Vietnamese goods worth US$1 billion enjoy EU’s tariff reduction thanks to EVFTA
|A worker processes tra fish for export at a plant in the Mekong Delta. Vietnam’s exports to the EU have increased significantly after the EVFTA came into force|
Two months after the EU-Vietnam Free Trade Agreement (EVFTA) took effect, the Ministry of Industry and Trade has granted 24,000 sets of the EUR.1 certificate of origin (C/O) for Vietnamese goods worth nearly US$1 billion to enjoy the EU’s tariff incentives.
Addressing a seminar in HCMC on October 17, Deputy Minister of Industry and Trade Tran Quoc Khanh said the EVFTA has benefited both Vietnam and the EU, especially in the context of the Covid-19 pandemic seriously affecting the global economy.
Vietnam’s exports to the EU reached US$3.77 billion and US$3.54 billion in August and September, up 2.9% and 7.9% year-on-year, respectively.
“The number of C/Os granted under the EVFTA is much higher than that under the Comprehensive and Progressive Trans-Pacific Partnership. While the EU's economy has been negatively affected by Covid-19, consumption has declined and gross domestic product has posted negative growth, the increase in Vietnam’s exports to the EU has been encouraging,” Khanh said.
According to the Ministry of Industry and Trade, 10 export items with the highest number of granted C/Os under the EVFTA over the past two months have been footwear, aquatic products, plastic, textiles and garments, coffee, vegetables and fruits, iron and steel, vehicles and tools, rubber and rice.
The EVFTA, which took effect on August 1, eliminates over 99% of all tariffs between Vietnam and the EU and partly abolish the rest through limited zero-duty quotas.
Up to 65% of tariff lines on EU exports to Vietnam were slashed to zero as soon as the agreement came into force, while the remainder will be phased out gradually over a period of up to 10 years.
Regarding Vietnamese exports to the EU, 71% of duties have been abolished since August 1, with the remainder being phased out over a period of up to seven years.
EU-Vietnam Business Council debuts
The EU-Vietnam Business Council (EVBC) was jointly launched on October 22 by the Vietnam Chamber of Commerce and Industry (VCCI) and the EU Chamber of Commerce in Vietnam in Hanoi, in light of the EU-Vietnam Free Trade Agreement (EVFTA) taking effect in August.
In his remarks to the gathering, VCCI Vice Chairman Hoang Quang Phong said the EVBC was founded to help enterprises from both sides make the most of the opportunities the EVFTA will bring.
Enterprises will be provided with information, consultation, technical support, and other assistance to overcome barriers standing in the way of business partnerships, he said, adding that the effort is expected to facilitate the expansion of bilateral trade and boost investment, cooperation, and technology transfer between Vietnam and the EU.
EuroCham Chairman Nicolas Audier said the founding of the council demonstrates the desire of both sides to beef up cooperation, trade, and investment, and help enterprises seek new business opportunities.
Two-way trade and investment are expected to increase strongly and consistently in the time to come, if companies can bring into full play the potential and opportunities in export and import activities presented by the trade deal, he said.
Quang Ninh eyes 3 million visitor target in final quarter
The administration of Quang Ninh, a tourism-driven province in northern Vietnam, announced at a press conference on October 20 a goal of receiving 3 million arrivals during the final quarter of the year.
Pham Ngoc Thuy, director of the provincial Department of Tourism, said in order to meet the target the locality will host a tourism stimulus programme in an effort to attract large numbers of tourists coming to the province.
In line with the scheme, up to 64 culture, sports, and tourism events are scheduled to be held, including a seafood week, the One Commune One Product (OCOP) fair, along with a week dedicated to ethnic culture and sports.
Local authorities have also devised plans to welcome domestic visitors from across the country by offering discounts and fresh tourism products.
Furthermore, Famtrip and Presstrip will promote images of a safe Quang Ninh amid the novel coronavirus (COVID-19) as a means of introducing the area to tourists.
Vietnam Airlines simplifies transit procedures for Con Dao visitors
Vietnam Airlines Group announced that procedures for passengers to and from Con Dao Island with a transit flight will be simplified from October 20.
Passengers of Vietnam Airlines, Pacific Airlines and VASCO who want to go to Con Dao Island with a transit flight in HCM City will only have to complete flight procedures once.
The new rules will be applied for passengers who go from Van Don Airport in Quang Ninh, Noi Bai Airport in Hanoi, Cat Bi Airport in Hai Phong, Tho Xuan Airport in Thanh Hoa, Vinh Airport in Nghe An, Cam Ranh Airport in Khanh Hoa and Danang Airport.
All procedures will be completed once at the first airport. The passengers will be given two passes to board the planes for their next flight. At Tan Son Nhat Airport, passengers can go straight to the security checkpoints and then the plane without having to complete more transit procedures.
Vietnam Airlines have a total of 18 flights to and from Con Dao every day. This is Vietnam Airlines' busiest flight route at the moment.
In the coming time, Vietnam Airlines will continue to simplify the transit procedures at any transit point used by the Vietnam Airlines Group.
ADB urges Southeast Asian countries to close digital divide amid COVID-19
Asian Development Bank (ADB) President Masatsugu Asakawa today urged Southeast Asian countries to expand investments in digital infrastructure and ensure equitable access to technology as economies recover from the coronavirus disease (COVID-19) pandemic.
