This information was published in the Official Gazette on January 17 regarding the implementation of the EU’s regulation on the temporary increase of official controls and emergency measures governing the entry of certain goods from certain third countries into the bloc.

According to the regulations, Vietnamese export items subject to inspection at the EU borders include bell peppers, instant noodles, and durian, with inspection frequencies of 50%, 20%, and 10%, respectively.

This is the first time that Vietnamese durian products have been subject to excessive pesticide residue testing at EU borders with a frequency of 10%.

Under the new rule, both okra and dragon fruit remain listed in the Appendix II regarding the requirement of a certificate of pesticide control from Vietnam with inspection frequencies of 50% and 20% respectively.

The new rule takes effect 20 days after the date of publication in the official gazette.

Bình Dương promotes industrial manufacturing decarbonisation towards net-zero

Bình Dương Province pledges to accelerate the effort for decarbonisation towards a net-zero future and contribute to promoting sustainable development, Mai Hùng Dũng, Deputy Chairman of the southern province’s People’s Committee, said.

He was speaking at the “US – Việt Nam Getting to Net Zero Workshop: Industrial Manufacturing Decarbonisation” held on Thursday in Bình Dương, discussing potential US clean energy technologies to support Việt Nam’s clean energy transition.

Stressing that climate change is a global issue, Susan Burns, Consul General at the US Consulate in HCM City, said that Việt Nam needs energy efficiency technologies and decarbonisation solutions to promote greener production and reduce costs, especially in the context that the country is emerging as an industrial manufacturing hub of the region, posing a number of challenges to the environment.

Dũng said that the southern province is developing a new ecosystem to supplement the industrial – urban services complex.

It is an ecosystem for innovation, science and technology, a smart eco-industrial model to promote sustainable development and leverage the province’s industry to a new height and gradually develop new growth momentum which will replace advantages from labour-intensive and land resources.

The new ecosystem will help Bình Dương actively participate in the emission reduction to journey towards net zero by 2050 as the Government committed.

Net-zero is not only solving environmental issues or sustainable development, but is also a test of local governance capacity, Dũng said, adding that as a major manufacturing centre of Việt Nam, Bình Dương will participate in the process of bringing net emissions to zero with the desire to contributing to building a sustainable future for Việt Nam and the world.

At the workshop, participants also discuss energy efficiency solutions for industrial parks, eco industrial park models in Việt Nam, industrial decarbonization and potential US clean technologies for industrial manufacturing decarbonisation as well as opportunities to leverage international assistance and opportunities in renewable energy and carbon certifications to drive sustainability in manufacturing. 

Private hospitals look to capture growing healthcare market, profitability varies

Private hospitals are seeking to expand quickly to tap into the growing healthcare market though not all are profitable.

According to the Việt Nam Private Hospital Association, by the end of 2022 the country will have nearly 320 private hospitals with 22,000 beds or a fifth of all hospitals and 8 per cent of beds. There are also 38,000 private clinics.

The non-public medical market is considered to be lucrative for investors due to the rapid growth of the middle class in Southeast Asia and increasing spending on healthcare.

Nevertheless, not all participants are finding it uniformly profitable.

Only two private hospitals, Tâm Đức Heart Hospital and Thái Nguyên International Hospital Joint Stock Company, publicly disclose their financial performance since they are listed on the stock market.

Thái Nguyên, established in 2013, has since increased its charter capital from VNĐ27.7 billion (US$1.1 million) to VNĐ518 billion.

It operates the Thái Nguyên International Hospital and Yên Bình Thái Nguyên General Hospital with a total of 550 beds, and is the largest private healthcare provider in the mountainous provinces of the north-east.

Its average annual revenues were around VNĐ270 billion from 2015 to 2019. But they rose significantly after it expanded in 2020, and are on course to reach a record VNĐ415 billion in 2023.

It next plans to build a hospital in Bắc Giang with 300 beds and another in Hà Nội with 500.

Tâm Đức Heart Hospital Joint Stock Company, which opened in 2006 with 250 beds, achieved revenues of over VNĐ723 billion and pre-tax profits of nearly VNĐ104 billion in 2022. 

In the first nine months of 2023, for which results are available, it had net revenues of VNĐ553 billion, a 4 per cent increase year-on-year, and pre-tax profits of VNĐ73 billion.

However, many other private hospitals are struggling to generate significant profits or are even losing money.

Vinmec International General Hospital, part of conglomerate Vingroup, is one of the leading private hospital networks in terms of revenues. It has 10 hospitals and clinics with 1,650 beds.

It saw a 50 per cent increase in the number of patient visits in 2022, but remained mired in losses despite a 53 per cent revenue growth to VNĐ4.48 trillion.

Its pre-tax loss in 2022 topped VNĐ700 billion.

Hoàn Mỹ Medical Joint Stock Company, which owned the Hoàn Mỹ hospital chain, reported an after-tax loss of nearly VNĐ50 billion in 2022 after a profit of VNĐ285.5 billion the previous year.

By the end of 2022 its liabilities amounted to VNĐ3.48 trillion.

Hoàn Mỹ was bought by Richard Chandler's Clermont Group in 2013. 

The Tâm Anh General Hospital chain belonging to medical and pharmaceutical entrepreneur Ngô Chí Dũng (the person behind the VNVC and Eco Pharma brands) makes negligible profits despite earning revenues of hundreds of billions of đồng.

In 2019 and 2020 the private hospital chain reported after-tax profits of VNĐ1.14 billion and VNĐ380 million on revenues of VNĐ660 billion and VNĐ745 billion.

Tâm Anh was established in 2007 but only began operations in 2016. It has one hospital each in Long Biên District in Hà Nội and District 2 in HCM City.

