BUSINESS NEWS HEADLINES APRIL 28

Drastic changes needed in farming practices to access EU market

BUSINESS NEWS HEADLINES APRIL 28

Maximise the opportunities that will come with the impending Vietnam - EU Free Trade Agreement (EVFTA), farmers and cooperatives are advised to implement changes to their farming methods in an effort to meet the higher standards of the EU market.

drastic changes needed in farming practices to access eu market hinh 0Nguyen Ngoc Nhan, head of Binh Hoa Phuoc Cooperative in Long An province, underscored the importance of applying organic farming practices, using organic fertilisers and biological products to create higher quality items with the aim of raising standards to penetrate the demanding market.

Thanks to the application of the farming practices, the cooperative’s rambutan products have been exported to a range of stringent markets such as France and the Netherlands, said Nhan, adding that both countries are willing to pay higher prices than several other markets when importing agricultural items that come up to the strict requirements in terms of design, quality, and pesticide residue so that food safety and hygiene standards can be ensured.

A local farmer who cultivates dragon fruits in Chau Thanh district, the Mekong Delta province of Long An, elaborated that since switching to the organic farming methods, both output and overall product quality has risen exponentially, coupled with products being sold at a higher price.

Tran Ngoc Bao Binh, the head of the raw material area of Chanh Thu Company in Ben Tre province, pointed out that the EU is a highly demanding market when it comes to applying stringent requirements regarding design, product quality, and antibiotic residues. Therefore, he recommended that local farmers should be striving to gradually eliminate chemicals, switch to organic farming, whilst also keeping a cultivation journal, as European firms carefully examine these technical requirements when choosing to import Vietnamese products.

According to Le Van Thiet, Deputy Director of the Plant Protection Department under the Ministry of Agriculture and Rural Development, Vietnamese fruits have been successfully exported to 60 countries and territories globally, with farmers applying VietGAP and Global GAP standards in line with farming procedures that see the use of chemicals prohibited.

With the rate of use of organic fertiliser in production being roughly 10%, Vietnam aims to increase the rate to 30% by 2030.

Asset sales bring profits to natural rubber firms, not their farms

Natural rubber firms are making profits from non-core activities despite falling rubber prices on global markets.

Phuoc Hoa Rubber JSC (HoSE: PHR) reported VND335 billion (US$14.3 million) in revenue for the first quarter of 2020, up 18 per cent on-year. Pre-tax profit soared 260 per cent on-year to VND172.5 billion in January-March.

The company targets to earn a total revenue of VND2.46 trillion and pre-tax profit of VND1.15 trillion in 2020, up 126 per cent and 134 per cent year on year.

Higher earnings are forecast because Phuoc Hoa Rubber expects to receive compensation from handing over its industrial parks to industrial park developers Nam Tan Uyen JSC and Vietnam-Singapore Industrial Park.

Selling assets is expected to bring high turnovers to the company as its core business – rubber exploitation and trading – has been affected negatively by the global COVID-19 pandemic.

In the first three months of the year, Phuoc Hoa Rubber posted a 40 per cent decline in its export volume, which was 1,024 tonnes – fulfilling 8.9 per cent of the full-year plan. Purchasing and processing volumes also fell 35 per cent and 51 per cent on-year, respectively.

The company’s board of directors have predicted consumption would keep falling in the remaining months of the year.

Hoa Binh Rubber JSC (HoSE: HRC) also recorded good earnings growth in the first quarter of the year.

The company reported an annual increase of 27 per cent in its first quarter net revenue, which touched VND43 billion. Its net profit gained more than a third on-year to VND825 million in the first three months.

According to the company spokesperson Banh Manh Duc, Hoa Binh Rubber recorded strong gains in net profit due to receivables from its clients, which were worth at least VND4.5 billion.

Tay Ninh Rubber JSC (HoSE: TRC) saw its profit surge five times on-year to VND20.3 billion in the first quarter, though revenue dropped 26.3 per cent on-year to VND52 billion.

The company reported it had earned VND21 billion from selling fixed assets, which helped cut costs by 30 per cent and boosted profit.

According to TRC, natural rubber firms’ operation depends significantly on the price of natural rubber and the conditions of international markets.