“We must close the digital divide and expand existing investments in digital infrastructure by building more and higher quality mobile broadband infrastructure and ensuring affordable internet access and coverage,” Mr. Asakawa said in a keynote address at ADB’s first Southeast Asia Development Symposium. “These steps can also enhance access to basic social services such as health and education and access to financial services. These investments will better equip countries to address the worsening income inequality and disparities in opportunities brought about by the pandemic.”
The Southeast Asia Development Symposium aims to provide government officials and other stakeholders with a wide range of cutting-edge perspectives on critical development issues. As countries in the region continue to grapple with COVID-19 response, this year’s inaugural event is focused on providing knowledge support to countries as they recover from the pandemic’s economic and social impacts.
Indonesian Finance Minister Sri Mulyani Indrawati delivered an opening plenary speech followed by a high-level panel discussion titled “The New Normal: Driving Economic Recovery through Digital Innovation” featuring ADB Vice-President Ahmed M. Saeed; Indonesian Minister of Education and Culture Nadiem Anwar Makarim; General Manager for Asia-Pacific, Public Sector at Microsoft Sherie Ng; Vice President for Government Affairs and Public Policy for Asia-Pacific at Google and former US Ambassador to Viet Nam Ted Osius; Senior Vice President for Public–Private Partnership at Mastercard Mimi Alemayehou; and Managing Partner at 500 Startups Khailee Ng.
In his keynote address, Mr. Asakawa highlighted five key policy areas that can support developing economies in Southeast Asia as they return to a path of sustainable growth:• First, address regional disparities and ensure more equitable access to technology, including an expansion of investments in digital infrastructure to close the “digital divide”, while addressing cyber security.
• Second, facilitate a green and resilient recovery by promoting investments that drive economic activity toward low-carbon and resilient practices.
• Third, strengthen regional cooperation and integration by improving cross-border digital connectivity, e-customs systems, and electronic cargo tracking systems.
• Fourth, deepen institutional capacity for mobilizing domestic resources to finance public services, while ensuring debt sustainability.
• Fifth, incubate, develop, and congregate small and medium-sized enterprises with entrepreneurship and technology, supported by an aggregated financial, academic, and business ecosystem to help set the stage for tech-based growth.
As digitalization has become an integral part of longer-term economic recovery, participants discussed how to boost economic recovery through digital innovation, how to foster an environment for technology adoption, and how to leverage technology for health care and remote learning. Participants also explored ways to facilitate a green and resilient recovery by promoting climate and environmentally friendly investments. Intelligent transportation systems, for example, can support real-time traffic control and transport routing systems to manage congestion and reduce air pollution, while smart-grid systems are helping secure a more efficient energy supply for a green recovery.
The one-day virtual event attracted more than 1,700 high-level government officials, private sector representatives, and other stakeholders from 57 countries.
Dairy export rise likely with EU influx
The EU-Vietnam Free Trade Agreement is giving a boost to the European dairy industry to penetrate deeper into the promising Vietnamese market.
Talking to VIR, Alexander Anton, secretary general of the European Dairy Association, said that the EU-Vietnam Free Trade Agreement (EVFTA) offers great opportunities for the European dairy sector by fully liberalising milk and dairy products in 3-5 years. It also provides protection for nearly 200 products with geographical indications, including many types of cheese.
Currently, dairy products are subject to 5-20 per cent tariffs. For instance, for cheese it is 10 per cent. However, the EVFTA will gradually eliminate all duties. Under these circumstances, dairy trade flows between the EU and Vietnam will most likely increase.
In 2019, the EU exported 63,000 tonnes of dairy products to Vietnam for a value of more than €110 million ($128.72 million). Meanwhile, Vietnam exported to the EU half a tonne of products for a value of €2,000 ($2,300).
“We expect increases in the volume and value of milk and dairy exports from the EU to Vietnam in the years to come. This magnitude of this increase will depend on the consumption trends among the Vietnamese population,” Anton said.
Now that the FTA has entered into force, the EU dairy trading community looks forward to reaping the benefits of the deal.
“Tariffs on European dairy imports are currently quite low in Vietnam. Skimmed milk powder, for example, is subject to a 5 per cent charge. Nevertheless, the complete removal of all tariffs within five years will allow European products to directly compete with imports from Australia and New Zealand, which enjoy duty-free access to the Vietnamese market as a result of the ASEAN-Australia-New Zealand Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” said Aloice O’Donovan, legal and policy advisor at the European Association of Dairy Trade.
“Currently per capita consumption of milk in Vietnam is low. While there is dairy production in Vietnam, self-sufficiency in milk is still quite far off. We expect that the EVFTA will create a boost in exports to Vietnam, with investment by European companies in Vietnamese dairy production also being a possibility,” O’Donovan added.
Last year, Vietnam’s per capita demand for milk is 26 litres a year, lower than the 35 litres in Thailand, 45 litres in Singapore, and the 80-100 litres in Europe. Moreover, the dairy industry has only met about 35 per cent of the domestic demand.
Under the development plan for the domestic dairy industry, the production of fresh milk is expected to reach one billion litres, meeting 38 per cent of the domestic demand in 2020 and increasing to 1.4 billion litres, meeting 40 per cent of the demand by 2025.
The growing presence of European dairy products will help meet the local demand but will also pile pressure on Vietnamese producers. Nevertheless, Anton from the European Dairy Association noted that dairy is not yet a part of the daily Vietnamese diet, which is underlined by the rather low historical production volumes of milk in Vietnam. Cheese is also not seen as part of a healthy and nutritious diet, yet an increase in exports, for instance for drinking milk, is still expected.
