VIETNAM'S BUSINESS NEWS HEADLINES JUNE 30

HCMC hotels suffer despite big discounts

VIETNAM'S BUSINESS NEWS HEADLINES JUNE 30
Tourists cross the street in downtown HCMC. Hotels in HCMC are still unable to recoup from the Covid-19-induced losses - PHOTO: VGP



Despite the modest number of domestic guests and discounts of 30%-40% or higher on offer, hotels in HCMC are still unable to recoup from the Covid-19-induced losses and the subsequent travel restrictions around the world, as they mainly rely on international travelers.

Although Vietnam has contained the coronavirus pandemic, multiple hotels are yet to reopen, while some chains have scaled down their businesses or are lowering prices to attract customers.

A sales director of a five-star hotel in the city said the room rate is currently at US$90 per night, compared to the previous rate of over US$120.

The regular room rate at four-star hotels is US$100 per night. Many hotels are offering services at lower prices to attract domestic guests, who mainly come to the city for business purposes. There could be further cuts on room rates but the number of guests is not expected to improve, he added.

Tran Thi Thanh Tam, owner of the Chez Mimosa small hotel chain, said that of the five Chez Mimosa-branded hotels, she had to give up the site of one hotel, while only one of the other four is operational as there are no international arrivals and only a handful of local guests.

Current revenues are just enough to pay rentals, salaries, electricity and water bills. The chain cannot afford to cover other fees, Tam noted.

Similarly, a seven-property hotel chain is operating only two facilities in District 1, with a major focus on the domestic segment but it rarely reaches the breakeven point. The chain has furloughed most of its staff and can only resume regular operations once travel restrictions are lifted, said its marketing director.

Data from CBRE Vietnam indicated that the revenue per available room (RevPAR) earned by four- to five-star hotels in the first quarter of the year was a mere US$46.3, down a sharp 48% over the same period last year. The RevPAR could be severely affected this quarter due to travel restrictions and low travel demand from local people.

Samsung to shift major portion of monitor production from China to HCMC

Samsung Vina Electronics announced on June 19 that a major portion of Samsung’s monitor production would be shifted from China to the Samsung HCMC CE Complex at the Saigon Hi-tech Park in District 9, HCMC, this year.

The South Korean tech giant is developing a production chain for over 40 monitor models at its factory in HCMC. Once the shift is complete, Vietnam will become one of the largest suppliers of Samsung monitors in the world, according to Tuoi Tre newspaper.

A Samsung representative said the shift will help Vietnamese consumers become the first to use the company’s latest monitors, while the country will also help Samsung monitors increase their market presence in Southeast Asia.

Data from global market intelligence firm IDC indicated that Samsung is the leading producer of monitors in Vietnam, with Samsung monitors of 24 inches or larger accounting for 34% of the Vietnamese market in the first quarter of 2020.

Lack of demand forces HCMC to lower bus advertising charges

With the introduction of a variety of new advertising media, the declining popularity of bus advertising and four failed tenders for the same advertising packages, the HCMC Department of Transport is now planning on decreasing the prices of bus advertising.

Vo Khanh Hung, deputy director of the municipal Department of Transport, told the local media on June 19 that among the previous tenders, only one found a winner, while no enterprises submitted bids for the other tenders.

Hung attributed the failure of the four previous auctions for rights to advertise on buses and at bus stop lounges to the popularity of various new forms of advertising including LED-based outdoor advertising boards.

As such, the department proposed reducing the prices of bus advertising packages to attract investors and advertising firms and submitted a plan in this regard to the HCMC government for consideration and approval.

The demand for outdoor advertising was high 10 years ago, but has dropped by 30% as clients are gradually switching to online advertising, noted Dang Van Son, director of Phuoc Son Advertising Company.

Apart from this, many buses in HCMC have become old and worn out, while the prices of bus advertising are higher than those in other localities and of online advertising, Son added.

Son suggested the authorities assign bus firms and transport cooperatives to look out for advertising contracts and pay the costs of maintaining and upgrading buses to attract more advertisers and make bus advertising more effective.

Vingroup breaks ground on US$1 billion theme park

Vietnam's private conglomerate Vingroup has begun construction on the VinWonders theme park on Vu Yen island off the northern city of Haiphong at an investment of US$1 billion.

A groundbreaking ceremony for the project was held on June 21 and attended by Prime Minister Nguyen Xuan Phuc.

As part of an entertainment, housing and eco-park project, VinWonders Vu Yen will cover an area of 50 hectares with six indoor and outdoor entertainment zones. The children's area will have science, sports, virtual reality and thrilling games, while an outdoor water park will be designed to complement the three rivers surrounding the island.

A safari with many rare species will also be built, the first one in the north. Apart from that, VinWonders Vu Yen will also have designated areas for shopping and restaurants.

