Scores of commercial banks post handsome profits
Many commercial banks, such as the Bank for Foreign Trade of Vietnam (Vietcombank) and Military Bank, made robust profits in the first half of this year.
Vietcombank is the first State-turned-shareholding bank to release its six-month business results. Its general director, Pham Quang Dung, said at a recent review conference that the bank had earned a consolidated profit of more than VND11 trillion (US$475 million), up a staggering 40.7% from the previous year.
Earlier, Vietcombank’s Chairman Nghiem Xuan Thanh said that the bank could fulfill its target for consolidated profit in 2019 at around VND20 trillion.
Military Bank reported that its business indicators remained strong. For example, its credit growth was high, while its credit quality continued to be closely controlled.
As a result, the bank’s total gross profit rose by 22.5% year-on-year to over VND4.3 trillion (US$185 million).
Despite the ongoing restructuring process, Saigon Thuong Tin Bank (Sacombank) posted roughly VND1.5 trillion (US$64 million) in profits in the first half of the year.
A representative of Sacombank was quoted by Nguoi Lao Dong newspaper as claiming that the bank is taking steps to reduce loans for real estate businesses but will increase loans for business production, consumer and green credits.
Also, the bank has kept a close watch on its credit quality, so the ratio of its nonperforming loans dropped to 1.96% from the previous 2.11%. Its proceeds from value-added services are up 22% year-on-year to nearly VND1.4 trillion.
Asia Commercial Bank reported its total gross profit in the first six months reached some VND3.6 trillion (US$155 million). Also, its credits and deposits grew 9% and 7%, respectively.
Among small- and medium-sized banks, Vietnam International Bank posted a pretax profit jump of 58% against the year-ago period to VND1.82 trillion (US$78 million), of which its gross profit from service activities saw a sharp increase from VND315 billion in the first half of 2018 to VND715 billion in the first six months of this year.
Tien Phong Bank announced gross profit of VND1.62 trillion, almost double the figure from the same period last year. The figure was recorded after the bank had already allocated VND224 billion to its credit risk provision fund and special bonds, which are issued by Vietnam Asset Management Company to manage bad debts sold to the State-run enterprise.
In a related development, some commercial banks raised their interest rates for savings to attract capital inflows.
Saigon-Hanoi Bank has raised its interest rates for savings of nine months by up to 8.2% per year, one of the highest rates of its kind on the local market.
Its general director, Nguyen Van Le, explained that the move is intended to mobilize medium- and long-term capital, which will help make use of business opportunities for the remainder of the year.
At Vietnam Export Import Bank, the rate for three-year deposits in Vietnamese dong has been hiked to 8% per year. If its clients engage in its promotional programs, the rate will be 8.4% for the two- and three-year tenors.
As for short terms of six to nine months, the rate has been raised to 7.8%, 0.2 percentage points higher than the previous adjustment.
International electricity-energy expos open in HCM City
The 2019 international exhibitions on electrical technology and equipment (Vietnam ETE) and on products, technologies of energy saving and green power (Enertec Expo) are showcasing advanced technologies of the industry in Ho Chi Minh City between July 17 and 20.
With their scale doubling that of 2018, the exhibitions span over 10,000 square metres at the Sai Gon Exhibition and Convention Centre in District 7.
They feature 400 domestic and international enterprises from such countries as Japan, the Republic of Korea (RoK), China, Italy, Turkey, Russia and Singapore with 550 booths. Participating local brands include EVN HCMC, Gelex, ABB, LS Vina, Panasonic, Philips, Long Giang and HENGS Vietnam.
The expos also consist of three national exhibition spaces run by the RoK, China and Japan.
This year, the RoK is the special guest, with its space, themed ‘Korea Smart Electric and Energy Week’ (KOSEF), showcasing the nation’s latest achievements in electricity.
In addition, the Korea Electrical Manufacturers Association (KOEMA) and the Korea Electric Power Corporation (KEPCO) are scheduled to host workshops on new energy creation, smart electric devices, energy saving and green power.
During the fair, in addition to business matching events, an international conference will be held to find solutions for energy saving in Vietnam.
The annual ETE and Enertec Expo act as a bridge between local and international enterprises, gather experts to discuss strategies in electric technology, and help businesses attract investment and seek partners.
It is organised by the HCM City Centre for Support Industries Development and CIS Vietnam Advertising and Exhibition JSC, with support from the Ministry of Industry and Trade.
White book to give overview of collective economy, cooperatives
Deputy Prime Minister Vuong Dinh Hue has asked the Ministry of Planning and Investment and the Vietnam Cooperative Alliance (VCA) to compile a “white book” on the country’s collective economy and cooperatives.
