BUSINESS NEWS 14/6

FTA opportunities remain largely untapped: trade official

Only 30 - 40 per cent of local firms have utilized opportunities arising from the free trade agreements Vietnam has signed, though the deals are reckoned to present an array of business chances.

Vietnam has pledged to lift 66 per cent of tariff lines on commodities imported from CPTPP markets right after the pact came into force from January 14, 2019 onwards.

Nguyen Thi Quynh Nga, deputy head of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, made the statement during a recent press briefing themed international integration in Hanoi.

The ASEAN Free Trade Area is the first of which the country is a signatory. Vietnam now outshine its regional peers in terms of economic integration, Nga noted, adding that Vietnam and other ASEAN member states had removed up to 98 per cent of tariff lines by 2018.

Regarding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Nga emphasized it as the most comprehensive trade pact Vietnam has implemented. Most notably, the Southeast Asian country has pledged to lift nearly 100 per cent of tariffs on imports from other CPTPP members.

In a drastic move, the country has pledged to lift 66 per cent of tariff lines on commodities imported from CPTPP markets right after the pact came into force from January 14, 2019 onwards. Other CPTPP members committed to remove 97 - 100 per cent of tariff lines on Vietnamese goods.

The CPTPP allows for full cumulation, meaning that firms within a CPTPP market can use inputs sourced from other CPTPP markets for their production in order to qualify for preferential tariffs. This origin rule enables local small and medium-sized firms to integrate more deeply within the global supply chain, she added.

The country has made strong commitments to further enhancing the protection of intellectual property and handling issues related to competitiveness and state-owned enterprises. If necessary, the Government is entitled to take measures to protect national security and tackle urgent issues regarding socio-economic development and environmental protection.

The official noted that a fresh commitment by the Vietnamese side is to open up opportunities for providers of public goods from other CPTPP member countries. However, the country is set to put forth limited bidding packages and is entitled to assign domestic providers of public goods during a transition period ranging from 10 - 15 years.

She added that the elimination of tariff lines under CPTPP guidelines would leverage local enterprises to boost their exports to CPTPP markets and make their deeper penetration in the global market as well.

How to tap into the opportunities arising from the CPTPP remains a thorny issue, Nga said, explaining that only 30 - 40 per cent of local firms have so far utilized the chances. She attributed this modest ratio to difficulties facing a large number of local firms in keeping pace with CPTPP requirements as the majority of domestic companies operate on small and medium scale and lack information on CPTPP markets.

Local firms must gain insights into origin regulations set by the importing countries Vietnam has inked FTAs with. They should also seek support from state management agencies to ease quarantine related hindrances for their export, the official added.

Revised tax management, public investment laws passed

Up to 91.32 percent of National Assembly deputies approved the revised Law on Tax Management during their ongoing seventh session in Hanoi on June 13.

The law, comprising 17 chapters and 152 articles, defines the management of various types of taxes and other incomes of the State budget. It also makes clear rights and obligations of taxpayers.

Later, the NA deputies adopted the revised Law on Public Investment, with 90.7 percent of votes.

The law has six chapters and 101 articles, stipulating the State management on public investment, the management and use of public investment, rights, obligations and responsibilities of agencies, units, organizations, and individuals relating to public investment operation.

Vietnam confronts four economic challenges: Japanese expert

Vietnam is facing four key challenges, including the risk of becoming a country that have commercial friction with the US, early non-industrialization, not being able to participate in industrialization production chain and not really grasping the automotive industry, according to a Japanese expert.

vietnam confronts four economic challenges: japanese expert hinh 0 Prof. Ikebe Ryo from Senshu university of Japan said in an interview granted to the Vietnam News Agency that Vietnam, which account for 4.5 percent of the US trade deficit, could become a commercial friction country with the US.

Vietnam is among the six countries with large trade deficits with the US, after China, Mexico, Germany, Japan and Ireland.

Prof. Ikebe stressed that facing this risk, Vietnam needs to promote industries that require specialized technical human resources and new investment capital flows.

Regarding the participation in industrialization production chain, Ikebe said promoting the development of small- and medium-sized enterprises in supporting industries such as mold making, metal sheet manufacturing, coating, and metal surface treatment is extremely important, and can be said to be an urgent issue for Vietnam.

