VIETNAM'S BUSINESS NEWS HEADLINES JULY 6

Retail-service revenue increases 5.3 percent in June

VIETNAM'S BUSINESS NEWS HEADLINES JULY 6

Retail and service revenue amounted to some 2.38 quadrillion VND (103 billion USD) in June, up 6.2 percent on month and 5.3 percent on year.

However, between January and June, the figure saw an annual decrease of 0.8 percent.

Also in the period, the retail sector earned about 1.89 quadrillion VND, an annual increase of 3.4 percent. The rise was attributable to abundant supply of goods and thriving online shopping, particularly during the COVID-19 social distancing period.

By contrast, the accommodation and catering services earned just 234.7 trillion VND, down 18.1 percent against the same period last year.

The tourism revenue also followed suit with an annual reduction of 53.2 percent. In the first half, the sector reeled in just about 10.3 trillion VND due to a hiatus in welcoming foreign visitors to control the spread of COVID-19. Meanwhile, the summer vacation of students is yet to arrive, resulting in a less vibrant domestic travel market.

Stock market players hail covered warrants on 1st anniversary

One year after they were introduced on the Ho Chi Minh Stock Exchange, covered warrants have had a positive impact on the market, helping increase liquidity for their underlying stocks.

The State Securities Commission of Vietnam (SSC), the exchange and securities firms issuing covered warrants (CWs) comprehensively reviewed the issuance of CW products and transaction situation at a press conference held in HCM City last Friday.

According to the exchange, 134 CW codes issued by eight securities firms with a total volume of 410.2 million CWs had been listed and traded as of May 29.

Over 990.32 million CWs have totally been traded so far for VND1.48 trillion (US$63.8 million), with the highest trading volume being in May 2020 (15.92 million CWs) and the highest transaction value being in November last year (VND221.1 billion), it said.

Hoang Phu Cuong, deputy director of SSC’s securities business management department, said a large number of local and foreign investors have welcomed CWs and made profits from them, and they have proven safe at every stage from depository and issuance to listing and transacting.

Trinh Hoai Giang, general director of the HCM City Securities Corporation (HSC), one of eight CW issuers, said, “I think this is a potential market and we are gradually improving our activities related to CW such as issuance, market creation and hedging.

“Despite severe volatility recently, especially when the market fell sharply, we were able to operate this product well.”

He suggested that the regulator and the exchange should simplify CW issuance procedures, improve the trading system and develop new CW products that are based on the index rather than just stocks.

“I believe that CWs trading will become better in future.”

Le Hai Tra, acting chairman of HOSE, said the exchange would co-ordinate with market members to make a thorough review and evaluation of issuances, transactions and market feedback on CW products, so that it could improve and perfect the CW products.

The Securities Law was passed last year and the SSC is drafting documents and circulars for its implementation, and more new products would be launched in the market including CWs, he said.

The exchange is installing a new generation of IT system, and the huge and complex project that would cover the entire trading, information disclosure, clearing, payment, and depository systems is expected to be finished by year-end, he added.

Tran Van Dung, the SSC chairman, said the CW market has been developing well, but there are plans to amend their mechanism and issuance procedures to make the market more attractive.

“[With] the new IT system … there will be many modern technical tools … to meet the needs of market members and investors. By that time, when the market is sufficiently developed and risk management is ensured, the SSC will seek to allow the issuance and trading of put warrants.”

Currently, only call warrants are available in the market.

Staying ready to welcome new investment flows

Vietnam would welcome a new foreign direct investment capital flow after the COVID-19 pandemic with many favorable opportunities seriously in order to tap those opportunities effectively. Economic experts have said at a seminar on new FDI flow held recently in Hanoi.
 
Vietnam has been considered a safe destination for foreign investors to relocate and diversify operations thanks to its stable policy framework and success in controlling the COVID-19 outbreak. Besides favourable opportunities, there are still challenges.

Vietnam’s stature and foreign investment attraction policy has changed remarkably over the decades, however, incentive packages remain just as important to filter out large-scale and high-quality projects.

Experts also emphasized that the Covid-19 pandemic gave Vietnam a lesson on mobilizing the participation of the whole society. So does the foreign investment attraction strategy.

Thailand approves two stimulus packages to revitalise domestic tourism

The Thai cabinet on June 30 approved two stimulus packages worth 22.4 billion THB to revitalise domestic tourism which has been left reeling from the COVID-19 lockdown.

The packages, proposed by the Thai Ministry of Tourism and Sports, will run from July 1 to October 30.

The “Happiness-sharing trips” package worth 2 billion THB is to subsidise domestic flight fares, inter-provincial bus fares and car rental fees for a total of 2 million people.

The Thai government will subsidise 2 million air tickets, with the subsidy limited to 2,000 THB per person. Eligible people must pay for their tickets first and the government will pay them back 40 percent of ticket prices. For round-trip tickets, the subsidy is limited to no more than 1,000 THB per seat.

The “Let’s travel” package worth 18 billion THB will fund subsidies for accommodation, food and other services provided at tourist destinations.

The government will subsidise five million nights of hotel accommodation at 40 percent of normal room rates, with the subsidy limited to 3,000 THB per night for up to five nights. Tourists will be responsible for the other 60 percent.