Addressing the event, Nguyen Viet Quang, vice chairman and general director of Vingroup, said that once completed, the theme park is expected to offer a significant travel experience for local and foreign tourists, as well as help boost the tourism industry of Haiphong in particular and Vietnam as a whole.

Locals have been looking forward to VinWonders Vu Yen for years now, as it will be the city's first large-scale theme park. It is Vingroup’s fourth theme park in the country and the first VinWonders-branded property in the north, noted a Vingroup representative.

Con Dao to lease over 888 hectares of land for ecotourism development

Con Dao National Park in Ba Ria-Vung Tau Province will lease 888.23 hectares of forest land by 2030 to develop ecotourism projects, with the rent not lower than 1% of the annual revenue earned by the lessee, in line with the provincial government’s Decision 1668 approving a scheme to manage the national park in a sustainable manner until 2030.

The area offered for the lease, which accounts for some 15% of the park’s total area preserved for ecotourism development, includes some 720 hectares from the park’s service administrative zone, while the rest is from the ecosystem restoration zone.

The maximum lease term is 30 years. After that, if the lessee wishes to extend the lease, the lessor will consider the extension upon reviewing the lease contract every five years.

Through the lease, the southern province aims to develop scores of ecotourism products in Con Dao island in keeping with national and international standards.

According to the scheme, while developing ecotourism in the province is a crucial move to raise the economic benefits, the original state of the ecosystem and the landscape of the park must remain unchanged.

The resolve of the province not to trade the pristine beauty of the park for economic gains is a major criterion while selecting investors that can develop environmentally-responsible tourism products.

There will be an estimated 17 ecotourism routes, with a wide selection of tourism products at the park, such as sports tourism, nature discovery, and wildlife watching and rescuing.

Con Dao island has emerged as an attractive destination over the past few years. In 2019, the island welcomed some 394,000 tourists, up over 31% year-on-year. Travelers now can visit Con Dao by air or ship departing from Vung Tau City, Soc Trang and Can Tho. The island is expected to serve some 500,000-700,000 tourists per year until 2030.

Car manufacturers recall thousands of cars in Vietnam

Foreign and local car manufacturers Ford, Honda, Mitsubishi and VinFast recently announced the recall of thousands of faulty cars in Vietnam, Tuoi Tre newspaper reported.

Honda has announced that it will recall some 20,000 City, Jazz, HR-V, Civic, CR-V and Accord cars assembled or manufactured between 2018 and 2019 to check and replace faulty fuel pumps.

Vietnamese carmaker VinFast also launched a campaign to recall roughly 12,500 Cruze, Orlando and Trax cars manufactured between 2014 and 2018

Ford Everest car owners received an email this month stating that Ford Vietnam is recalling over 3,300 Ford Everest cars manufactured between December 15, 2017, and October 12, 2019, to update the transmission control module and power-train control module.

Mitsubishi Motors Vietnam, which has planned to build a second car assembly plant in Binh Dinh Province, is recalling 13 Lancer cars manufactured between 2009 and 2011 to fix the sunroof and auto tensioner.

Representatives of these carmakers said they have sent emails and messages or called up car users to inform them about the recall campaigns.

Car users can bring their cars to authorized dealerships for free checks and repairs. They have been advised to bring along the recall announcement as well.

Vietnam is Indonesia’s competitor in foreign investment attraction: Minister

Vietnam and Bangladesh are considered the most potential competitors of Indonesia in attracting foreign investment after COVID-19, according to Indonesian Minister of Public Works and Public Housing (PUPR) Basuki Hadimuljono.

To welcome the wave of foreign investment shifting from China, Indonesia has prepared land areas to draw investors, he said.

The minister added that President Joko Widodo has repeatedly expressed concern about Indonesia’s weaker attraction of foreign investment than neighbouring countries.

Therefore, Indonesian government agencies have quickly adjusted a number of policies to create the optimal conditions for overseas investors to operate in the Southeast Asian country.

The government has pushed the policy of building industrial parks to welcome US and Japanese investors.

Indonesia is now home to 103 active industrial parks covering 55,000 hectares.

Vietjet to seize all opportunities for sustainable development

Amid the global crisis sparked by COVID-19, Vietjet Aviation Joint Stock Company (HOSE: VJC) has created a foundation for recovery and will look to seize all opportunities for sustainable development from 2020 thanks to the resources of a robust management system, the airline’s modern fleet and flexible business strategies, especially its strong financial capacity.

The plan was announced by Vietjet during its 2020 Annual General Shareholders’ Meeting (AGM) to review business results from 2019 as well as vote for the approval of audited financial statement and discuss the company’s development plan for 2020 in HCM City on June 27.

According to Vietjet, since the beginning of this year, the domestic aviation industry has been impacted severely in the wake of the COVID-19 pandemic. However, the country has quickly resumed all domestic operations ahead of most other countries in the world.

