BUSINESS NEWS HEADLINES APRIL 9

Hanoi poised to cut regular spending by 5% to combat epidemic

The capital city is gearing up to cut at least 5% of its regular expenditure, in addition to reviewing the financial situation in order to come up with a plan in order to be more efficient with budget revenue and expenditure management moving forward.

The Hanoi People's Committee Chairman Nguyen Duc Chung chaired an online meeting on April 6 which reviewed the committee’s performance during the first quarter of the year.

A the meeting, Department of Planning and Investment Director Nguyen Manh Quyen reported that, despite the capital maintaining its economic growth during the first quarter, most targets came in lower than during the same period from last year. Indeed, Hanoi’s Gross Regional Domestic Product surged by 3.72%, in comparison to last year's increase of 6.95%, while the total number of tourists fell by 47.2%.

Total social investment reached a figure of VND63.04 trillion, an increase of 5.2%, in contrast to the corresponding period from last year which saw a 10.5% increase, while total outstanding debts soared by 1.8%, with the same period last year enjoying an increase of 2.59%.

There were 6,350 newly established enterprises that recorded registered capital of VND3 trillion, an annual increase of 1% in terms of newly formed firms and 98% in terms of registered capital.

These results can largely be put down to the complicated developments caused by the COVID-19 epidemic which has had a comprehensive impact on economic, cultural, social, and security activities, affecting the capital’s targets in the process.

Economic growth targets all came in lower than the year before, creating great pressure to fulfill socio-economic development targets as price indexes tend to grow higher each year, especially food prices.

There have been a number of scenarios planned for in terms of managing finances going forward, with the first scenario seeing the epidemic last until the end of the second quarter, causing GDP growth for the entire year to grow at over 5%.

Therefore, Hanoi has identified three scenarios and ways in which to mitigate the damage caused by the epidemic.

The first scenario sees the epidemic being controlled quickly, with the second quarter regaining its growth momentum and accelerating further into the third and fourth quarters. In this scenario, annual growth is expected to hit 7.5% and ultimately fulfill the yearly target.

The second scenario involves the complete control of the epidemic by the third quarter, with growth continuing to be affected. This could cause difficulties for overall economic growth which is forecast to reach 6.42%, therefore failing to reach the set target.

In the third scenario the epidemic drags out until the end of the year, in which the whole year’s growth rate is predicted to stand at 5.34%, failing to meet the set plan.

In the near future, the City’s People's Committee will focus on reviewing public investment projects and speeding up procedures regarding construction and disbursement in order to implement measures that are capable of maintaining and restoring economic development. This will serve to create more capital resources to be used in stimulating socio-economic development.

It is imperative to ensure social welfare and focus on producing products aimed at preventing the spread of the epidemic such as medical equipment, including ventilators and testing instruments, along with other items like masks, disinfecting chemicals, and pharmaceuticals, Mayor Chung stressed.

People pour money into banks despite interest rate cut

Despite lower interest rates, bank savings are still considered a safe option by many investors as other investment channels have become more risky due to the COVID-19 pandemic.

Interest rates for savings in Vietnamese dong with terms of six months to over one year are two to three percent higher than short-term savings. That’s why many people are opting for medium and long term savings. Besides, online savings accounts are also offering higher interest.

Lower savings’ interest rates aim to facilitate decreasing lending interest rates, for which local enterprises are longing for amid the complicated developments of the COVID-19 pandemic./.

Eight export commodity groups enjoy turnover of over US$1bil in Q1

Eight export commodity categories recorded a turnover of over US$1 billion between the start of the year and mid-March, with one group making over US$10 billion, according to the latest information released by the General Department of Vietnam Customs.

A total of eight commodity groups significantly contributed to the positive results, including aquatic products, timber and wooden products, textile, footwear, computers, electronic products and components, phones and components, machinery, equipment, tools and spare parts, along with transport.

With a total turnover of approximately US$35.54 billion, the mentioned groups alone contributed 70.5% to total export turnover throughout the reviewed period.

Most notably, the country even recorded its first group of export commodities earning over US$10 billion in revenue by March 15. In contrast, last year’s corresponding period saw no category achieve such strong results.

Telephones and accessories were the first commodity group grossing a turnover of over US$10.2 billion, a year-on-year increase of roughly 8.5%.

