VIETNAM BUSINESS NEWS AUGUST 13
The signing of this cooperation agreement is the first and largest cooperation ever in Cambodia in terms of business but also promotes the development of eSports in Cambodia and gradually professionalising the eSports industry in Cambodia.
ESport, which has become popular globally, has been a sports at the Southeast Asian Games recently.
However, it is still new in Cambodia. Professional tournaments have gradually appeared and created a certain resonance, with a large number of existing players, accounting for more than 80 percent of GenZ.
Vietnam Airlines expands partnerships to boot multi-sector business
The national flag carrier Vietnam Airlines has signed a strategic cooperation agreement with T&T Group and SHB Bank; and a Memorandum of Understanding (MoU) with T&Y SuperPortTM - a joint venture between T&T Group and YCH Group of Singapore.
The agreements are expected to not only boost business efficiency and affirm the position and competitiveness of the signatories but also contribute to expanding the strategic cooperation between Vietnam and Singapore.
Under the deals, the parties will prioritise using each other's products and services and jointly exploit the potential and strengths of each party to create outstanding synergistic values for the Vietnamese businesses and economy.
Vietnam Airlines will provide international standard air transport services on the basis of promoting its strength as a modern fleet of over 100 aircraft , and its network of more than 100 air routes around the world.
ETC service providers told to address problems prior to mid-August
The Directorate for Roads of Vietnam has ordered two electronic toll collection (ETC) service providers to distribute sufficient tags to vehicles and deal with any problems faced by road users before August 15.
E-Tags of the VETC Electronic Toll Collection Company and ePasses of Vietnam Digital Transport JSC (VDTC) have been found to have numerous errors. The electronic toll payment accounts also have problems.
Recently, many road users had toll payment tags attached to their vehicles and got an account from one of the two companies, but were asked to register for another account from the other.
The road directorate urged the two ETC service providers to resolve the hindrances, speed up the attachment of tags and effectively manage road user accounts.
Today, over 3.5 million vehicles nationwide have an ETC tag, increasing by some 1.2 million cars against late 2021.
At the end of August, some 80% of the total vehicles across the country will have a toll payment tag.
Countries, major groups seek investment opportunities in Da Nang
Major groups and countries worldwide want to invest in the central city of Da Nang as the COVID-19 pandemic has been under control, Permanent Deputy Minister of Foreign Affairs Nguyen Minh Vu, who is also Chairman of the National Border Committee, said on August 11.
This provides an opportunity for the city to seek important partners, establish in-depth relations, promote economic and cultural development, and strengthen international cooperation in personnel training and equipment supplies, Vu told Secretary of the municipal Party Committee Nguyen Van Quang during their working session in Da Nang.
According to the Deputy Minister, Da Nang has closely coordinated with the Ministry of Foreign Affairs and central agencies to successfully organise multiple international events.
It has also joined efforts to protect Vietnam’s sovereignty over its sea and islands, especially Hoang Sa island district of Da Nang city, he said, noting that the National Border Committee will continue to support Da Nang in this regard through training courses.
The Ministry of Foreign Affairs will also further assist the city to seek partners and attract foreign investors, Vu noted.
20th Vietnam Medi-Pharm Expo features 320 stalls
The 20th International Medical and Pharmaceutical Exhibition (Vietnam Medi-Pharm Expo) opened in Ho Chi Minh City on August 11, attracting visitors to 320 stalls of diverse products and equipment.
These stalls are being operated by more than 260 firms from 20 countries and territories.
Pharmaceutical and vitamin supplement brands account for 55% of the total participants this year. In 2019, those showcasing medical equipment made up 70% of the total.
Lasting until August 13, this year’s event also has five national promotion booths of India, Germany, the Republic of Korea, Malaysia and Turkey.
VietFood & Beverage – ProPack expo opens in HCM City
The 26th VietFood, Beverage and Professional Packing Machines (VietFood & Beverage – ProPack) International Exhibition opened in Ho Chi Minh City on August 11.
