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VIETNAM BUSINESS NEWS APRIL 4

Da Nang focusing on developing hi-tech, supporting industries

 

Authorities in central Da Nang city have adopted a host of key measures to speed up economic restructuring in 2020-2025, focusing on strengthening hi-tech and supporting industries and IT development in connection with building startups and innovative urban areas and smart cities.

Data of the municipal Department of Industry and Trade show that Da Nang’s supporting industry has attracted a number of large-scale investment projects over recent years and gradually joined global supply chains.

The supporting industry’s added value has made rising contributions to the added value of the city’s manufacturing and processing industry.

Since 2016, Da Nang has attracted 24 new investment projects in the supporting industry with total registered capital of over 9 trillion VND (390 million USD), including two foreign-invested projects totalling 240 million USD in the manufacture of automotive and aircraft components.

The central city is home to about 110 businesses operating in supporting industries, accounting for 6.3 percent of all industrial enterprises in the city.

According to the head of the Management Board of Da Nang Hi-Tech Parks and Industrial Parks, Pham Truong Son, the municipal People’s Committee has completed a  draft plan for supporting industrial park development”, which is awaiting approval by the Prime Minister.

This is expected to be the first IP in Da Nang operating in supporting industries. Investors will cooperate with businesses in the hi-tech park to form a reciprocal ecosystem.

Under the draft plan submitted to the Government for approval, the supporting industry park will cover an area of 102 ha adjacent to the hi-tech park and the concentrated information technology zone in Hoa Vang district.

Under Resolution No 01-NQ/TU dated October 30, 2020 from the Standing Board of the municipal Party Committee on developing supporting industries to 2030 with vision to 2045, the city aims to increase the number and capacity of supporting industry enterprises that can create products with high competitiveness, such as spare parts, accessories, materials, supporting equipment for special purposes, software, and essential services that meet the demand of priority industrial sectors.

The city also looks to attract investment from multinational companies, thus promoting technology transfer in supporting industries.

The municipal Party Committee has set a target of having over 150 supporting industry businesses by 2025 and over 300 by 2030, with at least 10 percent and 15 percent of domestic enterprises being capable of supplying products directly to enterprises operating in manufacturing and assembling finished products by those times.

The production value of supporting industries is hoped to account for about 30 percent and 40 percent of the added value of manufacturing and processing industries by 2025 and 2030, respectively.

Da Nang aims to attract at least one multinational company to invest in manufacturing finished products in each supporting industry by 2030./.

Chinese investors hope Binh Duong have better investment environment

Many Chinese investors operating in the southern province of Binh Duong have put forth proposals to the provincial People’s Committee regarding the minimum wage, the land fund for warehousing, and investment procedures at a recent online investment promotion workshop.

The workshop, jointly held by the provincial People’s Committee, Becamex IDC and the Chinese Consulate General in Ho Chi Minh City, brought together about 80 Chinese investors and representatives from relevant departments and agencies in Binh Duong.

It provided investors with insights into the investment environment in Vietnam in general and Binh Duong in particular, while helping connect Vietnamese and Chinese businesses amid the COVID-19 pandemic.

Binh Duong currently has 1,515 projects worth over 8.8 billion USD, including 432 valued at 1.3 billion USD from mainland China, 845 worth 5.4 billion USD from Taiwan (China), 234 worth 2.1 billion USD from Hong Kong (China), and four worth nearly 41 million USD from Macau (China).

Projects mainly focus on processing and manufacturing, household utensil production, steel, and electronic components, among others.

Bui Minh Tri, head of the management board of industrial parks in Binh Duong, said the province is stepping up its investment attraction. It will reject, however, projects that cause environmental pollution, use many unskilled workers, and consume much energy.

Binh Duong encourages projects in high technology, supporting industries, and high-quality services, he emphasised.

Mai Hung Dung, Vice Chairman of the provincial People’s Committee, pledged that Binh Duong will further press ahead with administrative reforms and facilitate investment.

Binh Duong has also focused resources on completing socio-economic infrastructure, expanding industrial parks, training human resources, and building housing for workers, he said.

The province hopes to receive more support from the Chinese Consulate General in HCM City, the China Construction Bank, and business associations in the two countries regarding investment attraction, he added.

Binh Duong’s gross regional domestic product (GRDP) increased 6.91 percent last year and GRDP per capita stood at 150 million VND (6,500 USD). Its export revenue exceeded 27.43 billion USD and import value over 21.46 billion USD./.

Vietnam’s growth prospect remains brightest in Asia 

As uncertainties has led to HSBC revising down Vietnam’s GDP growth forecast in 2021 to 6.6%, the bank expected a strong rebound to 8.5% next year.

Despite a weaker-than-expected GDP growth in the first quarter at 4.48%, Vietnam still boasts one of the brightest growth prospects in Asia, according to HSBC.

Upswing in the tech cycle, consistent FDI inflows, and multiple Free Trade Agreements (FTAs) are seen as factors to keep up the country’s growth momentum, noted the bank in its latest report. 