Thai Prime Minister Gen Prayut Chan-o-cha also floated an idea to promote domestic tourism on weekdays to ease overcrowding on Saturdays and Sundays. Employees who take days off for holiday travel on weekdays under the campaign would have to work other days instead, he said.

In the first five months of this year, the total number of domestic flights in Thailand dropped 58.2 percent, reaching 40.2 million trips, with revenues falling 57.9 percent to 191 billion THB. Data from the Tourism Authority of Thailand (TAT) showed that international arrivals to the country plunged 60 percent in the period to 6.69 million and revenues from them decreased 59.6 percent to 332 billion THB.

In 2019, Thailand hosted nearly 40 million foreign tourists.

Over 1.4 billion USD raised via G-bond auctions in June

A total of nearly 32.6 trillion VND (over 1.4 billion USD) was raised by the State Treasury through 16 G-bond auctions at the Hanoi Stock Exchange (HNX) in June.

The amount was 77.2 percent higher than that of the previous month. About 90 percent of G-bonds offered were sold.

Annual interest rates of 10-year and 15-year bonds rose by 0.04 – 0.05 percent against May while those of five-year and 20-year ones declined 0.04 – 0.25 percent.

On the secondary G-bond market, trading volume averaged nearly 8.2 billion VND per session, a month-on-month decrease of 11.8 percent.

Total outright purchases of G-bonds in June amounted over 114 trillion VND, down 8 percent month-on-month; while total trading volume of G-bonds via repurchasing agreements (repos) was valued 65.3 trillion VND, up 7.9 percent.

Foreign investors made outright purchases of more than 5.2 trillion VND, and outright sales of over 3 trillion VND. They did not make any repo transactions.

Total listed G-bonds were valued at more than 1.16 quadrillion VND as of June 30.

Manufacturing output returns to growth in June

The Vietnamese manufacturing sector returned to growth in June as success in suppressing the coronavirus pandemic and greater business confidence helped lead to renewed expansions in output and new orders.

A survey of Nikkei and IHS Markit released on July 1 showed the Vietnam Manufacturing Purchasing Managers' Index (PMI) posted 51.1 in June, up from 42.7 in May and above the 50.0 no-change mark for the first time in five months. The reading represented a continuation of the recovery seen since the PMI hit a record low in April.

According to the survey, new orders increased for the first time in five months, and at a solid pace that was the fastest in just under a year. Respondents indicated that the COVID-19 pandemic being brought under control in Vietnam had contributed to rising new business. Both the consumer and intermediate goods sectors posted expansions in new business, but investment goods orders continued to fall.

While total new orders increased, new export business declined again amid restrictions on international movement and customer closures in some export markets.

A renewed rise in production was also signalled in June, driven by the consumer goods sector, the survey showed.

Despite new orders increasing at the end of the second quarter, there was continued evidence of spare capacity in the sector. Backlogs of work fell again, while staffing levels were reduced for the fifth month running. That said, the pace of decline in staffing levels was the weakest since February.

Efforts to expand production led firms to accumulate stocks of purchases, facilitated by a marginal rise in purchasing activity. Moreover, pre-production inventories increased to the greatest extent since November 2018. Stocks of finished goods also expanded, partly reflecting delays in the shipment of finished products.

Firms signalled a rise in input costs for the first time in three months during June. Where input prices increased, respondents linked this to the scarcity of certain materials. That said, the rate of inflation was softer than the series average as suppliers responded to relatively weak demand for inputs.

While some firms reacted to higher input costs by increasing their own selling prices, others continued to reduce charges amid demand weakness. Selling prices fell for the fifth month running, but at a marginal pace that was the slowest in this sequence.

Panellists reported continued issues in supply chains as a result of the COVID-19 pandemic, particularly with regard to imported items. Suppliers' delivery times lengthened for the seventh consecutive month, albeit to the least extent since January.

Confidence that COVID-19 is under control in Vietnam and that new orders will expand supported optimism that production will increase over the coming year. Sentiment strengthened sharply for the second month running and was the highest since January.

“The Vietnamese manufacturing sector returned to growth in June, thanks to COVID-19 being brought under control and subsequent improvements in customer demand within Vietnam,” Andrew Harker, Economics Director at IHS Markit, said, noting the main hurdle to a strengthening recovery is likely to be the performance of the global economy, which is still suffering due to the virus. New export orders continued to fall, while firms again cited difficulties in securing inputs from abroad.

"Moreover, COVID-19 appears to have taken a large toll on the economy in recent months. IHS Markit currently forecasts GDP to rise by just 1 per cent in 2020, well down on the 7 percent increase seen in 2019."

Prime Minister directs support for SMEs

Prime Minister Nguyen Xuan Phuc has requested ministries, ministerial-level agencies, localities, and associations promote the effective implementation of the law on supporting small-and medium-sized enterprises (SMEs).

He asked them to improve guidance documents and seek more solutions to bring SME support policies into reality.

The Ministry of Planning and Investment was tasked with arranging State budget capital to implement assistance programmes for SMEs, including one supporting them with startups and joining value chains in 2021-2025.

The Ministry of Finance is responsible for guiding the implementation of a National Assembly resolution on corporate income tax reductions in 2020 for SMEs and micro enterprises.

The State Bank of Vietnam was assigned to pilot peer-to-peer lending to help the group gain access to loans.