By the end of February, the phone and component group had also contributed over 20% to the country's total export turnover.

The category’s main export markets remain the United States, the European Union, China, and the Republic of Korea.

Wood firms seek new market channels amid COVID-19

Domestic wood enterprises are being advised to transform their business models by striving to boost online sales whilst seeking additional partners amid the growing economic impact of the novel coronavirus (COVID-19) pandemic, according to insiders.

Although a number of the country’s key export products plummeted during the first quarter of the year, the export turnover of timber and wood products enjoyed a surge of 9.5% to US$2.47 billion in comparison with the same period from last year, the Ministry of Industry and Trade has said.

Local experts forecast that with the COVID-19 epidemic situation still likely to remain complicated during the second quarter of the year, it will start to have a far-reaching effect on the consumption of wooden furniture in export markets such as the United States, the European Union, Japan, and the Republic of Korea (RoK).

The most recent statistics indicate that the consumption of wood products in both the EU and the RoK markets suffered annual declines of 14.9% and 15.6% respectively, in addition to a string of export shipments to the EU and the US coming to a halt in the last weeks of March as a result of the COVID-19 outbreak.

With the COVID-19 epidemic severely disrupting supply sources from China, several major clients from the US, the EU, Australia, and Japan have turned their attention to seeking production markets outside of China, with Vietnam identified as a potential prospect, therefore creating a range of opportunities for local wood firms.

Moreover, with a number of new-generation free trade agreements (FTA) coming into force such as the the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), they will serve to give a fresh impetus to the development of the wood industry thanks to import tariffs to the EU to be reduced to 0%.

Insiders have recommended that Vietnamese enterprises work to promote their sales online via e-commerce platforms as a means of seeking partners and promoting wood exports.

According to Do Xuan Lap, Chairman of the Vietnam Timber and Forest Product Association, e-commerce channels provide domestic wooden enterprises with the ability to introduce their products and production capacity to customers globally. In addition, e-commerce is an inevitable trend and long-term direction which all industries will move towards.

Sharing the same view, Nguyen Ngoc Dung, Vice Chairman of Vietnam E-commerce Association, says that with B2C and B2B applications being readily available through e-commerce channels, Vietnamese businesses will have greater opportunities to sell products to more customers throughout the world in a fast and convenient manner.

Most importantly, enterprises will be able to cut out intermediaries, thereby reducing product costs and improving the value of their product, Dung notes.

PV Power marks impressive milestone of 200 billion kWh

PV Power, a subsidiary of the Vietnam Oil and Gas Group (PetroVietnam), achieved a milestone of reaching 200 billion kWh of output on April 6, marking itself as the nation's leading electricity supplier after nearly 13 years since beginning operations.

With the firm’s primary focus on producing electricity for use in business activities whilst also creating other power sources, PV Power has set a target of becoming a strong and reputable company whose brand is known both nationally and throughout Southeast Asia.

The pathway to achieving the 200 billion kWh milestone saw PV Power's leaders unite with officials and employees to promote a positive spirit and maintain sustained efforts to fulfill all assigned tasks within the context of changes faced by the electricity industry, along with the energy, oil, and gas industry in general.

There are currently seven power plants being operated by PV Power nationwide that operate using different forms of power, such as coal, gas, and hydroelectricity, with a total combined capacity of 4,205 MW. PV Power annually provides the national grid with over 21 billion kWh of energy.

Alongside Electricity of Vietnam, the firm is ensuring both energy security and the stability of the national grid. As a result, this has contributed to greatly developing the national economy, benefiting the lives of normal citizens, and boosting the development of the country’s electricity industry.

One of the best features of the enterprise is that PV Power's power plants are always guaranteed to operate in a safe and efficient manner whilst providing high levels of availability. Fire prevention and safety at their factories and construction sites has always been a top priority.

In addition, the periodic maintenance and repair of power plants are always carried out in a safe manner at a high standard and are generally completed ahead of schedule. In order to achieve this, PV Power has focused on developing its personnel, training human resources to improve the skills of employees, and helping them stay active in the operation, management, maintenance, and repair of power plants.

These proactive tendencies have always been a feature when it comes to making plans to procure equipment and supplies, along with providing stable sources of input materials and fuels to be used in electricity production in a range of situations. This ultimately ensures operations are continued in an effective manner whilst simultaneously limiting the occurrence of incidents that could possibly lead to turbines being stopped.