On capturing the automotive industry - one of the key areas of industrialization, Ikebe said the automobile industry in Vietnam was in the initial stage.

FTA opportunities remain largely untapped: trade official

Only 30 - 40 per cent of local firms have utilized opportunities arising from the free trade agreements Vietnam has signed, though the deals are reckoned to present an array of business chances.

Vietnam has pledged to lift 66 per cent of tariff lines on commodities imported from CPTPP markets right after the pact came into force from January 14, 2019 onwards.

Nguyen Thi Quynh Nga, deputy head of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, made the statement during a recent press briefing themed international integration in Hanoi.

The ASEAN Free Trade Area is the first of which the country is a signatory. Vietnam now outshine its regional peers in terms of economic integration, Nga noted, adding that Vietnam and other ASEAN member states had removed up to 98 per cent of tariff lines by 2018.

Regarding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Nga emphasized it as the most comprehensive trade pact Vietnam has implemented. Most notably, the Southeast Asian country has pledged to lift nearly 100 per cent of tariffs on imports from other CPTPP members.

In a drastic move, the country has pledged to lift 66 per cent of tariff lines on commodities imported from CPTPP markets right after the pact came into force from January 14, 2019 onwards. Other CPTPP members committed to remove 97 - 100 per cent of tariff lines on Vietnamese goods.

The CPTPP allows for full cumulation, meaning that firms within a CPTPP market can use inputs sourced from other CPTPP markets for their production in order to qualify for preferential tariffs. This origin rule enables local small and medium-sized firms to integrate more deeply within the global supply chain, she added.

The country has made strong commitments to further enhancing the protection of intellectual property and handling issues related to competitiveness and state-owned enterprises. If necessary, the Government is entitled to take measures to protect national security and tackle urgent issues regarding socio-economic development and environmental protection.

The official noted that a fresh commitment by the Vietnamese side is to open up opportunities for providers of public goods from other CPTPP member countries. However, the country is set to put forth limited bidding packages and is entitled to assign domestic providers of public goods during a transition period ranging from 10 - 15 years.

She added that the elimination of tariff lines under CPTPP guidelines would leverage local enterprises to boost their exports to CPTPP markets and make their deeper penetration in the global market as well.

How to tap into the opportunities arising from the CPTPP remains a thorny issue, Nga said, explaining that only 30 - 40 per cent of local firms have so far utilized the chances. She attributed this modest ratio to difficulties facing a large number of local firms in keeping pace with CPTPP requirements as the majority of domestic companies operate on small and medium scale and lack information on CPTPP markets.

Local firms must gain insights into origin regulations set by the importing countries Vietnam has inked FTAs with. They should also seek support from state management agencies to ease quarantine related hindrances for their export, the official added.

Vietnam needs stable legal framework for wind power: workshop

With huge potential for wind power development, Vietnam will be an attractive investment destination if it has a stable and long-term legal framework, said Director for Asia at the Global Wind Energy Council (GWEC) Liming Qiao.

A report delivered at a workshop in Hanoi on June 11 noted that by the end of 2018, the total capacity of wind power turbines installed in Vietnam was about 228 MW, a modest figure compared to those in other markets in the world.

The Vietnamese Government aims to raise this figure to 800 MW by the end of 2020, 2 GW by 2025 and 6 GW by 2030.

Benoit Nguyen, head of the renewables advisory section at the DNV GL energy company, said Southeast Asia, including Vietnam, boasts great potential as wind speeds here average 6.5 – 7.5 metres per second, and wind turbine towers with the height of 120 metres can operate in this condition.

He noted the feed-in tariff (FIT) scheme – the selling prices of electricity from renewable energy sources sold to the grid or used on the spot – is also very good, 8.5 US cent per kWh for onshore wind power projects and 9.8 US cent per kWh for offshore projects, not to mention other incentives like exemption of equipment import tariffs and corporate income taxes.

They are the advantages for Vietnam to attract more investment to this field, he said.

However, the problem facing investors is how to put their projects into operation before November 1, 2021 to benefit from the best FITs under the Prime Minister’s Decision No. 39/2018/QD-TTg, which revised a decision in 2011 on mechanisms supporting wind power development in the country.