As soon as the domestic market resumed, Vietjet quickly implemented a campaign called "Returning to the sky” and inaugurated eight new routes, increasing the domestic flight network to a total of 53 routes. Thai Vietjet - a joint venture between Vietjet and Thai airline Kan Air - is also the first airline to reopen operations in Phuket Airport, expanding its network with five new domestic routes in Thailand.

After completing the resumption and expansion of the domestic flight network, Vietjet and the local aviation industry are ready to return to international skies from July with careful preparations to control the epidemic and ensure medical safety for its passengers and staff while contributing significantly to economic and investment recovery.

Currently, the Vietnamese Government is implementing many practical programmes and solutions to support airlines such as tax and fee reductions and loans with low rates. Based on this reality, Vietjet is striving to operate 90 aircraft with more than 118,000 flights and transport more than 20 million passengers by the end of 2020.

To this end, Vietjet will concentrate on carrying out cost-optimising solutions such as fostering its cargo service, aircraft purchase, diversifying credit loans solutions and expanding self-serving ground operation, and aim for the air transport, its core business, to reach break-even point by the end of 2020.

The carrier will also continue to strongly grow its loyal customer base and boost the effectiveness of financial activities and applications on e-commerce platforms while digitally transforming operating systems and procedure by applying advanced management software and programmes in operation as well as thoroughly arranging flight routes and fleet.

At the meeting, Vietjet shareholders agreed to pay a dividend of 2019 up to 50 percent per share. This is the result of the financial accumulation gained from the airline’s sustainable, safe and effective development in recent time.

According to the Executive Board’s report from the AGM, 2019 continued to reveal the airline’s strong growth and sustainable development with positive business results. Also, 2019 marked an important milestone in the new-age carrier’s journey as the airline celebrated transporting 100 million passengers.

In 2019, Vietjet's audited air transport revenue reached more than 41.25 trillion VND (1.77 billion USD), up 22 percent year-on-year while its pre-tax profit hit over 3.86 trillion VND (166 million USD), a yearly hike of 27 percent.

As per the report, Vietjet’s consolidated pre-tax revenue and profit in 2019 topped 50.6 trillion VND and 4.56 trillion VND respectively.

Noticeably, the carrier's ancillary revenue saw a significant rise of 36 percent to 11.34 trillion VND in 2019. The portion of ancillary revenue in the airline’s total air transportation revenue also increased from 25.3 percent in 2018 to 30.4 percent in 2019, making Vietjet one of the top ranking airlines globally in terms of ancillary revenue over total revenue ratio.

Last year, Vietjet opened 34 new routes, increasing the flight network to 139, including domestic routes and 95 international routes. Also in 2019, it transported more than 25 million passengers, reaching the accumulated transported passenger up to 100 million, creating a solid base for Vietjet’s post-pandemic rebound.

In the same year, Vietjet Aviation Academy continued to invest, aware that expansion will play a critical role in the airline’s sustainable development plan. The airline’s academy is now one of the region's leading modern-scale, specialised institutions for aviation training.

Vietjet was also honored to receive a number of prestigious awards in 2019 such as ASEAN’s Best Aviation Enterprise Award from ASIAN-BAC. The airline was also named ‘Asia Pacific Low Cost Carrier of the Year’ by CAPA and one of Vietnam's 50 best listed companies in 2019 by Forbes. The airline was also listed in the Top 50 airlines for healthy financing and operations for the second consecutive year by AirFinance Journal.

All of these successes achieved in 2019 have helped Vietjet become a major airline that significantly contributes to the development of Vietnam’s aviation industry as well as both the national and global economic recovery./.

Vinamilk sees revenue and profit up despite COVID-19

Despite the impact of the COVID-19 pandemic, dairy producer Vinamilk’s total revenue and profit in the first half of 2020 still rose 3-7 percent on-year, CEO Mai Kieu Lien has said.

In the first six months of 2020, Vietnam Dairy Products JSC (Vinamilk) earned 14.6 trillion VND (628.7 million USD) worth of total revenue and 2.9 trillion VND (124.9 million USD) worth of profit.

Modest earnings growth this year was attributed to the downturn of income brought by the school milk programme as schools were shut to cope with the pandemic, Lien told the firm’s annual shareholder meeting on June 26.

"When schools re-opened in May, the situation became better but performance was still below the expectation," she said, adding that "Earnings may improve in the last two quarters of the year."

Vinamilk targets 59.6 trillion VND in total revenue this year, up 5.7 percent on-year, and profit is forecast to gain only 1 percent on-year to 10.69 trillion VND.

In the first quarter of 2020, Vinamilk reported total revenue rose 7 percent on-year to 14.2 trillion VND and profit was down slightly to 2.78 trillion VND.

A 50 percent cash dividend is set for 2020, divided into three separate tranches. Two advance tranches will be made in October 2020 and February 2021, with corresponding pay-out ratios of 20 percent and 10 percent. The schedule and pay-out ratio for the third tranche will be decided in the 2021 annual general meeting of shareholders.