The most prominent and best-known EU dairy product on the Vietnamese market is FrieslandCampina, which is a vibrant and fully integrated part of the Vietnamese dairy sector, both in terms of local production and EU imports. However, statistics from the German Zentrale Milchmarkt Berichterstattung GmbH show that Vietnam is only 41 per cent self-sufficient in milk, which is higher than estimates from local authorities. In comparison, the EU is around 112 per cent self-sufficient, meaning the producers are active exporters of a wider range of products.
For these reasons, European milk and dairy products cannot really be seen as competition for national milk production, especially since EU dairy is an integrated part of your national ‘lactosphere’ (dairy sector).
However, according to a report by VNDirect, the reduction of import duties will benefit European countries that are famous for their dairy products and will increase the competitive pressure on domestic milk businesses.
The EVFTA also opens opportunities for Vietnamese dairy companies to more easily access production technology and milk ingredients from Europe, which are highly appreciated for quality and food safety, thereby improving the quality of domestic dairy products.
According to European Commission’s figures, the EVFTA could boost Vietnam’s booming economy by 15 per cent of GDP, with Vietnamese exports to Europe growing by over a third.
Positive export figures after two months of EVFTA being in effect
The effectiveness of the EU-Vietnam Free Trade Agreement (EVFTA) has brought about huge opportunities for Vietnamese enterprises with exports to the EU market witnessing positive signs.
Deputy Minister of Industry and Trade Tran Quoc Khanh made the remark at a conference on the evaluation of the implementation of the rules of origin in the EVFTA that was held in Ho Chi Minh City on October 17.
According to Khanh, seafood is one of the commodities that was able to take advantage of tariff incentives right after the agreement came into effect.
Vietnamese seafood exports to the EU and UK reached US$263 million in August and September, up 17.1% over the same period last year.
Some items witnessed increases in export turnover from the beginning of September. Thanks to the use of tariff quotas under EVFTA, Vietnamese rice export in September reached US$1.74 million, up 168% month-on-month.
Footwear exports, though strongly affected by the demand drop due to the COVID-19 pandemic, also increased slightly in September, recording a figure of US$307.07 million, up 3.5% from the previous month.
In addition, nearly 15,000 sets of EUR.1 certificates of origin (C/O) were granted to Vietnamese products, worth a total of US$700 million, allowing them to export to 28 EU countries.
The items granted with EUR.1 C/Os are mainly related to footwear, seafood, plastic products, coffee, textiles, bags, suitcases, vegetables, rattan and bamboo products, agricultural products and electronic products, amongst others.
Deputy Minister of Industry and Trade said that, based on the results of export growth, Vietnam has made good use of tariff preferences in FTAs signed to expand export markets, particularly the EVFTA.
However, the access to the EU market still faces difficulties despite high tax incentives. Thus, Vietnamese enterprises need to meet many other regulations regarding non-tariff barriers, including regulations on the origin of goods, to fully utilise the agreement.
ACV begins to expand Danang airport’s apron
The Airports Corporation of Vietnam (ACV) broke ground on a project to expand the apron of the Danang International Airport this morning, October 19.
Lai Xuan Thanh, ACV’s chairman of the Board of Directors, said the expansion of the airport's apron is essential to ensure development at the airport and contribute to the socioeconomic and tourism development of not just Danang City but also the central and Central Highlands regions.
The expansion area will cover nearly 67,000 square meters. ACV will build four more aircraft parking positions to raise the total number of aircraft parking positions at the airport to 35. Five aircraft parking positions that are close to the 35R/17L runway will be relocated.
The project costs VND420 billion (US$18.13 million) and is scheduled for completion after 11 months, according to Vietnam News Agency.
As investor of the project, ACV is committed to managing it effectively, complying with the Government’s regulations on construction and ensuring the quality, environmental protection and progress of the project.
The Danang International Airport is the third busiest airport in Vietnam, after the Tan Son Nhat International Airport in HCMC and the Noi Bai International Airport in Hanoi.
In 2019, the airport received more than 15.5 million passengers, some 98,700 flights and over 45,000 tons of cargo. The airport expects to receive 28 million passengers and 200,000 tons of cargo annually by 2030.
ACV is operating 22 airports nationwide—nine international airports and 13 domestic airports—that received more than 116 million passengers and 1.541 million tons of cargo last year.
Besides expanding the Danang International Airport’s apron, ACV is carrying out a number of other projects, including building Terminal 3 of the Tan Son Nhat International Airport, expanding Terminal 2 and the apron of the Noi Bai International Airport and building Terminal 2 of the Phu Bai International Airport.
Businesses in Danang suffer heavy losses due to supply chain failures
After the second Covid-19 outbreak, businesses are facing extreme difficulties, with 45% of 8,300 enterprises surveyed stating that they lack raw materials and input goods for production and trading activities due to disrupted supply chains worldwide, according to a report on the impact of the second Covid-19 outbreak on the production and business activities of enterprises in Danang City.
There are various reasons for the shortage, including a decline in the number of enterprises supplying imported raw materials and goods, the increase in the prices of imports as well as of transportation and warehousing costs. The restrictions imposed by the import markets and the decreasing quality of raw materials and goods are other reasons.
Of the 8,300 enterprises that participated in the survey conducted by the Danang Statistics Office, 6,082 are operational, 1,422 have planned to restart operations after a temporary halt, 645 have no plans to resume operations and 151 are awaiting dissolution.