He also pointed out many risks to these projects like commercial risks and policy vagaries.

Liming Qiao from the GWEC said Vietnam should make stronger efforts to improve the efficiency and transparency of regulations and the procurement process.

Power purchase agreements need to be standardized while the project approval process needs to be simplified and more transparent to promote investment in this market, she added.

At the workshop, many participants said with decreasing equipment prices and better technologies, the capacity and efficiency of wind power projects will be improved.

The remaining issue is how to mobilise capital for projects, they said, suggesting the mobilisation of investment from international financial sources be stepped up.

Only three SOEs have equitisation plans approved in five months

Only three state-owned enterprises (SOEs) got the nod from authorized agencies for their equitisation plans in the first five months of this year, lifting the total number of companies to have plans approved by the end of May 2019 to 30, according to the Ministry of Finance.

This was a poor result in the context that a total of 127 SOEs must be equitised by 2020 to meet the Government’s target.

The remaining 97 enterprises, equivalent 76 percent of the total, must move quickly to have their equitisation plans approved by the end of next year.

SOEs divested capital with total face value of 759 billion VND (32.5 million USD) in the first five months of the year, collecting nearly 1.66 trillion VND (71.2 million USD) for the State budget.

Since 2017 to the end of May 2019, 87 SOEs have completed divestment with total value of 4.55 trillion VND (195 million USD), fetching nearly 8.7 trillion VND (372.7 million USD) for the State.

The Prime Minister has asked ministries and branches to continue developing and issuing policies and regulations on equitisation, divestment and restructuring of SOEs to ensure the process is done openly and transparently in accordance with the law, following the market mechanism while guaranteeing the State's interests.

The Ministry of Finance has set key tasks in June to coordinate with ministries, sectors and localities to speed the process, focusing on supervision and handling financial issues.

Vietnam’s supporting industries attract Korean businesses

More and more businesses from the Republic of Korea (RoK) are coming to Vietnam to operate in supporting industries.

Tens of Korean firms took part in the Saigon Autotech & Accessories 2019 in Ho Chi Minh City in late May. Aside from introducing the latest products and technologies, they also came to seek partners to expand their production and business activities.

Tommy Ji, CEO of the auto spare part and cleaning product manufacturer JCWORKS, said the potential of the Vietnamese market is huge.

The company’s products are suitable for different weather conditions, while the climate in the RoK and Vietnam is similar, he said, expressing his confidence that the company will develop well in the Vietnamese market.

Justin Kim, a representative of the DesiKhan company, expressed his optimism about a bright outlook of the Vietnamese market, noting that as a leading producer of desiccants for car and motorbike lamps in the RoK, his firm is planning to expand operations in Vietnam.

He added many major Korean brands like Hyundai and Daewoo have set up factories in Vietnam while the Vietnamese carmaker VinFast is expected to sell its cars from this year. Therefore, the Vietnamese market is promising for his company, which hopes to find out potential partners in the country to promote production and sale.

Meanwhile, CEO of the Ktecrober company Dae Hey Kang said he and executives of tens of other Korean firms came to HCM City in late May to seek new opportunities. They specialise in technologies and solutions for smart city building.

They plan to organise a workshop in late June to introduce new smart city technologies. After that, they will continue learning about the local investment environment to carry out projects, he said.

According to a leader of the Saigon Hi-Tech Park, after Samsung raised the investment capital of its project in the park to 2 billion USD in 2015, many of its Korean suppliers have come to build factories, most of which are in supporting industries.

The newly-licensed Korean investors pledged to establish research and development centres for new Samsung products which are set to employ Vietnamese workers and transfer technology to local partners.

Lee Jonggun, Director General of the Korea Trade-Investment Promotion Agency (KOTRA), said in just the first half of May, more than 100 Korean enterprises told KOTRA that they hope to be connected to invest in Vietnam.

He added Vietnam currently ranks first among the investment destinations of Korean businesses. To assist them, KOTRA is scheduled to hold an investment forum in central Quang Nam province later this year.

The RoK is now one of the top foreign direct investors in Vietnam with about 7,000 valid projects worth almost 64 billion USD.