Housing demand remains high in HCM City despite COVID-19: JLL

Housing demand remains high in Ho Chi Minh City despite impact of the COVID-19 pandemic, according to US-based real estate and investment management services firm Jones Lang LaSalle (JLL).

The total number of the units sold in the country's biggest city in the second quarter of this year doubled that of the previous quarter, amounting to 569, 65 percent of which came from Manhattan townhouses at Vinhomes Grand Park.

The property primary price during the period climbed to a new record high, at 5,277 USD per sqm, up 35.9 percent year-on-year and 5.2 percent quarter-on-quarter, largely owing to the fact that newly-launched units were offered at higher prices than the average, reflecting developers’ confidence over high demand and supply shortage.

Supply of terraced houses continued to be limited in the second quarter as the new launches were less than twice the quarterly average between 2017 and 2018. But it was a positive sign when they increased by 37 percent from the first quarter.

The JLL estimates about 1,500 – 2,000 terraced houses will be launched in Vietnam’s southern hub in the next six months of the year, raising the total supply to 2,500 – 3,000, doubling the 2019 figure.

Quang Ninh to develop night-time economy

The northern province of Quang Ninh is aiming to boost its night-time economy to attract visitors.

The provincial People’s Committee assigned the Department of Planning and Investment to pilot the model by selecting appropriate locations and devising policies to appeal to businesses and investors.

Main activities will include cultural services, entertainment, dining, shopping, and tours.

Quang Ninh is a tourism hub in Vietnam and home to the world natural heritage site of Ha Long Bay.

In 2019, it welcomed nearly 12 million tourists, including over 4 million foreigners.

A number of night-time activities were held last year, such as an international circus festival, the Ha Long international musical fest, night markets, walking streets, street music shows, and food festivals.

CPI must be kept below 4 pct. this year: PM

Vietnam’s CPI this year must be controlled and grow by less than 4 percent, and this is one of the tasks to develop the economy during the remaining months of 2020, Prime Minister Nguyen Xuan Phuc said on July 1.

At a meeting of the national steering committee for price management in Hanoi, of which he is the chair, the Ministry of Finance reported that pork prices tended downwards in June due to a rise in live pig imports.

The General Statistics Office said that aside from bringing pork prices down, it is also necessary to set electricity and petrol prices at appropriate levels so as to help keep the CPI within the ceiling set by the National Assembly.

As the rise in the basic wage for cadres, civil servants, public employees, members of the armed forces, and pensioners, initially slated for July 1, was delayed due to COVID-19, an increase to health service prices was also rescheduled, the office noted.

The PM said the early containment of COVID-19 has created the conditions necessary for development, noting that the Government is determined to boost economic development and obtain macro-stability - an important target requiring ministries, sectors, and localities to have high levels of resolve.

The country is still working to concurrently fight the pandemic and promote development, and it will absolutely prevent a second wave of infections, he said.

Pointing out that GDP growth was just 1.81 percent in the first half of 2020 - the slowest first-half pace in a decade - he made four requests for the remaining months of the year to promote economic development.

He demanded that economic growth be as high as possible, noting that the Government targets growth of 4 percent for the year, while social security must be ensured and unemployment minimised.

The third task is to keep the CPI below 4 percent, which he said is critical in stabilising exchange rates, which would subsequently help with investment attraction and job creation.

And the fourth is to ensure balance within the economy, especially as uncertainty is likely to come in the second half, such as storms and floods, while food reserves must be guaranteed in all circumstances.

As inflationary pressure remains substantial, the PM asked for flexibility in governance so as not to affect economic recovery and development.

The Finance Ministry should work with other ministries and sectors to take appropriate action to keep CPI growth at less than 4 percent, he said, adding that 4 percent is acceptable to help spur growth.

Many foreign companies relocate facilities to Indonesia

Indonesian President Joko “Jokowi” Widodo announced on June 30 that seven foreign companies had confirmed plans to relocate production facilities to Indonesia, mostly from China.

This is an encouraging signal for the country’s investment climate amid the COVID-19 pandemic, he said.

The relocation of factories of the seven companies, including the industrial conglomerate LG of the Republic of Korea and Japanese electronics giant Panasonic, is estimated to bring investment of 850 million USD to the country and potential employment for 30,000 workers, according to the Investment Coordinating Board (BKPM).

Other companies that have reportedly confirmed their relocation include Taiwan-based audio equipment maker Meiloon, Japanese rubber products manufacturer Sagami, US-based light product maker Alpan, Taiwan-based tire-maker Kenda and Japanese automotive component manufacturer Denso.

Speaking during his tour of the newly established Batang Industrial Park, Widodo ordered ministers and BKPM leader provide the best services for the companies during the relocation process.

He also revealed that 17 more companies were looking to open facilities in Indonesia. BKPM data show that the potential relocation and facilities expansion of the 17 companies will bring in total investment of 37 billion USD and provide employment for 112,000 people.

According to Indonesian government data, Panasonic relocated its facilities to Indonesia to turn Southeast Asia’s biggest economy into its export base for home appliances. Meanwhile, LG Electronics moved its facilities from the Republic of Korea as it planned to turn Indonesia into its regional hub to expand its market in Asia and Australia.

The coronavirus outbreak has strained Indonesia’s foreign direct investment, as projects have been delayed as a result of social restrictions to contain the spread of the virus. Indonesia has booked a 9.2 percent year-on-year decline in foreign direct investment (FDI) to 98 trillion Rp (6.8 billion USD) in the first quarter of 2020.