The cash dividend pay-out rate for 2019 was 45 percent.

The largest dairy producer by market value will also issue 348 million shares to shareholders this year at a five-to-one ratio, meaning every shareholder will receive one new share for every five shares they have.

The share issuance will raise Vinamilk’s charter capital by 3.38 trillion VND to 17.4 trillion VND.

A new cattle farm in Quang Ngai province will come into operation this year and Vinamilk is planning to build more in Dong Nai province, the centrally-run city of Can Tho, and Laos.

New products for dietary customers will also be studied and developed.

Vinamilk this year is planning to launch a coffee and dining store chain with the brand “Hi-Café”. A store was opened in 2019 at the firm’s headquarters in District 7, HCM City. The chain will be enlarged this year.

The chain would be developed based on Vinamilk’s milk retail system with 430 stores being allocated across the country, Lien said.

Vinamilk and consumer staples firm Kido have recently announced a partnership deal that establishes a joint-venture business, in which Vinamilk holds 51 percent of the capital.

Revenue of the joint-venture will be accounted by Vinamilk and Kido will enjoy the net profit on its part.

The joint-venture is expected to help both firms step in the beverage sector.

The two firms were hiring an independent auditor to value their products before the joint-venture begins operating, Lien said.

Phu Yen to build VND263bn waste treatment plant

Phu Yen People's Committee has approved to rent out a 100,000-square-metre land to build a waste treatment plant in Tuy Hoa City. 

Phu Yen People's Committee will rent a 100,000-square-metre land to T-Tech Vietnam Company to build Tuy Hoa Waste Treatment Plant. The contract will expire on May 15, 2067. T-Tech Vietnam Company was asked to use the land per the registered purposes, follow environment protection regulations and not affect the households living nearby.

Tuy Hoa Waste Treatment Plant will have the capacity to deal with 240 tonnes of rubbish per day from Tuy Hoa City and nearby districts. Its estimated investment is over VND263bn (USD11m). All processes are going smoothing since the land is empty and they don't have to pay clearance compensation. Incentives were also offered to the investor including preferential corporate income taxes and import duties.

The plan was approved as the amount of rubbish in Phu Yen Province is increasing while the treatment system still has many shortcomings. It is hoped that the construction will be started on August 30 to reduce solid waste pollution, recycling and producing secondary products.

There will be a section for recycling nylon bags, making fertiliser and bricks.

Concentrated national promotion month to begin from July 1

A concentrated national promotion month entitled ‘Vietnam Grand Sale 2020’ will be held from July 1 to 31 by the Vietnam Trade Promotion Agency under theMinistry of Industry and Trade in a bid to stimulate domestic consumption.
The information was announced at a press briefing heldby the Vietnam Trade Promotion Agency in Hanoi on June 25.

According to the Director of the Vietnam Trade Promotion Agency Vu Ba Phu, the concentrated national promotion month will be organised concurrently on a national scale, combining traditional trade and e-commerce and is expected to create a spillover effect and attract the participation of a large number of enterprises across various aspects.

At this event, enterprises can offer promotions of up to 100% instead of 50% as prescribed, Phu noted.

 

Throughout the promotional month, various activities will be held, aligned with the organisation of trade fairs, traditional festivals and the display of local products at localities, contributing to boosting and restoring tourism, Phu said.

Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade Le Viet Nga expressed her hope that the promotional month will attract a large number of consumers, stimulate domestic consumption and promote retail sales in Vietnam.

Carbon market plans offer real hope for sustainable Vietnam

Vietnam is working on a roadmap that lays out policy proposals for implementing market-based carbon pricing instruments, giving hope to enterprises towards sustainable development.

As a country heavily suffering from climate change and discharging over 120 million tonnes of solid waste per year, along with its infamous traffic jams, Vietnam has been regulating varying policies along with striving to build a carbon crediting market, in an attempt to cut emissions along with global wishes.

So far, Vietnam has developed a portfolio for a strong clean development mechanism (CDM) and established a functioning governance framework from a very early stage.

Under the Kyoto Protocol’s definitions, the CDM allows a country with a greenhouse gas (GHG) emission-reduction or emission-limitation commitment to implement an related project in developing countries like Vietnam. Such projects can earn saleable Certified Emissions Reduction (CER) credits, each equivalent to one tonne of CO2 which can be counted towards meeting the Kyoto targets.

While CDM projects play an important role in sustainable socio-economic development as well as in environmental protection, they are still relatively new to Vietnam.

CDMs exist to help developed countries achieve their climate commitments while assisting developing countries in achieving sustainable development. However, nations have thus far struggled to update rules for a new international carbon trading system under the Paris Agreement on climate change.