Within the current context, the nation’s energy industry and its power system are facing fluctuations due to increasing electricity demand. Consequently, PV Power has moved to transform its business into a joint stock company model and has affirmed its position by fulfilling and exceeding the business targets assigned by PetroVietnam for 2019. These targets have been met across a number of different areas, including output, revenue, profits, and remittance to the state budget.

In addition, PV Power's shares coded POW, have always taken the lead in terms of liquidity among power firms that are publicly listed on the stock market.

PV Power's output of 200 billion kWh has become a memorable milestone which marks the company’s significant development. In terms of the strategic direction for development in the next phase, the company is determined to intensify investment in new power projects, continue research, expand new fuel sources, and invest in clean energy sources such as solar power and electricity using liquefied natural gas (LNG). It is hoped that these developments will fit alongside traditional types of coal-fired thermal power, gas-fired thermoelectricity, and hydroelectricity.

There is therefore a desire from the business to further promote its role in ensuring national energy security as a means of contributing to serving the life of citizens, along with developing the electricity industry and the national economy.

With this in mind, PV Power has set itself a goal of becoming a strong force within the industry whilst also enjoying efficient business production, professional management, strong finances, high competitiveness, and contributing to a greener environment.

Bright prospects for tra fish exports to major markets ahead

Vietnam's tra fish exports recorded a number of positive signs from several major markets such as the United States and China during the first quarter of the year amid the impact of the novel coronavirus (COVID-19), according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

Most notably, the first half of March saw the export value of tra fish (pangasius) to the US increase by 18.8% in comparison with the same period from last year.

At present, the US is the largest buyer of Vietnamese tra fish and accounts for 18.8% of the country’s total value of tra fish exports.

As of mid-March, the total value of tra fish exports stood at US$267.8 million, with a few signs of recovery beginning to emerge when compared to last year’s figures.

According to export firms, the sale of tra fish to Hong Kong (China) has bounced back since February with export activities gradually beginning to return to normal.

Only during the first half of March did the export value of pangasius to this market come close to reaching US$13 million, an increase of US$1 million in comparison with the figures recorded in February.

If the export rate increases as projected, then the export value of tra fish to China over the coming months is likely to rise between 40% and 50%.

As a result of the disruption faced when trying to export products to the Chinese market during the opening months of the year, several Vietnamese exporters have sought out new markets.

The VASEP said that despite the epidemic situation affecting the export of aquatic products, it has also served to create opportunities for businesses as they seek to increase exports amid rising consumption demand for seafood products in the US.

Vietnam Airlines requires VND12,000 billion to overcome COVID-19

In order to remain solvent for the remainder of the year, Vietnam Airlines needs VND12 trillion from the State beginning from April, according to the Committee for State Capital Management at Enterprises (CMSC).

The CMSC has recently sent a document to the Prime Minister which outlines the impact of the novel coronavirus (COVID-19) epidemic on production and business activities of 19 groups and corporations which are under the management of the CMSC.

Vietnam Airlines has been the business most heavily affected by the COVID-19 epidemic, with its revenue falling by VND6,712 billion in comparison to the same period from last year, suffering a loss of VND2,383 billion in the process.

If the epidemic lingers and only ends in the year’s fourth quarter, it is estimated that the national flag carrier’s total revenue will be VND38,140 billion, coming in VND72,411 billion under the set target and representing an estimated loss of VND19,651 billion.

At present, Vietnam Airlines has moved to halt all international routes whilst keeping domestic routes to a minimum. Since March the airline has been forced to unilaterally delay paying some debts due to the sudden loss of revenue.

During recent meetings held with the CMSC and the Ministry of Transport, Vietnam Airlines leaders expressed their concern regarding the length of time that the epidemic could last, whilst also stating that the airline is currently going through an unprecedented challenging period.

In addition, Vietnam Airlines has also announced plans to downsize personnel, including pilots, while reducing the salary of staff in the near future.

Excess inventories and COVID-19 lead to significant price drops for tuna

Tuna prices in the south central provinces have suffered a number of sharp falls recently with local businesses failing to export tuna products to foreign markets as a result the ongoing impact of the novel coronavirus (COVID-19).