To take advantage of the situation, the Indonesian government has established a special task force to attract businesses leaving China and facilitate their relocation to the Southeast Asian country.

Bamboo Airways opens new domestic routes

Bamboo Airways officially put into operation two new routes on July 1, connecting Thanh Hoa city in the north-central province of Thanh Hoa with Quy Nhon city in the south-central province of Binh Dinh and with Phu Quoc Island off the coast of the Mekong Delta province of Kien Giang.

There will be four round-trip flights a week on the Thanh Hoa - Quy Nhon route, on Tuesday, Thursday, Friday, and Sunday, with each trip taking an hour and 35 minutes and tickets costing from 199,000 VND (8.5 USD), excluding taxes and fees.

The Thanh Hoa - Phu Quoc route will see three round-trip flights a week, on Monday, Wednesday, and Saturday. Each trip takes 2 hours and 5 minutes and tickets cost from 399,000 VND, excluding taxes and fees.

Vice General Director of Bamboo Airways Nguyen Ngoc Trong said Thanh Hoa Airport plays an important role in the carrier’s network expansion strategy due to its favourable location.

He hopes the routes will contribute to tapping into the province’s tourism potential and fostering its socio-economic growth.

On the same day the hybrid local carrier also launched flights between Vinh city in the north-central province of Nghe An and Quy Nhon, with three round-trip flights a week.

It plans to open flights linking Hanoi and Con Dao Island, off the coast of southern Ba Ria-Vung Tau province, in mid-July.

Bamboo Airway is working on recovering all of its domestic routes following its enforced COVID-19 hiatus. According to the latest data from the Civil Aviation Authority of Vietnam, the airline’s throughput in June surpassed that in the same period last year. In the first five months of 2020 it also posted the highest on-time performance (OTP) rate in the domestic industry, at nearly 96 percent, with all flights deemed safe.

Retail sales enjoy six-month increase despite epidemic impact

The opening six months of the year saw retail sales reach a figure of VND1,895,600 billion, accounting for 79.6% of total turnover and representing an annual boost of 3.4%, according to figures released by the General Statistics Office.

Most notably, online shopping has become increasingly popular, especially when social distancing measures were put in place in order to meet people’s growing demands, of which, food and foodstuff increased by 7%, whilst household appliances, tools and equipment went up by 5%. 

A number of localities enjoyed a fair increase in retail sales of goods, including Hai Phong by 10.4%, Ho Chi Minh City with 10.1%; Hanoi by 9.9%, Dong Nai with 8.4%, Binh Dinh by 4.3%, Ba Ria - Vung Tau with 3%, and Thanh Hoa by 0.9%.

Elsewhere, revenue from accommodation and catering services was estimated to stand at VND234,700 billion, representing 9.9% of the total whilst being a drop of 18.1% on-year, of which the second quarter of the year saw a severe drop of 26.1% due to the impact of social distancing measures.

Vietnam exports huge rice haul over five-month period

The country earned US$1.41 billion from exporting 2.9 million tonnes of rice over the first five months of the year, a rise of 5.1% in volume and 18.9% in value compared to last year’s figures, according to statistics released by the Agro Processing Market Development Authority.

The opening four months of the year saw the Philipppines take the lead as the largest importer of Vietnamese rice, making up 40.5% of the overall market share with 902,100 tonnes valued at US$401.3 million, an increase of 11.4% in volume and 26% in value.

Moreover, the value also went up in other markets such as China and Indonesia, a 2.7-fold increase, Taiwan (China), up 67.9%, and Ghana, with a rise of 39.3%.

Indeed, the average price of rice during the first four months of the year increased on year by 10% to US$470.2 per tonne. The price of 5% broken rice hit yearly highs of between US$450 and US$460 per tonne.

In terms of the global market, the export price of Indian rice hit its highest level in recent years thanks to strong demand from African and Asian countries. Elsewhere, the price of Thai rice plunged due to drought and fierce competition from both Indian and Vietnamese suppliers.

Within the domestic market, the price of rice in the Mekong Delta underwent a slight increase, with the Vietnamese Government allowing the export of rice through international border gates, road, rail, sea, waterways, and air.

Meanwhile, the price of rice in the Mekong Delta surged by VND200 to between VND5,500 and VND6,900 per kg, depending on their type.

EC officially reveals date of EVFTA entering into force

A statement made by the European Commission (EC) on June 30 officially announced the European Union-Vietnam Free Trade Agreement (EVFTA), signed on June 30, 2019, will officially come into effective as of August 1.

Once the trade deal comes into effect, 65% of duties on EU exports to the country will be eliminated, while the remainder will be gradually phased out over the course of a 10-year period. Furthermore, 71% of duties are poised to be eliminated on Vietnamese exports to the EU, with the rest being eliminated over a seven-year period.

The EVFTA also features many important provisions with regard to intellectual property protection, workers' rights, and sustainable development.

It also covers commitments in terms of the implementation of the International Labor Organization's core standards, as well as various UN conventions regarding climate change response and biodiversity protection.

The EVFTA represents a new generation bilateral agreement that is considered to be an ambitious trade agreement which will seek to eliminate 99% of custom duties between both sides. It is expected to help raise Vietnamese GDP by 4.6%, with exports to the EU anticipated to rise by 42.7% by 2025.

