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VIETNAM BUSINESS NEWS MAY 24

Tight material supply impedes textile exports

Although the demand for Vietnamese textiles is forecast to rise steadily in the short term, firms are concerned that tight material supply will impede their export plans.

According to the Vietnam Textile and Apparel Association, export prospects for the industry are getting better as major importers have reopened their economies and various free trade agreements have begun to take effect.

Under a likely scenario, Viet Nam's textile export is expected to reach up to US$43.5 billion in 2022.

VITAS said Vietnamese textiles are urging the Government to soon approve the Development Strategy for Textile and Footwear by 2030 to make the industry self-sufficient in material production and compliant with rules of origin as stated in free trade agreements.

Decree on 2 percent interest rate support package officially issued

The Government has officially issued Decree 31/2022/ND-CP on interest rate support from the State budget for loans of enterprises, co-operatives and business households.

This decree provides interest rate support for loans in Vietnamese dong arising from lending activities of commercial banks to customers that are enterprises, co-operatives and business households according to Resolution 43/2022/QH15 dated January 11 of the National Assembly and Resolution 11/NQ-CP dated January 30 of the Government.

The State budget shall fully and promptly allocate funds for interest rate support for commercial banks to provide interest rate support to customers. Commercial banks provide interest rate support to ensure compliance with regulations, creating favourable conditions for customers.

The interest rate support applies to interest payment obligations at interest payment terms that arise during the period from the effective date of this decree to December 31 next year.

Commercial banks will stop supporting interest rates after December 31 next year or when the funding source runs out, whichever comes first.

The loan with interest rate support is a loan in Vietnamese dong, with loan agreement signed and disbursed in the period from January 1 this year to December 31 next year, using the capital for the right purpose under the provisions of Clause 2, Article 2 of this decree and have not yet received interest rate support from the State budget according to other policies.

The interest rate support period is from the date of loan disbursement to the time when the customer pays off the loan principal and/or interest as agreed between the commercial banks and the customers, in line with the funding source for interest support rates announced, but not exceeding December 31 next year.

The support interest rate for customers is 2 percent per year, calculated on the loan balance.

Hanoi strengthens consumption stimulus programmes

The capital city of Hanoi plans to strengthen promotion programmes to stimulate consumption, thereby supporting businesses and enhancing economic growth.

Hanoi is implementing a series of promotional programmes for 2022, focusing on May, July and November at more than 2,000 sales points of businesses.

Notably, the businesses have registered more than 10,000 promotion programmes with the Department of Industry and Trade in May, worth nearly 20 trillion VND. In July and November, Hanoi expects to have about 25,000 promotion programmes.

In addition, many trade promotion activities will be implemented to support connections, brand promotion and product consumption for Vietnamese businesses.

Hanoi will also organise a supporting industry fair to display key industrial products; and an exhibition for the introduction and sale of handicraft products manufactured under the One Commune, One Product (OCOP) programme.

Hanoi will create favourable conditions for businesses and cooperatives of other provinces and cities in supplying agricultural products and food, and carrying out trade promotion activities in the city.

Green Economy Forum and Exhibition to be held in HCM City in November

The Green Economy Forum and Exhibition (GEFE 2022) is scheduled to take place from November 28-30 in Ho Chi Minh City, with conferences, exhibitions and dialogues, the European Chamber of Commerce in Vietnam (EuroCham) announced on May 24.

GEFE 2022 aims to help Vietnam fulfill its commitments made at the 26th UN Climate Change Conference of the Parties (COP26) in the UK last year, and its socio-economic development targets set in the national strategy on green growth for 2021-2030.

It will bring together experts, scientists, students and governmental representatives from Europe, Vietnam and other Southeast Asian nations.

GEFE 2022 will also feature EuroCham Vietnam’s Green Business Awards and annual Gala Dinner.

The event will be organised by EuroCham’s Green Growth Sector Committee with the support of the Delegation of the European Union to Vietnam, EuroCham’s nine affiliated European business associations, European embassies and governmental organisations, as well as the Vietnamese government and its ministries.

Solutions sought to help Vietnam's aviation industry take off

Vietnam’s aviation industry needs to improve to keep up with the global market as flights resume following the pandemic, Deputy Minister of Transport Le Anh Tuan said on May 24.