At present, tuna prices are fluctuating between VND80,000 and 90,000 per kilo, with some places even seeing prices plummet to as low as VND65,000 per kilo. This fall in price has forced many fishing vessel owners to take their business to other provinces in order to get a higher price for their products.

The sharp declines hitting tuna prices can attributed to the fact that enterprises are unable to export their products because of the effects of the COVID-19 which has led to companies having a large amount of inventory.

In Binh Dinh province, the quantity of tuna inventories has reached up to 600 tonnes, while businesses operating in Phu Yen are running of out space in their frozen warehouses after not being able to export goods for over a month.

Whilst also enduring low prices and suffering heavy losses, fishermen have also been struggling to find new outlets to sell their tuna.

Two businesses that regularly purchase large amounts of tuna exports in Phu Yen said they will inform their intermediaries to stop buying tuna for the foreseeable future.

Elsewhere, other firms have unveiled that they intend to make a decision regarding whether or not they continue purchasing tuna from fishermen within the next three days.

Industrial production, export turnover up in Soc Trang despite COVID-19

The industrial production value of the Mekong Delta’s Soc Trang province in the first quarter has been estimated at 6.6 trillion VND (279.7 million USD), up 5.7 percent year-on-year.

According to the provincial Department of Industry and Trade, processing and manufacturing grew by 5.7 percent in the quarter, water supply and waste treatment 5.3 percent, and electricity production and distribution 1.1 percent.

The province’s export turnover is estimated at 190 million USD, a year-on-year increase of 12.07 percent, with rice exports posting impressive growth of 62.14 percent.

To deal with the COVID-19 outbreak, provincial leaders have asked the industry and trade sector to coordinate with relevant sectors to guarantee the supply of materials for production, consolidate the domestic market, and help exporters solve difficulties caused by the pandemic.

A report from the department shows that almost all major enterprises in the province are operating stably./.

HCM City suspends work on non-urgent construction projects

Ho Chi Minh City has suspended non-urgent construction projects until April 15 in an aim to strictly follow nationwide social distancing rules amid the COVID-19 pandemic.

The municipal Department of Construction has sent an urgent document to people’s committees in 24 districts and relevant agencies about the implementation of the temporary suspension of such projects.

Investors must make adjustments to construction schedules or temporarily suspend projects that are not urgent.

For urgent projects that must be completed on time, contractors and construction units must take preventive measures to ensure the health and safety of their workers.

They are required to make a commitment on the prevention and control of COVID-19 and send it to district-level people's committees where their project is located.

In addition, they must manage their foreign experts and workers who have returned from COVID-19-hit regions and notify local authorities who will implement quarantine procedures.

 

They must also limit night shifts and crowds at construction sites.

A working shift must have no more than 20 workers, and equipment and machinery machinery must be disinfected after each shift.

All workers must have their body temperature checked before and after each shift. If the temperature is above 37.5 degrees Celsius, it must be immediately reported to local health centres.

They must wear face masks, wash their hands with sanitizer frequently, and keep a minimum distance of two metres from others during their working time./.

Demand for workers among construction companies down in Q1

Only 23.6 percent of construction companies in Vietnam had a greater demand for workers in the first quarter of this year compared to the previous quarter, while 20.1 percent said they needed fewer workers, a survey by the General Statistics Office (GSO) found.

The remaining 56.3 percent said their demand for workers remained stable.

More State-owned enterprises (SOEs) reported increasing demand (29.6 percent) than those in the non-State and foreign-invested sectors (24.1 percent and 16.5 percent, respectively).

Only 14.1 percent of State-owned construction companies noted falling demand for workers, while 20.4 percent of non-State and 18.3 percent of foreign-invested enterprises did likewise.

The demand for workers is forecast to further contract in the second quarter since many businesses have scaled down production and personnel to cope with the ongoing difficulties caused by the COVID-19 pandemic.

The survey also revealed that non-State firms had the highest number of seasonal workers (60.2 percent), compared to 39.9 percent in State-owned enterprises and 20.8 percent in foreign-invested enterprises./.

Hanoi devises three scenarios to cushion impacts of COVID-19

Hanoi authorities outlined three scenarios during an online meeting on April 6, in an effort to offset losses caused by the COVID-19.

