VIETNAM BUSINESS NEWS JUNE 24

Aquatic exports to China plunge amid COVID-19 threats

VIETNAM BUSINESS NEWS JUNE 24

Vietnamese seafood exports to China in April suffered a decline of 11%, and this downward trajectory continued in May with a fall of 22%, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

While major markets such as the United States and the EU have reopened and moved to increase imports of seafood products from Vietnam, China has recently tightened their inspection over frozen seafood products from other countries as part of efforts to prevent the potential spread of the SARS-CoV-2 virus.

This has caused Vietnamese seafood exports to the market to experience a rapid decline over the past two months.

Most notably, aquatic exports fell sharply in all major product groups, including shrimp, down 35%, other fish species, with the exception of tuna, down 23%, and pangasius, down 5%.

The impact of the pandemic coupled with China's latest tight policy has led to turnover of frozen products to drop sharply, while the export of dried and processed goods has enjoyed an upward trend.

VASEP data show seafood exports to China over the past five months have decreased by 6% to US$405 million.

Bac Giang applies drastic measure to lure investment

The northern province of Bac Giang is applying measures to implement its investment promotion programme for 2021 with an aim to attract about 1.3 billion USD worth of investment in 2021, said Chairman of the provincial People’s Committee Le Anh Duong.

The provincial leader said that in the area of industry, the province will prioritise projects with a high proportion of high, new, green and energy-saving technology, using domestic materials and having commitment to technology transfer and labour training, and making great contributions to the province’s budget revenue.

The northern province has designed particular areas for projects in different fields, including industry, agriculture, tourism, services, urban areas, logistics, entertainment and health care, he said.

Accordingly, projects in electronic industry will be placed in industrial parks (IPs) and industrial clusters in Viet Yen, Tan Yen, Hiep Hoa, Yen Dung and Lang Giang districts as well as Bac Giang city. Priority will be given to projects producing computers, peripheral devices, semi-conductor accessories and accessories for electronic household appliances, mobile phones, and products for export and joining global value chains.

Bac Giang aims to attract about 1.3 billion USD worth of investment in 2021. Illustrative image (Source: VNA)
Meanwhile, garment projects will be located in planned IPs and industrial clusters, while electricity and manufacturing projects will be placed in new IPs and industrial clusters in Hiep Hoa and Yen Dung areas, and agro-forestry and food processing projects in Luc Ngan, Luc Nam and Hiep Hoa districts.

In the field of agriculture, Bac Giang will encourage investment in large-scale, green agricultural projects using high and environmentally-friendly technologies.

In trade-service sector, the province aims to lure investment in developing service-urban areas, thus forming a number of national tourist sites. Urban areas, trade centres, high-end hotels and entertainment centres, as well as projects in logistics, financial, insurance and health care sectors will be developed in Bac Giang city, while a number of resorts will be built in Lang Giang, Luc Ngan and Luc Nam districts.

Bac Giang will also encourage investors to develop tourism projects as well as trade centres, supermarkets, rural markets, retail and wholesale chains, resort and eco-tourism, sport and entertainment complexes and hi-end service-hotel areas in Bac Giang city.

In order to optimise advantages of each region, in 2021 and beyond, Bac Giang will focus on calling for investment projects in particular regions, with the core being areas along the National Highway 1A and Bac Giang city.

For foreign-invested projects, Bac Giang will strive to lure partners which have global brands with great financial capacity and long-term operation, and projects in supporting industries. Meanwhile, the locality will not encourage those without long-term investment commitment or depending on borrowed capital and using a large number of labourers and outdated technologies.

For domestically-invested projects, the province will call for investment from businesses in the list of 500 largest firms of Vietnam (VNR500), especially in areas of agriculture, trade and services.

Nguyen Cuong, Deputy Director of the provincial Department of Planning and Investment, said that in the first two months of 2021, Bac Giang attracted over 588 million USD in investment, 4.5 times higher than that in the same period last year.

Notably, the province granted investment licences to a number of large projects, including 270-million-USD Fukang Technology Factory invested by Foxconn Singapore PTE Ltd, and a 210 million-USD Ja Solar PV Vietnam project funded by Ja Solar Investment (Hong Kong) Limited.

Recently, the Prime Minister has agreed to build three industrial parks and expand three others in Bac Giang province.

In 2020, Bac Giang granted new licences and permitted additional investment to 215 projects with total registered investment of nearly 1.4 billion USD, up 7.3 percent year on year, rising to the ninth position among provinces and cities nationwide in FDI attraction./.

