Banks ask for higher credit quota to prepare for peak lending season
|The credit growth of the entire banking system is estimated at less than 10 per cent in 2020. — Photo VPB|
Despite a credit slowdown in the first half of 2020, some private commercial banks have still asked the State Bank of Viet Nam (SBV) for a credit growth expansion to prepare for a peak lending season expected at the end of the year.
According to the SBV’s policy, it assigns an annual credit growth quota for each bank depending on business performance and bad debt ratios to control lending of the entire banking system and ensure money supply and inflation control as targeted by the Government.
The credit growth in the first half of this year is only half of the same period of last year. SBV’s statistics showed banks’ mobilised capital increased by 5.31 per cent while loans grew only by 3.45 per cent in the period.
However, banks said loans often increase sharply at the end of the year when capital demands of both firms and individuals surge significantly to prepare for the country’s holidays and festivals.
According to finance expert Huynh Trung Minh, it is feasible for the SBV to loosen the credit growth limits for banks, but banks must ensure to lend to only effective projects.
SBV has also recently expanded credit growth limits for some banks with healthy business performance to boost the country’s economic growth. Techcombank, VIB, VPBank, TPBank and Sacombank were approved to raise their credit growth limits to 19-23 per cent.
Despite the expansion, a report of BIDV Securities Company (BSC) estimated the credit growth of the entire banking system this year would be only 9 per cent, compared with the 13 per cent rate in 2019.
Banks have been reducing the proportion of lending to individuals and small- and medium-sized enterprises (SMEs) while focusing on large-sized businesses with good resistance against the COVID-19 pandemic, BSC noted.
Sharing the same view, Vietcombank Securities Company (VCBS) also said the SBV had loosened credit growth limits for some banks, but the credit growth of the entire banking system would be less than 10 per cent in 2020.
Analysts from Saigon Securities Incorporation (SSI) estimated an even lower rate. SSI’s recent report on the outlook for the banking industry in the second half of 2020, forecast credit growth in 2020 could be around 7.5-8.5 per cent.
According to the analysts, the credit demand may continue to weaken as the country still suffered impacts of the pandemic while banks, especially large-sized ones, may not lower their credit granting standards.
Regional financial co-operation vital in the fight against COVID-19
Regional and financial co-operation are crucial to strengthen the co-ordination and respond to the impacts of the COVID-19 pandemic and support a sustained economic recovery, participants agreed at a meeting held Friday in Ha Noi.
The 23rd ASEAN+3 Finance Ministers' and Central Bank Governors' Meeting (AFMGM+3) was attended by the Finance Ministers and Central Bank Governors of China, Japan, South Korea and the 10-member Association of South East Asian Nations (ASEAN).
It is considered as an important milestone in the ASEAN+3 financial co-operation progress under the co-chairmanship of Viet Nam and Japan in 2020.
The event was also attended by ASEAN Secretary General, President of the Asian Development Bank (ADB), Director of Regional Office for Asia and the Pacific, International Monetary Fund (IMF) and Director of ASEAN+3 Macroeconomic Research Office (AMRO).
Viet Nam’s Finance Minister Dinh Tien Dung and Governor of the State Bank of Viet Nam Le Minh Hung co-chaired the meeting with Deputy Prime Minister and Minister of Finance of Japan Aso Taro and Governor of the Bank of Japan Kuroda Haruhiko.
During his opening remarks, the Minister of Finance said the COVID-19 pandemic was causing a heavy impact on the global and regional economy.
“According to the IMF's forecast, the global economic growth in 2020 will decline by 4.9 per cent, while the Asian region's economy will decrease by 1.6 per cent. The economies in the region are facing enormous challenges,” Dung said.
The ASEAN Finance Ministers and Central Bank Governors and counterparts from China, South Korea and Japan, and representatives from international organisations discussed global and regional macro-economic policies and other policy measures in response to COVID-19 pandemic.
They discussed policy solutions that regional economies have been implementing to restore economic growth, including fiscal, monetary and other financial regulatory policies.
The Ministers and Governors acknowledged that increasing economic interdependence among countries had triggered detrimental effects of the pandemic on the global supply chain. These impacts require financial and monetary management agencies to develop and adopt effective macroeconomic policies to enhance their economic resilience, thereby maintaining the stability and integrity of their financial systems.
The Ministers and Governors also reviewed ASEAN+3 financial co-operation initiatives, and adopted Joint Statement of the 23rd ASEAN+3 Finance Ministers' and Central Bank Governors' Meeting.