Foreign-invested enterprises are hit the hardest by a shortage of imported materials with 42.2% feeling the pinch, followed by State-owned enterprises at 38.5% and non-State enterprises at 37.9%.
“Not just businesses that often import raw materials but also those using domestic raw materials are facing difficulties,” noted Tran Van Vu, director of the Danang Statistics Office, adding that large-scale enterprises are the ones facing the most difficulties in accessing raw materials and input goods from imports as well as domestic sources at 42.6% and 48.5%, respectively.
Due to supply chain failures, partly due to the disruption of many commercial flights as well as the transportation and circulation of goods, service enterprises face the highest shortage of input goods at 45.6%, followed by those operating in the processing and manufacturing industry at 45%, mainly leather and related products (71.4%), metal production (66.7%), electronics (62.5%), etc.
According to Vu, what the business community in Danang City hopes for the most at the moment is that the process of issuing and implementing policies must prioritize supporting businesses. Besides, the Government also needs to come up with decisions and mechanisms to ensure policies are issued and implemented faster in more transparent and convenient ways.
HCM City licences 30,000 new businesses in nine months
As of the beginning of October, Ho Chi Minh City has licenced nearly 30,000 new businesses with combined registered capital totalling 667 trillion VND (28.64 billion USD), according to the municipal Department of Planning and Investment.
The number of newly-established enterprises declined 7.5 percent compared to the same period last year; however, their registered capital was up 34.7 percent year-on-year.
The southern hub lured 3.25 billion USD in foreign direct investment (FDI) in the first nine months of this year, down 28 percent from a year earlier.
Up to 407.4 million USD was poured into 719 newly-licenced projects, 283.8 million USD added into 163 underway projects, and 2.56 billion USD invested in 2,911 share trading deals.
Trade was the leading sector in FDI attraction with more than 751 million USD, accounting for more than 23 percent of the total. It was followed by the property sector with 726.8 million USD, and science-technology with 685.5 million USD.
The department revealed that in the future, the city will prioritise three investment areas: smart city, highly interactive and innovative urban area to the East HCM City, and regional and international financial centre construction./.
Chinese firms commit 35 billion USD investment in Indonesia’s nickel processing
Chinese investors are seeking to expand their business in Indonesia by doubling their investment in nickel processing to 35 billion USD by 2033.
Chinese steel and battery companies operating in Indonesia met with the country’s Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan during his recent visit to China’s Yunnan province, the minister’s spokesman Jodi Mahardi said.
Among the projects discussed was a plan by China’s Contemporary Amperex Technology Co Ltd and Ningbo Lygend Mining Co to create an integrated lithium battery production facility. This would be their largest facility in the world.
The companies, along with others including Tsingshan Holding Group and Delong Holdings, currently have around 16 billion USD invested in Indonesia. The four firms made a commitment to increasing their collective investment to around 20.9 billion USD by 2024, and some 35 billion USD by 2033.
They will collaborate with investors from France, Japan, Republic of Korea, Australia and other countries, Jodi said.
Indonesia, a major nickel ore producer, is keen to expand as a nickel processing hub, starting from steel, to extracting battery grade chemicals from the ore, and eventually producing batteries for electric vehicles (EVs) and building EVs.
A group of Indonesian state-owned companies are planning to form a venture to make batteries for EVs, the chief executive of Mining Industry Indonesia said, and the new company would partner with Chinese and Korean firms on projects valued at 12 billion USD.
Indonesia was the largest nickel ore exporter until it stopped exports in January to ensure there were enough raw materials for investors to use in the country./.
Binh Duong IPs attracts over 840 million USD of FDI in nine months
Local industrial parks (IP) in the southern industrial hub of Binh Duong lured 840.5 million USD of investment in the first nine months of 2020, according to the Management Board of Binh Duong IP.
The figure accounted for 67.9 percent of the total foreign direct investment (FDI) of the whole province in the period.
In the period under review, the locality saw 75 newly-licenced projects, along with the addition of capital to 56 underway projects, and 157 share purchase deals.
Major projects included one in real estate worth 78 million USD invested by H9BC Investment, another worth 30 million USD by Singapore’s Sung Shin Tech Limited, and a 20 million USD one by Singapore’s Ever Giant International Provate Limited.
In order to complete the duo-target of preventing the spreading of COVID-19 pandemic and boosting economic development, the People’s Committee of Binh Duong has issued regulations on receiving foreign experts to the locality for short-term working, thus meeting the demand of skilled workers in the province./.
Shipments bound for EU two years ago eligible for tax incentives
Shipments bound for the European Union (EU) market before August 1, the day the EU-Vietnam free trade deal took effect, will still be granted a certificate of origin (C/O) to enjoy preferential tax policies as part of the agreement.
If shipments that do not exceed 24 months before August 1 are in the process of being transported or stocked at warehouses, bonded warehouses and tax-free areas, the enterprises can ask functional agencies to grant the C/O under the EUR.1 form.
Besides this, businesses must provide documents with information about transport vehicles, flight numbers, departure dates and container numbers.
Shipments exceeding 24 months from August 1 but stuck in bonded warehouses are also eligible for the policy. However, the ministry and EU partners will discuss each specific case and take a final decision.
The policy was stipulated in Circular 11 issued by the Ministry of Industry and Trade at the end of June. It was then clarified in a document issued by the Department of Export and Import on September 22.
India seeks closer economic ties with VN
There is huge potential for co-operation with Viet Nam in sectors like hospitality, healthcare, pharmaceuticals, infrastructure development, energy, service, IT, mining, and agriculture, a senior Indian foreign affairs official has said.