Construction of major ecotourism site begins in Thanh Hoa

A ceremony to kick-start the construction of an ecotourism project worth more than 3.66 trillion VND (159.61 million USD) took place in Nghi Son township of the north central coastal province of Thanh Hoa on June 23.

The project, covering 84.8 ha, is invested by the T&T Group.

The site will have beachfront villas, a five-star hotel, a shopping area, a golf course, pedestrian zones and recreation facilities, among others.

It is hoped to become a driving force for socio-economic development of the locality and surrounding regions, especially in creating a chain of tourism sites along Thanh Hoa’s coastline.

The first phase of the project is set to complete in October next year and the entire project will be operational in May 2024.

Speaking at the ceremony, Vice Chairman of the provincial People’s Committee Nguyen Van Thi spoke highly of efforts and cooperation between the investor and relevant agencies in land clearance and meeting requirements to carry out the project against the backdrop of COVID-19.

He asked the local authorities to continue helping the investor address bottlenecks in terms of land and legal procedures, as well as support local people affected by the implementation of the project.

The T&T Group was requested to ensure progress and quality of the project in compliance with regulations./.

Vietnamese lychees reach EU consumers through e-commerce platform

More than three tonnes of lychee from the northern province of Bac Giang has been exported to Germany via the e-commerce platform Voso.

The Vietnam E-Commerce and Digital Economy Agency under the Ministry of Industry and Trade said this is the first time Vietnam’s agricultural products have been shipped to Europe through the “cross-border e-commerce” model on an e-commerce platform developed and operated by the Southeast Asian nation.

Sponsored by Viettel Post, Voso launched its Voso Global last March, offering high-quality Vietnamese farm produce to consumers in foreign markets, especially overseas Vietnamese.

The platform has optimised Viettel Post’s smart logistics system to deliver the fruit that satisfies GlobalGap standards to German customers.

More farming products are expected to be put on the platform in the time ahead, thus serving consumers both at home and abroad.

The Department of E-commerce and Digital Economy has supported Voso to create Vietnamese and English versions of its website./.

VAFI proposes to gradually send deposit interest rate to zero percent

The Vietnam Association of Financial Investors (VAFI) has recently made a proposal on deposit interest rates. According to VAFI, deposits in VND for short and medium terms are from 3.5 percent to 6.2 percent per annum, which is extremely high compared to other countries, leading to high lending interest rates, causing disadvantages for enterprises and a large number of low- and middle-income consumers.

According to VAFI, Vietnam's economy has solid premises to gradually bring the deposit interest rate to zero percent per annum, such as political stability, fast-growing economic development, and double-digit export growth.

Moreover, Vietnam is in the position of a country with a trade surplus and earning a huge amount of foreign currency annually, thanks to continuous export growth. It receives tens of billions of US dollars of overseas remittances every year.

Foreign currency reserves at the State Bank of Vietnam continued to increase sharply. Vietnam’s stock market has prospered despite the Covid-19 pandemic. The bond market has also developed rapidly and is gradually attracting individual investors to participate.

To gradually bring the deposit interest rate to zero percent per annum, VAFI proposes some solutions, including limiting the speculative cash flows into the real estate market and applying progressive property tax collection from the second house onwards at a low enough level to prevent speculative cash flows then gradually increasing as other countries.

Profuse real estate lending on alert

Loans related to real estate-backed collateral and build-operate-transfer projects are classified as among the riskiest and largest portion of banks’ portfolios, which might require restrictive approaches on quantitative quotas.

Non-performing loans (NPLs) stemming from build-operate-transfer (BOT) projects are another roadblock for lenders and the domestic economy, according to National Assembly (NA) Chairman Vuong Dinh Hue at last week’s NA Standing Committee meeting.

“The NPLs from the BOT credit package for the National Highway No.1A are a formidable obstacle,” Hue said. “According to the latest data, the NPL ratio exceeds 2 per cent, mainly because the new regulations have offered favourable conditions for banks to reschedule, reclassify, and restructure debts. When the State Bank of Vietnam’s (SBV) Circular No.03/2021/TT-NHNN, on additional conditions for debt restructuring and extending the roadmap for restructuring debts provisions until 2023 expires, the NPL ratio will be higher.”

Hue also questioned the SBV about the issue at the meeting. “BOT highway projects will need more than VND300 trillion ($13 billion) of capital in 2022. Where will this money come from?” he asked.