Technical documents were also approved, including amending the Chiang Mai Initiative Multilateralisation (CMIM) Agreement on the increase in the IMF De-Linked Portion from 30 per cent to 40 per cent and CMIM operational guidelines, including CMIM Swap Implementation Manual, the CMIM Conditionality Framework for the IMF Linked Portion and IMF De-linked Portion, and plans on 11th Test Run of CMIM.
The amendments have helped to increase the availability and efficiency of CMIM operations, and meet new requirements of the financial market, thereby making CMIM an effective tool to supplement a regional and global financial safety net. Achievements in CMIM Initiative have important implications for tightening cooperation and strengthening mutual support when regional economies have confronted many difficulties and uncertainties.
The meeting appreciated the efforts of the ASEAN+3 Macroeconomic Research Office (AMRO) as an international organisation actively implementing macroeconomic surveillance activities, providing its assessment and analysis on the impact of the COVID-19 pandemic on regional economies, and policy recommendations to secure regional macroeconomic and financial stability.
In order to enhance regional economic and financial stability, the Finance Ministers and the Central Bank Governors welcomed the implementation of new initiatives under Strategic Directions of ASEAN+3 Finance Process.
These initiatives comprise of promoting local currency usage for trade and investment payments, as well as payment connectivity; developing a comprehensive initiative on infrastructure finance; designing supporting tools to help members better solve problems of macroeconomic structure; harmonising collaborative climate change financing initiatives such as the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) and enhancing policy coordination to harness the benefit of technological advancements while minimising financial risks.
Bond market initiative
At the meeting, the Finance Ministers and the Central Bank Governors also appreciated the implementation progress and achievement of Asian Bond Markets Initiative (ABMI) working groups which provide insight on how to improve the investment environment, develop new investment tools, improve legal frameworks, develop infrastructure for the bond market, and provide technical assistance programmes on bond market development.
The ABMI continued to foster the development of local currency bond markets to mitigate currency and maturity mismatches and to mobilise the region’s savings to finance long-term investment across the region, they said.
The Credit Guarantee and Investment Facility (CGIF) had supported infrastructure financing, including the Infrastructure Investors Partnership (IIP) study. CGIF should utilise the findings from the study to explore innovative ways to further promote regional infrastructure financing and local currency bond market development.
They urged a commencement of a new technical assistance (TA) project to promote local currency green bonds to meet the region’s infrastructure needs as well as the commencement of a new TA project aimed at improving the usefulness of AsianBondsOnline (ABO).
Vietnam, Singapore hold online investment promotion event
An online Viet Nam-Singapore investment promotion conference was held on September 17 with the participation of 500 enterprises from over 80 Singaporean business associations and chambers of commerce around the world.
The event, held by the Vietnamese Ministry of Planning and Investment in coordination with the Vietnamese Embassy in Singapore, the Singapore Manufacturing Federation (SMF), and the Singapore Business Federation (SBF), took place amid global enterprises’ restructuring of production and supply chains so as to avoid overdependence on a single country or partner and seek safer and more effective investment destinations.
Participants in the meeting were updated on Vietnam’s investment climate and readiness to welcome a new wave of foreign investment; the country’s policies for developing ecosystems for industries, especially electronics, textile-garment, automobile, and food processing; along with digital transformation and smart city development.
Some orientations for more sustainable cooperation between the two countries amid the complex global economic situation were also shared.
Deputy Minister of Planning and Investment Tran Quoc Phuong said facing the COVID-19 pandemic, Viet Nam still persists in proactive and effective solutions to concurrently contain the outbreak and develop the economy.
He affirmed that foreign investors, including Singaporean ones, will have more opportunities to invest and do business more successfully in Viet Nam as the country’s legal framework is constantly improved, channels connecting the domestic and foreign markets are being expanded, and the Vietnamese Government, ministries, sectors, and localities are determined to improve the business environment.
The Vietnamese Government encourages Singaporean firms to invest in the hi-tech industry, set up innovation and R&D centres, develop industrial park infrastructure, and take part in the equitisation of State-owned enterprises, among others, Phuong added.
At the conference, participants shared the view on Viet Nam's growing role in the international community and that the country is a safe and attractive investment destination for Singaporean businesses in the post-pandemic period.
SMF President and SBF Vice Chairman Douglas Foo said as both countries are ASEAN members joining in certain free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), their companies will secure more chances to capitalise on advantages and bolster investment and business activities.
