Nikkei Asia, a leading financial newspaper run by Japanese media giants Nikkei Inc., published an article on August 6 titled “Vietnam emerges as Southeast Asia's next fintech battleground”.

Vietnam witnesses an explosion of digital wallets, such as MoMo, Grab's Moca, ZaloPay and VNPAY, used widely in various businesses.  (Photo credit Lien Hoang and Ken Kobayashi) 
According to Nikkei, for Vietnamese fintech startups like MoMo, the key to winning the battle against rivals such as Grab and Sea for the country's 100 million consumers may be “a simple cup of coffee”.

Before Vietnam was hit by fresh lockdowns amid the ongoing COVID-19 outbreak, the Ho Chi Minh City-based company ran promotions with some of the country's largest coffee chains, including Highlands Coffee, a fast-growing brand that boasts more than 300 outlets nationwide.

MoMo users received discounts for using the app to place and pay for an order, before then going to pick it up at a scheduled time. The promotion was designed in order to provide customers with a taste of the convenience of the all-in-one app.

Nikkei also quotes a person close to the company, stating that the attraction of Vietnamese consumers to use MoMo, even for small purchases, is part of the company's strategy which aims to get the app "on the first page of their iPhone".

Tuong Nguyen, executive vice chairman and Co-CEO at MoMo, told Nikkei that the diverse portfolio of services has helped to drive revenue at the firm, even during the current COVID-19 wave.

"We built a pretty balanced business... so we were confident that even in the very worst case, we will maintain at least 70% [of revenue] of a normal month," he said. "But of course we wanted to keep growing, so we focused on changing the risks to opportunities." 

According to the Japanese media outlet, MoMo, short for Mobile Money, first launched in 2013 and has gone on to become Vietnam’s largest e-wallet. It claims 60% of the country’s mobile payments market, processing an annualised US$14 billion worth of transactions for more than 25 million users.

However, Nikkei notes, the rise of MoMo has drawn in overseas rivals, helping to turn Vietnam into one of Asia's most competitive fintech markets.

“Dozens of players, including Southeast Asian tech giants Sea and Grab, have entered the space and are burning cash to acquire users,” the article notes.

According the financial publication, MoMo, which said in January it had successfully raised US$100 million from a group of investors, including US private equity fund Warburg Pincus, is already considering raising additional capital.

To enlarge  its network of stores that accept the app, MoMo is striving to expand its suite of services, an effort which will help it to branch out into areas like motorcycle insurance and consumer loans. In addition, it has acquired a software company that aims to speed up product development.

Nikkei notes that although Vietnam’s US$340 billion economy is also smaller than those of Indonesia, Thailand and the Philippines, its fintech sector is particularly appealing due to a range of factors.

Firstly, Vietnam has one of the region's highest mobile phone penetration rates at around 80% of the adult population, despite having a relatively low number of bank branches per capita.

Secondly, regulators have offered great support for the fintech sector, handing e-wallet licenses to dozens of local companies. That combination has served to create fertile ground for startups seeking to deliver financial services to consumers via smartphones.

Finally, the COVID-19 pandemic has greatly contributed to easing a major bottleneck for fintech to take off and be used more widely among the local population.

MoMo’s executives also acknowledge that the problem moving forward is that the app's success has contributed to attracting a flood of formidable competitors into the market.

Meanwhile, Grab has partnered with Moca, a local mobile payments company, making it the main payment option for its ride-hailing and food delivery services. Elsewhere, Singapore-based Sea, the gaming and e-commerce company, has also moved to launch payment services in Vietnam. Sea also operates Now, one of Vietnam's most popular food delivery apps.

Amid this increasing competition, Nikkei states MoMo believes it can beat its competition by locking in coffee chains and convenience stores.

“Young consumers use them more frequently than shopping online or hailing a car,” the article concludes.

More than 300 enterprises to participate in ASEAN Online Sale Day

ASEAN Online Sale Day 2021, the biggest online shopping day among ASEAN member countries in 2021, will officially take place from 0:00 on August 8 until the end of August 10, 2021.

According to the Ministry of Industry and Trade, the event will see the participation of more than 300 enterprises in various areas which are expected to bring about diverse choices for ASEAN consumers. Of which, more than 100 enterprises registered to provide online sales in the Vietnamese market.

The programme is aimed at domestic e-commerce and cross-border e-commerce between countries in the ASEAN region with exclusive incentives for consumers.

The event is co-chaired by Brunei, Singapore and Vietnam and implemented by all 10 member countries of ASEAN.

Consumers and enterprises can visit the programme's official website at www.onlineasean.com for more information.

This is an opportunity for consumers in the bloc to experience online shopping in a wide, safe and quality-assured marketplace under the official supervision of governments.

At the same time, the event will support enterprises in the bloc to adapt to and promote digital transformation through the already-developed ecosystem, as well as help consumers to gradually change their purchasing methods.

Rice exports hoped to recover after COVID-19 controlled: insiders 

Despite a fall in Vietnam's rice exports so far this year, experts held that the situation will be improved once the COVID-19 pandemic is controlled.

Vietnam shipped 3.58 million tonnes of rice abroad, earning US$1.94 billion in the first seven months of 2021, down 10.6% in volume and 0.6% in value compared to the same period last year.

According to the Institute of Policy and Strategy for Agriculture and Rural Development under the Ministry of Agriculture and Rural Development, 550,000 tonnes of rice worth US$289 million were exported in July.