As uncertainties have led HSBC to revise down Vietnam’s GDP growth forecast in 2021 to 6.6%, but the bank expected a strong rebound to 8.5% next year, up two percentage points from its previous assessment of 6.5%.

For 2021, the report suggested Vietnam’s inflation would average around 3% in 2021, well below the State Bank of Vietnam’s (SBV) 4% ceiling. With inflation being less of a concern, the central bank has more flexibility to keep its monetary policy unchanged in 2021, it added.  

Given Vietnam’s limited fiscal space, monetary policy did most of the heavy-lifting to support the economic recovery in 2020. The SBV cut its annual refinancing interest rate from 6% to 4%.

Taking into consideration positive GDP growth and benign inflation pressure, HSBC expected the SBV to keep its policy rate on hold until the second quarter of 2022, before possibly delivering a 25bp rate hike in the subsequent quarter. This would bring the refinancing rate to 4.25% by end-2022.

According to HSBC, while Vietnam’s fiscal space is constrained by its elevated public debt, some targeted and short-term assistance is still needed for struggling sectors and individuals to broaden out the recovery.

Indeed, the Ministry of Finance has proposed another extension of taxes and land rental payments with a total package worth VND115 trillion (1.7% of GDP). This includes a 5-month extension of the value-added tax (VAT) and a 3-month deferral of corporate income tax (CIT).

After a brief pause in 2020, the bank expected Vietnam to resume its fiscal consolidation efforts in 2021, while the fiscal deficit is predicted to shrink from 5.2% of GDP in 2020 to 4.7% in 2021, bringing down its public debt back to below 60% of GDP.

Future risks

Although Vietnam remains on a fast track to economic recovery, there are notable risks still looming, including a prolonged vaccination roll-out, which may delay the country’s tourism recovery.

At the domestic front, the weak labor market remains a headwind for reviving private consumption. While unemployment rates have dropped since the third quarter of 2020, a large part of Vietnam’s labor market remains in the informal sector, which may not be captured in formal employment statistics.

“Thus, supporting vulnerable businesses and workers remains a key task,” stated HSBC.

Meanwhile, Fitch Solutions in its new report argued that downside risks to Vietnam’s growth in 2021 “are now higher owing to the continued pressures being faced globally from the pandemic”.

Headwinds to both Vietnam’s services will remain as the outlook for a rapid resumption of international leisure travel remains bleak.

In addition, the strong momentum in manufacturing will also begin to face challenges arising from high shipping costs and competition for shipping capacity to the west between rest of Asia-West routes and China-West routes, asserted Fitch Solutions.

Business confidence in Vietnam hits 27-month high

The Vietnam Manufacturing Purchasing Managers' Index (PMI) rose to 53.6 in March, up from 51.6 in February, signaling a solid improvement in the health of the manufacturing sector. In fact, business conditions strengthened to the greatest extent in 27 months, according to Nikkei and IHS Markit.

A reading below the 50 neutral mark indicates no change from the previous month, while a reading below 50 indicates contractions and above 50 points to an expansion. 

Signs of improving customer demand and success in keeping the Covid-19 pandemic under control helped to support rises in new orders and output in March.

New business increased for the seventh successive month, and at the fastest pace since July 2019. In some cases, clients had expanded their order sizes over the month. There were also signs of improvement in international demand conditions, helping lead to the greatest increase in new business from abroad since November 2018.

Production, meanwhile, rose at a much faster pace than in February, with the rate of growth hitting a 20-month high. Output was up across all three broad sectors, with consumer goods firms leading the expansion.

Higher new orders and expanded production requirements encouraged Vietnamese manufacturers to increase their staffing levels and purchasing activity during March.

Employment rose at a modest pace, but one that was nonetheless the strongest since June 2019. Similarly, input buying increased to the greatest extent in 20 months.

Difficulties sourcing raw materials remained, with suppliers' delivery times continuing to lengthen. Issues with the importing of items, material shortages and a lack of shipping containers all contributed to longer lead times. That said, vendor performance declined to the least extent in four months and firms were able to expand their stocks of purchases. 

Stocks of finished goods also rose, due to a combination of higher production and issues with the delivery of orders.

Shortages of raw materials, often due to the COVID-19 pandemic, led to a sharp and accelerated increase in input costs during March. In particular, higher steel prices and increased costs for items sourced from China were mentioned. The latest rise was the fastest in just over three years.

Output prices, meanwhile, were raised at the sharpest pace in just over four years as manufacturers passed on higher input costs to their customers.

Hopes that the Covid-19 pandemic will come to an end and demand will improve supported confidence in the 12-month outlook for production. Furthermore, sentiment was the highest since July 2019, with close to half of all respondents optimistic regarding the prospects for output.

"Particularly encouraging in the latest set of figures was the strength in export orders as international demand shows signs of improvement,” said Andrew Harker, associate director at IHS Markit, which compiles the survey.

“Hopes that these trends will continue and that the Covid-19 pandemic will come to an end supported the greatest business confidence since mid-2019. The sector therefore looks well set to make further progress in the second quarter."

Lack of autonomy prevents state firms from embarking on innovation

The lack of autonomy is restricting state-owned enterprises (SOEs) from embarking on innovation and supporting startups.