He made the request at a meeting in Hanoi on July 15 that focused on preparations for the review of 15 years of the Party Central Committee’s Resolution 13-NQ/TW on collective economy; five years of the committee’s Resolution 30-NQ/TW and the Government’s Decree 118/2014/ND-CP on the reorganisation, reform and improvement of agro-forestry companies; and 10 years of the new-style rural area building in 2019.
Hue said the three contents have different objectives but are strongly connected with one another in developing agro-forestry economy and rural and mountainous areas. The review will greatly help with compiling documents to be submitted to the Party Central Committee and the 13th National Party Congress slated for early 2021.
More than 50 percent of all communes nationwide will have been recognised as new-style rural areas by the end of 2019, one year ahead of the deadline set in the resolution of the 12th National Party Congress.
The Deputy PM asked relevant ministries, sectors and localities to make thorough review of this work, especially of new-style rural role models and efforts at village level.
Meanwhile, there are over 14,700 cooperatives nationwide at present, compared to the target of 15,000 in 2020, and more than 50 percent of them have operated effectively, the Deputy PM said, considering this a great stride.
He requested the parties concerned to clarify the model, legality and mechanisms for cooperatives to set up subordinate businesses, and to devise solutions to addressing problems of old-style cooperatives.
At the meeting, Hue also asked ministries and sectors to thoroughly assess the equitisation of State-owned agro-forestry companies and build policies for and estimate the cost of medium-term public investment in such firms in the 2021-2025 period.
Aviation sector serves 38.5 million passengers in H1
The aviation sector served 38.5 million passengers in the first six months of this year, a year-on-year rise of 9.4 percent, according to the Civil Aviation Authority of Vietnam (CAAV).
Vietnamese airlines transported close to 27 million passengers in January – June, up 7.7 percent against the same period last year.
Currently, 72 international airlines and four Vietnamese ones are operating over 200 international scheduled and charter air routes from 25 countries and territories to eight destinations in Vietnam, namely Hanoi, Da Nang, Tan Son Nhat, Cam Ranh, Phu Quoc, Can Tho, Cat Bi, and Da Lat.
Vietnamese airlines operated 155 scheduled and chartered flights to 89 destinations of 20 countries and territories. They also operated 48 domestic air routes, carrying 18.3 million passengers, up 6.2 percent year-on-year.
According to the CAAV, in January-June, more than 130,000 flights took off on time while some 274 others were cancelled.
The newly-established Bamboo Airways recorded the highest rate of on-time performance of 93.8 percent, followed by VASCO with 93 percent, Vietnam Airlines 89.1 percent, and Vietjet Air 81.5 percent.-
Tax evasion, transfer pricing becoming more complicated: Deputy Minister
Tax evasion, tax avoidance and transfer pricing are getting more complicated, particularly through affiliated transactions, due to incomplete and impractical policies, said Deputy Minister of Finance Tran Xuan Ha on July 15.
He made the remark at the General Department of Taxation’s conference to review the six-month performance and map out tasks and solutions for the second half of the year.
State budget revenue in the first half of this year represented 51.2 percent of the yearly target and rose by 12.5 percent from a year earlier, he said, adding that 50 out of the country’s 63 cities and provinces have state budget revenue exceed 50 percent of the yearly target.
However, Ha pointed out several shortcomings in recent tax administration, particularly the inconsistency between tax regulations, making it difficult for the authorities to enforce the regulations.
Alongside tax evasion, tax avoidance and transfer pricing, the country has seen an increase in tax debt despite many efforts by the authorities, the official stated. By the end of June, the tax debt rose by 9.3 percent from the same period last year to nearly 83.4 trillion VND (3.58 billion USD).
The deputy minister then outlined eight tasks for the tax authorities in the last six months of the year. He urged them to focus more on collecting taxes to ensure state budget revenue will exceed 5 percent of the estimate while developing a practical state budget collection plan for 2020.
He asked the General Department of Taxation to coordinate with agencies from the Ministry of Finance to promptly draft decrees guiding the implementation of the Law on Tax Administration and circulars under the ministry’s competence, adding the tax authorities must continue pursuing the plan on tax investigation to prevent state budget losses and transfer pricing.
According to Deputy General Director of the General Department of Taxation Phi Van Tuan, in the first six months of 2019, tax authorities at all levels have conducted inspections at 35,344 enterprises, accounting for 40.5 percent of the yearly target.
Some 150 firms with affiliated transactions have been inspected. As a result, the tax authorities have collected 693.4 billion VND in tax refund and fines.