In the first half of 2021, the Philippines was the largest market of Vietnamese rice, accounting for 35.2% of Vietnam’s total rice exports, equivalent to 1.09 million tonnes worth US$579.8 million, down 20.6% and 8.6% year on year, respectively.

In the Jan-June period, the highest rise was seen in the Bangladeshi market with a 142-fold rise, while the sharpest fall was recorded in the Indonesian market with a 60.5% drop in export value.

On average, rice prices increased 11.6% year on year to US$544 per tonne, according to the institute.

Do Hoai Nam, Chairman and General Director of Intimex Group, held that it was not a big problem when rice exports reduced. The difficult thing is that domestic firms fail to fulfil orders, he stressed.

Nam explained that complicated developments of the COVID-19 pandemic in southern localities have made it difficult for rice trading, not to mention the "frozen" situation of the entire chain when a COVID-19 case is found in only one factory.

Rice traders are facing obstacles due to social distancing measures, especially in the stage of loading and unloading, causing big problems for exporters, he said.

Meanwhile, Pham Thai Binh, General Director of Trung An Hi-Tech Farming JSC, said that the firm has received orders with a total volume of over 10,000 tonnes. However, due to social distancing measures, two-thirds of its workers have been asked to temporary stay at home, leading to a lack of personnel for operations serving production and export activities.

Many rice exporters are facing the same plight, forcing them to re-negotiate with customers, and even refuse to sign new contracts.

According to the Vietnam Food Association, due to pandemic prevention and control regulations, it is difficult for domestic companies to buy, process and export rice. Meanwhile, the opportunity is high for Vietnam to increase exports as global demand is rising and supplies are reducing, especially from big exporters like India and Thailand.

Nam underlined the significance of promptly controlling COVID-19 as well as the faster vaccination for workers in food producing and processing companies.

Selling pressure ends stock market’s rising streak

The selling pressure on many stocks, especially bank and securities ones, dragged the VN-Index of the Hochiminh Stock Exchange down on August 6, ending its winning streak of nine sessions.

According to analysts, the stock market’s correction after a long gaining streak was normal and the correction may last for one to two more sessions.

Closing the day, the VN-Index lost 4.1 points, or 0.3%, at 1,341.45 points, with 177 winning stocks and 200 losing ones.

There were nearly 736 million shares worth more than VND22.5 trillion changing hands, up 15.82% in volume and 16.47% in value compared with the session earlier. Over 54 million shares worth nearly VND1.8 trillion were traded in block deals.

Most of bank stocks on bourse inched down over 1% each, while STB and EIB dropped more than 2% each.

STB saw the largest decline among bank stocks, at 2.4%, and closed at its intra-day low, at VND30,300. However, it led the bourse in terms of liquidity with 30.92 million shares traded.

Securities stocks faced the same fate. Specifically, HCM and CTS slid 2.4% each, while VCI lost 2.5%.

Some other blue-chip stocks also extended their losses, such as GAS, GVR, HPG and MSN. Of which, rubber group GVR fell 1.9% to its lowest level of the day, at VND34,200.

On the other hand, housing developer VHM remained a bright spot as it gained 2% at VND113,900 and saw nearly 11.23 million shares matched.

On the northern bourse, the HNX-Index closed at its reference level, at 325.46 points. More than 135.3 million shares worth some VND3.2 trillion were transacted on bourse.

Three bank stocks helped save the market from a loss. Specifically, BAB ended the day at its reference price, SHB edged up a slight 0.7% and NVB expanded 1.2%.

In addition, construction firm VC3 surged to its ceiling price, and housing firm NDN soared 5.9% at VND21,600.

Meanwhile, securities stocks VND, SHS, MBS, BVS and ART fell some 3% each and APS, TVB and BSI lost over 1.7% each.

SHB was the most actively traded stock on the northern bourse with nearly 24 million shares transacted.

Thermal power plants report poor business so far this year

Numerous thermal power plants reported a drop in revenue and profit in the first half of this year.

According to its second-quarter financialstatement, Pha Lai Thermal Power JSC generated 46.5 per cent less power in the second quarter. This has resulted in a 46.2 per cent drop in revenue and 57.1 per cent in after-tax profit. For the first half, profit declined by 37.6 per cent to VND259billion ($11.26 million).

Meanwhile, the revenue and profit of Haiphong Thermal Power JSC in H1 plunged 25 and 76 per cent, respectively and profit at Ba Ria Thermal Power JSC declined 61.5 per cent to VND23.3 billion ($1 million).

Ninh Binh Thermal Power Plant also saw revenue drop 30.1 per cent in Q2 while after-tax profit was only 0.8 per cent of the same period last year with VND178 million ($7,740). Its consolidated revenue for the first six months fell 37 per cent and after-tax profit decreased 95 per cent on-year.

Power generation at PetroVietnam Nhon Trach 2 Power JSC decreased by 23 per cent in Q2 as revenue and profit dropped 13.9 and 90.1 per cent on-year. Its consolidated profit in H1 declined 67 per cent to VND139.5 billion ($6 million).

These bleak business results come from the increasing price of coal (due to soaring demand for imports from China), along with oil and gas.

At the same time, power demand has dropped significantly in industrial parks in Ho Chi Minh City, Hanoi, and Binh Duong as factories had to suspend operations due to the COVID-19 pandemic.

 Over 32.5 trillion VND raised through G-bond auctions in July

On the primary market, the State Treasury and the Vietnam Bank for Social Policies (VBSP) mobilised more than 32.5 trillion VND (1.41 billion USD) via 22 Government bond (G-bond) auctions on the Hanoi Stock Exchange (HNX) in July.