Deputy Director General of the Enterprise Development Agency under the Ministry of Planning and Investment Nguyen Duc Trung made the statement at a conference discussing the role of state firms in economic development on March 31.

“At present, the level of efficiency in SOEs operation still remain modest and disproportionate to the amount of state capital under their disposal, while the sector’s competitiveness against international peers has left much to be desired,” Trung added.

According to Trung, the root cause for such issue come from the fact that they have not been active enough in production and business activities.

A recent study from the Vietnam Institute of Economics (VIE) revealed that as of 2020, the country has 650 SOEs. While the figure only accounted for 0.07% of number of operational enterprises in Vietnam, they made up 7% of total asset, 10% of equity and 30% of the GDP.

Along with the process of privatization, the number of state enterprises has been on the decline, but they remain a major contributor to the state budget, stated the VIE.

Director of School Business Administration under the Vietnam National University Hoang Van Hai added to further support the development of SOEs, the authorities should address legal bottlenecks, specifically the inconsistency and ambiguity in legal framework that are restricting them to apply for modern business models or corporate governance standards.

Vice Chairman of the Commission for the Management of State Capital at Enterprises (CMSC) Ho Sy Hung stressed the necessity for policy-makers to adopt new mindset in drafting regulations and creating conditions for enterprises to operate fairly against other economic components.

“Along with the strong growth of the private sector, the government should create room for large-scale SOEs to develop,” he added.

At the conference, Nguyen Quang Tuan from Viettel’s Department of Production Research said it is essential for government agencies to treat both state and private firms in a fair manner.

“The authorities should take advantage of the Industry 4.0 to enhance efficiency in supervising SOEs, at the same time giving them freedom in deciding on business strategy and operation,” Tuan noted.

Seafood companies under pressure from mounting shipping costs

Exporters have been beset by soaring transport expenses this year, with costs of transporting goods to the US soared just after costs to the EU normalised, according to the Vietnam Association of Seafood Exporters and Producers.

In addition to the dizzily increasing production costs at the beginning of this year, shipping expenses have been an issue of concern for Vietnamese seafood exporters. At the moment, little cargo space is available for frozen goods as most seagoing vessels are giving priority to dry items that come with more favourable freight rates.

A local catfish exporter in the Mekong Delta city of Can Tho complained about difficulties in finding a ship to the United States. "We are lucky to get a trip even without knowing how much it will cost because shipping companies usually send price quotations late,” said the exporter’s representative.

“Even if the vessel cannot go out on schedule for some reason, the price is up to $1,500 per container,” he added.

MSC, the leading global container shipping company, most recently revealed that it will stop shipping frozen goods to the US from April 2021. The move will mean more freight to other ships – but most of the suitable vessels have already been overloaded for months. Many shipping companies do not allow reservations either, which makes it difficult for producers who then need to hold their stocks while they find free cargo space – in a market where warehouse space is also short, according to VASEP.

Previously, in January this year, many seafood, plastic, and timber exporters said that they have been shouldering mounting container rental costs, with prices ranging from $1,000 to $8,000 per 40-feet container, and even hitting $10,000 for those travelling to the UK.

Textile and apparel exports looking at significant recovery in 2021

Textile and apparel exports are expected to recover significantly this year due to the large-scale vaccination schemes underway in key markets.    

According to statistics from the General Department of Vietnam Customs, Vietnam’s total textile and apparel export value stood at $35.2 billion, down nearly $4 billion on-year due to the COVID-19 outbreak affecting Vietnam’s major export markets, including the US, EU, and Japan.

However, the industry is forecasted to recover strongly this year as a vaccination scheme is being implemented across high-consumption countries for fashion products. In fact, successful control of the pandemic will accelerate market rebound, prompting demand for personal expenditure.

Le Tien Truong, deputy chairman of the Vietnam Textile and Apparel Association (Vitas), predicted that textile export turnover will likely achieve $39 billion, equal to that of 2019. The market is showing more positive signals from June due to current vaccination programmes working towards global immunity.

Truong added that the main commodity group from June will be autumn and winter clothing, which is generally high-value, helping to revive the sector.

Enterprises expect that the figure will continue to increase in the forthcoming time as the $1.9 trillion aid package disbursed by the US administration for businesses and residents will stimulate the appetite for fashion products.

Recent figures by the Vietnam General Department of Customs show that textile and apparel exports in January-February maintained growth momentum by hitting nearly $6 billion, up 7.7 per cent compared to the same period in 2020. Notably, the export volume to the US, Vietnam’s largest consumer, expanded by 8 per cent, accounting for 41 per cent of the industry’s total exports. Enterprises expect that the figure will continue to increase in the forthcoming time as the $1.9 trillion aid package disbursed by the US administration for businesses and residents will stimulate the appetite for fashion products.

Data from TNG Investment and Trading JSC showed that the revenue in January increased by 24 per cent and the accumulated profit in the first two months exceeded the same period in the previous year by 14 per cent. A company representative reported that the company has signed contracts until June.

