Vietnam - emerging market that shone in a difficult year: MoneyWeek
The UK’s MoneyWeek news website has run a story highlighting that Vietnam is one of the most promising markets of Asia in a long time thanks to the country’s success in COVID-19 control.
The article noted that Vietnam’s GDP growth rate of 2.9 percent was low by historical standards – it typically manages 6-7 percent – but still put it ahead of every other major economy in Asia and looks remarkable given the damage that the coronavirus pandemic inflicted on the world.
Even at the peak of the crisis in the second quarter of the year, Vietnam just about eked out positive growth and has recovered quickly, it said.
Vietnam’s immediate strength is that the impact of coronavirus has been fairly small and controlled compared to most of the world, the article wrote./.
Vietnam, Germany seek stronger economic ties
The nation has risen to become Germany's largest trading partner in ASEAN and its fifth throughout Asia, while Germany remains the country’s largest trading partner in the EU, with bilateral turnover reaching over EUR13 billion last year.
The information was released at a recent seminar on economic development held virtually between both countries under the sponsorship and co-organisation of the Leipzig city government of Sachsen state and the Vietnamese Embassy in Germany. They were joined by the development and investment agency InvestRegion Leipzig and the German-Vietnamese House Association, also known as Deutsch-Vietnamesisches Haus eV.
Upon addressing the event attended by over 120 delegates, Vietnamese Ambassador to Germany Nguyen Minh Vu emphasised that the participation of a large number of German and Vietnamese firms is a testament to their keen interest and desire to promote trade and investment co-operation. Whilst the nation is keen to promote ties with Germany in general, it is also seeking strong links with the city of Leipzig.
The Vietnamese Ambassador briefed participants on the country’s outstanding socio-economic development in recent times, in which the nation is widely considered by investors to be a destination for shifting investment amid the novel coronavirus (COVID-19) pandemic.
Not only does the country enjoy an abundance of human resources, an open and favourable investment mechanism for foreign investors, it is also considered one of the largest open economies globally.
Vietnamese participation in many major trade agreements such as the European Union Vietnam Free Trade Agreement (EVFTA) and the Regional Comprehensive Economic Partnership (RCEP) will create favourable conditions in which German businesses can import goods and services produced locally. In addition, German goods will also have advantages when being exported to other ASEAN members, as well as large countries participating in the RCEP such as China, Japan, the Republic of Korea, Australia, and New Zealand, Ambassador Vu said.
The local diplomat also noted his appreciation for the drastic changes occurring in Leipzig, with stringent socio-economic development strategies helping to develop it into one of the economic pillars of the central metropolitan area of Germany. Indeed, the city now features a developed economy, industry, strong infrastructure, along with science and technology, all of which are ideal incubators for startups.
He believes that through the seminar firms from both sides can develop practical and mutually beneficial co-operation ties in order to make the most of the opportunities brought by their fruitful partnership.
In response, Mayor of Leipzig Burkhard Jung expressed his pleasure at the strong development between Leipzig and Vietnam, as well as Ho Chi Minh City, in which the signing of an agreement to build a water plant in Long An province by enterprises from both Leipzig and Vietnam took place. This signing represents a vivid manifestation of the close and effective co-operation links between the two sides.
He stated that he hopes the enforcement of the EVFTA will see co-operation between the two sides increasingly strengthened. Leipzig is the first German city to open a representative office in the country and has a wide range of co-operative activities relating to economics, cultural, and social affairs with Vietnam.
Furthermore, Leipzig is home to a community of approximately 3,500 Vietnamese people, Mayor Jung added.
Talking points at the event largely focused on practical experience in economic co-operation and other issues of shared concern.
According to the Trade Promotion Agency of Leipzig, the online seminar had been specially designed for businesses that intend to enter the Vietnamese and German markets through sharing the experience of German firms in Ho Chi Minh City and central regions of the European nation.
Deputy Minister: UKVFTA to officially enter into force on May 1
The Vietnamese Government has issued a Resolution approving the UK-Vietnam Free Trade Agreement (UKVFTA) and will complete procedures this month to officially bring it into force on May 1, Deputy Minister of Industry and Trade Dang Hoang An has said.
During phone talks with Minister of State for Trade Policy Greg Hands on March 16, An said the UKVFTA temporarily took effect from January 1 to ensure undisrupted trade between Vietnam and the UK.
Hands expressed his thanks to the Vietnamese Government and especially the Ministry of Industry and Trade for their close coordination in signing and handling procedures to put the deal into force at the earliest possible time.
An was also delighted at the ratification of the UKVFTA by the two nations.
Regarding the UK’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Hands thanked Vietnam for its stance and support over recent times and expressed his hope of receiving further assistance to step up the process.
On the expansion of the CPTPP to other economies, An said Vietnam will follow domestic procedures, including reporting to the National Assembly for approval.
Both sides agreed to hold the 12th meeting of the Vietnam - UK Joint Economic and Trade Committee (JETCO) in August if conditions allow, assign technical teams to review the implementation of documents reached at JETCO 11, and offer specific suggestions to JETCO 12 for discussion.
According to the General Department of Vietnam Customs, two-way trade between Vietnam and the UK reached 1.024 billion USD in the first two months of this year, a 20.05 percent increase year-on-year. The UK’s exports to Vietnam hit 96.3 million USD.
There is space for Vietnam’s exports to the UK to grow, especially mobile phones, spare parts, apparel, footwear, aquatic products, wood and wooden furniture, computers and accessories, cashew nuts, coffee, and pepper.
Bilateral economic and trade ties are expected to continue being a spotlight in the relationship./.
Index for administrative procedure compliance costs in 2020 released
An annual report on the index for administrative procedure compliance costs in 2020 (APCI 2020) was released at a press conference on March 17 chaired by Minister and Chairman of the Government Office Mai Tien Dung, who is also Chairman of the Prime Minister’s Advisory Council for Administrative Procedure Reform.
The group of taxation procedures ranked first in the APCI, with its overall improvement rate assessed at the highest level, up 5.6 points compared to 2019.