He made the remark at an international seminar titled “Vietnam aviation in a post-pandemic world” organised by Tap chi Cong San (Communist Review) and the Ministry of Transport.

There were 42 million international visitors out of 116 million air passengers in Vietnam in 2019, before the pandemic broke out. About half of them came to Vietnam to invest and seek business opportunities.

The volume of goods shipped by air reached 1.5 million tonnes in 2019, which was rather low compared to other modes of transport but accounted for 25 percent of the value of exported goods.

With a growth rate of over 15 percent per year in the 2010-2019 period, Vietnam's aviation market is considered to be the fifth fastest-growing market in the world and the fastest in Southeast Asia.

Due to the impacts of the COVID-19 pandemic, the aviation industry was severely affected in 2020 and 2021 as domestic airlines stopped international flights, which account for an average of 60 percent of their capacity, while the domestic market has also suffered a serious decline.

Nawal Taneja, a senior adviser, said Vietnam can consider enhancing investment in human resource development, and upgrading infrastructure to increase productivity.

He also suggested expanding the national airline’s network and flight frequency as well as promoting trade exchange with strategic partners.

Professor Tran Tho Dat from the National Economics University emphasised that it is necessary for the State Bank of Vietnam to accelerate credit support for businesses to allow the aviation industry to recover.

He also mentioned the need to consider reducing expenditure to lessen the negative impacts of rising petrol prices through the adjustment of the import tax on fuel, and removing the ceiling cap on air ticket, among others.

Participants at the seminar recommended continuing to invest in building, expanding and harmonising aviation industry and systems infrastructure.

Vietnamese goods make inroads into Canadian market

Vietnam’s exports to Canada reeled in 2.04 billion USD in the first fourth months of 2022, up 31.77 percent on-year.

Of the total, the export value of apparel, phones and components, and seafood hit 392.278 million USD, 314.862 million USD, and 139.5 million USD, growing 57.59, 22.97, and 73.56 percent annually, respectively.

In 2021, despite COVID-19, Vietnam shipped goods worth 5.3 billion USD to Canada, an annual increase of 20.8 percent.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which both nations are members, has been considered the leverage behind such growth. The pact came into force in late 2018. Vietnam also signed a free trade agreement with Canada, therefore enjoying tariff reduction or elimination. Notably, since January 1, 2021, Canada removed a total of 96.3 percent of the tax lines for goods originated from Vietnam.

Supportive solutions needed for enterprises

Supportive solutions for businesses need to be implemented faster and stronger to improve the capacity of businesses and increase linkage among them, according to experts.

In the context of a pandemic-disrupted supply chain and political conflict, support from the Government and organisations for the linkage among businesses is significant.

According to the Vietnam Association of Supporting Industries (VASI), to improve the capacity of Vietnamese enterprises, it is necessary to have supportive policies to reduce costs, easy access to credit and preferential interest rates for businesses in investment activities and production. There are also solutions for training and improvement of management.

Many parts suppliers for motorcycle production want to have new investment but face large capital obstacles because there is no available collateral after two years of fighting COVID-19.

Ministries and branches should also create favourable conditions to promote support and linkages between Vietnamese manufacturing enterprises and foreign companies.

According to VAMI, the demand for Vietnam’s machinery and equipment is very large, with a value of 300 billion USD by 2030.

To participate in this potential market, besides the business efforts, it is necessary to have support from the State with a synchronous and stable policy system for sustainable development. The business community has overcome the pandemic. They have not recovered, so they need more practical and open policies.

The Ministry of Industry and Trade said to support the enterprises, the ministry would continue to strengthen and improve the operational efficiency of centres on support for industrial development in the North and the South. Now, these centres were actively cooperating with FDI companies in Vietnam, such as Toyota, Mitsubishi and Canon, in finding suitable suppliers to participate in the value chains of these firms.

According to VASI, about 300 enterprises are participating in the production supply chain for foreign companies in Vietnam, of which the motorcycle industry has a high rate of localisation, while the electronics and automobile industries have a low rate of localisation.

