As Vietnamese enterprises are facing difficulties due to the COVID-19 pandemic, online trading is considered a "tool" to help them turn the situation around, and at the same time opening up many opportunities for businesses to join the global supply chain.

Viettel Post Joint Stock Corporation (Viettel Post) is an example. It has promptly seized the opportunity to successfully deploy the Voso.vn e-commerce platform with the goal of "promoting Vietnamese agricultural products, turning farm produce into specialties."

Tran Trung Hung, General Director of Viettel Post, said that its strength is having a network of post offices spanning 63 provinces and cities and the ability to access farmers’ gardens and farms to get high-quality products at original prices.

The platform also aims to support farmers in digital transformation and gradually change their sales mindset.

Vo So’s point of view is that it is not the only sales channel and traders are not the only intermediary channel. Sellers have more choices through digital transformation. They get used to e-commerce platforms - where they own their digital store.

Accompanying local residents through meaningful programmes and campaigns, Vo So has helped consume tens of thousands of tonnes of agricultural products and specialties across the country within the first half of 2021. In which, it is worth mentioning the sale of Bac Giang lychee, Soc Trang purple onion, and Vinh Long purple sweet potato. 

It has supported Hai Duong farmers to sell 120 tonnes of vegetables and fruits in April, more than 120 tonnes of purple onions for Soc Trang in May and 4,903 tons of Bac Giang lychee in June.

Also in June, Vo So and Viettel Post marked the first time that Vietnam exported agricultural products to foreign countries in the form of cross-border e-commerce through Vietnam's e-commerce platform. Three batches of Bac Giang lychee have been exported to Europe to serve overseas Vietnamese in three markets including Germany, Belgium, and the Czech Republic with more than 1,000 orders.

Retailers in Ho Chi Minh City strive to ensure good supply for local residents. (Photo: VNA)

Dang Hoang Hai, Director of the Vietnam E-commerce and Digital Economy Agency under the Ministry of Industry and Trade, said that putting agricultural products for sale on the e-commerce platform is one of the new directions for Vietnamese farm produce. It is also a solution to create a direct connection between producers and consumers, reducing intermediaries, thus, lowering product costs.

In addition, the promotion of online trading in production and business activities will help enterprises and cooperatives improve the efficiency and competitiveness of products in the market./.

Foreign investors keep flowing into Vietnam’s semiconductor sector

Hanoi is considered a potential destination for microchip development as it is home to many research institutes and universities providing highly qualified and abundant human resources.

Vietnam’s semiconductor sector, despite the impact of Covid-19, is forecast to lure foreign investment thanks to its potential growth in the next five years, overseas insiders have said. 

At the Dong Van IV Industrial Zone, the northern province of Ha Nam, a keyboards manufacturing factory is under construction, which is the second investment of Taiwan-based Darfon Electronics, specializing in keyboards, passive components, and electric bicycles, in Vietnam. 

Previously, the Taiwan maker has moved some of its notebook and desktop keyboard production at China-based facilities to its first and second factories, which are under construction in the south and north of Vietnam, according to the IT website Digitimes Asia.

The two facilities in the Vietnamese market will initially account for 20-30% of total keyboard production of Darfon Electronics. 

In January, the Danang Hi-tech Park has authorized Silicon Valley-based supplier Hayward Quartz Technology to build its semiconductor plant United Enterprise worth a total of $110 million. 

In the same month, Intel increased investment by $475 million in its Vietnam’s factory in Saigon Hi-tech Park. This takes Intel's total investment in Vietnam's facility to $1.5 billion since 2006. 

According to Fitch Solutions, Vietnam's industrial parks still attract considerable foreign investment amid a resurgence of Covid-19 outbreaks, especially in the electronics industry. About 65% of foreign electronics companies choose to base in the north, while 30% go to the south. The rest chooses to settle in central Vietnam. 

The country’s semiconductor industry is projected to grow by US$6.16 billion, progressing at nearly 19% compound annual growth rate (CAGR) in the 2020-2024 period, according to the market research firm Technavio.  

Technavio said the sector in Vietnam has dispersed only a few suppliers and could get more dispersed in the same period. Vietnam’s main vendors of the semiconductor industry include Broadcom, Hitachi, Intel, NXP, Qualcomm, Samsung Electronics, SK Hynix, STMicroelectronics, Texas Instrument, and Toshiba.

Hanoi is considered a potential destination for the microchip development as it is home to many research institutes and universities providing a highly-qualified and abundant workforce. 

Investments in Hoa Lac Hi-Tech Park have helped form an initial ecosystem for technology fields, serving as a premise for the development of the semiconductor industry. Some domestic and foreign investors in the field of electronics and semiconductors are VNPT Technology Company, Viettel Telecommunications Group, and Noble Electronics Vietnam Co., Ltd.

The Hoa Lac Hi-Tech Park is one of three national high-tech centers in Vietnam. Two others are Danang Hi-tech Park in the central city of Danang and Saigon Hi-tech Park in Ho Chi Minh City.

Vietnam has issued many policies and legal instruments to create favorable conditions for investment and development of high-tech products, in which the field of semiconductors is the top priority. The semiconductor sector is deemed as a stimulator for many industries and as it is itself one of the high value-added industries from the national perspective.