Riva Ganguly Das, Secretary (East) in the Ministry of External Affairs, said: “The two sides can establish new partnerships in areas such as marine food products, agro-products, textiles, garments, leather and footwear, and electrical machinery and equipment in order to diversify the trade basket.”
Trade between India and Viet Nam has been growing steadily since 2000.
For India, Viet Nam is the 18th largest trading partner globally and the fourth largest in Southeast Asia after Singapore, Indonesia and Malaysia, she told the India – Viet Nam Business Forum held on October 20.
India is Viet Nam’s seventh largest trading partner, she said.
“Our export from India to Viet Nam includes bovine meat, fishery products, corn, steel, pharmaceuticals, cotton, and machinery while our imports from Viet Nam include mobile phones, electrical machinery and equipment, computers, electronic hardware, natural rubber, chemicals, and coffee.”
Vo Tan Thanh, director of the Viet Nam Chamber of Commerce and Industry’s HCM City branch, said bilateral trade has increased significantly in recent years to reach US$11.2 billion last year, with Viet Nam’s exports accounting for over $6.6 billion.
In the first seven months of this year, despite the pandemic, their trade has topped $5 billion, he said, adding they hope to increase it to $15 billion a year in the near future.
As of June Indian companies had invested $887 million in 278 projects in Viet Nam, mainly in energy, mining, agro-processing, sugar, tea, coffee manufacturing, agrochemicals, IT, and auto components.
Vietnamese investment in India was worth $28.55 million in pharmaceuticals, IT, chemicals, and construction materials.
Das said: “Our bilateral trade turnover is still not commensurate with the levels of our economic development. And therefore, we need to do more to broaden and intensify our trade relations to achieve its full potential.”
She said with the many measures taken by her government to liberalise and open all sectors to 100 per cent foreign investment, reform the banking and capital sector and announce multi-billion dollar projects in housing, renewable energy, railways, roads, infrastructure, and ports, India has continued to attract large foreign investment even during the Covid time.
She urged Vietnamese companies to explore opportunities for investment in India in food processing, leather, infrastructure, and other areas where they have expertise.
Pham Sanh Chau, Viet Nam’s ambassador to India, said while the two countries could be seen as competitors in attracting FDI, but in complementary fields, they have a lot of potential to invest in each other.
He urged Vietnamese firms to pay more attention to investing in India, an “increasingly important market” in the world.
Organised by the Indian Chamber of Commerce in New Delhi in collaboration with the ministry, the India consulate in HCM City, the Investment Promotion Centre Southern Vietnam, and VCCI in HCM City, the forum was followed by a B2B session on various sectors like fisheries, agriculture and food processing, iron and steel, chemicals, automobiles, healthcare, and pharmaceuticals.
Economic growth likely to hit 2.6-2.8%
The Vietnam Institute for Economic and Policy Research published a report on the macro-economy in the third quarter on October 21.
Following the gloomy picture of Vietnam’s economy in the second quarter of the year, when economic growth hit just 0.39%, the third quarter was a much rosier, with growth reaching 2.62%.
While challenges remain in manufacturing, retail gradually improved in the quarter, investment from State-owned enterprises increased significantly, the trade surplus stood at 10.7 billion USD, and inflation was kept under control.
According to experts, the economic prospects for 2020 will be largely determined by the circumstances surrounding COVID-19 not only in Vietnam but globally, together with the implementation of the EU-Vietnam Free Trade Agreement (EVFTA) and the disbursement of public investment.
The country has introduced preferential policies for foreign investors in order to take advantage of the global trend towards shifting investment flows. That, along with stable macroeconomic conditions, has created significant momentum for economic growth in 2021 and subsequent years.
The Vietnam Institute for Economic and Policy Research announced two growth scenarios for this year. The brighter one forecasts growth of 2.6 to 2.8%, while the other forecasts 1.8 to 2%./.
Banks in HCM City to continue supporting businesses
Banks in Ho Chi Minh City are focusing on measures to mitigate the difficulties faced by businesses due to the COVID-19 pandemic and help them get back to health, a State Bank of Vietnam official has said.
Nguyen Hoang Minh, Deputy Director of the SBV’s HCM City Branch, said the central bank is working with local authorities, the HCM City Union of Business Associations and other agencies to ease funding difficulties faced by businesses.
The SBV and the city authorities had organised a programme to connect banks with enterprises and business households to enable the latter to get loans at low interest rates, he said.
By the end of August outstanding loans under the programme had reached 289 trillion VND (12.45 billion USD), with 75,164 loans given, he said.
Loans to enterprises in the export processing zones and industrial parks had increased by 12.7 percent as of the end of July to 180.58 trillion VND (7.78 billion USD), he said.
Besides extending loan repayment schedules, many banks have also launched preferential credit packages for corporate customers.
For instance, Viet Capital Bank has launched several preferential credit packages for SMEs worth a total of 6 trillion VND.
HDBank also has a preferential loan package that offers a credit limit of up to 2 billion VND at interest rates of 8.6 percent and maximum tenor of 60 months.
Saigon-Hanoi Commercial Joint Stock Bank has deployed a programme for microbusinesses with flexible policies.
Asked whether loan interest rates would continue to decrease to support businesses during the peak business season at the end of the year, Minh said after the SBV cut the interest rate cap for a third time this year, banks had reduced their deposit rates for six months to less than 4 percent.
