BUSINESS NEWS SEPTEMBER 25

Vietnam’s top 50 brands in 2019 announced

BUSINESS NEWS SEPTEMBER 25

The Military Industry and Telecoms Group (Viettel) takes the lead in the top 50 brands in Vietnam in 2019

Vietnam’s top 50 brands in 2019 were announced on the sidelines of a workshop on brand management and development in Hanoi on September 24.

Brand valuation company Brand Finance and brand consultant Mibrand Vietnam presented official certificates of brand rankings, national brand values, and brand health indicators that meet the assessment standards of the International Organisation for Standardisation (ISO) to the 50 enterprises with the most valuable brands in Vietnam this year.

The Viettel Military Industry and Telecoms Group (Viettel) topped the list, followed by the Vietnam Posts and Telecommunications Group (VNPT) and the largest dairy producer in Vietnam Vinamilk.

The workshop and announcement ceremony aims to honour businesses with the most valuable brands in Vietnam and open opportunities for Vietnamese firms to understand better about the importance of brand development.

CEO of Brand Finance in Asia-Pacific Samir Dixit said in the era of Industry 4.0, customers will be affected by technology.

Technology could lead to the success or failure of a brand, he said, adding that many businesses have gone bankruptcy or stopped operation over the past 15 years.

Therefore, businesses should focus on building and developing brands, he suggested./.

Philippines-listed Phinma invests in largest local cement manufacturer

BUSINESS NEWS SEPTEMBER 25

Philippines-listed company Phinma Corporation is investing $50 million in Song Lam Cement JSC through a subscription of preferred shares convertible into common shares, according to a disclosure from Philippine Stock Exchange.

Phinma signed a binding term sheet with Song Lam, Vissai Ninh Binh JSC, and Hoang Minh Truong for the proposed investment in Song Lam, a subsidiary of Vissai via preferred shares.

The preferred shares will be entitled to receive annual, fixed cumulative dividends of 7.5 per cent. The preferred shares shall be convertible to common shares.

The number of shares and the percentage stake Phinma will have in Song Lam following the investment have not been disclosed yet but the Philippines-listed company said Song Lam will become a major supplier of Philcement Corporation – a 60 per cent owned subsidiary of Phinma.

Phinma will also be entitled to nominate one member of the board of directors as well as the chief financial officer of Song Lam.

Philcement is building a cement terminal with a storage capacity of two million tonnes for its cement importation business in Mariveles, Bataan at a cost of about P700 million ($13.4 million). Mariveles is a deep-sea port and can thus accommodate very large Panamax vessels from Vietnam which improves the efficiency and the cost per bag of cement.

According to analysis by financial data and business information provider FiinGroup, the production capacity of Vietnam's cement industry is expected to increase sharply thanks to the strong expansion of local private enterprises, including Thanh Thang Group Cement JSC, Vissai Group, ThaiGroup Corporation (formerly known as Xuan Thanh Group), and Long Son Co., Ltd. Vissai is the largest privately-owned cement manufacturer in Vietnam and exports to 37 countries, including the Philippines.

This year, the industry has targeted exporting about 25 million tonnes of cement and selling between 69 and 70 million tonnes domestically.

USAID helps Vietnamese SMEs improve linkage capacity

The Government Office, the Ministry of Planning and Investment and the US Agency for International Development (USAID) launched the USAID Linkages for Small and Medium Enterprises (LinkSME) in Hanoi on September 24.

Under the 22.1-million USD project, which will be carried out during September 2018-September 2023, the three parties will work together to enhance supply and linkage capability of SMEs, and improve the capabilities of business organisations in Vietnam in supporting SMEs’ development.

Strengthening business linkages between SMEs and leading firms is expected to advance the Indo-Pacific vision of improved economic competitiveness, and support USAID’s objective of expanding inclusive, market-driven, and private sector-led growth in Vietnam.

According to Minister and Chairman of the Government Office Mai Tien Dung, LinkSME will contribute to making systematic changes in the business environment through promoting institutional reform, streamlining regulations and administrative procedures, reducing compliance cost to better SMEs’ competitiveness.

“The project plays an important role in the country’s sustainable development, and ability to escape middle-income trap in the coming decades”, Dung underlined.

Minister of Planning and Investment Nguyen Chi Dung said thanks to the Government’s strong reform, local firms have made substantial progress in the past two decades. Currently, Vietnam has 730,000 operating enterprises, 97 percent of which are SMEs.

SMEs have contributed greatly to the nation’s economic growth and sustainable development by creating jobs and improving living quality of workers, he stressed, adding they are an important link of the value chain to better competitive edge for Vietnamese exports.

However, the firms are lacking in capital to renew technologies and expand production scale, while their management capacity remain poor and supply chain linkages among the SMEs are still limited, he pointed out.

Therefore, LinkSME is hoped to support the Vietnamese Government to address challenges for the SMEs, promote their linkage ability and encourage them to reach out to the global market, he added.

Sharing the same viewpoint with Minister Dung, US Ambassador Daniel J.Kritenbrink said SMEs play an important role in the Vietnamese economy as they contribute 45 percent of the nation’s GDP.