The meeting discussed the city’s socio-economic development in the first quarter and its efforts in the fight against the pandemic.

If it is brought under control soon, the city hopes to resume growth in the second quarter and speed up in the latter half of 2020 so it could gain growth of 7.5 percent, meeting the goal set previously.

In case the pandemic is repelled in the third quarter but negative economic impacts linger on, Hanoi will strive for a growth rate of 6.42 percent.

In a worst economic growth scenario with the COVID-19 pandemic continuing to impact the city until the year's end, the city forecasts a growth rate of 5.35 percent, thus failing to meet the initial target.

At the meeting, Director of the municipal Planning and Investment Department Nguyen Manh Quyen said the city maintained positive economic growth in the first quarter of 3.72 percent in gross regional domestic product (GRDP). The rate in the same period last year was 6.95 percent.

As much as 63 trillion VND (2.7 billion USD) of development investment was disbursed in the period, a quarter-to-quarter increase of 5.2 percent while that of the same period last year was 10.5 percent.

The city attracted 927.4 million USD in foreign investment while domestic investment was 7.14 trillion VND.

About 6,350 companies were established in the city in January-March with a combined registered capital of 103 trillion VND, 1 percent higher in quantity and 98 percent higher in capital value compared with Q1 2019.

Hanoi is now home to 6,102 FDI projects with total registered capital hitting 42.75 billion USD, of which 26.5 billion USD has been disbursed.

The city collected about 71.4 trillion VND in revenues for its budget, accounting for 25.6 percent of this year’s expected volume.

“The pandemic has put the city under high pressure to meet its socio-economic development goals,” Quyen said, adding that the price consumer index tended to be higher than last year, particularly food.

With three economic growth scenarios introduced, he said the city will devise an action plan to support business and production, as well as to ensure social welfare in response to the COVID-19 crisis.

Among economic recovery efforts, the city will push forward administration reforms by simplifying procedures, shortening time spent on procedures and expanding the catalogue of public administration services available online.

It will also encourage the production of medical supplies, including face masks, anti-antibacterial products, ventilators and testing kits to deal with the developments of the pandemic.

In its action plan, Hanoi will review its public expenditure for more effective spending, with a plan to cut spending by 5 percent this year.

Other key tasks are to maintain urban infrastructure and speed up clean water supply projects and solid waste treatment projects.

At this time, the city will focus on disease prevention and control. With the ongoing COVID-19 pandemic, it will strive to prevent any other disease, especially human ones, from occurring in the season-changing period to avoid further strains on public health./.

HCM City tourism hit hard by COVID-19

The number of foreign tourists visiting HCM City in the first quarter of the year plummeted by 42 per cent compared to the same period last year to 1.3 million due to the novel COVID-19 pandemic, resulting in a loss of revenues of nearly VNĐ10 trillion (US$427 million), according to the city Department of Tourism.

The revenues were down 26 per cent to VNĐ 25.6 trillion ($1.1 billion).

In March alone the number of tourists fell by 84 per cent to 117,000, resulting in a 65 per cent fall in revenues to VNĐ3.5 trillion ($149.9 million).

Travel firms have closed their offices and allow employees to work from home, and are not accepting new bookings, according to the department.

Tourism accommodation and catering services saw a drop of 30 per cent in revenues in the first quarter to VNĐ19.8 trillion ($846.6 million).

Nguyễn Thị Ánh Hoa, deputy director of the department, said the department was working with the State Bank of Việt Nam to help tourism businesses borrow from the Government’s COVID-19 stimulus credit package.

Vietnam issues list of special preferential tariffs for goods imported from Cuba

The Government has recently issued Decree No.39/2020/ND-CP on a list of Vietnam’s special preferential import tariffs to implement the Vietnam – Cuba Free Trade Agreement from now until 2023.

Accordingly, goods subject to the special preferential tax rates must be imported and directly transported to Vietnam from Cuba in compliance with the trade deal.

They must meet rules of origin as stipulated in the agreement and be accompanied with certificates of origin (C/O).

Goods imported from Vietnam’s non-tariff areas are also subject to the preferential tariffs if they satisfy these requirements.

The decree will become effective from May 20./.