Of the sum, the State Treasury raised 28,061 billion VND and the VBSP 4,500 billion VND.

Compared to the end of June, annual interest rates for the 5-, 7-, 10-, and 15-year bonds issued by the State Treasury decreased by 0.03 - 0.04 percent. Meanwhile, those for bonds with 20- and 30-year maturity remained unchanged at 2.91 and 3.05 percent, respectively.

On the secondary market, bonds worth 204,135 billion VND were sold in the month. The average trading value reached 9,278 billion VND per session, down 24.6 percent on-month.

The total volume traded via repos made up 29.58 percent of the total.

Foreign investors’ purchase accounted for 1.59 percent of the total value in July, with net purchase value hitting 538 billion VND./.

Aussie magazine names driving forces for Vietnam’s economy

Fundamental factors that help the Vietnamese economy respond to current challenges, especially the impacts of COVID-19, were discussed in an article by senior journalist Cameron Cooper published on the intheblack.com business news site of Australia.

The article cited as an example a story of Ho Chi Minh City-based entrepreneur Jewel Nguyen. As many trading companies battle the effects of the COVID-19 pandemic, she is being rushed off her feet with orders, it said.

In the past year, her business Viego Global has been in negotiations with hundreds of distributors, resellers and brokers for supplies of products such as coffee, coconuts, textiles and pharmaceuticals. She’s fielded inquiries from markets including the US, Saudi Arabia, Iran, the Republic of Korea (ROK) and the Caribbean region. Not bad for a start-up, the author commented.

The company’s founder and CEO said that all of the customers are new. She attributes the company’s success, in part, to taking advantage of digital marketing to acquire new customers.

“The quick commercial success of Viego Global’s team reflects business confidence in Vietnam, which has seen the Southeast Asian nation outperform most countries during the pandemic,” wrote the article.

The Lowy Institute, a Sydney-based think tank, has crunched data to rank the pandemic response of almost 100 markets, placing New Zealand in top spot, with Vietnam coming second.

The female entrepreneur said such positives are also encouraging highly trained graduates, professionals and other Vietnamese living abroad to return home and contribute to the country.

With businesses in the services and logistics space in particular bouncing back strongly from the impacts of COVID-19, the World Bank has estimated 6% to 6.5% economic growth for Vietnam in 2021, the article continued.

However, a recent surge in COVID-19 infections could affect this projection.

Warrick Cleine, CEO of KPMG in Vietnam, puts the success down to three key factors.

First, throughout 2020 and early 2021, Vietnam managed COVID-19 border controls and contact tracing better than most countries.

Vietnam is benefitting from more than two decades as a serious player in global trade and manufacturing. In addition, the country is less reliant on tourism than its neighbours.

Finally, Vietnam’s youthful population is fuelling a powerful domestic economy that has proven to be a buffer against the global slowdown. “Everybody’s young and getting jobs in an incredibly productive workforce,” the article quoted Cleine as saying.

Vietnam also attracts a new generation of foreign manufacturers.

The article quoted Michael Kokalari, chief economist at investment firm VinaCapital, as saying that he cannot see any immediate threats to Vietnam’s manufacturing power from its Southeast Asian neighbours.

Wages in Vietnam are much lower than in Thailand, for instance. Meanwhile, logistics bottlenecks are an issue for Indonesia, and high costs and an ageing workforce are the challenges facing Malaysia.

Kokalari went on saying that Vietnam can also keep drawing cheap labour from the agricultural sector, which still accounts for about 45% of all workers.

The article pointed out that a rapidly growing middle class, with increasing discretionary incomes, is fuelling domestic consumption in Vietnam.

The Australian Trade and Investment Commission (Austrade) envisions opportunities for Australian exporters in areas as diverse as energy, health and premium food and beverages.

Shannon Leahy, the Austrade trade commissioner in Hanoi, referred to Vietnam’s consumer market as a bright spot for investors, noting that the nation has one of the fastest-growing e-commerce markets in the region.

“The pandemic has accelerated trends in technology disruption within Vietnam, creating opportunities for Australia’s digitech and healthtech companies,” he added.

Similarly, Vietnam’s banks are embracing emerging fintech players, while in the health sector, private hospital networks across the country are leapfrogging technology phases, with data management going straight from paper to cloud computing.

While Vietnam’s tourism industry has been hit hard by the pandemic, Vietnam’s consumer market remains strong, driving opportunities for Australia’s agrifood industry, particularly in most premium food segments, including in meat, dairy, nuts and seafood, Leahy stated.

Furthermore, the Vietnamese Government has been issuing favourable laws and regulations in an effort to further improve the business and investment climate.

As analysts debate whether Vietnam’s golden run can continue, Kokalari drew confidence from demographic and investment analyses of Japan and the ROK.

He also mentioned that facing lower growth and a shortage of productive workers, the two Asian powerhouses have poured foreign direct investment into Vietnamese manufacturing plants in search of new opportunities.

They have a structural need to invest outside their countries into places like Vietnam, the expert said.

Economic resilience needed post pandemic

The Covid-19 pandemic has had an unprecedented harmful impact on the global economy as well as the individual economies of several countries.

Governments of many countries have implemented several policy solutions to overcome the disastrous effects of the pandemic and are struggling to restore their economies. In this effort, reforms and improvement of business environment are being considered as key solutions.

Support solutions to restore the economy are divided into three phases. In the first phase the pandemic must be totally suppressed and controlled. In the second phase the economy must be reopened gradually, and in the third phase there must be a strong move to recover and build resilience within the economy.