Da Nang attracts $542 million of foreign investment in H1
More than US$542 million of foreign capital was invested in the central city of Da Nang in the first half of this year.
Speaking at the 11th session of the 9th municipal People’s Council in Da Nang on Tuesday, Ho Ky Minh, vice chairman of the city's People’s Committee, attributed the results to investment attraction activities organised as part of the city's policy to focus on investment this year.
He said Da Nang recently held a conference with investors in which investment registration certificates were granted for eight projects worth over $492 million.
Local authorities have also allowed research to proceed on 11 potential projects worth nearly $3.5 billion.
“Despite such positive outcomes, the city has failed to meet the targets in some aspects,” Minh said.
For the remaining six months, the city plans to improve its business-investment promotions and management of investment in construction.
It also will speed up the progress of major projects and enhance its urban and environmental management, among other tasks.
Participants at the 11th session also reviewed socio-economic plans for the first half of the year and outlined measures to carry out tasks for the remainder of the year, resolving pressing issues such as waste, pollution, water shortages and land acquisition.
Exchange rates under less pressure, no sharp fluctuations
The increasing process of monetary policy normalization by some of the world’s most powerful economies will help to ease pressure on the domestic exchange rate.
The Vietnam Institute for Economic and Policy Research (VEPR) made the forecast during a conference to release its macro-economic growth report for the second quarter of 2019.
VEPR experts predicted that the United States Federal Reserve System (FED) is more likely to reduce interest rates in July.
The US added Vietnam to a watchlist for currency manipulation in May, hence forcing the State Bank of Vietnam (SBV) to regulate the exchange rate in a flexible manner and restrain the realization of monetary policy in order to create competitive edges for domestic firms involved in international trade.
The central exchange rate prescribed by the SBV continued the growth momentum seen in the first quarter of 2019, with growth slowing in the second quarter, said Nguyen Duc Thanh, head of the VEPR.
Since 2018, the SBV has been regulating the exchange rate in a proper manner, gradually decreasing under external pressures. The central exchange rate rose by 1.8 per cent in the fourth quarter of 2018, while the ratio rose slightly by 1 per cent and 0.3 per cent respectively during the first and second quarters of 2019.
The exchange rate prescribed by commercial banks ranged from 23,465 to 23,480 VND/USD in the second quarter of 2019. This was primarily caused by sharp fluctuations in several strong currencies such as USD, CNY, and JPY, along with rising concerns about the escalating US-China trade war and its subsequent negative effects on the depreciation of CNY.
However, the exchange rate set by commercial banks fell to 23,350 VND/USD at the end of the second quarter due to high expectations regarding a fall in interest rates set by the FED.
VEPR analysts said they believe that the economic growth target of 6.6 to 6.8 per cent set by the National Assembly for 2019 appears to be within reach.
The global supply chain and new economic alliances would be threatened by the ongoing US-China trade war and escalating trade tensions between Japan and the Republic of Korea, the analysts said.
They suggested that the central bank should flexibly regulate the exchange rate on a par with market rules, therefore helping to absorb external factors.
Local SMEs slow to respond to free trade pacts
Many local firms, particularly small and medium-sized enterprises (SMEs), remain indifferent and are making no preparations to make the most of the European Union-Vietnam free trade agreement (EVFTA).
Vietnam has signed and executed multiple FTAs, creating opportunities for the local economy, Ngo Chung Khanh, deputy head of the Multilateral Trade Policy Department at the Ministry of Industry and Trade, told a conference titled “Identifying trade and investment opportunities in the context of EVFTA,” on July 10 in Hanoi.
He noted that the ministry had voiced concern over the lack of preparation among local firms on the threshold of these trade pacts, including the EVFTA.
Many firms have paid little attention to the latest trade pact. Since the EVFTA was announced to the public, the trade ministry received only two inquiries from companies regarding tariff codes and country of origin regulations. These questions were mainly raised by foreign-invested firms.
Addressing the event, a representative of the Vietnam Chamber of Commerce and Industry (VCCI) pointed out that Vietnamese firms were lax in updating their knowledge bases. It is rumored that VCCI had insisted enterprises join its training courses, rather than inviting them to do so, as the firms had shown no interest in these programs.
Even on being notified of helpful training sessions on ways to export acipensers to Thailand, both local authorities and firms expressed indifference, the VCCI representative said.
Earlier, the prime minister issued a decision to execute the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), asking ministries and local authorities to work out specific plans and send them to the trade ministry. However, the number of plans sent to the ministry remains modest to date, even after repeated requests from the prime minister.