According to the Ministry of Natural Resources and Environment (MoNRE), Vietnam boasts great potential for developing CDM projects in at least 15 sectors. These include improving energy efficiency, exploitation and application of renewable energy sources, forestation and reforestation, change from the use of fossil fuels to reduce greenhouse gas emissions, recovery of methane from garbage landfills and coal mining pits for disposal or for power generation or daily-life use, recovery and use of associated gas from oil fields, and more besides.

Investors from any economic sector which brings about GHG emissions reductions are permitted to invest in a CDM project. So far the country has hosted over 255 CDM projects and 10 CDM programmes of activities registered by the CDM Executive Board.

Dr. Oliver Massmann, general director at Duane Morris Vietnam LLC, said that the country has more chances to join the global CDM market but the highest challenge it faces is to make actual CDM ideas economically feasible.

“Over the last few years, Vietnam has made the transition from a predominantly agricultural to a mixed economy with considerable advancement of commercial and mechanical exercises. Fast development of people’s lives, in conjunction with the government’s exertion regarding accessing electricity nationwide, have increased the demand for power,” he said.

“This presently postures a major challenge for Vietnam to preserve supported development of the control segment and to realise vitality security.”

According to Massmann, while Vietnam’s power demand is increasing exponentially, application of CDM in the renewable energy sector will help handle challenges of climate change. Thus far, solid waste and the steel sector are the two piloted fields for Vietnam joining the carbon market.

Vu Ngoc Anh, director of the Science Technology and Environment Department under the Ministry of Construction, said currently there are about 660 solid waste dumping sites with an area of at least one hectare, only 130 of which are hygienic.

Most household solid waste is used to make compost, or is buried or burned – a method of handling waste that creates the largest amount of GHG emissions.

“The target through the Partnership for Market Readiness (PMR) trust fund is reducing GHG in a way that is suitable with carbon crediting in solid waste management,” Anh said. “Along with that, market instruments in solid waste management will begin to be applied after 2020.”

Meanwhile, data from the Vietnam Steel Association shows that the sector is a power-intensive one. Currently, the whole sector consumes over 6,500 tonnes of oil equivalent per year, which can be reduced drastically thanks to renovating technologies that help to effectively save energy. The association has suggested that enterprises enhance management solutions to reduce power energy, particularly in regards to electricity.

According to the Paris Agreement, Vietnam commits to reducing at least 8 per cent of GHG emissions by 2030, and up to 25 per cent if it receives effective support from the international community.

Tang The Cuong, director of the Climate Change Department under the MoNRE, asserted that being aware of carbon pricing as an effective tool, Vietnam had participated in the PMR at the beginning of the programme. The results of co-operation with trust fund are currently being further developed and improved.

“As a country receiving technical assistance from the PMR, Vietnam not only receives direct benefits through capacity building, but also has the opportunity to participate in a forum to share knowledge and experiences from many countries,” he said.

Related projects focus on studying policies, mechanism promoting activities, and building Nationally Appropriate Mitigation Action policies for both the steel industry and solid waste, in which carbon pricing is an instrument that captures the external costs that the public pays for.

The World Bank admitted that the future of the carbon market is very complicated. For developing countries like Vietnam, joining the market is not only lining up with the world’s target of reducing GHG but also creating income and receiving modern technologies with fewer carbon emissions.

Besides this, the bank says, if developing countries including Vietnam cannot harmonise state policy with international policy, they will not be able to overcome barriers of finance and technologies in the process of participating in a low carbon market.

Binh Thuan pushes up sustainable farming of dragon fruit

To help unlock its competitive advantages, the southern province of Binh Thuan is actively taking steps for the sustainable, safe, and quality-oriented production of dragon fruit.

Along with improving dragon fruit farming, the province is promoting communications activities for local people on the role and importance of VietGAP-based dragon fruit farming and systematic organisation of production steps, from farming, packing, and preliminary processing to storage for export purposes. At the same time, more dragon fruit will be grown under GLOBALG.A.P standards to expand and diversify destination markets such as Japan, Korea, and Europe.

Signing co-operation agreements with leading agricultural enterprises, such as Nafoods Group JSC, for output market stability is also a sound approach taken by Binh Thuan province.

Under an MoU on investment co-operation between Chairman of Binh Thuan People's Committee Nguyen Ngoc Hai and chairman of the Board of Management of Nafoods Group JSC Nguyen Manh Hung signed in March 2019, the two sides agreed to jointly establish and develop organic dragon fruit farms in the province with a minimum of 10,000 hectares per farm.

In the framework of this co-operation on the establishment of organic dragon fruit farms in line with global standards, Nafoods will team up with the International Finance Corporation (IFC) – a member of the World Bank Group – to organise training sessions on this standard for 1,000 farmer households.

Binh Thuan is considered Vietnam’s dragon fruit capital with annual production approximating 600,000 tonnes, equal to 80 per cent of national output.