When the economy reopens again after a long period of lockdown, the solutions applied are usually the government's approach to a technology based model of Government-To-Business (G2B), to provide online public services to people and businesses. However, it is too early to assess the effectiveness of solutions for reopening the economy while the pandemic is still raging, but based on international experience, some lessons can be drawn.

The first is more flexibility in regulations, which must not compromise the results and effectiveness of public policy. The second must be timely and clear communication on policy solutions to ensure that businesses are aware of the latest changes and guidelines. This is especially important as the pandemic continues and policies must also be adjusted accordingly. The third solution calls for regular consultations with the private sector and accurate and timely data to allow the government to monitor the impact of the crisis.

The fourth solution must provide online G2B services in the context of social distancing. It is no coincidence that the Covid-19 pandemic has accelerated the trend of digitization. However, technology is not a magic wand, especially for countries that lack essential infrastructure and legal bases, hence digitalization is still not possible in a few weeks. Therefore, in many cases, simplifying or changing the institution before services are made available online is the preferred solution. Finally, the crisis can be the catalyst for reform. Some countries have taken advantage of the opportunity to offer solutions that not only help navigate through this crisis but also create a basis for sustainable and long-term improvement of the business environment.

Currently, creating a healthy business environment is extremely important to ensure economic recovery and restore investor confidence. In the medium and long term, the business environment will affect how the pandemic is overcome and how well businesses take advantage of opportunities when they begin the recovery process. Therefore, having effective, predictable legislation, a fair business environment that promotes competition, and institutions that guarantee asset protection and contractual rights, will make it easier to start a business as well as adapt to new regulations and rapidly shift business activities to meet new market needs. As a result, governments can take advantage of the Covid-19 pandemic crisis to implement stronger reforms.

In the above context, the Vietnamese government has promptly issued policies to support businesses and people in response to the pandemic, such as reducing interest rates, restructuring debt, reducing and simplifying payment of taxes and social insurance, exempting or reducing fees for a number of public services, and exemption or reduction of land rents, besides offering welfare support packages of VND 62,000 bn in 2020 and VND 26,000 bn in 2021.

However, in terms of implementation, the effectiveness of some support packages is not high. The spirit of reducing, loosening, and being flexible in applying regulations to support businesses to cope with the pandemic is still lacking. While the pandemic is still spreading and adversely affecting business investment, it is proposed to apply barcodes, attach dash cams, and force electronic trading floors to declare and pay taxes on behalf of sellers. These are some typical examples.

However, it is worth mentioning that reform and improvement of the business environment, in general, have stalled since the outbreak of the disease. The analysis and assessment to identify potential areas, policy priorities, and focus of institutional reforms for rapid growth recovery after the pandemic is still unclear. The policy making process and agenda of the competent authorities is not much different from before.

As we all know, the quality of the institutions that govern the business environment such as public administration efficiency, level of corruption, and protection of property ownership, all have a positive impact on attracting investment, especially for foreign investment.

Prime Minister Pham Minh Chinh has just signed Decision 1242/QD-TTG to establish a special working group to work under the Prime Minister on reviewing and removing difficulties and obstacles, and promoting the implementation of investment projects. The establishment of this working group is based on the reorganization of the working group to promote foreign investment cooperation established under Decision 850/QD-TTG dated 17 June, 2020, also approved by the Prime Minister, mainly to improve the efficiency of foreign investment in both quantity and quality.

According to Decision 1242, the working group is responsible for reviewing and summarizing difficulties and obstacles in the process of implementing investment projects, and explain and guide the uniform implementation of the provisions of the law on investment and related regulations. In addition, the working group will assist the Prime Minister to direct and coordinate activities among ministries, related branches, and localities to solve problems arising during the implementation of investment projects. The group will also propose ways to handle problems within the workings of competent authorities and urge and supervise the process of solving difficulties and problems. That is to say, focus must be directed to specific projects, and not general investment promotion.

The purpose of the working group is to actively attract investment, search for quality investors, and select good projects according to our criteria, as well as create the best conditions for the project, including solving difficulties and problems; design a good mechanism for the projects to quickly deploy; and hence promote socio-economic efficiency. This is because there are projects that are good in terms of profit for investors, but not for society as a whole.

In fact, so far we still do not have a complete set of criteria with specific quantification to select investors. Therefore, it is time for us to be more selective and change our approach, which will be the first step in attracting better investment projects. Accordingly, we must clearly define the attractiveness criteria, which would involve filtering projects and being much more selective. It is time to be choosey and not to take anything and everything that comes our way, and also not waste resources on projects that do not bring significant added value to our society, or if the potential damage to the environment is too great.

Pandemic curse seeps into “three-on-spot” strategy

Manufacturers are under pressure to maintain the “three-on-spot” production strategy and take care of their workers amidst a coronavirus surge.

After detecting infections among their workers, around 150 factories in the southern province of Binh Duong have decided to halt its three-on-spot operation – meaning production, meals, and rest after work at the same place. The businesses faced difficulties in securing food and raw materials, while their workers were anxious amidst the rising infection cases on the site. Before suspending operation, all workers have to take coronavirus tests. Those who are negative will be isolated at the factory for at least three days, then tested again with safe results before returning to their residence.