Lasting through August 13, the annual expo is featuring 400 booths run by around 350 businesses from 18 nations and territories.
On display are the sector's products, machinery, equipment, and packaging-processing technologies.
Deputy Director General Nguyen Van Nga of the Ministry of Industry and Trade’s Agency for Southern Region said taking place annually in Hanoi and HCM City, the event aims to help domestic firms expand businesses and markets and boost exports and foreign companies seek distributors in Vietnam.
Mountainous locality ships first batch of Son Thuy longans to Europe
The northern mountainous province of Hoa Binh held a ceremony on August 11 to export the first one tonne batch of Son Thuy longans to the EU market.
The event was jointly hosted by the Hoa Binh province’s Department of Agriculture and Rural Development in collaboration with Kim Boi district’s People's Committee and FUSA Organic Agriculture Joint Stock Company.
Moving forward, the Hoa Binh Department of Agriculture and Rural Development and FUSA Organic Agriculture Joint Stock Company aim to export approximately 50 tonnes of longans during this year’s longan crop.
Textile and apparel firms increasingly going green
Going green increasingly becomes an inevitable trend among firms in the textile and apparel sector, with more units bolstering investment into greening their production.
According to the Vietnam Textile and Apparel Association (Vitas), greening the textile and apparel sector has become a global trend that local firms must follow to reach sustainable development targets and scale up export into key markets like the EU and United States.
It would be particularly significant as new-generation free trade agreements with Vietnam’s engagement all feature the commitments for environmental protection and emission reduction, Vitas stated.
This would require firms to invest in cutting-edge production technology which also entails mounting challenges.
Currently, most firms in the textile and apparel supply chain performing export processing for global brands have been mandated to satisfy set requirements on environmental, social, and emission reduction standards, among others.
Based on their scale, capacity, and customer requirements, each firm works on suitable plans to meet the criteria.
With export scale surpassing $3.5 billion a year, the state-owned textile and apparel conglomerate Vinatex unveiled that in the immediate future the company will be investing in novel technologies to reduce 30 per cent of wastewater after dyeing, reusing 30 per cent of this wastewater after being treated to diverse stages of washing and cleaning.
To join the global game, Vietnamese firms need to become more transparent in production, ensure their products have a clear origin and meet green production standards, and increase the volume of products that can be recycled.
In addition, Vinatex also commits to installing solar panels for its factories with suitable natural conditions to reach the target of having 10 per cent of its power come from renewable energy sources.
Potential energy investors clamour for regulation clarity
The lack of an answer for feed-in tariffs and generally available infrastructure is slowing down the prospects of mergers and acquisitions in Vietnam’s renewables arena.
Given that Vietnam’s population, economy, and energy consumption are all expected to continue to rise over the coming years, renewable energy is one of the industries that has attracted the attention of foreign investors seeking merger and acquisition (M&A) prospects in Vietnam.
However, while Vietnam witnessed 10 big M&A deals last year, so far 2022 has seen only two deals announced. Vaibhav Saxena from Vietnam International Law Firm told VIR, “In the past 3-4 months there has been a market slowdown. The issue is the lack of a feed-in tariff (FiT) rate to calculate returns on investment, and competitive market regulations are yet to be seen. We will see an enormous interest from foreign investors after we have the tariff policy in place. Now, it is more about asset management and diversifying investments that have a cash flow in the renewable energy industry.”
After being assigned by the government to advise on solutions for the projects that missed the FiT deadline last November, the Ministry of Industry and Trade (MoIT) sent official options in late July to solve problems for projects and avoid wasting investment.
This is not the first time the MoIT has sought solutions to help the delayed projects. It was originally proposed that projects be allowed to negotiate purchase prices with Electricity of Vietnam (EVN) but final decisions have not yet been made.
The MoIT has argued that because the FiT provisions have expired but the legality remains, the prime minister should reverse any current decisions on incentives for the growth of wind and solar power. It has also been noted that some regulations on exchange rate fluctuations and term lengths are no longer relevant.