The training sessions are scheduled to be held from June to October 2020 in collaboration with Binh Thuan Sub-department of Crop Production and Plant Protection. In the short-term, 30 eligible households will submit applications for GLOBALG.A.P certification, and more farmers are expected to be certified based on market demands and the actual business performance of enterprises.

This positive step forward will create incentives and strongly drive the expansion of GLOBALG.A.P-certified dragon fruit farms. Such farms will provide organic dragon fruit as inputs for production and build farmers’ understanding of the role and economic efficiency of organic dragon fruit farming, including satisfying new food safety requirements. This will also build stronger linkages between businesses and farmers in the farming, processing, and marketing of dragon fruit for sustainable production.

Binh Thuan is considered Vietnam’s dragon fruit capital. With a total farming area exceeding 37,000ha across key districts of Ham Thuan Nam, Ham Thuan Bac, and Bac Binh, its annual production reached nearly 600,000 tonnes (equal to 80 per cent of the national output). Yet, only 10,000ha was certified as meeting VietGAP standards.

China is the main export destination for Vietnam’s dragon fruit through cross-border trade characterised by price fluctuations. In particular, with dragon fruit production focused on meeting requests from small-scale Chinese businesses, little attention has been paid to food safety and fruit quality.

As a result, Binh Thuan’s dragon fruit has made little inroads into demanding markets with high quality and food safety standards. Moreover, wider-scale production of this fruit in other countries, especially China, also poses challenges to Binh Thuan.

EVFTA widens horizon for logistics expansion

The forthcoming official entry of the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreem ent is set to offer a new horizon of development to Vietnam’s logistics industry. 
Russell Reed, managing director of UPS Vietnam and Thailand, said that the agreements represent a breakthrough in Vietnam’s progress as a trading powerhouse, and will help to further unlock the country’s vast economic potential in the coming years. Vietnamese exports to the EU have grown consistently in recent years, hitting a total of $41.7 billion in 2019, representing annual average growth of 13 per cent since 2014.

As a global provider of logistics services, UPS sees these agreements as providing a great deal more latitude for their customers to expand their key imports, as well as helping to simplify processes while encouraging more long-term investment and strategic business partnerships.

According to Reed, Vietnam is an exceptionally competitive manufacturing market, which has been one of the major contributors to the country’s economic growth. This growth has created a rapidly expanding middle class – one that is increasingly international in its outlook and interested in purchasing imported products, such as those coming out of the EU.

“At the same time, we continue to see sustained volume in Vietnamese exports to the bloc, and have made enhancements to our network to help Vietnamese businesses, particularly in high-tech and retail, maintain their competitive edge,” he added. “With the upcoming official entry of the EU-Vietnam Free Trade Agreement (EVFTA) in 2020, we look forward to working with more small- and medium-sized enterprises and large multinationals across a range of industries to help them enter and succeed in the EU – a market which now has even greater accessibility for Vietnamese businesses of all.”

On the same note, Tran Viet Huy, managing director of Tracimexco - Supply Chains and Agency Services J.S Company (TRA-SAS), told VIR that Vietnam has committed to open the logistics market under the World Trade Organization (WTO) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, the EVFTA is expected to create a new driving force for Vietnam’s logistics industry.

According to Huy, the EVFTA may affect the development of logistics industry in three aspects including stronger commitment to open markets of Vietnam and EU in the field of transport and transport services; creating added-value services for freight brokerage, sampling, inspections; and stronger commitments in areas improving logistics service market such as scale, service quality, open demand, wide capacity, and service performance.

Meanwhile, the EU-Vietnam Investment Protection Agreement (EVIPA) shall provide a solid legal background for EU investors where they have more tools and inter-country commitments to protect and run EU businesses in Vietnam. “It is no doubt that those effects will make positive influences to EU investors in investment to Vietnam’s logistics industry in both expanding their current business and making new investment via either mergers and acquisitions activities or green-field investment,” Huy said.

Beside current segments which may be more interesting, EU logistics investors will have new opportunities to enter new segments of Vietnamese government procurement, such as some logistics services which require deep experience and techniques in storage/management of pharmaceuticals, warehousing of dangerous chemicals, and transportation of oversized equipment for government infrastructure projects.

Meanwhile, Vietnamese logistics providers have more chances in bidding on logistics services for official development assistance projects funded by the EU.

Research by the Ministry of Planning and Investment showed that Vietnam’s export turnover to the EU will increase by 20 per cent in 2020, 42.7 per cent by late 2025, and 44.37 per cent by late 2030. Thus, increasing trade as well as investment activities between Europe and Vietnam will create plenty of opportunities for the logistics industry.

Commenting on the prospect of Vietnam’s logistics industry after the EVFTA comes into force, Tobias Gruemmer, area head of operations of Denmark’s A.P. Moller-Maersk, said that manufacturing and logistics in Vietnam have changed but the situation is still not entirely clear. Similar to the EU with a population of about 500 million, Southeast Asia with a population of 600 million (of which Vietnam is nearly 100 million) is considered a consumer market of high potential.