Lending interest rates still have room to decrease, but maybe not sharply since banks have already gradually cut them to a low level to assist customers affected by the pandemic, according to Minh.
“A decrease in interest rates will stimulate credit growth in the remaining months of 2020. This is also the peak business season of the year, so credit demand will increase compared to other months of the year.
“The banking sector will provide enough capital for businesses as well as the economy.”/.
Opportunity for Vietnam to export rice to Australia
SunRice CEO Rob Gordon, head of Australia’s largest rice supplier, has announced that Australia is suffering a massive shortage of domestic rice supplies and would be forced to rely on imported Vietnamese rice in the lead up to Christmas 2020.
In an article posted on the website australiavietnam.org, James Fairley of the Australia – Vietnam Young Leadership Dialogue wrote that these announcements emphasise nuances (and fear) of the growing economic fallout of COVID-19, compounded by the impacts of climate change on Australian domestic production. Perhaps more broadly however, such a shortage represents yet another opportunity for Australia in the face of growing calls for trade diversification and integration with new markets.
Australia’s rice market
According to the article, Australia’s rice production remains highly variable due to changing water availability and prices of alternative crops, amounting to merely 0.4 percent of total anticultural production value between 2017-2018. According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) and the Australian Bureau of Statistics (ABS) 2019-2020 crop yielded about 57,000 tonnes of rice and is, weather permitting, forecast to reach 266,000 tonnes in 2020-2021. This remains well below the 10-year average to 2018-2019 of 629,000 tonnes.
In any event, ABARES predicts that “fundamental changes in demand for water and relatively low returns for rice production mean that Australia is likely to grow less rice” and turn crops like cotton which have benefited from technological developments and benefited most from the US-China trade dispute.
Founder and Managing Director of agribusiness firm Lefarm Co. Ltd and AVYLD alumni Nguyen Le agrees, stating that “It is a natural movement towards importing more instead of producing more...the real question is, will Australia focus on importing out of necessity, or on forming sustainable long-term strategy to share and co-develop innovations with Vietnam to better align demand and supply when time comes?”
Australians consume about 300,000 tonnes of rice annually, with imports accounting for about half of all consumption – an average of 173,000 tones between 2009-2010 and 2018-2019. Most rice imports are from long grain rice producing countries like Vietnam, Thailand, Pakistan and India, with import’s providing more stable production as opposed to Australian variable domestic production levels.
Australian domestic production variability of rice, particularly in the 2019-2020 crop yield, highlights the increasing demand for alleviation of shortages by imports. As ABARES suggests, in the short term (and given the 2019-2020 yield deficit as above), since domestically produced rice is harvested in autumn - once per year - no new domestic supply will be available in Australia until 2021. Any shortages can only be alleviated via imports.
Vietnam’s rice exports
Vietnam is a key producer and exporter of rice globally and has significantly increased production and exports year on-year, meeting increasing global demand. According to Business Monitor International (BMI), Vietnamese rice exports rose by 30 percent year-on-year in the 2016-2017 harvest due to strong demand by China, the Philippines and Indonesia.
Exports are forecast to continue to rise from 6.1 million tonnes in 2020 to more than 7.86 million tonnes by 2023-2024. This may be driven by Vietnam’s price competitiveness against regional neighbours like Thailand, underscored by Vietnamese government intentions to increase hybrid rice variety production by 50 percent, bolstering future production and export capabilities.
Unlike its neighbours and competitors like Thailand, Vietnam enjoys elevated rice yields as a result of the governments past crop intensification policy, which encouraged farmers to skip crop rotation to maximise production annually.
Nevertheless, Vietnam remains challenged by the increasing water levels in the Mekong Delta, driven by climate change and its impact on soil conditions. These are compounded by issues with sorting and grading, and storage of rice.
Bipartisan calls for trade diversification
Australia’s rice deficit and the growing viability of enhanced trade in rice with Vietnam are strengthened by growing socio-political sentiment about strategic reliance and trade imbalances brought about by the economic consequences of COVID-19.
The impact of a halt to globalisation and economic interconnection (whether through border closures, localised shutdowns of manufacturing and exporting or otherwise) has accelerated calls for a rethink about who, why and what Australia partners with, in trade and innovation.
There are calls for Australia to look beyond its traditional partners in China, Japan, the United States and the Republic of Korea (who together account for 55.5 percent of Australian trade) and towards “growing regions that complement Australian goods, services and expertise, which offer significant potential to diversify”.
Opportunities with Vietnam
Indeed, Australia can expand its relations with Vietnam by driving meaningful mutually beneficial improvements in this industry. Canberra can drive new partnerships in innovation, leveraging institutional knowledge in the Commonwealth Scientific and Industrial Research Organisation (CSIRO), ABARES and others to aide Vietnamese rice export quality and growth to Australia. These Departments can concurrently strengthen existing policy agendas in rice by other Departments like the Australian Centre for International Agricultural Research (ACIAR).
Concurrently, Canberra can support Australian farmers to transition to crops benefiting most from technology like cotton – a sector which has benefited greatly from the US-China trade dispute and a fast-growing import for Vietnam.
In the end, Australia should not view imports from Vietnam as a last resort, but an opportunity for the forging of longer term meaningful links with emerging partners for both countries' sake./.
Cambodia ready to sign RCEP agreement
The Regional Comprehensive Economic Partnership (RCEP) agreement is set to be signed next month at the 4th RCEP Summit during the 37th ASEAN Summit in Vietnam in mid-November, Cambodian Minister of Commerce Pan Sorasak has said.