Le Ngoc Thanh, deputy director of Vinatex’s Nam Dinh spinning branch, said that the production and sale of yarn had been gradually improving since December 2020, despite the high price of cotton. The firm has signed a contract to produce yarn until the end of April. Thanh added that the profit is expected to hit over VND5 billion ($217,390) in the first quarter. If the market remains stable, the profit may be 1-2 times higher than in the previous quarter.

According to Tran Thi Kim Chi, general director of Phu Bai Spinning JSC, the enterprise has received orders until May and has even had to decline further orders.

Chi noted that as the market was beset by fluctuations due to the pandemic, her firm needed to balance the price of exported goods and cotton, maintaining production and ensuring business efficiency. The company’s revenue in the first quarter is estimated at VND192 billion ($8.35 million) and in the next quarter may reach VND218.5 billion ($9.5 billion).

Dreary times persisting for appliance retailers

The pandemic has without a doubt been a real challenge for any consumer business. However, the health crisis may not have been the deciding factor in the declining stored-based electronics and home appliances retail segment as e-commerce services’ share has been continuously on the rise. 

Many electronics and appliance retail stores have remained empty especially after the Lunar New Year as customers were not eagerly shopping. Given the low customer traffic, some stores merely displayed old samples without offering new ones, while others were struggling to survive.

Some institutes and experts have been making the pandemic and social distancing responsible for the low sales in brick-and-mortar shops, such as global market researcher Euromonitor, which pointed out that under the impact of COVID-19, electronics and appliance retailers registered a notably lower sales growth in 2020.

Dang Thanh Phong, public relations manager of Mobile World Investment Corporation (MWG) told VIR, “The consumer electronics and appliance retail industry in 2021 may face more hardship due to the pandemic which led to a large decrease of consumers’ income and slowed down the economy.”

However, Ralf Matthaes, managing director of Infocus Mekong Research claimed that the main challenge has actually not been the pandemic. He stated that though consumers have curtailed spending on consumer electronics in 2020, since January of this year, consumer electronics have started to show a rebound in sales with a mild yet positive 5 per cent increase.

“The main issue is that consumers are shopping more online for these goods, as they are able to save money and benefit from many promotional benefits. Hence, the major challenge is coming from e-commerce sites such as Lazada, Tiki, and Shopee,” Matthaes added.

In addition to Matthaes’ judgement, a look at the growth rate of the retail market shows that retail sales have been decreasing since 2015.

Other statistics by Euromonitor showed that from 2014 to 2018 the share of brick-and-mortar retailers dropped from 81.6 to 77 per cent. Meanwhile, the share of internet retailing grew from 17.8 to 22.1 per cent, while other sources remained largely stable.

In the shortlist of top electronics and appliance specialist retailers, MWG, FPT Corporation, and Pico JSC are the leading names, with respective shares of 27, 5.2, and 4 per cent. Following these are Cao Phong Co., Ltd. and Nguyen Kim Trading JSC with market shares of 3.8 and 3.1 per cent, respectively.

Last year, MWG opened 300 Dien May Xanh supermini outlets during the pandemic. Towards the end of 2021, the company is looking to open another 700 stores. Phong of MWG said that the company is following its roadmap to reach 60 per cent market share by 2022.

“Dien May Xanh will not spend much on pushing consumption, but instead focus on serving customers the best choices for their needs and budgets. MWG plans to expand its network to more remote areas that large and mini Dien May Xanh outlets cannot reach by opening Dien May Xanh supermini stores,”Matthaes added.

In the past five years, Vietnam’s electronics and appliance retail market has seen plenty of big names disappearing, including Tran Anh, Vien Thong A, Topcare, and Viet Long.

In 2017, MWG bought Tran Anh Digital World to expand its scale beyond the north. The combination of Dien May Xanh and Tran Anh generated 30 per cent of market share at the time of the merger.

Meanwhile, in 2020 Vingroup JSC exited the channel and the entire Vietnamese consumer electronics market to concentrate on technology and industrial sectors. The group acquired Vien Thong A electronics supermarket, renaming it VinPro. However, the market chain officially dissolved only a year after its launch.

Thai conglomerate Central Group, through its subsidiary, acquired the Vietnamese electronics retailer Nguyen Kim early in 2020 in a deal worth nearly $115 million, representing the group’s move to consolidate its presence in the Vietnamese electronics and appliance retail market.

Players in the electronics and appliance sector are advised by experts to diversify their strategies and adopt omnichannel models if they wish to lead the market. FPT and MWG tried to push e-commerce sales to mitigate the effects of the national lockdowns and social distancing campaigns throughout the pandemic. Their online sales have recorded growth in 2020, which helped to compensate for the declining sales at brick-and-mortar outlets.

These chains are also investing in their websites to compete with e-commerce platforms. However, the competition can be tough as both players need to cut down their prices and offer numerous promotions to snag online shoppers.

Nguyen Quang Hoa, chairman of Thien Nam Hoa JSC, said that his company is scaling down its premises and only retains some key stores. The company will focus on boosting its online sales, which are expected to contribute 60-70 per cent to its sales.