As Internet-of-Things (IoT) devices become popular in the country, it will be an opportunity for the local chip industry as well as foreign suppliers, local insiders have said.

Various state budget options offered up to quicken recovery

Extending tax schedules, pushing ahead with vaccinations, and dipping further into the budget are just some of the drastic measures the business community in Vietnam is looking for to climb its way out of the current stagnation.

The Vietnam Chamber of Commerce and Industry (VCCI) last week proposed to the government to extend the time for its support measures to the end of next June to ensure its effectiveness and consistency. According to the VCCI, it will not be until the first quarter of 2022 that business activities can return to a normal state, but the current time limit for applications is limited to 2021.

Another resolution from the National Assembly Standing Committee on tax exemptions and reductions to support businesses and people is also being finalised.

The MoF forecast that the state’s budget revenue results in the last months of the year will not be comparable to previous terms because of the pandemic. However, updated data on Vietnam’s economy for the first half of 2021 shows that the economy is continuing its recovery from last year.

But despite this, and proposals to extend some support measures, it is widely accepted that a massive rollout in vaccination programmes is the ticket to ultimate recovery for businesses large and small from the pandemic. Tran Chi Gia, director of Meko Garment JSC in the Mekong Delta city of Can Tho explained, “The support policies can come just in time, but workers now need to be given both shots of the vaccine so that businesses are able to return to production soon.”

Meko has around 1,200 workers, of which only about 645 workers received their first vaccine injection as of August 10. The company had to halt its production as it failed to meet the requirements of the stay-at-work model.

A slew of measures to help all sorts of companies survive is seen as the key, as so many fall by the wayside. According to the General Statistics Office, in the first seven months of the year, Vietnam saw nearly 80,000 enterprises suspending their operations for a definite time, with some completing dissolution procedures, an increase of 25.5 per cent over the same period in 2020. Of these, 40,300 enterprises temporarily suspended operations, up 23 per cent over the same period last year. Another 28,000 enterprises are now waiting for the dissolution procedures, an increase of nearly 29 per cent.

VCCI chairman Vu Tien Loc said that many businesses are trying to hold on and keep customers, jobs, and incomes for employees by borrowing or injecting further capital and trying to organise production according to the stay-at-work model.

Alhough he recognises the great efforts of the government, Loc pointed out, “The policy design has not reflected business reality”. The results of a VCCI survey with nearly 12,000 businesses throughout the country at the end of 2020 showed that groups of solutions to support budget revenues have the best effect and impact on businesses.

Narrowing the gap between policy and implementation is one of the issues that Loc considers “particularly important” to support the business community, citing another survey conducted by VCCI in conjunction with the National Economics University. Nearly 80 per cent of surveyed enterprises stated they had not received support from the government yet, and a relatively high percentage of enterprises did not even know about these measures or how to apply for them.

Vietnam’s state budget revenue continued to increase into 2021. MoF data from August 9 showed that state budget revenue in July increased by 15.6 per cent compared to the same period in 2020. Accumulated revenues in the last seven months reached 67.9 per cent of previous estimates, an increase of 15.6 per cent.

While a budget surplus is preferable, revenue sources from businesses and production as well as the central budget may not be entirely sustainable and have showed signs of a slowdown in the last two months. Therefore, businesses say, to achieve and exceed the estimate until the end of the year, local authorities may need to take measures to increase revenues from production and general business.

Vietnam’s state budget revenue comes mainly from taxes and fees, profits from state-owned enterprises, and grants. Tax and fee revenues contribute nearly 91 per cent to the total state budget.

Enterprises ask for solutions to reduce costs amid Covid-19

Amid the complicated developments of the Covid-19 pandemic, many enterprises said that they need authorities to research and find solutions to help them reduce costs, especially costs related to the implementation of three-on-site production.

Maintaining production or suspending operations to wait for the pandemic to end?

That is the biggest concern of many business owners in the context that the Covid-19 pandemic has spread in many provinces and cities, including Ho Chi Minh City, especially small and medium-sized enterprises. Because of their small capital and weak internal resources, they cannot afford to pay the costs to prevent the pandemic and maintain production.

Mr. Tran Quoc Trong, CEO of Thanh Long Wine Company in Long An Province, said that the company had to suspend operations from July this year because it did not have enough funds to support workers to stay at the factory and carry out Covid-19 tests for workers. He said that his company must wait until the Covid-19 pandemic is under control to resume operations.

Similarly, Mr. Le Vuong Quoc, Deputy Director of Gimex Vietnam Joint Stock Company, said that in Can Tho and Tien Giang, many agricultural product processing enterprises - partners of the company - had completely ceased production activities to fight against the pandemic. The stages of preliminary processing and packaging of agricultural products, especially agricultural products for the export market, need to use a large number of workers, so it is difficult to both organize production and fight the pandemic because the costs are too large. Moreover, currently, import-export enterprises are facing many difficulties, such as a shortage of workers and drivers, and container backlog. In addition, container shipping rates have highly increased, seriously affecting import and export activities.