As their operation has been hampered by shortage of linkages to the global value chain, LinkSME is expected to help the SME community run their business effectively, contribute more to the national economic growth, and promote competitive capacity, he added.

Since 2018, the Government has carried out comprehensive measures to simplify 3,451 out of 6,191 administrative procedures. Meanwhile, 6,776 out of 9,926 product lines subject to specialised inspections have been cut, and 30 related administrative procedures have been simplified, helping save over 18 million man day a year, equivalent to over 6.3 trillion VND (271.7 million USD) a year./.

SMEs face hurdles when seeking to join global supply chain

Vietnamese small and medium-sized enterprises must overcome such inadequacies as outdated technologies, a lack of experience in working with foreign businesses and high-skilled workers, and poor management in order to engage in the global supply chain, according to insiders.

Despite a large number of foreign companies investing in Vietnam, the country's localization rate remains low in comparison with its regional peers as foreign firms only look to utilize Vietnam’s low labour costs and bring along their global supply chain.

According to Prof. Dr. Nguyen Mai, Vietnam is widely considered to be the world’s fastest growing economy, particularly when studying the figures over the past two decades.

Several major investors and businesses from other nations across the globe have arrived in Vietnam to seek cooperation opportunities. As of August 20, 2019, the country’s foreign direct investment (FDI) performance stood at an estimated US$11.96 billion, up 6.3 per cent against the same period last year, thus opening a wealth of cooperation opportunities for domestic businesses seeking closer ties with their counterparts..

Despite this, it is not a simple task for Vietnamese businesses, especially small and medium-sized enterprises (SMEs), to meet the standards and requirements necessary to join the global supply chain of foreign firms.

According to the Vietnam Association of Small and Medium Enterprises, SMEs now make up 98 per cent of enterprises but contribute only 40 per cent to GDP, while just one-quarter of SMEs participate in the global supply chain.

A study conducted by the International Finance Corporation has pointed out that only 20 per cent of SMEs have joined the global supply chain, much lower than the figure seen in other nations throughout the region.

The number of local businesses joining the supply chain of FDI firms remains limited, especially in the fields of high levels of technology such as in automobile production and electronics.

During a recent workshop aimed at strengthening connectivity among SMEs in order for them to get involved in the global supply chain, Ron Ashkin, director of USAID LinkSME, noted that there are a number of reasons for the low localization rate in Vietnam.

Factors include outdated technologies, low productivity, a lack of experience in working with foreign businesses, in addition to a lack of high-skilled workers, poor management, limitations in foreign language proficiency, struggles to access financial sources, and low reliability.

Most notably, Vietnamese businesses still lack management tools such as a standard quality-control system, and problem-solving skills.

Most small enterprises have revealed shortcomings in meeting international safety standards despite buyers showing a keen interest in firms that can adhere to these standards.

In order to join the global supply chain, domestic enterprises must overcome these inadequacies and better meet the requirements set by foreign firms.

As a representative for a group operating in Vietnam with the aim of supporting and improving domestic businesses' capacity to engage in the global value chain, Mr Ashkin said when seeking suppliers, global companies need to be clear on what total production costs are, including the cost of labour, materials, the use of capital, transport, taxes, and other fees.

Aside from the cost of labour, the nation’s underdeveloped supply chain will increase the costs of businesses, he noted.

Ashkin emphasised that the country is currently a popular investment destination due to its low costs in comparison to China. Despite this, the LinkSME representative laid stress on the importance of other issues.

International companies seek for suppliers which could meet such standards as quality, technology, costs, feedback and reliability. Apart from these, traits such as trustworthiness, reliability, respect, mutual care, team working, co-operation, and regular communication, are also important for trans-national businesses when seeking suppliers.

The LinkSME representative said it might take at least three to five years for buyers to assess bidding documents, adding that Vietnamese businesses should make thorough preparations for these challenges.

Particularly, in situations when suppliers are selected to sign co-operative contracts, their efficiency is generally assessed regularly.

Delivery commitments also represent another important criteria for suppliers as any late deliveries cause challenges for the production procedures of buyers.

Furthermore, suppliers should pay close attention to a short-term and long-term goals of production strategy to better meet requirements of buyers in the future.

Ba Ria-Vung Tau creates breakthroughs in FDI attraction

Ba Ria-Vung Tau has, over the past few years, paid special attention to attracting investment in seaports, logistic services, tourism, and high-tech agriculture - the main drivers of the local economy.

Ba Ria-Vung Tau province accounts for nearly 10% of Vietnam’s total FDI and ranks fourth among 63 provinces and cities in FDI attraction. On average, one FDI project in Ba Ria-Vung Tau is worth 86.7 million USD. Most come from major investment groups in Japan, the Republic of Korea, the US, Canada, Thailand, the Netherlands, and Singapore who invest in ports, logistics, plastic beads, and electronics.

In recent years, Ba Ria-Vung Tau has also discarded ineffective projects to reserve land for new potential investors. It has discarded 142 projects - 38 in industrial zones, 53 housing projects in residential areas, and 51 others outside industrial zones.