According to Michael Kokalari, chief economist of VinaCapital, infrastructure spending surged by 35 per cent in 2020 to $20 billion or 6 per cent of GDP, and likely grew by a further 16 per cent on-year in the first half of 2021.

Next month, the Vietnamese government is set to formalise a plan to increase its infrastructure spending over the next five years by 38 per cent to $120 billion, compared with its aggregate infrastructure spending over the 2016-2020 period.

Meanwhile, Vietnam’s policymakers have been keeping a keen eye on the real estate sector in recent years, with activity accounting for 5-15 per cent of GDP in Southeast Asia, and 8 per cent in Vietnam, according to HSBC.

“The memory of the housing bubble in the 2007-2012 period, which ultimately led to a prolonged banking crisis, looms large in the collective conscience,” noted Yun Liu, economist at HSBC. “Even after a gradual recovery, real estate loans continue to account for a large proportion of bank balance sheets. While some banks do not have a specific classification of loans to the real estate sector, balance sheets of the four largest state-owned banks (Agribank, Vietcombank, VietinBank, and BIDV) reveal a key linkage with the associated construction sector.”

At the 10 largest banks in Vietnam, real estate loans account for roughly 70 per cent of the total value of collateral-based loans.

At Agribank and ACB, real estate collateral loans make up for 89 and 94 per cent, respectively. While lower than at other private banks, property-backed loans are also at high level, making up 69, 66, 68, and 84 per cent of the loan portfolios of VietinBank, Vietcombank, BIDV, and Sacombank.

The increasing appetite for the property sector is driven by an accommodative monetary policy that offers low interest rates and abundant liquidity.

Meanwhile, it is also driven by a sharp rise in the price of luxury condos, growing 9 per cent on-year in 2020 versus a 4-5 per cent on-year price increase in the mid-end and affordable segments.

Liu of HSBC also added that demand for luxury and high-end properties remains elevated, with their market share increasing from less than 30 per cent of total units sold in 2019 to more than 70 per cent in 2020. Foreign direct investment data reveals that even though new inflows into the real estate sector increased more than 200 per cent on-year as of May, such investment was largely concentrated in manufacturing.

Meanwhile, market watchdogs cautioned that property-backed credit is among the riskiest segments. The rapid growth of credit since the beginning of 2021 was cited as the main reason. By mid-April, total credit growth reached more than 15 per cent on-year.

“This is not the first time that the central bank has tightened its control over the property market to mitigate risks. The SBV has historically preferred to use macro-prudential policies to curb credit lending to the sector, targeting real estate developers rather than mortgage borrowers, as Vietnam still has a low mortgage penetration rate in ASEAN,” Liu explained.

Mortgages account for 40-90 per cent and of total household debt in the region, but the ratio is only about 25 per cent in Vietnam, according to the International Monetary Fund. Evidently, tightening the ratio of short-term funds that banks could use to fund medium- to long-term projects is one of the main tools.

The SBV is facing a delicate balance of curtailing excessive credit lending to real estate developers while reducing imminent COVID-19 risks to the sector, with it also being an increasing source of growth. Last year, the SBV delayed a roadmap to tighten capital requirements for an additional year.

Hai Duong greenlights three new industrial clusters

The Hai Duong People's Committee has approved the establishment of three new industrial clusters with a combined investment capital of more than VND1.7 trillion (US$75 million).

The Quang Trung, That Hung and Binh Giang 1 industrial clusters are projected to cover a total area of ​​nearly 210ha.

Financed by the Ha Noi-based Hyosung Vietnam Real Estate JSC, the 74.5ha Quang Trung Industrial Cluster in Quang Thanh Commune has an investment capital of VND515 billion and the 75ha Binh Giang 1 Industrial Cluster in Nhan Quyen Commune will cost VND470 billion.

Meanhwhile, the 60ha That Hung Industrial Cluster in That Hung Commune, will be developed by Nha Viet HD Group JSC in Hai Duong City, with a total capital of more than VND756 billion.

The three industrial clusters aim to attract firms in several industries, including agricultural and food processing, handicrafts, mechanical engineering, consumer good production and supporting industries.

It is expected that these zones will be finished within 36 months from the date of the investment decision.

Secretary of the provincial Party Committee and Chairman of the provincial People’s Council Pham Xuan Thang told a recent meeting that Hai Duong always stood side by side with businesses and would create the best possible conditions for investors in industrial zone infrastructure to build facilities and attract secondary investors, generating economic benefits for businesses and the province.

