceed the estimate of State budget collection set by the National Assembly by 3 percent, the official stressed. 

To that end, the ministry will work harder to prevent revenue losses, smuggling, trade fraud, and tax avoidance. It will also intensify tax inspections, handle tax debts, increase price and market management, improve the quality of the financial service market, and help finalise accounting and auditing markets.

Impact of new-generation FTAs on textile industry discussed

Vietnamese textiles firms were updated on the potential prospects, advantages, and barriers that are to brought about by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA) at a workshop in Hanoi on July 18. 

Organised by the Vietnam Textile and Apparel Association (VTAA), the event also provided information related to assistance from the Government for the textile and garment industry given the context of the official signing of the CPTTP, and the soon-to-be signed EVFTA which is currently under legal review. 

Experts said the EVFTA marks a new generation in free trade agreements (FTAs) between Vietnam and the 28 EU member nations. Of all Vietnam’s FTAs with partner regions and countries, those with the EU have been the most committed thus far and as such hold significant importance to local industries. 

The CPTPP was officially inked on March 9, 2018 between 11 countries, making it easier for promoting economic growth and opening the market amongst one of the world’s largest free trade blocs, with  nearly 500 million people and a GDP of over 10 trillion USD, accounting for 13.5 percent of the global GDP. 

Meanwhile, the EVFTA is split into two sub-agreements on trade and investment. Both signing parties have officially announced the completion of their legal reviews of the agreement on trade. Of note, Vietnam became the EU’s second largest trade partner in ASEAN after Singapore, with a trade value of 47.6 billion EUR (nearly 55.3 billion USD) in 2017.

Tran Thanh Hai, Deputy Director of the Department of Import-Export under the Ministry of Industry and Trade, said there are many great opportunities for Vietnam’s textile and garment industry to capture when the agreements take effect. 

However, in order to reap the benefits of the CPTPP, Vietnamese textile and garment enterprises will have to face many difficulties, especially in meeting regulations and requirements related to origin of goods, Nam said. 

He noted that local firms would also have to overcome challenges in the large and fast investment trends of foreign investors in Vietnam. 

The labour productivity of domestic textile and garment businesses remains low, and as such their competitiveness on the international market is still weak compared to foreign rivals.

Vu Duc Giang, Chairman of the VTAA, stressed the need for Vietnamese textile firms to focus on training human resources, renovating production lines, promoting cooperation, and effectively implementing investment projects. 

Attention should also be paid to increasing investment in technological application and building specific business and production strategies, which could thus meet strict market requirements, he said. 

Industry real estate to grow 

Growing foreign direct investment and a move up the value chain mean Viet Nam’s industrial real estate sector has a bright future, according to property consultant Savills Vietnam.

“This is very fertile ground,” Troy Griffiths, its deputy managing director, said.

“We see a lot of FDI into Viet Nam from Japan, South Korea, Singapore, and Thailand.”

Last year Viet Nam attracted FDI of US$35.6 billion, a year-on-year increase of 44.4 per cent, with investment in manufacturing and processing FDI making up 44 per cent.

Asian manufacturers want to take advantage of a skilled, youthful workforce and wage levels that are less than half that in China.

Vietnamese workers are also cheaper than their counterparts in Malaysia, Indonesia, the Philippines, and Thailand.

“The Vietnamese government wants to move beyond a low-wage economy and is targeting growth in high-tech manufacturing, renewable energy and smart city projects,” Griffiths said.

"The industrial investment market is in its early stages," he said.

A landmark deal was a sale-and-leaseback transaction earlier this year at VSIP Park, a Viet Nam-Singapore joint venture, which offered a yield of 10.7 per cent.

“The capital markets are very tight, there is not a lot of liquidity, but the VSIP deal is an important one to demonstrate what can potentially be done and the returns.

“Industrial yields above 10 per cent compare favourably with 5-6 per cent for office deals.”

"Foreign investors in Vietnamese manufacturing currently hold their assets on the balance sheet," he said.

This would offer an opportunity to real estate investors as the market matures, he said.

Meanwhile, the logistics-related real estate market is also set for growth due to rising exports, growing domestic consumption and a lack of modern facilities.

“The Government has invested heavily in infrastructure although still more is needed,” Griffiths said.

International third party logistics companies are becoming more active in Viet Nam and expected to drive demand for larger modern facilities.

John Campbell, senior consultant, industrial, at Savills Vietnam, said: “The rise of e-commerce means that ‘last mile’ fulfilment has significant potential here and demand will increase for well-located warehouses on central business district boundaries and near major arterial city routes.” 

Ca Mau to expand seafood exports     

The southernmost province of Ca Mau will expand trade promotion activities in the second half of the year, with shrimp as its key export.

In the first six months of the year, the province’s exports totalled US$441 million, accounting for nearly 37 per cent of the year’s target, or an increase of 5 per cent from the same period last year. Of the figure, shrimp exports were worth $428 million, up 5 per cent from last year.

Export value to Australia and Japan were up 33 per cent and 16 per cent, respectively.

Lam Van Bi, vice chairman of the province’s People’s Committee, said the province’s export activities, especially in the seafood sector, had improved thanks to the adoption of new technology to enhance productivity and quality by seafood processors.

Besides producing higher quality products, they have been actively looking for new export markets, he added.

The province is planning to work with Việt Nam Trade Offices and foreign consulates to organise trade exchange programmes to help local export companies find new business opportunities.

It also plans to organise trade delegations to attend foreign trade fairs where local firms can promote their products.

The province is targeting $2 billion export value from shrimp by 2020.

Italy seeks opportunities in leather, footwear, interior décor

Italian enterprises are seeking business opportunities in Vietnam, especially in leather, footwear and interior décor, sectors which are expected to benefit once the European Union – Vietnam Free Trade Agreement (EVFTA) is signed. 

In a recent interview with Dau tu (Vietnam Investment Review), Director of the Italian Trade Commission in Vietnam Paolo Lemma expressed optimism about the EVFTA, which he said will open up opportunities for Italian firms. 

Regional Director of the firm, Comelz Italy Fabrizio Bellagamba described Vietnam as its fastest-growing market globally. 

Comelz Italy offers cutting machines for the leather, footwear and handbag sector and established a representative office in Vietnam in 2012.  It sold 100 machines in 2017 and 140 since early this year. 

In the near future, it hopes to sell more machines to manufacturers that want to improve their competitiveness and join the global supply chain. 

Recently in Ho Chi Minh City, 26 Italian businesses displayed their machinery and equipment at the Vietnam International Exhibition on Shoes and Leather 2018, with most of the firms already having their own network of distributors, agents and representative offices in Vietnam. 

According to the Italian Trade Agency, Italy’s export of leather and footwear neared 440 million EUR last year, up more than 10 percent annually from 2016. The Vietnam market alone posted a two-fold increase with 30 million EUR. 

Earlier in the last half of 2017, the Vietnam – Italy shoe technology centre was put into operation in the southern province of Binh Duong. It is equipped with the latest and most modern machinery and technologies directly imported from Italy and Europe, making it easier for small and medium-sized Vietnamese enterprises to develop new products. 

Seven well-known Italian wood furniture firms, namely Badari Lighting, Cantori, Diemme Cucine, Formitalia, Officina Luce, Sicis and Versace Home, also recently arrived in Vietnam to explore the market. 

Over the past three years, Vietnam’s interior décor imports have grown by 33 percent on average each year. Among interior décor exporters to Vietnam, Italy ranked first in Europe and third globally, accounting for 7 percent of the market share. 

Chairman of the Italian Chamber of Commerce in Vietnam (Icham) Michele D’ercole said Italy chooses Vietnam as a strategic gateway to trade and investment in Asia thanks to its favourable geographical location and easy links with other regional countries. 

He added that Vietnam imported interior décor worth 15.6 million USD from Italy last year, which is expected to expand by 33 percent in 2018. 

Managing Director of Icham Vietnam Pham Hoang Hai said Italian businesses have high hopes for the Vietnamese market thanks to its growth pace.

Multiple factors support exchange rate stability: SSI

The State Bank of Vietnam (SBV) may sell part of its foreign reserves to stabilise the monetary market if the exchange rate continues to climb, the Saigon Securities Incorporation (SSI) forecast.

SSI on July 19 released a report on the country’s financial and monetary market in June and July, noting that the forex market recorded strong fluctuations in the two months when the USD/VND exchange rate soared by 150 VND.

In the first two weeks of this month alone, the exchange rate jumped 100 VND, or 1.1 percent, to 23,010 VND (buying rate) and 23,080 VND (selling rate) on the inter-bank market. It also rose dramatically by 360 VND to 23,180 VND (buying) and 23,230 VND (selling) in the free market. The difference of USD buying and selling prices surged from 20 VND to 50 VND.

SSI noted the pressure for exchange rate increase in June was mainly caused by external and psychological factors. An array of currencies in the world sharply depreciated last month when the US officially imposed high tariffs on Chinese imports, leading to heightened risks of trade war escalation.

Meanwhile, the foreign currency supply and demand imbalance was not big enough to drive up the exchange rate strongly.

With the abundant foreign reserves of around 65 billion USD, the SBV signalled that it is ready to make interventions to keep the exchange rate stable. In fact, it slashed the USD selling price from 23,294 VND down to 23,050 VND on July 3.

Since the beginning of July, the central bank has also kept the daily reference exchange rate almost unchanged, suggesting that it will not continue adjusting the rate. The forex rate set by commercial banks has also become stable, only the rate in the free market remains high.

SSI said the SBV’s pledge to keep the exchange rate stable, the abundant foreign reserves, and balanced foreign currency supply and demand are the factors supporting the exchange rate’s stability.