Vietnam is still importing about 90 percent of electronic parts. For the automobile industry, the country has 60 enterprises as part suppliers at level 1 for foreign partners and approximately 145 enterprises as part suppliers at level 2. It must import more than 70 percent of components for the supporting industry.

Industrial real estate recovery to be fueled by new investment wave

The recovery of the industrial real estate sector will be fueled by new investment waves, according to the Vietnam Association of Realtors (VARS).

Vinhomes IZ, an industrial property arm of developer Vinhomes, has raised its charter capital from 70 billion VND (3.02 million USD) to 18.5 trillion VND over the last two years.

VARS said Prime Minister Pham Minh Chinh had meetings with numerous major US corporations during his visit to the US last week which provided positive feedback.

Meeting with the Vietnamese PM, Apple CEO Tim Cook said his company is planning to expand the supply chain and hopes more eligible firms from Vietnam will integrate into its global value chain, VARS noted.

The global economy has been severely hurt by the Russia-Ukraine crisis, worsened by China’s “Zero COVID” policy, triggering supply chain disruptions and surging costs and transportation time. As a result, demand for storages, warehouses and factories is rising in large consumer markets like Vietnam.

Last year, the total FDI flows into Vietnam exceeded 31 billion USD, up 9.2 percent compared to 2020. Of the figure, 2.6 billion USD worth of FDI was poured into industrial properties, VARS reported.

By the end of this year, two new industrial parks, namely Vietnam – Singapore Industrial Park (VSIP III) and AMATA Long Thanh, will be put into operation. Work on VSIP III, where the one-billion-USD Lego project will set up base, started at the end of March.

Many more ready-built factories, including those provided by SLP, BWID and Vietnam Industrial Park, are expected to be available in southern Vietnam this year, supplying about 800,000 sqm of warehouses and factories. Southern industrial parks have sustained a relatively high occupancy rate (about 90 percent) and a stable level of rental thanks to growing demand.

Cargo throughput via seaports sees modest growth

Cargo throughput across seaports nationwide hit 241 million tonnes in the first four months of 2022, rising 2 percent year-on-year, according to the Vietnam Maritime Administration.

The volume, excluding transited goods not unloaded at seaports, included 61.95 million tonnes of exports (up 2 percent), 67.49 million tonnes of imports (down 9 percent), and 110.99 million tonnes of domestic goods (up 10 percent).

Container throughput also increased 2 percent to over 8.3 million TEUs during the period.

The administration said 2 percent is the slowest growth in recent years though Vietnam has entered the post-pandemic new normal.

Seaports in many localities have recorded a sharp decline in volume, such as Binh Thuan down 28 percent from a year earlier, Can Tho 25 percent, and Kien Giang 12 percent.

Major ports also witnessed drops from 0.5 - 4 percent, including Hai Phong down 0.5 percent, Ho Chi Minh City 2.8 percent, and Vung Tau 4 percent.

Over 100 tonnes of Son La plum sold on Postmart e-commerce platform

During the first half of May, Vietnamese e-commerce platform Postmart supported the consumption of more than 100 tons of Son La plums, thereby helping farmers to bring their products to consumers across the country.

Boasting a wide network that is capable of providing products to communes and wards, along with thousands of specialised means of transport, Vietnam Post has delivered and helped the payment for all orders on the e-commerce platform Postmart.vn.

This can be seen during the upcoming “One Commune, One Product” (OCOP) Vietnam Nam Fruit and Product Festival, which will open in the northern province of Son La on May 28 and will last until June 1. As a result, Vietnam Post will carry out many preferential and support freight support for orders at the OCOP Vietnam Fruit and Product Festival via the digital environment and the OCOP Fruit and Product Festival in Son La province.

Vietnamese economy facing new challenges amid global uncertainties

The Economic Daily of China has recently published an article stating that the Vietnamese economy is currently enjoying rapid development, although it is facing new challenges amid the constantly fluctuating international situation.

According to details outlined in the article, recent years has seen the local economy capture the attention of the international community.

The national economy can be viewed as resilient, especially in terms crisis response. In 2020, amid the initial break out of the COVID-19 pandemic, Vietnam was one of the few countries enjoying GDP growth.

The first quarter of the year witnessed Vietnamese GDP soar by 5.03% over the same period last year, with inflation initially contained.