The province is now home to 14 zones with a total area of 2,567ha. Among them, 11 have had their infrastructure completed with an average occupancy rate of 82 per cent. They are home to more than 300 projects from 21 countries and territories, including 235 foreign direct investment projects worth more than $4.7 billion and 64 Vietnamese projects worth $772 million.

Thang said apart from developing industrial zones, Hai Duong would also step up investment promotion, improve its business climate and competitiveness, and attract investment in a more selective manner. 

Retailers join hands for Govt’s dual goal of containing COVID, boosting economy

A message from a woman in Ha Noi, Pham Hoa, saying “I have bought all foods and necessary stuff through zalo” has excited many of her friends in recent days, especially those in HCM City, where a semi-lockdown and social distancing continues for a fortnight.

In recent weeks, after a new wave of the COVID-19 pandemic began, buying food and other essential goods for the house while still complying with the Ministry of Heath’s 5K message (Khau trang [facemask]- Khu khuan [disinfection] – Khoang cach [distance] – Khong tu tap [no gathering] – Khai bao y te [health declaration]) to protect themselves and their families is a common concern for housewives.

Buying goods through zalo, the free messaging app, is not totally new but it was used only by small companies and sellers.

But during the social distancing now it has been adopted by large retailers too.

In Hoa’s case, she bought goods from MM Mega Market, a giant wholesaler with a presence around the country.

“As soon as I send a message asking for things I want to buy, they reply and then ship products to my door.”

She said each MM Mega Market store has its own zalo number, and “You can easily buy food and other stuff.”

MM Mega Market’s zalo order indicates clearly that retailers are making every effort to join hands with the Government to successfully achieve its dual goal of containing the outbreak and keeping the economy on track.

Ensuring adequate supply of goods and diversifying the purchasing methods and shopping experiences are among a series of effective measures retailers have taken.

Besides, thanks to all this, customers can buy stuff while maintaining the mandated social distance, and merchants are able to earn some income.

Speaking to Viet Nam News, MM Mega Market said it was boosting multi-channel sales to offer its customers convenient and safe shopping amid the pandemic.

“MM Mega Market is making every effort to join hands with the Vietnamese Government and businesses to achieve the dual goal of containing the outbreak and keeping the economy on track,” Tran Kim Nga, foreign relation director at MM Mega Market, said.

Shopee, the country’s top e-commerce platform, announced to see an increasing number of consumers using e-commerce amid the pandemic.

To help customers and merchants, it has launched a number of promotional programmes for essential items.

A programme called ‘O nha khong kho, Ship Shopee lo’ offers many products with a 50 per cent discount and, more importantly, free delivery.

It has been around for weeks and will continue.

Through another programme, ‘Shopee Mart-Sieu Thi 0 dong tai nha’, the platform offers a number of promotional programmes on foods, products protecting health and essential goods with free shipping.

“We have worked closely with brands and sellers during this period to ensure that we offer buyers a wide selection of genuine products ranging from everyday items to high-end items that satisfy their needs,” a representative of Shopee told Viet Nam News.

“At the same time, to help brands, sellers and businesses overcome difficulties caused by the epidemic, we have also rolled out many benefit packages. There are many free benefits for the seller.”

"Shopee is strengthening its logistics system," he said.

“We are working closely with our transport partners and are optimising the operation of our warehouse system,” he explained.

“These enable sellers and brands to be more efficient at fulfilling orders, allowing them to maximise sales and improve customer satisfaction even during peak shopping time.”

To keep customers amused amid social distancing, many e-commerce platforms also combining shopping with entertainment programmes.

 

Home entertainment has become a new form chosen by people across the country.

E-commerce platforms have constantly updated many forms of online entertainment such as game stores and interactive live-stream to amuse users.

For instance, the Lazada Supershow at the beginning of this month attracted 17 million views, two million views on the Lazada app, a record number in the region, underlining the fact that Vietnamese users are embracing online shopping platforms for home entertainment.

Lazada said the number of customers following LazLive during its summer festival, a function of livestream sale, increased four times year-on-year. The total value of orders on this channel increased 19 times.

In addition to helping customers, Lazada also supports SMEs with e-commerce to help them overcome the pandemic-related difficulties.

It helps farmers sell their produce on its platform.

Each sector and company is making an effort to join hands with the Government in the fight agaisnt COVID, all with different plans but the same goals.

Policy support needed to boost business growth: insiders

Without a more effective business support package, the country’s goal of 6.5 per cent in gross domestic product (GDP) growth for this year will be hard to achieve as growth in the first six months of 2021 is forecast to reach only 5.8 per cent, according to experts.

Nguyen Xuan Phu, Chairman of Sunhouse Group, said that like many other large firms, Sunhouse hoped to receive support in terms of policies rather than financial assistance.

The country currently has about 500 large-scale enterprises that contribute 60-70 per cent to the State budget, making it impossible to provide a common support package for all of them, noted Phu, stressing that policy support would be much more effective.

"Businesses need a smoother mechanism and more simple administrative procedures so that they can focus on production, as COVID-19 has created development opportunities for many firms," said Phu.

Meanwhile, Than Duc Viet, General Director of May 10, another big firm, said that the current support package had yet to help businesses overcome difficulties although many areas were eyeing opportunities due to recovering demand in the world market.

Viet said that in 2020, May 10 and other firms in the garment-textile sector faced difficulties in both input and sales. In 2021, the situation had changed completely with abundant orders.

About 90 per cent of the company’s products are exported to the US, the EU and Japan with orders enough for production until the end of this year, but without favourable mechanisms and policies to help businesses attract labourers and protect them against COVID-19, the firms will struggle to fill their orders, according to Viet.

Although the number of COVID-19 cases has exceeded 13,500, Viet Nam is still considered one of the most successful countries in the world in pandemic control.

Nguyen Duc Kien, head of the Prime Minister’s economic advisory team, said that Vietnamese firms were eyeing great opportunities in the world market as other large suppliers such as India, Bangladesh and Myanmar were struggling with the rising case numbers.

The current fiscal, monetary and social security support is no longer suitable for large firms, and it is necessary to design another support package with a focus on policy, according to Kien.

Kien added that it was a great chance for Viet Nam to increase foreign direct investment (FDI) attraction. Along with the effective control of the pandemic, it was crucial to design new and stronger support policies to promote economic growth and complete the target of at least 6.5 per cent GDP growth this year and the following years, stressed Kien.

Deputy Minister of Planning and Investment Tran Quoc Phuong said that the pandemic had changed the mindset of many big and strategic investors on the formation of a production hub to diversify supply chains and distributing the supply chains around the globe, including in Viet Nam.

According to Phuong, the support package for FDI companies cannot be the same as for small and medium-sized enterprises, but it is necessary to give breakthrough policies and mechanisms.

“We should not organise traditional roadshows or trade promotion events in other countries. So how we can persuade investors to pour a large amount of capital into Viet Nam without having to visit the country? To do so, we must give another support package with assistance in policies and mechanisms,” stated Phuong.

Garment-textile exports hit US$15.2 billion in five months: VITAS

Export revenue of the garment and textile sector surged 21.2 per cent year on year in the first five months of 2021 to about $15.2 billion, according to the Viet Nam Textile and Apparel Association (VITAS).

The association reported that fibre and yarn exports during January-May soared by 60.1 per cent year-on-year to $2.1 billion, while that of fabrics also increased 26.4 per cent to $947 million.

In the period, Viet Nam spent more than $10.2 billion on importing materials for the garment and textile industry, representing a 33.4 per cent increase over the same period in 2020.

The Ministry of Industry and Trade attributed the growth to positive signals from the country’s major export markets as well as domestic businesses’ effective utilisation of opportunities from free trade agreements (FTAs) which have been signed and put into effect.

The US remained the largest importer of Viet Nam’s garment and textile products with a value of $6.02 billion, up 24.4 per cent from the same period in 2020 and accounting for 49.2 per cent of the sector’s total revenue.

Japan was the second largest customer with $1.31 billion (down 6.3 per cent), followed by the European Union with $1.21 billion (up 14.7 per cent) and the Republic of Korea at $1.07 billion (up 4.2 per cent). 

Steel prices in Vietnam continue falling

Many steelmakers in Vietnam have slashed the steel prices for the second time since June 7.

The prices of rolled steel products have dropped by VND600,000 (USD26.08) per tonne, while the decrease for steel bars is VND200,000 per tonne.

Before June 7, steel products in Vietnam saw price hikes for quite a long time.   

Lao Dong Newspaper cited Hoang Tung from the AZ Thang Long Construction Management Board as saying that the construction sector's falling demand was among the major causes of lower steel prices.

The peak time for Vietnam’s construction sector is often in the first and last three months of the year. Meanwhile, June and July are the rainy season so fewer construction sites are carried out during this time.

Steel prices on the world market have tended to decline, which has also contributed to the fall in domestic steel prices.

Steel prices in the domestic market increased by up to 45% in recent months. The Ministry of Industry and Trade’s Industry Agency said that the input costs of the steel industry largely depended on the prices of raw materials in the global market which saw whopping increases between January and May this year.

Vietnam was reliant on imported raw materials for steel production, including iron ore, scrap steel, fat coal and graphite electrodes.

The agency also pointed out that the delays in shipping due to the impact of the pandemic also pushed up steel production costs.

Hanoi welcomes 2.9 million visitors in first half of 2021

Hanoi received about 2.9 million tourists in the first six months of 2021, mainly domestic visitors, a year-on-year decrease of 25%, according to the municipal Department of Tourism.

Total tourism revenue from domestic tourists was estimated at VND8.1 trillion, down 57% as compared to the same period last year.

Despite the numerous difficulties due to the fourth outbreak of the COVID-19 epidemic, in the first half of 2021, Hanoi’s tourism sector performed a number of important tasks, with a focus on the restructuring of new tourism products and attracting domestic tourists.

In addition, the municipal Department of Tourism has submitted to the Hanoi City People’s Committee its concept design documents, the design and production of tourist sign systems, brand identity kits and tourism logos for craft villages.

Hanoi also successfully organised a conference to build products to stimulate domestic tourism with the participation of hundreds of transport, travel agencies, hotels, tourist sites in the city; and coordinated with the Hanoi Tourism, Trade and Investment Promotion Centre to organise the Tourism Stimulation Festival in 2021 and introduce Hanoi's culinary culture, among others.

Electricity demand outgrows supply in northern Vietnam

The demand for electricity in the northern region is steadily increasing while only a few large-scale electricity projects started construction or made it in the pipeline in recent years.

In mid-June, Electricity of Vietnam (EVN) and a consortium of contractors comprising of Japan's Mitsubishi Corporation, Hyundai Engineering and Construction Co., Ltd. (HEC) of South Korea, and Construction Corporation No.1 of Vietnam signed a contract on a bidding package of Quang Trach 1 thermal power plant in the central province of Quang Binh.

The VND30 trillion ($1.3 billion) engineering, procurement, and construction (EPC) contract includes the construction of two turbines with a combined designed capacity of 1,200MW and thesupporting infrastructure. The first turbine’s construction is expected to be completed within 42 months and the second one would be finished within 48 months from the day that the contract comes into effect.

With the construction plan of Quang Trach 1 thermal power plant, until early 2025, only 600-1,200MW will be added to the national grid.

The initial investor of Quang Trach 1 thermal power plant project was PetroVietnam. In 2016, EVN replaced PetroVietnam as the investor.

The problem is that EVN took five years to deal with problems related to investment procedures and it would take nearly five years to complete the construction, thus the total time for completing the 1,200MW thermal plant is 10 years.

Since 2016, a few large-scale power generation projects in the northern region either started construction or went into commercial operation. These include the 600MW Thang Long thermal power plant, the 600MW Thai Binh 1 thermal power plant, the 1,200MW Hai Duong thermal power plant. The 1,200MW Nghi Son 2 thermal power plant is expected to start commercial operation in 2022. The construction of these projects also took a long time.

EVN – the key unit in charge of developing power plants – did not even begin construction of any power plants between 2016 and the end of 2020 despite numerous projects waiting for construction. Until January 2021, the construction of the expanded Hoa Binh Hydropower Plant was kicked off, however, it would take at least three years to complete the construction.

In addition, despite Quang Trach 2 thermal power plant having its investment planning approved in February 2021, it will take a few years to complete the investment procedures.

Although a lot of renewable energy projects in the central and southern region come into operation, they cannot meet the electricity demand of the northern region due to the limited capacity of the 500kV transmission system.

CIT bonus dangled to lure high-tech groups

Foreign-invested enterprises could be set to enjoy a relaxation in corporate income tax payments in Vietnam, if they pay enough attention to research and development as well as high technology.

The Ministry of Planning and Investment (MPI) is drafting a decision in which research and development (R&D) is one of the criteria for foreign-invested enterprises (FIEs) to enjoy the special incentives. This fits with Resolution No.50-NQ/TW on orientations to perfect mechanisms and efficiency of foreign investment by 2030, in which the ratio of enterprises using advanced technology and protecting the environment towards is targeted to be 50 per cent by 2025, and 100 per cent by 2030.

In order to enjoy a ‘honeymoon’ corporate income tax (CIT) rate for a few decades, FIEs should spend around 0.5-2 per cent of their annual profit on R&D, and the ratio of labour in R&D among the total employees of the FIE should be 1-3 per cent.

“This is expected to create promising land to develop Vietnam as a high-tech hub and lure much more foreign direct investment,” said Do Nhat Hoang, director general of the MPI’s Foreign Investment Agency.

According to Circular No.78/2014/TT-BTC released in 2014 on guiding CIT, CIT has been set at 20 per cent since 2016. However, according to the Law on Investment, high-technology FIEs like Samsung, LG, and Intel have been applied special incentives on the tax.

Setting foot in Vietnam in 2009, Samsung enjoyed a 10 per cent CIT only, with an exemption for up to four years and a 50 per cent CIT reduction for up to nine subsequent years under the law on CIT. After that the company will continue enjoying the same CIT cut within the next three years, according to the People’s Committee of the northern province of Bac Ninh home to Samsung projects worth over $9 billion.

“When the decision on special incentives that the MPI is drafting is adopted by the prime minister, if any FIE develops new projects in Vietnam that meet criteria related to high technologies and R&D, they will be able to enjoy the best incentive of 5 per cent CIT for 37.5 years,” the MPI representative emphasised.

Specifically, the draft proposes 5 per cent during that timeframe to be the best CIT for FIEs if the business line is classified as high technology, or revenues of high-tech products make up at least 90 per cent.

Besides that, annual total expenses for R&D (including depreciation of infrastructure and assets, annual recurrent expenditure on R&D, training, and royalties) in annual total profits must be at least 2 per cent. Employees in the R&D department should be at least 3 per cent of the corporation’s total employees.

If the proportion of high-tech product revenues reduces to 70-80 per cent, investing into R&D to 0.5-1 per cent, and employees in R&D to 1-2 per cent, the FIE shall enjoy CIT at 7 per cent for 30 years or 9 per cent for 20 years, according to the draft.

“The more investment into high technologies and R&D is, the less CIT businesses shall have to pay,” Hoang said, noting that the MPI and the government hope to launch the new policies soon to welcome new investment as much as possible.

He also mentioned the case of Austrian high-end circuit board manufacturer AT&S, after its CEO recently announced it had chosen Malaysia to locate its first production plant and R&D centre in Southeast Asia. The new plant will have $2 billion investment and create 5,000 high-tech jobs.

Previously, in March, AT&S COO Ingolf Schroeder arrived in Vietnam and met with State President Nguyen Xuan Phuc to share the company’s plan of setting up a new plant in the region, possibly in Vietnam. However, the current foreign investment mobilisation policies of Vietnam were not deemed attractive enough for the company to follow through.

“The requirements on high technologies and R&D that are being drafted in the decision are not hard for such technology giants to follow. So the new incentives on CIT, if approved, will be attractive enough to lure investors to Vietnam, and we won’t see any more regrets as in the case of AT&S,” said Hoang.

Leading sectors remain in doldrums

While the pandemic pushes businesses into woes and close to bankruptcy, the Ministry of Planning and Investment has proposed numerous measures on interest rate and tax support to help them survive.

In a report on business development in 2020 and the first five months of 2021 drafted by the Ministry of Planning and Investment (MPI), the eight most affected by the pandemic include tourism, catering, accommodation; textiles and garments; retail; mechanics, manufacturing, and automobiles; agro-forestry-fisheries; transport and logistics; aviation; and IT and telecommunications.

To restructure loans and support interest rates of these businesses, the MPI has asked the State Bank of Vietnam (SBV) to amend and supplement Circular No. 01/2020/TT-NHNN dated March 13, 2020 on debt rescheduling, exemption or reduction of interest and fees to allow debt restructuring and rescheduling for the ones arising in the 2020-2021 period, and not move debt groups until the end of 2021. The SBV should direct commercial banks to reduce the interest rate by 3-5 per cent, delay deadlines, and provide new loans for businesses.

The MPI also suggests the SBV to amend and supplement Resolution No.84/2020/NQ-CP dated May 2020 regarding tasks and solutions to remove difficulties in production and business and to expand subjects entitled to a 2-per-cent reduction in interest rate, applied to all enterprises directly hit by COVID-19.

The MPI’s draft report also proposes the Ministry of Finance (MoF) to submit a 30-per-cent decrease of corporate income tax in 2021 for businesses and cooperatives that generated less than VND200 billion ($8.7 million) in 2020, as well as reduce 15 per cent of land rental for those who have stopped working for 15 days or more due to the pandemic.

The MoF should also cut down 50 per cent of VAT in 2021 for companies in aviation, catering, and accommodation sectors, and remove VAT for six months for transport businesses, as well as decrease 50 per cent of registration fees for newly registered cars for transport businesses.

The MPI proposes to cease social insurance payments for those hit by COVID-19 until end-2021, extend the payment of union fees and decrease of these by 50 per cent in 2021, as well as remove road maintenance fees for transport businesses until the end of the year.

Hit by COVID-19 since last year, the aviation market has dropped most seriously. The transport volume of aviation in 2020 was reduced by up to 65.9 per cent, and revenues declined by 61 per cent on-year.

During the Lunar New Year, revenues even decreased by 80 per cent on-year, and forecasts remain gloomy. “If the health crisis is managed, aviation could resume growth, perhaps, in 2024,” a representative of Vietnam Airlines said.

At present, overdue debts of Vietnam Airlines have expanded to VND6.24 trillion ($271.3 million), and the airline is close to bankruptcy. “Commercial banks have yet to see the disbursement of the bailout package for Vietnam Airlines, so they do not provide additional loans, extend, and re-grant credit limits,” the representative complained.

Meanwhile, Vietjet and Bamboo Airways have tried to optimise and maintain business. However, they are gradually running out of funds. Vietjet is estimated to require $435 million to maintain its operation.

In addition to aviation, tourism, catering, and accommodation are witnessing a halt of 90 per cent of companies, with the remainder operating in slow motion. Tour agencies and ticket agents mostly let all employees quit, while 60-90 per cent of employees of international travel businesses had to leave too, according to the Vietnam Tourism Association.

COVID-19 also hit the textile and garment industry seriously, which reported the first negative growth in 2020 (-10.5 per cent) over the last 25 years. Its export value last year was $35 billion only, a decrease of $4 billion on-year. More challenges are ahead, as old orders and reserves are running out.

HCMC Transport Dept seeks nod for taxi services during social distancing period

The HCMC Department of Transport recently proposed the municipal government consider allowing 400 taxis to resume operations, in order to transport residents to hospitals during the ongoing social distancing period in the city.

Earlier, the city implemented the municipal government’s Directive 10 on tightening anti-Covid-19 measures citywide, reported Tuoi Tre newspaper.

Following the directive, the Transport Department ordered the suspension of public passenger vehicles including commuter buses, coaches and transit cars starting from June 20. Taxis and contract cars with less than nine seats were asked to cease operations as well.

However, over the past few days, the Transport Department realized that local residents are facing difficulties in visiting hospitals and clinics due to the suspension of taxis and ride-hailing cars.

Therefore, the department suggested the city government weigh a plan that allows 200 taxis operated by Anh Duong Vietnam JSC (Vinasun) and 200 others operated by Mai Linh Group to offer their services during the period.

More than VND3.5 quadrillion of loans given with low-interest rates

The State Bank of Vietnam (SBV) said that to support people and businesses affected by the Covid-19 pandemic, credit institutions have provided new loans with lower interest rates than before the pandemic, with an accumulated loan outstanding balance from January 23, 2020, to now exceeded VND3.5 quadrillion.

SBV informed that by early June this year, credit institutions have restructured the repayment period for over 250,000 customers, with loan outstanding balance of more than VND330 trillion; exempted, reduced, and lowered interest rates for 676,690 customers, with loan outstanding balance of VND1,277,831 billion; provided new loans with lower interest rates than before the Covid-19 pandemic, with accumulated loan outstanding balance from January 23, 2020, to now reaching VND3,508,415 billion.

The maximum short-term lending interest rate in VND in some priority sectors and fields is 4.5 percent per annum. The average lending interest rate in USD is at 3-6 percent per annum. By May 31, the Vietnam Bank for Social Policies also extended repayment for 174,871 customers, with a loan outstanding balance of over VND4 trillion, gave new loans to more than 3 million new customers, with the amount of VND111,256 billion.

As for the support policy to remove difficulties for the national flag carrier, Vietnam Airlines (VNA), so far, three commercial banks, namely SeaBank, MSB, and SHB, have committed to lend VND4 trillion to VNA from the SBV's refinancing source. Commercial banks and VNA are actively implementing the procedures for signing credit contracts for early disbursement, which is expected to happen in late June and early July this year.

VIETNAM BUSINESS NEWS JUNE 24

Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes

VIETNAM BUSINESS NEWS JUNE 23

VIETNAM BUSINESS NEWS JUNE 23

Vietnam records 1.35 billion USD trade deficit in first half of June

 
 

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