Experts said the deal will open a wealth of new market opportunities for Cambodia to diversify its export portfolio and accelerate the inflow of regional investments.
Sorasak attended the 11th RCEP Intersessional Ministerial Meeting held via video link last week. He said all ASEAN ministers present at the meeting acknowledged the strides made towards the RCEP.
“Ministers of ASEAN highly evaluate the efforts of the trade negotiations committee and legal affairs working group which completed their works as planned despite the challenges posed by the COVID-19 pandemic,” Sorasak was cited by The Phnom Penh Post as saying.
“[We] agreed to have it [the RCEP] signed by the end of the year in hopes that it will create a more modernised, broader and more highly efficient partnership framework that provides economic interests to each member through the expanding regional trade and investment,” he said.
Royal Academy of Cambodia economics researcher Hong Vanak said RCEP is a platform for ASEAN that was years in the making.
“Cambodia now is not like it used to be. We have a wide selection of agricultural products on offer in addition to garments and textiles. Moreover, it has much more room to entice more regional investment to re-export to other countries that are partners of ASEAN,” Vanak said.
Fifteen countries – with the notable exception of India which withdrew in November last year – will sign the deal. The members have not yet been able to respond to India’s concerns regarding its trade deficit with many of them, according to Thailand’s The Nation.
Besides the 10 ASEAN member states, the other five partners are China, Japan, the Republic of Korea, Australia and New Zealand.
Even without India, RCEP will cover more than 2.2 billion people, or 30 percent of the world population, a total GDP of more than 25.6 trillion USD (29.3 percent of world GDP) and trade value of more than 10.4 trillion USD (27.4 percent of global trade)./.
Phu Tho an emerging destination for foreign investors
The northern province of Phu Tho is emerging as an attractive destination for both local and foreign investors thanks to its uniform infrastructure, open policies, and safe business climate.
The province has attracted 103 investment projects over the last five years, including 53 FDI projects, in the four operational industrial parks (IPs) of Thuy Van, Trung Ha, Phu Ha, and Cam Khe. The number of workers at the IPs has surged, growing from just 28,000 in 2015 to 42,000 in 2020, for an increase of over 3,000 each year on average.
The four IPs are now home to 172 projects in total, including 79 FDI projects, with total registered investment of 1.67 billion USD. Most investors hail from the Republic of Korea (RoK), China, or Japan, and have primarily poured capital into electronics, mechanics, textiles and garments, packaging, food processing, agricultural and forestry products, construction materials, and cattle feed.
A number of hi-tech, large-scale FDI projects have landed in the province, for example the Namuga Phu Tho, JNTC Vina, Almus Vina electronic component manufacturing projects, and the Hanyang Digitech Vina semiconductor component project, all from the RoK.
Established last year at the Phu Ha IP, Hanyang Digitech Vina is engaged in producing memory devices such as dynamic random access memory (DRAM) used in personal computers as well as memory modules used in servers. The 45-million USD project is capable of producing 25 million single items each year and expects this to reach 100 million by the end of 2023. Main customers include global tech giants Microsoft, Facebook, Google, HP, and Dell.
Choi Dong Hyeon, CEO of Hanyang Digitech Vina, said the company decided to shift its production base to Vietnam because of the country’s political stability and open investment environment. Phu Tho, in particular, offers various support policies and ample workers, he said, adding that local IPs have good infrastructure and easy road access that make for the convenient transportation of goods.
Phu Ha IP expects to welcome 16 more FDI projects in the near future, on a combined area of about 100 ha and with registered capital of up to 400 million USD. The new projects will create around 10,000 to 12,000 jobs.
FDI inflows have fuelled Phu Tho’s industrial production, which has been valued at more than 20 trillion VND this year, nearly 20-fold higher than in 2015, with greater shares going to processing and manufacturing and supporting industries. Export revenue of the industrial sector doubled to 1.35 billion USD in 2020 compared to 630 million USD five years ago.
The province’s Index of Industrial Production (IIP) has increased 9.8 percent annually, with processing and manufacturing posting an avereage 10.9 percent growth rate per year.
Phu Tho is bracing itself for a new wave of FDI flows into Vietnam caused by the on-going trend of relocation of global production bases.
It has been speeding up the construction of infrastructure at new IPs and upgrading those in operation, especially regarding power and water supply, wastewater treatment, and telecommunications, according to Chairman of the provincial People’s Committee Bui Van Quang.
He also noted that, in the near future, Phu Tho will break ground at three new IPs - Phu Ninh (100 ha), Tam Nong (350 ha), and Ha Hoa (400 ha), to meet increasing demand among investors. The IPs will be conveniently connected to the Hanoi - Lao Cai Expressway and National Highway No 2.
Phu Tho also plans to further streamline and improve administrative procedures relating to investment, land acquisitions, and basic construction, while developing exclusive financial mechanisms to remove bottlenecks in site clearance, he added./.
Vietnam urged to promote responsible business practice
Advancing Responsible Business Practice in Vietnam was the main theme of a consultation workshop held in Hanoi on October 21 by UNDP Vietnam, the Ministry of Justice and the Government of Sweden.
A Preliminary Assessment of the Regulatory Framework on Responsible Business Practice in Vietnam was launched at the event, with recommendations made by the report put up for discussion.