Increasing shipping rates along with many other costs incurred for pandemic control have become great pressure on enterprises. For instance, at Cat Lai Port, because transshipment is overloaded, when exporting goods, many enterprises have to bring their goods to the port a few days earlier to wait. Meanwhile, the costs of demurrage and cold storage are extremely expensive, about US$80 per day. On the other hand, for the food, foodstuff, and agricultural products industry, the longer the demurrage time, the higher risk that exported goods are being returned because the quality of goods is affected. This situation has put many enterprises at risk of shutting down because the more they produce, the more they suffer losses, especially for enterprises with many workers.

Regarding this issue, Ms. Le Bich Loan, Deputy Head of the Management Board of the Saigon High-tech Park (SHTP), added that the SHTP had been carrying out measures quite effectively to prevent the pandemic. However, enterprises can only implement three-on-site production in a short time. If it takes a long time, it is hard for enterprises to maintain production. Currently, on average, each enterprise in the industrial park has to spend several billion Vietnamese dongs per month on accommodations and Covid-19 tests. Therefore, enterprises only maintain a limited number of workers to fulfill export orders with scheduled delivery time. Many enterprises said they would not receive new orders if they have to prolong the three-on-site production model.

Ms. Le Bich Loan said that it is necessary to reduce unnecessarily incurred costs to remove difficulties for businesses amid the current context. Accordingly, it is essential to recalculate the regulation on the frequency of Covid-19 testing. Because with the average number of workers from a few hundred to several thousand people of each enterprise, the cost of testing is about several billion Vietnamese dongs per week. Besides, it is necessary to carry out Covid-19 vaccination for enterprises. The solution to do this is to socialize the supply of vaccines. It must be determined that vaccines are not too special goods to need strict control, as currently, or only allow a few enterprises to buy and import.

The Hepza Business Association proposes to convert the three-on-site solution into two-on-site and one-green-zone, in which workers produce and eat at the factory, but they can sleep in a green zone - the safe area. Workers in the green zones are tested by enterprises twice in five days. In addition, authorities should administer Covid-19 vaccines to workers in export processing zones and industrial parks. In particular, Covid-19 vaccination should be prioritized for workers in the export and manufacturing industries of electronic products, textiles, footwear, automobiles, steel, agricultural product processing, and food processing.

Ms. Le Bich Loan informed that up to now, 63 out of 85 enterprises in the SHTP had been maintaining stable production, and no Covid-19 clusters had broken out in enterprises yet. SHTP Management Board has coordinated with enterprises to deploy various solutions to prevent the pandemic, such as maintaining the frequency of rapid tests every three days and PCR tests every seven days. In case a Covid-19 case is detected, it will be removed quickly from the production workshop. The management board has been collaborating with enterprises to build a GPS to monitor the travel route from the factory to the green zone of workers to tighten the quarantine. This is also a feasible solution that helps businesses have more workers to participate in production in the near future.

The SHTP Management Board has received many official letters from the parent companies of enterprises in the SHTP. These companies proposed the relevant authorities, especially the Ministry of Health, to allow them to deliver Covid-19 vaccines to their member enterprises and branches in Vietnam. They will bear all the costs for buying, transporting, and transferring vaccines to quickly vaccinate workers at factories, speeding up the process of herd immunity to maintain stable production.

Growth prospects in rest of 2021 under the microscope

Many sectors with impressive second-quarter performance are expected to retain their growth momentum in the latter part of 2021, leveraging favourable supportive factors.

Accordingly, Vietnam had witnessed 24 per cent growth in export-import value on-year in the first quarter and a 39 per cent jump in the second quarter, even surpassing pre-pandemic levels. This is, however, not unique to Vietnam but is reported across the entire Asia region.

Generally in the first six months of 2021, Vietnam posted an estimated $157.6 billion in total export value, up 28.4 per cent on-year. During the period, the US was Vietnam’s largest export market with $45.1 billion, a 43.3 per cent jump on-year, while exports to the EU amounted to $19.3 billion, up 17.4 per cent.

A rebound in consumer demand in Vietnam’s top export markets like the US and the EU has benefited export-oriented sectors like seaport and logistics.

Le Nguyen Nhat Chuyen, analyst at Korean-backed Maybank Kim Eng Securities, said that the COVID-19 pandemic has caused serious disruptions in logistic services, leaving seaports overloaded.

Social distancing has caused a shortage of manpower and slowed down goods circulation. Many countries have imported more than they exported, leading to an imbalance in container supply, pushing logistics costs to new heights.

Shipping disruptions abounded in 2021 due to the COVID-19 pandemic and the staggered reopening of markets across the globe, holding up shipping firms.

Meanwhile, in the fertiliser sector, domestic prices were affected by the price of imported fertiliser which went up sharply on the back of soaring logistics (shipping) costs.

Self-reliant fertiliser businesses like PetroVietnam Fertiliser and Chemicals Corporation (DPM) and PetroVietnam Ca Mau Fertiliser JSC (DCM) will be able to maintain high-profit growth in successive quarters.

At the same time, leveraging a rebound in consumer demand, many textile, clothing, and fibre firms reported upbeat profits thanks to increasing order intake and prices in the first half. Leading players have received export orders for the whole of 2021 from the US, Japan, EU, or South Korean markets.

In addition, thanks to Vietnam’s reputation gained from containing the previous resurgence of the COVID-19 pandemic, a raft of global fashion brands have shifted production to Vietnam when the pandemic was taking a toll in big apparel exporting countries like India and Bangladesh.