In the first three-month period, rubber futures on the Tokyo Commodity Exchange (TOCOM) lost 30 per cent from 207.80 yen ($1.93) per kilo on January 14 to end March at 145.20 yen per kilo as the global pandemic COVID-19 hampered global trade and pulled the demand down.

Rubber prices are forecast to keep dropping in the months to come, according to the Department of Export and Import under the Ministry of Industry and Trade. Rubber price hit its 11-year low of 140.60 yen per kilo on April 2.

Ending the first quarter, Viet Nam exported 227,000 tonnes of rubber and rubber products, worth $331 million. The figures were down 33 per cent on-year in volume and 26 per cent on-year in value.

Facing the problems brought by the disease, natural rubber companies have switched from rubber farming to industrial park development, which is expected to bring them huge profits as they are managing a large scale of land.

The disruption of global supply, caused by the China-US trade war and COVID-19, will encourage international corporations to more their plants from China to other neighbouring countries, including Viet Nam. 

Light, flask maker Rang Dong to lower cash dividend rate to 35%

Rang Dong Light Source and Vacuum Flask JSC will pay a cash dividend of a minimum 35 per cent in the next two years.

From 2017-19 the company paid a dividend of 50 per cent, with payments made twice per year.

On Friday, the second cash dividend payment for 2019 was made at a rate of 25 per cent, meaning every shareholder received VND2,500 per share.

The first dividend for 2019 was made on September 24, 2019.

Rang Dong in 2019 posted a 17.3 per cent annual increase in revenue, which touched VND4.27 trillion (US$181.47 million). The figure beat the firm’s target last year by 18 per cent.

But pre-tax profit fell more than one third on-year to VND161.5 billion, meeting only 79 per cent of the plan, as the company suffered a loss of VND36 billion in the fourth quarter due to a factory blaze in late August.

In the first quarter of 2020, Rang Dong reported VND1.1 trillion in revenue, up 9.7 per cent on-year, and VND75.4 billion in post-tax profit, up 45 per cent on-year.

The light and flask producer will hold its annual shareholders’ meeting on May 9. It targets to achieve VND7 trillion in revenue in 2022.

Rang Dong shares (HoSE: RAL) ended Friday flat at VND72,000 apiece. 

Drastic changes needed in farming practices to access EU market

Maximise the opportunities that will come with the impending Vietnam - EU Free Trade Agreement (EVFTA), farmers and cooperatives are advised to implement changes to their farming methods in an effort to meet the higher standards of the EU market.

drastic changes needed in farming practices to access eu market hinh 0Nguyen Ngoc Nhan, head of Binh Hoa Phuoc Cooperative in Long An province, underscored the importance of applying organic farming practices, using organic fertilisers and biological products to create higher quality items with the aim of raising standards to penetrate the demanding market.

Thanks to the application of the farming practices, the cooperative’s rambutan products have been exported to a range of stringent markets such as France and the Netherlands, said Nhan, adding that both countries are willing to pay higher prices than several other markets when importing agricultural items that come up to the strict requirements in terms of design, quality, and pesticide residue so that food safety and hygiene standards can be ensured.

A local farmer who cultivates dragon fruits in Chau Thanh district, the Mekong Delta province of Long An, elaborated that since switching to the organic farming methods, both output and overall product quality has risen exponentially, coupled with products being sold at a higher price.

Tran Ngoc Bao Binh, the head of the raw material area of Chanh Thu Company in Ben Tre province, pointed out that the EU is a highly demanding market when it comes to applying stringent requirements regarding design, product quality, and antibiotic residues. Therefore, he recommended that local farmers should be striving to gradually eliminate chemicals, switch to organic farming, whilst also keeping a cultivation journal, as European firms carefully examine these technical requirements when choosing to import Vietnamese products.

According to Le Van Thiet, Deputy Director of the Plant Protection Department under the Ministry of Agriculture and Rural Development, Vietnamese fruits have been successfully exported to 60 countries and territories globally, with farmers applying VietGAP and Global GAP standards in line with farming procedures that see the use of chemicals prohibited.

With the rate of use of organic fertiliser in production being roughly 10%, Vietnam aims to increase the rate to 30% by 2030.

Gov’t support needed for economic recovery: business leader

Government support policies are urgently needed for businesses affected by the COVID-19 pandemic in order to protect the national economy and people’s livelihoods, according to a business leader.