Companies currently need 3.8 hours and 11,600 VND to carry out one taxation procedure on average.
Thai Binh province was the best performer in carrying out taxation administrative procedures, with an average of 0.9 hours.
Second place went to administrative procedures for specialised inspections, which improved 5 points compared to 2019.
It was followed by administrative procedures relating to the environment and business conditions, which were up 0.5 points and 0.2 points, respectively, compared to 2019.
Conversely, the five remaining groups of starting a business, investment, construction, land, and cross-border trade recorded lower scores than in APCI 2019.
Speaking at the press conference, Minister Dung pointed out four reform lessons from APCI 2020, emphasising that the top priority for the Government, ministries, sectors, and localities is promoting the application of information technology and processing administrative procedures via electronic platforms in order to save costs for businesses.
Built on a standard cost model and surveys at businesses in Vietnam’s 63 cities and provinces, since 2018, when it was released for the first time, the APCI annual report has been considered an important tool that objectively reflects the level of administrative reform, improvements to the business environment, and enforcement of policies and laws through analysing costs enterprises must pay to conduct administrative procedures in line with the law./.
Vingroup affiliate partners with Google Cloud
One Mount Group, an affiliate of Vietnamese conglomerate Vingroup, forged a cooperative arrangement with Google Cloud on March 17 to foster the largest technological ecosystem in Vietnam, in order to connect citizens and businesses during the Fourth Industrial Revolution.
The newly-established strategic partnership is hoped to offer One Mount Group the opportunity to capitalise on Google’s technologies, including SAP on Google Cloud and Google Workspace, in its strategy to expand and bolster its business fields, particularly VinShop, VinID, and OneHousing.
The company, which is also a strategic partner of the Technological and Commercial Joint Stock Bank (Techcombank), will apply and expand the scale of its new services and take advantage of Google Cloud’s advanced tools in data processing, artificial intelligence (AI), and machine learning, in a bid to quickly update information on customer behaviour.
The arrangement will also help it devise solutions addressing business challenges and creating new products and services.
Chief Data Officer of One Mount Group, Luc Nguyen Minh Lu, affirmed that Google Cloud is an important tech partner of the company in market access and efforts to provide Vietnamese customers with new products.
This year, it will recruit talent who have received training on Google Could to improve AI-based hyper personalisation in the fields of retail and real estate, he added./.
EC reviews possible extension of steel safeguard measure
The European Commission (EC) has announced the possible extension of safeguard measures applicable to imports of certain steel products, including some from Vietnam, according to the Trade Remedies Authority of Vietnam under the Ministry of Industry and Trade.
Earlier, on February 1, 2019, the EC imposed a definitive safeguard measure on certain steel products. The measure currently in force consists of a tariff rate quota, based on historical imports, applicable to 26 product categories. Where the relevant tariff-rate quota is exhausted, an additional duty of 25 percent is levied.
The safeguard measure was imposed for an initial period of three years, until June 30, 2021.
According to the EC’s notice, it received a substantiated request by a number of member states to examine whether the current safeguard measure should be extended.
The request contains evidence suggesting that the safeguard measure continue to be necessary to prevent or remedy serious injury. The request argues that the risk of trade diversion continues and if the measure was lifted, the industry would face a flood of imports that would have a very negative impact on its economic performance.
Accordingly, the investigation will focus on its assessment, notably, on whether the safeguard measure continues to be necessary to prevent or remedy serious injury, whether there is evidence that union producers are adjusting and whether a prolongation would be in the union's interest. The investigation will also determine the appropriate duration of the extension (if any).
A determination was expected to be made by June 30 at the latest.
According to the Trade Remedies Authority of Vietnam, among Vietnam’s steel products exported to the EU, four product categories are currently subject to the safeguard measure in the form of a tariff rate quota, including non-alloy and other alloy cold rolled sheets, organic coated sheets, stainless cold rolled sheets and strips and seamless tubes.
The Trade Remedies Authority of Vietnam urged relevant industry associations and manufacturers to make submissions to the EU as requested, adding that close watch would be kept on the investigation to provide updates and raise actions to protect the legitimate rights of Vietnam’s steel industry.
According to the Vietnam Steel Association, Vietnam’s steel export to the EU accounted for just around four percent of Vietnam’s total steel exports in recent years.
Customs statistics showed that Vietnam exported 9.86 million tonnes of steel in 2020, worth around 5.26 billion USD./.
Consumer finance retains attractiveness
Despite the resurgence of the pandemic, investors still remain upbeat about consumer finance and pawn chain businesses in Vietnam, which are considered among the most attractive loan segments.
According to a report by brokerage SSI Research, HD Saison - the consumer finance arm of HDBank and Japan’s Credit Saison - will enjoy an increase of 15 per cent on-year in its profit for 2021, reaching VND1.15 trillion ($50 million).
Although there are still areas of concern associated with new cash loans disbursed in 2020, HD Saison’s board also expected that this year, loans to buy motorbikes and home appliances will rise, especially when customer incomes increase along with economic recovery.
The report also showed that cash lending activities of HD Saison has increased strongly in the past year (up 47.8 per cent). SSI Research believed that this is a remarkable point because this is a segment that often has a higher non-performing loans ratio than motorcycles and home appliances loans.
Last year, HD Saison was greenlit to switch from a limited liability to a joint-stock company format. The firm is reportedly preparing for an upcoming initial public offering (IPO).
Meanwhile, VPBank has been mulled over seeking for strategic foreign investors to boost FE Credit’s performance.
According to SSI, due diligence process for FE Credit sale has been conducted. FE Credit, Vietnam’s largest consumer finance firm, is in negotiation with its potential partners, though the discussion progress is somewhat interrupted due to the health crisis.
If the two sides cannot reach a mutual agreement, FE Credit would mull over an IPO by the end of 2021.
If VPBank sells a 49-per-cent-stake in FE Credit at a valuation of around four times compared to the book value, the bank can record an after-tax profit of VND21 trillion ($913 million), SSI noted.
“VPBank owns the largest consumer finance company in Vietnam, FE Credit, which is the key driver of industry-high net interest margin, as well as credit costs. Broadly, consumer loans account for almost 60 per cent of the bank’s total loans and are a core competitive advantage,” noted JP Morgan.