These plans would help the country embrace opportunities and realize the benefits of the trade deals. If State management agencies continue to execute the EVFTA at the same snail’s space as the CPTPP, these opportunities will never be realized, Khanh said.
According to Khanh, companies in Vietnam have to make preparations to leverage the benefits of the EVFTA as soon as possible and focus on product origin rules, technical barriers and duties so that their products can quickly reach European consumers.
Anti-smoking campaigns extinguish state tobacco company’s profits
Revenues have been rising for three years for state-owned Vinataba, but its profits have fallen off the cliff.
The Vietnam National Tobacco Corporation (Vinataba) has reported average sales growth of 2.2 percent a year since 2016 as it moves towards mid-level products. Sales grew from 3.6 million packs in 2016 to 4.1 million packs in 2018.
Revenues last year were VND19.63 trillion ($845.6 million), up 4.58 percent. After-tax profits plummeted 23 percent to VND1.25 trillion ($53.6 million) as income from financial activities fell sharply.
In a separate consolidated report issued the same week, the company management said frequent media campaigns aimed at raising awareness of the harm caused by tobacco are affecting consumer habits and sales.
It expects revenues to fall by 3 percent this year as a result to VND20 trillion ($865 million) from VND20.63 trillion ($892 million) last year.
The company is also in the property, farming, garments, and travel businesses, and has 11 subsidiaries and six joint ventures.
Vintataba is a wholly state-owned enterprise run by sovereign fund State Capital Investment Corporation, which manages the government’s business investments.
Origin fraud threatens duties on Vietnamese wood, seafood exports to US
Vietnam’s wood and seafood exports could be the next to attract U.S. tariffs if it fails to prevent goods origin fraud, experts have warned.
Economist Le Dang Doanh said local exporters should be alarmed by duties that the U.S. recently imposed on certain steel from Vietnam, since it means the former is targeting the latter as a country that abets illegal circumvention of tariffs.
"Vietnam might need to reduce exports of items to the U.S. which are suspected of circumventing trade duties," he told VnExpress International.
The U.S. this month slapped duties of up to 456 percent on some steel products from Vietnam, which it alleges are produced in South Korea and Taiwan.
Minister of Industry and Trade Tran Tuan Anh said at a conference Tuesday that wood, seafood, agriculture, textiles, leather, and electronics are other sectors that need to be surveilled to avoid origin-related fraud.
The trade ministry warned last month that chances were high Chinese companies would borrow the made-in-Vietnam label to export its plywood to the U.S. to avoid a 25 percent duty.
In the first five months of this year Vietnam’s wood and wood products exports to the U.S. rose by 35 percent year-on-year, while its imports from China rose by over 35 percent, according to Vietnam Customs.
U.S. Customs and Border Protection said last November it was investigating suspected circumvention of tariffs by Chinese plywood exporters by shipping to the U.S. through Vietnam where labels were changed.
Huynh Van Hanh, deputy chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), said that there are possibilities that U.S. could slap duties on wood products exported from Vietnam."If that happens, the whole industry will have to face severe losses," he told local media.
Vietnamese seafood could also be sailing in troubled waters. Minh Phu Seafood JSC, one of the country’s biggest shrimp processors, has recently been accused of evading anti-dumping duties by exporting Indian shrimp to the U.S.
An Illinois representative alleged in an email that Minh Phu bought a large amount of frozen shrimp from India, processed it at a "minimum" level in Vietnam, and sold it to the U.S. through a subsidiary as a Vietnamese product.
This and other similar cases of origin-related fraud are a red flag for experts. Economist Vo Tri Thanh said other countries would seek to take advantage of Vietnam’s trade pacts to increase their exports to third countries, which could result in Vietnam being slapped with high duties. "Vietnam needs to make a big effort to stop this," he said.
Following the U.S.’s imposition of duties on steel, Prime Minister Nguyen Xuan Phuc last week signed a decision to prevent the circumvention of trade defense measures, especially origin-related fraud, and Vietnam being used as a transit point for exports to third countries.
The U.S. was Vietnam’s largest export market in the first half, with shipments rising by 27.4 percent year-on-year to $27.5 billion, according to the General Statistics Office.
Vietnam’s imports from the U.S. in the same period were worth $7.1 billion for a trade surplus of $20.4 billion, it said.
Son La longan eyes rising foothold in demanding markets
The northwestern province of Son La plans to export 8,100 tons of longan during this year’s crop while looking to gain a large share in demanding overseas markets.
