The Vietnam-Israel Free Trade Agreement, which was signed on July 26 after seven years of negotiations, would create a conducive atmosphere for the export of Vietnamese products to Israel, according to many experts. 

Expert Dinh Trong Thinh said the deal presents stellar opportunities for Vietnamese producers to drive substantial cost savings and gain competitive advantages through access to Israeli high-tech sectors.

Vietnamese tropical products will also have the prospect to serve as an essential link in Israeli supply chains.

"Israel needs imports from tropical countries like Vietnam to fuel its processing industry," said Thinh.

But Vietnamese producers still have a lot of work to do to get there, given that merely 30% of them have managed to use FTAs to their advantage.

Trade authorities, he said, could use communication and education tools to get more producers well-informed about VIFTA.

Expert Vu Vinh Phu said the deal would give a big push to Vietnam's exports to Israel, making bilateral trade more balanced and equitable. Current bilateral trade is skewed in favour of Israel.

He called on Vietnam's trade offices to assist producers in business matching to help them avoid scams in trade.

According to expert Ngo Tri Long, Israel is not self-sufficient in consumer goods and depends highly on imports. The country imports 35 billion USD worth of consumer goods annually, indicating large potential demand for Vietnamese exports.

The deal will open up opportunities for Vietnam to turn the potential demand into real revenue. With VIFTA, bilateral trade is expected to rise to 3 billion USD soon, from 2.6 billion USD in 2022.

"Vietnam currently has around 70 exportable products to Israel. Room for commercial growth is ample," said Long.

Long called on Vietnamese producers to read up on trade rules in Israeli markets to fully exploit the deal. He said market research and trade promotion would also serve producers well in that regard.

Truong Dinh Hoe, Secretary-General of the Vietnam Association of Seafood Exporters and Producers, said the deal would bring Vietnam's exports to new heights thanks to Israel's great demand for its seafood.

In fact, Israel has always been among the 30 largest importers of Vietnamese seafood, consuming 36.6 million USD worth of tuna, 23.2 million USD of squid, and 21 million USD of shrimp in 2022.

"Vietnamese seafood has won favour with Israeli consumers over the years. The deal will push the advantage further by phasing out tariffs," said Hoe.

Bamboo Airways launches first direct flight from Hanoi to Lijiang

Bamboo Airways has become the first Vietnamese carrier to launch a direct flight route between Hanoi (Vietnam) and Lijiang (China).      

The first flight on the route departed from Noi Bai International Airport in Hanoi and landed at Lijiang Sanyi International Airport on July 30.

Bamboo Airways uses Airbus A320NEO for the route, and runs three flights per week  the first phase.

The route helps to shorten the travel time between the two cities to two hours, saving four to 16 hours compared to transit flights.

According to the budget airline, the direct flights are expected to further contribute to meeting the passengers' travel demand between the two cities, as well as enhancing bilateral exchange across multiple fields between the two countries.

By operating direct flights to one of China's major cities, Bamboo Airways has proved its efforts in connecting Vietnam with key Asian markets after recently launching a series of flights to Japan, the Republic of Korea, Taiwan (China), Thailand, and Singapore.

VIFTA big push to bilateral trade

The trade deal would create a conducive atmosphere for the export of Vietnamese products to Israel and soon bring bilateral trade to US$3 billion. 

That was the comment of expert Đinh Trọng Thịnh on the Vietnam-Israel Free Trade Agreement, which was signed on Wednesday after seven years of negotiations.

Vietnamese tropical products will also have the scope to serve as an essential link in Israeli supply chains.

But Vietnamese producers still have a lot of work to do to get there, given that merely 30 per cent of them have managed to use FTAs to their advantage.

Trade authorities, he said, could use communication and education tools to get more producers well-informed about VIFTA.

According to expert Ngô Trí Long Israel is not self-sufficient in consumer goods and depends highly on imports. The country imports US$35 billion for consumption annually, indicating large potential demand for Vietnamese exports.

The deal will open up opportunities for Việt Nam to turn the potential demand into real revenue. With VIFTA, bilateral trade is expected to rise to $3 billion soon, from $2.6 billion in 2022.

Long called on Vietnamese producers to read up on trade rules in Israeli markets to fully exploit the deal. He said market research and trade promotion would also serve producers well in that regard.

Trương Đình Hòe, Secretary-General of the Vietnam Association of Seafood Exporters and Producers, said the deal would bring Việt Nam's exports to new heights thanks to Israel's great demand for its seafood.

In fact, Israel had always been among the 30 largest importers of Vietnamese seafood, consuming $36.6 million of tuna, $23.2 million of squid, and $21 million of shrimp in 2022.

Expert Vũ Vinh Phú said the deal would give a big push to Việt Nam's exports to Israel, making bilateral trade more balanced and equitable. Current bilateral trade is skewed in favour of Israel.

He called on Việt Nam's trade offices to assist producers in business matching to help them avoid scams in trade. 