Moreover, EU investors are currently operational in 18 economic sectors and in 52 out of the 63 provinces nationwide. Investment has therefore been the most prominent area of focus, with a particular emphasis placed on manufacturing, electricity, and real estate. With 24 EU nations investing in the country, the Netherlands leads the way, trailed by France, and the UK.

Kiên Giang to invest $14m in One Commune, One Product programme

The Cửu Long (Mekong) Delta province of Kiên Giang will spend more than VNĐ326 billion (US$14 million) to implement the One Commune, One Product programme in 2019 – 25.

 

Of the amount, VNĐ119 billion will come from the Government and the rest from other stakeholders in the programme launched by the Ministry of Agriculture and Rural Development.

It aims to develop one staple product in each commune around the country.

Kiên Giang is implementing it in 145 communes, wards and towns, with registered business households, production establishments, co-operative groups, co-operatives, and companies participating, according to its Department of Agriculture and Rural Development.

Its OCOP products are commercial products and services like food and beverages, medicinal herbs, handicrafts and home decoration, and rural tourism services and sales.

The programme ranks them on a scale of five stars, with a five-star being the highest.


The province wants to have one or two of its current OCOP products meeting provincial five-star standards this year, and by 2025 having 25 to 30 of provincial five-star standards and five of national five-star standards.

To implement the programme, the People’s Committee has ordered relevant agencies and local authorities to increase the dissemination of information about the programme in the community.

The province plans to consolidate the management of the programme and provide human resources training to implement it, step up research and use advanced techniques to produce OCOP products.

Đỗ Thanh Bình, deputy chairman of the People’s Committee, said the province aims to develop production in rural areas to enable industrialisation and modernisation of agriculture and rural areas.

It would enable the appropriate use of labour in rural areas, protect the environment and preserve traditional values, he said.

It would contribute to restructuring agriculture, changing the economic structure and improving the incomes and thus lives of rural people, he added. 

Improving business climate critical to post-pandemic growth

Barriers in the business environment must be removed to promote the development of private enterprises, which is considered a push for post-pandemic economic growth, experts said.

Vu Tien Loc, Chairman of the Viet Nam Chamber of Commerce and Industry, said that Vietnamese firms were undergoing a crisis caused by the COVID-19 pandemic.

“It’s time to speed up reforms and create a favourable business environment for the private sector,” Loc said, adding that the focus would be on strengthening institutional reforms, simplifying administrative procedures and improving the investment climate.

The pandemic was spurring a wave of investment shift with signals that Viet Nam would have significant opportunities to become a global production centre. However, the opportunities would come and go quickly if Vietnamese enterprises did not improve their competitiveness drastically to participate in global value chains, Loc said.

Improving competitiveness of Vietnamese enterprises, especially those of small and medium size, to enable them to be capable of becoming partners of multinational corporations was the decisive factor behind the success of the Vietnamese economy, he stressed.

According to economic expert Ngo Tri Long, one obstacle was that most private firms (around 96 per cent) were of small and medium scale. The private sector also had around five million business households, but the process of transforming them into enterprises had not been efficient as expected.

Le Duy Binh, Director of Economica Viet Nam, said that compliance costs, in terms of time and money, remained high to enterprises as many business and investment procedures were too complicated.

Besides, unofficial charges were also a big problem, Binh said, citing the recent provincial competitiveness index survey’s finding that more than 50 per cent must pay unofficial charges, a significant financial burden to any enterprise.

In some localities, there was discrimination between private firms and State-owned and foreign-invested enterprises, in which private firms had more limited access to resources and business opportunities, he said.

The Government was striving to achieve an economic growth rate of more than five per cent this year – a challenging goal.

While the workload for disbursing public investment remained huge in the remaining months of this year, increasing private investment was considered another push to post-pandemic economic growth.

Binh said that barriers in the business climate must be removed to promote private investment for post-pandemic recovery.

“It is critical to improve the business environment to cut costs for enterprises,” he said, adding that officials who intended to cause difficulties to businesses must be strictly punished. Firms’ confidence in the business environment must be improved so that they would be willing to pour investment into the economy.

The private sector, including business households, contributed around 40 per cent to the country’s gross domestic product.

Viet Nam targeted to have at least one million enterprises by the end of this year which would contribute 50 per cent of GDP and at least two million by 2030 which would contribute 60-65 per cent of GDP.

Manufacturing output returns to growth in June

The Vietnamese manufacturing sector returned to growth in June as success in suppressing the coronavirus pandemic and greater business confidence helped lead to renewed expansions in output and new orders.

A survey of Nikkei and IHS Markit released on Wednesday showed the Vietnam Manufacturing Purchasing Managers' Index (PMI) posted 51.1 in June, up from 42.7 in May and above the 50.0 no-change mark for the first time in five months. The reading represented a continuation of the recovery seen since the PMI hit a record low in April.

According to the survey, new orders increased for the first time in five months, and at a solid pace that was the fastest in just under a year. Respondents indicated that the COVID-19 pandemic being brought under control in Viet Nam had contributed to rising new business. Both the consumer and intermediate goods sectors posted expansions in new business, but investment goods orders continued to fall.

While total new orders increased, new export business declined again amid restrictions on international movement and customer closures in some export markets.