SHB Finance, a consumer finance arm of SHB, is reportedly in the middle of negotiations with a foreign partner for a potential sale.
Previously, international financers have made a big splash on the consumer lending market. For example, Hyundai Card from South Korea bought 50 per cent of shares in the Finance Company Limited for Community (FCCOM) – a subsidiary of local lender MSB – in a deal worth $42 million.
The joint venture would be Hyundai Card’s first overseas operation, which the South Korean firm expected to transfer international know-how and maximise synergies with Hyundai’s business in Vietnam.
Another company, Handico Finance JSC, has also received the attention of both domestic banks such as TPBank and foreign financial groups such as AFS, KB Kookmin Card, and JB Financial Holdings.
By the end of 2020, the State Bank of Vietnam granted operating licenses to 16 consumer finance companies. However, only five are eligible to provide credit card products, namely FE Credit, Home Credit, Lotte Finance, Viet Credit, and JACCS. The much-improved infrastructure for cashless payment is envisaged to further facilitate the growth of credit cards and diversify consumer lending products.
Besides consumer finance as unsecured loans, other collateral-based loans such as pawn shop business are also catching investors’ eyes. Pawn shop chains have gradually proved their and attractiveness compared to traditional ones.
One of Vietnam’s major chains, F88, recorded after-tax profit in 2020 of VND45 billion ($1.96 million). Last year, the firm continuously issued corporate bonds with interest rates around 12.5 per cent after being funded by Mekong Enterprise Fund III and Granite Oak. F88 now has 180 shops expanding in 25 cities and provinces.
Last month, T99, a Saigon-based pawn shop, raised VND20 billion ($870,000) from a Vietnamese celebrity. Despite still in its infancy, T99 aims for a presence of 500 stores in a nationwide network, and file for an IPO in the upcoming time.
Likewise, Vietmoney has just completed series A investment capital from Probus Opportunities Investment Fund – a major shareholder of Srisawad pawn chain in Thailand – and Digi Ventures.
“Probus and Digi Ventures will hold a 30-per-cent stake in Vietmoney and join the board of directors. I am very confident in our company’s rosy outlook. Last year, our revenue rose by 270 per cent on-year, with a network of 23 branches operating in Ho Chi Minh City, Can Tho, and Binh Duong,” said Trinh Van Phuong, CEO and founder of Vietmoney.
New international port in Mekong River Delta on the cards
With the improvement of the transport system a key development direction for the Mekong River Delta, the Ministry of Transport has proposed to develop an international port that could connect the delta to the world.
On March 13, at the third meeting on the sustainable development of the Mekong River Delta and adapting to climate change, Minister of Transport Nguyen Van The emphasised that transport is the core of the economy. The more convenient transport is, the more developed the economy is, he explained, as transport development paves the way for the economy.
Thereby, over numerous tenures, especially in 2016-2020, the government poured a lot of resources into developing the transport system of the Mekong River Delta. In Resolution No.120/NQ-CP dated November 17, 2017 on the sustainable and climate-resilient development of the Mekong Delta, the government highlighted the disadvantages of the local transport system that cannot accommodate the potential of the province.
"The government assigned the Ministry of Transport (MoT) and localities two tasks. First, adjusting the master plans of the regional transport system and building a mid-term plan for 2021-2025 for further investment in the regional transport system. Second, concentrating all resources to accomplish all major projects and developing projects in the region. Thereby, the MoT has worked closely with localities to carry out these tasks," the minister said.
So the minister proposed developing a deep-water port in the Mekong River Delta to receive vessels of 100,000 DWT and connect Vietnam to the world.
"We will call for investors to develop this port. Along with Can Tho International Airport, the port and airport will enable the Mekong River Delta to develop and change the economic structure from a salinised region to an industrial region," Minister The said.
Additionally, a number of projects are being accelerated. Over the last three years, Cao Lanh Bridge, Vam Cong Bridge, and Cao Lanh-Rang Soi Boulevard have already connected Cao Lanh and Kien Giang. Moreover, VND5 trillion ($217.4 million) of public investment will be disbursed to develop the three expressways connecting Trung Luong, My Thuan, and Can Tho, which have just started construction. Of this, My Thuan-Can Tho Expressway will be finished in 2022.
"In the public investment plan for 2021-2025 for the transport system of the Mekong River Delta, the MoT and the Ministry of Planning and Investment have agreed to disburse VND57 trillion($2.5 billion), far more than the VND29 trillion ($1.26 billion) of the last development period. We hope the transport system of the region will be improved significantly by 2025 in a sustainable direction," Minister Nguyen Van The said.
The Mekong River Delta includes one centrally-run city Can Tho, and 12 other provinces as Long An, Tien Giang, Ben Tre, Vinh Long, Tra Vinh, Hau Giang, Soc Trang, Dong Thap, An Giang, Kien Giang, Bac Lieu, and Ca Mau. It has a total area of 3.94 million hectares and a population of 17.5 million, accounting for 12 per cent of Vietnam's natural land area and 19 per cent of its population.
China increases imports of Vietnamese seafood
China has moved to increase the import of aquatic products from Vietnam, with import value rising by up to 114% after enduring a downward trajectory throughout January and February, according to figures compiled by the Vietnam Association of Seafood Exporters and Producers (VASEP).
The VASEP have revealed that the country's total seafood exports during February suffered a decline of 17% to over US$410 million in comparison to the same period from last year due to the Lunar New Year, known locally as Tet.
Despite this, aquatic exports have started to enjoy a recovery due to the export value to various markets increasing sharply.
The leading 10 markets with the highest seafood import turnover from the nation in February include the United States, Japan, the Republic of Korea, China, Canada, Thailand, the UK, Russia, and the Netherlands, making up 75.4% of total Vietnamese seafood exports.
Exports to the US market have also maintained the momentum with a rise of 25% in January followed by growth of nearly 10% in February, with exports to Canada also surging by 31% in February.