Enterprises to be cautious when doing business in Mali: trade official
Vietnamese businesses should strictly monitor political situation and policy changes when conducting transactions in Mali following unfavourable developments in the country, according to Hoang Duc Nhuan, Vietnamese Trade Counsellor to Algeria and Mali.
Nhuan told Vietnam News Agency in a recent interview that two-way trade between Vietnam and Mali this year is projected to record a sharp drop due to the impact of the novel coronavirus (COVID-19) coupled with ongoing political instability in Mali. In addition, sanctions imposed by the Economic Community of West African States (ECOWAS) and neighbouring countries’ decision to seal their borders with the West African nation will also cause difficulties relating to the transport of goods and payment methods.
Furthermore, the shipping time by sea from Mali to a port in West Africa is between 45 days and 60 days, a factor that local firms should consider when handling affairs in order to mitigate commercial risks.
According to the General Department of Vietnam Customs, Vietnam’s export turnover to Mali last year reached US$38.9 million, representing an 11-fold increase compared to 2018, with the main export items being crude oil, cement, seafood, pepper, rice, and plastic products.
Moreover, the country’s import turnover from Mali in 2019 enjoyed a surge of 24% to US$28.49 million compared to the 2018 figure, with key imported products being cotton, cashew nuts, copper, computers, and steel products.
ECOWAS, a group comprised of 15 West African states including Mali, have imposed sanctions on Mali following a military coup last month. As a result, there has been a shutdown of land and air borders, in addition to the halting of all cross border economic and commercial transactions.
After implementing the decision, the Central Bank of West African States (BCEAO) sent a letter to ask its subsidiary banks and financial institutions to suspend transactions with Mali.
ASEAN+3 Finance Ministers, bank governors seek to boost economic recovery
How to cushion the impact of the novel coronavirus and boost economic recovery was high on the agenda of the 23rd ASEAN + 3 Financial Ministers’ and Central Bank Governors’ Meeting on September 18.
Co-chaired by Japan and Vietnam, Financial Ministers and Central Bank Governors from 10 ASEAN member states plus China, Japan and the Republic of Korea and leaders of international financial institutions examined global and regional macroeconomic situation as well as measures to respond to the COVID-19 pandemic.
They made an in-depth analysis on risks and challenges posed by the COVID-19 pandemic to global and regional economies. According to the International Monetary Fund, the global economy this year is projected to decline by 4.9%, while the Asian economy is anticipated to decrease by 1.6%.
Delegates shared the view that the disruption of the global supply chain due to the impact of the COVID-19 pandemic requires financial and monetary policymakers to introduce timely and effective macroeconomic policies and measures to enhance the resilience of the economies against shocks, thereby helping to maintain the stability and integrity of the financial system.
They agreed that regional cooperation, including financial cooperation, is an important factor in strengthening economies’ capacity to coordinate and respond to pandemic impact and aid economic recovery in a sustainable manner.
At the meeting, the Financial Ministers and Bank Governors of ASEAN + 3 to approved revisions of the Chieng Mai Initiative Multilateralization Agreement (CMIM), in which they agreed to increase the IMF De-Linked Portion from 30% to 40%. They maintained that the results of cooperation under the CMIM Initiative play important role in tightening cooperation and strengthening mutual support in the context of the regional economy facing many difficulties and uncertainties.
The delegates acknowledged the efforts the ASEAN + 3 Macroeconomic Research Office (AMRO) has made in carrying out macroeconomic monitoring activities, providing assessment and analysis of the COVID-19 pandemic and making policy recommendations to ensure stable macroeconomic and financial situation in the region.
They also acknowledged the progress and results achieved by the Asian Bond Markets Initiatives (ABMI) working groups in their research with a view to improving the investment environment, developing new investment tools, perfecting the legal framework, developing infrastructure for the bond market as well as implementing technical assistance programs to develop the bond markets of member economies.
They also welcomed the implementation of new initiatives under the Strategic Directions of the ASEAN+3 Finance Process in order to enhance regional economic and financial stability.
The delegates attending the virtual meeting adopted a joint statement and agreed to hold the next meeting in Tbilisi, Georgia in 2021.
Vietnam economy still on recovery track: WB
The Vietnamese economy remains on track despite the impact of the COVID-19 pandemic, but greater attention should be paid to maintaining the fiscal and financial stability, according to the World Bank in its September 2020 update.
The WB says the COVID-19 outbreak in Da Nang has been brought under control, with infection rates falling to single digit since late August. The outbreak forced the authorities to restrict mobility in a targeted manner and to increase other mitigation measures. This targeted approach has affected the economy less than the April nation-wide lockdown, but has created a new sense of uncertainty.