According to Nguyen Thanh Long, Vice Chairman of the provincial People's Committee, the withdrawal of projects is in accordance with law. Provincial authorities have worked with investors to identify the cause and propose ways to address each case.

“Under a program to deal with projects in disrepair, the province has issued specific regulations. The management of these projects has been conducted professionally and transparently. All related information has been published on online newspapers,” said Long.

Cancelling ineffective projects has increased land reserves for other investors. The province has consistently pursued selective investment attraction, given special attention to large-scale, and advanced technological and environmentally friendly projects.

Choi Young Gyo, Chairman of the Republic of Korea’s Hyosung Chemical Group, said that he has invested 1.2 million USD to build a polypropylene (PP) plant and an underground storage facility for liquefied petroleum gas (LPG) in Ba Ria-Vung Tau.

“We are very happy to receive the investment licence. We have been doing business in Vietnam for a decade. During the last 4 years preparing for the PP project, we received great support from Ba Ria-Vung Tau authorities,” said Choi Young Gyo.

Nguyen Hong Linh, Secretary of the Ba Ria-Vung Tau provincial Party Committee, said the province has developed a set of criteria for attracting high-end investors. Last year, 3.6 billion USD of FDI was invested in Ba Ria-Vung Tau’s target areas, creating a motivation for local investment.

Linh said “Ba Ria-Vung Tau will continue to select investors in the industries which will not cause environmental pollution and will meet sustainable development requirements.

The province is calling investment in such projects as the Dinh Mountain project, the Safari Wild Animal Garden, and the Cai Mep Ha Logistics Center. More support will be given to boost investment in the Bau Trung urban residential area, the Cape Nghinh Phong tourist area, and the Vung Tau Marina City-Tuan Chau tourist site.

HCM City-based food producers relocated to neighbouring provinces

A number of food companies based in HCM City are planning to relocate their manufacturing facilities to neighbouring provinces for various reasons including cost.

They include Uniben Company, CJfood Cau Tre and Vinamilk.

The city-headquartered Vissan Joint Stock Company has invested VND1.5 trillion (about US$65 million) in an industrial complex to produce dairy products in Long An Province.

A number of poultry egg production companies also plan to move their facilities to neighbouring provinces, according to Ly Kim Chi, chairwoman of the Association of Food and Foodstuff of HCM City.

She said in the first eight months of this year food and foodstuff companies encountered challenges, and achieved a growth rate of only 2.39 per cent year-on-year.

Disease outbreaks forced down demand for pork, affecting the food processing industry, she said.

Besides the increasing costs of transportation, warehousing, electricity, and salaries forced production costs up, she said.

Abroad, changes in export markets also had a negative impact.

Chi said China, the biggest market for Vietnamese products, had put up new technical barriers related to taxation, goods origin, quarantine, and quality verification for imported seafood.

In the US, Europe, Japan, and Korea, Vietnamese exporters benefited from lower tariffs thanks to free trade agreements with them, but technical barriers there were again posing challenges, she added.

Easier bank loans

Experts said food companies could face further challenges in the near future. A survey by the Association of Food and Foodstuff of HCM City found 85 per cent of the companies were concerned about the intense competition they could face.

Besides, most managers at these food firms had yet to understand and take advantage of the FTAs Vietnam has signed with other countries, experts said.

According to trade experts, to help food producing firms enhance their production capacity, meet quality standards and get past the new technical barriers in export markets and enhance their competitiveness in local markets, authorities should help them get easier access to bank loans to expand and upgrade their technologies.

Economic stimulus packages with preferential interest rates have been launched but it is not easy for enterprises to access them, with the experts saying their small scale of production is one of the main reasons.

This is arguably the main reason for them to move from HCM City to neighbouring provinces where they could take advantage of the lower land rentals to expand and make long-term strategic plans.

These localities also offer excellent infrastructure and logistics including transportation.

The food processing sector, one of the country’s main industries, has great potential for development, according to the experts.

In the past few years the sector has achieved steady growth of nearly 7 per cent.

Consumption of processed food is rising by nearly 10 per cent annually and is expected to further increase in the coming years.

Price of white-flesh dragon fruit soars

White-flesh dragon fruit from the Mekong Delta province of Tien Giang has seen a recent exponential price rise with the food produce being valued at more than VND15,000 per kilo, a three-fold increase in comparison to the previous week.

With the soaring prices, dragon fruit growers have enjoyed increased profits of over VND5,000 per kilo. According to sources in local businesses, the upturn in price can be attributed to an increasingly high export demand for the agricultural product, especially from the Chinese market.

A number of co-operatives that have applied the Vietnamese Good Agricultural Practices (VietGap) standards to grow the fruit have also seen increased exports in demanding markets such as the United States, Japan, and the EU.

With the escalating price of white-flesh dragon fruit, red-flesh dragon fruit has remained at VND20,000 per kilo, earning no additional profit for farmers of red-flesh dragon fruit.

The Mekong Delta province of Tien Giang is home to nearly 8,000 hectares of dragon fruit cultivation area, with the district of Cho Gao being the leading growing area.

