BUSINESS NEWS 10/7

Stakeholders urged to consult arbitrators in PPP project disputes

BUSINESS NEWS 10/7

Arbitrators need to step in and deal with disputes in public-private-partnership (PPP) projects so economic development will not be disrupted, experts have warned.

Vietnam has encouraged PPP projects in recent years to meet the demand for energy and infrastructure development in the context of limited State budget.

According to Vice Chairman of the Vietnam Chamber of Commerce and Industry Hoang Quang Phong, as of January 2019, 336 PPP project agreements were signed with the total capital raised reaching 1.6 quadrillion VND (68.8 billion USD). The figure consisted of 140 build-operation-transfer (BOT) projects and 188 build-transfer (BT) projects.

Do Trong Hai, director of the law firm Bizlink, said disagreements and conflicts might arise between government agencies, investors and people when carrying out a PPP project.

“Disputes must be resolved shortly so that they don’t escalate, assuring the PPP project is carried out quickly and has no negative impact on the nation’s general business environment,” Hai told a two-day seminar that took place in both Hanoi and HCM City last week.

Stakeholders should bring the case to the arbitrator as this is an effective way to deal with conflicts, Phan Trong Dat, deputy general secretary of the Vietnam International Arbitration Centre, told the conference.

“Arbitration is secure, flexible, less time-consuming and cost-saving,” Dat said, adding that experiences in developed countries have proven arbitration can lessen the tensions in PPP projects. Therefore, cases may not be brought to the court.

Professor Pham Duy Nghia at Fullbright Vietnam University said attracting private investment was good for infrastructure development.

“However, PPP projects often have long life cycles, so risks will come along,” he said, adding risks were related to legal framework, finance, tax and management.

“Risks increase spending on projects. It may not only result in losses for stakeholders but also create disputes, leading to the delay, or even worse, the cancellation of the projects.”

In order to limit the risks, there are two solutions, according to Nghia. One is to forecast potential risks when stakeholders prepare mutual contracts.

A PPP project often lasts for 20-30 years. During the period, the regulations and policies could change so there must be appropriate measures to make sure stakeholders would not suffer, Nghia said.

"The second solution is selecting arbitrators to resolve disputes," he added. “If investors are unaware of the administrative procedures, it may prolong the implementation plan and create more risks for both private investors and State agencies.”

Bottlenecks in SOE equitization need to be removed

According to a plan approved by the Prime Minister, Vietnam must equitize 127 state-owned enterprises (SOE) during the 2017-2020 period. But to date, less than one third of the enterprises have been equitized. The question now is what to do to complete the plan on time?

The Ministry of Finance said only 24 SOEs were equitized in 2017 and 23 businesses were equitized last year. 80 more SOEs must be equitized by next year. That means 10 enterprises must be equitized in each quarter of 2019 and 2020.

The number of enterprises to be equitized in Ho Chi Minh City account for 60% of the planned total, but in the first 5 months of this year, no enterprises were equitized.

The HCMC People's Committee has asked the Government to allow its equitization progress to be delayed by 20 years until 2020.

Economists say most of the enterprises to be equitized in Ho Chi Minh City are major interdisciplinary businesses with complex structures and many different types of assets.

Economist Huynh The Du said the State asset identification in these SOEs is the first bottleneck to be removed. Equitization is a complicated process, Du said, and it’s tempting to try to evade responsibility or delay the equitization.

Vietnam lacks policies to motivate the process, even though HCMC is being allowed to keep the state divestment capital for its budget.

An audit of the valuation process for SOEs managed by the Hanoi People’s Committee revealed mistakes in the valuation of land use and land leases and capital contributions for joint ventures, and poor monitoring of the proceeds from IPOs and divestment. These mistakes need to be resolved for any future equitization.

Do Van Sinh, a member of the National Assembly Economic Committee, said Vietnam has created a legal framework for the equitization process but hasn’t specified all the details.