In an interview granted to the Vietnam News Agency, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said Vietnam has a chance to step out of the downturn caused by the pandemic earlier than other economies.

Despite budget difficulties, the Government has put in place solutions and policies on fiscal, credit and social security to support businesses and people amid the impacts of the pandemic, he stressed.

Loc underlined the importance of gradually resuming activities in the domestic market through stimulating demand and circulation of goods given that exports are yet to recover.

Nearly 800,000 businesses and millions of business households and individuals are being affected by the disease, Loc said, adding that many businesses have closed, dissolved or scaled down production.

According to Loc, millions of workers are at risk of losing their jobs.

The re-opening of the domestic market is an urgent need as well as a big opportunity for Vietnam to recover its economy, he said.

He urged the Government to repromote the “Vietnamese people give priority to using Vietnamese goods” campaign, thus helping the business community to tap into the domestic market of nearly 100 million people.

Loc also proposed the Government establish a steering committee and working group to re-start the national economy and support the business community.

SCG accompanying communities to overcome coronavirus emergency
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In light of active operation in many localities across Vietnam, SCG Group along with its member companies have engaged in numerous initiatives to support the community in the fight against the COVID-19 pandemic.


Over the past few months, the crisis has posed challenges to socio-economic development in many cities and provinces. While society is fast-tracking efforts, businesses are also active in their corporate social responsibility programmes in response. Among them, SCG and its member companies have led several meaningful initiatives to assist the communities where they operate.

Specifically, they have made several donations from cash and medical equipment to food, in order to meet the pressing demand of localities, thereby making a significant contribution in the coronavirus struggle.

Binh Minh Plastics JSC has contributed VND1 billion ($43,450) to the Ho Chi Minh City Fatherland Front Committee through the Community Entrepreneurs Fund. The company also donated 500 BX5 sprayers with a filling capacity of five litres for disinfectant pumps to various units under Ho Chi Minh City Department of Health.

Meanwhile, SCG Vietnam has offered medical masks, disinfectant, and food for healthcare workers at Health Center District 3.

The Mekong Delta province of Ben Tre is facing both the coronavirus pandemic and heavy saline intrusion. Binh Minh Plastics has granted 50 disinfectant sprayers to the provincial Center for Rural Water and Environmental Sanitation, facilitating the province to overcome challenges posed by both threats.

The southern province of Ba Ria-Vung Tau is home to SCG’s Long Son petrochemicals complex. Thus, Long Son Petrochemicals Co., Ltd. has made a contribution of VND500 million ($21,700) to the provincial Fatherland Front Committee as well as sending 2,000 face masks, dry hand sanitiser, and thermometers to local agencies and health centres.

In addition, the company is not only supporting the procedure of cleaning the health clinic in Long Son commune for two weeks, but is also providing medical equipment for healthcare workers there.

Another member company, Vinakraft, has presented face masks and hand sanitiser to 44 disadvantaged households in Hoa Loi commune, Binh Duong province, which has received a warm response from the local people. This will go towards helping such households protect the health and safety of themselves and others during the pandemic.

Meanwhile, TPC Vina Plastic and Chemical Corporation has made VND200 million ($8,700) in donations to Dong Nai Fatherland Front Committee.

In the central region, SCG Cement - Building Materials contributed VND600 million ($26,000) to Quang Binh Fatherland Front Committee, Quang Tri Hospital, and Danang’s anti-pandemic fund.

In the north, subsidiaries under SCG have quickly raised funds to support the local communities against coronavirus. Prime Group has spent VND150 million ($6,500) on 3,000 litres of dry hand sanitiser and handwashing sinks for its staff and some schools in Vinh Phuc where the factory operates.

Binh Minh Plastics has also donated two tonnes of rice to Hung Yen, while AP Packaging has granted cash and medical equipment to COVID-19 anti-pandemic committees and centres in both Hanoi and Hai Duong.

These efforts reaffirm the group’s commitment to its mission of “Passion for Better”, to improve the livelihood of the local people and community in Vietnam as well as other countries across Southeast Asia.

Ba Ria-Vung Tau calls for investment in 17 seaport projects

Calling for investment into ports is one of the five sectors that Ba Ria-Vung Tau will focus on to realise its target to become one of the three provinces attracting the highest foreign direct investment this year.