Son La expects to yield some 73,000 tons of longan from this year’s crop, an annual rise of 14 per cent. This fruitful outcome is a result of the expansion of high-quality longan cultivation farms throughout the province.
A total of 16 food hygiene supply chains have been developed in order to absorb the output from 510 hectares of longan cultivation areas.
Local authorities are striving to accelerate their shipments of longan to make further inroads into the neighboring country China, as well as in demanding markets such as the US, Japan, and the Republic of Korea.
Regarding domestic consumption, some 3,800 tons of longan will be on offer at nationwide distribution networks, including Vinmart, BigC, Hapromart, and others.
CPTPP boosts export opportunities in Japan
With the Comprehensive and Progressive Agreement for Trans-Pacific (CPTPP) officially coming into force, Vietnamese exporters should make the most use of the opportunities it brings in Japan, one of Vietnam’s leading trade partners.
Vietnam’s exports to Japan have seen steady growth over the years, hitting 9.68 billion USD in the first half of 2019, up 9.1 percent from the same period last year. Key export items include textile and garment, seafood, machinery, wood products, mobile phones and electronic components.
As of the beginning of May, Japan was Vietnam’s second largest investor, running 4,118 foreign direct investment projects worth 57.3 billion USD, mostly in processing and manufacturing, retail and real estate. An estimated 2,500 Japanese firms, including leading conglomerates, have operated in Vietnam, and many of them plan to expand.
The recent upswing in exports to Japan was thanks to the signing of the CPTPP, of which both Vietnam and Japan are members. Under the CPTPP, Japan agreed to eliminate duties for most Vietnamese agricultural and seafood products.
Japan immediately lifted 86 percent of tariff lines for goods from Vietnam, representing 93.6 percent of the latter country’s exports after the deal went into force. After five years, Vietnam will be exempt from about 90 percent of tariff lines.
The CPTPP is hoped to bring tremendous benefits for both countries, said Deputy Minister of Industry and Trade Tran Quoc Khanh.
The trade deal will allow Japanese enterprises to enter Vietnam’s growing public procurement market, which has been so far closed to foreign providers. Additionally, it would give those working in banking, insurance, construction, logistics, accounting and graphic design – areas Japan holds competitive edges – broader access to the Vietnamese market.
The CPTPP will strengthen Vietnam’s role as a production base for Japanese manufacturers and in return, Vietnamese firms will also receive the same benefits when entering Japan, according to Yuri Sato, Executive Vice President of the Japan External Trade Organisation (JETRO).
Sato added that the agreement imposes strong protection requirements in terms of intellectual property rights and investment protection. For example, foreign companies now have the right to withdraw investment and require fair compensation and legal support if their assets are nationalised. These rules could encourage Japanese firms to ramp up technological exports to Vietnam.
Therefore, the CPTPP is expected to greatly facilitate the flow of trade and investment between the two nations by not only removing tariffs but also creating new business opportunities and allowing reduction of trade and investment procedures.
Shibata Eiji, Vice Chairman of Japan-based AEON Group said Vietnamese goods have great potential in the Japanese market. In 2013, Japan imported Vietnamese tra fish for the first time with a very modest number of 5 tonnes, but imports rose 20 times to 100 tonnes a mere five years later.
AEON wants to double import revenue of Vietnamese products to 500 million USD by 2020 and raise it to 1 billion USD by 2025, the vice chairman noted.
To sustainably boost exports to Japan, Vietnam, first and foremost, needs an effective marketing strategy. The two sides should also provide broader access for each other’s agricultural and seafood products and effectively implement joint initiatives to improve the investment environment and promote Japanese investment in Vietnam.
Minister of Industry and Trade Tran Tuan Anh said Vietnam joining trade agreements like CPTPP will bring more export opportunities; however, the country would confront challenges, particularly growing competition from foreign rivals for agricultural and seafood products.
The minister suggested Vietnamese producers seek partnerships with Japanese firms to utilise their capital and technology, hereby gaining stronger foothold in the Japanese market and playing a greater part in regional and global supply chains.
Agriculture sector struggles to recover weakening exports
The agriculture sector is struggling to boost the export of key products in the second half of the year amid dropping prices in the world market.
According to statistics of the Ministry of Agriculture and Rural Development, though the export revenue of agricultural products grew by 2.2 percent in the first six months of 2019, the turnover of main currency earners, including rice, cassava, coffee and cashew, plunged 9.2 percent.
Vietnam exported 3.39 million tonnes of rice for 1.46 million USD in the January-June period, down 2.8 percent and 19 percent, respectively. Except for the Philippines, the country’s three major traditional rice importing countries such as China, Indonesia and Bangladesh all imported less in the reviewed period.