“The SOE equitization plan has multiple problems. The question is whether or not the information is transparent for investors and can meet their expectations. For example, an SOE plans to sell 30% of its shares in the initial public offering but its investor wants to buy 51%. The government should re-assess the reasons leading to the deferred process and propose solutions,” said Sinh.

The State Capital Investment Corporation (SCIC) has proposed a number of solutions to make state divestment go smoothly. One is to implement Decree 32 on the transfer of state capital investment in enterprises, determining the value of land use rights (rent paid annually) and the value of intellectual property and other invisible assets like cultural and historical values.

It has also called for the promulgation of a sample regulation for the offering of shares and instructions for book building, the process by which an underwriter attempts to determine the price of the offered IPO.

Apple takes down gambling apps at Vietnam’s behest

Apple has fulfilled a Vietnamese demand to remove nine apps that flouted its gambling laws, the U.S. company says in its latest transparency report.

It said Vietnam had sought the removal of 29 apps from the App Store between July and December last year, the requests being "predominantly related to illegal gambling app investigations and unlicensed gaming apps investigations," the report released on Tuesday said. It did not identify the apps.

Vietnam was among 11 countries to make similar requests, and as a result Apple removed 634 apps. A majority, 517, were taken down at China’s demand since they violated its gambling and pornography laws.

Online betting remains illegal in Vietnam though the country has in recent years relaxed its stance on gambling as a "social evil."

Numbers of new and closed enterprises keep rising: WB

There is considerable churning in the domestically-owned private enterprise sector in Vietnam, with the registration of new, and closure of existing enterprises, both rising in recent years, according to the World Bank (WB).

The WB stated in its bi-annual economic report on Vietnam, called “Taking Stock,” that 107,000 firms closed or suspended business in 2018, compared with 73,000 business closures in 2017.

Another 24,000 businesses closed shop during the first five months of this year, an 18.3% increase over the same period last year.

At the same time, the number of newly-registered enterprises increased by 131,000 last year, compared with 127,000 in 2017, significantly exceeding the number of closures during both periods. These enterprises also eclipsed closures in the first five months of this year, with 54,000 new registrants.

Among businesses that closed, trading enterprises suffered the largest number, accounting for 40% of all businesses that were liquidated or whose operations were suspended in early 2019.

The WB cited a survey by the Vietnam Chamber of Commerce and Industry as showing that difficulties in finding suitable markets, low competitiveness among domestic firms and products, and limited access to financial and labor resources were among the main reasons behind enterprise liquidations or suspensions.

Despite these challenges, the number of newly registered firms has consistently exceeded the number of firms that have been liquidated, at least since 2013.

The WB also stated that the dynamic domestic private sector is still dominated by micro and small enterprises (MSEs). According to the 2017 Economic Census of the General Statistics Office, out of some 500,000 existing domestic firms, 98% are MSEs.

While these enterprises create the vast majority of jobs in the economy, many operate in relatively low productivity services, such as small retail and restaurants, and simple manufacturing.

Most are focused on the domestic markets and few of these businesses are engaged in export activities. They often lack the scale, access to finance and technology to make them efficient producers.

To support MSEs to expand rapidly, the most important policy imperative is to provide a level playing field for all firms. While Vietnam has made progress in improving its business environment, as evidenced in the improvement in the World Bank Doing Business Ranking, some deep-seated distortions remain.

The WB suggested the Government revisit the competition policy program to strengthen competition-supporting institutions and fully decentralize the decision-making process, to allow equal access of all enterprises to key production factors, such as land, credit, labor and technology.

In addition, the Government needs to implement reforms to strengthen structural changes in the economy that will boost private investment and create greater efficiency in State-owned enterprises (SOEs) and continue to reduce a disproportionately large role of the State in the economy.

The strong presence of SOEs results in inefficient prices and various other market distortions that suppress the domestic private sector, the WB warned, adding that rationalization of the role of the State requires the elimination of private sector distortions and an end to favorable treatment of SOEs.

The bank also noted that the State needs to relinquish the direct management of economic activities where no market failures exist, and concentrate more on its role in providing a level playing field for all economic sectors.