In August, the domestic economy continued to expand but at a slower rate than in recent months and far below the pre-COVID-19 trajectory. While the industrial production index grew by 2.1% year on year in August, slightly slower than in July, growth in retail sales moderated to 2.3% year on year in August compared to 5.2% in July.
The balance of payments remained positive in the first eight months of 2020. The central bank has been able to accumulate about US$12 billion more in international reserves.
In August, Vietnam’s export performance remained resilient, growing 1.42% month on month, but foreign direct investment (FDI) inflows moderated significantly as they reached about US$720 million in August compared to US$3.1 billion in July. Overall, Vietnam received US$19.5 billion in FDI during the first 8 months of 2020, a 14 percent decline compared to the same period of 2019.
Inflation remained subdued at 3.2% year on year in August, slightly lower than in recent months due to the stability of food prices.
Credit to the economy continued to moderate at 9.4% year on year in July, reflecting the decline in economic activity despite the central bank’s policy to reduce interest rates and encourage commercial credit.
However, the WB warns government balances are worsening and should be watched. The government has appropriately responded to the crisis with accommodating fiscal policy, but this has gradually reduced fiscal space. In the first eight months of the year, revenues reached 58.3% of estimated collections, 12.4% lower than the same period in 2019, due to the economic slowdown and deferred taxes for businesses and individuals to support economic recovery.
Concurrently, public expenditure was 8.2% higher than during the same period in 2019, reflecting fiscal accommodation to support economic recovery.
In short, the WB says most economic and financial indicators continued to demonstrate Vietnam’s resilience, but the domestic rebound moderated in August, partly as the result of the COVID-19 outbreak in Da Nang.
In the coming months, the WB says the pace of economic recovery will depend on how well domestic demand recovers in the wake of the Da Nang outbreak. Greater attention should be paid to the impacts of the crisis and on fiscal and financial stability in the medium to longer terms, and policies to address them.
Government expects 6.5% GDP growth for Vietnam next year
Vietnam’s economic growth rate in 2021 is anticipated to reach between 6% and 6.5%, according to a resolution adopted during the Government's recent monthly meeting for August.
To this end, the Government assigned the Ministry of Planning and Investment (MPI) to continue reviewing and outlining the growth scenario for the remainder of the year, while simultaneously devising plans for next year.
According to a MPI report delivered at the Government meeting for August, MPI Minister Nguyen Chi Dung projected that the Vietnamese economy will continue to face hurdles moving into next year due to the novel coronavirus (COVID-19) pandemic expected to remain an unpredictable factor globally.
Dung added that although it typically takes between two to four years for economies to bounce back following a global economic downturn, especially for countries that are the nation’s major partners, the growth rate of Vietnamese GDP is likely to reach 6.7% next year.
The Government has also assigned the MPI and the Ministry of Finance to conduct a review and adjust the year’s budget plans before submitting them to the Prime Minister for approval before September 25, while also speeding up the disbursement of public investment capital this year.
Priority will be given to actions that serve to fulfill the dual goal of economic recovery and preventive prevention .
The State Bank of Vietnam has been requested to continue regulating its monetary policy in a flexible manner, while also working in close conjunction with fiscal and other policies in an effort to accelerate economic growth, control inflation, and sustain macro-economic development.
The MPI has been committed to enhancing the efficiency of foreign investment by screening quality FDI projects, with a particular focus placed on the shift of supply chains from large corporations.
The Ministry of Industry and Trade plans to promote trade, boost exports to potential markets, stimulate local consumption demand, and prevent trade fraud in all forms, while also protecting domestic production and consumption.
Auto industry steers strategy towards wider supply chains
Vietnam’s automobile industry is transforming drastically but it still lacks scenarios to join the global supply chains after the COVID-19 pandemic.
Truong Hai Auto Corporation (THACO) has told VIR of its wide range of new policies to boost sales and increase exports to mitigate the effects of the pandemic. Its strategy is centred on producing spare parts and exporting completely-built units while using the domestic market as a base for exports.
“THACO has consistently maintained its leading position in the automobile market since the beginning of 2020. In July, THACO accounted for 31.1 per cent of the automobile market share,” said the carmaker’s general director Pham Van Tai.