Automobile sale climbs up 22 percent in five months

The total automobile sales in the first five months of 2019 surged by 22 percent year-on-year to 126,646 units, the Vietnam Automobile Manufacturers’ Association (VAMA) reported on June 11.

Domestically assembled car sale in the reviewed time was down 14 percent, whilst imported ones registered a yearly surge of 210 percent.

According to VAMA, the total automobile sale in May 2019 was up 30 percent compared to the previous month to 27,373 units.

The total number of vehicles sold between January and May excluded the 29,246 units from Hyundai Thanh Cong, which is not a member of VAMA.

Europe-based Vietnamese commercial counselors meet in Moscow

A conference gathering commercial counselors and head of trade offices of Vietnam in Europe took place in Moscow, Russia on June 11.

Participants to the event discussed forecast of economic and trade situation in Europe and impacts on Vietnam, and gave recommendations on strategies and measures to develop markets for Vietnamese goods in the region in the 2019-2020 period.

They also debated how to improve market study work, and the building of new mechanisms for economic, trade and industry cooperation between Vietnam and European countries to meet the demand of Vietnam’s economic development.

The event also focused on ways to remove trade barriers and enhance trade promotion to help Vietnamese enterprises.

Addressing the event, head of the Party Central Committee's Economic Commission Nguyen Van Binh praised the work of Vietnamese trade offices in Europe, which is a strategic market of Vietnam’s exports and also a priority cooperative partner of Vietnam in all aspects.

He stressed that as Vietnam has joined new-generation free trade agreements (FTA) with European nations, the Ministry of Industry and Trade and the network of trade offices have a new important task of studying and proposing policies and cooperation frameworks to tap opportunities brought about by the integration process.

He also underlined the need for the Ministry of Industry and Trade (MoIT) and trade offices to look for ways to promote Vietnam’s participation in regional and global value chains, and form new value chains.

Deputy Minister of the MoIT Hoang Quoc Vuong asked commercial counselors and heads of trade offices in Europe to pay more attention to assisting exporters and actively responding to trade protection measures targeting Vietnamese exports.

According to the MoIT, Vietnam’s export to Europe continues to be expanded, with export turnover in 2018 hitting over 62 billion USD, up 11.85 percent. Notably, Vietnam’s export to member countries of the Eurasian Economic Union (EAEU) has recorded a strong growth of 12 percent in 2018 after the FTA between Vietnam and the union took effect in 2016.

Europe-based Vietnamese commercial counselors meet in Moscow

A conference gathering commercial counselors and head of trade offices of Vietnam in Europe took place in Moscow, Russia on June 11.

Participants to the event discussed forecast of economic and trade situation in Europe and impacts on Vietnam, and gave recommendations on strategies and measures to develop markets for Vietnamese goods in the region in the 2019-2020 period.

They also debated how to improve market study work, and the building of new mechanisms for economic, trade and industry cooperation between Vietnam and European countries to meet the demand of Vietnam’s economic development.

The event also focused on ways to remove trade barriers and enhance trade promotion to help Vietnamese enterprises.

Addressing the event, head of the Party Central Committee's Economic Commission Nguyen Van Binh praised the work of Vietnamese trade offices in Europe, which is a strategic market of Vietnam’s exports and also a priority cooperative partner of Vietnam in all aspects.

He stressed that as Vietnam has joined new-generation free trade agreements (FTA) with European nations, the Ministry of Industry and Trade and the network of trade offices have a new important task of studying and proposing policies and cooperation frameworks to tap opportunities brought about by the integration process.

He also underlined the need for the Ministry of Industry and Trade (MoIT) and trade offices to look for ways to promote Vietnam’s participation in regional and global value chains, and form new value chains.

Deputy Minister of the MoIT Hoang Quoc Vuong asked commercial counselors and heads of trade offices in Europe to pay more attention to assisting exporters and actively responding to trade protection measures targeting Vietnamese exports.

According to the MoIT, Vietnam’s export to Europe continues to be expanded, with export turnover in 2018 hitting over 62 billion USD, up 11.85 percent. Notably, Vietnam’s export to member countries of the Eurasian Economic Union (EAEU) has recorded a strong growth of 12 percent in 2018 after the FTA between Vietnam and the union took effect in 2016.