A renewed rise in production was also signalled in June, driven by the consumer goods sector, the survey showed.

Despite new orders increasing at the end of the second quarter, there was continued evidence of spare capacity in the sector. Backlogs of work fell again, while staffing levels were reduced for the fifth month running. That said, the pace of decline in staffing levels was the weakest since February.

Efforts to expand production led firms to accumulate stocks of purchases, facilitated by a marginal rise in purchasing activity. Moreover, pre-production inventories increased to the greatest extent since November 2018. Stocks of finished goods also expanded, partly reflecting delays in the shipment of finished products.

Firms signalled a rise in input costs for the first time in three months during June. Where input prices increased, respondents linked this to the scarcity of certain materials. That said, the rate of inflation was softer than the series average as suppliers responded to relatively weak demand for inputs.

While some firms reacted to higher input costs by increasing their own selling prices, others continued to reduce charges amid demand weakness. Selling prices fell for the fifth month running, but at a marginal pace that was the slowest in this sequence.

Panellists reported continued issues in supply chains as a result of the COVID-19 pandemic, particularly with regard to imported items. Suppliers' delivery times lengthened for the seventh consecutive month, albeit to the least extent since January.

Confidence that COVID-19 is under control in Viet Nam and that new orders will expand supported optimism that production will increase over the coming year. Sentiment strengthened sharply for the second month running and was the highest since January.

“The Vietnamese manufacturing sector returned to growth in June, thanks to COVID-19 being brought under control and subsequent improvements in customer demand within Viet Nam,” Andrew Harker, Economics Director at IHS Markit, said, noting the main hurdle to a strengthening recovery is likely to be the performance of the global economy, which is still suffering due to the virus. New export orders continued to fall, while firms again cited difficulties in securing inputs from abroad.

"Moreover, COVID-19 appears to have taken a large toll on the economy in recent months. IHS Markit currently forecasts GDP to rise by just 1 per cent in 2020, well down on the 7 per cent increase seen in 2019." 

Improving business climate critical to post-pandemic growth

Barriers in the business environment must be removed to promote the development of private enterprises, which is considered a push for post-pandemic economic growth, experts said.

Vu Tien Loc, Chairman of the Viet Nam Chamber of Commerce and Industry, said that Vietnamese firms were undergoing a crisis caused by the COVID-19 pandemic.

“It’s time to speed up reforms and create a favourable business environment for the private sector,” Loc said, adding that the focus would be on strengthening institutional reforms, simplifying administrative procedures and improving the investment climate.

The pandemic was spurring a wave of investment shift with signals that Viet Nam would have significant opportunities to become a global production centre. However, the opportunities would come and go quickly if Vietnamese enterprises did not improve their competitiveness drastically to participate in global value chains, Loc said.

Improving competitiveness of Vietnamese enterprises, especially those of small and medium size, to enable them to be capable of becoming partners of multinational corporations was the decisive factor behind the success of the Vietnamese economy, he stressed.

According to economic expert Ngo Tri Long, one obstacle was that most private firms (around 96 per cent) were of small and medium scale. The private sector also had around five million business households, but the process of transforming them into enterprises had not been efficient as expected.

Le Duy Binh, Director of Economica Viet Nam, said that compliance costs, in terms of time and money, remained high to enterprises as many business and investment procedures were too complicated.

Besides, unofficial charges were also a big problem, Binh said, citing the recent provincial competitiveness index survey’s finding that more than 50 per cent must pay unofficial charges, a significant financial burden to any enterprise.

In some localities, there was discrimination between private firms and State-owned and foreign-invested enterprises, in which private firms had more limited access to resources and business opportunities, he said.

The Government was striving to achieve an economic growth rate of more than five per cent this year – a challenging goal.

While the workload for disbursing public investment remained huge in the remaining months of this year, increasing private investment was considered another push to post-pandemic economic growth.

Binh said that barriers in the business climate must be removed to promote private investment for post-pandemic recovery.

“It is critical to improve the business environment to cut costs for enterprises,” he said, adding that officials who intended to cause difficulties to businesses must be strictly punished. Firms’ confidence in the business environment must be improved so that they would be willing to pour investment into the economy.

The private sector, including business households, contributed around 40 per cent to the country’s gross domestic product.

Viet Nam targeted to have at least one million enterprises by the end of this year which would contribute 50 per cent of GDP and at least two million by 2030 which would contribute 60-65 per cent of GDP. 

Online trade exchange to promote exports of consumer goods to Japan

The Ministry of Industry and Trade and the ASEAN – Japan Centre (AJC) on Tuesday held an online trade promotion conference with an aim to increase exports of consumer goods to Japan.

This was the first online consumer goods trade promotion conference with Japan, which attracted the participation of 40 producers and distributors of consumer goods from eight provinces and cities including Ha Noi, HCM City, Binh Duong, Binh Thuan, Dong Nai, Lam Dong, Long An and Quang Ngai.

Vu Ba Phu, director of the ministry’s Viet Nam Trade Promotion Agency, said that Japan was one of the biggest economic partners of Viet Nam, being its third largest export market.

The two countries had huge untapped potential to boost trade, Phu said, adding that Japan had high demand for agro-fishery products, processed food and consumer goods in which Viet Nam had a competitive advantage.