The COVID-19 situation, however, is intensifying in Vietnam, forcing many factories to operate at reduced capacity while facing labour shortages, making timely delivery difficult.

The Vietnam Textile and Apparel Association (Vitas) assumed that businesses in virus-hit localities could lose export orders. Pressure would abate with the acceleration of the government’s COVID-19 vaccination programme, from there containing the pandemic and enabling firms to rebound operations.

The seafood sector is another beneficiary, with leading players like Vinh Hoan Corporation (VHC) or Sao Mai Group (ASM) posting double-digit growth in their revenue in H1. The cost burden, particularly logistics cost, however, has put a dent in the firms’ profits, leading to only modest growth.

According to the Vietnam Industry and Trade Information Centreunder the Ministry of Industry and Trade, Vietnam’s big export markets like the US, UK, Japan, the EU, Canada, and China gradually overcoming COVID-19 through extensive vaccination would lead to a sharp rise in seafood import demand.

Vinh Hoan Corporation, the largest pangasius exporter in Vietnam, reported that its exports to the US rose 31 per cent on-year in July as restaurants reopened in the market resumed operation. Accordingly, the company posted VND765 billion ($33.2 million) in revenue in July, a 21 per cent jump on-year.

Wood production is also looking at upbeat growth potential. According to the General Department of Customs, the value of Vietnam’s wood and wood product exports soared 55 per cent on-year reaching $9.58 billion in the first seven months, with the export of wooden items coming to $7.44 billion, a 64 per cent jump.

By early July 2021, Duc Thanh Wood Processing JSC (GDT), a leading player based in Ho Chi Minh City, has received export orders of more than $14.5 million, taking up 86 per cent of the order intake for 2021.The company has raised the price of their products from Q2 to mitigate rising input cost.

Similarly, residential real estate is showing solid growth potential in the medium and long-term, powered by accelerated public disbursement for infrastructure projects.

However, residential real estate projects finalise profit after product handover. Accordingly, businesses with effective sale activities and those that can maintain construction progress are expected to report positive results.

Meanwhile, the building materials sector, particularly steel, will also benefit from public investment. Experts at SSI Securities assumed that accelerated public investment will drive up steel demands.

HCMC delivers VND2 billion to support innovative startup projects
 
In order to encourage and accelerate current innovative startup projects so that they can be launched onto the market at the earliest time, the Ho Chi Minh City Department of Science and Technology introduces a program called SPEEDUP.

Accordingly, SPEEDUP will support innovative startups in the aspects of laborer and expert seek and hire, third-party hire, and material supply. This will be done via incubation organizations, with each project receiving up to VND2 billion (approx. US$87,400) in no later than 24 months.

SPEEDUP is one of the eight programs run by the HCMC Science and Technology Department to celebrate its 45th anniversary.

In 2020, SPEEDUP selected and supported 40 projects, spending VND25.3 billion ($1.1 million) from the state budget and VND10.3 billion ($450,000) of reciprocal capital from investment funds. Thanks to this, many innovative startup projects like Teamup, SchoolBus, 689 Cloud were successful in attracting more capital from private investors and increased their value by 1.5-1.8 times.

EVFTA effect yet to blossom in pharma

While encouraging signs bring some hope for European players in the enforcement of the EU-Vietnam Free Trade Agreement, more conundrums are still to be solved to increase attraction for the local pharmaceutical market.

In early August the Ministry of Health’s Drug Administration of Vietnam (DAV) announced results of the evaluation of multinational corporations attempting to meet GMP-EU standards, with GlaxoSmithKline Biologicals SA, B. Braun Melsungen AG, and MSD International GmbH T/A MSD Ireland being among the names included.

Seeking such recognition has become crucial for these groups since the EU-Vietnam Free Trade Agreement (EVFTA) came into force a year ago. Under the landmark agreement, EU-GMP is selected as one of the evaluation criteria in the bidding tender packages for hospitals. This has lengthened the list of European pharmaceutical producers seeking the certificate to venture further into the profitable hospital channel.

Beyond EU-GMP recognition, for the first time, foreign-invested enterprises’ (FIEs) rights to import and export drugs are recognised under the Law on Pharmacy and Decree No.54/2017/ND-CP, which guides this law and was announced in 2017 as part of preparations for the enforcement of the EVFTA.

The EVFTA allows FIEs to import drugs by converting their operating model from a representative office to a pharmaceutical limited company, thus enabling EU pharmaceutical enterprises to join more deeply in the supply chain in the local market.

To adapt, AstraZeneca approached a new strategy by transforming its Vietnamese arm into an FIE by launching AstraZeneca Vietnam last year. It also announced three new partnerships: a pharmaceutical distribution deal with National Phytopharma JSC; an MoU with the University of Medicine and Pharmacy in Ho Chi Minh City to enhance knowledge and clinical trial capabilities; and a sustainability partnership with the UK government to promote green energy by donating solar power systems to local health facilities.

Similarly, other multinationals changed their business strategies towards becoming a pharmaceutical limited company. In particular, France’s Sanofi-Aventis Vietnam became the first lawful multinational importer in drug production in the country in 2019.