Government firm with goals of macroeconomic stability, inflation control

The Government has affirmed its resolve to pursue the goal of macro-economic stability and inflation control while focusing efforts on addressing existing shortcomings and limitations in a resolution adopted at its regular meeting for May.

In order to fulfil all targets set in the plans for 2019, the Government required ministries, sectors and localities to take proactive and flexible measures to respond to developments in the international and domestic situations, and regularly inspect the implementation of tasks and solutions set by the Party, National Assembly and Government.

 

Specifically, ministries, agencies and local administrations should push ahead with restructuring the economy and sectors and fields under their management, effectively implementing tasks and measures specified in the Government’s Resolutions 01/NQ-CP and 02/NQ-CP dated January 1, 2019 and the Prime Minister’s Directive 09/CT-TTg dated April 1, 2019.

They are also asked to continue drastically streamlining administrative procedures and redundant business conditions and further improve the business and investment environment.

At the same time, ministries, agencies and localities should also look for new driving forces for growth in the domains under their management, pilot new development models and multiply tested effective models.

The Government urged the State Bank to continue keeping a close watch of the world financial and monetary markets and make forecast on possible impacts on Vietnam, while utilizing monetary policy tools in a proactive and flexible manner to counter outside impacts.

The Ministry of Planning and Investment is told to urgently complete a strategy to attract new-generation FDI, with attention paid to solutions to enhance connectivity and technology transfer between FDI enterprises and their domestic counterparts. The ministry is also required to submit to the Prime Minister the plan on equitisation of State-owned enterprises nationwide in 2019-2020 before June 15.

The Ministry of Industry and Trade is tasked with devising solutions and scenarios to cope with impacts of trade disputes and the trend of trade protectionism, and to make full use of opportunities brought about by signed free trade agreements, particularly the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while pushing the ratification of the EU-Vietnam FTA.

The resolution of the Government’s May meeting also specified tasks for relevant ministries and agencies in dealing with the African swine fever and the organisation of the senior high school examination.

The Government’s regular meeting for May took place on May 31.

Conference seeks to unlock Vietnam’s wind energy potential

Major issues regarding wind energy development in Vietnam are being discussed at the second Vietnam Wind Power Conference that opened in Hanoi on June 11.

The two-day event is jointly held by the Global Wind Energy Council (GWEC), the German Development Cooperation Agency (GIZ) and the Danish Embassy in Vietnam.

It includes a workshop on "Accelerating Wind Project Financing in Vietnam", a half-day offshore wind workshop and a full-day Vietnam wind power conference.

Participants will share their viewpoints and experience to help Vietnam complete its goal of building a greener future, Liming Qiao, GWEC’s Asia Director, said in her opening remarks.

Naveen Ballachandran, GWEC’s Special Advisor, said the Vietnamese Government has set a target for wind development at 800 MW by 2020. Vietnam also aims to produce 10.7 percent of its electricity from renewable energy by 2030.

Jootst Siteur, from the USAID Clean Power Asia, suggested that potential risks, including those relating to licences, prices and capacity building, should be taken into account while developing wind energy in Vietnam.

Alastair Dutton, head of GWEC’s Offshore Wind Taskforce, pointed out difficulties and risks facing investors of offshore wind power plants in particular and those investing in wind energy in general.

Ta Dinh Thi, head of the Vietnam Administration of Seas and Islands under the Vietnamese Ministry of Natural Resources and Environment, said wind power projects must be included in the national electricity planning scheme.

Of note, offshore wind power projects must match maritime planning schemes, he said, noting that his agency needs technical and financial support to review and evaluate Vietnam’s offshore wind energy potential.

Automobile sale climbs up 22 percent in five months

The total automobile sales in the first five months of 2019 surged by 22 percent year-on-year to 126,646 units, the Vietnam Automobile Manufacturers’ Association (VAMA) reported on June 11.

Domestically assembled car sale in the reviewed time was down 14 percent, whilst imported ones registered a yearly surge of 210 percent.

According to VAMA, the total automobile sale in May 2019 was up 30 percent compared to the previous month to 27,373 units.

The total number of vehicles sold between January and May excluded the 29,246 units from Hyundai Thanh Cong, which is not a member of VAMA.

