Central bank continues growth drive amid global uncertainties


The State Bank of Vietnam is predicted to continue maintaining a loose monetary policy with low interest rates, even as the global economy is showing positive signs. 

HSBC economist Yun Liu stated that given Vietnam’s limited fiscal space, the monetary policy has done most of the heavy lifting to drive growth.

“As Vietnam’s economy is set for robust recovery in the coming quarters, we expect the central bank to keep its monetary policy on hold until June 2022, before possibly delivering a 25-basis-point hike, bringing its refinancing rate to 4.25 per cent by the year-end,” she forecast.

In 2020, the State Bank of Vietnam (SBV) cut rates thrice to help vulnerable businesses weather the storm. The latest cut was in September when the SBV dropped its annual refinancing rate by another 50 basis points, bringing it down to 4 per cent. The magnitude of the cut signalled the central bank’s sense of urgency, given the government’s 2020 growth target of 2.5-3 per cent.

Data from Vietnam’s provider of financial data Fiingroup revealed that deposit rates continued the downward trajectory in December for both 6-month and 12-month terms in most banking sectors.

For 6-month rates, the interest rates of state-owned banks and small-sized commercial banks such as ABBank and Kien Long Bank decreased by 0.135 and 0.1 per cent, respectively, to 3.75 and 5.66 per cent per year.

In contrast, large joint-stock commercial banks such as Techcombank and VPBank were the only ones with average annual interest rates increasing, by 0.04 per cent to 4.93 per cent. Vietcombank currently offers the lowest deposit rate in the market at 3.6 per cent per year, while National Citizen Bank pays the most with 6.65 per cent.

Meanwhile, according to Bao Viet Securities JSC (BVSC), for 12-month rates, the average deposit rates of all three banking groups shared the same decline. The rates of state-owned banks dropped the most (down 0.325 per cent to 5.03 per cent per year). Interest rates of small and large joint-stock commercial banks decreased by 0.13 and 0.145 per cent, respectively, to 6.29 and 5.71 per cent per year.

The lowest interest rate can be found at Techcombank (4.6 per cent) and the highest at National Citizen Bank, HDBank, and Indovina Bank (6.9 per cent). Thus, the average 6-month and 12-month interest rates of the whole banking industry are 5.03 and 5.83 per cent, both down 1.3 per cent compared to the end of 2019.

BVSC believed that the SBV will maintain its current monetary policy without adding pressure. Therefore, the long-term interest rate in 2021 is expected to remain stable at the low end-of-2020 level.

Low deposit rates could be an impetus for credit institutions thanks to the reduction of capital costs and increasing profits. In fact, since the third quarter of 2020, the profit margins of many commercial banks increased due to historic low deposit interest rates while the interest rates did not fall correspondingly.

While Vietnam is poised to outperform the region in 2021, there are several risks to its economic recovery.

Yun Liu from HSBC believed tourism prospects remain bleak. “Even though the worst has likely passed in the second quarter, tourism-related services such as accommodation and transportation will remain in the doldrums. This is not surprising, given ongoing border restrictions, despite the select travel arrangements Vietnam has with neighbouring countries,” she explained.

Although the second wave was quickly contained, it likely made the government more cautious about reopening the borders and welcoming international tourists, Liu added. As such, there is unlikely to be meaningful recovery in the sector in the near term, at least until there is an effective vaccine and a coordinated global approach to international travel.

“Domestically, Vietnam’s soft labour market remains a challenge. Despite some improvements in the third quarter, unemployment rates remained elevated with lower wages. If this continues, it will likely result in a prolonged recovery in consumer spending, which has been a key pillar of growth,” said Liu.

On the other hand, the SBV has modified its exchange rate management policy. Since December 31 it stopped listing spot bid-rates of USD/VND at its Operations Centre and deferred foreign exchange spot purchases.

Besides, from January 4, 2021, the central bank has started buying 6-month forward contracts (instead of 3-month term ones as before) for VND23,125 per USD with requirement for cancellation.

Moreover, stopping the bid-rate listing at the Operations Centre will remove the support for the VND to appreciate.

Thai Thi Viet Trinh, analyst at KB Securities, noted that deferring forex spot purchases shows that the SBV is no longer willing to buy USD to accumulate forex reserves.

“Commercial banks, thus, need to actively contact the central bank in case of a large positive forex position and if there is any, the spot purchase of USD will most likely take place on a case-by-case basis,” Trinh said.

Vietnam always a leading partner of Netherlands in Asia

Vietnam is always a leading partner of the Netherlands in Asia, said the Dutch Minister for Foreign Trade and Development Cooperation, Sigrid Kaag, at an online meeting with Vietnamese Minister of Industry and Trade Tran Tuan Anh on January 14.

The minister, who attended the meeting with the CEOs of 13 major Dutch companies, said the EVFTA is expected to open up big opportunities for businesses of the two countries and now is a suitable time for the two sides to deepen their cooperation.

She noted that the two countries have worked closely together in various fields, particularly industry, clean energy, renewable energy, circular economy and emissions reduction towards sustainable development.