Ha Noi’s economic growth might fall to 5.35% this year due to COVID-19

In a worst economic growth scenario with the COVID-19 pandemic continuing to impact the city until the year's end, Ha Noi expects a growth rate of 5.35 per cent, below its previously set target of 7.5 per cent.

If the pandemic is under control soon, the city hopes to resume growth in the second quarter and speed up in the two following quarters so it could gain growth of 7.5 per cent, meeting the goal set previously.

If the pandemic is controlled in the third quarter but still leaves negative impacts on the city’s economy, Ha Noi expects a growth rate of 6.42 per cent.

These scenarios were outlined during the city’s online meeting on Monday discussing socio-economic development in the first quarter and its efforts in COVID-19 prevention and control.

At the meeting, director of the city’s Planning and Investment Department Nguyen Manh Quyen said the city maintained positive economic growth in the first quarter – 3.72 per cent in gross regional domestic product (GRDP). The rate in the same period last year was 6.95 per cent.

In the last three months, Ha Noi’s export revenue fell 18.1 per cent and import revenue decreased 21.3 per cent compared to the same period in 2019.

The city's tourism was severely hit by the travel restrictions and border shuttering around the globe, with the number of tourists to the city dropping by 47.2 per cent, and the number of foreign visitors falling by 43.9 per cent. Tourism revenues decreased by 38.8 per cent.

As much as VND63 trillion (US$2.7 billion) of development investment was disbursed in the period, an increase of 5.2 per cent compared to the previous quarter while that of the same period last year was 10.5 per cent.

The city attracted $927.4 million from foreign investors while domestic investment was VND 7.14 trillion ($303 million).

About 6,350 companies were established in the city in this year’s first quarter with total registered capital of VND103 trillion ($4.4 billion), 1 per cent higher in term of quantity and 98 per cent higher in term of capital value compared with last year’s first quarter.

Ha Noi is now home to 6,102 FDI projects with total registered capital of $42.75 billion, of which $26.5 billion has been disbursed.

The city collected about VND 71.4 trillion in revenues for its budget, accounting for 25.6 per cent of this year’s expected volume.

Director Quyen said the COVID-19 pandemic had impacted all aspects of life in the city.

“The pandemic has put the city under high pressure to meet its socio-economic development goals,” he said, adding that price consumer index tended to be higher last year, particularly food.

With three economic growth scenarios introduced at the municipal meeting today, Quyen said the city would devise an action plan to support business, production and to ensure social welfare in response to the COVID-19 crisis.

Among economic recovery efforts, the city will push forward administration reforms efforts by simplifying procedures, shortening time spent on procedures and expanding the catalogue of public administration services available online.

The city will also encourage the production of medical supplies, including face masks, antibacterial cleaning products, ventilators and testing kits to deal with the developments of the pandemic.

In its action plan, Ha Noi will review its public expenditure for more effective spending, with a plan to cut spending by 5 per cent this year.

Other key tasks the city’s leaders mentioned in the online meeting on Monday are to maintain urban infrastructure and speed up clean water supply projects and solid waste treatment projects.

At this time, the city will focus on disease prevention and control.

With the ongoing COVID-19 pandemic, the city will make efforts to prevent any other disease – especially human ones – from occurring in the changing season period, to avoid further strains on public health.

HCM City ensures oil and petrol supply, takes steps to prevent hoarding

HCM City businesses and authorities have been asked to ensure sufficient oil and petrol for local demand, and to prevent hoarding of these goods during the COVID-19 pandemic.

Nguyen Huynh Trang, deputy director of the city’s Department of Industry and Trade, requested last week that oil and petrol distributors and retailers in the city ensure sufficient supply for local demand.

Businesses were also told not to sell to customers who use containers to hoard oil and petrol, and to have their staff strictly follow directives to protect against COVID-19.

Meanwhile, the Police Department of Fire Prevention, Fighting and Rescue and district police have been told to inform locals not to hoard oil and petrol due to fire hazards, and to carry out inspections and deal with violators.

Wards, communes, towns and residential areas also have to spread awareness about the issue.

The city’s Market Surveillance team will work with authorities to monitor oil and petrol business activities in the city and stop instances of trade fraud, low-quality products, or the withholding of goods and other fraudulent activities.

Many oil and petrol businesses in the city said they were seeing fewer and fewer customers even though prices have fallen, as most residents are working from home.