French coffee chain Malongo eyes Vietnam foray

French organic coffee chain Malongo is looking for partners to enter Vietnam as part of its plan to expand in Asia.

The firm’s export director Henri Rodriguez said in a recent statement that the company is developing plans to franchise in Vietnam after opening two stores in the Philippines last year.

Vietnam is a priority market in its expansion plans for Asia, he added. Malongo had presented its products at an April exhibition in Ho Chi Minh City.

In 40 countries that Malongo is present, its coffee stores are often located in prime downtown locations. The company says its organic coffee beans are harvested by hand.

Malongo produces 8,000 tons of coffee a year, including whole bean coffee, ground coffee and instant coffee. It also manufactures coffee machines.

Its annual revenue is almost 110 million euros ($124.5 million), of which 15 percent comes from exports.

Vietnam’s domestic consumption of coffee has been growing 7.9 percent annually, according to India-based market research firm Ken Research.

The market sees strong competition between players like Highlands Coffee, The Coffee House, Starbucks, Phuc Long and Trung Nguyen.

Foreign investment to HCMC soars 49%

The city attracted US$2.77 billion in foreign capital, inclusive of both direct and portfolio investments, during the January-May period, up 49% year-on-year, according to the HCMC government.

Foreign investors pledged more than US$472 million into 451 newly licensed projects in the period, marking a year-on-year rise of 22.6% in the number of new projects, VietnamPlus news site reported.

The property sector took the lead in foreign direct investment (FDI) attraction in HCMC in the first five months, with capital rising by 46.7% over the year-ago period.

The second position belonged to science and technology, making up 23.4% of the total investment in the city, followed by retail and wholesale as well as automobile and motorbike repair, representing 16.8% of the total.

The five-month period also saw the city attract over US$214 million in additional capital for 102 operational foreign-invested projects, up 35.8% in value and 27.5% in volume, year-on-year.

Capital contribution and share purchases by foreign investors through mergers and acquisitions (M&As) in HCMC amounted to some US$2.08 billion during the period, up a whopping 64.3% year-on-year.

The foreign investors carried out 1,719 M&A deals with local firms, soaring by 33% against the same period last year, with the real estate sector attracting the most capital.

As for the domestic business activities, the city saw the total registered and additional capital reach VND348 trillion, up 4.6% from the year earlier. Some 16,600 enterprises were licensed for business, with total registered capital of VND265.6 trillion, surging by 43.2% year-on-year.

NA committee supports charter capital hike for public firms

The Government has presented its draft amended Law on Securities, which includes a proposal to raise the regulatory charter capital of public companies from the current VND10 billion (US$428,000) to VND30 billion, and has received support from the National Assembly Economic Committee.

The committee’s chairman, Vu Hong Thanh, delivered an assessment report on the revised Law on Securities project at an NA session in Hanoi on June 6.

The requirements for offering securities to the public and becoming a public company are very different, he said.

Tripling public companies’ charter capital against the current level of VND10 billion is reportedly aligned with the current size of the stock market and intended to increase the quality of these companies. However, the hike might also restrict their capital mobilization.

The chairman said that most members of his committee had thrown their support behind the requirements, noting that they are necessary to enhance the quality and stability of shares prior to being listed to the stock market, in line with international practices.

The capital expansion, he added, is also needed to help companies with modest financial capacity ease their risks when making transactions on the stock market.

The Government said in a report that more than 81% of public companies have charter capital of at least VND30 billion, so the increase would affect only the remainder, at some 18%.

On the other hand, the increase would pose challenges for small- and medium-sized enterprises that desire to mobilize capital from the stock market. Their charter capital averages roughly VND11 billion.

Therefore, the chairman called upon the law drafting team to make a more comprehensive review of the impact that the proposal could have on overall socioeconomic development.

Earlier, Finance Minister Dinh Tien Dung told legislators that the capital increase proposal aims to address the shortcomings of the current Securities Law, which many firms use to issue a large number of securities to multiply their equity, posing high risks for investors.

On separate securities offerings, he said, the current law has yet to prescribe detailed conditions for buyers and transaction caps. This is why many firms utilize the legal loophole to hold separate securities offerings instead of initial public offerings.

Dung stated that the VND10 billion level of charter capital set for public companies is now reasonably low compared with the current scale of local enterprises.