Aside from white-flesh and red-flesh dragon fruit, local farmers have also expanded their operations to grow both yellow and purple-flesh dragon fruit.

We can’t afford more national holidays: corporate leaders

Businesses, and the nation itself, cannot pay for more national holidays given Vietnam’s low labor productivity and relatively underdeveloped status, corporate leaders argue.

Dang Van Son, vice president and general secretary of the Vietnam Pulp and Paper Association (VPPA), said: "No business would want to have three more days added."

"The proposal by the Vietnam General Confederation of Labor (VGCL) to create three new holidays is not practical now since Vietnam's labor productivity is already low and its economy is not as developed as its neighbors," he told VnExpress.

Moreover, Son added, for business owners it would be a double whammy since they would have to pay extra to employees working during those holidays.

By law, wages during weekends are at least 200 percent of normal rates, and they rise to at least 300 percent during holidays.

Nguyen Xuan Duong, chairman of Hung Yen Province's Business Association and owner of a garment business, said: "Vietnam has a decent number of days off already with 22 days - 12 days of paid leave a year and 10 public holidays - in total. It could be a huge challenge for businesses if the three additional holidays fall during the harvest period."

A majority of Vietnamese businesses pay high wages for seasonal workers, he explained. The end of the year is the peak time for the electronics sector too, and it coincides with the peak fishing season, he said.

Duong noted that the current number of working days is 305, meaning the three days off would shave off 1 percent of the total working time.

"Vietnam has set a future economic growth target of over 7 percent to catch up with other countries in the region. But if we proceed with the proposal, the development gap with other countries will widen."

Earlier this month, the VGCL proposed adding three days to the public holiday calendar with two options for how it could be done.

One is to extend the Independence Day holiday on September 2 by three more days until September 5, the day the new school year starts. The other is to have a three-day break for the New Year (January 1-3) and declaring Vietnamese Family Day on June 28 as a public holiday.

The VGCL called for increasing the number of holidays a year, saying Vietnam's is the lowest in Southeast Asia at 10, while Cambodia has 28, Thailand and Indonesia have 16, Brunei 15, Malaysia 14, and Singapore 11.

81 percent of around 1,300 workers in an online survey conducted this month by the confederation voted to reduce the workweek from 48 hours to 44.

Vice chairman of the Vietnam Chamber of Commerce and Industry (VCCI), Hoang Quang Phong, said the confederation’s proposal is not feasible since its previous proposal of reducing regular working hours and increasing the annual overtime cap has yet to be achieved.

Business executives said the VGCL's argument is fallacious since Vietnam's productivity is the lowest in the region, its population is the world’s 15th largest but per capita GDP is only 131st highest.

"Having more holidays is not recommended when productivity and economy are poor. Its per capita income is not half of Thailand’s or a quarter of China and others," he said.

"The issue should be looked at from an economic perspective."

National Assembly Chairwoman Nguyen Thi Kim Ngan ordered a study into the socioeconomic impacts of the proposal. The confederation is set to submit its recommendation to the National Assembly next month.

Vietnamese exports to Italian market enjoy vast increase

Vietnam’s exports to Italy have enjoyed robust growth during the first eight months of the year, a sharp increase of up to 29.1 per cent in comparison to the country’s export growth of 8.1 per cent, according to the General Department of Vietnam Customs.

During the reviewed period, Vietnam's export scale to Italy grew strongly, accounting for more than 1.3 per cent of the country's total export turnover. This figure saw the Southeast Asian nation ranked 18th in the world for exporting goods to the Italian market.

With the EU-Vietnam Free Trade Agreement (EVFTA) expected to gain approval and take effect in the near future, the nation’s exports to Italy and the wider EU market are expected to increase more due to import tax being substantially reduced.

As a result of increased trade, Vietnam's export turnover to the European nation stands at much higher than in previous years, surpassing previous records of US$3.27 billion in 2016 and US$2.74 billion in 2017.

During this year, Vietnam is projected to rake in US$3.75 billion from exports to the Italian market.

Of the commodities exported to Italy, 18 export items earned over US$10 million. Furthermore, seven items including telephones and components, garments and textiles, footwear, coffee, machinery, equipment, spare parts, computers, electronics products and components, and means of transport, made over US$100 million.

The export scale of telephones and components enjoyed a rapid increase with turnover of more than US$812 million, a 2.1-fold increase in comparison with the same period last year.

This was followed by garments and textiles at US$201.5 million, a sharp rise of 15.1 per cent, and footwear with US$198 million, a slight decline of 0.8 per cent.

 

Vietnam faces more challenges for rice export to China

Vietnam’s rice export to China has declined following stricter trade barriers.

In the first eight months of this year, Vietnam exported 5.4 million tonnes of rice worth a total USD1.96 billion, down 15% in value. During the period, the rice volume exported to China which was the country’s biggest rice importer for many previous years dropped by 65%.

According to Tran Thanh Hai, deputy head of the Ministry of Industry and Trade’s Import-Export Department, last year, one tonne of rice was exported at around USD500 on average, but the price has declined so far this year.