Furthermore, Canada became the country’s fourth largest export market, making up 4.6% of Vietnamese seafood exports, second only to the US with 21%, Japan with 7.8%, the Republic of Korea with 9.2%, and China with 8.3%.
Most notably, China has strongly increased imports from the nation in February, with value reaching up to 114% after experiencing a drop of 10% in January, opening up bright prospects ahead for local seafood exports over the coming months.
Moreover, seafood exports to the UK and other major markets also enjoyed a sharp increase in February due to the positive impacts of both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), according to the VASEP.
Japan grants GI certification to Vietnamese lychee
The Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) has granted geographical indication (GI) certification to Luc Ngan lychee that originates from Bac Giang, a northern Vietnamese province, according to the Bac Giang Department of Science and Technology.
Luc Ngan lychee represents the first Vietnamese product to be granted geographical indication certification in Japan.
The product had previously successfully protected its trademark in China, the Republic of Korea, Singapore, Australia, Laos, and Cambodia. It is currently consumed in several countries globally.
The issuance of geographical indication certification looks set to create favourable conditions in which Luc Ngan lychee can start to make inroads into the Japanese market, along with others worldwide.
At present, Luc Ngan district is home to more than 15,000 hectares of lychee, mostly in Hong Giang, Tan Son, Quy Son, and Giap Son communes. In addition, several lychee growing areas fall in line with Global Good Agricultural Practices (GlobalGAP) and Vietnamese Good Agricultural Practices (VietGAP) to produce high-quality organic products that meet the various needs of domestic consumption and export.
The year ahead will continue to see Bac Giang direct the production of 19 codes of growing areas that were granted by Japan last year, while also increasing the total cultivation lychee area to the Japanese market to approximately 130 hectares.
Currently, the Plant Protection Department under the Ministry of Agriculture and Rural Development is in the process of evaluating and appraising the production procedures in order to grant area codes for lychees in the near future.
Garment sector expects to overcome difficulties as orders rise again
Textile and garment orders have increased again in the early months of 2021 after Vietnam’s COVID-19 vaccination programme began on a large scale. Enterprises in the field expect market opportunities willhelp the industry overcome its difficulties and graduallyrestore revenue levels as during the period before the outbreak of the pandemic.
Hung Yen Garment Corporation has faced many difficulties due to the COVID-19 pandemic in 2020 withits revenue decreasing by about 5% compared to 2019. However, in early 2021, since the COVID-19 vaccination programme began, orders have gradually returned at the company.
Chairman of the Board of Directors of Hung Yen Garment Corporation Nguyen Xuan Duong said his company now has orders to fulfill until the end of July 2021, focusing on the US market (over 50%), Europe, and Japan.
“Hung Yen Garment Corporation is expected to grow by5-10% in 2021 to compensate for the deficit in 2020, a slight increase compared to 2019,” Nguyen Xuan Duong said.
Regarding the yarn sector, although the beginning of the year is not the usual time demand for textiles goes up, orders made for the first six months of 2021 at the DalatWorsted Spinning Company have been nearly equivalent to the last six months of 2020.
“2021 will certainly be a difficult year, but the company's products are mainly exported to Europe, where the market is improving. In addition, the EU-Vietnam Free Trade Agreement (EVFTA) will certainly create impetus fortextile and garment exports to Europe,” said Alessandro Di Palma, CEO of Dalat Worsted Spinning Company.
The increase in orders has helped boost the export turnover of the textile and garment industry. Statistics from the Ministry of Industry and Trade show that total export turnover of textiles and garments reached US$5.954 billion in the first two months of 2021 while import turnover reached US$3.167 billion. Thus, the industry reported a trade surplus of US$3.299 billionwhile the added value of the industry has been quite high at 55.4%.
The initial recovery of the industry is thanks toenterprises’ efforts in seeking suitable directions after ayear of living with the pandemic. The rolling out of vaccines against the COVID-19 virus by countries across the world has also helped increase people’s confidence, contributing to stimulating consumer demand, including demand for textiles and garments.
Chairman of the Board of Directors of the Vietnam National Textile and Garment Group (Vinatex) Le Tien Truong said that despite the presence of the pandemic, the world textile and garment market has gradually returned to a vibrant state. Although the number and prices of products have yet to return to the levels seen in 2019, market signals in the first quarter of 2021 show the industry's targets set for entire 2021 is feasible.
Diversifying solutions to achieve the target of US$39 billion
Vietnam's textile and garment industry strives to obtainexport revenue of about US$39 billion in 2021. Chairman of the Vietnam Textile and Apparel Association Vu Duc Giang said that the textile and garment industry is seeinggreat opportunities from the signed Free Trade Agreements (FTAs).
In particular, the Regional Comprehensive Economic Partnership (RCEP) is also expected to create impetus for the industry and replace some markets where the COVID-19 pandemic has yet to be controlled. At the same time, FTAs are also an attractive force to help the textile and garment industry attract investment and increase the supply of raw materials.
However, the industry still needs to consider long-term solutions to stand ready to seize opportunities when the disease is under control and also develop a foundation for the sustainable development of the industry.
Accordingly, it is necessary to define a development strategy for the 2021-2025 period. It is advisable to clearly define technological solutions, which provide a vision for the spinning and dyeing industries and focus on automation to adapt to the fast-changing trends of the market after the COVID-19 pandemic.
The sector should build a green agenda through the saving of renewable energy and the efficient use of water resources as well as sustainable development of factories.
It is also important to develop the supply chain of raw materials and promote Vietnamese textile and garment brands to the world market while building a connection strategy to bring Vietnamese textile and apparel brands further into the global retail chain.
In particular, businesses need to promote productivity and the quality of their products to reach the levels seen in2019 in order to recover their revenue and orders as well as consolidating their position in the supply chain, Truong said.
Duong said that although textile and garment orders have returned, it is not possible to reach peak demand as in the previous years. Therefore, the textile and garment enterprises need support policies from the State. Inaddition to reducing tax and delaying payment deadlinesfor land rent for enterprises, it is necessary to renew and update land policies and related laws.