The average equity of local firms has surged in the past decade, he said, adding that low charter capital could hinder the operations of public firms on the stock market. SGT

Falling rice, tra fish shipments to China affect domestic prices

Shrinking rice and tra fish exports to China, a major consumption market for Vietnam, have dropped prices of the two items in the local market.

A report from the Agro Processing and Market Development Authority, under the Ministry of Agriculture and Rural Development, shows that Vietnam’s outbound rice shipments in May amounted to an estimated 739,000 tons, worth US$314 million, taking the total volume of rice exports in the first five months to 2.83 million tons, down 4% year-on-year.

The first four months of 2019 saw China’s rice imports from Vietnam plummet by over 90% over the year-ago period, even though the Chinese market’s rice purchases from the latter accounted for 30%-40% of Vietnam’s total rice shipments each year a few years ago.

Nguyen Thanh Phong, director of private firm Van Loi in the Mekong Delta province of Tien Giang, said that the rice export slump had dragged down domestic prices of rice, resulting in strong fluctuations in the local agro market.

Accordingly, fresh IR 50404 rice is priced at VND4,000 per kilogram, down by VND1,300-VND1,400 against the same period last year, while the IR 50404 material rice price fell by VND1,300 per kilogram to VND5,900-VND6,000 per kilogram.

The fall in rice prices has also reduced farmers’ profits. They have earned only VND10 million in profit per hectare for rice cultivation.

Facing the same fate, tra fish farmers have also suffered financial difficulties as the tra fish price is currently VND20,000 per kilogram, tumbling by VND16,000 per kilogram against the record price seen last year. Many tra fish raisers said that the current low price of tra fish has caused them to incur a loss of VND2,500 per kilogram.

Statistics from the General Department of Vietnam Customs indicate that Vietnam saw the revenue from tra fish exports amount to US$143 million in April, down 17.6% year-on-year. Vietnam earned US$615 million for tra fish shipped to foreign markets in the first four months of 2019, equivalent to the figure in the same period last year.

As for the Chinese market, the value of Vietnam’s tra fish exports to the neighboring country during the January-April period dipped by 5.7% year-on-year.

No plastic bags in Saigon Co.op outlets on June 10

All 750 supermarkets and stores of Saigon Union of Trading Cooperatives (Saigon Co.op) across the country will use paper and fabric bags instead of plastic bags on June 10.

Do Quoc Huy, director of marketing at Saigon Co.op, noted that the firm has called on customers to bring their ecofriendly reusable bags when shopping at Saigon Co.op’s outlets or to buy these bags at the outlets.

Responding to a question on why the program was only conducted on June 6, Huy said using plastic bags is a habit among local consumers, and it is not easy to change habits over a short period of time.

Saigon Co.op expects the program to encourage consumers to gradually change their habit of using plastic bags to protect the environment, Huy added.

To encourage consumers and enterprises to protect the environment and stimulate the identification and consumption of green products, Saigon Co.op has launched the 10th Green Consumption Campaign, which will last until June 12.

Accordingly, Saigon Co.op’s retail chains, including Co.opmart, Co.opXtra, Co.op Food and Co.op Smiles and Cheers, have offered discounts of 40% for more than 10,000 environmentally friendly products and given vouchers to membership card holders who buy green products.

Which coffee chain makes the most money in Vietnam?

Competition is fierce among the top five coffee shop chains in Vietnam, but Highlands Coffee tops the revenue spot.

The other four leaders are Starbucks, Phuc Long, Trung Nguyen and The Coffee House.

According to research firm Vietnam Industry Research and Consultancy JSC (VIRAC), the country’s biggest coffee chains all saw double digit revenue growth in 2018.

The Cao Nguyen Coffee Service JSC, which owns Highlands Coffee, recorded revenues of VND1.6 trillion ($68.67 million) in 2018, an increase of nearly 31 percent from the previous year.

Highlands Coffee was founded in 2002 by a Vietnamese-American. In 2012, it was bought by Philippine fast food giant Jollibee. The brand takes a relatively different direction compared to competitors, focusing on coverage rather than consumer tastes.

Although the chain maintains a simple, easy-to-choose beverage menu, many of its stores can be found positioned in large buildings, commercial centers, and other prime locations.