Phu said Viet Nam and Japan were now members of three trade agreements, including the Vietnam-Japan Economic Partnership Agreement, ASEAN-Japan Comprehensive Economic Partnership Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This creates favourable conditions to deepen cooperation between the two countries in a number of fields and brings opportunities for the two countries in participating in regional and global value chains.

Masataka Fujita, AJC’s Secretary General, said that he highly appreciated Viet Nam’s economic achievements in the context of the COVID-19 pandemic.

Masataka at the conference introduced Japan’s regulations on importing goods, urging Vietnamese firms to strictly comply with these regulations to export to Japan.

Customs statistics showed that the bilateral trade between Japan and Viet Nam reached US$15.6 billion in January-May, up 2.2 per cent against the same period last year, despite the impacts of COVID-19.

Japanese investors also registered to pour $1.27 billion in investment in Viet Nam in the first five months of this year.

Standard Chartered supports Tecomen’s fight against COVID-19

Standard Chartered on Tuesday announced that Tecomen Joint Stock Company (Tecomen) has become the first company in Viet Nam to make a drawdown under the bank’s US$1 billion COVID-19 financing commitment. This is also the first such drawdown in ASEAN that the bank has announced.

The bank extended Tecomen a credit limit of VND40 billion ($1.8 million) as working capital for the production of medical masks to meet the global demand of medical supplies in the global fight against COVID-19.

Standard Chartered announced in March its commitment to provide not-for-profit financing to companies that provide goods and services to help combat the pandemic. Companies within the scope of this financing commitment include manufacturers and distributors in the pharmaceutical sector including ventilators, face masks, protective equipment, sanitisers, and other consumables.

Organisations from other sectors that are planning to add manufacturing capabilities for such products are also eligible to apply for the programme. Tecomen is Viet Nam’s leading manufacturer of water filters, water dispensers, air purifiers, sea water purification equipment, industrial filtration systems, and household electrical appliances. Since early 2020, the company has added medical face mask production to its product lines as the pandemic threatened to pose increasing risks to global health.

Nirukt Sapru, CEO, Viet Nam and ASEAN & South Asia Cluster Markets, Standard Chartered Bank, said: “We are pleased to support Tecomen in its effort to combat COVID-19. At Standard Chartered, we are committed to be here for good for our clients and the community. By extending working capital to our clients in this global time of need, we are able to contribute to the international effort to enable greater access to medical supplies. We have been and will continue working with our clients and stakeholders to tackle the outbreak and help restore economic activity.”

Nguyen Thy Phuong, Tecomen’s CEO said: “The credit extension from Standard Chartered will enable us to ramp up the production of high-quality protective equipment to benefit more people who are affected by the pandemic.” 

Sabeco CEO bemoans tough six months

The first half of this year was the toughest time for the Saigon Beer-Alcohol-Beverage Corporation (Sabeco) as the brewer suffered losses due to rumours and policy changes, executives said on Tuesday.

The company has encountered difficulties since stronger penalties on drinking drivers and tightened beer advertising rules were issued in January and February, CEO Neo Gim Siong Bennett said at the annual shareholders’ meeting.

In addition, the COVID-19 pandemic has ravaged the domestic economy, downsizing the tourism sector and closing entertainment facilities where alcohol is consumed the most, he said.

According to the General Statistics Office, the total production of the beer and alcohol industry dropped 19 per cent year-on-year in the first six months.

Sabeco has had to shut down some of its plants, suspended the expansion of the Cu Chi plant, which was almost complete, and cut non-core expenses, the CEO added.

Takeaways have been encouraged while inventory management processes have been overhauled to assure the quality of the stockpiled beer, he said.

Cost-cutting helped Sabeco earn a profit in the first six months despite the drop in sales revenue, he added.

The company has also lost some of its market share to competitors due to rumours and speculation, the CEO said.

The Government should issue a regulation to strictly deal with those who spread bad news as it could kill a business, he said.

Total revenue is forecast to drop 37 per cent year-on-year to VND23.8 trillion (US$1.03 billion) and post-tax profit is projected to slip 39 per cent year-on-year to VND3.25 trillion in 2020.

In the first three months, total revenue lost 47 per cent on-year to VND4.9 trillion and post-tax profit was down 44 per cent year-on-year to VND717 billion.

The Sabeco CEO reported sales in May and June improved significantly as social distancing was eased and Viet Nam had done well to contain the spread of the coronavirus, making people willing to go out and consume food and drink.

Second-quarter earnings will be released later this month, the CEO said, adding that earnings targets this year may be beaten.

Sabeco shares (HoSE: SAB) jumped 3.8 per cent to end Wednesday at VND163,000 apiece. 

VNDirect Securities eyes 5 per cent profit growth in 2020

VNDirect Securities Corporation projects its total post-tax profit may increase 5 per cent year-on-year to VND405 billion (US$17.5 million) in 2020.

Total revenue is forecast to gain 17 per cent on-year to VND1.87 trillion, according to acting CEO Do Ngoc Quynh.

The earnings forecasts were made upon VNDirect’s expectation that the benchmark VN-Index on the Ho Chi Minh Stock Exchange will move between 840 points and 920 points in 2020.

“Average market liquidity is estimated to increase by 14.5 per cent from the same period of last year,” the brokerage firm said in a filing to shareholders at the annual meeting on Tuesday.