High time to seek solutions to solar power surplus

The solar power surplus has now reached a crisis point when numerous projects, especially in the south-central provinces of Binh Thuan and Ninh Thuan, have to scale down the amount of power generated to the national grid due to the overload on the transmission system there.

Regrettably, this situation has been anticipated for long, but relevant bodies, especially the Vietnam Electricity Group (EVN) and the Ministry of Industry and Trade, have failed to make appropriate responses.

At the Government teleconference with leaders of localities last Thursday, Chairman of Ninh Thuan Province Luu Xuan Vinh complained about solar power projects in the locality being told to cut supplies due to the low-capacity transmission there, according to Vnexpress.net.

Under the revised power generation master plan for the locality, Ninh Thuan is authorized to license renewable power projects with total output of 2,000MW till 2020, but the transmission system in the province could accommodate a maximum rate of 800 to 1,000MW.

Such a yawning gap means a waste of resources and money for investors and society, as the output of solar power plants as of end-June had already hit 1,090MW.

The overload to the national grid is attributed to the rapid development of solar power projects nationwide, a fact that should have been attended to by authorities following the Government’s decision in 2017 to provide incentives for investors who completed solar power projects prior to the end of this June.

Last year, according to the National Load Dispatch Center, only three solar power plants were commissioned, but the number was five in this year’s first quarter, and shot up to a staggering 81 projects in the second quarter, with combined output of 4,500MWp.

The center warned that without projects to enhance the transmission capacity, the risk for the national grid to collapse is high, which will put the entire national economy under tenterhooks.

Relevant bodies, as mentioned early on, wait until it begins to rain to make the coat.

An official of the Department of Electricity and Renewable Energy under the Ministry of Industry and Trade, asserts on Vnexpress.net that his organization has multiple times warned of the imminent overload.

He furthers that the organization will ask the Government to call for private investment in the power grid development.

EVN, meanwhile, says it will manage to speed up transmission projects to ensure that all the output from renewable power plants can be generated to the national grid by the end of next year.

Solutions to the solar-power surplus need to be worked out at the soonest possibility as it is better late than never.

Things to do first should be to quickly develop transmission projects – either by the State or private sources – and to reduce power generation by other traditional power projects such as thermo- and hydro-power plants so as to save on resources on one hand and give a wider slot to renewable energy generators on the other.

And more importantly, efforts must be taken in the immediate future to ensure that such a surplus crisis would not recur elsewhere in the country.

Enterprises need better branding to compete in int'l market

Vietnamese enterprises must develop globally competitive brands if they want to succeed internationally, speakers said at a conference on domestic trademarks held in HCM City on Saturday.

Vinamilk is one of major Vietnamese brands to have sucessfully expanded its brand in foreign markets

Economist Lê Đăng Doanh said that most Vietnamese farm produce and seafood exported through unofficial channels had no brand names and thus suffered from low export prices.

“A strong and competitive economy has many large businesses with strong international brands,” he noted, adding that brand development, however, was not the strength of Vietnamese enterprises.

Vietnam is among the world's largest exporters of farm produce and seafood, but few foreign consumers know they're using products from Vietnam, he said.

“These products are exported without brand names on the packaging. More than 70 per cent of Vietnamese exports are from foreign direct invested companies," he explained.

A representative of the US-based Global Home Visa LLC, who wished to remain anonymous, said that Vietnamese enterprises must have good financial and human resources to build brand names in the US market.

Vietnamese exporters must also be knowledgeable about importing countries' laws and regulations on intellectual property, safety and quality of products, he said.

“With a strict market like the US, enterprises should learn about labeling, packaging and procedures for registering trademark protection,” he added.

To enter the US market, Vietnamese brands also need to be protected from violations made by other competitors.

Bùi Hoàng Yến, deputy representative of the Office of Trade Promotion Department in HCM City, noted that the newly signed free trade agreements (FTAs) would offer great opportunities for Vietnam to export products to more than 100 countries.

However, exporters will face increasing trade protectionism and non-tariff barriers as well as stricter standards, especially on food safety and environmental protection.