It is also important to facilitate the building of closed textile and garment chains in order to enhance the capacity of domestic enterprises, increase export volume and value and raise profits for textile and garment enterprises.
Rubber price and export rise in first two months
Production fell while the world consumption of natural rubber will likely recover, dragging up the export volume and price of Vietnamese rubber.
According to the estimate of the Agency of Foreign Trade under the Ministry of Industry and Trade, in the first two months of the year, rubber exports reached about 320,000 tonnes, worth $516 million, up 89.9 per cent in volume and 109.9 per cent in value over the same period in 2020.
Particularly in February, rubber exports reached about 130,000 tonnes, worth $211 million, increasing 68 per cent in volume and 86.2 per cent in value. The average export price has increased by 0.9 per cent compared to January 2021 and by 10.9 per cent compared to February 2020, up to $1,623 a tonne.
Vietnam mainly exports natural rubber to China, India, South Korea, and China, with the latter accounting for 76 per cent. In 2020, Vietnam's rubber export turnover to this market reached $1.78 billion, an increase of 18.1 per cent on-year, reaching 1.36 million tonnes in volume, up 17.3 per cent.
Vietnam is also one of the largest markets supplying rubber to South Korea. The Agency of Foreign Tradecited the statistics of the Korean Customs Service, saying that in January 2021, Vietnam was the third-largest rubber supplier to South Korea with 393,000 tonnes, worth $7.51 million, down 13.5 per cent in volume but up 8.1 per cent in value.
Natural rubber prices also recorded positive signs. The average export price in February increased by 0.9 per cent over January 2021 and by 10.9 per cent over the same period last year to $1,623 a tonne.
Dong Phu Rubber JSC (HSX: DPR) said the average selling price of rubber in the first two months reached VND46 million($2,000) a tonne, up 25.5 per cent on-year. Of this, the export price and the entrusted export price was VND43.37 million ($1885.65) a tonne, while the domestic consumption price was VND48.2 million ($2,095.651) a tonne.
Tay Ninh Rubber JSC (HSX: TRC) recorded an average selling price of VND46.3 million ($2,013) a tonne, an increase of 35 per cent compared to the average price of 2020.
According to the report on Natural Rubber Trends February 2021 of the Association of Natural Rubber Producing Countries (ANRPC), based on the preliminary estimates, world production of natural rubber is likely to fall 12.4 per cent on-year to 897,000 tonnesin February 2021, while the world consumption of natural rubber is estimated to recover at 47.5 per cent on-year to 1.103 million tonnes during the same month.
Demand for rubber in the coming time will increase due to the forecast improvements in the Chinese economy, which is the leading rubber consumer in the world, especially in 2021. At the same time, automakers boosting output also increase the demand for natural rubber.
While supply may be interrupted due to weather factors, production in major exporting countries such as Thailand, Indonesia, Vietnam, and Malaysia may decrease. As a result, the selling price of rubber is expected to continue to increase.
The International Rubber Study Group (IRSG) forecasts that the world demand for natural rubber in 2021 will recover thanks to the growth of the commercial vehicle segment, mainly due to emerging markets. Meanwhile, demand for synthetic rubber is forecast to increase 10.2 per cent compared to last year, thanks to strong demand for gloves and other products during the season.
Higher risk of default from solar power investment
The rush into solar power investment ventures has triggered a growing concern over loan defaults at banks as well as threatened to disrupt the country’s energy balance.
With high expectations for escalating profit margin rates and multiple tax incentives, scores of firms have rushed into solar power project investments in the past few years. These companies commonly use high financial leverage tools as up to 70-80 per cent of their capital sources come from loans and enterprise bonds.
According to a recent report by SSI Research, the bond value mobilised for solar power projects climbed to VND29.9 trillion ($1.3 billion) in 2020, a 254 per cent jump on-year.
In terms of credit sources, by the end of 2020, banks had poured VND84 trillion ($3.65 billion) into renewable energies, mostly lending to solar power projects.
That is because solar power is deemed a renewable energy that is stimulated for investment and development. Credit channelling into solar projects just accounts for 1 per cent of banks’ total outstanding loan balance.
Some experts, however, assumed that though the credit volume earmarked for solar power projects (including that into corporate bonds) is not too large, as it was mainly concentrated into several top players in this field.
If these developers faced defaults, both banks and retail investors would be on tenterhooks.
Of the total corporate bonds value for solar power projects in 2020, more than 42 per cent were to feed projects by privately-held Xuan Thien Group. Xuan Thien was reported using high financial leverage tools for its projects, so that the company could hardly pay back capital if the money flow got stuck.
Trung Nam Group – another major player in renewable energies – lodged a petition to the National Assembly’s Standing Committee, arguing that the group needed to borrow at several banks to carry out renewable energy projects.
The company then had the plan to sell power, receive revenue, and pay back the loans. However, due to continual power cuts, the company finds it difficult to realise its obligations.
Nguyen Quoc Hung, general secretary of the Vietnam Banks Association, told VIR that green credit including for solar power projects is a priority investment field, and before lending banks have carefully evaluated the projects’ feasibility and only lent to projects in the government’s planning scheme.
Hung noted that the quality of credit to lend to solar power projects has yet to be pegged at ‘an alarming level’, and the State Bank of Vietnam (SBV) has yet to deliver any warnings about credit sources to feed solar power projects.
Nguyen Tuan Anh, director general of the Department of Credit for Economic Sectors under the SBV, acknowledged that investments into renewable energy are somewhat challenging due to high costs, lengthy capital recouping, and market risks.
The credit sources of banks, however, are often short-term and bear fairly high raising cost.
Industry experts assumed that many solar power investors that were crying for help in the past few years indicate that this field is not quite lucrative to banks, businesses, and investors.
Especially, as the state power authority Electricity of Vietnam (EVN) has the right to refuse buying power in the power purchase agreement, it would be hard for banks, business, and investors to properly calculate their projects’ revenue streams during the evaluation processes.
Notwithstanding, in 2021 EVN envisages slashing 1.3 billion KWh of renewable energy, thus augmenting the risk towards banks and retail investors who are possessing corporate bonds by real estate developers..