More encouragingly, local rules provide the legal framework for FIEs to import vaccines into the country, making it instrumental to import COVID-19 vaccines into Vietnam. In late February, the country received the first batch of vaccines produced by British-Swedish pharma and biotech giant AstraZeneca.

Ngo Thanh Hai, a senior associate at LNT & Partners said, “With these changes, we have advised AstraZeneca Vietnam in obtaining the certificate of satisfaction of conditions for drug-importing business to import the AstraZeneca COVID-19 vaccine into Vietnam, and Moderna on its vaccine shipment which will be imported and supplied to the government by Zuellig Pharma.”

Together with AstraZeneca and Moderna, the changes also benefit other COVID-19 vaccine producers, with Johnson & Johnson’s COVID-19 vaccine also set to arrive in Vietnam in the near future.

Industry insiders, however, said that the improvements have not made much impact on the local pharmaceutical market over the past year, with many barriers in Decree 54 remaining. Pharmaceutical analyst Nguyen Vu Cuong told VIR, “The EVFTA needs more time to settle in.”

One of the major challenges concerns new registration, re-registration, and licence renewal certificates for drugs. Decree 54 introduces limits including the concept of drug distribution, warehousing, and transportation services which have prevented European businesses from implementing plans and giving drugs directly to hospitals for patients.

Meanwhile, market authorisation (MA) registration is deemed too time-consuming. A representative of Adamed Pharma explained that, for medicines having obtained MA in Vietnam, such authorisation would need to be renewed every five years and the quality, safety, and efficacy of such medicines remain unchanged.

For medicines that are registered for the first time, they need to be registered for MA in Vietnam by submitting administrative dossiers and dossiers relating to the drug quality, safety, and efficacy. The DAV has the obligation to review and issue MA or provide an explanation for rejected applications within 12 months.

“However, those timelines are not being met and the actual timelines of the DAV are far beyond those stipulated,” the Adamed representative noted.

Members look for quick EFTA accord

Vietnam is hoping that a free trade agreement with the European Free Trade Area – which comprises of Switzerland, Norway, Iceland, and Liechtenstein – will improve both sides’ market access in trade. However, negotiations are dragging on into their ninth year.

On August 5, Ignazio Cassis, Vice President and Minister of Foreign Affairs of the Swiss Federation, met with Prime Minister Pham Minh Chinh and leaders of some ministries within his official visit to Vietnam on August 4-6 to discuss some important issues between both nations, including a push for the free trade agreement (FTA) negotiation process between Vietnam and the bloc. To reach such a deal with the European Free Trade Area (EFTA) members, Vietnam must add value through higher commitments than those of the World Trade Organization. But so far, the negotiation process between both sides has not been completed.

In Southeast Asia, EFTA member states have agreements with the Philippines and Indonesia. But for Vietnam, the EFTA only offers about 87 per cent of the tariff reductions that these countries had been guaranteed partners – a very low level, even lower than the standard agreements Vietnam has signed. Switzerland wants all the contents to have the same level of commitment as in the EU-Vietnam FTA.

Expectations of higher trade growth or new waves of investments will have to wait as the negotiation process almost stopped after the 16th round in Oslo in 2018. Back then, problems related to intellectual property and government procurements appeared – two important contents mentioned in the EFTA Convention. The EFTA Convention, signed in 1960, includes basic rules regarding free trade in goods and disciplines.

An agreement with the EFTA will likely tighten trade relations between Europe and Vietnam, especially on the back of the existing FTAs with Europe and the United Kingdom. Vice President Cassis asserted that Switzerland is ready to work with Vietnam to conclude the negotiations.

The completion of the trade deal will likely also contribute to helping Switzerland strengthen its position as one of the most competitive economies in the world. The Swiss government, with its investment orientation abroad, has allowed an increasing number of companies to invest and do business in Vietnam.

As of July 20, Switzerland has 177 valid investment projects in Vietnam, registered at $1.92 billion, ranking 20th out of 140 countries and territories with direct investments in Vietnam.

According to Swiss statistics, the total two-way trade turnover in the last five years has achieved an average growth rate of nearly 20 per cent per year. About 20,000 jobs have been created from large Swiss corporations in Vietnam, such as Nestlé in food and beverages, Novatis/Ciba-Sandoz in chemicals and pharmaceuticals, and ABB in electrical equipment.

Investors from the EFTA members would mainly participate in manufacturing, infrastructure, education, tourism and hospitality, IT, and banking and finance as Vietnam transforms its economic development model to one based on high technologies and green growth.

Vietnam’s new Law on Investment provides many incentives, creating favourable conditions for overseas investors, said lawyer Pierre Schifferli at the seminar “Vietnam: An Open and Dynamic Market – Opportunities for Swiss Enterprises and Investors” held on July 20. Schifferli’s wife is among these investors and currently participates in Phan Thiet’s tourism and hospitality sector. “Vietnam’s legal system has been relatively complete in most fields, with many factors attractive for overseas financiers, such as high and stable economic growth and open policies,” Schifferli said.

The focus of FTAs lies on liberalising trade and reducing import taxes. In all FTAs, countries and organisations aim to make commitments to all items in the tariff schedule. Along with that comes the expansion of non-discriminatory services and investments between domestic and foreign investors.