Meanwhile, China has tightened control over unofficial rice imports from across the border trade since 2018. The country has also applied more stringent requirements for rice imported from Vietnam and other ASEAN countries, including packaging and labels or product origins.

Hai added that Vietnam needs to diversity rice export markets and improve rice quality to meet stricter export standards.

China’s tighter policies on border trade have affected Vietnam’s agricultural produce exports.

Between January and July this year, the US replaced China as the top import of Vietnam’s agriculture produce with a value of USD4.8 billion, up 12.6% on-year.

Treasury shares used as dividend payments

Treasury shares have been used to pay shareholders’ dividends as the payment does not lower the stock price on the ex-dividend date.

On the ex-dividend date, a company’s shares are traded without the value of the dividend payment.

When a buyer purchases shares on or after the ex-dividend date, he is not entitled to the declared dividend.

The declared dividend is owned by the shareholder before the ex-dividend date.

Under existing regulations, when a company pays treasury shares for bonuses and dividend pay-outs, the opening price of its shares is not adjusted on the ex-dividend date.

Meanwhile, if the company pays cash dividend, the opening price of its shares will be changed.

At the Ha Noi Stock Exchange, the trading band for an ex-dividend stock is 30 per cent on either side if the company uses treasury shares in its bonus and dividend payments.

Among listed companies that use treasury shares to pay bonuses and dividends to shareholders is Vicostone JSC (HNX: VCS).

The marble maker in early September decided to issue treasury shares for existing shareholders at the ratio of 2.04 to 100.

At this ratio, every shareholder will receive 2.04 treasury shares for each 100 shares they have.

Vicostone now has 3.2 million treasury shares, which were bought back in November 2018 when the firm’s shares fell back to the VND65,000-70,000 per share range.

Vicostone shares have gained as much as 20 per cent since the decision was announced to close Friday at VND96,900 (US$4.17) per share.

In 2014, the company purchased 10.6 million treasury shares and paid them to shareholders in 2016.

According to analysts, Vicostone’s move would benefit its shareholders because they will have new shares at a higher price without having to purchase them.

Other companies that have done the same included Song Da Industry Trade JSC (HNX: STP) and Sai Gon Thuong Tin Commercial Joint Stock Bank (HoSE: STB).

Treasury shares sold

Other companies have sought to sell treasury shares to raise capital and fund their business activities or look for potential investors.

The HCM City Infrastructure Investment Corp (HoSE: CII) in August planned to sell 35.5 million treasury shares for a minimum VND32,650 per share, 60 per cent higher than its share price at the same time.

The company shares have moved almost flat since then, ending Friday at VND20,300 per share.

Other companies that also do so are Thanh Thanh Cong-Bien Hoa (TTC Sugar) (HoSE: SBT) and Huu Nghi Food JSC (UPCoM: HNF).

The two companies want to sell treasury shares to earn some revenue so they can restructure their capital and debt, and increase the volume of outstanding shares.

HCM City-based food producers relocated to neighbouring provinces

A number of food companies based in HCM City are planning to relocate their manufacturing facilities to neighbouring provinces for various reasons including cost.

They include Uniben Company, CJfood Cau Tre and Vinamilk.

The city-headquartered Vissan Joint Stock Company has invested VND1.5 trillion (about US$65 million) in an industrial complex to produce dairy products in Long An Province.

A number of poultry egg production companies also plan to move their facilities to neighbouring provinces, according to Ly Kim Chi, chairwoman of the Association of Food and Foodstuff of HCM City.

She said in the first eight months of this year food and foodstuff companies encountered challenges, and achieved a growth rate of only 2.39 per cent year-on-year.

Disease outbreaks forced down demand for pork, affecting the food processing industry, she said.

Besides the increasing costs of transportation, warehousing, electricity, and salaries forced production costs up, she said.

Abroad, changes in export markets also had a negative impact.

Chi said China, the biggest market for Vietnamese products, had put up new technical barriers related to taxation, goods origin, quarantine, and quality verification for imported seafood.

In the US, Europe, Japan, and Korea, Vietnamese exporters benefited from lower tariffs thanks to free trade agreements with them, but technical barriers there were again posing challenges, she added.

Easier bank loans

Experts said food companies could face further challenges in the near future. A survey by the Association of Food and Foodstuff of HCM City found 85 per cent of the companies were concerned about the intense competition they could face.

Besides, most managers at these food firms had yet to understand and take advantage of the FTAs Viet Nam has signed with other countries, experts said.

According to trade experts, to help food producing firms enhance their production capacity, meet quality standards and get past the new technical barriers in export markets and enhance their competitiveness in local markets, authorities should help them get easier access to bank loans to expand and upgrade their technologies.

Economic stimulus packages with preferential interest rates have been launched but it is not easy for enterprises to access them, with the experts saying their small scale of production is one of the main reasons.

This is arguably the main reason for them to move from HCM City to neighbouring provinces where they could take advantage of the lower land rentals to expand and make long-term strategic plans.

These localities also offer excellent infrastructure and logistics including transportation.

The food processing sector, one of the country’s main industries, has great potential for development, according to the experts.

In the past few years the sector has achieved steady growth of nearly 7 per cent.

Consumption of processed food is rising by nearly 10 per cent annually and is expected to further increase in the coming years.

Vocational training not to be overshadowed by higher education

Sharing about Malaysia's experiences in overcoming the middle-income trap, Datuk K. Yogeevaran Kumaraguru, former Secretary-General of the Ministry of Plantation Industry and Commodities, Malaysia said at the Vietnam Reform and Development Forum (VRDF) 2019 that Malaysia made a mistake by only focusing on higher education while forgetting vocational training, and cautioned Vietnam against making the same mistake.

Datuk K. Yogeevaran Kumaraguru, former Secretary-General of the Malaysian Ministry of Plantation Industry and Commodities, presenting why Vietnam needs to focus on both vocational training and higher education to improve labour productivity

Beginning his talk with a story about Korea's 26 years of upgrading the economy from low to high-income status, Yogeevaran said that Malaysia, despite its rapid growth, is still not where it wants to be as it had forgotten to promote vocational training.

"It took us 27 years to go from low-income to middle-income, and 22 years to go from a middle-income to high-income economy," he said.

The problems of Malaysia, according to K. Yogeevaran, include uneven growth among different regions, unequal distribution, and low labour productivity. Therefore, total factor productivity (TFP) decreases over time. The costs of living also increased, a trend exacerbated by the trade war tensions.

Another problem for Malaysia, Yogeevaran added, is the imbalance in the labour market, where 48 per cent of the workforce is skilled labour, while only 5 per cent of market demand is for skilled workers. This leads to a relatively high unemployment rate among young people who commonly hold university education.

Over the past time, according to the General Statistics Office of Vietnam, labour productivity has been steadily improving and Vietnam is now among the fastest growers in the ASEAN region in this area.

Specifically, the economic growth of 7.08 per cent in 2018 was accompanied by labour productivity of VND102.2 million ($4,443) per worker (in 2018 rates), up 6 per cent on-year. On average in 2016-2018, labour productivity increased by 5.77 per cent per year, higher than the average 4.35 per cent measured in 2011-2015. Generally, in 2011-2018, labour productivity increased by an average of 4.88 per cent per year.

It can be said that labour productivity plays an increasing role in economic growth. In 2011-2015, the average GDP growth reached 5.91 per cent per year, while the workforce grew by 1.5 per cent and labour productivity by 4.35 per cent per year. In 2016 to 2018, although the workforce grew by only 0.88 per cent a year, labour productivity reached an average growth rate of 5.77 per cent, higher than the previous period's 1.42 percentage points, so the average GDP growth rate is 6.7 per cent per year.

Adjusted to 2011 purchasing power parity (PPP 2011), Vietnam's labour productivity in 2011-2018 increased by 4.8 per cent per year on average, higher than many countries in the region, but the gap remains wide and may even increase in absolute terms. This shows that it will be difficult to catch up with other countries.

Relying on Malaysia's experience, Yogeevaran claimed Vietnam shares its problem of productivity. "Productivity issues must be addressed at all three levels, including the national, sectoral, and enterprise levels, in which enterprises must play a leading and important role," Yogeevaran said.

Growth is based on productivity and innovation. Innovation should be oriented to create value and economic benefits. Along with that, a country needs institutional and governance reforms to create a supportive ecosystem and ensure that FDI will bring maximum benefits to the domestic economy.

Vietjet gains great profits from ancillary revenue

The privately-owned new age airline in Vietnam is looking to become one of the top carriers for ancillary revenue.

Vietjet has gained major successes in its ancillary (revenue from non-ticket sources) business thus far, ranking among the top dozen airlines in the world. Revenue of passenger transport in the first half of 2019 stood at VND1.89 trillion ($82.1 million), an increase of 17 per cent on-year. Alongside that, ancillary revenue of passenger transport reached VND5.43 trillion ($230 million), an

increase of 43 per cent on-year, mainly thanks to the growth of international passenger transportation. The proportion of ancillary revenue in total air transport revenue was 27 per cent.

The 2019 CarTrawler Ancillary Revenue Yearbook, which comprises statistics from more than 100 airlines’ audited financial statements, revealed that Vietjet is ranked 12th in terms of ancillary revenue to total air transport revenue ratio.

According to the sustainable development model of low-cost carriers, ancillary revenue is a decisive factor in the success of a carrier when its profit margin reaches over 90 per cent.

Aiming to expand its service ecosystem and continue on a path of sustainable development, Vietjet has planned to provide ground services for itself at Noi Bai International Airport in Hanoi from next year. It also uses the latest e-commerce technologies to offer various products and services for consumers. These will bring benefits to both customers and the airline, including improvement of service quality and ancillary revenue.

Currently, Vietjet operates around 400 flights daily, carrying more than 80 million passengers to date, with 129 routes covering destinations across Vietnam and international destinations such as Japan, Hong Kong, Singapore, South Korea, China, Thailand, Malaysia, Indonesia, and India.