Previously, Vietnam focused on exports with the establishment of many export processing zones, but imports and domestic production have increased significantly. The main reason is due to the rise of the middle class, causing consumer habits to change and leading to shifts in the supply chain.

“The demand for storage and transportation has increased sharply, resulting in diversified warehousing and delivery solutions and attracting many businesses to participate. Logistics will be considered a hotbed for investors in the near future,” he said.

Hanoi has 275 more municipal-level OCOP products

Hanoi recently announced 275 products meeting standards of the “One Commune – One Product” (OCOP) programme at the municipal level in 2019, raising the total number of such products here to 301.

According to the local coordinating office for new-style countryside building, Hanoi classified 301 products last year, including six rated five stars, 207 others four stars, and 88 three stars. The city also stepped up promoting OCOP products, thus helping to improve consumers’ recognition of and trust in local goods.

During the first half of 2020, it has continued to enhance communication about the OCOP programme and issued temporary guidance on the management and use of OCOP marks and star ratings on labels and packages of products with at least three stars in the programme.

Meanwhile, local districts and towns have also selected products for classification at the district level.

Hanoi aims to rate about 800 – 1,000 OCOP products by the end of this year.

Addressing a recent show of local OCOP products, Director of the municipal Department of Agriculture and Rural Development Chu Phu My said the OCOP programme has created a fair platform for healthy competition among producers and for craft villages to bring into play their potential values.

It has also created stable jobs and helped raise labourers’ income, thus practically contributing to the implementation of the national target programme for new-style rural area building. OCOP producers have also gained chances to improve their knowledge of business laws and have open dialogue with partners and State agencies, he noted.

Last year, Hanoi announced it would spend 265 billion VND (11.4 million USD) on implementing the local OCOP programme for the 2019 – 2020 period.

According to the plan, 100 percent of OCOP programme managers at commune-, district, and municipal level public agencies as well as at organizations, businesses and cooperatives registering for the programme will have to undergo training to improve their building capacity.

The capital city has set a goal of developing at least two eco-craft village models. It will look to improve the local origin tracing system for agro-forestry-fishery goods (https://hn.check.net.vn) and website serving State management and demand-supply connectivity related to Hanoi’s OCOP products (http://nongthonmoihanoi.gov.vn/).

Initially, Hanoi’s OCOP programme will focus on a number of goods groups, including food, beverage, herbs, fabrics and apparel, souvenir – home decoration, and agricultural tourism.

Participating organisations will receive support to invest in machines and equipment for production; design and register their brand; obtain capital; hire experts, and distribute goods.

The OCOP was initiated by the Ministry of Agriculture and Rural Development in 2008, following the model of Japan’s “One Village, One Product” and Thailand’s “One Town, One Product”. It is an economic development programme for rural areas focusing on increasing internal power and values, which is also meant to help with the national target programme on new-style rural area building.

The classifications of goods and services defined in the programme include food (fresh and processed farm produce); beverages (alcoholic and non-alcoholic drinking); medicinal herbs (products made from herbal plants); fabric and textiles (products made from cotton and yarn); souvenirs, furniture, and decorations (products made from wood, fibres, rattan, metal, and ceramics); and rural tourism services and sales (services for sightseeing, tourism, study, and research).

The overall objective of the programme is to develop stable and sustainable forms of production for organisations and businesses (with priority given to developing cooperatives and small- and medium-sized enterprises), towards producing traditional products and improving services with high competitiveness on the domestic and international markets, thus promoting rural economy and national agriculture industrialisation and modernisation.

In 2013, Quang Ninh was the first province in Vietnam to pilot the programme.

Petrolimex targets revenue and profit drops

The Vietnam National Petroleum Group (Petrolimex or PLX) forecast a drop in both revenue and profit this year due to the decline in demand amid the COVID-19 pandemic.

The information was released during its Annual General Meeting of shareholders held in Hanoi last week.

The group targets to earn 122 trillion VND (5.3 million USD) in revenue, equivalent to 64 percent of that recorded in 2019. Pre-tax profit is expected to reach 1.57 trillion VND, equalling 28 percent of last year’s figure.

Petrolimex plans to sell 11.47 million cubic meters of petrol this year, equivalent to 83 percent of the selling output in 2019. Dividend payout ratio for 2020 is forecast at 12 percent.

The group’s general director Pham Duc Thang said the spread of the COVID-19 pandemic had caused a sharp decline in oil consumption worldwide due to blockades and travel restrictions.

“The oversupply of oil, rampant production by producers and an exhaustion of storage capacity drove West Texas Intermediate crude to a negative price for the first time in history, closing at -37.63 USD per parrel on April 20,” he said.