Additionally, the world’s rice prices will likely go down further this year as the US Department of Agriculture forecast the global rice production in 2018 – 2019 to reach 499.1 million tonnes, 4.2 million tonnes higher than the previous year.
Exports of cassava and cassava products were estimated at 1.2 million tonnes, worth 460 million USD, a year-on-year decrease of 19 percent in volume and 15.3 percent in value, also due to the falling demand from China - Vietnam’s main market.
Prices of Vietnamese cassava and cassava products averaged 386.3 USD per tonne, down 2.91 percent year on year. Cassava starch was fetched 425 USD per tonne in average, down 1.7 percent month on month and 15.2 percent year on year.
A similar trend was seen in coffee exports in the first six month. The country shipped abroad 943,000 tonnes of coffee for 1.6 billion USD, down 9.2 percent in volume and 19.9 percent in value from the same period last year. Germany and the US remained the two biggest importers of Vietnamese coffee.
It is projected that global and domestic coffee prices would slide in the short term because of oversupply in the world market.
The six-month export volume of cashew nuts amounted to 197,000 tonnes, 13.1 percent higher than a year earlier, but the value plummeted 11.3 percent year on year.
To get the export of agricultural products back on the track, the Ministry of Agriculture and Rural Development considers shifting focus to seafood and forestry products.
The Institute for Policy and Strategy for Agriculture and Rural Development (IPSARD) suggested farmers to switch areas of unproductive rice cultivation to farming other crops or aquaculture as rice exports do not have much room to grow in the global market like fruit crops or aquatic products. Many of Vietnam’s major buyers are now able to produce enough rice for domestic demand and even for export in recent years.
Not only the fluctuations of the global prices have affected Vietnam’s agricultural product exports but also the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which officially went into force. The trade deal strips 98 percent of tariffs for 11 member countries with a combined GDP of more than 13.5 trillion USD and close to 500 million consumers.
To seize opportunities the agreement would bring, Vietnamese producers must actively explore Vietnam’s commitments and requirements of other member states. They should also think outside the box and take advantage of competition to create motivation for innovation and development.
In addition, Vietnamese enterprises need to seek cooperation with partners from the CPTPP member countries in order to attract new source of investment and advanced technologies, and more importantly, engage deeper in the regional and global supply chain.
Interest rates to remain on hold through 2019
The State Bank of Vietnam would hold its benchmark refinancing and discount rate at 6.25 per cent and 4.25 per cent, respectively, along with its 14 per cent credit growth target to be kept for the remainder of 2019, Fitch Solutions analysts have predicted.
The analysts stated in a newly-released outlook for Vietnam’s interest rates that the State Bank of Vietnam (SBV) would continue to manage financial risks through non-interest rate measures like loan directives and macro-prudential ones as monetary policy transmission in Vietnam remains weak.
Meanwhile, Vietnam’s five-year government bond yield stands at 3.85 per cent, below the SBV’s discount rate of 4.25 per cent, and this continues to suggest that monetary policy transmission is still not optimal due to excess liquidity in the banking system.
Bank lending rates are high and appear to be on the uptrend. For example, interest rates at Techcombank now range from 6.80 - 9.83 per cent on large VND-denominated corporate loans in June, as compared to the ratio stretching from 6.40 - 9.00 per cent in March. Moreover, high deposit interest rates at 6.80 per cent for tenures above 12 months for both Agribank and Vietcombank suggest that lending interest rates should be high in these banks.
Fitch Solutions, a macro-research subsidiary of Fitch Group, cited the SBV Credit Department as saying the credit outstanding to the economy by late May 2019 was 5.74 per cent higher as compared to the end of 2018.
At 5.74 per cent, credit growth is now at 41 per cent of the Government’s full-year 2019 target of 14 per cent. The Government’s five priority sectors, including export, high-tech industries, agriculture, spare-parts industries, and small and medium sized enterprises, reported strong credit growth.
In particular, credit to export and high-tech industries recorded robust growth of 13 per cent and 14 per cent, respectively, while credit to the agriculture and rural sector increased by 5 per cent and that to support industries rose by 4 per cent over the same period.
Credit to risky sectors such as those in securities, real estate, and consumer loans has been strictly controlled in line with the orientations of the SBV.
Managing risks through macro-prudential measures
Fitch Solutions believe that macro-prudential measures will continue to be a good choice for the SBV over the coming quarters to manage financial stability risks. According to SBV regulations, the proportion of short-term capital to be used for medium and long term lending by banks will have to be reduced to 40 per cent in 2019 from 45 per cent in 2018. This has already seen some smaller and less well-capitalized banks raise interest rates offered on long-term time deposits since the first quarter of 2019, with the aim of attracting the capital needed to meet this requirement.