Vietnamese goods sometimes fail to meet export standards, especially in strict markets like the US, the EU and others.

A programme on high-quality product production should be implemented by State management agencies, she said.

FTAs have opened up trade for domestic companies, but they have also allowed more foreign brands to enter the local market, creating fierce competition, experts said.

A good product with a good trademark will live forever in the heart of consumers, they noted. To build and protect brands, enterprises must invest in standardised production processes, market development, communication and marketing.

Experts also warned that social media and wide usage of IT around the world can be beneficial for building brands, but can also carry risks if comments about products are negative.

The event was organised by the Research Centre for Developing Vietnamese Brands.

VCCI, EuroCham to help SMEs extract EVFTA gains

SMEs will be counseled on how to benefit the most from the newly-signed EU-Vietnam Free Trade Agreement.

Small and medium-sized enterprises (SMEs) are a priority target under the EVFTA, said Vu Tien Loc, president of Vietnam Chamber of Commerce and Industry (VCCI).

He was speaking at a conference titled "The EVFTA: What happens next", which was organized by VCCI and the European Chamber of Commerce (EuroCham). The conference gathered enterprises from textile, coffee, communication, pharmacy and other industries to discuss EVFTA regulations and ways to benefit from tax and investment incentives.

Loc said EVFTA carried the highest-level of freedom and fairness in which EU and Vietnam businesses shared the vision of sustainable development.

However, in discussions, experts pointed out limitations like the lack of information access among Vietnamese SMEs. Many enterprises in key manufacturing sectors did not know when the tax rate of products exported to the EU will return to zero percent or what that rate is for upcoming years, they said.

"After the signing of EVFTA, Vietnamese enterprises, especially SMEs, need to be fully-equipped to benefit from tax and investment incentives, which would enhance their competitiveness in the domestic market and enable exports to the EU," Loc said.

He said that the VCCI, in association with EuroCham, will carry out counseling and support programs for Vietnamese enterprises, including training courses and establishment of business associations with emphasis on governance capacity.

Activities and seminars regarding EVFTA will be organized, aiming at introducing opportunities and guidelines for Vietnamese businesses, especially in the most affected areas, he said.

"Enterprises themselves need to improve the quality of human resources and corporate governance. The most important thing is that enterprises must study the agreement, then restructure products, technology, partners and markets."

Nicolas Audier, EuroCham chairman, said Vietnamese businesses need to learn European standards and find ways to apply these, and look for EU partners to easily access markets.

EuroCham suggested that guidelines are provided for companies to come and invest in Vietnam. It also suggested that specific industry committees are formed, for paper, medicine, automotive, food, etc., so the most appropriate support can be provided.

VCCI and EuroCham will jointly establish the EU-Vietnam Business Council, and hold an annual event called the "Vietnam-EU Economic Summit" to promote economic, trade and investment cooperation between the two sides.

The EVFTA was signed in Hanoi on June 30 after nine years of negotiations.

 

The EU will eliminate 99.7 percent of tariff lines for Vietnam's exports in seven years after the deal comes into force. Up to 70.3 percent of Vietnamese products exported to the EU will be free of tariffs immediately, said Minister of Industry and Trade Tran Tuan Anh. Only 42 percent now enjoys zero tariffs.

In response, Vietnam will eliminate tariffs on 64.5 percent of imports from the EU, rising to 97.1 percent in seven years.

Mechanical engineering industry needs more support for growth

The mechanical engineering industry needs supportive policies from the Government to enhance its competitiveness during the fourth industrial revolution, officials and industry experts have said.

Pham Xuan Da, head of the Ministry of Science and Technology’s southern affairs, said the industry plays an important role in manufacturing, which is the backbone of the economy.

“Although the [Government’s] preferential and support policies have not met the expectations of the industry, the mechanical engineering industry has achieved remarkable results such as expanding rapidly in terms of number of enterprises from around 10,000 in 2010 to more than 21,000 enterprises in 2016, and increasing exports to over 16 billion USD,” he said.