Ba Ria-Vung Tau People’s Committee has assigned the Department of Transport to collect information and statistics of all seaports and local water ports in the province, while simultaneously co-operating with the Department of Planning and Investment to check and build plans to call for investment in projects in the planning.

The Department of Planning and Investment will check the province's ports which have come into operation but have yet to reach their designed capacity in order to identify appropriate support measures for the project investors.

According to the Department of Transport, there are 69 seaport projects included in the planning of Ba Ria-Vung Tau. 48 projects are already operational, while four are under construction, 10 projects have yet to be implemented, and investors ignored the remaining seven projects.

The planning of the Cai Mep-Thi Vai area includes 35 ports. 22 of these operate smoothly, while two are currently undergoing construction and nine others have yet to be kicked off. The remaining two projects have not managed to attract investors.

A total of 26.4 million tonnes of cargo has gone through the seaports of Ba Ria-Vung Tau in the first three months of this year. The volume of goods handled by ship reached 17.7 million tonnes (up 11 per cent). The total volume of container cargo reached 13.3 million tonnes (up 27 per cent). The volume of containers handled by ship reached 7.4 million tonnes (up 18 per cent).

Ba Ria-Vung Tau has set the target of becoming one of the three provinces attracting the highest foreign direct investment this year. Thus, it has been calling on investors with deep pockets and extensive experience as well as advanced technology to invest in large-scale projects. The five main areas it focuses on to attract investment are industry, ports, logistics, tourism, and high-tech agriculture.

Two key southern waterways logistics corridors proposed with World Bank funding

Awaiting the prime minister's approval, the project on developing two key waterway logistics corridors with World Bank funding would give a facelift to shipping infrastructure in the Mekong Delta and Ho Chi Minh City.

The Ministry of Transport has just proposed the prime minister to give the thumbs-up to a project on developing southern waterways and logistics corridors utilising World Bank loans.

The project aims to upgrade the inland waterways transport network in the Mekong Delta region and Ho Chi Minh City and would feature two waterway corridors – the East-West corridor connecting the port complex of the Mekong Delta (and its economic hub Can Tho city), Ho Chi Minh City, Cai Mep, and Thi Vai and the North-South corridor connecting the Binh Duong-Dong Nai-Ho Chi Minh City-Cai Mep-Thi Vai port complex.

The East-West corridor was designed to cross many major local rivers and channels such as Tra On River, Hau River, or Mang Thit Channel which will be upgraded to reach Grade II inland waterways standards (55m wide for channels and 75m wide for rivers) able to receive vessels reaching 1,500 tonnes in gross tonnage and three-layer container ships.

The North-South corridor will also pass through many local rivers such as Dong Nai, Nha Be, or Thi Vai, which will also be upgraded to Grade II inland waterways standards (60m wide for channels and 90m wide for rivers), able to receive vessels of 3,000-5,000 tonnes in gross tonnage and four-layer container ships.

The project will take place across the southern region, including Ho Chi Minh City, Can Tho city, and stakeholder provinces of Vinh Long, Ben Tre, Tien Giang, Long An, Dong Nai, and Ba Ria-Vung Tau.

In addition, the project involves upgrading the two bridges of Tra On and Cho Lach 2, building 16 passenger stopovers (replacing 10 existing ones and building six new ones), installing signs and a vessel transport management system in order to mitigate traffic congestions and facilitate transport.

After completion, the project will help significantly reduce travelling distance and time for ships between the Mekong Delta and Ho Chi Minh City and key ports in the region, from there curtailing transportation costs and ensuring traffic safety.

The total project would require VND5.786 trillion ($251.57 million) in total investment value, of which nearly $158 million would be offset by World Bank loans, $2.99 million would be granted by the Australian government, and the remainder to be provided by Vietnam in counter-funding. The project will be deployed in 2021-2025.

After completion, the project will help significantly reduce travelling distance and time for ships between the Mekong Delta and Ho Chi Minh City and key ports in the region, from there curtailing transportation costs and ensuring traffic safety.

Earlier in last July, the World Bank approved a credit plan to help four secondary cities in Vietnam build critically-needed municipal infrastructure and strengthen urban planning.

The project aims to increase access to improved urban services for Ky Anh (Ha Tinh province), Tinh Gia (Thanh Hoa province), Hai Duong (Hai Duong province), and Yen Bai (Yen Bai province).