As of last month, THACO has exported 200 Kia Grand Carnival cars (known as Kia Sedona in Vietnam) to Thailand, 280 Kia Cerato and Soluto vehicles to Myanmar, and 69 semi-trailers to the United States. “By the end of 2020, THACO will export more than 1,400 cars of all kinds, while expanding its reach to other markets,” Tai said.
THACO is now diversifying its strategy to seek growth in new landscapes – something Vietnam’s entire automobile industry is working on.
In particular, Vietnam aims to develop the automobile industry and become a regional hub. However, it is difficult for foreign investors to develop large-scale projects in Vietnam as the scale of the domestic market is about one-tenth of Thailand and one-fifth of Indonesia, according to the Ministry of Industry and Trade (MoIT).
With over 20 companies and 40 car brands, Vietnam’s automobile industry remains limited with an annual capacity of 500,000 vehicles, 47 per cent of which are built by foreign companies. The domestic automobile industry has about 170 manufacturing and assembling companies, mostly of small and medium size.
According to the MoIT, trucks and special-use vehicles have the highest localisation rate of 50 per cent. At present, THACO has achieved a rate of 40-45 per cent for trucks and 60 per cent for buses, meeting the Ministry of Science and Technology regulations for Made-in-Vietnam products.
Vietnam aimed to achieve 60 per cent localisation ratio for cars with less than nine seats in 2010. However, as of present, the ratio is just around 10 per cent, except for THACO with 15-20 per cent and 37 per cent for Toyota Vietnam’s Innova model.
Cars assembled and produced in Vietnam generally cost 20 per cent more than in Thailand and Indonesia because a large number of parts have to be imported. It is estimated that production costs for a B-segment compact car in Vietnam is $6,000 higher than in Malaysia.
Also, passenger cars manufactured in Vietnam have yet to reach the localisation rate of 40 per cent to enjoy a zero per cent preferential import tax under the ASEAN Trade in Goods Agreement (ATIGA).
Development plan of Vietnam’s automobile industry with vision to 2030
- Estimated proportion of the number of vehicles assembled or manufactured locally compared with total domestic demand: 18 per cent of special-use vehicles, 78 per cent of trucks, and 92 per cent of cars with more than 10 seats by 2025. In 2030, the proportions will be 20, 80, and 92 per cent, respectively.
- Expected output of cars with up to nine seats, cars with more than 10 seats, and trucks and special-use vehicles is 237,000; 29,102; 197,017; and 2,356 units by the end of 2020.
- By the end of 2020, the supporting industry for automobile manufacturing was aimed to be established. Vietnam will strive to meet 30-40 per cent of the value of spare parts and components needed for domestic manufacturing and assembly of automobiles, fabrication of important parts of actuators, gearboxes, and engines (especially for passenger cars and light trucks), and the country will gradually be involved in the global supply chain of components and spare parts.
- In the 2026-2030 period, the supporting industry shall develop both in scale of output and number of product categories, ensuring the supply of more than 50 per cent of the value of spare parts and components needed for domestic manufacturing and assembly of automobiles. Vietnam will strive to become an important supplier of a number of components and spare parts for the regional and global automobile industry.
A report from the Vietnam Business Forum stated that domestic carmakers are facing challenges due to the small scale and limited supporting industry, having to import components for assembly.
Meanwhile, localised parts are mostly of low-tech products such as tyres, seats, mirrors, glass, cable harnesses, batteries, and plastic products. About 80-90 per cent of the main raw materials used to manufacture components are still imported. As a result, this incurs higher expenses for shipping, packaging, and import duties.
The Vietnamese automobile market exceeded a record 400,000 new vehicles – 302,000 passenger cars and 80,000 commercial vehicles – in 2019. Of these, 70 per cent were completely knocked-down (CKD) units and 30 per cent of completely built-up (CBU) cars. Imports from Thailand and Indonesia accounted for 90 per cent.
Since 2018, local assemblers of CKD vehicles have been switching to importing CBUs from ASEAN to avail of the benefits of the ATIGA. Vietnam’s automobile sector is less attractive for foreign investors than regional peers due to inconsistent policies as well as a lack of incentives and local suppliers.
Vietnam remains a major import market for European car brands in ASEAN. However, recent local regulations prevent foreign-owned carmakers from proceeding to import for export or transshipment, specifically Decree No.69/2018/ND-CP, which restricts them from proceeding with trans-shipments from the same customs checkpoint.
Decree No.74/2018/ND-CP, meanwhile, further complicates trade by requesting vehicle imports for exportation to proceed in Vietnam to basic homologation without local tests even though those vehicles are not intended for use in Vietnam. Vehicle importers with a valid business licence already including transshipment can only proceed until the expiration of their business licences as per Decree 69. However, transshipments of vehicles must now take place within 30 days.