“It’s still possible to conclude negotiations at the end of 2021 if the EFTA adjusts its position in areas that have not been reached yet,” said Luong Hoang Thai, director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade – the unit in charge of national trade negotiations. “We have reached agreements in many areas, with the core contents completed. However, intellectual property and government procurements are issues that need to be resolved,” said Thai.

Cotton yarn and product exports drive record cotton consumption in Vietnam

Robust growth in Vietnam’s cotton yarn and product exports is projected to drive 2020-2021 cotton consumption to a record 7.3 million bales, 700,000 higher than the previous year’s downfall from COVID-19, according to the weekly report by the US Department of Agriculture (USDA).

Yarn exports during 2020-2021 have exceeded the previous year’s record by more than 10 per cent through the first 11 months of the marketing year. Foreign demand has been primarily driven by China, with Vietnam’s cotton yarn exports to the country accounting for roughly 60 per cent of Vietnam’s total cotton lint consumption.

China is the world’s largest cotton yarn importer and Vietnam’s largest customer with the geographic proximity and foreign investment by Chinese companies driving record exports. China’s August to June imports of Vietnamese cotton yarn were a record (for the period) and equal to roughly four million bales of cotton lint consumption.

China’s robust demand is expected to persist with projected growth in China’s cotton fabric and product exports, in addition to greater domestic consumption of cotton products. The United States WRO (Withhold Release Order) on cotton lint from China’s Xinjiang region is further supporting current and future demand for Vietnam’s cotton yarn.

Practically all cotton yarn spun in Vietnam is produced with cotton lint imported from outside of China. Garment and textile manufacturers in China seeking to circumvent the WRO are likely substituting imported cotton yarn for domestic with roughly two-thirds containing Xinjiang lint.

Greater domestic consumption in Vietnam of cotton yarn is also driving cotton consumption higher. Significant foreign and domestic investment in Vietnam’s garment industry has driven greater demand for cotton knitted fabrics and thus domestic consumption of cotton yarn by knitters. According to Vietnam customs data, garment and textile exports in 2020-2021 are expected to recover from the previous year’s decline and rise to more than $30 billion; the garment industry is one of the country’s largest valued source for exports.

Vietnam’s largest export market for cotton textiles and garments is the United States, which is also the world’s largest importer. US imports from Vietnam were a record in the first 11 months at more than $5 billion. Knitted cotton sweaters, pullovers, and other similar articles of clothing were the largest product category, accounting for roughly 30 per cent of the total value of US cotton product imports from Vietnam.

This particular category has historically been dominated by China, however, two factors have driven Vietnam’s market share of US imports higher – the 2020 and 2021 WROs and ongoing tariffs specific to China. Both have lowered US imports of knitted cotton sweaters, pullovers, among others from China nearly 20 per cent thus far in 2020-2021 (August-June) despite US imports of this product category rising over 10 per cent on-year during the same period.

Robust export prospects for both cotton yarn and products are expected to boost 2021-2022 cotton consumption even higher to 7.6 million bales, and further support Vietnam’s rise as a major global cotton importer as well as exporter and consumer of cotton yarn and products. 

Lucky shippers circumventing tough pandemic restrictions

Shippers are hoping for priority in vaccine programmes to help serve pandemic-affected areas like Hanoi, with some delivery platforms being allowed to resume delivery of groceries and other essential goods in the city.

According to Hanoi Department of Transport and Hanoi Department of Information and Communications, goods delivery services NowFresh and NowShip officially resumed operations from August 4 in the five districts of Cau Giay, Dong Da, Hai Ba Trung, Ba Dinh, and Thanh Xuan.

Before restarting operations, shippers will have to complete daily health declarations and temperature checks. Now stated that only drivers who meet the conditions are approved by Hanoi Department of Transport, and who follow the rules will be allowed to operate.

Like other mobile applications such as Grab, Be, and Gojek, Now was forced to suspend all services in Hanoi from July 28 due to pandemic prevention requirements.

Some large supermarkets such as AEON Vietnam and Saigon Co.op previously had to suspend online shopping services due to a lack of shippers. E-commerce platforms also constantly issue notices to apologise to customers for delayed deliveries.

Due to strict regulations on movements in Hanoi and Ho Chi Minh City, shippers take a long time to fullfill orders, with some even fined after running into a police checkpoint.

“Delivering currently feels like an illegal action. Each order only gets a few thousand VND in exchange for the risk of infection and fines,” Van Hiep, a shipper in Ho Chi Minh City’s District 7 shared on social media.

Driver Quang Thanh, who works with AhaMove, said that in the early days of Hanoi’s social distancing, only AhaMove’s drivers were allowed to deliver. Although the number of orders increased 10 times compared to normal days, Thanh and many of his colleagues did not dare to accept many of these orders for fear of being fined at the quarantine checkpoints.

“I only accepted orders for delivery at noon because at that time the checkpoints are quieter. When delivering goods, I also have to urge customers to take them quickly to avoid detection,” Thanh said.

The tightened regulations on delivery activities not only affect shippers but also users, like individuals and businesses.

Vi Nguyen, owner of Eat Me Cake in Hanoi, lamented that online orders now take two days to be delivered instead of just a few hours. The rates also increased by about 20-30 per cent, sometimes doubling, causing her to pay extra shipping fees to reduce costs for customers.