Minister Tuan Anh welcomed the Dutch government and businesses’ interest in collaboration with Vietnam in trade, industry and energy.

He took the occasion to explain issues of interests of each participating Dutch business and clarify contents related to the enforcement of the EVFTA including taxation, intellectual property, trade in services and Government procurement. He also made clear what Vietnam can do to help Dutch investors implement a strategy to turn Vietnam into a production and consumption hub in the ASEAN.  

The minister emphasized that Vietnam has been, and is still a reliable destination for Dutch investors, urging the business communities of the two countries to work harder to seek new business and investment opportunities and optimize the benefits brought about by the EVFTA.

Speaking on behalf of the participating Dutch businesses, Ingrid Thijssen, chair of the Confederation of Netherlands Industry and Employers, said Vietnam is a strategic market in Asia for Dutch businesses, which are willing to invest more in the country.

Concluding the meeting, the two ministers affirmed that they will create favourable conditions for the two countries’ businesses to make full use of opportunities brought about by the  EVFTA.

Statistics of the Ministry of Industry and Trade show the Netherlands is the biggest export market in the EU for Vietnamese goods, and also the biggest EU investor in Vietnam.

Bilateral trade has been growing at an average 11.78 percent a year in the past five years. In 2020, despite the impact of the COVID-19 pandemic, Vietnam’s exports to the Netherlands in the January-November period still rose 0.22 percent year on year to 6.26 billion USD. Its imports from the European country in the period decreased by 4.13 percent to 582.4 million USD.

As of the end of November 2020, total Dutch investment in Vietnam reached 10.4 billion USD in 375 projects./.

Wait goes on for medical VAT clarity

International importers of medical devices into Vietnam are urging for an end to the legal impasse that has been blocking them from enjoying a 5 per cent VAT rate. 

The European Chamber of Commerce in Vietnam (EuroCham) at the Vietnam Business Forum held last December once again called on the Ministry of Finance (MoF) to provide a detailed timeline for amending the circulars guiding the VAT charge on medical device imports, with members shouldering a 10 per cent rate for a long time now.

A representative of EuroCham said, “The MoF is drafting the amendments to Circular No.83/2014/TT-BTC and guiding documents. However, Circular No.26/2015/TT-BTC is also a major challenge that requires attention. This issue has long been affecting the importation of medical devices.”

Circular 26 dated 2015 provides guidance on VAT, while Circular 83 guides the application of VAT according to Vietnam’s list of imports.

“We recommend the MoF to issue a guiding document on applying VAT on imported medical devices as soon as possible to ensure consistency with decrees No.36/2016/ND-CP and No.169/2018/ND-CP,” the representative added. “The MoF is requested to provide a detailed timeline for amending circulars 26 and 83 as soon as possible.”

The request was not immediately met at the event, meaning the waiting will continue for medical device importers.

The underlying issue is a mismatch between Decree 36 (and its amendments in Decree 169) on medical equipment management and circulars 26 and 83 on VAT. While the decrees stipulate that the categorisation of medical devices is not within the purview of the Ministry of Health (MoH) but by a qualifying organisation certified by the ministry, Vietnamese customs authorities still require companies to provide certification from the ministry for a range of imported medical devices to be eligible for 5 per cent VAT.

Affected medical equipment includes chemicals used for testing and sterilisation, which are not on the list of imports included with circulars 26 and 83.

As a result, many imported products listed as medical equipment under decrees 36 and 169 are left out of reach of the 5 per cent VAT policy and are instead subject to 10 per cent.

This is not the first time EuroCham has raised the issue. It was also brought up at the June dialogue between the prime minister’s Advisory Council for Administrative Procedure Reform and the European business community that also saw the launch of the EuroCham Whitebook 2020.

However, despite promises by the MoF that the circulars would be amended to strike out the requirement of import licenses or certification from the MoH for medical equipment and to harmonise the circulars with the decrees, no improvements have been seen since.

In fact, VAT for imported medical equipment has been an unsolved issue for years. According to the MoH, it has sent documents to the MoF on several occasions, urging a solution but no noteworthy moves have been made so far.

Meanwhile, the MoF’s customs authorities blamed the impasse on the lack of a clear legal basis for the application of Decree 36 and its guiding documents to apply the lower VAT rate to medical devices and equipment. This leaves them with Circular 26 and the requirement for certification by the MoH to be eligible for the 5 per cent VAT rate.

EuroCham’s Medical Devices and Diagnostics Sector Committee was established to provide a unifying voice for the international medical devices and in-vitro diagnostics industry in Vietnam, with notable brands including Abbott Diagnostics, B.Braun, Bayer, DKSH, GE Healthcare, Philips, Roche Diagnostics, Zuellig Pharma, and many others.

Vietnam’s medical devices and diagnostics market reports double-digit annual growth, with 90 per cent made up of imports. It is forecast to become even more bustling as more multinational corporations are expanding to and in the market.