“Local enterprises can make some products that we previously had to import. Production lines in factories are synchronised, and enterprises have developed a number of technologies.”

Local firms have also successfully developed many kinds of machinery, equipment and production lines for the agricultural sector, including for animal feed production and cassava starch processing, he said.

Dao Phan Long, chairman of the Vietnam Association of Mechanical Enterprises (VAMI), said in the past all types of steel structures and non-standard equipment used in industrial plants, oil rigs and hydropower, irrigation, cement, and chemical plants had to be imported.

But now Vietnam can make them, he said, adding that local firms can also build ships of 70,000 - 105,000 tonnes.

But Da said the industry has many limitations, including low competitiveness of its products, local shortage of raw material supply and qualified human resources and lack of linkages between companies.

At a recent seminar held in HCM City experts said in the context of integration and the fourth industrial revolution, new requirements have emerged for the mechanical industry.

Do Phuoc Tong, Chairman of the HCM City Association of Mechanical – Electrical Enterprises, said policies to help enterprises get bank loans for buying equipment, machinery and production facilities are necessary as are programmes to help enterprises upgrade their technologies and train human resources.

Building mechanisms to promote technical and technology transfer to Vietnamese companies by foreign enterprises is also vital, he said.

On the other hand, mechanical enterprises need to proactively restructure and embrace innovation, improve management efficiency, reduce costs, improve productivity and quality, expand markets, enhance linkages with businesses in the same industry, and actively participate in global value chains, he said.

Concurring, Nguyen Van Thu, VAMI’s former chairman, said Vietnam’s mechanical engineering industry is a few centuries behind the world, making it necessary to create a driving force for it to develop.

Funding and quality human resources are two important factors in the development of the industry, he said.

“We are living in a flat world and need to have policies ahead of one’s time so that our mechanical engineering quality and capacity can keep up with the demand of the world market.”

Multiple Japanese firms seek investment opportunities in Danang

A delegation of over 130 Japanese firms, representing a variety of fields, has visited the central city of Danang to study the investment environment in local industrial zones, hi-tech parks, as well as real estate and services.

This was the first time that a delegation of potential Japanese investors took a charter flight to the city, co-organized by the municipal Department of Foreign Affairs and Brain Works, said Nguyen Cong Tien, deputy director of the department, at the 66th EGA business conference on July 4 in the city.

The fact that Danang tops the list of the most popular overseas investment destinations among Japanese firms has provided a reference for others to consider additional investments in this city, according to many active Japanese firms in Vietnam and those visiting the city for the first time.

Japanese investors usually focus on such fields as hi-tech, technologies for elderly people, tourism services, and property, when they plan to invest in the city.

Tsuyoshi Yamamoto, chairman at Jibanet Holdings, said he looks to invest in residential projects, worth a total US$3 million in the next five years, to serve Japanese experts and employees working in the central city.

Noboru Kondo, general director of Brain Works, said he earlier brought many Japanese firms to make investments in Hanoi, HCMC, and Can Tho. He expected that several companies, after this trip, will invest in the city.

For the city’s side, Nguyen Cong Tien pinned his hopes for investment by Japanese firms on three industrial park projects with a combined 1,000 hectares of land in Cam Le District and outlying Hoa Vang District.

The department will collaborate with other agencies to operate more charter flights to bring Japanese firms to the city for studying business investment opportunities, Tien said.

EGA is an annual event taking place in many localities in Japan and Vietnam, with an aim at connecting Japanese and local businesses.

No bank charges for switching to chip cards

Many commercial banks will not charge fees if customers switch from magnetic-stripe cards to chip cards during the initial roll-out period to support the conversion plan, sources from banks have said.

Seven banks, which have issued a combined 70% of the cards in the country, introduced their domestic chip cards in late May. They are eligible to issue these cards using Europay, MasterCard and Visa (EMV) chip technology, which optimizes the security of card information and enables contactless payment.