According to Le Duy Binh, director of consulting company Economica Vietnam, shippers are part of a huge commercial supply network to bring products to consumers. “In the early stages, we only cared about protecting production but forgot about logistics. When we paid attention to logistics, we still forgot about last-mile delivery services to the end consumer,” Binh said.

He suggested that it is necessary to immediately vaccinate the shippers. “A year ago, when there was no vaccine, there were no measures, but now that we have it, we can’t forget the truckers, loaders, packers, retailers, and shippers,” Binh argued.

Representatives of Grab, Be, and Gojek have proposed to put drivers in the priority group for vaccinations and loosen up regulations on transporting goods.

Ho Chi Minh City has sent an official dispatch to the city’s Department of Health and people’s committees of districts, recommending vaccination for staff delivering and receiving goods. Thousands of shippers in Ho Chi Minh City have been vaccinated since the beginning of August.

The Mekong Delta city of Can Tho also injected more than 400 Grab shippers to ensure goods supply activities in the area.

Hanoi Department of Industry and Trade is proposing to speed up vaccinations for about 15,000 shippers in freight-forwarding activities.

Better linkage sought in warehouse system

Although warehouse real estate is the most promising segment in the industrial property market for foreign investors, the lack of synchronous transport connectivity is a major deterrent for many looking to expand their warehouse systems in Vietnam.

Paul Fisher, country head in Vietnam of JLL, said that compared to regional peers, the local logistics market is still at a nascent stage.

“We see some much-needed investment going into infrastructure, as well as private sector funds into developing state-of-the-art facilities. Driven by growth in e-commerce and manufacturing, as well as growing domestic consumption, we believe that the Vietnamese logistics market will continue to thrive and evolve in the same way we have witnessed in other markets,” Fisher said.

Vietnam, which has been one of the fastest-growing e-commerce nations in Southeast Asia even before the pandemic, has seen a massive acceleration in the segment in 2020-2021 as shoppers stuck at home have taken their purchases online.

“Logistics is crucial to the day-to-day operations and future success of the Vietnamese e-commerce market. Many foreign logistics providers are moving to meet the rapidly growing needs of the market,” said Fisher.

These trends are only expected to grow stronger over the coming years as Vietnam move from a production to a consumption hub, with logistics providing a key foundation.

Experts also said that industrial real estate in Vietnam is only in the initial stage of linking supply chains, warehouses, and the infrastructure system. Thus, it needs the right strategies to support investor participation as well as better human resources that can meet the increasing demands of foreign investors.

“The government needs to ramp up infrastructure development so that the private sector can deploy projects offering logistics and supporting services,” said Su Ngoc Khuong, senior director from Savills Vietnam.

“Export-import procedures are another problem to consider. Supporting domestic and foreign businesses in clearing and exporting goods will help reduce costs, attracting other foreign investors,” he said.

Vietnam’s industrial real estate sector is one of the greatest attractors of foreign investment, with world-class names like GLP, LOGOS, Warburg Pincus, DSV, and Frasers Property, among many others, already present. However, the market is in close competition for foreign investment with China, Thailand, Malaysia, Indonesia, Singapore, and even the Philippines, urging an even more conducive environment for investment.

With the aim of pairing runaway growth potential in consumption and trade with improved infrastructure, the National Assembly is discussing public investment until 2025. It is estimated that a total of $35 billion will be invested in the next five years in the southern provinces alone, benefiting industrial producers and the logistics market as a whole.

Cases of smuggling, trade fraud, counterfeit goods detected

Yesterday, the National Steering Committee for Prevention and Fight against smuggling, commercial fraud, and counterfeit goods (Steering Committee 389) said at a press brief that from the beginning of 2021 until now, despite the widespread Covid-19 epidemic, many cases of smuggling, trade fraud, and counterfeit goods have been detected.

Minister of Finance Ho Duc Phoc reported the anti-trafficking plan following the complicated developments in the last months of 2021.

According to this report, only in the first 6 months of the year, functional forces in the country have detected and handled 11,330 cases of illegal trading and transportation of banned and smuggled goods; 50,141 cases of commercial fraud, tax fraud; 10,847 cases of counterfeit goods, intellectual property violations, inspectors have collected VND5,036 billion for the state budget.

Over the past few months, soldiers at border gates have both prevented and controlled the Covid-19 epidemic and smuggling, commercial fraud, and counterfeit goods. These forces have strictly followed the direction of the Government and the Prime Minister. It is forecasted that smugglers will take advantage of the Covid-19 epidemic to transport illegal commodities in the last months of 2021.

Therefore, Minister of Finance Ho Duc Phuc, Standing Deputy Head of the National Steering Committee 389, requested the Steering Committee 389 of the Prevention and Control of Smuggling, Commercial Fraud, and Counterfeit Goods to develop a specific plan against smuggling, commercial fraud, and counterfeit goods amid the ongoing Covid-19 epidemic.

Above all, it is necessary to prevent commercial fraud, counterfeit goods and goods infringing upon intellectual property rights for essential goods, medical products for prevention and control of the Covid-19 epidemic.
In addition, functional forces have strengthened inspection, and handling of violations on the land, sea, and domestic borders, especially after the epidemic is under control.