According to Matthaes from Infocus Mekong, there is still pent up demand for consumer electronics in Vietnam. However the retail sales model must change for these companies to survive. “The key challenge will be to find the right central locations and convert store offers into easy-to-buy products that can be fitted for homes via virtual product mapping, and then be delivered conveniently,” Matthaes explained.

Supporting industries receiving multinational boost

The relocation of multinational corporations has accelerated the shift of foreign investment capital to Vietnam’s supporting industries to accommodate the lack of local suppliers.

According to Ho Chi Minh City People’s Committee, more foreign businesses are developing projects at Saigon Hi-tech Park (SHTP) in District 9 to become suppliers for Samsung Electronics’ CE Complex (SEHC) in the city.

As of February, four local companies and nine foreign-invested enterprises have been providing materials, spare parts, and accessories to SEHC.

Among them, Vija Technology JSC specialises in manufacturing automation equipment, industrial robots, precision mechanical details, and molds. Meanwhile, Daeyoung Electronics Vina Company manufactures and trades in electronic components and LED displays for household goods like refrigerators, washing machines, and air-conditioners.

Another supplier, New-Hanam Co., Ltd., makes motor and plastic injection molding for washing machines, vacuum cleaners, air conditioners, and other home appliances. The company is supplying motor products to Samsung, and received an investment certificate in 2016 following the development of SEHC.

At the beginning of the year, Dong Nai People’s Committee granted investment certificates to two suppliers for Samsung. South Korea’s Hansol Electronics Vietnam Co., Ltd., is investing $100 million in the Hansol Electronics Ho Nai project in the locality. Covering an area of over five hectares, the project specialises in manufacturing, processing, and assembling liquid crystal displays as well as printed board assembly for electronic circuit boards.

Another South Korean investor, Platel Vina, also got the nod to develop a factory in Amata Industrial Park in the southern province of Dong Nai with the registered investment capital of $30 million. The factory will manufacture electronic equipment covers as well as electronic components from plastic materials with a capacity of 400 tonnes of products per year.

Platel Vina is a member of Intops Group, which has been a Samsung supplier for 30 years – and Intops has already developed two factories in Vietnam.

Since the beginning of 2021, many southern localities like Ho Chi Minh City, Dong Nai, and Binh Duong have witnessed a surge in foreign investment capital into local supporting industries.

Mai Ba Truoc, director of Binh Duong Department of Planning and Investment, said that the province has attracted $300 million in foreign capital in the first two months of this year. Among them, there are a large number of supporting industry projects.

New MOTION Industry Co., Ltd. from Singapore will inject $185 million to build a manufacturing factory for radio screen and display products. Meanwhile, GIGA Electronic Vietnam Co., Ltd. will manufacture and assemble electronic components, power adapters and converters for mobile phones, and power tools as well as other LED-based products.

The growing presence of foreign suppliers is in line with the wave of manufacturing relocation to Vietnam. However, this trend is in contrast to the fact that local supporting industries are not adequately developed to fulfil the requirements of foreign manufacturers.

According to data from the Ministry of Industry and Trade, the total number of enterprises currently involved in Vietnam’s supporting industries is more than 600.

However, the number of domestic players involved in the global supply chain of foreign investors is low due to the internal constraints of the local suppliers and also the limitation of understanding between the two sides.

This issue has been one of the main obstacles for foreign investors to scale up their presence in Vietnam. Surveys by the Japan External Trade Organization (JETRO) reveal that the low localisation rate has been one of the main concerns for Japanese investors to expand presence in Vietnam.

Hirai Shinji, chief representative of JETRO in Ho Chi Minh City, cited a recent survey showing that the localisation rate has increased slowly since 2010. However, Japanese companies are considering re-establishing some supply chains affected by the COVID-19 outbreak by changing purchasing units. Thus, just under one-fifth of surveyed respondents will choose Vietnamese suppliers in the coming time, which is the highest rate across 20 countries in Asia.

In addition, the Japanese government has provided subsidies for 30 companies to increase production in Vietnam, in the first two rounds of a multi-billion dollar programme to diversify supply chains. A large number of Japanese manufacturers are supplying spare parts and materials such as Mabuchi Motor, Yokoi Mould, Pronics, and Meiko Electronics.

The new investment projects are expected to give a new boost to Vietnam’s supporting industries. In June last year, Vingroup unveiled its plan to inject VND3.4 trillion ($147.3 million) to build a manufacturing complex for automobile spare parts, which will support the “Make in Vietnam” automobiles plan from VinFast.

Meanwhile, global cordless power equipment and floor care company Techtronic Industries Co., Ltd. (TTI) aims to scout around 180-200 local suppliers to increase the localisation rate up to 80 per cent at its Vietnamese manufacturing facilities next year.

TTI has received an investment certificate for the establishment of a cordless power equipment plant at SHTP with the registered investment capital of $180 million which it expects to raise to $650 million within the next five years.

Meanwhile, the company is developing a high-rise factory in an industrial park in Ho Chi Minh City, which would facilitate more Vietnamese companies to join its global supply chains. It is hoped the new project will be greenlit in the near future.