PetroVietnam’s crude oil production surpasses target in Q1

The Vietnam Oil and Gas Group (PetroVietnam) has reported that its exploitation of crude oil in the first quarter of 2020 exceeded the target by 10 percent.

According to PetroVietnam, in the first quarter, the group also enjoyed high production of other products.

Electricity production reached 5.33 billion kWh, equivalent to 100 percent of the first quarter plan, and 24.7 percent of the annual target.

The firm produced 441,800 tonnes of nitrogenous fertilizer, and 3.41 million tonnes of petroleum, 5.5 percent and 2.5 percent higher than the set targets, respectively.

PetroVietnam contributed 20.8 trillion VND (883.6 million USD) to the State budget in the period, or 89.7 percent of its target for the quarter.

PetroVietnam and its subsidiaries have actively implemented a series of solutions to maintain their production and business activities amid the COVID-19 pandemic, which has led to a sharp drop in global crude oil prices and caused serious losses to the domestic oil and gas industry.

The group has strengthened cooperation with domestic businesses that have business lines related to products they supply.

It has also monitored market information related to the demand and price fluctuations of crude oil and petroleum products, and outlined plans to take advantage of business opportunities./

Vietnam Airlines expects VND50trn losses

Vietnam Airlines will lose some VND50trn (USD2.1bn) in revenues while 10,000 staff are without work due to the Covid-19 outbreak.

Duong Tri Thanh, general director of Vietnam Airlines, said in a letter that had been sent to all employees. Thanh said they had never had to halt nearly all operations as 100 planes are grounded. Many other firms in the world are also struggling to survive.

"As the outbreak is still developing, in 2020, Vietnam Airlines will lose some VND50trn in revenue or 65% of its target," he said.

Vietnam Airlines will apply strong measures like cutting staff, cutting salaries and unnecessary expenses. Such decisions will affect all employees as over 50% of the current employees will be laid off and everyone will have their salary cut, Thanh said.

Vietnam Airlines Group has over 20,000 employees including 1,200 pilots, 2,500 engineers and 3,000 flight attendants. It is estimated that 90% of the pilots and flight attendants will be laid off. There are 15 Boeing 787 and 14 Airbus 350 planes. Each month, Vietnam Airlines has to pay USD30m a month for their fleet's rending and bank interests. The parking fee is VND6bn (USD253,000) a month.

Starting from April 1, Vietnam Airlines can only make six flights between Hanoi, HCM City and Danang.

Dinh Viet Thang, head of the Civil Aviation Administration of Vietnam, the aviation industry has never been in such difficulty. "Since the cash flow stopped, the airlines don't have anything to pay expenses," he said. "The cash flow is like the bloodstream in our bodies."

He went on to say that preventing and controlling the outbreak is the top priority.

Coping with the outbreak in the Vietnamese way – a role model?

Prof. Andreas Stoffers, Vietnam country director for Friedrich Naumann Foundation for Freedom, has expressed his belief that Vietnam will certainly weather the COVID-19 storm thanks to its prudent monetary and fiscal policy introduced and serve as a role model for others.

The world is currently teetering on the brink of the global health crisis. This pandemic was the trigger of the downturn, but certainly not the cause, which lies much deeper. After the longest economic boom of modern times after 2008, many seemed to have forgotten that economic crises have always been and still are quite normal. As in the past, there will be winners and losers. It will depend on how countries will deal with the crisis and what economic policy measures will be taken. Vietnam is presenting an interesting package of measures. Can it serve as a model?

The world is currently teetering on the brink of the global health crisis. This pandemic was the trigger of the downturn, but certainly not the cause, which lies much deeper. After the longest economic boom of modern times after 2008, many seemed to have forgotten that economic crises have always been and still are quite normal. As in the past, there will be winners and losers. It will depend on how countries will deal with the crisis and what economic policy measures will be taken. Vietnam is presenting an interesting package of measures. Can it serve as a model?

Vietnam’s government has reacted to the pandemic early and fiercely. Schools were closed, events were cancelled, the population was reminded to be careful, and now, borders were closed and entry to the country has been restricted. Nevertheless, nowhere in Vietnam was any sign of a similar panic to what can be seen now in the increasingly hectic European Union. After the danger had initially seemed to be ignored in the West, headlessness is now apparent. Moreover, thanks to the starving European Central Bank’s (ECB) policy of recent years, essential monetary policy instruments are now missing in the EU. This is different in Vietnam, as we shall see.