Police warn Binary Option BO trading platform with signs of fraud

The Ministry of Public Security today announced that its Department of Cyber Security and Hi-tech Crime Prevention (A05) warned Binary Option BO trading platform on the cyberspace with multi-level marketing aiming to defraud and appropriate participants' assets.

Recently, many organizations and individuals in Vietnam have set up hundreds of binary options trading floors and introduced them as products of foreign financial technology, branding them as Blockchain technology applications in the revolution 4.0. These organizations and individuals have been using social media to promote their products, making investors think that these exchanges have been licensed in Vietnam.

According to A05, binary options trading is a form of financial investment, a transaction in which buyers will make predictions about the uptrend or downtrend of assets such as commodities, currencies, stocks, indices at the time of prediction.

If the prediction is correct, the investor will have a profit according to the rate which the floor offers; if the prediction is wrong, the investor will lose the entire amount for that trade.

The activities of binary options trading floors (Binary Option BO) in cyberspace show signs of illegal multi-level businesses, fraud, and appropriation of participants' assets.

According to the 2005 Ordinance on Foreign Exchange, only credit institutions are allowed to conduct foreign exchange business; therefore, binary options trading platforms operating in Vietnam are illegally operated.

Accordingly, most of these BO exchanges are licensed in foreign countries and introduced by foreign investors; in fact, these are set up and operated by Vietnamese individuals and organizations that have been using a multi-level marketing tool to attract and develop the number of participating investors; for example, Wefinex, Raidenbo, Bitono, Pocinex, Deniex, Remitex, Ares BO, Binanex, Fxtradingmarket, GardenBO, Hitoption...

Organizers of these platforms have committed to giving profits to investors, high commissions when attracting new investors. When they have raised a large amount of money, the floor owners will intervene in the price, adjust the win or lose for the purpose of appropriating investors' money, or crash the system to appropriate all investors' money. They have been using media effects on social networks, to attract investors’ attention.

Some people are self-introduced as expert reading orders, candles trimming hot girls, chiseling floors who have been emerged as high-income earners. However, A05 said that they are convincing investors to participate in the floors. A05 has warned that those participating in binary options trading floors are at risk of losing money. Additionally, participants will not be protected by the law if they use virtual currencies or tokens on these floors.

Vietnam accounts for 87 percent of Philippines’ rice imports

Vietnam's rice exports to the Philippines still won a lion share of 87 percent in the first half of this year.

According to the Bureau of Plant Industry of the Philippines, the country had imported 1.26 million tonnes of rice during the period, down 11 percent from 2020, including 1.12 million tonnes from Vietnam.

It attributed the decrease to rising world rice prices, global logistics issues and improved domestic output.

The Philippines also bought over 2,600 tonnes of rice from Pakistan and more than 109 tonnes from India on the back of the Most Favoured Nation (MFN) tariff rates on rice dropping to 35 percent from 40 percent for in-quota purchases and 50 percent for out-quota volume.

The General Department of Vietnam Customs reported that in the first seven months of this year, Vietnam shipped over 1.27 million tonnes of rice worth 665.72 million USD to the Philippines, accounting for 35.3 percent of the country's total rice exports and 36.4 percent of its revenue.

The Philippines remained the largest rice importer of Vietnam in the reviewed period.

Vingroup to sell 3 per cent stake in Vinhomes to further invest in VinFast

Vingroup (HSX: VIC) has registered selling a little more than 100 million shares of its giant property arm Vinhomes JSC (HSX: VHM).

Vingroup is allegedy to sell 3 per cent stake in Vinhomes to invest in its automobile arm VinFast
The share volume registered for sale is equivalent to 3 per cent of Vinhomes' charter capital. If the transaction is executed successfully, Vingroup's ownership rate in Vinhomes would decrease to 66.66 per cent.

The transaction will be executed through put through orders and/or order matching. The expected transaction time is from August 19 to September 17, 2021.

Last year, a KKR-led consortium including Temasek has collectively invested VND15.1 trillion ($650 million) which translated into a 6 per cent equity stake in Vinhomes.

Following the transaction, Vingroup JSC reminded the controlling shareholder of Vinhomes. KKR is making the investment primarily from its Asian Fund III.

According to information from Viet Capital Securities Company, the proceeds from the sale of this 3 per cent sale of Vinhomes will help Vingroup invest in advanced technology, including VinFast's electric vehicles and to accelerate its "go global" strategy.

Russia exports second batch of ice cream to Vietnam

As many as 4.75 tonnes of Russian ice cream have been shipped from Novosibirsk province to Vietnam.

According to the press office of the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor ) of Novosibirsk region, this is the second shipment of this product to Vietnam in 2021.

Rosselkhoznadzor said the first consignment was shipped to the Southeast Asian nation in March this year.

The ice cream maker is a business in Novosibirsk. Its products were transported to Vietnam by railway and then by sea. Exported ice cream meets all the necessary requirements.

So far this year, Russia has exported six batches of ice cream with a total volume of 38.6 tonnes to Vietnam, China, Uzbekistan and Azerbaijan./.

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

VIETNAM BUSINESS NEWS AUGUST 20

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