Austrian $1.8 billion high-tech deal utilises EVFTA edge

More Austrian investors are expected to pour billions of US dollars in high-tech projects in Vietnam which they consider a new investment base with numerous opportunities from the EU-Vietnam Free Trade Agreement.

In a meeting with Prime Minister Nguyen Xuan Phuc last week, Ingolf Schroeder, director of circuit board manufacturer AT&S, expressed a plan to establish its manufacturing base in Vietnam. The company intends to develop two factories with the total investment capital of nearly $1.8 billion in the first phase.

The company develops and produces high-tech solutions for its global partners, especially for applications in communications, computer and consumer electronics, mobility, industry, and medical technology. The company has achieved an average growth rate of 7 per cent in the past five years and up to 20 per cent in the past year.

Schroeder said that AT&S is confident it can implement the factory in a short time to serve the huge demand in the field. The company is hurrying to finalise its factory location in mid-April and inaugurate its development by the end of 2021. The construction of the planning factory will be completed within one year.

AT&S also needs to employ at least 1,500 engineers to implement the project. Thus, Schroeder has proposed that the government supports it in human resources and creates favourable conditions for AT&S to build the new factory. He added that Vietnam has introduced some suitable locations like the northern province of Thai Nguyen for factory development.

AT&S will soon make the location decision after taking into account different factors like infrastructure, personnel, supply chain, and others. The company also hopes that the government will soon announce potential incentives.

Austrian Ambassador to Vietnam Thomas Schuller-Götzburg previously said that Austrian companies are eyeing Vietnam thanks to the EU-Vietnam Free Trade Agreement (EVFTA), which will push Vietnam to boost its reforms to attract more foreign companies.

“Currently Austrian companies are talking more and more about Vietnam. I think there are many Austrian companies wanting to do business and investment in Vietnam in many sectors such as construction, engineering, and high technology,” the ambassador said. “The Vietnamese government is now strongly upgrading the country’s infrastructure system to attract more foreign investors. The efforts include plans to build many plants operating in electricity, steel, oil chemicals, and urban development.”

Many other Austrian groups have looked to expand investments in Vietnam, with a focus laid on manufacturing high-tech products.

In a matching webinar between Vietnamese and Austrian investors last December, Thomas Zopfl, director of Wattenspapier under Austrian group Delfort, said that the company purchased a paper processing factory in the southern province of Binh Duong in 2015, establishing its manufacturing hub in the country.

Since then, the company has gained some achievements thanks to the country’s favourable conditions like infrastructure, quality human resources, and a wide range of free trade agreements. “The Vietnamese government’s foreign investment support policy has facilitated Austrian companies to do business here, while political stability and the key role of the government have helped Vietnam successfully cope with COVID-19,” Zopfl explained.

Michael Otter, CEO of Advantage Austria, the international trade unit of the Austrian Economic Chamber, said that Vietnam is the most potential market for Austrian investors in Southeast Asia. “Vietnam and Austria’s economic cooperation has made some important progress with growing bilateral trade turnover, and the opening of a representative office in May 2019 reflects the importance of the Vietnamese market,” Otter said.

Austrian investors are also exploring investment and partnership opportunities in infrastructure, green technology, renewable energy, and Industry 4.0.

According to data from the Ministry of Planning and Investment, Austrian investors are among the top 50 leading investors in Vietnam. As of 2020 end, they had funded 35 projects with the total investment capital of $147.26 million, which is expected to grow on the back of the EVFTA.

Through the agreement, Austrian investors can have more opportunities to provide Vietnam with medical equipment, infrastructure, environment, and renewable energy technology. At the same time, Austrian goods that are unfamiliar to Vietnamese consumers, such as wine and food, will also enjoy tariff cuts and better access to the local market.

Vietnamese Ambassador to Austria Le Dung stated that Vietnam has become an attractive and safe investment destination for foreign investors who are looking to speed up their China+1 strategy. At the same time, the official entry of the EVFTA last August has helped mitigate the impact of the pandemic on bilateral trade between the countries. Therefore, once the pandemic shows signs of fading away, Austrian investors can take advantage of opportunities to invest in Vietnam to penetrate the large population and extend their reach to the ASEAN market.

Canned seafood exports surge 42% in Jan-Feb

Vietnam exported canned seafood worth nearly US$55 million in the first two months of 2021, surging 42% compared with the same period last year.

Exports of canned seafood accounted for nearly 6% of the country’s total seafood exports from January to February, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

The country’s key canned seafood products included tuna, which accounted for 66% of the total, crab (13%), mackerel scad (8%), catfish (2%) and shrimp (1.6%).

Vietnamese canned seafood was exported to 55 countries and territories around the world in the first two months of the year. The 10 biggest markets imported Vietnamese canned seafood worth US$45 million, accounting for 84% of the total. Canned seafood exports to the United States soared 60% year-on-year and accounted for 40% of the total.

There were 28 enterprises exporting Vietnamese canned seafood in January and February. The 10 biggest exporters exported Vietnamese canned seafood worth US$44.5 million, accounting for 83% of the total. The three biggest exporters were Highland Dragon, Pataya and Viet Cuong Canned Food, accounting for 19.4%, 14% and 10% of the total, respectively.