Thus, the default threat is more apparent to solar power projects that are not present in the government planning without contracts to be plugged into the national power grid and using high financial leverage tools.
“Corporate bonds, particularly those issued by real estate developers and solar power projects, are highly risky. Retail investors with little knowledge about corporate finance analysis capacity should not run after these high margin rates as it is very risky. Besides this, most corporate bonds generally and solar power bonds particularly are not guaranteed by banks when it comes to payment capacity,” said senior economist Nguyen Tri Hieu.
Real estate price inflation, chaos near future Southeastern airport
Phan Thiet City in Binh Thuan Province recently saw waves of real estate buyers from all over Vietnam due to news of a major airport project in the area, leading to inflation in local land prices, public disturbance, and potential legal and financial problems for land buyers and sellers.
Deputy Minister of National Defense Lt.Gen. Tran Don on March 05 worked with Binh Thuan Province’s authorities regarding the Phan Thiet Airport project, namely announcing the PM’s approval on the budget, and requesting the locality to prepare for constructions starting this March, reports said.
As soon as the news broke, real estate dealers and small investors flooded Thien Nghiep Commune where the airport is planned for constructions to promote and purchase the land plots “supposedly” located near the future flight terminal.
Due to a huge number of potential buyers, the price for each plot has reached nearly VND6 billion (US$259,639), almost triple that in 2019.
According to a local resident, this is at least the third time their commune has seen such a price inflation. “Swarms of people pour into town every time they hear a major infrastructure is going to be built; we are kind of used to it now”, he stated.
On the other hand, commune leaders acknowledged how the locals had sold off most of the land surrounding the future Phan Thiet Airport when it made the news in 2019.
Consequently, buyers who hoarded land plots from 2019 can resell them for higher since actual construction plans had been confirmed this time, a local real estate agent remarked. “Dealers might offer the locals a very small deposit to buy a land plot, so they would only lose a fraction of the land’s worth if they can’t find someone to resell it to”, the man stated.
According to a local business insider, dealers would perform underhanded transactions with one another to generate hype for a piece of land, essentially boosting its price before selling to a final buyer who would have to pay an absurd amount.
Meanwhile, commune leaders are concerned about the legality of these private transactions, since there is currently no land plot licensed for commercial purposes in the area. The responsibility of proving the land use rights also falls onto ill-informed locals who might be talked into sales by tricky dealers.
“There were multiple cases back in 2019 where local landowners had to compensate up to triple the deposit they received since their farm lands were technically unusable to a real estate investor”, said a local official.
In response, the communal People’s Committee issued a public service announcement to warn local residents against shady real estate deals, and began to disband illegitimate real estate setups and impose administrative fines.
In Vietnam, real estate dealers are unlicensed middle-men who buy land and houses from the locals, sometimes without obtaining legal use rights, and try to boost the price before reselling them to unsuspecting buyers. Statistics from the Vietnam Association of Realtors in 2019 showed that about 88 percent of practicing brokers are unlicensed.
Technology key to improve future job prospects: PwC
The significant impact of technology on jobs, however, comes with a sense of uncertainty, as 45% of Vietnamese respondents expressed concerns around job security due to automation.
Ninety percent of Vietnamese respondents believe that technological developments will improve their job prospects in the future.
The information was revealed in PwC’s latest survey on Vietnam Digital Readiness from November 12 - December 27 with nearly 1,150 participants, adding this level much higher than the global sentiment of 60% recorded in PwC’s Global Upskilling Hopes and Fears report released in 2019.
Meanwhile, 83% surveyed Vietnamese expected with technology, their current jobs will not look the same in three to five years, and for 90% of respondents in the medium term (six to ten years).
Grant Dennis, chairman of PwC Vietnam, said the survey findings reflect the accelerated presence and influence of technology in the workplace and the pace of change that is to come in Vietnam.
"Going forward, enabling workers and firms to adapt in the new technological environment and empowering them to achieve outcomes will be key to any organisation’s success,” he said.
The significant impact of technology on jobs, however, comes with a sense of uncertainty, as 45% of Vietnamese respondents expressed concerns around job security due to automation.
This is not surprising, as the uses of digital technologies are increasingly becoming key solutions across industries, while this progress is shaping a future where digital skills are expected to be among the top ten job competencies in the next five years, according to a report by World Economic Forum in October 2020.
“As companies fast-track technology development, it’s important to note that employees play a critical role at every stage. While an upgrade or investment in technology can be immediate, equipping the people with the right skills to meet the needs of the future, helping them thrive in changing conditions of the digital world requires time and constant effort,” said General Director of PwC Vietnam Dinh Thi Quynh Van.
The need for adapting to new skills resonates with the majority of the survey respondents. The report revealed a majority (93%) are already making efforts to reskill and upskill. Technology related skills are top of mind, with 43% of respondents wanting to become better at learning and adapting to different technologies and 34% looking to become proficient in a specific technology.
It is encouraging to note that 88% of Vietnamese surveyed said that to different extents, they are provided with opportunities to improve their digital skills at work. This shows that businesses are doing their part to meet the upskilling needs of their workforce. However, the skills mismatch and opportunity gaps are real and widening in an increasingly technology-enabled economy, both globally and locally.
According to PwC’s Global CEO survey 2021, 79% of CEOs in the Asia Pacific region expressed concerns about the availability of key skills, compared to 72% globally.
In this regard, while over half of respondents feel the responsibility for upskilling is on themselves, we believe both the government and businesses have important roles in providing people access to inclusive upskilling programmes.
“Covid-19 has intensified the stark mismatch of people with the right skills for available jobs. The need to upskill and reskill people so they can participate in the economy is more critical than ever. Business leaders, governments and educational institutions need to work together to upskill our people to meet the workforce needs of the future and drive an inclusive, sustainable social and economic growth for Vietnam” added Van.
“Hanoians travel in Hanoi” to boost up the city’s tourism
The Hanoi Tourism Stimulating Festival 2021 aims at introducing tourism products, tour combos and accommodations to Hanoi travelers.