These banks are Bank for Foreign Trade of Vietnam, Vietnam Bank for Industry and Trade (VietinBank), Bank for Investment and Development of Vietnam, Vietnam Bank for Agriculture and Rural Development, Saigon Thuong Tin Commercial Bank, Tien Phong Bank and An Binh Commercial Bank (ABBank).

ABBank aims to complete the card conversion by late 2020, ahead of the December 2021 deadline set by the State Bank of Vietnam. The commercial bank expects some 30% of its clients to replace their cards by the end of this year.

VietinBank is also helping its clients to exchange their magnetic automated teller machine (ATM) cards for chip ATM cards. The new cards will be integrated on the smart phone platform, making it easier to conduct contactless payments. Card users only need to bring their phones closer to the point of sale (POS) terminals to complete their transactions.

The card change is aimed at improving security, safety and payment speed as well as reducing the risk of skimmer fraud, according to VietinBank.

Card skimming is a type of theft that utilizes a small device to steal credit card information. The thieves then sell or use this card data to make fraudulent purchases.

To complete card conversions in line with the Vietnam Chip Card Specifications (VCCS), local issuing banks have to invest heavily in upgrading their card management, card personalization and ATM/POS systems.

The VCCS uses contactless technology and can make payments through Quick Response codes in line with EMV specifications.

ABBank noted that it will not raise fees when its cardholders apply for a domestic debit card, called the ABBANK YouCard, over the short term. Some other banks will also eliminate fees for card switches during the initial phase.

Data from the National Payment Corporation of Vietnam showed that 48 banks have so far issued some 76 million domestic cards and have over 260,000 POS terminals and 18,600 ATMs.

Local commercial banks have to convert at least 30% of their magnetic-stripe ATM cards, 35% of ATMs and 50% of POS terminals to contact and contactless chip-based technology by the end of this year. They have to replace all of their cards by late 2021, according to the plan of the central bank.

HCM City lures over US$3 billion in FDI in first half of 2019

Ho Chi Minh City attracted over US$3 billion in foreign direct investment (FDI) during the first half of this year, according to the municipal Statistics Office.

Specifically, the city’s authorities have granted licenses to 572 FDI projects, with a total registered capital of US$528.8 million, while 137 currently operating projects registered to expand their capital, with total supplemented capital amounting to US$285.3 million.

As of June 20, the total for newly registered and additional capital neared US$814.1 million, down 3.2% year-on-year.

The real estate sector secured the most from FDI attraction, followed by science and technology, and the manufacturing and processing industry.

The British Virgin Islands were the largest FDI investor in the city while the Republic of Korea and Japan came second and third, respectively.

Next Story Group enters Vietnam with Kafnu brand

International hospitality company the Next Story Group has marked the opening of the eight-story Kafnu Ho Chi Minh City co-working space in the heart of one of Asia’s leading emerging markets.

Kafnu Ho Chi Minh City is the fifth Kafnu property to open globally, following launches in Taipei, Bengaluru, and Sydney since its debut in Hong Kong in late 2017.

The co-working space is located at Saigon Pearl in Binh Thanh district. Members enjoy round-the-clock access and their productivity is assured with a range of work spaces including hot desks and private offices, high-speed internet, a soundproof phone booth, and five meeting rooms with video conferencing capabilities.

Spanning 2,440 sq m, Kafnu Ho Chi Minh City also has a multi-screen 180 sq m event space where members can host product launches, workshops, and other events for up to 150 guests. There are also eight ensuite hotel rooms where members from out of town can get a good night’s rest and wake up to views of the city skyline.

“We are excited to be part of Vietnam’s growth story,” said Mr. Chris Edwards, General Manager of Kafnu Ho Chi Minh City. “We aim to be a catalyst for success for entrepreneurs and creative trailblazers who choose to build their enterprises, brands, and personal networks in the vibrant economic hub of Ho Chi Minh City. To support their endeavors, we are cultivating a warm, welcoming community of like-minded change-makers, delivering targeted programming and providing unique opportunities for discovery, connection, and growth.”