Furthermore, consumer price index (CPI) in the first four months of the year grew by 2.1%, while financial, monetary, and credit indexes remained stable amid the national budget revenue growing steadily.

Although the Vietnamese economy is in the process of gradually recovering and traffic in major cities has almost returned to normal as it was before the pandemic, it is also facing a "headwind" from the outside, the article said.

Economic globalisation is confronting a range of difficulties and challenges, such as the development trend of regionalisation gradually appearing, inflation is increasing, and the Russia-Ukraine conflict is seriously impacting global economic development. These factors have started to affect the development of the Vietnamese economy.

Vietnam represents bright spot in FDI attraction

Vietnam remains a bright spot in terms of foreign direct investment (FDI) attraction, despite the negative impacts of geopolitical factors globally and the COVID-19 pandemic, according to insiders.

Experts made this assessment at the Vietnam Industrial Property Forum 2022 which is being co-organised by Dau Tu (Investment) newspaper and the BW Industrial JSC on May 24.

At the event, Deputy Minister of Planning and Investment Tran Duy Dong emphasised that although the pandemic has disrupted the global supply chain and the flow of goods, investors from Asia, Europe, the US, and ASEAN have continued injecting money into the Vietnamese market.

Last year saw FDI inflows into the country surge by 9.2% to US$31.15 billion compared to 2020, while financers also injected US$10.8 billion into the nation during the four-month period, with the additional investment capital soaring by 92% to reach US$5.29 billion against the same period from last year.

These positive figures have highlighted investors' confidence in the business climate and the Government’s policies regarding economic recovery moving into the post-COVID-19 period.

Deputy Minister Dong pointed out that Vietnam is becoming an attractive destination for foreign investors, proving the Government’s effective solutions for COVID-19 containment in order to restore production activities and reboot the local economy.

Furthermore, these positive signs can also be attributed to rapid vaccination coverage and the Government’s bailout packages for socio-economic recovery and development,  he noted. 

Through consistent political stability and the Government's determination to carry out these drastic measures, Vietnamese GDP in the first quarter of the year grew by 5.03% on-year, higher than last year’s growth rate of 4.7%.

Most notably, the country’s total trade turnover throughout the reviewed period edged up 15.9% to reach US$242.43 billion, of which FDI-invested firms continued making significant contributions, with import and export value increasing by 14.9% to US$168.37 billion.

Experts analyzed that new-generation free trade agreements (FTAs) such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) have become a driving force behind economic growth, as well as the country’s international trade activities in the post-pandemic period.

Work begins on 40-million USD thin film project in Binh Dinh province

Kurz International Holdings GMBH from Germany held a groundbreaking ceremony to build a thin film factory at the Becamex Vietnam-Singapore Industrial Park (VSIP) in the south central province of Binh Dinh on May 24.

Kurz International is the first European investor to invest in the 1,425 ha park as well as in the south central province. 

The 40-million USD project covers 12,000 sq.m. It is the third invested by Kurz International in Asia.

The first phase of the project is expected to be operational in the third quarter of 2023, with a total production capacity of 15 million sq.m of hi-tech film and coating products a year. Depending on operations in Vietnam, the total investment for the project is expected to be up to 100 million USD in 10-15 years.

Government urged to complete Ho Chi Minh Road project by 2025

About 86.1 percent of the Ho Chi Minh Road project has been completed, and the Government is working on the remaining sections so as to finish the entire project by 2025, Minister of Transport Nguyen Van The said on May 24.

Reporting on the project implementation to the National Assembly (NA), he said under a resolution of the NA, this project, stretching 2,744km in total from Pac Bo in northern Cao Bang province to Dat Mui in the southernmost province of Ca Mau, should have had at least two lanes and been completed by 2020.

So far, 2,362km of the road, equivalent to 86.1 percent, along with about 258km of access roads, has been completed. About 211km is current under construction while capital hasn’t been allocated for building the remaining 171km.

The said as the project holds great significance in terms of politics, economy, defence - security, and poverty reduction, it has received great attention from the Party and State.

It was carried out basically on schedule during 2000 - 2011. However, only few sub-projects were implemented between 2011 and 2015 due to impacts of the global economic crisis. Besides, since the size of the economy remained modest and resources limited, there wasn’t enough funding for the project to be completed by the end of 2020 as targeted by the parliament, according to the minister.