Likewise, nine industrial zones (IZs) and clusters in the Mekong Delta province of Tien Giang are being forced to shut down from August 5 to prevent the spread of the disease. The move was made by the province after detecting 260 workers contracted coronavirus despite their factories implementing the three-on-spot model in both Long Giang and My Tho IZs. As many companies sustained operations at their manufacturing facilities amid stringent COVID-19 measures, thousands of workers have been locked down at the factories with sleep facilities and food provided by the company. Should the situation continue, exhaustion of workforce may occur as not all workers are able or willing to spend a few months at the factory, according to a supply chain risk analytics company Everstream Analytics.

Simon Fraser, executive director of the Australian Chamber of Commerce Vietnam, told VIR, “Many of our member companies were able to accommodate a proportion of their workforce at their premises opting to have all employees located onsite rather than the offsite and dedicated transport model.”

This, however, has meant all staff are confined within an area normally reserved purely for work. “A lot of staff would have been eager to enter these arrangements for health reasons being in a bubble and the chance to be tested and even receive a vaccination, along with earning a wage as opposed to being on a lessened wage or none at all. There are also social reasons, like being around people you probably get along with plus the novelty factor of something different,” he added.

However, after a month, the novelty would have worn off and people would be missing family and friends. the feeling of isolation may be creeping in and monotony of the surroundings and people playing on people’s minds, according to Fraser.

“I know that management and business owners have been managing their teams remotely and are monitoring their staff’s wellbeing with food, accommodation, entertainment, and better wages, but these will lose their lustre too soon enough,” he said. “If the current arrangements drag on, then swapping out of staff should be available to replace the current workforce with a rotation system supported by medical checks, vaccinations, and fair wages. This is the only way businesses could meet a longer-term arrangement.”

On the same note, Sami Kteily, executive chairman of PEB Steel Buildings Co., Ltd. said, “We are doing everything we can do to maintain manufacturing. By applying necessary measures, our activities remained stable until July 18. We were able to continue normal operations because we had enough people, project backlogs, and materials inventory.”

Kteily’s company is closely complying with governmental requirements to deal with the toughest wave of the pandemic. So far, F1 cases have been sent to a centralised quarantine area per the instructions of Ba Ria-Vung Tau People’s Committee, and the province is also undergoing a pilot quarantine at home for this case. F2 cases are required to be quarantined at home.

“We do not set up on-site quarantine zones for workers. However, temporary quarantine zones have been established in response to six emergent scenarios addressing F0, F1, or workers with any COVID-19 symptoms inside or outside the workplace,” Kteily added.

Meanwhile, a representative of Bosch Vietnam said that all their prevention measures are even more stringent than requirements from local authorities. The company has set up a team of experts to handle and manage issues related to the pandemic at all Bosch locations.

Besides following 5K guidance, the company also applies a zoning restriction method to completely stop the movement of associates between the floors/areas in its offices and manufacturing plant. It also adopts COVID-19 prevention measures toward contractor management in the plant to reduce the risk of infection.

Last week, the American Apparel and Footwear Association (AAFA), which represents Gap, Adidas, and other global fashion brands, sent a letter asking US President Joe Biden to ramp up the distribution of excess vaccines and COVID-19 testing and personal protective equipment to Vietnam. The AAFA also asked Vietnam’s Prime Minister Pham Minh Chinh to prioritise the apparel and footwear industry for equitable vaccine distribution and testing. The association urged the prime minister to continue working with the local industry and, in particular, its industry partners to identify and deploy creative short- and long-term solutions to enable the industry to continue to function safely during this crisis. These include more three-on-spot approaches to safely support workers and mechanisms to permit the transit of critical materials and products.

Vietnam is the second-largest supplier of apparel, footwear, and travel goods to the US market, accounting for 20 per cent of all US imports.

Shake-up required to fund infrastructure

Vietnam’s newly-adopted public funding will not be sufficient for infrastructure investment because of colossal future demand for this type of development, which would need more private financiers via attractive enticements.

The National Assembly (NA) last week adopted a hallmark resolution on the 2021-2025 medium-term public investment plan, in which the total money for investment from the state budget will be at least VND2.87 quadrillion ($124.8 billion). This includes VND1.5 quadrillion ($65.2 billion) from the central coffers - including VND1.2 quadrillion ($52.17 billion) from the domestic capital and the rest from foreign sources – and VND1.37 quadrillion ($59.56 billion) from localities’ budget.

The 2021-2025 plan will be deployed under priorities, with the total number of projects so far at nearly 5,000, down over half as compared to that in 2016-2020. The number of new projects will be nearly 2,240. The average capital for each project will be VND210.4 billion ($9.14 million), which is 2.4 times higher than that in the previous period.

However, many NA deputies said that such state funding until 2025 will not be sufficient for Vietnam to remarkably change its infrastructure landscape, which remains a big barrier for the country’s socioeconomic development.

“The VND2.87 quadrillion ($124.8 billion) as public investment is not so much amid huge demands for development funding. Thus we need to stress that public investment like this is just a primer for wooing private investment. Especially, we must boost public-private partnerships (PPPs), with attractive mechanisms for private investors,” said deputy Hoang Van Cuong, representing Hanoi.

“We have learned valuable lessons from some very successful PPP projects like Halong–Van Don Expressway and Van Don Airport in the northeastern province of Quang Ninh,” Cuong said. “These projects are testimony to our success in calling for good investors and we must seek resources for development.”

Built under the build-operate-transfer format, the 60km Halong–Van Don Expressway has a maximum speed of 100km per hour and cuts travel time between Halong and Van Don by half, to only 50 minutes. With the investor being Sun Group, the project was valued at VND12 trillion ($521.74 million), built during 2015-2018 before it was officially put into operation in February 2019.