Named after a hamlet, Himachal Pradesh, in northern India, where climbers regroup before summiting the Himalayan peaks, the Kafnu brand offers the best in shared work spaces, boutique hotels, and social communities. Kafnu properties are strategically-located and designed to foster co-creation, co-exploration, and co-innovation.

Kafnu aims to elevate the individual and collective potential of its members, who include creators and business owners, and to support them in their journey to success by providing an ideal environment for them to work, rest, and socialize.

It also offers bespoke member events and curated workshops tailored to the needs of its community, providing access to resources, capabilities, and people that inspire success. Members enjoy access to all Kafnu properties worldwide, which means they can stay connected to the Kafnu community wherever their work and inspiration may take them.

Co-working space has seen ongoing demand in Vietnam’s real estate market in recent years, according to CBRE Vietnam. The country is now home to 20 brands providing shared workspace services at 100 venues in the country, primarily in Hanoi and Ho Chi Minh City.

Global co-working space provider Spaces opened its first center in Hanoi in May, marking its entry into Vietnam. In March, another leading co-working space operator, WeWork, announced the official opening of its first Vietnam’s location in E-Town Central in Ho Chi Minh City’s District 4.

Trade spat fallout: cheaper Chinese toys hurt Vietnamese producers

An import surge of cheaper Chinese toys courtesy of the U.S.-China trade war is making life difficult for Vietnamese producers.

Hoang, a local importer, said Chinese toys are 30 percent cheaper this year. In the first five months, his import volume doubled compared to the same period last year.

A Chinese toy airplane costs VND100,000-150,000 ($4.3-6.4), while a Vietnamese or Japanese one costs five times as much, he said. "Chinese toys are selling well at low prices. About 60 percent of the toys I sell are from China, the rest from Vietnam and the U.S."

"Vietnamese toys are struggling to compete as Chinese toys are being sold at much lower prices," Hoang added.

Vietnam imported $68.7 million worth of toys from China last year, up 21 percent from 2017, according to Vietnam Customs. In the first 5 months of 2019, the import value reached $35.8 million.

The surge in toy imports is being attributed to the year-long U.S-China trade war, which shows no signs of ending. Experts had warned earlier that China could increase the export of cheap goods to Vietnam to avoid U.S. tariffs.

The U.S. has so far slapped a 25 percent tariff on $250 billion worth of Chinese goods, and President Donald Trump has threatened to apply the same elevated levy on remaining imports from China worth around $300 billion. In retaliation, Beijing also raised tariffs on $60 billion worth of American products.

China has been weakening its currency to improve exports. The yuan fell to its lowest this year on Jun 10 at CNY6.93 per dollar. As of Friday, it has fallen by 3.7 percent compared to a year earlier, according to Bloomberg data.

PMI: New order growth strongest year-to-date

The Vietnam Manufacturing Purchasing Managers’ Index™ (PMI®) posted 52.5 in June, up from 52.0 in May and in line with the reading from April. The average PMI reading for the second quarter of 2019 was above that seen in the opening three months of the year, albeit remaining short of the 2018 average.

June data completed a solid second quarter of 2019 for the Vietnamese manufacturing sector, with business conditions improving amid ongoing new order growth. There was also a return to job creation in June, after employment had dipped marginally in May. Rising workloads also led manufacturers to increase their purchasing activity, with efforts to build inventories amid confidence around the near-term outlook for new orders also highlighted.

The rate of input cost inflation softened to a three-month low, thereby enabling firms to continue recent discounting of selling prices.

Vietnamese manufacturers continued to record solid growth of new orders in June, with the rate of expansion ticking up to a six-month high. Panelists linked the latest rise to the launch of new products and increased customer numbers. Less positive data was seen with regards to new export orders, which rose at the slowest pace since February. There were some reports that the US-China trade tensions had impacted negatively on export orders.