Data of VASEP showed that Vietnam exported canned seafood worth over US$331 million to 90 countries and territories in 2020. The 10 biggest importers comprising the United States, Thailand, Germany, Egypt, Canada, Japan, France, Israel, Hong Kong and Jordan accounted for 73% of the total, with the United States being the biggest importer, accounting for 38%.

Most of the 10 biggest importers, except Germany, have increased imports of Vietnamese canned seafood. VASEP predicted that Vietnam’s canned seafood exports will maintain the growth momentum this year.

HCM City to promote trade, investment in Germany’s Bremen state

HCM City and Germany’s Bremen State have great potential for cooperation in trade and investment in a range of fields, Hoang Thi Huong, chief representative of BremenInvest, a trade and investment services provider, has said.

When investing in Bremen state, Vietnamese businesses need to pay attention to products and services that have high-tech content as well as environmental factors and consumer health, Huong said at a seminar held on Wednesday in HCM City.

“Quality, reliability and delivery time are the deciding factors, instead of prices,” she added. Most EU commodity standards are recognised in Germany and vice versa.

Businesses should pay attention to CE marking certificates, an administrative marking that indicates conformity with health, safety and environmental protection standards for products sold within the European Economic Area.

The tax system in the state is relatively complicated, so businesses should also seek tax advice when doing business in Bremen, according to Huong.

Bremen is an industrial port city in Germany, which accounts for more than 30 per cent of the state and is the mainstay economy of Germany and Europe.

It is home to leading industries in logistics, automobiles, aviation, automation, education, research and development, renewable energy, seaports and food and beverages.

BremenInvest, set up in 2018 in HCM City, aims to facilitate trade and investment between HCM City and Bremen state.

Covering an area of 404sq.km with a population of 797,000, Bremen is the smallest state of Germany’s 16 states.

Germany is Viet Nam’s largest trading partner in Europe, accounting for nearly one fifth of Vietnamese exports to the EU, and is an important gateway for transshipment of Vietnamese goods to other markets in Europe.

Two-way trade between Viet Nam and Germany has doubled since 2010, with an average growth rate of over 10 per cent per year, reaching over US$10 billion.

As of February, two-way trade reached more than $1.5 billion, up 5 per cent over the same period last year.

Germany ranks 18th among countries and territories investing in Viet Nam with more than 300 firms with 361 projects in the fields of engineering, machinery manufacturing, logistics, chemicals and renewable energy, with total investment of more than $2 billion.

Viet Nam has 35 projects investing in Germany worth more than $250 million in the fields of finance - banking, information technology, restaurants and hotels.

Germany is one of HCM City’s major partners with large projects in the city such as the Metro Line 2, Vietnam - Germany University and German International University.

The seminar was organised by the Investment and Trade Promotion Centre of HCM City. 

HCM City seeks to meet 65 per cent of supporting industry products demand by 2025

HCM City has set itself a target of meeting 65 per cent of its demand for supporting industry products by 2025 by honouring and supporting business that invest in supporting industries.

Supporting industries are the backbone of its industry, playing a key role in raising the competitiveness of its industrial products, and a decisive factor in the nation’s competitiveness.

The Saigon Hi-tech Park would strive to attract investment in technology and supporting industries this year, Nguyen Anh Thi, director of its management board, said.

Last year Hong Kong company TTI, Inc., a wireless industrial electrical equipment manufacturer, invested $650 million in the park and is looking for local suppliers of parts.

It plans to set up a plant and R&D centre and make Viet Nam its new manufacturing base.

As part of its efforts to attract investment, the park has organised high-tech supporting industry development programmes to help firms link up with lead firms, like business matching activities between foreign and Vietnamese enterprises, and with export processing zones and industrial parks around the country.

Earlier of this year the city's Department of Industry and Trade honoured 92 industrial products of 2020, including 43 supporting industrial products. They included some key products such as precision moulds for the plastic and metal stamping sectors from Lap Phuc Precision Mold Company.

According to the department, the city has in recent years adopted many mechanisms and policies to back supporting industries, including programmes to link up local suppliers with foreign manufacturers.

Lap Phuc Precision Mold Company is supplying precision moulds to Colgate, Hiep Phuoc Thanh and Minh Nguyen, which have become vendors for Samsung, and Thong Nhat and Amura Precision, which make plastic components for tier 1 and 2 suppliers of automobile companies, it said.

According to foreign companies, Vietnamese firms have made great progress in the manufacturing of industrial supporting products.

Many now confidently introduce their products to foreign firms, and not just simple products like screws, moulds and plastic packaging, but also high value-added products such as motor cores, electronic chips and circuit boards.

To promote the development of supporting industries, the department is drafting an investment stimulus programme for 2021-25 for supporting industry enterprises to improve their production technologies and equipment and make more products meeting global corporations’ requirements, and entrench themselves in global supply chains.

Supporting industries are key to raising the value of the industrial production, and promoting them is vital to attracting more large foreign investors to the city, Thi added. 