“The investment format of this project needs to be multiplied nationwide. If our projects are not really attractive, we must design independent projects with all obstructions removed to attract private investors,” Cuong added.

NA deputy Nguyen Tao, representing the Central Highlands province of Lam Dong, also cited a conclusion by the prime minister at a recent meeting with localities that the medium-term public investment capital is a primer for Vietnam to attract private investors and create a breakthrough to implement the government’s programme on constructing 5,000km of expressways by 2026.

“This year is the first for us to implement the Law on Public-Private Partnership Investment, and the government has demonstrated its high determination in attracting investment via strongly institutional reform and removal of difficulties in implementing this law,” Tao said.

He cited Lam Dong and the southern province of Dong Nai having actively implemented the law since early this year, with the upcoming deployment of the 67km Tan Phu-Bao Loc Expressway under the PPP format, valued at over VND18 trillion ($782.6 million). The four-lane project belongs to Dau Giay-Lien Khuong Expressway, with the investor reported to be a partnership between Deo Ca Group and Hung Thinh.

“In June, the National Appraisal Council and authorities of Lam Dong and Dong Nai made a pre-feasibility report for the project, and the report will be submitted to the prime minister for approval for PPP implementation,” Tao said.

Also highlighting the role of private investment in infrastructure, deputy Thach Phuoc Binh representing the Mekong Delta province of Tra Vinh said that in 2016-2020, the rate of public investment disbursement hit 80.3, 73.3, 66.8, 67.4, and 63.8 per cent of the plan, respectively. “Currently, private investors are not so much interested in long-term infrastructure projects. It is due to risks caused by the frequent adjustment in the country’s law system,” Binh said. “It is high time investment was assessed based on effectiveness, not on the obedience of regulations. PPP is a good tool for attracting private investment, but the government needs to offer attractive mechanisms for private investors.”

Don Lambert, principal private sector development specialist at the Asian Development Bank, told VIR that the spending required to close the infrastructure gap in Vietnam is significant.

“By 2030 at the latest, Vietnam will need an estimated $237 billion for infrastructure investments to achieve its Sustainable Development Goals. To fund this, the Global Infrastructure Hub estimates that Vietnam will need to mobilise $49 billion above what it has historically spent,” Lambert said.

The government already shoulders 90 per cent of infrastructure spending, and public investment as a proportion of GDP at 8 per cent is relatively high. “Therefore, Vietnam cannot afford a large increase in its infrastructure budget, given the fiscal pressures the pandemic introduced. PPPs could help to address the shortfall,” Lambert continued.

More drastic actions urged to aid economy

While Vietnam’s strategy to cope with the global health crisis has protected the lives of most, bringing the economy back on track remains a challenging task.

Supply chains are being squeezed as restrictions are being faced across all sectors and segments. Photo Le Toan
Although the macroeconomy remains stable and inflation is under control, the National Assembly last week had to recognise that GDP growth of 5.64 per cent in the first six months of 2021 has not met the set target.

The disbursement of public investment capital remained slow, and overseas investment attraction decreased. Generally, such activities are still facing many difficulties, with the number of enterprises withdrawing from the market increasing by 25.5 per cent in the first seven months of 2021. Meanwhile, the unemployment rate has increased and people’s lives remain challenging amid widely implemented lockdowns across the nation.

In a report, the government acknowledged that the COVID-19 vaccine scheme remains burdensome, with the proportion of vaccinated people still too low. Despite the radical vaccination strategy, long-term success may only be effective when over 70 per cent of the people are vaccinated, the vast majority of experts point out.

Disease control and economic recovery are both huge challenges for the newly-consolidated government and prime minister. The policies and actions of both issued in the last 100 days, such as the disbursement of a $1.13 billion support package for businesses and workers, are not yet enough to help all businesses and people and develop the economy.

Vietnam’s economy continues to be largely stunned amid pandemic prevention measures. However, inconsistent solutions in localities are also seriously affecting production and business activities.

Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association, last week confirmed that 97 per cent of enterprises in the southern textile and garment industry had to stop operating as they failed to meet the requirements for continuing production with their workers present on-site. If factories follow this model, they are allowed to continue production, but must follow strict rules to ensure the safety of their workers and the community.

The complicated developments of the pandemic threw many stones in way of Vietnam’s supply chains, especially when exporting. According to Giang, global partners of domestic enterprises are concerned that their goods may not be delivered on time if Vietnamese manufacturers cannot manage to return to normal production levels. Some of these partners are now diverting to countries with better disease control, indicating an even more difficult situation for Vietnam.

Assoc. Prof. Dr. Bui Quang Tuan, director of the Vietnam Institute of Economics, urged the government to take more drastic and decisive actions based on the learnings from some localities that are currently involved in fighting the pandemic.

“The government should soon find solutions to quickly deal with the hot issues of the economy, while continuing to perfect the economic institutions in the direction of creating an investment and business environment with favourable conditions for medium- and long-term development,” Tuan said.

He believed that special regulations could solve problems related to registration procedures for research and production of vaccines, as well as the disbursement of public investment.

From now until the year’s end, Vietnam’s economy could continue to suffer from the impacts of the pandemic. According to Tuan, the government needs to establish strong policies to protect businesses and economic hubs of the country, while continuing to pursue the dual goal of pandemic curb and economic development. “The endurance of enterprises has almost reached its limit after almost 1.5 years of the pandemic,” he said.