HoREA seeks amendment to central bank’s circular

The HCMC Real Estate Association (HoREA) has requested the State Bank of Vietnam (SBV) to amend Circular 06/2023, citing its concerns over potential credit constraints for real estate businesses.

The circular, set to be effective from September 1, stipulates that banks cannot provide loans for capital contributions towards investment projects that are not yet qualified for business operations as per the requirements at the time the bank decides to grant the loan.

In a letter addressed to the prime minister and the SBV, HoREA highlighted its apprehensions regarding the criteria for determining the “business viability” of real estate projects. It stated that the circular’s definition of “projects ineligible for business operations” lacks consistency with existing provisions under the 2014 Real Estate Business Law.

Le Hoang Chau, chairman of HoREA, said that after investing significant capital to acquire land use rights and obtaining official approval for a project from authorities, real estate developers may require additional capital to commence construction.

When projects become ‘eligible for business operations’, it indicates that they are already completed. At this stage, developers no longer need to mobilize capital for project implementation. Instead, they may require funds to compensate for investments or seek secondary investors for further capital infusion or to share risks.

He further pointed out that if a project fulfills the requirements for business operations, the developers will not choose to borrow from banks at higher interest rates. Instead, they would opt for the most cost-effective source of funding, which is mobilizing capital from customers. This approach relieves the pressure of paying interest and principal, and developers can focus on timely completion to deliver properties to customers.

However, Article 55 of the 2014 Real Estate Business Law does not enable them to do so, as their project is ineligible for business operations.

Consequently, the circular has led to credit restrictions for residential and commercial real estate projects and urban developments, as developers can neither receive funding from banks nor customers.

HoREA said that Circular 06 does not solely impact real estate businesses with specific investment conditions but also has wider implications for overall investment and development.

The circular’s blanket application may lead to credit restrictions for other ventures, such as those operating under public-private partnership (PPP) models in the infrastructure sector as well as in the agricultural, forestry, and fishery sectors.

It states that the current ban imposed by Circular 06 could lead to a situation where real estate developers must possess sufficient capital for their projects, find a third party with sufficient capability, or attract foreign capital for investment and business collaboration. This provision creates more favorable conditions for foreign investors due to their advantage of “cheap capital,” while limiting domestic businesses’ potential on their home turf.

HoREA has urged the SBV to reevaluate the circular and consider revisions that eliminate credit restrictions for projects with appropriate legal prerequisites or those with land usage and investment decision approvals from relevant authorities.

Market entrants and re-entrants surge in July

This month has seen a record-breaking 20,761 businesses either established or resuming operations, a 34% increase year-on-year, according to the General Statistics Office.

Specifically, the market has welcomed 13,700 businesses this month with total pledged capital of VND126,900 billion. Concurrently, around 7,000 enterprises have resumed operations in July.

The number of newly-established businesses and their pledged capital have risen by 4.3% in volume and 2.4% in value, reported the Government news site at baochinhphu.vn. These businesses have created nearly 79,000 jobs.

In the first seven months of the year, the country has seen 89,600 businesses entering into the market with total investment capital of VND834,300 billion and creating 588,900 new jobs.

For July, the average pledged capital of a newly-established enterprise is estimated at VND9.3 billion. Considering the additional capital amount registered by existing businesses, the total pledged capital injected into the economy this month has reached VND1,952,200 billion.

In terms of sector distribution in the first seven months, the service sector has seen the highest number of newly-registered businesses, with 67,300 firms entering the local market. The sectors of industry-construction and agriculture-forestry-fishery follow, with 21,300 and 945 new market entrants, respectively.

The report also highlights the ongoing challenges facing the real estate sector from January to July. The number of newly-established businesses in the sector and their pledged capital in the first seven months have decreased compared to the same period last year, while the number of businesses exiting the market is rising.

Long Thanh airport expected to need 14,000 employees

Up to 13,800 people will be employed for the Long Thanh International Airport when it is operational, according to the Civil Aviation Authority of Vietnam (CCAV).

The airport will need a great deal of skilled labor. Over 5,000 employees will be required to hold post-secondary degrees and more than 2,000 will need to have college diplomas.

The Department of Labor, Invalids, and Social Affairs in Dong Nai Province, where the airport is located, has worked with the CCAV to address the labor supply for the airport and asked the Vietnam Academy of Science and Technology to draft plans for training programs.

Local educational institutions have begun to get involved in the human resource development effort for the airport. Lilama 2 International Technology College in Dong Nai is teaming up with organizations to train personnel in fields such as logistics, aircraft maintenance, air traffic control and ground services.

Vietnam ascends global app development ranks: four firms enter Top 50

Four Vietnamese app developers have been spotlighted among the Top 50 global companies, boasting new applications that have each garnered over 100,000 downloads in 2022. This noteworthy development was outlined in a recent report by the data analytics firms, DataAI and AppMagic.
 