In fact, among 19 European auto brands in Vietnam, one importer has completely stopped operations while other brands have changed official importers. The proportion of CBU vehicles imported from the EU dropped from 10 to 4 per cent between 2017 and 2019.
However, it is worth noting that CBU vehicles from the EU will have 3-3.7 times higher tax contribution compared with imports from ASEAN of the same value which have been exempted from import tariffs.
According to the General Department of Vietnam Customs, Vietnam imported nearly 53,000 CBU vehicles worth over $1.2 billion in the first eight months, down 44.3 per cent in volume and 43.7 per cent in value. This is the second consecutive month that the country saw increasing CBU imports. In July, Vietnam spent $104 million on importing 4,000 CBU units, up 12.6 per cent in volume and 6.3 per cent in value compared to June.
Vietnam is committed to the facilitation and effective control of transhipment operations and transit movements through its territory, according to Article 4.6 on Transit and Transshipment of Chapter 4 of the EU Vietnam Free Trade Agreement (EVFTA) on Customs and Trade Facilitation.
According to the European Chamber of Commerce in Vietnam, foreign-invested companies in the automobile sector should be allowed to undertake transshipment without restrictions. Transshipment should continue to be allowed from the customs entry point so that vehicles arriving to Vietnam by boat should be allowed to transship by truck or boat to their final destination. Multimodal transport to transship or export to landlocked Laos or Cambodia by truck or boat should also be allowed with no restriction.
Although Vietnam’s market scale is not large enough to join the regional supply chain, the local supporting industry has made some strides. As of present, car companies under An Phat Holdings have landed many orders to supply components worth millions of US dollars.
Man Chi Trung, deputy director of Hanoi Plastics JSC and general director of VinFast-An Phat Plastic Auto Part Co., Ltd. (VAPA) said that Hanoi Plastics has been a subsidiary of An Phat Holdings since 2013. The company has signed contracts to provide three plastic parts for the body and doors of Toyota and Honda Vietnam vehicles. The partnership has been blossoming recently as Hanoi Plastics now provides 45 plastic parts for the latest models of Toyota Vietnam and 11 plastics parts for Honda Vietnam.
An Phat Holdings also teamed up with Vietnamese automaker VinFast to develop the 50:50 joint venture VAPA to provide components for VinFast vehicles.
Better policies needed for independent power producer: experts
As private investment can play a significant role in increasing local power supply, experts have worked to find better mechanisms and policies to solve problems that have discouraged investment in the sector.
Deputy Minister of Industry and Trade Hoàng Quoc Vuong told a seminar on independent power producers (IPPs) in Hanoi on September 18 that electricity demand will increase by 7.5- 8 percent per year by 2030 when local production capacity nationwide should reach 526 billion kWh, meaning the total capacity of the national grid would reach 131,000 MW.
“The scale and proportion of private investors have been increasing. Specifically, by the end of 2019, the national power source structure had a capacity of 19,253 MW belonging to the private sector including power plants invested in the form of IPP and build-operate-transfer, accounting for 34.4 percent," he said.
Vuong, also deputy head of the National Steering Committee for Electricity Development, added: “From now to 2030, an additional 75,100 MW of electricity will be needed each year.”
Calculating that the investment required for this power source is between 7 billion USD and 8 billion USD per year, the official said there is great potential for investors to join the market.
According to the National Steering Committee for Electricity Development, IPP power projects that have been invested in and put into operation reached a total capacity of 16,400 MW, accounting for 28.3 percent of the total capacity of the national grid.
Other experts told the seminar that the renewable energy market should be encouraged by lengthening the feed-in tariff (FIT) mechanism for another one or two years as many projects of that type had faced difficulties and delays due to the COVID-19 pandemic.
As of July, there were a total of 99 solar power plants operating with a total capacity of 5,053 MW and 11 wind power plants in operation with a total capacity of 429 MW, accounting for about 9.5 percent of the total installed capacity of the system.
Hoang Tien Dung, Director of the Department of Electricity and Renewable Energy under the MoIT, said his department is working with the Institute of Energy to complete the Power Planning VIII and submit it to the MoIT by the end of this month.
Muted mid-autumn cake business anticipated this season
Mid-autumn cake sales in this year season are forecast to be 10-20 per cent behind last year due to COVID-19, as major players are drawing up cautious business plans and small players are gradually losing their footing.
Due to the adverse impacts of the prolonged COVID-19 pandemic, the market demand for mid-autumn cake this year is forecast to slide 10-20 per cent compared to the corresponding period last year, a stark contrast to the usual 5-10 per cent annual growth.
The muted demand did not hinder the cake makers efforts to invest and develop new products to fuel consumption.
According to Kao Sieu Luc, CEO of ABC Bakery, the brand behind thanh long (red dragon fruit) bread which created stirred up the southern market last year, the company has rolled out a variety of fresh products in this season which were made of Vietnamese thanh long, durian, and coffee, blended with high-grade imported ingredients such as almond and walnut kernels from the US.
Other renowned brands like Bibica and KIDO are prudent when penning their production plans for this year’s mid-autumn.
Bibica has decided to produce 600 tonnes of mid-autumn cakes, about as much as last year, which would contribute 15 per cent to the company’s total full-year revenue.
“Our production plan consists of four phases to closely mirror market movements and make suitable adjustments. As the pandemic takes an unpredicted turn, we must not downplay the threat,” said Nguyen Quoc Hoang, CEO of Bibica.
Hoang added that in recent weeks, the company has recorded positive signs from the group of institutional customers which make up 60 per cent of the total mid-autumn cake volume Bibica sells every year.
Meanwhile, the demand from retail customers which make up the remaining 40 per cent is forecast to be softer than in previous years.
Meanwhile, KIDO set out the modest plan of turning out 400 tonnes of products with an estimated revenue of VND200 billion ($8.69 million) and profit of about VND50 billion ($2.17 million).
The plan to return to mid-autumn cake production was conceived by KIDO several years before the emergence of COVID-19.
“We keep close eyes on market movements to pen out suitable business plans for each particular situation,” said Bui Thanh Tung, KIDO deputy general director.
In 2016, KIDO sold its confectionery business to foreign partner Mondelez. After fulfilling its commitment to the foreign partner of not to take part in the confectionery business for five years, the company is now returning to the snack food business, its core business line, and is slated to launch products from the third quarter this year under the brand Kingdom, including mid-autumn cake items.
Based on the experience of confectionery makers, besides quality, there are three essential factors during the mid-autumn cake season, including research and development (R&D) to produce the right items suiting customer taste; drawing up suitable marketing ideas to gain the affection of customers; and putting in place an extensive distribution network to approach customers the fastest.
The domestic confectionery market, particularly mid-autumn cake sales, is shaped by two eminent groups of businesses: sizeable businesses with long years of tradition like Bibica and chain-based brands developing in niche local markets such as ABC Bakery, Givral, and Brodard.
These two groups hold an advantage in the mid-autumn cake season while small brands have undergone tough market screening in the past years.
“The consumers are growing increasingly demanding, particularly in regards to products used as gifts, providing opportunities to older brands like Bibica,” said Nguyen Quoc Hoang.
In the confectionery business, the production and trade of mid-autumn cake is a field where the expertise of business leaders is apparent. Weeks before the mid-autumn festival, cakes can fetch from tens to several hundred thousand Vietnamese dong, depending on the market segment but right after the festival, prices go into a nosedive. The businesses, thereby, must create flexible sales policies to avoid unsold stock after the festival.
Food exporters seek to deepen global footprint
Export firms are diligently looking for and finding opportunities to expand their foothold in the global market despite COVID-19 setbacks.
The exports of many items, particularly vegetables and fruits, were hit hard by the protracted health crisis. Despite this, however, many firms have still secured stable orders to export to many markets with high technical requirements.
According to Nguyen Dinh Tung, chairman of Vina T&T Group, one of the leading local fruit exporters, the company exports 30 containers of frozen durian and 22 containers of coconut to the US every month and is happy with positive feedback from the customers.
The exports of these two fruits alone generate around $1.8 million a month in export value for Vina T&T. More significantly, it helps promote the Vietnamese coconut brand in the global marketplace to better compete with brands from around the world.
To be able to maintain the product flow to the US, as one of Vietnam’s 15 biggest fruit exporters to the US in the past decade, Vina T&T heavily prioritises product quality.
"As one of the most demanding food markets, companies will be encouraged to match the requirements and then consistently stay at that level if they do not want to miss out on opportunities."
As of now, all the company products have acquired HACCP and GlobalGAP standards and are monitored in every stage from harvesting, packaging to shipping in order to ensure the products are of the best quality.