According to the General Statistics Office, in the first seven months of this year, about 79,700 enterprises suspended their operations and are now waiting for the completion of their dissolution. Most of the surviving businesses are those of a certain size and with experience – if these also went bankrupt, the economy would seriously suffer.

The two economic powerhouses, Hanoi and Ho Chi Minh City, account for nearly 40 per cent of the country’s GDP, but both are now forced to implement social distancing to cope with the health crisis. It will be difficult for the economy to recover if these two metropolises continue to suffer from such a woe.

Nevertheless, Prime Minister Pham Minh Chinh – who was re-elected by the National Assembly on July 26 – could be a great advantage. Urgent issues of the economy are still waiting for strong decisions from the prime minister and other members of the government.

People and enterprises feel the pinch of pandemic effects

Given the business community and the public are facing grave aftermaths caused by the pandemic, the government has been urged to offer more effective remedies to succour enterprises and labourers.

A huge number of companies are having to operate with a reduced workforce. Photo: Le Toan
Over the past four months, Nguyen Xuan Tuyen has had nothing to do to feed his four-member family, with his wife having had to stop working as a vendor in the inner city of Hanoi due to travelling restrictions caused by the ongoing pandemic.

Before April, Tuyen had been working for a Japanese company based in Hanoi’s Thang Long

Industrial Zone (IZ) for five years. However, the company, producing electronics and plastics equipment, has made a staff cutback of 100 employees including Tuyen, whose monthly income was about VND8 million ($350).

Like many other employees of the company suffering the cutback, Tuyen lives in Hanoi’s rural Dong Anh district, which is connected to the city centre by the Nhat Tan Bridge, funded by Japan’s official development assistance.

“Our company has had to shrink production caused by a reduction in export orders from Japan and South Korea,” Tuyen told VIR. “Now I hope to be employed again by the company or I will have to seek another job.”

In Kim Chung commune, home to his family, thousands of unemployed people like Tuyen are commonly seen now. They used to work not only in Thang Long IZ but also in other IZs including Quang Minh and Dong Anh in the district.

According to the Hanoi Centre for Employment Services, since early this year the centre has received about 1,500 registrations every day on taking up unemployment insurance and receiving job announcements.

Nguyen Cong Bang, director of Hanoian foodstuff producer Cong Bang JSC, said that his company used to have 300 employees.

“However, COVID-19 has hurt our business and we have had to lay off 150 workers. Now we want to access preferential loans, but the procedures and conditions are quite complicated, and we think we will never be able to approach such a kind of loan,” Bang said. “We have had to resort to loans from other sources to secure our business.”

According to the General Statistics Office (GSO), in the first seven months of 2021, the pandemic forced about 79,900 enterprises, both local and foreign ones, to halt performance and completed procedures for dissolution, up 25.5 per cent on-year. On average, nearly 11,400 enterprises left the market every month.

The number of unemployed people of working age in Q2 of 2021 reached nearly 1.2 million, up by just over 87,000 people over Q1.

Vietnam currently has 870,000 operational businesses, of which about 97 per cent are small- and medium-sized enterprises (SMEs). In the first seven months of 2021, Vietnam saw about 75,800 enterprises newly established, with total registered capital of VND1.06 quadrillion ($46 billion) and employing 555,500 new labourers, up 0.8 per cent in the number of enterprises, and 13.8 per cent in registered capital, but down 7.2 per cent in the number of labourers.

Call for help

At last week’s discussion by the National Assembly, many deputies have called for the government to find timely solutions to deal with how to provide sufficient employment for millions of people kicked out of work due to companies’ shutting down or shrinking operations.

“Hundreds of thousands of people in Cao Bang are out of work due to COVID-19. This has led to more massive woes in the life of people here, especially those living along borders,” said deputy Doan Thi Le An, representing the northern mountainous province of Cao Bang. “Cross-border trading activities have almost been halted, with many workers returning to their localities without employment and income.”

Echoing this view, deputy Nguyen Thị Viet Nga representing the northern province of Hai Duong said that COVID-19 has damaged living, working, and studying activities, with isolation and lockdowns seen in many localities nationwide.

“Simple demands in normal times previously have become a luxury now. Many people and businesses have had to apply for online activities, which are not totally effective. Production firms need physical activities,” Nga said.

Meanwhile, deputy Vu Tien Loc representing Hanoi stressed, “Businesses are now bogged down in great difficulties, especially SMEs – mostly those which are operating in the service sector.”

In this sector, Loc added, besides financial, banking, and insurance services, other types of services are facing massive problems. “Many firms in tourism, aviation, restaurants, hotels, and transport are dying away. It is likely that many of these will be unable to recover after the pandemic ends if no more practical or strong support solutions are taken,” said Loc, who is also chairman of the Vietnam Chamber of Commerce and Industry representing the interests of the domestic business community.

According to the Ministry of Labour, Invalids, and Social Affairs (MoLISA), currently, Vietnam’s unemployment rate is 2.52 per cent. Since early this year, many sectors’ growth in the economy has declined on-year, such as tourism (54.8 per cent), hotels (2.7 per cent), and transport (0.7 per cent).

“The pandemic has attacked our IZs and export processing zones, which are our important economic pillar and use millions of labourers,” said MoLISA Minister Dao Ngoc Dung. “Some IZs have had to halt operations such as Bac Giang closing operations of four IZs affecting 322 businesses using 150,000 labourers, and Bac Ninh seeing 42,000 labourers become unemployed. The fate of other tens of millions of labourers has become similar in Ho Chi Minh City, Hanoi, Danang, and Vinh Phuc.”