He submitted the Government’s proposal for continued investment in the uncompleted sections during 2021 - 2025, and about 634km of Ho Chi Minh Road to be upgraded into expressways after that depending on demand, effectiveness, and financial capacity.

Plan of using State capital must be realistic: NA
     
The plan for using State capital in development investment must be realistic to ensure efficiency, according to the National Assembly’s Finance and Budget Committee.

The committee’s Deputy Chairwoman Nguyen Thi Phu Ha said on Monday at the third meeting of the 15th National Assembly that the plan of using the State budget for development investment was not feasible, with incorrect capital demand, forcing the plan to be adjusted three times.

At the meeting, Minister of Finance Ho Duc Phoc disclosed that the ministry’s report on the budget in 2020 showed that collection totalled more than VND1.5 quadrillion, while spending reached VND1.7 quadrillion, 1.9 per cent and 3.6 per cent lower than the plans, respectively.

The public debt level fell significantly from 63.7 per cent of gross domestic product (GDP) in 2016 to 55.2 per cent by the end of 2020, with debt maturities extended and borrowing costs reduced, which helped strengthen the national financial safety and security and create room to support growth and promptly respond to the pandemic, Phoc said.

According to Ha, the committee’s verification report found some limitations in budget collection in 2020, such as central budget revenue, tax and fee collection failing to meet the plan. The collection of land use fees was much lower than in previous years.

The plan for using State capital for development investment lacked feasibility and localities did not register their capital demands correctly, which forced the plan to be adjusted.

There was also a lack of observance in the implementation of the budget plan, such as slow allocation and disbursement of public investment and violations in allocating capital, she said.

The committee’s report also pointed out that the revenues from land lease and mineral exploitation were mismanaged in some localities, causing losses to the State budget. In addition, tax evasion remained an issue.

She said that accountability must be enhanced to increase discipline in the implementation of the State budget plan.

According to the finance ministry, the COVID-19 pandemic heavily affected budget revenue in 2021 as a number of industries suffered, such as aviation and tourism, together with the implementation of a number of tax reduction and exemption policies to promote economic recovery.

From the end of the third quarter, with the large-scale vaccination campaign coupled with drastic measures to remove difficulties for businesses, economic activities recovered and supported budget revenue.

Budget collection totalled nearly VND1.57 quadrillion in 2021, 16.8 per cent higher than the plan.

Phoc said that some industries, such as construction, steel and automobile manufacturing, generated high profits and contributed significantly to the State budget.

Budget collection was estimated to be equivalent to 46.6 per cent of the plan for this year, 15.4 per cent higher than the same period last year. The total sum of VND16 trillion in tax reduction and exemption was provided to enterprises and residents in the first four months of this year.

SCIC posts lower profits due to affiliated company losses
     
The State Capital Investment Corporation (SCIC) has recently published its financial report for 2021, announcing consolidated revenue of around VND10.1 trillion (US$438 million), 50 per cent higher than the figure for 2020.

Of the amount, VND4.3 trillion came from dividends and distributed profits, VND1.9 trillion from capital sales and VND1.4 trillion from banking deposit and bond interests. The returned provision for devaluation in investments also contributed VND3.4 trillion to the figure.

Despite high revenue, SCIC earned a consolidated after-tax profit of just VND3.6 trillion last year, a 10-year low, due to losses from its affiliated companies.

Notably, SCIC held 31.14 per cent ownership of the national flag carrier Vietnam Airlines. By late Q3/2021, Vietnam Airlines equity fell to about VND1.5 trillion, leading to a shrinkage of SCIC’s capital.

The airline continued to make a loss of over VND1.1 trillion in Q4, resulting in equity of VND507 billion. SCIC had to record an additional fall of VND300 billion to its consolidated profit in this regard.

By late 2021, SCIC had a total asset of nearly VND57.7 trillion, down 9 per cent year-on-year, and 145 affiliated companies in its portfolio with a total state capital of VND46.5 trillion.

SCIC is expected to transform into a governmental fund in the near future with its focus shifting from capital management to investment. 

Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes

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