Falcon Global, ABI Global, Zego Global, and Rocket Studio have made the prestigious list, according to details disclosed at Google's Vietnamese-hosted Think Apps event on July 20.

Vietnam is home to a thriving technology sector, hosting 93 gaming and app development firms, who between them have created 171 applications that have each found a place in the top 10 most downloaded apps on the Play Store, at least once.

In a striking move, Vietnam has catapulted from the top 15 to the Top 5 countries globally for app downloads from 2019 to the first quarter of 2023, amassing an impressive 4.2 billion downloads for apps originated from the nation.

Vietnam's growth is impressive and rapid. It is expanding 2.5 times faster than other countries worldwide. In 2022, the country saw a 20 per cent increase in revenue from in-app purchases (IAP) in domestically developed apps, in stark contrast to a 2 per cent global decline.

These gains further consolidate Vietnam's position as a burgeoning hub for app development and demonstrate its increasingly influential role in the sector.

Despite this positive trajectory, Vietnamese developers are not without challenges. The DataAI and AppMagic report also points to a slowing momentum in download numbers, subdued growth in IAP revenue, and a decline in the estimated revenue per thousand ad impressions. Alongside these headwinds, a decrease in user engagement of 5 per cent has been recorded up to mid-2023.

Emily Nguyen, Google Asia-Pacific's director of Gaming and Apps Business for the Vietnamese market said, "Think Apps has become the most eagerly awaited industry event in Vietnam, and the significant attendance at this year's event has been striking"

"Our commitment to nurturing the emerging generation of app developers and studios through education, international expertise, and market insights remains steadfast. Our ambition is to catalyse the growth of Vietnamese companies and app developers, supporting them to flourish on the international stage."

The international recognition of Vietnam's app development capacity, coupled with visible support from giants like Google, suggests a bright future for the country's technology industry on the global stage.

Retail real estate market witnesses surge in new projects

The retail real estate market in Vietnam is gearing up for a significant growth spurt as several major players from both local and foreign shores embark on a series of ambitious ventures across the country.
 
Noteworthy entrants such as MM Mega Market, Central Retail, and AEON Group are leading the charge in the retail landscape, opening new shopping centres and supermarkets with an eye on the promising prospects of Vietnam's retail sector.

Among the notable developments is AEON's substantial investment of $250 million in a 30,000 square-metre shopping centre project situated along the National Highway No.22 in Hoc Mon district, Ho Chi Minh City. This project is set to bolster AEON's presence in the Vietnamese market and enhance its offerings to local consumers.

South Korean retail giants are also making significant strides in Vietnam, capitalising on the strengthening bilateral ties between the two countries. Lotte Group, in particular, is making headlines with its largest-ever project in Vietnam, an expansive 354,000sq.m complex.

With a soft opening on July 28, and an official inauguration on September 22, Lotte Mall West Lake Hanoi will house an impressive array of 233 brands, with 25 making their debut in the Vietnamese market, and 28 marking their entry into the bustling capital of Hanoi. Additionally, the complex will showcase 32 flagship stores, further enriching the retail landscape in the region.

The ambitious venture will include the Lotte World Aquarium, covering over 9,000sq.m and boasting the distinction of being Hanoi's largest indoor aquarium. Moreover, the aquarium will house the largest acrylic dome aquarium in Southeast Asia.

Beyond Lotte's endeavours, the Vietnamese retail landscape is seeing an active revamp and expansion by local players such as Vincom Retail and Kido Group. Vincom Retail, with its robust business and operational plans, is poised to introduce two new shopping centres this year. These centres, namely Vincom Mega Mall Grand Park in Thu Duc, Ho Chi Minh City, and Vincom Plaza Ha Giang in Ha Giang, are set to cover a combined retail floor area of 55,000sq.m.

Vinhomes Corporation recently unveiled its ambitious Mega Grand World project. The multifaceted complex, nestled in Hanoi's Ocean City, is projected to span nearly 18.7 hectares and accommodate over 800 commercial shop units. With an impressive 35,000sq.m already under active trading, even before its scheduled December 2023 launch, Mega Grand World is garnering considerable attention.

As the retail market flourishes with a blend of domestic and foreign players, SonKim Retail, a prominent Vietnamese enterprise, has secured a substantial $20 billion investment contract with International Finance Corporation (IFC). The collaboration is aimed at fuelling SonKim Retail's expansion plans for its GS25 store network in Vietnam from 2022 to 2025. This strategic move signals the company's dedication to bolstering its presence in the region and capitalising on opportunities presented by the thriving retail landscape.

With an influx of retail real estate projects backed by both local and foreign investors, Vietnam's retail sector is poised for an exciting period of growth. These developments are poised to not only transform the retail landscape but also contribute significantly to the country's economic development in the foreseeable future.