One of the recommendations said Vietnam should prioritise improvement of the regulatory framework to ensure protection of vulnerable groups, including workers in the informal sector, ethnic minorities, migrant workers, and victims of labour exploitation, in the global value chains.
In her opening remarks, Swedish Ambassador to Vietnam Anne Mawe said: “Responsible business practice is essential to ensuring economic growth. In our experiences, economic growth does not come at the cost of social or environmental development. Sweden has an excellent track record in this regard, making responsible business practice an important component of business development, balancing growth with social dialogue in the workplace and sustainability”.
In Vietnam, efforts at promoting responsible business practice have been driven through the lens of sustainable development. The country’s leaders have recently shifted their focus from a purely economic development strategy, to one of sustainable development. In late 2019, the Prime Minister issued Decision 1362/QD-TTg approving a plan for sustainable development of the private sector. A key viewpoint of the Decision is to develop private sector in an effective and sustainable manner, ensuring a close, reasonable and harmonious combination between economic efficiency, social responsibility, and natural resources and environment protection.
Deputy Minister of Justice Nguyen Khanh Ngoc said based on three pillars of “protect, respect and remedy”, responsible business practice first of all means adherence to laws and regulations.
“Promotion of responsible business practice in Vietnam aims at the balance between continued economic growth and sustainable development. It can be done thanks to the improvement of relevant laws and regulations and their enforcement”, he said.
Meanwhile, UNDP Resident Representative in Vietnam Caitlin Wiesen highlighted the opportunity for Vietnam to advance responsible business practice.
“COVID-19 has disclosed pre-existing inequalities and vulnerabilities in our systems, including in how we do business,” she said, adding “Vietnam has shown tremendous leadership in managing the pandemic. Recovering from and co-existing with COVID provides Vietnam with an opportunity to extend this leadership and build forward better, by rebuilding businesses that are responsible to the people and the environment. They can continue to drive economic growth without compromising sustainable development.”
The workshop heard presentations on Responsible Business Practice in ASEAN in the context of COVID-19, including experience in advancing responsible business in Thailand.
Participants discussed ways forward on developing a national action plan to advance Responsible Business Practice in Vietnam./.
CLMV’s economic recovery depends on ability to control COVID-19
Economic recovery in CLMV countries (Cambodia, Laos, Myanmar and Vietnam) depends on their ability to contain the second wave of the COVID-19 pandemic, according to a report from Maybank Kim Eng.
Analysts Linda Liu and Chua Hak Bin kept their forecast for Vietnam’s GDP growth at +2.9 percent for 2020 but lowered projections for Cambodia, Myanmar, and Laos. Cambodia specifically will slip into a shallow recession in 2020 (-1 percent) followed by a +5.9 percent growth recovery in 2021, they said.
Meanwhile, while Myanmar and Laos may avoid a recession; however, the recovery remains tentative because of a second wave of COVID-19 infections.
Myanmar is the latest hotspot within CLMV as a “monstrous second wave” of the pandemic swept the country since late August. As of October 18, COVID-19 cases in the country totaled 34,875, with 838 deaths. The country has since re-imposed domestic travel curbs and placed Yangon and nearby provinces under lockdown. Most garment factories in Yangon have also been ordered to shut down until October 20.
The report stated that Myanmar’s 2020 general elections, which are slated for November 8, takes place when the country is facing a major second wave of COVID-19 infections. Therefore, they may increase healthcare risks, worsen the spread and derail the economic recovery.
Overall, inflation remains positive across the CLMV economies despite the downturn, with Laos’ inflation elevated at above +5 percent amid higher food prices and weaker currency.
The analysts raised inflation forecasts for Laos (+5.5 percent in 2020 and +4.2 percent in 2021) and Cambodia (+2.8 percent in 2020 and +2.7 percent in 2021), but lowered it for Myanmar (+5.8 percent in 2020). They maintained their headline CPI forecasts for Vietnam at +3.3 percent in 2020 and +3 percent in 2021.
CLMV currencies saw diverging trends, with strong appreciation in Myanmar kyat (+11.5 percent YTD against the USD) but depreciation in the Laos kip (-3.9 percent). Vietnam dong (+0.02 percent) and Cambodia riel (-0.9 percent) were largely stable./
RoK enterprises seek investment opportunities in Khanh Hoa
The People’s Committee of south central Khanh Hoa province held an investment promotion conference on October 23 with a delegation of 16 enterprises from the Republic of Korea (RoK), led by Ahn Seong-ho, Trade Counsellor at the RoK Consulate General in HCM City.
Representatives from the provincial Department of Planning and Investment, Van Phong Economic Zone Management Board, and Cam Ranh International Airport introduced the guests to the province’s potential and advantages, fields calling for investment, and preferential policies for foreign investors in Vietnam in general and in Khanh Hoa in particular.
Chairman of the provincial People’s Committee Nguyen Tan Tuan highlighted the locality’s economic development orientations and expressed his hope that participating enterprises will seek business and investment opportunities and expand their markets to contribute to fostering two-way trade and investment between the two countries.
Khanh Hoa has set a target of developing three key economic zones - Nha Trang Bay, Cam Ranh Bay, and Van Phong Bay - and is calling for investment in tourism seaport services, aquaculture and aquatic product processing, maritime and aviation services, and shipbuilding.
The province has attracted 79 FDI projects to date with total capital of 3.6 billion USD. The RoK ranks second in terms of investment value, after Japan.
The participating RoK enterprises spoke highly of Khanh Hoa’s potential and advantages, saying they will conduct fact-finding tours shortly.