Evolving demands being met in high-end segment

Despite COVID-19 restricting the flow of foreign buyers and investors to Vietnam, positive signs were reported from local buyers in the last quarter of 2020 for high-end residences, brightening up 2021. 

Singaporean developer Keppel Land Vietnam successfully received bookings for all units of the first three towers of its latest project named Celesta Rise in Ho Chi Minh City in one morning event held at the end of November.

The astoundingly quick absorption rate of Celesta Rise proved that the market demand remains strong and developers who have good products can still attract buyers by the droves.

Indeed, Celesta Rise was one of the most sought-after residential developments in the urban Saigon South area thanks to its strategic location as well as unique and fascinating facilities.

Diversifying products and adding technology to serve customers from beginning to end are the way leading developers are now trying to attract customers’ attention.

Andy Han, CEO of SonKim Land, Corporation explained why the company’s luxury integrated development The Metropole Thu Thiem has been a runaway success.

“Vietnamese love buying property. From the central location to ongoing and planned infrastructure improvements, the development was popular from the onset,” he said at a talk held in Ho Chi Minh City last month themed “Real estate and tech sector in a changing world”.

“But what has been really driving sales is The Metropole’s ability to meet the demand of a post-pandemic world: non-touch design and the innovative 99 per cent dust filtering ventilation system. With people spending more time indoors, there is an increased demand for larger apartments of three bedrooms, too.”

In 2020, 65 per cent of apartment units launched in Ho Chi Minh City were in the high-end and luxury segment. Figures from CBRE show that the city’s east along with Thu Duc City have been contributing a major portion of property supply, including high-end and luxury products and is forecast to provide 44 per cent of the total supply until 2025. Meanwhile in Hanoi, nearly 70 per cent of launches were mid- and high-end products.

A primary trend putting wind in the sails of the Vietnamese residential property market is the increasing population and income levels. Local developers are also starting to look beyond the bounds of their northern and southern bases of power, with Ho Chi Minh City-based developers rolling out projects in the capital and vice versa.

According to Nguyen Van Dinh, general secretary of the Vietnam National Real Estate Association (VNREA), even if foreign investment flows into real estate have dropped due to the pandemic, the setback is only temporary as many foreign investors are still waiting for the opportunity to invest in Vietnam.

“The global supply chain has been disrupted and European and North American enterprises are considering leaving China, presenting an opportunity for Vietnam to receive a new wave of foreign investment, which will benefit the real estate sector,” he said.

The positive sentiment is shared by the largest global real estate developers. These investors from South Korea, Singapore, Taiwan, and Japan among others are all looking for assets and cooperation opportunities with reputable domestic enterprises.

However, the forecast recovery will likely be moderated by several factors, such as the prolonged legal difficulties that have been haunting the real estate sector this year.

Despite Vietnam’s strong showing in pandemic control, the coronavirus remains a living threat across the globe and even a working vaccine will take several months of clinical testing before it can be put into wide-scale use.

It is hoped that things can return to normalcy around the second or the third quarter of 2021, with intentional flights reopened, said Dinh from VNREA.

Buyers warned over inaccurate info regarding Long Thanh land

Concerns have been raised on the land fever in surrounding areas of the future Long Thanh International Airport in the southern province of Dong Nai after construction started last week. 

According to Tran Hien Phuong, general director of Sea Holdings JSC, some local real estate centres are using false information regarding land ownership to push up prices of land around the airport. “Land brokers have been approaching buyers via social networks and directly consulting land plot owners. Many buyers have been reported to have been caught in this trap,” Phuong said. “Buyers must be more careful because there are many false reports on projects around Long Thanh Airport.”

Phuong also claimed that the lack of official information on planning and zoning of the area was one of the reasons buyers are falling victim to false information. “Local authorities must be more active in leading and instructing buyers on land usage by setting up public offices, used to check on targeted projects,” she suggested.

Local resident Nguyen Khoa told VIR that buyers must pay much more attention to the land plots which were previously agricultural land.

“Many local landlords are dividing their agricultural land into smaller plots to sell them. However, those plots will not be used for housing, only for planting crops,” Khoa said.

Phan Cong Chanh, a private real estate consultant, said that even if the land around Long Thanh Airport in increasing in value, it could take many years for purchases to be worthwhile. “Therefore, investments in the land here do not amount to much for short-term investors. Meanwhile, brokers must also be more cautious with dossiers of the land plots,” Chanh said.

At present, most of the area around Long Thanh Airport is meant for planting crops and dairy farming.

“Land funds around Long Thanh Airport are very large but investors need to carefully consider the status of the land and its market potential to avoid risks,” Chanh said.

With the decision from the government to set up Long Thanh Airport, the land’s attraction in the area has been skyrocketing on a daily basis.

Figures from the Vietnam National Real Estate Association show that a 100-square-metre land plot in the area is advertised for over VND1.5 billion ($65,000), double the price compared to six months ago. Some plots in the southern part of the region, which can used for services development in Bau Can and Tan Hiep district, are even more expensive.