Approximately 200,000 residents are expected to benefit directly from the project.

The project will help reduce flood risks, improve sanitation, reduce travel times on new and improved roads, and develop high-quality public spaces.

These improvements, in turn, are expected to help beneficiaries boost productivity, enable exports, create more jobs, and help generate sustained economic growth.

The total cost of the project is $276.17 million, $194.36 million of which will come from the International Development Association (IDA).

Price bracket for land clearance at Long Thanh Airport approved

Approving the compensation price bracket for site clearance at Long Thanh International Airport will accelerate the construction of the project, bringing the large-scale national construction work closer to reality.

 

Dong Nai People’s Committee has approved the compensation price bracket for 3,000 hectares of land, which was planned to develop Long Thanh International Airport. This will serve as the basis to calculate compensation for land withdrawn to implement the construction.

Notably, the highest compensation rate for residential property in the rural area is VND6.5 million ($282.6) per square metre, while residential property in other areas are eligible for VND1.3-5.1 million ($56.50-220) per sq.m.

Regarding agricultural land, the rate for land used for green areas is VND360,000 ($15.65) per square metre and land used for growing aquatic products and forestry will receive the lowest level of VND161,000 ($7) per square metre.

In order to develop Long Thanh International Airport, Dong Nai People’s Committee has revoked 5,000 hectares of land from 18 organisations and 5,283 households.

Previously, Prime Minister Nguyen Xuan Phuc urged the southern province to make every effort to complete site clearance for the construction of Long Thanh International Airport at an online meeting in Hanoi on April 8.

The goal set by the National Assembly is to wrap up site clearance by 2025 or earlier, he reminded.

According to a report by Dong Nai province, only VND1.7 trillion ($73.9 million) of the total of VND17 trillion ($739 million) allocated for the task has been disbursed so far.

Long Thanh International Airport, situated near its namesake township in the southern province of Dong Nai, is a keyi national project. Once fully operational, the airport is expected to reduce the load on Tan Son Nhat International Airport in Ho Chi Minh City and become a major international aviation hub in the region.

The project is made up of three investment phases with the ultimate goal of making the airport capable of serving 100 million passengers and handling five million tonnes of cargo annually.

The project’s first phase costs an estimated VND111.69 trillion ($4.86 billion). In this phase, one runway and one terminal along with other components will be built to handle 25 million passengers and 1.2 million tonnes of cargo a year. It is scheduled to be put into use in 2025 at the latest.

800 real estate trading floors in Vietnam shut down due to COVID-19 pandemic

800 of the country's 1,000 real estate trading floors have closed temporarily due to a sharp plunge in customer demand and signs of an impending economic downturn.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA) confirmed that 800 of the 1,000 trading floors are facing great challenges from the turbulent market. The COVID-19 pandemic has caused great disruptions to business and living, creating spillover effects for the property market.

Nguyen Van Dinh, deputy chairman of the Vietnam Association of Realtors, said that the figure has risen from 300 closed floors in February, while the remaining 200 floors have adopted an online approach to reach more customers.

“Even so, they still backed into a corner because of shrinking appetite among buyers,” said Dinh.

A great majority of real estate trading floors across Vietnam shut down for the duration of the pandemic
Amidst the COVID-19 outbreak, a number of projects were reported to delay construction and launch, resulting in fewer-than-previously-expected units being launched. About 1,200-2,000 units are expected to enter the market in 2020. However, this is subject to great uncertainty, depending on how long the outbreak will last.

Total sales of ready-built landed property in Ho Chi Minh City are lower than the quarterly average for the past five years at 366 units in the first quarter of this year, according to Jones Lang LaSalle (JLL).

The number of apartments for sale in Ho Chi Minh City in the first quarter totalled only 1,980 units, less than half than in the fourth quarter of 2019. This sales volume is equivalent to only 54 per cent of the total stock available for sale on the market, the lowest level in the past two years.

In Hanoi, the take-up totalled at 4,017 units in the first quarter, down almost 42.2 per cent on-quarter. This was mainly in tandem with the supply slump, although COVID-19 also slowed down sales velocity to a certain extent.

JLLalso noted there was a number of buyers, especially from overseas, who already made the bookings but were unable to carry on with the deposit or sales and purchase agreement due to travel restrictions.

Retail property landlords and tenants facing predicament

Retail property landlords and tenants must prepare to navigate a period of elevated risks to cash flow and increased operational costs arising from a slump in consumer demand and disruption to supply chains.

Some retailers are seeking rent holidays from landlords during the pandemic period, Photo: Le Toan
According to Trang Bui, head of markets at JLL Vietnam, retail property owners are suffering heavy losses due to the ongoing coronavirus outbreak.

Foot traffic in many malls and retail centres in Ho Chi Minh City declined by 80 per cent during February and March compared to the same period last year, as many mall operators have closed their retail spaces.

A few international brands have postponed their launch plans this year in Vietnam, particularly in Ho Chi Minh City, due to the impact of the pandemic.

Nearly 280,000 square metres of gross floor area (GFA) and 180,000sq.m of GFA of retail space scheduled to open in 2020 in Ho Chi Minh City and Hanoi respectively have been affected, adding to over 2.3 million sq.m GFA of current stock. Challenges may remain in the sector in the second quarter of 2020 following the ongoing nationwide social distancing policy which came into effect on April 1.

In order to assist tenants during the crisis, many Hanoi landlords have offered various temporary supportive measures. The most direct solution is to reduce rents by 10-50 per cent depending on the sector, with the level of reduction varying from each landlord to another. Other indirect measures include promotions and advertising packages to attract customers.

Some landlords have issued rent discounts for February and March, ranging from 10-30 per cent, with top priority given to general retail groups like food and beverages, and entertainment.

Other landlords have considered reducing rent by 10-50 per cent, depending on the performance of each tenant. One landlord in particular offered a rent deferment of 30 per cent from March to later in the year when the situation is expected to improve.

Vincom Retail JSC, the retail arm of Vingroup, in March announced that it would be reserving VND300 billion ($13 million) to support tenants in its 79 retail centres nationwide who are impacted by the pandemic. The majority of the fund will be used to subsidise rental charges for tenants and offer discounts and vouchers for customers who visit Vincom retail centres.

Meanwhile, Hung Thinh Corporation is the second major landlord to support tenants and customers by reducing rent. The company plans to cut rates by up to 40 per cent at a range of the company’s retail units in Moonlight Plaza and Saigon Mia in Ho Chi Minh City, and Vung Tau Melody in Vung Tau City.

According to Leon Cheneval, an expert from the Real Estate Data Network, the relationship between landlord and tenant is now at a crossroads. “Rent is of course a main cost. The landlord argues they have a valid lease and tenants must pay. This problem is being approached differently by various landlords, but it’s been reported that some retail centres are remaining steadfast and not open to renegotiating or providing a remedy for tenants,” said Cheneval.

Landlords in general are currently and pro-actively talking to tenants and offering some form of rent relief.

“Rent holidays or relief has to be an immediate solution as we see landlords standing their ground on payment,” continued Cheneval. “This is not ideal as the tenant’s only other option is to rescind or break the lease and then vacancies are likely to be prolonged. What is needed right now is dialogue, from agent to tenant and agent to landlord.”

Meanwhile JLL Vietnam’s Trang Bui stated that domestic retail spending may suffer a temporary decline from consumer reluctance or inability to visit destinations where infection risks are elevated.

Non-essential goods and leisure services will be hit harder than perishables and essential dry goods, which have seen increased demand as consumers stockpile to avoid personal shortages. As the outbreak spreads, this behaviour can be expected to emerge in new locations.

Regarding where money will be spent by consumers once the outbreak crisis is over, Bui predicted that luxury items would be hit the hardest as consumers tighten their purse strings. “We’re going back to shopping for essential daily needs,” she said.

Liquidity in retail is a big issue, meaning that the sector most at risk might be small- to medium-sized family-owned retailers. The average liquidity amongst these retailers is a couple of weeks, not several months.

If transmission of the virus slows by mid-year, the important fourth-quarter seasonal sales period will be minimally affected, helping to lessen the full-year financial impact.

Nonetheless, Lunar New Year sales have already been impacted and months of inactivity are unlikely to be covered. Significant downside risks exist across all areas if the spread of the virus continues throughout the year.

Protecting cash flow remains crucial for all retailers, especially for operators with thin profit margins, including weaker retailers and non-food value operators, Bui from JLL added. Those hit hardest may seek temporary rent relief from landlords. If liquidity and capital constraints arise, new store openings will slow and refurbishments will be delayed.

Pandemic could become catalyst for M&A within real estate market

The current serious impacts of the coronavirus pandemic are expected to eventually lead to more opportunities for investors, as existing developers run out of funds and are forced to withdraw from large-scale projects.

According to Su Ngoc Khuong, senior director at Savills Vietnam, 2020 has thus far been a difficult period for local and international property investors. However, for cash rich, sector-experienced financiers it will also be a time of great opportunity, in overseas markets as well as in Vietnam, as those who have over-extended are forced into rapid divestment.

“A trend on the rise since 2019 is for investor groups to seek to partner with others to develop larger-scale merger and acquisition (M&A) opportunities,” said Khuong. “In Vietnam we estimate that there are deals of this nature, currently under negotiation, valued at well over half a billion dollars.”

In addition, the government is currently implementing robust directives to support property and business through the slowdown.

“With this increased liquidity, and a potentially opportunity-rich investment environment, we anticipate that when the pandemic eases, more and more investors will plough new capital into Vietnam’s real estate sector,” Khuong added.

Amid the coronavirus outbreak, a number of projects reported delays in construction, resulting in fewer units than expected being launched. This is likely to increase house prices in the aftermath of the pandemic.

The health emergency can be considered an opportunity for some financiers to gain assets at a more reasonable price, as well as become involved in exciting projects with plenty of potential.

Meanwhile, Doan Van Binh, chairman of CEO Group, also confirmed that although the Vietnamese real estate market is suffering, there are still many bright spots and it will be the industry that promises to recover sooner than others after the virus is under control.

The most attractive sector right now is mid-end housing, which is in high demand but has limited supply, factors which are attracting increased M&A and foreign investment.

According to Binh, the Vietnamese government has issued a series of fiscal and monetary instruments to support investors and buyers, boosting public investment to stimulate demand, creating jobs, and pushing up purchasing demand. The government has also issued policies to reduce and extend the timeline for paying tax for enterprises.

Most importantly, the government has also drastically implemented measures to promote the disbursement of public investment capital, which has had a strong impact on the real estate market.

Furthermore, Vietnam’s economy is more integrated into the global economy. In 2020, Vietnam is ranked 105 in the world’s Economic Freedom Index, 23 places higher than last year.

Vietnam is in a golden population stage and is the country with the highest urbanisation speed in the world. It provides a powerful driving force for the development of the housing market, regardless of the impact from COVID-19. Strong population growth in urban areas has created loud requests for new housing projects.

A 2019 survey by HSBC placed Vietnam as one of the top ten best places to work for foreign experts, showing that Vietnam is one of the safest countries in the world to do business.

“With increasingly open policies for Vietnamese living overseas and expats, who are now permitted to own property in Vietnam, the real estate market promises to make a breakthrough in the near future when the pandemic is over,” said Binh.

Apartments for sale in Ho Chi Minh City drop to five-year low

Impacted by limited new supply, the number of apartments for sale in Ho Chi Minh City was down 42 per cent in the first quarter of this year compared to the same period of last year, hitting the lowest level in the past five years.

According to Savills Vietnam, only three new projects opened bookings before Tet and were officially launched before the COVID-19 lockdown. These are D’lusso and Citigrand in District 2 and the West Gate in Binh Chanh districts, all of which have achieved an average 79 per cent take up rate right before the lockdown.

Nguyen Khanh Duy, director of residential sales at Savills' Ho Chi Minh City office, said that with a solid equity background, there appears to be little defaulting or delays to payment schedules for apartments in the coming time, despite of the COVID-19.

The number of units sold in the entire Ho Chi Minh City market dropped by 32 per cent on-year to just slightly more than 4,700 units.

With the majority of 2020 sales taking place prior to the pandemic in January and February, absorption was positive at over 50 per cent.

However, social distancing and tourism restrictions decelerated rental demand in Ho Chi Minh City.

By the end of the first quarter of 2020, all grades of affordable, mid-, and high-end apartments have suffered from drops in rental yield with a drop of 4 per cent for Grade A and 5.2 per cent for Grade B. Those rates were around 6-8 per cent in 2019 and before.

In the coming quarters, with national borders closed, timelines being uncertain, and buyers being more cautious, rental demand and investor purchasers will be affected. Yields will continue to be pressured in the near term.

From 2021, however, indicators suggest improvements in Grades A and B, with low buy-to-let stock levels and rental demand expected to recover with COVID-19 under greater control.

Over the short-term, the secondary market may come under pressure from outstanding debts. A Savills study of 40 Grade A and B projects showed levels of outstanding purchase contract payments will increase and peak in the first quarter of 2021.

The impact on personal incomes has resulted in increasing numbers of short term investors who are unable to meet their instalments, in turn pressuring secondary prices. However, in reviews of specific high-end developments, virtually all payment schedules have been maintained, with no defaults or extensions required so far. For cash-rich investors however, lower prices and illiquidity present long-term opportunities.

Social distancing is affecting developer sales strategies, but the biggest effect is on buyer behaviour.

Having healthcare, essential services, and education nearby and minimising travel has become increasingly relevant, and high-end buyers will favour smaller, less densely built, and more private developments with good amenities.

Most major developers have postponed launches or ramped up online sales efforts. Anticipated stock until 2022 is over 147,800 units, 60 per cent of which will be made by a dominant Grade C segment.

The government-led stimulus, including an emergency interest rate cut, and willingness of mortgage lenders will help mitigate the effects of COVID-19.

Developers may increasingly use their balance sheets to provide extended terms or debt to maintain competitive marketing. Decreasing household sizes and steady 2 per cent per year population growth in Ho Chi Minh City will also help boost longer-term recovery.

Remittances to experience sharpest decline in history due to COVID-19

Global remittances are projected to drop by 20 per cent in 2020 – the sharpest decline in history because of the economic fallout stemming from the COVID-19 pandemic.

The projected fall in remittances, which would be the sharpest decline in history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country, according to the latest report of the World Bank.

Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 per cent), followed by Sub-Saharan Africa (23.1 per cent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).

Remittances to South Asia are projected to decline by 22 per cent to $109 billion in 2020, following the growth of 6.1 per cent in 2019.

Last year, Vietnamese expatriate workers sent home approximately $17 billion, equivalent to 6.5 per cent of Vietnam’s GDP.

The total amount has made Vietnam the world’s ninth biggest remittance beneficiary.

The money has been on an upward trend for the last 20 years, with around $1.3 billion in 2000.

However, remittances to low- and middle-income countries are projected to fall by 19.7 per cent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.

“Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” said World Bank Group president David Malpass.

Vietnam prepared for a new normal

After the Prime Minister launched a second front to stop economic slowdown and stimulate recovery, some localities that are regarded as engines of the Vietnamese economy have set out plans to bring economic activity back to normal based on the national recovery scenarios.

At the same time, credit and fiscal packages are also being implemented to bolster production and business to prevent them being broken up by Covid-19.

Such efforts show that Vietnam is restarting its economic engine by accelerating economic activity and bringing it back to the previous state. But the economic structure will shift to a new normal after Covid-19 is brought to an end, meaning it will have to adapt to a new environment deeply transformed by the epidemic.

Accordingly, traditional business models will have to adapt to exist with new means of production and consumption. There is also an emergence of new business models and new working methods, requiring enterprises to restructure themselves comprehensively.

Amid the general socio-economic difficulties, enterprises and entrepreneurs have remained in an indomitable spirit to fight against recession, maintain growth and ensure jobs for their employees.

The compulsory choice of enterprises amidst the epidemic has created the foundation for a new start in many sectors and enterprises. This is the story of several pioneering enterprises holding online shareholders’ meetings with remote voting to proactively sustain their economic plans instead of waiting for when conditions are safe to hold meetings in the traditional way.

Another example is the launch of a remote medical diagnosis platform to deal with the overload of and ensure safety within healthcare facilities as well as to promote digital transformation in the healthcare sector and open the opportunity for digital technology to develop at a faster pace than previously.

In addition, a wide variety of innovative products and services designed for new consumption demands have been welcomed and adopted by consumers.

Although data is not yet adequate to assess all the negative impacts of Covid-19 on the global economy, it is certain that the epidemic will transform the world economy in ways never seen before. As such, enterprises must ensure they are well prepared to overcome the challenges and take advantage of economic recovery opportunities in the aftermath of the crisis caused by the epidemic.

 
 

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