In June, the SBV released a draft circular seeking public comment on further macro-prudential measures the central bank intends to introduce to manage financial risks, with a specific focus on managing the risk of lending to the real estate sector.
The circular encompassed a number of changes, including a further reduction to the ratio of short-term capital for medium and long term loans to 30 per cent by July 1 2020, aiming to help the central bank manage liquidity risks in the banking sector. To be sure, this regulatory change would apply to loans in all sectors and not just the real estate sector.
Other regulatory changes proposed include raising the risk weight ratio for home purchase loans worth VND3 billion (US$129,000) and above and loans worth between VND1.5 billion (US$64,500) and VND3 billion to 150 per cent and 100 per cent, respectively, from 50 per cent at present.
Housing mortgage loans worth less than VND1.5 billion and loans for the purchase of social and government supported housing projects will remain at the risk weight ratio of 50 per cent. According to the SBV, these changes look to channel real estate credit toward borrowers with genuine housing needs instead of speculators and to balance the development of low-cost commercial and social housing as demand in the low-cost segment still outstrips supply.
Additionally, the authorities are expected to focus their efforts on banking sector reforms as credit growth remains one of the SBV’s main monetary policy tools. The SBV tailors credit growth quotas for each bank, with healthier banks being assigned a higher quota, vice versa, in order to regulate overall credit growth within its annual target.
Risks to Fitch Solutions’ view are that the credit growth is likely to come in below the SBV’s 14 per cent target for the year. Raising the risk weight of real estate loans will likely reduce the appetite for credit expansion in this segment among credit institutions. Additionally, slowing real GDP growth – in which the research unit forecast to slow to 6.5 per cent in 2019 from 7.1 per cent in 2018 – would also weigh on demand for business loans over the coming quarters.
HCMC terminates much delayed $110 million parking lot project
A $110 million underground parking project in downtown Saigon has been cancelled after unresolved issues caused a 10-year delay.
The HCMC People's Committee said it will work with the project investor, the Underground Space Investment Development Corporation, to end the BOT contract for the project in Le Van Tam Park, District 1.
The parking lot was meant to accommodate 2,000 motorbikes, 1,250 cars, and 28 buses and trucks in an area of 100,000 square meters.
The project broke ground in 2010, but stalled soon after.
According to the city Department of Transport, the project was paused because many important requirements were not finalized, including applying for construction permits and evaluating technical designs.
Saigon had planned four underground parking spaces in the downtown Districts 1 and 3, totally accommodating 6,300 cars and 4,000 motorbikes. None of these have been implemented.
Parking space in the downtown area of the 13-million strong HCMC now only meets around 7 percent of total demand, according to urban planning experts.
EVFTA improves Vietnam’s business governance, farm produce exports
The signing of the EU-Vietnam Free Trade Agreement (EVFTA) and the Europe-Vietnam Investment Protection Agreement (EVIPA) provides an opportunity for Vietnamese enterprises to increase their integration and expand the export market for agricultural products.
The EU-Vietnam Free Trade Agreement (EVFTA) will open up a dual opportunity for Vietnam's economy. On one hand, it will create conditions for Vietnamese businesses to access a variety of trading partners in the world, allowing them to promote their products to different markets. On the other hand, it is also an opportunity for them to gain professional experience from partners in Europe.
EVFTA is an important key to modernize the Vietnamese economy, especially as Vietnam is boosting the reform of state-owned enterprises. In addition, it will help Vietnam improve business management to be able to compete with European enterprises.
Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry, said that through the EVFTA, Vietnamese enterprises will access a market of 500 million people with potential purchasing power. This means that Vietnamese businesses will gain added value and create more jobs when they penetrate the EU market.
Loc said, “To meet the requirements set by the EU, a market with high standards, Vietnamese businesses should improve their technology, management, and social responsibility. This will make domestic enterprises more mature and allow them to grow more sustainably.
The EVFTA will create both pressure and a driving force to reform Vietnam’s institutions and develop a more transparent, fair, and favorable business environment. The EVFTA will be an integrated solution to internationalize Vietnamese businesses, especially small and medium-sized enterprises.”
Vietnam is one of the world’s biggest exporters of rice, peppers, cashews, seafood, vegetables and fruit. It is gradually affirming its brand in its reputation for quality and competitive prices.
In the first 5 months of this year, trade turnover between Vietnam and the EU totalled nearly 23 billion USD, 2.7 billion USD from farm produce. Vietnam’s agricultural exports to the EU earned more than 15% of total revenue.
Tran Tuan Anh, Minister of Industry and Trade, said that to export agricultural products efficiently, Vietnam should enhance its processing capacity, because when the EVFTA takes effect, the tax imposed on almost all exported agricultural products will be slashed to 0%.
“By joining the CPTPP, Vietnam will have a market of countries with a total GDP of about 10 trillion USD. For the EVFTA, we will approach an economic region with a GDP of 18 trillion USD. That means exports of agricultural products and seafood to EU and CPTPP members will fetch 35% of Vietnam’s total export revenues”, Mr Anh noted.
The EVFTA will offer a great opportunity for Vietnam to improve its competitiveness and export value, but it also challenges the agricultural sector to change greatly to compete with other countries with long experience in agricultural production, the agricultural market, and comprehensive policies.
Vietnamese an important MICE market for South Korea
South Korea has been seeing substantial growth in the number of Vietnamese tourists and the latter has become an important market, the Korean Tourism Organization (KTO) said at the Korea MICE Roadshow 2019 in Hanoi on July 11.
The number of travelers between Vietnam and South Korea has increased remarkably, according to the KTO. Some 277,000 Vietnamese travelers visited South Korea in the first half of 2019, an increase of 32.1 per cent against the same period of 2018. Of this, about 34,000 Vietnamese visitors headed to South Korea as part of MICE tours with support from the KTO, a year-on-year rise of nearly 25 per cent.
Additional air routes and amendments to visa policies have helped travel between the two countries become more convenient and easier, according to Mr. Jo Deok Hyun, Executive Director of the Korea MICE Bureau at the KTO.
Conversely, there was over 2 million South Korean visitors to Vietnam in the first half, a year-on-year increase of 21.3 per cent. South Koreans were second in number, after China.
The two countries have organized events and programs in recent years to promote tourism in both. The Korea MICE Roadshow 2019 aimed to act as a bridge for MICE service providers in South Korea and travel companies in Vietnam, creating new tourism products and boosting the number of Vietnamese MICE tourists to South Korea. It attracted the participation of about 200 South Korean and Vietnamese enterprises.
South Korea will continue to adjust its visa policy and improve tourism services to attract more Vietnamese tourists and stimulate growth in MICE tourism in the time to come, according to the KTO.
Half a million Vietnamese tourists visited South Korea in 2018, an increase of about 41 per cent over 2017. Meanwhile, Vietnam welcomed nearly 3.5 million South Korean tourists, a surge of 44.3 per cent year-on-year.
Vinalines proposes new port in H?i Phòng
The Vi?t Nam National Shipping Lines Corporation (Vinalines) has proposed building a port and warehouses for petrol and liquefied gas on Cái Tráp Island in the city of H?i Phòng’s Cát H?i District, reported online newspaper vietnamplus.vn.
The port and warehouses will be located on an area of 450ha, said acting general director of Vinalines Nguy?n C?nh Tinh.
“At present, liquefied gas accounts for 5 to 7 per cent all goods at H?i Phòng Port, with an increase of 12.5 per cent per year along with increasing demand for fuel for sea transport and other industries,” said Tinh. “So building warehouses for petrol and liquefied gas in H?i Phòng is essential."
According to the proposal, in the first phase, the corporation will build petrol and liquefied gas warehouses and two wharfs with a total length of 540m and loading capacity of 1.5 million tonnes of goods per year, suitable for 50,000-tonne vessels.
In the next phase, two 560m-long wharfs with annual loading capacity of 4 million tonnes suitable for 90,000-tonne ships will be built.
At present, Vinalines manages and operates 14 seaports, one river port and 76 quays nationwide.
Petrol prices rise over 700 VND per litre
From 17:00 of July 17, the retail price of RON95-III increased 718 VND to a maximum level of 21,235 VND per litre, while the ceiling price of bio-fuel E5 RON 92 was up 626 VND to 20,279 VND per litre.
The changes were made following the latest adjustment by the Ministry of Industry and Trade and the Ministry of Finance on July 17.
The two ministries review fuel prices every 15 days to adjust domestic prices in accordance with swings in the global market.
The prices of diesel 0.05S and kerosene are capped at 16,997 VND and 15,959 VND per litre, respectively. Meanwhile, Mazut 180CST 3.5S is sold at no more than 15,980 VND per kilogramme.
This is the second hike in petrol prices, with total rise of over 1,000 VND per litre. Earlier, petrol prices declined three consecutive times.