However, the increase of the land prices in Dong Nai was not only caused by the construction of Long Thanh Airport, as many buyers have been rushing to neighbouring provinces amid a limited supply of new projects in Ho Chi Minh City.

Land plots in Long Thanh are now traded anywhere from VND18 to VND40 million ($800-1,700) per sq.m, with land plots located along the National Highway No.51, linking Vung Tau city and Dong Nai, offered from VND50-60 million ($2,200-2,600) per sq.m – prices equivalent to those in some areas of Ho Chi Minh City.

Full-fledged airport city could be in Dong Nai’s future

The ceremony to kick off construction of Long Thanh International Airport last week in Dong Nai province, 40km east of Ho Chi Minh City, marks bright prospects for developing the area as a whole into an airport city, and thereby pushing up the real estate market. 

The area around the future aviation hub will boast favourable conditions to become an airport city when Long Thanh International Airport is finally put into operation and the services system is developed, and it would be the first such so-called airport city in the entire country.

Long Thanh will be the largest ever airport in Vietnam, with total capital of up to $16 billion and annual capacity for 100 million passengers, and is being considered as a huge competitive advantage in economics, politics, culture, and tourism for Dong Nai compared to neighbouring provinces and beyond.

Over the years, the province has created convenient infrastructure, technology, and transportation systems. It now the hub of the eastern region of Ho Chi Minh City – and in addition, it has straightforward connections with other provinces such as Binh Duong and Long An, as well as the Cai Mep-Thi Vai port complex.

Apart from the government side, domestic and foreign enterprises will have to be mobilised for an airport city to eventually come to fruition.

There should be solutions to connect the public and private sector, and bind foreign and domestic investors as well as experts not only in Vietnam but overseas, while applying advanced models based on those found in Japan, South Korea, and Europe.

To solve the issues between public and private funding, the most important factor is still how to harmonise the benefits between economy and politics. In addition, there should be advisory groups to help provincial and government people's committees to achieve this project’s goals.

The transparency in mobilising investment capital sources from different sectors is seriously needed for this project.

In order to successfully set up a Long Thanh airport city, there will need to be a comprehensive master plan for developing Dong Nai as a whole, and attracting international investment.

Foreign investors will consider several aspects when considering pouring money into such a venture, including policy stability, financial capacity, local authority capacity to develop large-scale projects, and the long-term development prospects over the next few decades.

Once the airport is completed, the question of whether the project can become an airport city will depend on the determination of many generations of local authorities, under the direction of the central government.

Completing Long Thanh International Airport will not mean that we have reached the ultimate goal in the industrial and service sectors for Dong Nai – and we will still have to be in charge of how to entice more investors to the province as a whole.

Cavalcade of revisions to stimulate business

After a 2020 full of drastic changes by the pandemic, and shifts in global supply chains, the Ministry of Planning and Investment’s carefully crafted laws on some business and investment aspects may come at the right time to enable Vietnam’s domestic and foreign-invested enterprises to rebound and grow even stronger. 

The Law on Investment and the Law on Enterprises with provisions for public-private partnerships (PPP) are two important laws for Vietnam’s economy, which will be implemented this year.

In the draft decrees guiding the implementation of these laws, the Ministry of Planning and Investment (MPI) addresses the key issues in detail. “We are ready to receive comments from ministries and localities on implementing these laws effectively,” said Minister of Planning and Investment Nguyen Chi Dung at a conference last week.

According to Minister Dung, in the 2016-2020 period the system of institutions, laws, and policies in planning, investment, and statistics was continuously and comprehensively renovated.

The ministry submitted five laws for public investment activities and improvement of the business environment to the government and National Assembly – the amended Law on Public Investment, the amended Law on Investment, the amended Law on Enterprises, the Law on the Support of Small- and Medium-sized Enterprises, and the Law on Public-Private Partnership Investment.

Analysts said the documents drafted under the chair of the MPI show its pioneering role in proactively proposing reforms of the institutional system and policies towards creating a legal corridor for economic restructuring, the renewal of the country’s growth model, and the improvement of the allocation and mobilisation of resources for development investment.

Moreover, the laws will help promote the private economy and drastically innovate and improve Vietnam’s business environment.

The MPI also took the lead in innovating the mode of establishing the new laws by minimising the number of legal documents to facilitate a smoother implementation process for people and businesses.

During the last few months, the MPI has presided over the establishment and submission of a series of resolutions on improving the business environment and enhancing national competitiveness; and published several resolutions on business support and development and the simplification of regulations related to companies’ activities in the country.

Le Anh Quan, Vice Chairman of Haiphong People’s Committee confirmed that the new regulations and publications “are exactly what the people and the business community have been waiting for.”

Up to this point, the MPI has submitted a draft decree detailing and guiding implementation of several articles of the new Law on Investment, including on funding promotion and outward investments, and another decree prescribing the procedures for appraisal of projects of national importance as well as investment supervision and evaluation, based on related decrees.

Both documents are finalising the government’s orientation and will be submitted to the prime minister for signing this month.

Le Anh Duong, Chairman of Bac Giang People’s Committee, commented on the decree guiding the examination under the Law on Investment that, “The MPI has worked very quickly on the issues that our locality cares about and solved most of them. However, there remains one point to be clarified by the ministry.”

Clause 3, Article 33 of the new law provides the procedures for accepting an investment policy that requires assessment of the conformity of a project with national, regional, and provincial planning.

The law holds that projects that want a policy to be adopted must follow these plans, but in some cases, those plans are not approved, especially provincial ones.

Thus, while waiting for planning approval, a province may get stuck in the process as there is no legal basis to act on.


Bac Giang, one of the bright spots amid the economic recovery of the nation, led Vietnam’s growth with an exemplary rate of 13.2 per cent in 2020.

However, Chairman Duong said “the province is having difficulties” in implementing the tasks in the coming period. Currently, the province lacks the necessary land funds to attract further investment and ensure a continuous economic and social growth at that pace, even though Bac Giang had previously added more than 1,100 hectares of land.

“For example, we are currently hoping for the MPI to submit the approval of the Vietnam-Korea Industrial Park project in 2021 as soon as possible to the prime minister to start with its implementation,” Duong emphasised.

Besides the positive changes that the new law on PPP investment brings with it, updates on the laws on investment and enterprises also offer enticing regulations to suit the new situation of the country after the dramatic movements last year.

Many enterprises have just gone through a difficult time as operations stagnated or even failed entirely during the pandemic.

The new laws and policies, therefore, may be just what they need in order to facilitate the economic transformation of such businesses in the new year.

However, it has been pointed out that several additional decrees and guiding documents may be necessary to fully use the opportunities of the new laws and enable localities and the business community to understand and know how to apply them effectively and in the right direction.

Increasing the efficiency of tourism connectivity

Activities to boost tourism connectivity among localities have been fostered more than ever in a bid to address the difficulties imposed by the COVID-19 pandemic on the hospitality sector.

In only a short time, a number of conferences and fora have been held to link tourism development between Hanoi, Ho Chi Minh City and the north western, southwestern, central and southern provinces.

These activities have the common goal of promoting links between tourism management agencies, travel agencies, transport service providers, and accommodation establishments in an effort to create attractive products with high quality and reasonable prices.

This is a crucial task for the tourism industry at a time when Vietnam is yet to reopen its door to international visitors. Many memoranda and agreements have been made among tourism management agencies, associations, and businesses.

Localities have offered their best products to travel businesses to help them design new tours for visitors. Linkages between regions and areas make it easier for visitors to formulate their travel plans.

Localities in a same region share certain similarities in natural geography and features: the northwest region impresses visitors with its majestic natural landscapes, distinct cultural practices and superb cuisine from ethnic minorities; central provinces boast beautiful coastlines, the south-western provinces have the advantage of heavily laden fruit gardens, river-based tourist products, and folklore melodies.

These similarities led to the fact that when participating in tourism cooperation programmes, localities in the same regions offer the same products to travel agencies. For example, northern localities have tea, smoked meat, and tours to mountainous areas. This consequently leads to competition among the localities while making it difficult for travel agencies to build distinct tourist products for each locality.

Another inadequacy in promoting tourism connectivity is that they are not binding upon the signatories of the memoranda and agreements. The implementation of such documents has been reviewed only once a year rather than regularly in order to timely fix any problems arising.

In order to address the shortcomings, the Vietnam National Administration of Tourism needs to consolidate its role as coordinator and supporter for localities in implementing their commitments.

The localities themselves should collect opinions from experts and travel agencies in selecting their most representative tourist products which can make them stand out from others.

It is also necessary to establish a fund for facilitating tourism connectivity, which can help to allocate proper financial support to localities to promote tourism and develop products and linkages.

As Vietnam is doing well in its containment of the CODI-19 pandemic, it is expected the country’s tourism sector will gradually recover in 2021. In this context, enhancing connectivity between tourism service providers and promoting the role of major travel companies are both crucial factors for domestic tourism to reboot itself post-COVID-19. Therefore, more drastic measures are needed to remove the above-mentioned obstacles and increase the efficiency of tourism connectivity, thus enhancing the overall competitiveness of Vietnam’s tourism.

Thu Duc City’s office rent market emerges, supply set to take off

The emergence of Thu Duc City will set new borders for the appraisal and assessment of commercial markets, according to Alex Crane, managing director of Cushman & Wakefield Vietnam. 

Since there are major infrastructure projects in the offing, including the Thu Thiem 2 bridge, the expansion of the Hanoi Highway and the under-construction metro line, the draw to the east will increase in pace in the post-Covid-19 world, Crane said.

Thu Duc City’s GDP will be higher than that of Binh Duong and Dong Nai combined, according to research by Cushman & Wakefield. The new city will also become the launchpad for many businesses in these two powerful manufacturing provinces.

According to the research, the average rents in Thu Duc City are approximately VND700,000/sq.m per month compared to HCMC’s VND 920,000/sq.m per month.

Thu Duc City currently contributes only 2% of office inventory to the office market between Binh Duong and Dong Nai, with 26,000 sq.m of space over a handful of buildings, Cushman & Wakefield noted.

Within five years, the real estate consultancy firm forecast that an additional 390,000 sq.m of A & B quality office space is planned for the city, with the majority in the new Thu Thiem urban area. 

“If we look at the historic data of the new Thu Thiem City, office rents have risen faster than HCMC at an average of 9% per year versus 5% in HCMC,” Crane said. "So, the burst of new supply, particularly in the Thu Thiem area, will draw occupiers and create competition in pricing which will pressure it slightly in the first couple of years,” he added.

Thu Duc City, alone, is an important innovation and education area that will lead to high-tech jobs. And, it will, at the same time, raise a flag to investors as a center for investment into critical sectors, Crane said.

Restoring purchasing power poses significant challenge to local economy: experts

Experts and business executives agreed that one of the major challenges plaguing Vietnam’s economy this year is figuring out how to ensure the purchasing power recovers, after the Covid-19 pandemic hit the country and left many families financially weak.

Speaking on the sidelines of the Vietnam Economic Scenario Forum held in HCMC on January 11, Nguyen Xuan Thanh, lecturer at the Fulbright Vietnam University and a member of the prime minister’s economic advisory team, said that restoring the purchasing power in the domestic market remains the biggest challenge facing the local economy this year.

During the final months of 2020, the purchasing power slightly bounced back compared to the time when the first coronavirus outbreak hit the country and the national social distancing order was imposed, but it was still 19% lower than that recorded before Covid-19. The current purchasing power remains weak as consumers are spending less given their jobs and incomes being impacted by the public health crisis, Thanh continued.

For this year, supposing that the disease would be brought under control and consumer confidence could recover, consumers may continue to tighten their belts if their financial conditions see no progress, he added.

To recover the purchasing power, Thanh suggested that regulatory policies be mapped out to maintain macroeconomic stability and lower deposit and lending rates. Once lending rates are reduced, businesses and local residents would facilitate their consumption.

Also at the event, 27% of the participants, mostly business representatives, responded that the weakened domestic purchasing power remains the top risk to the nation’s economic growth this year. Besides, 33% said that the global supply chain disruption could be the main factor challenging the country’s growth.

Dang Hoang Hai Anh, senior economist of the World Bank in the United States, concurred that the domestic purchasing power is a crucial factor. He stressed that before the coronavirus outbreak, an economic growth model based on the domestic purchasing power had been tabled for discussion globally. For Asian nations such as Vietnam where saving rates are high among the local people, efficiently exploiting such sources of capital could help restore the purchasing power. While focusing on the domestic purchasing power, the Government and enterprises would need to include more measures to boost consumption.

Nguyen Bich Lam, former head of the General Statistics Office, also said the domestic purchasing power is the second most important factor for Vietnam’s growth in 2021, just after the disruption of the global supply chain.

HCMC to have additional 60,000 square meters of retail space

HCMC will have an additional 60,000 square meters of retail space this year with the reopening of the Union Square in District 1 and the launch of the Socar Shopping Mall project in District 2, according to a press release by property service provider CB Richard Ellis (CBRE) Vietnam.

From 2022, the supply of retail space will be mainly in the eastern and central parts of the city. CBRE predicted the city would have an extra 500,000 square meters of retail space in the next five years, Thanh Nien Online newspaper reported.

Besides catering, healthcare and beauty care services, supermarkets, fashion and accessory stores, some other sectors were expected to have a higher demand for retail space this year, such as showrooms for cars, household appliances and high-end goods.

Due to the impact of Covid-19, HCMC saw almost no new supply of retail space in 2020. Besides the flagship store of Uniqlo which was opened earlier, only the Parkson shopping center in District 1 was reopened in the last quarter with two key lessees -- MUJI and Kohnan.

By the end of last year, the city’s retail market had an area of more than one million square meters. The rentals of the retail space fell a slight 3%-5%. Some projects reported a higher reduction, at 8%-15%, due to a smaller number of shoppers and a 15% increase in the vacancy rate over the pre-pandemic period.

Meanwhile, the office-for-lease market continued facing difficulties as many enterprises have been hit by the pandemic. The market saw three new office buildings with a total area of more than 65,000 square meters last year, including the Friendship Tower, the UOA Tower and the Opal Tower.

By 2020, HCMC had more than 1.4 million square meters of offices to be leased, including 18 grade-A buildings and 68 grade-B buildings. As their vacancy rates increased 18.1% and 9.1%, respectively, the rentals declined.

In 2021 and 2022, HCMC will have more than 15,000 square meters of space to be leased, with the introduction of six new buildings—Pearl 5 Tower, Cobi Tower, The Graces, Saigon First House, Spirit of Saigon and Etown 6.

Inauguration of US$260 million solar power plant in Mekong Delta Province

The Sao Mai Group yesterday announced the inauguration of the Sao Mai-An Giang solar power plant in the Mekong Delta Province of An Giang with the attendance of province leaders. 

The plant was built in the area of 275 hectares in An Giang Province’s Tinh Bien District with total investment of over VND6 trillion (over US$260 million). The plant had a capacity of 104 Mwp in the first phase in June, 2019.
Now, with a total capacity of 210 Mwp, the plant is expected to generate nearly 400 million kWh of electricity to the national grid each year from 2021.

After two years of construction, the plant was connected to the national grid on December 2, 2020.

Beforehand, the Sao Mai group has re-operated the solar power plant in the Mekong Delta province of Long An’s Duc Hue District in June, 2019 with a capacity of 50Mwp.

According to the group’s plan, in the ten following years, the Sao Mai group’s plants will generate approximately 2.5 billion KWh of electricity annually.

Additionally, the group expected to convert vast solar fields into ecological gardens to attract tourists to the province.

Speaking at the inauguration of the plant, Chairman of An Giang province People’s Committee Nguyen Thanh Binh highly valued the group’s efforts for the past years as the group’s solar power plant in the border province Tinh Bien has helped to change the rural district’s face. Moreover, the group has contributed greatly to the province’s budget and offered more employment to locals in the countryside.

According to the chairman, An Giang has great potential for the development of renewable energy, including solar energy.

HCMC fixes selling prices of pork for Tet holidays

The Department of Finance of Ho Chi Minh City, on January 12, allowed enterprises participated in the market stabilization program to increase their selling prices of pork by VND6,000-VND15,000 per kilogram, up 4.1-10 percent per kg. It means that the department has already pegged the selling prices of pork during the Tet holidays and will keep them stable within the next 60 days. 

Accordingly, there are eight types of pork in the market stabilization program whose retail prices increased this time. Of which, the price of ham rose from VND145,000 to VND151,000 kg; that of pork shoulder from VND145,000 to VND158,000 per kg; that of pork loin chops from VND140,000 to VND153,000 per kg; that of pork shanks from VND129,000 to VND139,000 per kg; that of pork armpit from VND127,000 to VND137,000 per kg; that of pork shoulder and ham lean from VND175,000 to VND190,000 per kg; that of pork tail bone from VND103,000 to VND113,000 per kg; that of pork bones from VND77,000 to VND85,000 per kg.

Four enterprises in the market stabilization program that are allowed to increase their selling prices include Saigon Co.op, BigC, Vissan, and Saigon Agricultural Corporation (Sagri).

On the other hand, the adjustment of the selling prices of pork from January 12 still ensures that the prices of pork in the program are lower than the retail prices of the same products in the market.  The prices of pork will be stable within 30 days after the Lunar New Year, even in the case, the retail prices of live pigs and pork products on the market soar heavily.

In case the prices of pork decline, enterprises will have to increase promotions so that the selling prices in the program are always lower than those of the same products on the market by at least 5-10 percent. According to the Department of Finance, the remaining groups of goods in the program, including rice, poultry meat, poultry eggs, cooking oil, and sugar, stay stable.

* 50-percent reduction in market space rentals for small traders

The office of the People's Committee of HCMC announced that Mr. Nguyen Thanh Phong, Chairman of the municipal People's Committee, approved the policy of reducing 50 percent of stall rentals at city-based traditional markets during the period from July to December 2020 as proposed by the Department of Industry and Trade. This department is assigned to take responsibility and coordinate with the Department of Finance to guide the People's Committees of districts to implement the policy.

During the implementation of measures to control the Covid-19 pandemic, the purchasing power in traditional markets plummeted sharply by 50-80 percent, causing small traders to face several difficulties. The reduction of 50 percent in the stall rents aims to support small traders to overcome difficulties caused by the Covid-19 pandemic, reorganize their business activities, as well as prepare goods to serve the upcoming peak shopping season.

State-owned firms urged to preserve State capital in pandemic context

In a market-based economy, all economic actors compete fairly with each other, while state-owned enterprises (SOEs) are independent and accountable for their own performance, Deputy Prime Minister Truong Hoa Binh has said.

Major state firms are required to preserve and expand their respective state capital during the Covid-19 pandemic.

Deputy Prime Minister Truong Hoa Binh made the statement at the year-end conference of the Committee for State Capital Management (CSCM), dubbed as the super committee, on January 11.

“Vietnam’s leading state-owned corporations should excel at their respective fields and be capable of competing with other economic components,” stated Mr. Binh, saying they should realize the role of being the “big fist” of the state economy.

In 2020, 17 out of the total 19 state-owned corporations under the administration of the CSCM paid VND56 trillion (US$2.42 billion) in taxes, up 12% against the year’s plan. The group posted a combined revenue of VND767.8 trillion (US$33.22 billion) and pre-tax profit of VND21.06 trillion (US$911.4 million).

According to Mr. Binh, the CSCM should focus on its role as the representative of state capital at enterprises, while each of the group or corporation is responsible for their own business plans.

“State-owned enterprises (SOEs) are independent and accountable for their own performance. In a market-based economy, all economic actors compete fairly with each other,” stated Mr. Binh.

The Deputy Prime Minister requested the CSCM to continue setting up set of criteria to evaluate the performance of SOEs in compliance with international standards, in which economic efficiency should be the priority.

In 2021, Mr. Binh expected the CSCM to soon approve the development strategy for all 19 corporations, while pushing for the privatization and divestment of state capital. So far, major state corporations have divested a total of VND2.42 trillion (US$104.7 million) in proceeds from 16 subsidiaries, representing a nearly four-fold increase from its book value.

“State firms should be the pioneers in innovation and digital transformation,” he added.

Meanwhile, one of the key tasks in the coming time for the committee is to resolve loss-making projects that continue to be a burden of the economy.

Launched in September 2018, the CMSC is tasked with managing state capital at 19 leading state-run groups and corporations with a combined capital of VND1,000 trillion (US$43.02 billion) and assets of over VND2,300 trillion (US$98.96 billion). These include major names such as the state investment arm State Capital Investment Corporation (SCIC), Electricity of Vietnam (EVN), and Vietnam Oil and Gas Group (PetroVietnam).

Vietnam curbs illegal timber import following US probe

Hanoi doubles fine and applies the maximum prison sentence of 10 years for violators of illegal timber trade.

The Vietnamese Government is cracking down on illegal timber imports from countries such as Laos and Cambodia after the US initiated investigation on the allegation of Vietnam’s illegally-harvested or -traded timber.

The Government has doubled its fine for such activities to about US$22,000 with the jail sentence as long as 10 years, according to Do Xuan Lap, chairman of the Vietnam Timber and Forest Product Association.

In another move, Vietnam has been buying more timber from the US, Mr. Lap said in a recent interview with Bloomberg. He said the import might increase by 15% this year.

Meanwhile, Nguyen Do Anh Tuan, the spokesman for the Ministry of Agriculture and Rural Development said Vietnam bought about 40% of its timber from the US in 2020.

In early October, the US Trade Representative (USTR) announced the timber investigation.

“A high tariff will seriously damage our wood industry, but it will also hurt US companies,” Mr. Lap said.

A 25% US tariff on Vietnamese wood products will “devastate” the industry and its 10,000 workers," he noted.

The US is the biggest market for Vietnamese wood products, representing an estimated US$6.5 billion in 2020, about half of the nation’s total agricultural shipments to America last year, said Mr. Tuan.

Vietnamese wood-furniture makers, whose customers include Walmart Inc. and Ashley Furniture Industries Inc., will buy as much as 1.3 million cubic meters of wood in 2021, up more than 60% from that in 2019, according to Mr. Lap.

In a phone talk with US Trade Representative Robert Lighthizer last week, Vietnam’s Minister of Industry and Trade Tran Tuan Anh said the investigation could cause many undesirable effects, damage bilateral relations, and have negative impacts on thousands of businesses, and millions of workers and consumers in Vietnam and the US.

There is room for stronger reforms: VCCI 

There is still significant room for stronger reforms to create a more favourable business environment and make Việt Nam among countries with the best business environment in ASEAN, according to the Việt Nam Chamber of Commerce and Industry (VCCI).

VCCI’s Chairman Vũ Tiến Lộc spoke at an event on Tuesday to announce the report about Việt Nam's business regulations in 2020, saying that Việt Nam was among few countries reporting positive economic growth last year.

Lộc said drastic efforts in hastening institutional reforms and improving policies and mechanisms for enterprises helped the Vietnamese economy overcome difficulties as the COVID-19 pandemic heavily affected every socio-economic field.

The report, which looked at notable business regulations in 2020 with a focus on market entry and the legal framework for the digital economy, revealed that there were 17 laws, 158 decrees, 39 decisions and 310 circulars issued last year.

The number of circulars issued strongly decreased compared to previous years, which reflected that the quality of legal documents improved significantly, thus, it would not be necessary to issue too many circulars to provide instructions, VCCI pointed out.

About 55 per cent of opinions of businesses were received and responded to, compared to 44.08 per cent in 2019 and 42.51 per cent in 2018, the report found.

“Policy-makers are paying more attention to enterprises’ opinions,” the report wrote, adding that the management thinking of policy-makers was witnessing renovations in recent years.

The current business legal system was not perfect, VCCI said, however. Some legal documents issued in 2020 still put in place unnecessary regulations which caused difficulties for businesses.

Đậu Anh Tuấn, Head of the VCCI’s Legal Department, said that there were still overlaps, inconsistencies and a lack of transparency in existing legal documents.

Some inspections were also causing burdens and delays for enterprises.

Tuấn said the existing overlaps, inconsistencies and lack of transparency required stronger reforms to be carried out with a drastic spirit to create the most favourable business environment for enterprises and position Việt Nam among countries with the best business climate in ASEAN.

The management thinking must be renovated in the trend of rapid and intensive international integration to raise transparency and develop practical regulations which serve enterprises in an effective way, Tuấn said. 



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