Bigger solutions

According to Minister of Finance Ho Duc Phoc, the ministry has allocated VND5.16 trillion ($224.3 million) to the fight against COVID-19 and built a vaccine fund with VND8.3 trillion ($360.87 million) so far.

The Ministry of Finance (MoF) has disbursed VND8.18 trillion ($355.6 million) for the Ministry of Health to purchase 91 million vaccine doses, and the MoF is following procedures to disburse another VND12.28 trillion ($533.9 million) for the same purpose.

“The MoF has been assigned to design a new support package related to taxes and fees, estimated at VND24 trillion ($1.04 billion),” Phoc said. If realised, this would be the second rescue package for the economy that is initiated by the new government, following a recently-released social package worth VND26 trillion ($1.13 billion) for workers and businesses.

“The MoF has also proposed the delay of the implementation of Circular 40 on taxation until January 1, 2022,” Phoc said.

Circular No.40/2021/TT-BTC was issued in June 2021 offering guidelines on VAT, personal income tax (PIT), and tax administration for business households. It was due to take effect on August 1, 2021.

Specifically, a VAT rate of 5 per cent and a PIT rate of 2 per cent shall be applied to sauna, massage parlors, karaoke bars, nightclubs, billiard halls, internet and gaming cafes; tailoring and laundry services, and hairdressing; other repair services including that of computers and household appliances; legal consulting, financial consulting, accounting, and auditing; and services of implementation of administrative procedures related to tax and customs.

Meanwhile, Minister of Planning and Investment Nguyen Chi Dung said the pandemic developments are very complicated and enterprises are in major difficulties. “The MoF and the State Bank of Vietnam are also considering the next support packages,” he said. “Regarding solutions for the coming time, a special task force with the minister of planning and investment as a permanent member will be set up. The task force is in charge of detecting and solving procedural problems at projects in all economic sectors to create the most favourable business environment.”

The government wants to apply policies that allow enterprises to delay the tax and fee payment at a maximum level; create a ‘green passage’ mechanism to pave the way for goods to circulate smoothly; and speed up vaccinations for workers in IZs, aviation, tourism, and accommodation sectors, Minister Dung said.

Since the second quarter of 2020, the government has also been utilising some drastic measures to support businesses. For instance, the SBV has been deploying a package worth VND180 trillion ($7.82 billion) for businesses and households, in the form of debt payment deferral and preferential loans. Most recently, on April 19, the government signed and issued Decree No.52/2021/ND-CP on the extension of time limits for payment of VAT, corporate income tax, PIT, and land rental in 2021. The total size of the package was estimated at VND115 trillion ($5 billion).

However, like many unemployed people, Nguyen Xuan Tuyen lamented that he does not know how to benefit from these packages.

“I have heard about the packages on the media. But several times I have talked with the authorities in the locality, and they said they barely know about how to access them,” Tuyen said.

For example, he said, the government has since April last year been applying a VND62 trillion ($2.69 billion) package to support the unemployed, but those like him have never been able to touch it.

According to the MoLISA, as of May this year, only VND13.1 trillion ($569.5 million) of this package was disbursed, due to various complicated procedures. 

Vietnam prioritises FDI in high technology, innovation during its transformation: ambassador

Vietnam prioritises foreign investment projects in high technology, innovation, research and development, and projects that create favourable conditions for Vietnamese enterprises to participate in the value chain, as well as those related to promoting the digital economy and actively contributing to the country’s sustainable socio-economic development, Vietnamese Ambassador to Singapore Mai Phuoc Dung told a webinar on August 5.

The webinar entitled ‘Future of Vietnam’s transformation and sectoral opportunities’ was held by the Singapore Business Federation (SBF) as part of the ongoing FYIstival ASEAN edition, attracting nearly 300 delegates from Singapore, Vietnam, Hong Kong (China), the US, and Europe.

Ambassador Dung stated that the Vietnamese Government always listens to and works side by side with businesses to provide them with timely support to overcome difficulties caused by the COVID-19 pandemic.

He told participants that Vietnam's GDP grew 5.64 percent percent in the first half of this year, despite the complicated situation of the pandemic.

Regarding Singaporean businesses in particular, the Vietnamese diplomat affirmed that Vietnam always appreciates partners from Singapore in terms of their financial capacity, technology and management capacity.

He also suggested that Vietnam and Singapore need to promote cooperation in areas where both sides have advantages, such as high-tech manufacturing industry, infrastructure and logistics, smart city solutions, energy and renewable energy, financial technology, healthcare, and education, among others.

In his speech, Terrence Oh, a representative from Western Union (WUBS), forecast that the fastest growing industries and sectors in Vietnam in the next 5 years will include high-tech products, transportation, furniture, and electronic products.

Meanwhile, oil and natural gas exploitation, pulp and paper industry, and non-metallic mineral product manufacturing are predicted to be among the slowest-growing industries at the same time, he added.

Delegates at the event also heard assessments of Vietnam’s economic development strategies, experiences in taking advantage of the benefits of free trade agreements (FTAs), and the SuperPort project launched by YCH Group in Vietnam’s northern province of Vinh Phuc.

FYIstival ASEAN edition is the fourth in a series of curated country and region-centred briefing sessions which targets Singapore companies and has to date covered internationalisation opportunities in Africa, South Asia, and Japan.

Running from May to August 2021, the FYIstival ASEAN edition covers six ASEAN markets – Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam – through a series of 14 virtual events./.

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

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