Wheels set in motion for JETP plan

Vietnam is working on a fresh plan to mobilise resources for bringing emissions down to a net-zero level by mid-century, amid increased international interest in supporting the country.

Prime Minister Pham Minh Chinh last week required authorities at all levels to boost the implementation of the nation’s new Vietnam Resource Mobilisation Plan (RMP), which will enable the implementation of the Just Energy Transition Partnership (JETP) announced last December by the European Commission (EC).

Vietnam has been required by the EC to develop and publish as soon as possible an RMP by November 2023 to identify the new investment requirements and opportunities – for the development and implementation of wind, solar, transmission, energy efficiency, storage, electric vehicles, training, retraining and vocational support for employment among others – and measures to facilitate the deployment of support and overcome barriers to investment, to deliver Vietnam’s just energy transition.

PM Chinh stated, “We must strongly carry out the partnership and soon formulate the RMP, while proactively working with the International Partners Group (IPG) and the Glasgow Financial Alliance for Net Zero (GFANZ) and other stakeholders about their support for Vietnam to implement net-zero emissions.”

Last December, the EC announced that leaders from Vietnam and the IPG, including the EU, the UK, France, Germany, the US, Italy, Canada, Japan, Norway, and Denmark had agreed on the JETP.

Initial contributions to the Vietnam JETP include $7.75 billion in pledges from the IPG together with the Asian Development Bank and the International Finance Corporation. This is supported by a commitment to work to mobilise and facilitate a matching $7.75 billion in private investment from an initial set of private financial institutions coordinated by the GFANZ, including Bank of America, Citi, Deutsche Bank, HSBC, Macquarie Group, Mizuho Financial Group, MUFG, Prudential, Shinhan Financial Group, SMBC Group, and Standard Chartered.

The partnership will assist Vietnam in working towards some new targets, including advancing the projected peaking date for all greenhouse gases in Vietnam from 2035 to 2030; reducing peak annual power sector emissions by up to 30 per cent, from 240 to 170 megatonnes, and bringing forward the peaking date by five years to 2030; limiting Vietnam’s peak coal capacity to 30.2GW down from a current planning figure of 37GW; and accelerating the adoption of renewables so that renewable energy accounts for at least 47 per cent of electricity generation by 2030, up from the current planned generation share of 36 per cent.

At a meeting with PM Chinh in Hanoi over a week ago, US Treasury Secretary Janet Yellen said that the US is committed to mobilising support for Vietnam’s adoption of renewable energy as part of the JETP.

Ramla Khalidi, resident representative in Vietnam at the United Nations Development Programme (UNDP), said, “In the next 3-5 years, the country needs to accelerate preparation for a package of public instruments to de-risking investments in renewable energies and design a just and feasible process to phase out coals in both state own enterprises and foreign invested coal power plants.”

Currently, the UNDP is initiating assessment on the impact of phasing-out coal power and energy transition in Vietnam and defining what these processes would specifically mean for the nation.

In 2023, the UNDP stands ready to support the Vietnamese government in the detailed formulation and implementation of the RMP. This includes the UNDP’s technical assistance services to the governments in green transition and Nationally Appropriate Mitigation Action projects, which can help Vietnam identify cost-effective de-risking public instruments to promote and scale up private sectors investments in the plan.

Banking sector assigned tasks for H2

The Government Office on July 31 issued a notice on Prime Minister Pham Minh Chinh’s opinions at a recent conference reviewing the performance of the banking sector in the first half of this year, and setting forth tasks for the remaining months.

According to the document, the PM commended the banking sector for its efforts and achievements over the past time, contributing to maintaining the macroeconomic stability, controlling inflation, promoting growth and ensuring major economic balances.

He asked the State Bank of Vietnam (SBV) to keep a close watch on the situation both at home and abroad, and intensify its management, inspections and supervisions over the operation of the financial and monetary markets, banks and credit institutions.

Credit loans should be concentrated on growth drivers like investment, consumption and export, Chinh said, asking for the balanced, rational and effective management of interest rates and exchange rates, as well as inflation and control.

The central bank was requested to continue reviewing and perfecting relevant institutions and mechanisms, including the draft Law on Credit Institutions (amended), while pushing for the disbursement of the 40 trillion VND (1.68 billion USD) interest rate subsidy package, the 120 trillion VND housing credit package, and another worth 15 trillion VND in support of wood and aquatic production.

The SBV needs to instruct credit institutions to cut unnecessary procedures, and step up IT application and digital transformation to enhance credit access and facilitate production and production recovery of their clients, he said.

Apart from reforming its inspections and supervisions, the SBV should work to promote the publicity and transparency of information to consolidate confidence of people and businesses, the leader stressed, asking the bank to continue with personnel training.

It was also urged to coordinate with the Ministry of Finance to further implement solutions to ensure the effective, healthy, safe and sustainable development of corporate bond and stock markets, and with the Ministry of Construction to roll out solutions in support of the real estate market in line with legal regulations.

Domestic retail gas prices up after consecutive falls

Retail gas prices in Vietnam, after dropping for two consecutive months, have bounced back this month following an increase in the global market.

Accordingly, the August retail prices of Petrolimex gas (including VAT) in the Hanoi market are 380,160 VND (16.05 USD) per 12 kg household cylinder and 1,520,640 VND per 48 kg industrial cylinder. These represent increases of 26,360 VND and 105,640 VND, respectively.

Nghiem Xuan Cuong, head of the Commercial and Civil Gas Sales Department under the Petrolimex Gas JSC, attributed the rise to the average world gas price contract for August being set at 465 USD per tonne, up by 77.5 USD per tonne compared to July.

Since the beginning of this year, domestic gas prices have decreased five times in January, March, April, June, and July and gone up three times in February, May, and August.

Cashless payment promoted in remote areas

The National Payment Corporation of Vietnam (NAPAS) in coordination with the Vietnam Bank for Social Policies (VBSP) launched NAPAS 247 Quick Transfer and NAPAS 247 Quick Transfer via VietQR Code on the bank’s mobile banking app (VBSP Smartbanking) on July 31.

The collaboration is part of a plan to provide modern digital payment products and services to the bank's target customer groups who live in rural and remote areas, contributing to the realisation of the Government's project on cashless payments and the national comprehensive financial strategy.

Accordingly, customers can access the VBSP Smartbanking app and make quick transfers from an account opened at the VBSP to 45 member banks of NAPAS and vice versa. The clients can also create their own QR codes to receive money on the app as well as transfer money by scanning QR codes of other banks.

Money transfer/payment through the above-mentioned methods will bring a convenient, fast, and safe payment experience to clients.

According to Nguyen Quang Minh, General Director of NAPAS, this cooperation will be an important step in promoting the development of cashless payment as the VBSP’s branches and customers are in all 63 provinces and cities across the country.

In the coming time, NAPAS and the VBSP will also continue to strengthen collaboration to deploy more payment products and services to better serve the demand of people and support other socio-economic activities, contributing to the country's digital transformation process, he said.

Basic geological survey planning on minerals for 2021-2030 released

A basic geological survey planning on minerals for the 2021-30 period with a vision to 2050 has been released by the Vietnam Geological Department under the Ministry of Natural Resources and Environment.

Addressing the launching ceremony in Hanoi on July 31, Tran Binh Trong, head of the Vietnam Geological Department, said the planning has received feedback from ministries, including those for industry and trade, construction, finance, national defence, science and technology, and transport as well as 63 provinces and cities, and geological and mineral experts.

The planning shows the importance of a basic geological survey on minerals as prescribed in the Politburo resolution and the Government’s strategy.

The planning consists of ten key tasks to be implemented from now until 2030.

One of the tasks is to evaluate mineral potential in newly-discovered, large-scale areas and others with high demand; assessing important metal minerals such as uranium, thorium, rare earth, tin, tungsten, copper, nickel, gold, and river bed gravel, as well as paving stone, silica white sand, and industrial limestone.

The planning will also look into geological hazards in high-risk mountainous areas.

It encourages organisations and individuals to invest in and evaluate mineral potential.

Eight groups of solutions have been proposed including three breakthrough solutions - Financial and management mechanisms for basic geological surveys of minerals; application of science and technology; and training and capacity building.

Trong said the planning implementation is expected to obtain important results, providing data and serving as a foundation for mineral exploration and exploitation, and meeting the mineral demand for socio-economic development, national defence and security.

The geological survey results will provide an information system integrated with the database on environmental resources, serving timely and effectively the geological information needs of sectors and localities.

The database will also issue warnings, and seek to prevent and minimise adverse impacts of climate change and sea level rise, he said.

New firms up 0.2% in seven months

The number of new firms established in the January-July period, at 89,600, was up 0.2% from the same period last year, but their total registered capital reduced by 17.1% to 834 trillion VND (35.2 billion USD), reported the General Statistics Office.

The real estate sector saw a strong reduction in the number of newly-established firms, with 2,622 ones in the past seven months, down 56.2% annually. Meanwhile, 756 firms in the sector were dissolved during the period, marking a year-on-year rise of 17%.

Experts believed that these figures accurately reflect the current challenging situation in the real estate market. The period of its peak growth has passed while difficulties are expected to continue, leading to an increase in the number of businesses that will have to exit the market in the near future.

Survey data from the Vietnam Association of Realtors (VARS) indicated that if the market situation continues to be challenging, up to 23% of real estate companies could only sustain their operations until the end of the third quarter, and only about 43% can survive till later this year.

VARS Chairman Nguyen Van Dinh said since May 2022, the market has experienced difficulties due to the impact of the pandemic and market growth cycle, as well as the economic slowdown. A series of tightened credit policies, corporate bonds and lingering legal issues in project implementation have also contributed to the challenges.

Interest rates have remained high since late 2022 and despite a downward trend from the beginning of this year, they still remain at a level that is burdensome for businesses, he said.

The high financial cost pressure, coupled with "scarce" cash flow due to unsold inventory, difficulties in raising capital through bonds, and insufficient creditworthiness for loans, has weakened the health of real estate companies. The prolonged state of difficulty not only affects players in the property market but also leads to stagnation in various related industries.

General Director of Phuc Hung Real Estate Services JSC Nguyen Duy Thanh, however, said the market has shown some positive signals due to management policies, including the ongoing finalising process of relevant real estate market-related laws, such as the Real Estate Business Law, Housing Law and Land Law. Moreover, there is a consistent commitment to lower lending rates and expand the credit room to 14% for the entire banking system.

PM orders assistance to peppercorn exporters in trouble

Prime Minister Pham Minh Chinh has ordered assistance to firms at risk of losing their farm produce shipments to the United Arab Emirates (UAE) market.

In a freshly signed dispatch, the PM has assigned the Ministry of Foreign Affairs to coordinate with the ministries of Trade and Industry (MoIT), Justice, Agriculture and Rural Development (MARD), Transport, and the State Bank of Vietnam; and to direct the Vietnamese Embassy in the United Arab Emirates to work closely with the host country’s competent agencies on a case involving four lost containers of agricultural products.

A number of online new outlets, including vtv.vn, tuoitre.vn, and tienphong.vn, have been running articles on the risk that some business members of the Vietnam Pepper Association (VPA) are facing of losing their shipments of peppercorn, cinnamon, star anise, and cashews to UAE due to a commercial fraud.

The dispatch stressed those concerned must come up with measures ensuring the legitimate rights and interests of Vietnamese enterprises in accordance with international law and local regulations. A report on the outcomes of the work must be submitted to the PM before August 5. In the meantime, a proposal must be made to the UAE side to apply urgent measures to protect a star anise container of a Vietnamese enterprise at the nation’s Jebel Ali Port.

The document wrote it is also necessary for the MoIT to join the association and representative agencies of Vietnam overseas in advising firms to regularly provide information to relevant authorities for verification and thorough assessment of foreign partners before entering into trade agreements.

The MARD, meanwhile, is tasked with promoting the establishment of cooperative associations between Vietnamese agricultural export enterprises and UAE import-distribution businesses, creating a mechanism for cooperation and information exchange to prevent fraudulent activities and resolve trade disputes.

Vietnam needs roadmap for carbon neutrality in light of CBAM

Fears were expressed at a recent workshop that the Carbon Border Adjustment Mechanism (CBAM), to be implemented by the EU on October 1, may have a significant impact on Vietnamese businesses exporting to Europe.
 
Speaking at a workshop on the transition to a greener economy and the role of climate change policies on July 25, Dr. Ha Huy Tuan, dean of Chu Van An University's Economics Faculty, said, "Failure to comprehend the content of theCBAM can result in concerns over exceeding allowable carbon emissions, which can result in increased fees."

"A significant number of businesses, particularly manufacturing firms, do not fully comprehend the EU mechanism since the idea is still relatively novel to the Vietnamese market," Dr. Tuan added.

According to a study conducted by the Private Economic Development Research Board in 2022, just 11 per cent of businesses stated that they comprehended the content of the CBAM, while up to 53 per cent of businesses were unaware of its existence.

According to consultancy firm Dezan Shira & Associates, an additional carbon tax will raise prices of Vietnamese-made products set for the EU, thereby decreasing their competitiveness. CBAM pertains to products from heavy industry and those with the highest carbon emissions.

From October 1, the transition period of CBAM may see reductions in the export turnover of certain Vietnamese products to the EU by approximately $100 million, including iron, steel, cement, aluminium, and fertilisers. The iron and steel industries are expected to be most severely affected.

This reduction should not be detrimental, as the aforementioned commodities account for a small portion of the total quantity of goods exported to the EU. In the future, however, the CBAM is set to be expanded to include a substantial larger number of products that will be subject to an additional carbon fee. This could partially nullify the benefits that Vietnamese businesses receive from the EU-Vietnam Free Trade Agreement.

Furthermore, when the CBAM is implemented, we may see significant markets such as the United States, Japan, and South Korea issue similar policies soon after. Vietnam, a country with a high level of openness, will suffer greatly if it does not take immediate action in response, according to Dezan Shira & Associates.

The EU is developing its strategy to realise its ambition of becoming a climate-neutral continent by 2050. Pham Thi Tinh, commercial director of logistics firm InterLOG's Hanoi Branch, said, apprehensively, "This mechanism imposes taxes. Carbon costs will increase constantly in developed nations, and the number of categories subject to these taxes will be expanded."

As increasing numbers of Vietnamese companies pursue sustainable development, head of Sustainable Development at the British Standards Institution, Truong Vinh Khang, said, "We need to enhance competitive advantages in the supply chain with green strategies that positively impact the environment and reduce our economy's carbon footprint. From there, businesses can develop their own carbon-neutral roadmap."

Manufacturers may pay more than $259 million per year in recycling costs

Industry leaders are concerned that an all-time high and disproportionate level of recycling costs will negatively impact the ability to run a profitable business.
 
Dau Anh Tuan, deputy secretary general of the Vietnam Chamber of Commerce and Industry (VCCI), spoke at a meeting on July 28 regarding recycling costs and extended liabilities in Vietnam, saying "It is not feasible for manufacturers and importers to carry out their responsibilities efficiently without proper recycling cost norms."

The draft on recycling cost norms, which was drafted on the basis of Article 54 of the 2020 Law on Environmental Protection, proposed by the National Extended Producer Responsibility (EPR) Council specifies, "The norm of recycling costs for a unit volume of product, packaging, and administrative costs for management, supports the implementation of product and packaging recycling responsibilities and the responsibility of manufacturers and importers for waste collection and treatment."

Phan Tuan Hung, director of the Legal Department under the Ministry of Natural Resources and Environment, and permanent member of the National EPR Council, stated, "The oversight of recycling duties and extended responsibilities for manufacturers and exports will motivate enterprises to manufacture and export products of higher quality, reducing emissions of single-use materials, and lead to the execution of the government's commitments to minimise emissions."

Currently, the Vietnam Beer, Wine, and Beverage Association, the Vietnam Plastic Association (VPA), and the Food and Foodstuff Association Ho Chi Minh City, are extremely concerned about the recycling cost coefficient in their respective industries. The belief is that the draft remains excessive and unreasonable, as the coefficient is greater than that of countries in Western Europe, with aluminium 1.26 times higher and glass 2.12 times higher.

According to the calculations of these associations, businesses will be required to pay an estimated $259 million per year in recycling fees, excluding fees for the three primary categories of packaging, namely paper, plastic, and metal. This is a tremendous expense that will cause a great deal of difficulty for businesses and increase product prices, particularly given the current economic climate.

The general secretary of the VPA, Huynh Thi My, stated that Vietnam's plastic recycling industry has just entered its infancy and is confronting many challenges. In 2022, Vietnam consumed 9.2 million tonnes of plastic materials, 38 per cent of which was used for packaging.

According to My, the plastic packaging industry is a processing industry with basic and straightforward technology, resulting in the very low profit margin of approximately 5 per cent. "Under the proposed recycling cost standards, the recycling contribution will account for nearly 40 per cent of the company's profits. Low interest rates and significant contributions will cause a recession in the plastics industry," she said.

Historic support enters new phase for Japan and Vietnam

Japan’s investment in Vietnam’s new sectors will expand thanks to a new scheme currently under discussion, expected to help increase bilateral trade.

Over the next few weeks, Vietnam’s Ministry of Planning and Investment (MPI) and Ministry of Industry (MoIT) are set to work with Japanese peers about increasing funding into high-tech industry, energy transformation, and improvement of production capacity and competitiveness, in order for Vietnam to participate deeper in Japanese supply chains and global supply chains.

The Japanese government will also encourage strategic investors to boost investment in clean energy and renewable energy, while supporting Vietnam in improving its agricultural value chains through technology and improvement in capacity in distribution and processing.

Both sides are also to work on completing procedures for Vietnamese pomelo to enter the Japanese market and for Japanese grapes to be marketed here.

Such a significant plan is expected to be confirmed by the two governments at the end of this year, with the Vietnamese prime minister set to pay an official visit to Japan in December to attend the ASEAN-Japan Commemorative Summit.

“The Vietnam-Japan relationship is witnessing its heyday as it has been created by the two countries’ big mutual confidence,” said Vietnamese Ambassador to Japan Pham Quang Hieu. “Japan is now the largest provider of official development assistance, the second-largest labour cooperation partner, the third-largest foreign investor, the third-largest tourism partner, and the fourth-largest trade partner of Vietnam.”

“Japanese investment has made an important contribution to developing Vietnam’s key infrastructure projects, boosting the country’s socioeconomic development in a sustainable manner, supporting the transfer of advanced technology to Vietnam, and also training high-quality human resources for Vietnam,” Hieu said.

According to the MPI, Vietnamese investors have funded around 105 projects in Japan, with total registered capital of $19.5 million.

Meanwhile, cumulatively as of June 20, Vietnam attracted over 5,100 Japanese projects registered at $69.9 billion, ranking third out of over 140 foreign countries and territories investing in Vietnam.

Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi, said that Vietnam has become an indispensable and essential country for the global expansion of Japanese companies.

He cited a JETRO survey of more than 3,000 Japanese companies conducted at the end of 2022 stating that Vietnam was ranked second worldwide as a country in which to expand business in the future. The US and China ranked first and third, respectively.

In the survey, the most attractive investment environment for Vietnam was “market growth potential” (74 per cent) and “market size” (46 per cent).

“Vietnam expects to receive a large amount of foreign investment, and the domestic business-to-business market and infrastructure development will grow,” Nakajima said.

According to JETRO, the introduction of the Law on Investment and the Law on Enterprises has made the Vietnamese legal system more predictable and created an environment where companies can invest confidently. The laws reduced the number of prohibited and restricted investment areas, and investment in the service sector, which has been of great interest to businesses, was further promoted. Merger and acquisition procedures have also become simplified.

In an example, two months ago, Japan’s TotalEnergies ENEOS inked a long-term agreement with Golden Victory Vietnam Co., Ltd., one of the biggest shoes and footwear manufacturers and a key supplier for globally renowned sportswear brands, to develop a 4.6MWp solar photovoltaic system at its facility in the northern province of Nam Dinh. This new phase takes their total solarisation system size to 7.5MWp.

With over 7,900 of modules installed, the system is expected to produce about 5,200MWh of renewable electricity annually. Under the agreement, TotalEnergies ENEOS will fully fund, install, and operate the solar system while Golden Victory will pay only for the electricity generated for 20 years, avoiding any upfront costs.

There are also some big Japanese projects in Vietnam. For example, the $1.33 billion O Mon II thermal power plant in the Mekong Delta city of Can Tho is now underway.

In 2021, the joint venture between Vietnam Trading Engineering Construction JSC and Japan’s Marubeni Corporation received an investment registration certificate for the 1,050MW O Mon II plant.

The Japan-Vietnam Joint Initiative will complete its eighth phase this year. The MPI and Keidanren/Japanese Chamber of Commerce and Industry in Vietnam have formed 11 working teams to hold specific discussions on improving the investment environment in Vietnam. They are also discussing improvements to the investment and enterprise laws.

An increase in Japanese investment in Vietnam has resulted in a rise in bilateral trade, which has almost doubled over the past decade. In the first six months of 2023, two-way trade reached $20.8 billion – including $11 billion worth of Vietnamese exports, down 3.3 per cent on-year and imports of $9.8 billion, down 18.7 per cent on-year, according to the MoIT.

Order decline prompts exploration of new export markets

On July 31, the Ministry of Industry and Trade convened a meeting with Vietnam's commercial counselors to explore solutions for redirecting connections and accessing new markets for the wood, textile, and footwear industries.

During the meeting, Mr. Do Thang Hai, Deputy Minister of Industry and Trade, disclosed that in the first seven months of 2023, the export orders for crucial sectors like textiles and garments, footwear, wood, and wood products had undergone substantial declines, with figures reaching US$18.9 billion (down 15.1 percent), $11.7 billion (down 17 percent), and $7.2 billion (down 26.2 percent), respectively, compared to the same period last year.

The declines are attributed to the tightening monetary policies and prolonged increases in interest rates and inflation, resulting in a substantial reduction in global consumer demand, particularly in the three primary export markets for Vietnamese businesses, namely Europe, the US, and Japan.

Mr. Tran Ngoc Quan, Vietnam's Commercial Counselor in Belgium and Europe, also revealed that Vietnamese export enterprises are encountering fierce competition not just in terms of quantity but also regarding product quality and pricing from businesses from China, Bangladesh, and Turkey.

From a different angle, the representative of the Vietnam Timber and Forest Product Association said that in the past three years, Vietnam's exports had seen robust growth. Notably, export turnover of wood and wood products had consistently achieved double-digit growth, showcasing the ability of Vietnamese businesses to swiftly leverage the benefits of free trade agreements. However, when export markets introduce obstacles linked to new standards and technologies, particularly those pertaining to the circular economy, Vietnamese enterprises tend to adapt at a slower pace, leading to a notable impact on export activities.

For instance, for exported wood products, companies are required to demonstrate that the wood originates from sustainably managed forests. Similarly, for leather and footwear products, there is a requirement to use renewable materials for the leather. Manufacturing plants must undergo a transition to clean energy to comply with carbon neutrality criteria.

In the textile and garment industry, export enterprises are required to showcase solutions for mitigating the negative impact of fast fashion and demonstrate their capability to fulfill extended producer responsibility, which includes collecting and recycling exported textile and garment products.

Vietnam's Commercial Counselor in Belgium and Europe emphasizes that besides addressing the technical barriers of export markets, businesses must invest in research activities to innovate and create new products to reverse the downward trend in exports.

The Ministry of Industry and Trade has announced that during September and October 2023, there will be a surge in trade promotion activities aimed at export markets. The ministry will assist export enterprises in collaborating with diverse distributors, retailers, investors, and importers in locations such as North Carolina, Washington DC, and New York in the US, Slovenia, Bulgaria, Indonesia, Canada, and Chile. Businesses are encouraged to proactively engage with the Ministry of Industry and Trade to register for participation in these export promotion delegations.

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