Last year, 62 wind power projects with a total capacity of 3.48MW missed the November deadline to enjoy the FiT incentives, and five solar projects with a total capacity of 452.6MW are also awaiting the determination of electricity prices according to EVN.
Although many advertisements have been posted online aiming to sell renewable energy in Vietnam from local developers, especially projects that missed the FiT deadline, no successful transactions have been made among the 62 unfinished wind ventures.
Industrial real estate remains defiant in stock market
Many businesses in the industrial property sector recorded strong business results in the first half of 2022, with rental demand and average rates in increasing industrial zones increasing.
Among the notable stocks is Kinh Bac Urban Development Corporation JSC (KBC). In the first six months, KBC achieved nearly $47 million in net revenues and $103 million in net profit, down 61 per cent in revenues but up 271 per cent in profit over the same period last year. This year, it set a business plan with total revenue of $426 million and profit after tax of $195 million.
Industrial Development and Investment Corporation JSC (BCM) is one of the largest capitalised and most profitable enterprises in the industry. BCM is funding and managing many IZs in the southern province of Binh Duong and other provinces with a total area of more than 15,000ha.
Among those, My Phuoc Industrial Park Complex (including My Phuoc 1-3, Thoi Hoa-My Phuoc 4, and Bau Bang-My Phuoc 5) is a typical example with a high occupancy rate.
Meanwhile, Vietnam-Singapore Industrial Park (VSIP) is a joint venture between Becamex IDC Corporation and Sembcorp Industries Group. To date, VSIP has developed a total of 10 projects across the country with a total land fund of more than 10,000ha including industrial, urban, and service land. In addition, the VSIP3 project with a total area of 1,000ha will also be the driving force for future growth.
An updated report on industrial property stock released by SSI at the end of July predicts that the second half of the year will see a growth rate of 47.3 per cent in after-tax revenue for the whole sector compared with the same period of last year. This growth rate is based on the expected resumption in demand for industrial real estate and the anticipated average rental increase from 8 to 20 per cent on-year.
In addition to these, the improvement of infrastructure in the coming time such as the ring roads No.3 and No.4, Bien Hoa-Vung Tau, Dau Giay-Phan Thiet, and North-South expressways, the Cai Mep-Thi Vai port complex, and Gemalink Port will create more convenient connections between IZs.
According to SSI Research, the profit after tax of listed industrial real estate enterprises in the last six months of 2022 had a growth rate of more than 24 per cent, mainly coming from the recognition of land areas for investment.
In the second half of 2022 and into 2023, it is likely that industrial real estate will still gain investors’ interest, especially for stocks with attractive valuations. Some notable tickers are IDC, BCM, KBC, and VGC.
M&A heating up in industrial real estate
Implementing merger and acquisition deals is an opportunity for real estate developers and partners to team up to develop large-scale and high-quality industrial zones.
In late July, PC1 Group JSC, a Vietnamese group operating in power construction, energy, and property, signed a contract to buy the entire stake in Singapore-based Nomura Asia Investment Vietnam (NAIV).
Industrial real estate is still the most prominent M&A sector, accounting for 35 per cent of the total transaction value with a series of outstanding deals made this year, according to statistics from the global real estate services firm Cushman & Wakefield Vietnam.
Some of the biggest deals combine the acquisition of BW Industrial Development, a developer co-founded by Warburg Pincus and Becamex IDC in Bac Tien Phong Industrial Zone in the northeastern province of Quang Ninh, developed by DEEP C Industrial Zones. A second prominent deal involves Boustead Projects Co., Ltd.’s acquisition of 49 per cent in KTG & Boustead Logistics Industry JSC in Yen Phong IZ in the northern province of Bac Ninh for $6.9 million.
HCMC to develop major traffic projects
HCMC has plans to develop multiple traffic projects such as junctions, expressways and ring roads to ease traffic congestion and improve its traffic system.
The HCMC Department of Transport has proposed building 16 T-junctions citywide to ease traffic congestion in the 2022-2025 period.
Among them, the National Highway 1-Nguyen Van Qua Junction project in District 12 has had its investment procedures completed, while five others have been passed by the municipal People’s Council. The remaining 10 junctions have yet to get the nod for investment and construction.
In addition, the Ministry of Transport has announced restarting the Ben Luc-Long Thanh expressway project in the third quarter of the year. The 57.8-kilometer-long expressway, invested by Vietnam Expressway Corporation, will run across Long An, HCMC and Dong Nai.
The project will be divided into three sections and require VND31.3 trillion in investment.
Work on the project began in July 2014 and was set for completion in 2018. Due to some obstacles, the project had been slow and was suspended in 2019.
In related news, the HCMC government has asked the municipal Department of Transport to step up procedures to develop the Saigon River-Thay Cai Canal section of the Beltway No. 4 project under the public-private partnership format. The department was told to collaborate with relevant agencies to complete the prefeasibility study for the 17-kilometer-long section as soon as possible.
More green property trends incoming
Vietnam is one of the key markets for Singaporean investors who are interested in green real estate, smart cities, and high-tech logistics.
A feasibility study contract was signed at the end of last month by MTBS and the investor of a superport in northern Vinh Phuc province, 60km from Hanoi.
Construction began last December for the Vinh Phuc Inland Container Depot Logistics Cente, to be known as Vietnam SuperPort. It is funded by YCH Group, a Singaporean integrated end-to-end supply chain management and logistics partner, and Vietnamese conglomerate T&T Group.
Over the past 20 years, Singaporean developers have also entered Vietnam to build hundreds of apartments and office projects for rent. Typical names include Mapletree, CapitaLand, Frasers Property, Sembcorp Development, and Keppel Land.
Vietnam-Singapore Industrial Park (VSIP) is a joint venture between Sembcorp Development (Singapore) and Becamex IDC (Vietnam). Established in 1996, VSIP has had about a dozen investment projects in IPs spread throughout Vietnam’s provinces and cities, including Binh Duong, Binh Dinh, Nghe An, Hai Duong, Haiphong, and Bac Ninh.
In the Vietnamese real estate market, there are a number of other green building certification systems being utilised besides the GMC that is helping evaluate the performance of buildings in terms of energy use, emissions, design, safety, and working environment.
In Ho Chi Minh City, some office buildings that have been assessed for LEED certification include Deutsches Haus, Friendship Tower, President’s Place, Phu My Hung Tower, and Saigon Center 2, all located in District 1.
In Hanoi, some prime examples include Techcombank Tower, Capital Place, and Landcaster Luminaire.
According to figures released by the Ministry of Construction earlier this year, the number of green buildings in Vietnam has now reached just over 200, a modest number compared with the number of total projects built and put into operation. The construction and real estate sectors are responsible for nearly 40 per cent of global CO2 emissions and account for about 36 per cent of total energy consumption compared to other sectors.
Construction businesses expect rosier stock performance in H2
Looking towards the year's end, construction businesses are expected to benefit from the government’s programme on economic rebound and development in 2022-2023 and accelerated public investment, heralding rosier performance.
In the recent report to the government, Minister of Transport Nguyen Van The noted that four component projects under North-South Highway network’s first phase with a total length stretching 361km would be put into use by the end of this year.
As scheduled, the six remaining projects are slated for completion in 2023. For the 12 component projects under the North-South Highway network’s second phase, the National Assembly has approved to forge ahead following the public investment format.
The government is swiftly expediting relevant procedures for the projects to be able to kick off construction right this year and trending towards completion by 2026.
This lays the bedrock for growth expectations of building tickers in the upcoming time.
Major infrastructure projects all require foundation treatment, requiring the engagement of local contractors with expertise in foundation treatment, particularly with regards to weak foundations and underground works.
Localisation favoured by overseas banks
Vietnam’s banking and finance sector is witnessing an uptick in foreign banks’ presence despite global economic headwinds.