Vietjet is a fully-fledged member of International Air Transport Association, with an IATA Operational Safety Audit certificate. The carrier was named Best Ultra Low-Cost Airline 2018-2019 and awarded the highest ranking for safety in 2018 and 2019 by the world’s only safety and product rating website, AirlineRatings. Vietjet was also listed as one of the globe’s 50 best airlines for healthy financing and operations by Airfinance Journal in 2018.

Besides bringing the dream of flying to millions of customers, Vietjet vows to continue paying special attention to the community in the form of meaningful charity, cultural, sporting, and entertainment activities, which bring better values for all.

Upgrade for PetroVietnam after positive credit moves

State-owned conglomerate PetroVietnam has been assigned an upgrade in two credit areas by one of the ‘big three’ ratings agencies, reflecting the group’s high degree of integration, diversification, and conservative financial profile.

Fitch Ratings has offered PetroVietnam a standalone credit profile at ‘bb+’, and first-time long-term foreign-currency issuer default rating (IDR) at ‘BB’ with a positive outlook.

PetroVietnam’s IDR is commensurate to that of its parent, the Vietnam sovereign (BB/Positive), under Fitch’s Government-Related Entities Rating Criteria.

The positive rating is expected to help PetroVietnam bolster its capital mobilisation capacity in the international market, and diversify capital sources for the group’s investment projects amid the government’s constrained guarantee scheme.

The rating also attests to PetroVietnam’s healthy business performance and financial stead as well as its upbeat future business perspective, helping to bring trust to investors, domestic and international financial institutions, and its strategic partners, especially at a time when PetroVietnam is propelling restructuring efforts.

In a statement, Fitch highlighted the robust state links with PetroVietnam, the group’s solid market position, and its integrated activities from upstream to medium and downstream sections which cover exploration, exploitation, petro-chemical refining, fertiliser production, gas and petroleum products distribution, and power generation.

“PetroVietnam has not required tangible financial support in at least five years due to its strong financial profile, although we expect support to be forthcoming if required,” Fitch said in the statement.

The agency also assesses the socio-political implications of a PetroVietnam default as “very strong”, and any disruptions in the group’s operations would have material implications for the entire energy value chain in the country.

“This very positive result attests to the close support and guidance from the Party and state leaders, and its effective co-operation with diverse ministries and sectors, as well as the total devotion and great solidarity of every member in the oil and gas industry in the past few years,” said PetroVietnam’s general director Le Manh Hung.

“The credit rating is also one of the fundaments for our group to review and improve corporate governance activities, particularly in financial targets governance, to ensure the positive rating will be maintained and further improved in the future,” Hung said. “We hold a trust that with clear leadership of the Party and the state, and total commitment of every PetroVietnam member, the group will make further strides in the path ahead with even bigger contributions towards national development.”

According to Nirukt Sapru – Standard Chartered Bank’s CEO in Vietnam, the ASEAN, and South Asia Cluster Markets – the ratings assigned to PetroVietnam will help the group attract more international investors, pledging that the bank will support PetroVietnam to realise its growth targets.

Fitch Ratings is one of the world’s three most prestigious credit rating organisations, alongside Standard & Poor’s and Moody’s.

In Vietnam, Fitch Ratings has also engaged in Vietnam’s sovereign rating, as well as assigning credit rating for Vietnam’s power authority Electricity of Vietnam, and several other leading players.

PetroVietnam holds interests in all of Vietnam’s upstream oil and gas assets, accounting for about a third of the country’s refined product output, and supplies gas for power plants which make up about 15 per cent of the country’s power generation.

The group also delivers about 80 per cent of Vietnam’s fertiliser production.

PetroVietnam’s investment is projected to rise significantly to VND321 trillion ($13.96 billion) over the next five years, from VND38 trillion ($1.65 billion) last year.

PetroVietnam estimates over half of its expected consolidated capital expenditure and investment will be used to develop its upstream resources, mainly gas fields.

KB Asset Management launches representative office in Vietnam

Launching the representative office in Vietnam is expected to help KB Asset Management (KBAM) – a member of KB Financial Group (KBFG) – expand its markets and develop investment in Asia.

On September 3, KBAM launched its representative office in Ho Chi Minh City, marking its third overseas location established as part of KBAM's global scale and network development plan, after representative offices in Singapore and China.

The KBAM Vietnam office will focus on conducting research of the local financial market as well as developing new products and services tailored to the specific needs of Vietnam and Southeast Asia.

Accordingly, with total assets in Vietnam of more than $150 million and plans to continue to increase this in the coming time, KBAM Vietnam will focus on promoting the asset portfolio including equity, fixed income, real estate, infrastructure, and alternatives.

KBAM Vietnam’s executive managing director is Justin Suh, a finance expert with 22 years of experience working at leading financial companies such as Goldman Sachs Asset Management and AllianceBernstein, said, “Having identified Vietnam as a potential development market, we are planning to build a professional investment team. The establishment of KBAM Vietnam clearly shows the orientation as well as affirms KB Group's commitment to contributing to the Vietnamese market. We hope KBAM will have many opportunities to co-operate with financial institutions in Vietnam.”