The Hanoi Tourism Stimulating Festival 2021 themed “Hanoians travel in Hanoi” to introduce the city’s culture, cuisine and destinations will be held between April 16 and 18, according to a plan recently approved by the municipal People’s Committee.
Accordingly, some cultural exchange spaces, tourist and local product booths, as well as gastronomic areas will be set up around Ly Thai To monument, Bat Giac house, Le Thach and Le Lai streets and Hanoi Children's Palace in Hoan Kiem district, Hanoi.
Specifically, at the two cultural exchange spaces on Le Lai and Le Thach streets, 2D and 3D miniatures of Hanoi’s famous tourist destinations will be set up. These zones are expected to be interesting spaces for visitors to the festival to take “check-in” photos.
The booths of provinces and cities introducing their tourism and local specialties will be installed along Dinh Tien Hoang Street.
Travel booths that introduce tourism products, tour combos, accommodation and flight tickets will be installed at Dinh Tien Hoang and Le Thach streets while the food area that serve Hanoi’s specialties will be set up at Hanoi Children's Palace.
Vietnam rapid suppression of Covid-19 outbreak helps maintain positive economic outlook: WB
Further fiscal and monetary policy interventions may be needed to support recovery of private demand, asserted the World Bank.
The rapid suppression of the new Covid-19 outbreak in late January 2021 in the northern province of Hai Duong, the epicenter, has helped maintain Vietnam’s positive outlook for economic recovery in 2021 with an estimated GDP growth of 6.5%.
However, “special attention should be paid to how the Covid-19 vaccinations will be rolled out domestically and globally as they will impact the pace of Vietnam’s economic growth,” stated the World Bank (WB) in a note, adding further fiscal and monetary policy interventions may be needed to support recovery of private demand.
The Ministry of Finance’s proposal for a second round of tax and land rental fees payment deferrals is being discussed by the government. The total size of the package was estimated at VND115 trillion (US$ 5 billion). If approved and implemented well, it is expected to help businesses and households maintain their economic activities, particularly in tourism, which remains depressed, stated the WB.
Despite the new Covid-19 outbreak, retail sales in February grew by 0.3% month-on-month and by 8.3% year-on-year due to higher consumption demand associated with the Tet holidays.
“While lower than pre-Covid-19 performance, this growth suggests that the government’s targeted response to the outbreak mitigated the spillover of the negative impacts of anti-Covid stringency measures on economic activities to provinces outside the epicenter,” noted the WB.
While textiles and apparel, footwear and phones contributed to lower exports, computers, electronics and optical products, machinery, metal and metal products, and furniture maintained robust growth. Foreign-owned exporters, who dominate high-technology product manufacturing, appeared to be more dynamic as their exports dropped by only 1.0% (year-on-year), compared to a 15.1%-fall in exports of domestic firms.
In January 2021, imports of phones, computers, electronics and their parts, and machinery accounted for half of total imports from China and grew by over 75% year-on-year. This reflects both Vietnam’s heavy reliance on imported inputs in manufacturing and the continuation of trade diversification due to trade tensions between US and China, which have yet to be resolved.
After a sub-par performance in January 2021, the country attracted US$3.4 billion of FDI in February, which was 70.4% higher than in the previous month, and tripled the value of FDI observed in February 2020.
The recent increase in FDI amid the Covid-19 pandemic was primarily driven by higher greenfield investments (265.7% year-on-year) and expansion (273% year-on-year). Major projects included the O Mon II thermal power plant worth US$1.31 billion in Can Tho, and an OLED panel module plant worth US$750 million in Hai Phong.
The Consumer Price Index (CPI) grew by 1.3% (month-on-month) and 0.7% (year-on-year) in February. This acceleration in prices increase followed months of deceleration. It reflects the one-time adjustment in electricity tariffs (up by 10%) and stronger consumer demand, particularly for food products during the Tet holidays. Food prices were 0.3% higher than in the previous month, and 1.2% higher than in February of 2020.
Credit growth remained at 12.0% (year-on-year) during February 2021, in line with the rate observed in recent months. This rate of expansion is only one or two percentage points below the rates observed prior to the Covid-19 crisis, reflecting the rebound in the real economy and the accommodative monetary policy followed by the State Bank of Vietnam.
In the first two month of 2021, the government collected VND286.7 trillion (US$12.46 billion) of revenues, which is 0.6% higher than the same period last year. This good performance – the first time that government total revenue is increasing since the beginning of the Covid-19 crisis a year ago reflects the ongoing recovery and the elimination of most tax incentives that were adopted in last April.
Reduction of renewable energy plants’ capacity unavoidable: Ministry
The Ministry of Industry and Trade has explained that the reduction of the capacity of renewable energy plants is unavoidable due to the redundant supply and the overload of the national grid.
In a document sent to the National Assembly’s Economic and Science, Technology and Environment Committees and the Government Office, the ministry said the cut will help ensure security and safety for the national electricity system, news site Vietnamplus reported.
The Vietnam Electricity Group (EVN) and the National Load Dispatch Center have weighed the reduction in a transparent and fair manner.
According to the Ministry of Industry and Trade, the development of renewable energy, especially solar power in Vietnam, has seen positive results, attracting large investment and contributing to effectively exploiting the potential renewable energy resources in the country.
However, the boom of high-capacity renewable energy plants, mainly in the central and southern regions, has overloaded inter-regional transmission lines and caused an oversupply.
In addition, due to the impact of Covid-19, the demand for electricity has fallen, leading to an oversupply of electricity during the off-peak periods, such as holidays, weekends and at noon.
According to the ministry, this is a very dangerous situation that adversely affects the safe operation of the national grid. Although the National Load Dispatch Center has reduced the output of traditional power plants to the minimum, the oversupply remains, so the center had to cut the renewable energy capacity to prevent the electricity system from collapsing.
The ministry has ordered EVN and the National Load Dispatch Center to calculate the reduced capacity at all renewable power plants in a transparent and fair manner.
The ministry had earlier proposed and received the prime minister’s approval for the supplementation of power transmission line projects.
The ministry has also urged EVN and the relevant agencies to accelerate the progress of current power transmission line projects to minimize the cut of renewable energy capacity and encourage interest and confidence among investors.