Shinhan Bank last week expanded its footprint in Vietnam by opening three new branches in the country’s two most populous cities, solidifying its position as the largest foreign lender currently active in the Southeast Asian nation.
Meanwhile, Thailand’s Kasikornbank (KBank) is moving forward with aspirations to become a regional digital bank, with a focus on Vietnam’s growth. Thailand’s largest financial institution last week announced its commitment to broaden its presence in the Vietnamese market in order to serve customers across all segments with digital services.
Woori Bank Vietnam – another wholly-owned South Korean lender operating in Vietnam – has inked an MoU with Seoul Guarantee Insurance Company (SGI) to jointly develop and launch new credit products in the country. Woori Bank said it would actively localise its business by building advanced credit solutions including loan application and loan approval. A favourable synergy between the two parties is expected as a result of this collaboration. SGI also expects this synergy would foster its underwriting business.
Bank of America – the second-largest in the United States – submitted an application last month to open a branch in Ho Chi Minh City with capital of around $50 million.
In the same vein, Korean Development Bank (KDB), a wholly-owned policy development bank in South Korea, earlier this year also confirmed its intention to open a branch in Hanoi. According to its announcement, it will assist South Korean and Vietnamese enterprises in the infrastructure sector when it opens an office in Vietnam.
Meanwhile, BIDV Securities Company (BSC) and Hana Securities Company (HSC), a member of Hana Financial Group, have entered strategic cooperation. “HSC will proactively assist BSC in formulating a strategic plan and long-term vision, particularly specialising in digital transformation and establishing a fund management company,” the firm said.
In last week’s meeting with Kim Jung Tai, chairman of the Global Strategy Committee at Hana Financial Group, Vietnamese National Assembly Chairman Vuong Dinh Hue stated, “Vietnam will continue to consider expanding investment for foreign groups, including South Korean financial institutions.”
Squeeze in allotted credit room for commercial banks
The rapid expansion of credit and lending activities in the first few months of this year have prompted commercial banks to run out of credit lines, which had been temporarily allotted by the State Bank of Vietnam at the start of the year.
Vietcombank’s consumer credit balance alone climbed by 14.6 per cent at the end of June. Including existing bond investments, the bank’s loan growth is projected at about 14.4 per cent, well surpassing the central bank’s (SBV) temporary 10 per cent cap.
Likewise, MBBank’s parent bank’s individual increase in client loans was 14.25 per cent at the end of June, which is close to the 15 per cent credit ceiling set by the SBV.
However, as MB is rumoured to be a potential acquirer of one of three struggling local institutions, the bank is likely to be awarded a greater credit limit thanks to any deal.
Over the same time, customer loan growth at ACB surpassed 9.8 per cent, although the rise in total credit outstanding for the whole year was just 10 per cent.
The newly announced opinion of the SBV is still compatible with the aim of credit growth for the full year at 14 per cent, despite the fact that nearly all credit room has been impacted by lending activities. As of the end of July, the governing body has not yet adjusted the loan growth objective for any of the banks.
Credit in the banking sector as of July 20 was 9.27 per cent higher than the end of 2021, which is the highest increase in the first six months of the year in the past 10 years, according to the SBV’s latest figures. This growth rate exceeded the 6.47 per cent rate recorded in the first seven months of 2021.
According to SSI Securities Corporation, the SBV will raise the credit growth quota before the end of the year. However, the degree of easing may be scaled down to a more cautious level in order to prevent the rise in loans from adding to the existing level of inflationary pressure.
Over 2.5 billion USD poured into Binh Duong since early 2022
So far this year, the southern province of Binh Duong – a magnet for foreign investment of Vietnam – attracted over 2.5 billion USD in FDI, up 74% year-on-year.
To date, the province has had 4,059 foreign-invested projects worth 39.6 billion USD.
After the COVID-19 pandemic is put under control, every week, Binh Duong welcomes at least one foreign delegation coming to learn about the province’s investment environment and seek cooperation opportunities.