KBAM is also promoting co-operation with members of KB Financial Group such as KB Securities Vietnam (KBSV), KB Kookmin Bank, KB Card, and KB Insurance in expanding its customer base, diversification, and cross-selling products. In particular, KBAM is planning to co-operate with KBSV in seeking investment opportunities as well as launching new and unique products in the near future.

As a member of KB Financial Group, KBAM is one of the oldest and most prestigious asset management firms in Korea. With strong support from the parent group and other members, with optimistic market assessments, KBAM is confident and shows great determination in expanding investment activities in Vietnam – the long-term investment market of many Korean investors.

Binh Thuan hits project jackpot

A record capital volume of nearly VND457 trillion ($19.87 billion) was committed by investors for 22 projects in the south-central province of Binh Thuan at the 2019 Investment Promotion Conference held last weekend.

Among those, Binh Thuan signed a MoU for 11 projects with total investment capital of VND435 trillion ($18.9 billion). Further, 11 other projects with total investment of VND21.8 trillion ($947.8 million) have received approval in principle, mainly in urban, industrial, and agricultural development, as well as healthcare facilities.

According to Phan Nguyen Hoang Tan, deputy director of Binh Thuan Planning and Investment Department, the conference had directly called on strategic investors and partners who are capable and have high prestige in different key areas such as urban and tourism development, green energy, agriculture, and infrastructure.

“We are giving priority to strategic investors and partners who have strong financial capacities and be able to invest in outbreak investment fields which are suitable to the sustainable development of the province, especially those in new technologies which are creating positive impact to the people and pushing economy and society of the project,” Tan said.

In renewables, Energy Capital Vietnam has signed up to invest in a liquefied natural gas facility with capital of VND116 trillion ($5 billion), and Enterprize Energy will invest in the Thang Long Wind offshore wind power project with capital of VND276 trillion ($12 billion).

Meanwhile in the tourism sector, TMS Group proposed a beach tourism venture with investment capital of VND14.7 trillion ($639.1 million) and FLC Group proposed to invest VND4.8 trillion ($208.7 million) into an eco-tourism resort.

The province is focusing on calling investment capital into tourism properties which are trending among investors moving capital inflows from major cities to provinces, especially to localities with a large room for developments like Binh Thuan. Foreign capital flows into Vietnam are also set to increase thanks to Vietnam’s rapid integration into the global economy.

Binh Thuan also released a list, calling for investment from interested financiers. The province will focus on high-end tourism, entertainment projects, urban development areas, residential projects, sport development projects, and the infrastructure system. It also plans to develop the brand name of Ham Tien-Mui Ne into a prestigious destination for international tourists.

Moreover, Binh Thuan is calling for investments into agriculture, forestry, marine products, mineral resources, manufacture, and IT equipment, as well as expanding clean energy.

According to figures released by the provincial People’s Committee, industrial and construction sectors are contributing more than 30 per cent to the gross regional domestic product (GRDP) of the whole province. Binh Thuan is envisioned to be the nation’s energy centre with a total capacity of up to 12,000MW in 2020.

In agriculture, the province will particularly call on smart projects applying high technologies, setting up a value chain of farming and husbandry processing ­towards international standards and climate change adaptation.

Notably, the economic growth momentum in 2019 continues to be maintained. In the first six months of the year, the province’s GRDP increased by 8.46 per cent on-year, and the provincial budget revenue climbed by 30.9 per cent on-year. Meanwhile, tourist arrivals in the first half of 2019 reached about three million, up 12 per cent on-year. Total ­revenue from tourism hit VND7.4 trillion ($321.7 million) as compared to the same period last year.

Measures sought to support firms in exporting to ASEAN market

A conference was held in Hanoi on September 23 to seek solutions to support and create favourable conditions for businesses to export goods and services to the ASEAN market.

According to Nguyen Vu Kien, head of the International Relations Department under the Vietnam Chamber of Commerce and Industry (VCCI), ASEAN is a huge market that has been opened to all member countries.

To ensure transparency and equality for exporters and avoid conflicts, it is necessary to design a mechanism to support exporters to deal with problems facing them during the import-export process, he said.

According to Kien, the mechanism will help improve the operation efficiency of firms and trade relations among ASEAN countries, while harmonising the business environment in the whole region.

Introducing an ASEAN Portal funded by the European Union through ARISE Plus, Paul Mandl, head of the project, said that the ASSIST portal (assist.asean.org) provides information on legal regulations, criteria and measures to make their goods and services exporting process to the ASEAN market easier.

It also helps exporters react directly with authorities of ASEAN member countries and ask for consultations.

Paoplo R. Vergano, an expert from the ARISE Plus, said that the ASSIST will help businesses deal with issues related to tariff and non-tariff measures as well as investment in some areas, but it does not involve in the handling of disputes between employees and employers or complaints related to discrimination or cases settled by countries, as well as matters that are not relevant to trade, service and investment in ASEAN.

Nguyen Tuong, Vice Chairman of the Vietnam Logistics Business Association, said that with the support of the ASSIST, Vietnamese firms can avoid problems during import-export activities at border gates and customs agencies./.

 
 
 
 
 
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