In the words of CEO Nguyen Dinh Tung, the impact of the pandemic is inevitable. It, however, drives business innovations and opens opportunities to those having the capacity to adapt to the new situation. In the case of Vina T&T, besides exporting fresh fruit, the company has engaged in freezing some kinds of fresh fruits in a bid to diversify export markets as well as export new customers.
This allows the sharp rise of Vitenamese fresh and frozen fruit exports to the US, Canada, and Australia.
Also active in agricultural sector, Trung An Hi-Tech Farming JSC based in the Mekong Delta city of Can Tho has secured rice export contracts with three EU customers.
Under the contracts, the company will be exporting a total of 3,000 tonnes of ST20 and Jasmine fragrant rice to the EU. This late August, Trung An shipped 150 tonnes to this market.
According to Pham Thai Binh, CEO of Trung An, this is not the first time the company secures a rice export contract to the EU but this was the first rice order since the enforcement of the landmark EU-Vietnam Free Trade Agreement (EVFTA). He noted that rice products must obtain a GlobalGAP certificate, have clear product traceability and good quality to meet strict market requirements.
After making inroads into Japan, South Korea, Russia, and South Africa, this July, Le Gia Foods and Trading Services Co., Ltd. succeeded in setting foot in Taiwan. According to Le Anh, CEO of Le Gia, although the deal itself is not big, it has significant meaning as Taiwan has a fairly large Vietnamese expat community.
“This result came on the back of years of negotiation and countless examinations to meet the standards set by Taiwanese partners,” said Anh.
Binh from Trung Anh noted that exporters must be diligently working to meet different standards in different markets.
“Take rice export as an example. The EVFTA is expected to bring a breakthrough for rice exports. Moreover, the agreement should also be considered a gateway for Vietnamese rice brands to approach stricter markets. As one of the most demanding food markets, companies will be encouraged to match the requirements and then consistently stay at that level if they do not want to miss out on opportunities,” said Binh.
Local SMEs plunge for digital moves
Despite facing many challenges from the pandemic, a large proportion of local small- and medium-sized enterprises are looking to digitalise themselves to bring new products and services to the market.
According to the recent Asia-Pacific SMB Digital Maturity Study by International Data Corporation about digitalisation across the region, 72 per cent of small- and medium-sized enterprises (SMEs) recognised that competition is becoming tougher and they must keep up with the pace, while 46 per cent of them say they are transforming due to demand by the customers.
Luong Thi Le Thuy, managing director of Cisco Vietnam, said that the digitalisation of SMEs in Vietnam could bring a huge benefit to their business and the country, possibly adding $24-30 billion to the country’s GDP by 2024 and contributing to economic recovery post-COVID-19.
“SMEs that are more digitally mature enjoy twice as many benefits in terms of revenue and productivity compared to those that have an indifferent approach to digitalisation,” Thuy said.
The results of the study also show that purchasing or upgrading IT hardware and investing in cloud technologies are the top investment priorities for SMEs in Vietnam with 18 per cent, followed by cybersecurity with 11 per cent.
In addition, the lack of a digital mindset, knowledge about necessary technologies, and insights into customer and operational data are the main challenges for Vietnam’s SMEs in digitalisation.
According to the General Statistics Office, SMEs form a large proportion of the domestic private sector and play a vital role in the Vietnamese economy, as they account for more than 95 per cent of all enterprises and contribute around 47 per cent of the country’s GDP.
Thuy stressed that despite the segment’s role as a key driver of Vietnam’s economic growth in recent years, it has been among the hardest hit by the COVID-19 pandemic.
“As Vietnam is working to overcome the current situation, and consumer and business activities start to pick up, the digital transformation of SMEs will play a pivotal role in their recovery and contribute to the country’s overall economic growth. At Cisco, we are committed to working with SMEs to help them emerge stronger with the right digital solutions and strategies,” Thuy said.
Raz Mohammad, director of ASEAN SME at Cisco, emphasised that SMEs are the backbone of ASEAN economies, accounting for over 85 per cent of total businesses and making up the main contributions to private sector employment in the region.
“While they are currently facing the biggest challenges to their operations, they also have an unprecedented opportunity to accelerate their digital transformation. Technology can not only help solve some of their key challenges and revitalise their operations, but also help them sustain their growth in the long term,” said Mohammad.
SMEs in Singapore, Japan, and New Zealand continue to lead in digital maturity development. Meanwhile, mainland China, Taiwan, and Thailand surpassed other regional countries, and there has been notable progress made by SMEs in Indonesia and Vietnam.