“The Vietnamese manufacturing sector continues to bob along nicely midway through 2019,” said Mr. Andrew Harker, Associate Director at IHS Markit. “The second quarter of the year saw solid growth that was broadly stable across the period and an improvement on the first quarter. Ongoing strength in demand encouraged firms to fill positions that had been vacated by resigning staff in May, leading to a return to job creation. One concern outlined by some firms was the US-China trade issues, which contributed to a moderation of export growth and weaker business confidence.”

Higher new orders were the key factor leading to a 19th successive monthly rise in manufacturing production. The upturn in output was solid and broadly in line with those seen during the rest of the second quarter.

Continued marked new order growth led to a rise in backlogs of work in June; the first in 2019 so far. Firms responded to higher workloads by taking on extra staff, reversing the decline seen in May.

Alongside job creation, higher workloads also encouraged manufacturers to purchase additional inputs in June. Moreover, the rate of expansion was marked and the fastest in three months. Some panelists reported efforts to build inventory reserves. Higher input buying and shorter delivery times enabled firms to raise stocks of purchases for the third consecutive month.

On the other hand, stocks of finished goods decreased modestly for the second month in a row.

Input prices rose at a relatively modest pace in June and one that was the softest in three months. Where input costs did rise, panelists reported higher market prices for items such as oil and gas. Relatively weak input cost inflation meant that manufacturers were able to lower their output prices again. Charges have now decreased in seven successive months, with the rate of decline broadly stable throughout the second quarter.

Although manufacturers remained optimistic that output will increase over the coming year, the level of confidence dropped sharply in June and was the lowest since February. Some panelists reported concerns regarding the US-China trade situation. Where growth was predicted, respondents linked optimism to planned business investment, new product launches, and entry into new markets.

Sumitomo invests in Vietnam port operator

Japan's Sumitomo has invested $37 million in a major port operator to take advantage of Vietnam’s growing logistics demand.

SSJ Consulting Vietnam Llc, a company in which Sumitomo Corp owns a 51 percent stake, has acquired a 10 percent stake in Gemadept Corp, according to the Ho Chi Minh Stock Exchange.
SSJ Consulting was established recently by Sumitomo and two other Japanese companies.

Sumitomo operates three industrial parks near Hanoi and owns a logistics company in the country, while Gemadept operates six ports and handles 1.7 million containers a year.

Stock brokerage MBS said in a recent report that Vietnam would see more demand for logistics services since exports are set to grow by 10 percent a year for the next three to five years.

Last year the country's ports handled 524.7 million tons of goods, up 19 percent from 2017, according to the Vietnam Maritime Administration.

Vietnam has 1,600 ships with a total capacity of 7.8 million tons, the fourth highest in Southeast Asia, the report added.

Hanoi to build new metro section in 2021

Hanoi plans to borrow $1.48 billion from official development assistance funds (ODA) to build a metro section in 2021.

The new section, connecting the downtown Hanoi Railway Station with southern Hoang Mai District, is estimated to cost $1.75 billion. The remaining $271.3 million will come from the city’s budget, the Hanoi People’s Committee says in a document.

The Asian Development Bank (ADB) has committed to lend $450 million for the project, construction of which is scheduled to start in 2021. Other lenders that have expressed interest in the project are the German state-owned development bank KfW, the French Development Agency (AFD) and the World Bank.

The Hanoi Railway Station-Hoang Mai section is one of three sections of the 26-kilometer Metro Line 3. The other parts are the long-delayed Nhon-Hanoi Railway Station route, which is under constructed, and the Troi-Nhon section, where work is yet to begin.

The Hanoi Railway Station-Hoang Mai section will run 8.7 kilometers from Le Duan Street to the Phap Van viaduct in Hoang Mai District. Most of the route will run underground.

An area of 11.34 hectares will need to be cleared, and construction is set to be completed in 2025.

Hanoi plans to have nine metro lines by 2030 with vision until 2050. Only two have started construction so far and none started operations.

The first Hanoi metro in April missed its deadline due to the inexperience of the Chinese contractor, according to the Ministry of Transport.

It had also said earlier that five metro projects in Vietnam have seen their costs balloon by VND81 trillion ($3.5 billion) following long delays.

 
 
 
 
 
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