The monetary and fiscal policy of Vietnam seems promising and includes the following parts: (i) A credit package of VND250 trillion ($10.87 billion); (ii) a fiscal package of VND30 trillion ($1.3 billion); (iii) the lowering of the refinance rate from 6 to 5% and of the discount rate from 4 to 3.5%; as well as (iv) several measures of the Ministry of Finance regarding tax and fee reductions.

The credit package is not a huge threat to inflation. Rather, it can be used to defer loans, to remove or reduce interest rates, and to reduce transaction fees.

This is not new money supply being pumped into the economy, but a lubricant to support companies in a spin. It reduces operating costs for banks and, although the banks’ earnings will fall, liquidity will remain in the banking system. The fiscal package also entails only minor inflationary risks. However, it helps companies to reduce taxes or to receive tax moratorium. Here, too, liquidity is maintained.

With both appropriate packages, however, it is important to ensure that the stakeholders involved know how the packages work and that there is clarity about the recipients as not everyone needs support, others like small- and medium-sized enterprises (SMEs) may require more, and that the money is used carefully, so it does not exacerbate inflationary tendencies and takes fiscal policy resources out of the hands of the government. No one knows how long this pandemic will last. Fiscal policy reactions may then become even more important which will require resources.

The interest rate cuts by the central bank also send an important signal. They enable companies to obtain loans more cheaply. Unlike the ECB or the Fed, whose interest rates have been lowered to zero since 2016 (for the ECB) or since March 16 (for the Fed), the State Bank of Vietnam (SBV) has not yet shot its bolt.

For example, how can the ECB still support the market through its interest rate stance? Even now, the ECB’s disastrous zero interest rate policy is already causing massive difficulties for European banks.

A majority of banking profits, meaning around 70 to 80%, come from margins. With a zero-interest rate policy, the margins will be almost completely eliminated. The savings and the transformation margins become negative and the credit margin is reduced to a minimum. Loans at low or zero interest rates allow companies that are actually no longer viable to continue to exist as zombies and a large bubble is created.

In Vietnam, the situation is much better. The SBV still has plenty of leeway on interest rates. However, it should be a warning finger for Vietnam against a zero interest rate policy.

Of course, the Vietnamese policy also entails risks. For example, the national debt will increase. Since 2016, the national debt has nearly touched the ceiling of 65%, which offers limited space to borrow more. In addition, it could happen that companies rely too much on government support rather than finding ways out of the crisis by themselves, which would ultimately make them strong. Vietnam should resist the temptations of long-standing Keynesian policies. This always leads to an upward spiral of state interventionism. There have been economic crises and there always will be. It would be alchemy to believe that Keynesian instruments can eliminate or dampen them. Measures may be necessary in this case, but they should be taken with a sense of proportion and be limited in time.

The following is recommended for Vietnam. First, the provision of emergency aid is beyond question. Here, the above-mentioned packages of measures are the right way forward, if they are not designed to last too long. Second, a massive state investment policy in the Keynesian sense is not advisable. Instead, energy should be put into promoting both domestic and foreign direct investment in the private sector.

Third, in concrete terms, strengthening e-commerce or diversifying customer groups could be two viable solutions. Fourth, state-owned enterprises should not be the beneficiaries of any subsidies whatsoever. SMEs need the money much more urgently. Fifth, state price controls are counterproductive and distort competition. They should be avoided in order to prevent side-effects such as black markets and the waste of resources (minimum prices) or queues and low investment (maximum prices). Sixth, social measures such as unemployment benefits are definitely appropriate to support citizens in need. Lastly, in view of the warning example of the EU, a zero-interest rate policy should never be introduced to Vietnam.

I am convinced that Vietnam will emerge stronger from this crisis with a prudent monetary and fiscal policy. The role of the Vietnamese economy in the world will grow. In view of the foreseeable fall in asset prices, particularly in the EU, good investment opportunities will arise for Vietnam within the framework of the ratified EU-Vietnam Free Trade Agreement. In any case, free trade will help all participating nations to get back on their feet more quickly. So far, it seems that the current Vietnamese crisis policy can indeed serve as a role model for others.

 
 

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