According to VIRAC, because it had invested huge sums in shops, land and marketing, Highlands Coffee has only been really profitable in the past two years.

In 2018, the chain earned pre-tax profits of VND129 billion ($5.54 million), down slightly from VND132 billion ($5.67 million) in 2017. Despite a 31 percent increase in revenue this year, the chain’s profits fell slightly as its operating costs shot up from VND600 billion ($25.75 million) to nearly VND850 billion ($36.49 million).

In 2017, Starbucks reported the second highest revenue in Vietnam, but its position was usurped a year later by local chain The Coffee House with a 100 percent revenue growth 2018. According to data from VIRAC, sales of The Coffee House chain reached VND669 billion ($28.72 million) in 2018, while Starbucks was relegated to third place with nearly VND600 billion ($25.75 million).

The Coffee House does not invest in stores in premium locations, but focuses on providing a rich menu of drinks, reasonable prices, high speed wifi, spacious shops, all geared towards the young customer segment, it said.

"We aim to open about 700 stores across Vietnam in the next 5 years, which translates to around 10 new outlets each month," said Nguyen Hai Ninh, founder and CEO of The Coffee House.

While domestic coffee chains are accelerating, foreign chains have been slower to rise. After over 6 years in Vietnam, Starbucks has just 49 stores, compared to over 330 in Thailand, over 320 in Indonesia and over 190 in Malaysia.

Domestic brands Phuc Long and Trung Nguyen took fourth and fifth place in 2018, respectively

As coffee chain that also sells milk tea, Phuc Long earned more than VND470 billion ($20.17 million) in revenues in 2018, an increase of 39 percent compared to the previous year.

Originating in southern Vietnam, Phuc Long differentiates itself by offering many bold and sweet flavors typical of Southern culture.

The chain opened its first store in Hanoi this January, and has attracted lines of people waiting in front of its shop to try out its drinks.

Compared to the other coffee shop chains, Trung Nguyen’s market share has been falling. From 2015 to 2018, the chain’s revenue remained around VND300-350 billion ($12.88 million - $15.02 million), with growth negligible compared to the breakthroughs of the rest.

Trung Nguyen’s strategy is not to cater to young people, who like youthful and vibrant environments, or office workers to need space to work. It targets customers who like to enjoy coffee in quiet spaces.

With the rapid growth of coffee chains, coffee consumption by Vietnamese has also risen sharply.

According to a study by BMI Research, a subsidiary of ratings firm Fitch, consumption grew from 0.43 kg per person in 2005 to 1.38 kg in 2015. This is the highest growth rate of any global coffee exporter, and the figure is forecast to reach 2.6 kg by 2021.

Fourth denims & jeans show opens in HCM City

The Denimsandjeans.com Vietnam Show returned to Ho Chi Minh City in its 4th edition on June 12, with over 40 garment and textile firms and visitors from 10 countries and territories like China, Japan, the US, the EU and Singapore taking part in.

The exhibition is organised by the Vietnam Textile & Apparel Association in collaboration with Denimsandjeans.com under the theme of “My Earth My Denim”.

According to Sandeep Agarwal, representative of the organising board, as the show focuses on the importance of sustainability in the entire denim production process, exhibitors bring to the event their latest machines, equipment, technologies and products that qualified the standard of sustainability.

With environmentally-friendly products on display, the event is expected to lure 1,500 purchasers from 300 companies. Besides, it is considered a trustworthy destination for businesses interested in the textile and garment industry, opening up opportunities to connect denim the supply chain in the Vietnamese markets while affirming position of denim fabric in exports.

Vice General Secretary of Vietnam Textile & Apparel Association Nguyen Thi Tuyet Mai said that her organisation has joined hands with domestic and foreign partners to protect the environment and promote sustainable development. Therefore, the exhibition is in line with the greening trend of the garment and textile sector.

The show particularly encourage the sector to go green by improving their technologies, she said, adding that the sector not only forms a complete supply chain but also makes efforts to meet standards in environmental protection and sustainable development.

Workshops on sustainability in the garment and textile sector will be held during the two-day show, introducing retail sales trend in sustainable development to users, designers and producers.

 
 
 
 
 
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