“Subject to the basic scenario, foreign investors are not really excited about the Vietnamese market this year, thus, the market is mostly supported by domestic investors.”

VNDirect also delivered two other projections for this year’s performance, in which the VN-Index may end 2020 in the ranges of 940-810 points or 960-1,000 points.

In the better forecast, positive signs will appear, for example, the total weight of Vietnamese shares in the MSCI Frontier Index will gain, the trend of global quantitative easing will direct cheap capital to flow into emerging markets, and foreign investors will return to net-buying from July.

Under this forecast, trading liquidity will grow 20.8 per cent year-on-year in 2020 and post-tax profit is estimated at VND490 billion.

Meanwhile, if the VN-Index falls back to the 940-810 range, average trading liquidity on the local market will increase by only 5.8 per cent year-on-year in 2020.

Post-tax profit may fall to VND320 billion under this projection.

In 2019, VNDirect earned VND1.5 trillion in total revenue, down 7.8 per cent year-on-year, and VND383 billion in post-tax profit, up 2.7 per cent year-on-year.

The company’s financial report 2019 pointed out that revenues from brokerage services and proprietary trading lost 34.5 per cent and 12.8 per cent year-on-year.

But a 113.6 per cent surge in revenue from investment banking, which was VND48 billion, helped offset those losses.

VNDirect blamed losses in proprietary trading and brokerage services on the sharp drop of the local market in 2019 caused by “disappointing earnings growth of listed companies, the absence of notable IPOs and the delay of State-owned enterprises’ divestments, and the vibrant corporate bond market which has partially absorbed money from the equity market”.

In the second half of 2020, the company expects the stock market will recover as the amended Law on Securities will “improve share quality, enhance the transparency and better protect investors’ interests.”

More domestic and foreign funds are expected to enter Viet Nam’s stock market and accelerate the process of upgrading the market to the “emerging markets” level, the company said.

In addition, the Government’s divestment plans in large-cap companies like dairy producer Vinamilk, petrol firm Petrolimex, the Vietnam Engine and Agricultural Machinery Corporation (VEAM), tech group FPT and insurer Bao Minh may be executed in the short term, probably this year, VNDirect said.

“However, the progress of equitisation and divestment in SOEs may be difficult to improve in 2020 because the bottlenecks in the equitisation process have not been thoroughly solved, especially the issues related to land pricing.” 

Banks restructure VND384 trillion worth of loans for HCMC businesses

Loans worth a total of VND384 trillion (US$16.5 billion) have been restructured by commercial banks to support businesses in Ho Chi Minh City hit by the coronavirus pandemic. 

The information was released at a conference jointly held by the HCMC branch of the State Bank of Vietnam (SBV) and the municipal Department of Industry and Trade on July 2.

Support measures taken by commercial banks included reducing interest rates, deferring loan repayments and providing new loans with lower rates, moves which benefited over 230,000 customers.

These actions came following a central bank circular in March aimed at giving assistance to enterprises affected by the coronavirus.

Speaking at the conference, HCMC Vice Chairman Tran Vinh Tuyen said he highly appreciated the banking sector’s assistance while calling on the agencies concerned to take note of all feedback received from enterprises in order to deal with any difficulties arising.

For his part, SBV Deputy Governor Dao Minh Tu pledged to continue working with the HCMC authorities and enterprises in order to get through this troubled time.

He added that the central bank will continue to pursue a flexible monetary policy, keep rates stable and maintain a balance between credit growth and inflation alongside other macroeconomic indicators.

According to Tu, the SBV will quickly amend its circular to extend the support period until the end of 2020 or beyond, depending on the outbreak’s development.

On the occasion, 16 credit institutions in Ho Chi Minh City signed a pledge to provide VND87 trillion (US$3.7 billion) to 17,000 enterprises, mainly small and medium-sized operations hit by the coronavirus.

Vietnam-Japan trade promo event in support industries to take place in July 7

The Ministry of Industry and Trade will host a teleconference for trade promotion in support industries between Vietnam and Japan on July 7, attracting about 30 – 40 enterprises from both countries.

Held following the success of a similar event on consumer goods last week, the online trade exchange conference aims to introduce more Vietnamese products to partners in Japan and help them gain a broader access to the Eastern Asian market.

Vu Ba Phu, director of the ministry’s Vietnam Trade Promotion Agency, said Japan is Vietnam’s third largest trade partner, with the two-way trade reaching 15.6 billion USD in the first five months of this year, up 2.2 percent against the same period last year, despite the impacts of the COVID-19.

Vietnam’s exports to Japan during the period stood at 7.83 billion USD while imports totalled 7.77 billion USD, he said.

Last month, Vietnam shipped to Japan the first batches of lychee, more than two tonnes, which were sold out in just a day.

Vietnam expects to export a total of 200 tonnes of lychee to Japan via air and sea this year.

Phu further noted that the two countries have huge untapped potential to boost trade as the structure of Vietnamese and Japanese goods is complementary and non-competitive, and both are now members of a number of free trade agreements, notably the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Though the door to the Japanese market is wider than ever, Japan remains a demanding market with high requirements. So Masataka Fujita, Secretary General of the ASEAN – Japan Centre (AJC) urged Vietnamese producers and exporters to strictly comply with Japan’s regulations on imported goods.

VIETNAM'S BUSINESS NEWS HEADLINES JULY 6
 
 

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