App-based taxi drivers likely to pay personal income tax

Income that drivers receive from business cooperation contracts with app-based taxi services will be subject to personal income tax with the tax rate of 1.5 percent, according to a draft circular from the Ministry of Finance.
The Ministry of Finance informed that the new principle of tax collection will make the businesses easy to declare and pay tax for drivers and do not increase the driver's tax liability.

In particular, in case the drivers are rewarded for service quality that was previously subject to 10 percent tax, they are now paid only 1.5 percent.

Accordingly, the ministry has been collecting comments about the draft circular guiding the implementation of several articles of Tax Administration Law and Decree 126/2020/ND-CP detailing some articles of the Law on Tax Administration.

Vietnam, Sweden promote cooperation in renewable energy development

Vietnam and Sweden have nurtured long-standing energy cooperation and now the scope of cooperation has expanded from hydropower in the past to safe and sustainable energy development at present.

Speaking with the Cong Thuong (Industry and Trade) newspaper, Swedish Ambassador to Vietnam Ann Mawe said in the recent time, in addition to stepping cooperation at the governmental level, the Swedish side and Vietnam’s Ministry of Industry and Trade have regularly held seminars to offer chances for major energy firms.

The events focused on technical solutions, improvement of the national grid, development of the renewable energy market, credit support from Swedish financial institutes.

The diplomat spoke highly of Vietnam’s enormous potential in renewable energy development, not only wind but also solar energy.

Vietnam should invest in and improve transmission systems to join the network of safe and sustainable energy resources, as well as preserve redundant energy in peak production season, she said.

In addition, the Vietnamese government needs to devise programmes to raise public awareness of energy saving, Mawe added.

In the coming time, Sweden will continue to work with the European Union (EU) and northern European nations in green energy development projects, and provide counselling to the Vietnamese Government in the transition from fossil fuels to renewable energy.

The ambassador also noted that the EU-Vietnam Free Trade Agreement (EVFTA) will offer Sweden and Vietnam more cooperation opportunities in the fields of economy, investment and trade.

Many major corporations of Sweden have seen efficient operations in Vietnam and earned trust from local consumers, paving the way for others to invest in the Southeast Asian country, Mawe said.

She voiced her hope that once the COVID-19 is kept under control, Swedish small- and medium-sized enterprises will invest in Vietnam and Vietnamese firms will bolster investment and exports to Sweden.

The diplomat also expressed her belief that bilateral trade will continue its upward trend recorded in recent years./.

Da Nang’s tourism seeks ways to stage comeback

Da Nang city is seeking suitable measures to hold back recovery of its tourism crash, following the relaxation of the nation’s social distancing measures to curb the virus spread.

At a forum held on April 1, honorary president of the city tourism development promotion fund Dang Viet Dung said that COVID-19, coupled with natural disasters in 2020, has made local tourism exhausted.

According to Deputy Director of the municipal Department of Tourism Nguyen Xuan Binh, the department has outlined ten tasks and solutions to recover local tourism.

Priority will be given to ensure safety at local tourist destinations, support tourism companies to resume their business activities, as well as promote digitalisation in tourism.

Besides, the sector will work to improve human resources quality and service quality, he added.

Participants suggested the city better the quality of tourism environment, and give assistance to shape up new tourism products, while recommending the Government pilot welcoming international visitors with strict pandemic prevention measures put in place.

Speaking highly of the suggestions, Secretary of the municipal Party Committee Nguyen Van Quang said that the city will mobilise resources to form excellent tourism products with a view to attracting domestic tourists and getting ready to open door for international visitors.

The city pledged the best conditions for tourism activities, Quang said, highlighting the city is working with prestigious investors to develop new night tourism products to serve visitors.

He asked the municipal People’s Committee and competent sectors to support local firms in the digital transformation, as well as continue attention to improving human resources quality.

According to Deputy Director General of the Vietnam National Administration of Tourism Ngo Hoai Chung, the Vietnamese tourism sector has been battered by COVID-19, with the number of foreign arrivals falling 80 percent in 2020 to only 3.7 million, and that of domestic visitors declining 35 percent to 55 million in 2020.

Total revenue from tourism services topped 320.2 trillion VND, a year-on-year decrease of 54 percent./.

Co-operative development assistance fund established

A fund for co-operative development assistance will be established under a newly-issued decree issued by the government, given that co-operatives are playing an increasingly important role in Vietnam’s economy.

Accordingly, it is an off-budget state financial fund operated as a single-member limited liability company with charter capital wholly owned by the State, or a financial institution run as a non-profit co-operative.

The fund is responsible for receiving and managing capital contributed or donated by individuals and organisations both at home and overseas under the current regulations.

The government of Vietnam has adopted various policies to promote the development of co-operatives, resulting in considerable achievement in poverty reduction, household business development and new-style rural building.

Data shows that by the end of 2020, Vietnam was home to 26,040 co-operatives, attracting 8.1 million members.

Collective economy and co-operatives contributed about 4.8 percent of the country’s Gross Domestic Product./.

Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes    

 

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