From January 1, the use of new marine fuels will comply with the provisions of the World Maritime Organisation (IMO), causing the price of new fuels to increase by 50 per cent, making sea transport costs rise sharply in 2020 compared to 2019, Thang said.

He added that in 2020, the group is focuses on the acceleration of the My Giang Power Center project to carry out trial operations in the fourth quarter of 2025.

The group will also develop a plan to reduce State capital to 51 percent, reducing its holding in Petrolimex Insurance Joint Stock Company to 35.1 percent and successfully merging PGBank and HDBank.

“In the past eight years operating as a joint stock company, Petrolimex has consistently achieve higher production and business results through years. However, in 2020, the COVID-19 pandemic has disrupted business and production activities of Vietnamese enterprises, including Petrolimex,” Ho Sy Hung, Vice Chairman of the Vietnam Committee for State Capital Management told the meeting.

“It is necessary for Petrolimex to adjust the business targets in 2020. The Committee for State Capital Management will accompany and assist Petrolimex in carrying out the tasks of production, business and development investment in 2020,” Hung said.

Viet Nam Grand Sale 2020 to open next month

A national promotion month entitled ‘Viet Nam Grand Sale 2020’ will be held from July 1 to 31 by the Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade to stimulate domestic consumption.

The promotion month will be held at the same time on a national scale, combining traditional trade and e-commerce, Vietrade director Vu Ba Phu said in a briefing in Ha Noi on Thursday.

The event is expected to draw a large number of enterprises, he said.

During the month, participating enterprises can offer promotions of up to 100 per cent instead of 50 per cent as prescribed, Phu added.

For her part, deputy director of the ministry's Domestic Market Department Le Viet Nga said she hoped the promotional month would attract a large number of consumers, stimulate domestic consumption and promote retail sales.

The nations' total revenue of retail trade and services exceeded VND1.91 quadrillion (US$82.36 billion) in the first five months of this year, down 4 per cent year-on-year, a report from the General Statistics Office (GSO) showed.

Retail sales of goods during the period were estimated at VND1.54 quadrillion, representing a modest rise of 1.2 per cent year-on-year or accounting for 80.6 per cent of total revenue. 

IFC supports Hanoi to attract high value-added investments

IFC will work with Hanoi to formulate a new-generation FDI strategy in response to the government’s master plan on foreign investment promotion toward 2030.

IFC, a member of the World Bank Group, today [June 27] signed a memorandum of understanding (MoU) with the People’s Committee of Hanoi to support its efforts to attract new-generation foreign direct investment (FDI) and diversify its funding sources, thereby sustaining the city’s rapid economic development, competitiveness, and inclusive prosperity.

As one of the fastest growing cities in Asia and home to over eight million inhabitants, Hanoi accounts for one-fifth of Vietnam’s gross domestic product (GDP).

Hanoi attracted US$8.45 billion in FDI in 2019, highest among the country’s 63 cities and provinces. Three areas namely property development, processing and manufacturing, and telecommunication and information drew the largest shares of FDI.

To sustain robust socioeconomic development, Hanoi aims to attract higher-quality streams of FDI. This will support the city’s strategy of developing high-tech and high value-added industries, increasing local sourcing, and creating more and better jobs.

“Strategic FDI as guided in the Politburo’s Resolution 50/2019 on orientations to finalize policies and mechanisms to promote FDI quality and effectiveness toward 2030 plays an essential role in sustaining Hanoi’s sustainable economic and employment growth and in realizing its industrialization and modernization plan toward 2030,” said Nguyen Duc Chung, Chairman of the People’s Committee of Hanoi.

“We welcome IFC’s support in developing a new investment strategy and diversifying funding sources as well as mobilizing quality investors through its global network,” Chung added.

Under the MoU framework, IFC will work with Hanoi to formulate a new-generation FDI strategy in response to the government’s master plan on foreign investment promotion toward 2030. Where possible, IFC will also assist Hanoi in diversifying its funding sources. The overall effort will leverage IFC’s global network of clients and partners, with benefits to potential key sectors including financial markets, infrastructure, logistics, and health and education.

“Hanoi already possesses many key factors that are attractive to higher quality FDI. The current environment of global supply chain changes — as a result of the Covid-19 pandemic — provides a good opportunity for the city to further prioritize FDI inflows in line with its development strategy,” said Kyle Kelhofer, IFC Regional Manager for Vietnam, Cambodia, and Lao.

“This includes FDI with increased local value-addition, with increased technology focus, to strengthen foreign-local firm linkages and help enhance local supply chain opportunities, foster improved job opportunities, and boost the overall competitiveness of the city.”

Promoting private sector development, IFC has been supporting Vietnam to improve business competitiveness and attract international investors over the past two decades. Most recently, IFC worked with the Ministry of Planning and Investment on recommendations for Vietnam’s new national FDI approach. It is also helping Vietnamese manufacturers improve capacity and supply to multinationals through a pilot Vietnam Supplier Development Program.

 
 

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