Hanoi, Quang Ninh seek to attract tourists after pandemic
Two large tourism hubs in the north of Vietnam---Hanoi and Quang Ninh---plan to introduce multiple programs to attract tourists after seeing no new Covid-19 cases for a long period.
As of March 14, Hanoi went 26 straight days without fresh locally-transmitted Covid-19 cases and Quang Ninh has seen no new patients for a month.
The Hanoi government has assigned the municipal Tourism, Trade and Investment Promotion Center to coordinate with other relevant agencies, tourism and aviation firms and localities to hold a program to promote tourism and introduce the city’s culture and cuisine.
The program will be organized from April 16 to 18 at Ly Thai To Statue Square, Bat Giac House area, Le Thach and Le Lai streets and the Hanoi Children's Palace in Hoan Kiem District.
As part of the program, Hanoi’s tourism products, its tourism products in collaboration with other localities and its culinary culture will be showcased.
The program is aimed at encouraging local residents to visit the tourist sites in the city, such as 36 ancient streets, Son Tay, Ba Vi, Huong Son, Soc Son and Dong Anh as well as those in other localities to boost domestic tourism.
As for Quang Ninh, on March 11, the province resumed the operations of interprovincial passenger transport vehicles, except for those to and from Hai Duong Province. It also reopened tourism facilities and encouraged tourists from other parts of the country to visit.
According to the provincial government, it will hold many events in March and April to promote tourism, including a ceremony to announce nine national precious objects, a program named “Hello summer in Halong”, and other tourism promotion programs in potential markets including Hanoi, Thai Nguyen and HCMC.
The province expected to hold some 150 tourism activities this year, focusing on cultural events at historical monuments such as Yen Tu and Bach Dang and tourism and sports events at key tourist sites such as Halong, Cam Pha and Mong Cai.
Electronics helps HCM City become leading production centre
Multinational electronic companies are making moves to increase investment and expand production, to help Ho Chi Minh City become a leading production hub.
Vo Van Hoan, Vice Chairman of the HCM City People's Committee, said the city is now home to 50 foreign direct investment (FDI) projects with an investment capital of more than 5 billion USD and an area of land of more than 326 ha.
Seventeen are electronic projects with an investment capital of 20 million USD located in industrial parks, export processing zones and high-tech zones.
The city has lured many global leading brands including Intel, Samsung, First Solar, Furukawa Automotive Parts, and Renesas.
Early this year, both Intel and Samsung simultaneously increased their investment and committed to long-term investment in Vietnam, despite current restrictions caused by the COVID-19 pandemic.
Intel Products Vietnam Company had increased its investment capital by 475 million USD, bringing its total investment capital to more than 1.5 billion USD.
Alan Danner, CFO of Intel Vietnam, said Intel Vietnam has manufactured and exported more than 2 billion microprocessor and semiconductor products. By the end of last year, total export value reached 50 billion USD and created nearly 7,000 jobs.
This has helped Intel increase its production of 5G products, Intel Core processors with Intel Hybrid technology, and 10th generation Intel Core processors.
Samsung Electronics HCMC CE Complex Co Ltd has agreed to adjust project information and transform their business from a high-tech enterprise to an export processing enterprise.
Samsung's project in HCM City Hi-Tech Park was first licensed on September 25, 2014. The investment capital has now reached over 2 billion USD. The project was built on an area of more than 93 ha with a production capacity of 19 million products per year; bringing an annual average turnover of 4.2 billion USD. Of this figure, import value was more than 2.5 billion USD and export value 3.6 billion USD. This contributed more than 2.7 trillion VND (118 million USD) to the State coffers.
Experts said the transformation not only generates incentives for export, but also provide practical support to businesses in the supply chain of Samsung, especially businesses in the field of supporting industry in HCM City and neighbouring areas.
Hua Quoc Hung, head of the management board of industrial and export processing zones of HCM City, said there are 45 FDI projects in the electronics sector operating in industrial zones and export processing zones with an investment capital of more than 1.7 billion USD.
He said the US First Solar project located in the Southeast Industrial Park has an investment capital of more than 1 billion USD.
Chan See Chong, General Director of First Solar Vietnam Manufacturing Co Ltd, told Vietnam Investment Review that his company had invested in building two factories in Dong Nam Industrial Park. First Solar Group currently has three main production facilities in the US, Malaysia and Vietnam.
First Solar has announced that the total investment capital for these two new factories was 830 million USD. The first plant began manufacturing Series 6 solar modules at the end of 2018.
When both factories are in full operation, First Solar's total capacity will reach 2.4 GW per year, he said.
The company also doubled its production capacity to about 5.31 million modules per year, compared with the initial expected capacity of 2.6 million modules per year. Products are expected to be exported mainly to America and Europe.
A representative of First Solar said they will have more opportunities to discuss with local authorities and real estate investors to focus on developing solar power projects so as to meet Vietnam’s market demand./.
Binh Dinh calls for Korean investors
The southern central province of Binh Dinh held a forum on Monday to call for South Korean investors.
Amid the on-going Covid-19 pandemic, the event was held online to ensure safety. It is aimed to promote the provincial investment and business advantages for South Korean investors as well as boost co-operation activities between companies from both countries.
According to the Binh Dinh Investment and Trade Promotion Centre, to date, South Korean companies have invested USD97.71 million in four projects in Binh Dinh.
During the 2016-2020 period, Binh Dinh organised many investment promotion activities in Yong San and Yanggu districts and Seoul in South Korea. Provincial representatives also visited the headquarters of big groups in South Korea such as Lotte, CJ, LG and Samsung Engineering.
In 2019, a Binh Dinh investment promotion forum was held in South Korea, attracting 250 South Korean companies.
An official from Binh Dinh Investment and Trade Promotion Centre said that the province will offer the best favourable conditions for investors.
The locality has focused on administrative reform and transport infrastructure projects to improve the investment environment.
The province is seeking investors for the Binh Dinh Industrial, Urban and Service Complex project which has a total investment of VND3.33 trillion.
Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes