Vietnam’s supply chain is expected to open up further to increased European business.
The signing of the EU-Singapore Free Trade Agreement (EUSFTA) marks a significant moment for the two dynamic economies and for Vietnam, which is currently in negotiations with Europe on a similar free trade agreement (FTA), HSBC Vietnam has said in a statement.

The EUSFTA, which will eliminate virtually all tariffs and lowering non-tariff barriers between Singapore and Europe, will allow for some manufactured goods to have ASEAN cumulation.

This means that inputs sourced by Singapore businesses from other ASEAN member states – especially Vietnam - will be considered as domestic content for the determination of the origin of the final product made in Singapore.  In other words, certain inputs will come under Singapore’s zero tariff regime with Europe.

A high proportion of Singapore products have parts produced in other ASEAN countries. With the rule of ‘ASEAN cumulation’, more Singapore exports produced along intra-ASEAN value chains can benefit under the EUSFTA. This will have a significant impact for Singapore and for the ASEAN region including Vietnam - again in areas like electronics and pharmaceuticals, said Head of Wholesale Banking at HSBC Vietnam Winfield Wong.

ASEAN as an aggregate is the largest exporter to Singapore, with Singapore importing US$71.06 billion of goods from ASEAN in 2017.  At the moment, Singapore is the third biggest trade partner to Vietnam in ASEAN and the tenth biggest trade partner to Vietnam in the world.  The exports from Vietnam to Singapore includes majorly computers, electronic products and accessories, telephone sets and accessories, glass and glassware, machine, equipment and parts, textiles and garments etc.

Singapore is also Vietnam’s third-largest foreign investor and top ASEAN investor, with a cumulative investment of US$43 billion invested in more than 2,000 projects. Singapore’s investments in Vietnam cover many sectors including real estate, manufacturing, energy, logistics and services.

Following the construction of the first Vietnam-Singapore Industrial Park (VSIP) in 1994, now VSIP has operations across the southern, northern and central economic zones of Vietnam, attracting over US$10 billion in investments.

Electronics is one of ASEAN’s most important sectors directly employing more than 2.5 million workers.  According to the ASEAN Secretariat, the bulk of the world’s consumer electronics comes from the ASEAN region including 80% of the world’s hard drives which are produced in ASEAN countries. Singapore, Malaysia, Thailand, Vietnam, Philippines, and Indonesia account for over 90% of ASEAN industry exports. 

EUSFTA paves the way for Europe to establish FTAs with other ASEAN markets
The EUSFTA will be the first free trade agreement with a member of ASEAN and will act as a template for FTAs in other ASEAN markets.

Moreover, should the EU conclude additional FTAs with other ASEAN member states, regional cumulation will be further facilitated under specific conditions. The EU and Vietnam agreed on the final text for the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement in July 2018. Vietnam has become the EU’s second biggest trading partner in the ASEAN after Singapore, with trade worth Euro 47.6 billion in 2017.

“Allowing other ASEAN countries to claim ASEAN cumulation will elevate the entire region’s trade competitiveness with Europe in effect delivering a super-regional supply chain,” Wong added.

The EU continues negotiations towards an FTA with Vietnam, Indonesia, Thailand and Malaysia, and has signed a trade deal with Japan which is now awaiting ratification.

In addition, HSBC Vietnam pointed out that the EUSFTA will be driving green activity within the corridor by removing trade and investment obstacles in green technology and removing duties on many environmental goods. This is important in ensuring Singapore and ASEAN businesses progress further along the green agenda.

Commenting on the need for ASEAN businesses to address Environmental, Social and Governance (ESG) standards in light of the EUSFTA, Wong noted Europe is leading the way in ESG adoption, and the bloc’s willingness to ensure its trading partners raise their own ESG standards is evident in the policies contained in the EUSFTA.

This has a wider consequence for ASEAN. Large European corporations will want to see a similar shift in their suppliers ESG stance. With ASEAN increasingly becoming the supply chain ‘factory’ for several European countries, suppliers in Vietnam of European clients will be expected to transform, or risk being left behind when further FTAs come into force, he added.

Vietcombank sees 47% rise in Jan-Sep pre-tax profit

As of September 30, state-run Joint Stock Commercial Bankfor Foreign Trade of Vietnam (Vietcombank)`s total assets were valued atVND995.11 trillion (US$42.47 billion), down 3.9% compared to the beginning ofthe year.

In the first nine months of 2018, Vietcombank, Vietnam'slargest lender by market value, posted a pre-tax profit of VND11.68 trillion(US$498.73 million), up 47% year-on-year, according to the lender's quarterlyconsolidated financial statement.

Additionally, the bank's revenue during the period reachedVND16.68 trillion (US$712.06 milillion), up 34% year-on-year, leading to aprofit before provisions for credit risks of VND11.68 trillion (US$489.54million), up 47% year-on-year.

During the July - September period, the Hanoi-based lenderposted a pre-tax profit of VND3.66 trillion (US$156.26 million), up 37%year-on-year.

The result was partly thanks to the bank's core businessline of credit-investment with revenue of VND20.42 trillion (US$871.89 million)in the January - September period, up 26% year-on-year, while net revenues fromservices reached VND2.62 trillion (US$111.86 million), up 34% year-on-year.

Meanwhile, revenue from other activities amounted to VND3.03trillion (US$129.36 million), doubling the figure recorded in the same periodlast year, and trading of foreign currencies brought VND1.6 trillion (US$68.31million), down 6%.

In this period, trading securities posted revenue at VND316billion (US$13.49 million), down 19% year-on-year.

As of September 30, Vietcombank's total assets were valuedat VND995.11 trillion (US$42.47 billion), down 3.9% compared to the beginningof the year.

The lender's current outstanding loans stood at VND627.95trillion (US$26.8 billion), up 15.6% against the beginning of the year. Baddebt accounted for 1.18% of the total loans.

The bank's equity as ofSeptember 30 climbed 17% compared to the beginning of the year to VND61.52trillion (US$2.6 billion). Customers' deposits at the bank amounted to VND773.4trillion (US$33.01 billion), in which 28% were demand deposits.

Three pillars of Japanese ODA policy in Vietnam

Sharing about the implementation of Japan`s official development assistance (ODA) projects, Konaka Tetsuo, Chief Representative of the Japan International Cooperation Agency (JICA) in Vietnam said that all Japanese projects have contributed to boosting economic growth and improving the Vietnamese living quality.

According to Konaka Tetsuo, as the Japanese’s ODA implementing agency, JICA has been supporting Vietnam to achieve sustainable economic development in line with national objectives. The development strategy of the Japanese government for Vietnam follows three pillars.

The first pillar is “promoting economic development and enhancing international competitiveness”.

JICA is helping the Vietnamese government to improve its investment climate through dialogue and policy advice; develop long-term industrialization strategies for six key areas; reform SOEs and restructure the banking sector.

Moreover, JICA is supporting small and medium enterprises (SMEs) and implementing a lot of activities in human resource development through upgrading of universities, technical units and vocational training. In terms of infrastructure, JICA’s projects for Vietnam, in particular with projects to build vital transport infrastructure (such as roads, seaports, airports, and railways) have adopted the advanced technology of Japan.

The second one is “Supporting vulnerable subjects”. In spite of the high speed of economic growth, Vietnam faces many social and environmental issues such as poverty, the gap between the rich and the poor, the need to prevent natural disasters, the problems of environmental pollution and climate change, etc.

JICA supports Vietnam in addressing these challenges through a number of activities: Building infrastructure to meet basic human needs; Agricultural and rural development; Health services improvement through upgrading major hospitals; Disaster preparedness assistance.

The last one is “Strengthening governance”. Governance is one of the cornerstones of sustainable socio-economic development. In judicial and legal reform, JICA assists Vietnam in developing and revising civil codes and procedural law; strengthening the implementation of laws and regulations, etc.

Konaka Tetsuo said that in general, the implementation of Japanese’s ODA projects is effective. Projects’ aims are completed and the public have benefits from these projects. Japanese’s ODA projects have contributed to promote the economic development and improve the quality of the Vietnamese life.

“However, there are a number of factors that affect the implementation of ODA projects in Vietnam, two of which are delayed payments and delays in the implementation of administrative procedures related to ODA projects. In order for Japanese ODA projects to be implemented smoothly and in accordance with the plan, JICA expects that Vietnam will continue reviewing administrative procedures to make timely decisions on budget allocation for ODA projects as well as simplify related procedures, etc", he said.

2018 marks 45th anniversary of diplomatic relations between Japan and Vietnam. Konaka Tetsuo shared that JICA will achieve the vision of "Connecting the world by faith" through the implementation ODA projects fast and efficently.

New cooperative activities will be included in JICA's plan in the coming time, including supporting Japanese SMEs to invest abroad. In particular, JICA will focus on promoting ongoing projects, restarting delayed projects such as the Hanoi Railway 1 and 2 projects. Besides, JICA will consult with relevant units and develop new projects based on Vietnamese government’s policy.

In the future, JICA will also promote the cooperation forms through financial investment of the private sector. The first co-financing project in this form was between JICA and the Asian Development Bank (ADB) that focuses on the development of Vietnam's coffee value chain. JICA provided a loan of US$75 million. This is the first project in the agriculture field supported by private sector.

Investment environment is key for Hanoi to attract FDI: Mayor

Hanoi identifies investment environment is instrumental in attracting FDI for development, which translates in its first place in FDI attraction nationwide this year, according to Nguyen Duc Chung, chairman of Hanoi People`s Committee.

In parallel with an effort in improving investment environment and reforming administrative procedures, Hanoi has been focusing on trade facilitation and signing cooperation agreements with potential markets, stated Chung.  

According to Chung, Hanoi has been the first city in Vietnam to establish a committee specialized in global economic integration. 

In 2016, 2017 and the first six months of 2018, the city attracted US$12.46 billion in FDI, equivalent to 59% of the total figure corresponding to the 1989 - 2015 period. With the total FDI capital of around US$5.9 billion in the first six months of 2018, Hanoi has claimed the first place in FDI attraction nationwide. 

Among economic fields and sectors in Hanoi, real estate attracted substantial attention with investment capital of US$10.8 billion as of present, accounting for 32.3% of total registered capital.

Processing and manufacturing were the second most heavily invested, with US$7 billion, or 21% of total registered capital, followed by information and communication with US$3.75 billion or 11.2%, construction US$2.6 billion or 7.7%, and trade service US$1.86 billion (5.6%).

Over the last five years, Hanoi has posted an average GRDP growth rate of 8 - 10%, accounting for 13% of Vietnam's GDP and contributes 20% to the nation's state budget. 

It is forecast that Hanoi's population would reach 9 - 9.2 million by 2030 and the urbanization rate of 65 - 68%. 

Notably, the city is in its quest to become a smart city through infrastructure development and applying high technologies, while turning tourism into a spearhead economic sector. This would be a big opportunity for investors taking part in Hanoi's development process, Chung continued. 

As of June 2018, Hanoi had 4,300 active projects with total registered capital of over US$33.38 billion. Actual FDI reached US$15.6 billion, equivalent to 47% of the registered amount. 

Chung attributed the success to the fact that Hanoi has always been the pioneer in activities to build a government of service which supports businesses in every step. "The satisfaction of enterprises and citizens has been identified as the gauge in the operation of Hanoi's government system," he said. 

According to Chung, FDI is an important source of capital for social investment, accounting for 10 - 15% on average of social investment and contributing to the city's high GRDP growth over the past years (averaging 7.11% annually).

At the same time, it is the FDI sector that has created stronger competition pressure in each sector, motivating domestic enterprises to innovate technology as well as enhance the economy's competitiveness. 

The FDI sector has also created more stable jobs and skills training for workers; and there is a strong impact on the development and transfer of the structure of the three main sectors (industry - construction, trade - services and agriculture), promoting administrative reform and improving the business environment, building capacity of state management officials in the area of investment and enterprises. 

Additionally, the FDI sector has helped the metropolitan Hanoi become a civilized and modern city with commercial and service facilities up to international standards, such as the 72-storey Keangnam apartment, commercial, and service complex; the 65-storey Lotte complex, and international five-star hotels like Sofitel Metropole, Hilton or Sheraton. 

For Hanoi, the important thing is not only how much FDI is attracted, but also how to promote the effectiveness of this capital flow. Firstly, Hanoi will continue to establish a favorable investment and business environment so that enterprises and investors can successfully carry out their business and production plans, Chung affirmed. 

Jens Ruebbert, a former chairman of the European Chamber of Commerce in Vietnam (EuroCham), stated Hanoi has been maintaining high economic growth rate with presences of global multinational companies. The city is also on track to establish an e-government, Ruebbert added. 

EuroCham expected to join hands with Hanoi in developing a smart city model while preserving the environment, Ruebbert continued. 

Christopher Maline, CEO of Boston Consulting Group (BCG), said countries are competing aggressively with each other for FDI, and "Vietnam is winning." However, in the next 10 years, a big part of global FDI will be poured into new innovation-driven sectors, for which the winner in this race would need a big domestic market and advanced innovation system. 

In case of Hanoi, the city has numerous advantages in information and communication technology (ICT), Maline stated.

Malaysia's RHB Bank gets okay to buy out Vietnamese securities firm

Upon completion of the proposed acquisition, Vietnam Securities Corporation (VSEC) will become a wholly-owned subsidiary of RHB Investment Bank.

Malaysia's RHB Bank has received the approval from the State Securities Commission of Vietnam (SSC) for its proposed acquisition of the remaining 51% equity interest in VSEC for VND121.63 billion (US$5.20 million). 

In a filing to Bursa Malaysia on October 22, RHB said the approval was received on Oct 18 via a letter from Vietnam SSC which was dated on Oct 17.

The approval by Vietnam SSC is subject to two conditions, namely the proposed acquisition must be completed within 90 days from the date of approval, failing which the approval shall lapse, and VSEC shall make the necessary reporting and announcement in relation to the transaction in accordance with the relevant laws in Vietnam.

On February 9, RHB Bank announced that its wholly-owned subsidiary RHB Investment Bank entered into a conditional share purchase agreement with Chu Thi Phuong Dung, Truong Lan Anh and Viet Quoc Insurance Broker Joint Stock Company for the acquisition of the remaining 51% equity interest in VSEC comprising 6.88 million existing common shares for VND121.63 billion (US$5.20 million) in cash.

Upon completion of the proposed acquisition, VSEC will become a wholly-owned subsidiary of RHB Investment Bank.

VSEC was established in December 2006 and commenced operations in March 2007. RHB Bank was granted a license to open its representative office in Ho Chi Minh City in 2008.

The banking group is the fourth largest fully-integrated financial services group in Malaysia, with seven core businesses: group retail banking, group business and transaction banking, group wholesale banking, RHB Singapore, group Shariah business, group international business and group insurance. 

RHB Bank's regional presence span across ten markets including Malaysia, Singapore, Indonesia, Thailand, Brunei, Cambodia, Hong Kong, China, Vietnam, Laos and Myanmar.

Vietnam tourism makes a breakthrough from Industry 4.0

In the survey conducted by Q & Me, a Vietnam`s market research service, in 2017, 88% of Vietnamese searched online travel information, of which 35% used the Internet for tourist information.

Using 4.0 technology is an opportunity for Vietnam to make breakthroughs in the tourims industry, the information was announced by Deputy Director General of the Vietnam National Administration of Tourism Ha Van Sieu at the seminar with theme “Number conversion in tourism development”.

The event as part of the series of events The Guide Awards 2018 by the Vietnam Economic Times.

Instead of customers looking for destination information on book, newspaper as before, today travel information is reaching out to the customers.

According to Q & Me's survey conducted in 2017, a market research service in Vietnam, 88% of Vietnamese search online travel information, including 35% frequently use of the internet to find tourism information. 

According to Google Trends, the frequency of searches for “travel” has tripled in the last five years. The most popular tourist information in the country is related to travel experiences, places, restaurants and hotels.

The 2017 hotel survey service, published by Grant Thornton Vietnam, also reports that internet booking channels are understood to be through online booking sites (OTAs) such as Booking.com, Vntrip.vn or Agoda.com occupies 20.7% of the booking channel structure.

The development of technology has changed the way and behavior of tourism. Previously, the technology conception made tourism products tough, but now is more attractive, more depth, more content,” said Director of the Tourism Information Center under VNAT Le Tuan Anh.

According to Le Tuan Anh, with the popularity of smart phones, the world is at hand. With Vietnam, the VNAT has developed a smart tourism plan, based on digitization and intelligence. 

The main theme of this project is to build a large amount of data, interconnected, multi-disciplinary with destinations, based on shared applications, with the goal of serving customers. 

Once in the system, customers can find information and compare, more beautiful destinations will be more competitive, promote innovation.

Samsung refutes rumors on shifting production from Vietnam to N.Korea

Workers at a Samsung smartphone factory in northern Vietnam.

In response to Hanoitimes’ request for comment, a spokesperson of Samsung Electronics Vietnam said the company “does not comment on rumors and personal speculation.”

Samsung Electronics Vietnam has said the rumors saying North Korea could replace Vietnam as Samsung's main production center for smartphones and displays are “personal speculation”.

You Seung-min, chief strategist at Samsung Securities earlier this week, was quoted by Nikkei Asian Review as saying that North Korea is a good candidate for Samsung Electronics to set up production lines because it can offer cheap labor, has no language barrier and has the same time zone.

Nikkei also cited analysts as saying the Kaesong complex is attractive to South Korean companies because of its low rent, cheap labor costs and a large pool of able workers who speak the same language as their counterparts in the South.

According to Hana Financial Investment, a South Korean brokerage, minimum monthly wages for factory workers in the complex in 2014 were just $63.8, lower than $95.8 in Vietnam’s Ho Chi Minh City and $194 in China’s Qingdao. In South Korea's Ansan, the figure was more than $800.

“North Korea could draw investments from the international community and South Korea in the long-term, if it benchmarks Vietnam's success model,” You Seung-min said.
In response to Hanoitimes’ request for comment, a spokesperson of Samsung Vietnam Complex said the company “does not comment on rumors and personal speculation.”

Samsung Securities is just a subsidiary of South Korean conglomerate Samsung Group and is independent of Samsung Electronics. In addition, You Seung-min is an economist at Samsung Securities and is not authorized to speak on Samsung Electronics’ investment plans.

Samsung has invested a total of US$17.36 billion in Vietnam over the past decade, and is employing over 160,000 workers, 400 times its workforce in the Southeast Asian country in 2008.

Samsung Electronics has some 110,000 employees in its two complexes in Bac Ninh and Thai Nguyen provinces in North Vietnam, accounting for one third of the giant’s workforce globally. These two factories are producing more than a half of smartphones and tables manufactured by Samsung Electronics worldwide.

Samsung shipped US$54.4 billion worth of “Made-in-Vietnam” products last year, making one fourth of the country’s total export turnover, and the exports are set to reach US$58 billion this year.

Singapore's wealth fund GIC invests nearly US$1.3 billion in Vietnam

VinHomes is GIC`s largest investment to date with the current market value of VND15 trillion (US$639.25 million), followed by Masan with VND6 trillion (US$255.7 million) and Vietjet Air with VND3.7 trillion (US$157.68 million).

With investment portfolio of nearly VND30 trillion (US$1.3 billion) in Vietnam, Singapore's sovereign wealth fund GIC is one of the largest investors in the country, along with Dragon Capital, VinaCapital and Korea Investment Management (KIM).

On October 5, GIC, through its subsidiary Ardolis Investment, bought roughly half of US-based KKR & Co.'s 4.7% stake worth around US$100 million in Masan, one of the three largest privately-run conglomerates in Vietnam in terms of market capitalization. After the deal, GIC holds a total of 75.7 million shares or a 6.5% stake in Masan.

An investment in Masan will join GIC purchases in Vietnam's airlines, banking and real estate industries. GIC Chief Executive Officer Lim Chow Kiat said last month that he saw potential opportunities in emerging markets, which are experiencing "idiosyncratic" rather than "systemic" challenges, according to Bloomberg.

Additionally, GIC also holds stakes in VinHomes (5.74%), Vietjet Air (5%), Vinamilk (0.7%), FPT (3.5%), Pan Group, Vinasun and others. Among them, VinHomes is its largest investment to date with the current market value of VND15 trillion (US$639.25 million), followed by Masan VND6 trillion (US$255.7 million) and Vietjet Air VND3.7 trillion (US$157.68 million). 

In 2015, GIC reportedly acquired a 10% stake in Vietnam's leading technology firm VNG for US$100 million, implying the valuation of the latter at US$1 billion. 

Established in 1981 to manage Singapore's foreign reserves, GIC is a global long-term investor with over US$100 billion in assets in over 40 countries worldwide.

In addition to GIC, the Singaporean government also owns another investment fund in the name of Temasek Holding with assets of US$200 billion. 

Vietnam tops list of most globalized populous country in modern history: WEF

Globalization has been good for Vietnam. Its GDP per person grew from about US$1,500 in 1990 to about US$6,500 today, but unlike in some fast growing economies, its new prosperity has been shared.

In 2017, Vietnam's trade as a percentage of GDP reached over 200%, the highest level for any country with over 50 million people in the World Bank's data, which goes back to 1960, stated the World Economic Forum (WEF). 

Of the world's twenty most populous countries, it blows away number two Thailand at 122%.

The measure is calculated by adding the value of exports and imports then dividing the figure by GDP. Countries with high measures are typically rich and small. Hong Kong, Singapore and Luxembourg all have rates over 300%. Companies in these countries make products for export because the domestic market is too small consume all of their output, for which Vietnam is an outlier. 

Vietnam's exceptionally globalized economy is a result of its focus on exports for economic growth. Like China before it, Vietnam has opened up its cheap labor market to foreign investors and become a hub for low-cost manufacturing. The country is now a major exporter of electronics and apparel, with the United States and China as the main destinations for its goods.

In order to make those goods, Vietnam is a major importer of machine parts and natural resources from South Korea and China.

Globalization has been good for Vietnam. Its GDP per person grew from about US$1,500 in 1990 to about US$6,500 today, but unlike in some fast growing economies, its new prosperity has been shared. 

The proportion of people in extreme poverty fell from above 70% in the early 1990s to around 10% in 2016. In a recent report, the World Bank credited the jobs created by Vietnam's export sector for this remarkable poverty reduction.

The Vietnamese people have noticed the benefits of globalization, for which 95% of Vietnamese people said "trade is good" in a 2014 Pew Research Survey.

At the global scale, globalization is going through tough times. The UK's exit from the EU, the rise of nationalist US President Donald Trump and the escalating trade spat between the US and China are stymieing the progress towards a more connected global economy. International trade as a share of GDP fell from 60% in 2011 to 56% in 2016 in another sign globalization's ill health.

Tax incentives are not enterprises' priority: Oxfam

Vietnam should focus on restructuring of state budget expenditures, increasing transparency and efficiency in state budget spending with people`s oversight, and avoiding tax evasion and unnecessary tax incentives.

Experiences from developed countries show that tax incentives do not influence capital inflows into the economy, stated Nguyen Thu Huong, senior program manager – governance of Oxfam in Vietnam.
 
Credible investors will decide to invest regardless of receiving preferential policies or not, stated Huong in a conference held by Oxfam on October 18.

Huong stressed that Vietnam's tax incentive policies are quite preferential compared to other countries in the region. Oxfam's report assessing Vietnam's tax incentive policies in 2017 pointed out that the coverage of the incentives is lengthy and scattered. Vietnam's tax holidays are longer and broader in scope than in other countries in the region. 

Moreover, Vietnam also applies generous tax incentives for investment projects in economic zones and less developed regions. Consequently, tax incentives may potentially lead to transfer pricing, profit remittances, and erode the tax base.

Referring to the Global Competitiveness Report of the World Economic Forum, Huong pointed out that the three most important factors for investors are infrastructure, human resources and social stability. 

Additionally, a World Bank report released on 2014 concluded that 85% of foreign invested companies said that tax incentives are unnecessary. 

Huong stated that Vietnam should review all existing tax incentives to avoid overlapping and waste. The government should prevent tax incentives from becoming scattered and fragmented. Additionally, tax holidays - which accounts for the highest proportion of revenue forgone - need to be restricted. 

Vietnam would need huge financial resources to achieve the sustainable development goals (SDGs), for which effective state budget management is key, said Marthew Martin, director of Development Finance International (DFI) at the conference.

"One of the key solution is to expand the fiscal space, which is the budgetary room that allows a government to provide resources for public purposes without undermining fiscal sustainability," Martin continued. 

According to the International Monetary Fund, fiscal space exists if a government can raise spending or lower taxes without endangering market access and putting debt sustainability at risk. 

Huong from Oxfam added that the issue is particular important for Vietnam, as the country is undertaking the restructuring process of public finance system.

"The aim of the process is to address arising challenges such as high public debt and a lack of state budget revenue for development goals," Huong stated.

Huong said that there are many solutions to expand the fiscal space. However, solutions such as tightening the fiscal policy or borrowing for development investment are out of question, especially in the context where the government is trying to control the inflation rate and the public debt is approaching the limit of 65% of GDP set by the National Assembly. 

Among those solutions, Martin said that the public-private partnership (PPP) model should not be considered a solution for fiscal space expansion, which is based on OECD's experiences. Martin added that the model would cause high cost due to the involvement of private financial funding. 

"They often ask for a high level of profit, which are normally three to four times more expensive than borrowing government bonds. PPP should only be used if you have a project that really needs private sector expertise," Martin concluded, adding that this case happens rarely. 

Nguyen Quang Thuong, vice director of Center for Development and Integration, said it is vital for Vietnam to increase efficiency in state budget expenditures through transparency and monitoring. 

Experiences from many countries showed that a good legislation system is crucial but not sufficient for effective state budget management. People contribute to the state's budget by paying taxes, fees, and natural resource revenues; and they are also final beneficiaries in many programs funded from the state budget. 

Therefore, the state budget is spent more effectively with people's oversight. However, the state budget is still a challenging topic for public engagement in Vietnam, since budget management used to be viewed as the function of research institutions and policy makers, Thuong said. 

Vu Sy Cuong from the Academy of Finance recommended enhancing efficiency in state budget allocation, which could be done through the close cooperation between government agencies in developing state budget planning  for common development goals. 

“Vietnam should focus on three measures, including the restructuring of state budget expenditures, increasing transparency and efficiency in state budget spending with people's oversight, and avoiding tax evasion and unnecessary tax incentives," Huong concluded.

Global uncertainties continue to pose threats to Vietnam economy: CIEM

Uncertainties surrounding global trade activities, especially the escalating trade tensions between the US and China and the FED`s decision of hiking interest rates are putting pressure on Vietnam`s macro-economic management.

Vietnam still maintains high economic growth rate of 6.88% in the third quarter and 6.98% in the first nine months of 2018, however, global uncertainties continue to pose threats to the country's economic prospects, according to Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM). 
 
Uncertainties surrounding global trade activities, especially the escalating trade tensions between the US and China and the FED's decision of hiking interest rates, are putting pressure on Vietnam's macro-economic management, Cung said in a conference on October 17. 

"It is vital that the government solidify the macro-economic foundation, in turn ensuring economic resilience against external shocks," Cung continued. 

Additionally, Vietnam should give priority to the facilitation of major free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU - Vietnam Free Trade Agreement (EVFTA), as well as the development of the private sector, he added. 

Nguyen Anh Duong, head of CIEM's Macroeconomic Policy Department, said that there had been complex movements in Vietnam's consumer price index (CPI), which decreased by 0.09% month-on-month in July and then increased by 0.45% and 0.59% in August and September, respectively. 

Overall, the CPI expanded 4.14% in the third quarter and 3.57% in the first nine months. Duong stated that the government's inflation target of 4% in 2018 is feasible in face of inflationary risks at some points. 

With regard to the USD/VND exchange rate, there has been a gap between the USD selling price in the free market, the inter-bank exchange rate and the central bank's benchmark rate. However, the State Bank of Vietnam (SBV) has adopted a more flexible management of the exchange rate in an effort to minimize potential negative impacts on the macro economy, Duong said. 

"Maintaining trade surplus and increasing the FDI disbursement rate are solutions to relieve pressure on exchange rate management," Duong said. 

In summary, Duong expected the GDP growth rate in 2018 to reach 6.88%, while exports are set to grow by 13.34% with a trade surplus of US$5.1 billion. 

Meanwhile, the inflation rate is projected to reach 3.97%.

Looking forward, the CIEM's director considered state budget performance a weakness of the economy as expenditures remain high, while spending efficiency still leaves much to be desired. 

Cung mentioned the US - China trade friction would bring both challenges and opportunities to Vietnam. However, Vietnam has to be active and prepared to adjust to new situations. 

Moreover, the global financial market in general and emerging markets in particular are vulnerable to the growing trend of protectionism and the volatile capital flows.