In July 2023 Thomson Medical Group paid US$381.4 million to acquire Far East Vietnam Medical Company Limited, owner of FV Hospital, making it the largest M&A deal in Southeast Asia in the healthcare sector since 2020.

FV was founded by Dr. Jean-Marcel Guillon in 2003 with a group of French doctors and registered capital of $44 million.

By last year it had nearly 200 beds and more than 30 specialities, and was capable of treating 1,500 patients per day.

According to Thomson Medical Group, FV made a profit of $19.5 million in 2022.

In 2019-22 it achieved annual revenue growth of 8.2 per cent and profit growth of 14.8 per cent. 

Bringing e-commerce into the tax net

Tax authorities plan to expand the list of taxable entities to properly and fully tax digital business activities.

There are many problems in managing e-commerce taxation, Nguyễn Thị Lan Anh, head of the General Department of Taxation (GDT)’s small and medium-sized enterprises, household and individual tax management department, said.

Households and individuals involved in e-commerce often lack business and tax registration addresses, she said.

In many cases, they use other people's information to register their business, making it difficult for the tax authorities, she said.

They could do business on many e-commerce platforms and have many stores on each, as well as on social networks, adding to the difficulty, she said.

Many e-commerce sites do not provide complete information about organisations and individuals doing business on their platforms.

In the case of businesses accepting cash on delivery, the delivery companies cannot provide the name or tax code of the seller to tax agencies.

The GDT will study and propose amendments and supplements to the laws this year to make it incumbent on platform owners, foreign suppliers without business establishments in Việt Nam, shipping units, banks, and payment intermediaries to provide information to tax authorities about e-commerce activities.

It plans to set up a database using information from taxpayers, tax authorities, inspections, and third parties.

It will develop a risk management model for organisations and individuals involved in e-commerce, applying artificial intelligence to process big data and issue warnings in case of tax risks.

Nguyễn Bằng Thắng, director of the GDT’s large enterprise tax management department, said tax authorities would apply big data analysis to identify foreign businesses, organisations and individuals that have revenues in Việt Nam but do not register or file for taxes.

At the same time, tax authorities will actively co-ordinate with the Ministries of Industry and Trade, Information and Communications and Public Security and the State Bank of Việt Nam to share data to improve e-commerce tax oversight and management. 

Industrial parks key to attract investment: FAIP

Việt Nam should improve the mobilisation of investment in infrastructure for industrial parks, particularly for ecological industrial parks, which have faced significant challenges in recent years, according to the Financial Association of Industrial Parks (FAIP). 

Industrial parks have become the major focus in attracting domestic and international investment projects, with major global corporations investing in them. Domestic and foreign businesses operating in industrial parks contribute approximately half of the country's total export turnover (as of the end of 2022) and make important contributions to the national budget.

According to data from the Ministry of Planning and Investment (MPI), there are currently 414 industrial parks established in 61/63 provinces and cities nationwide, covering a total area of nearly 127,000 hectares. There are also over 1,000 industrial clusters with a total area of more than 31,000 hectares.

Dr. Ngô Công Thành from the Institute of International Investment Research (ISC), said limitations such as the quality and effectiveness of investment policies not meeting development requirements. Collaboration within and between industrial parks, economic zones, and regions, as well as subpar innovation, sustainability issues, and imbalances in socio-economic and environmental aspects, remained significant hurdles to overcome.

Experts said investors, limited by financial capacity, often waited to find other investors before investing in shared infrastructure, which creates a dilemma as they may have to wait for a long time. This situation has led to low occupancy rates in many industrial parks.

To mobilise capital for investment in industrial parks in the coming years, fundamental changes were required to facilitate the flow of funds. FAIP said it's willing to provide all necessary support to businesses and management agencies in seeking solutions to mobilise resources for the robust development of Việt Nam's industrial parks and economic zones, aligning with the direction of green and sustainable growth.

Dr Lê Minh Nghĩa, Chairman of the Vietnam Financial Consulting Association, said the main focuses include promoting industrial park development, tax and fee policies, investment policies, credit policies and land policies. However, the role of credit policies remained relatively unclear in practice, and financial resources for the development of technical infrastructure in industrial parks were limited.

Dr Cấn Văn Lực, an economic expert at the Bank for Investment and Development of Vietnam (BIDV), suggested solutions to address financial challenges, emphasising the need to complete institutional frameworks, expediting the review process for industrial park real estate projects, implementing approved socio-economic development plans, and allocating public investment for upgrading infrastructure connecting industrial parks.

He stressed the importance of special policies for ecological industrial parks, and financial institutions' need to implement guidelines and instructions from the State Bank of Vietnam (SBV) and the Ministry of Finance (MoF) to support capital and tax policies.

FAIP has served as a bridge between industrial park businesses, state management agencies, international investors, and foreign economic and financial organisations to mobilise resources, especially for the development of industrial parks in the country. 

Hải Dương lures additional $1.5 billion in investment

he northern province of Hải Dương recently granted investment certificates to 27 domestic and foreign enterprises with a total registered capital of US$1.5 billion, including several projects worth hundreds of millions of US dollars.

The locality has announced its investment attraction portfolio for the 2024-30 period and handed over investment certificates to 26 local and foreign businesses, and a memorandum of understanding to a domestic firm.

Notable projects among them include a $270-million stationery factory invested by Deli Vietnam Office Technology Co, Ltd; a project worth $260 million by Biel Crystal Vietnam Manufacturing Limited, a Boviet Hai Duong solar photovoltaic cell factory worth $120 million, and a $160-million construction investment and infrastructure business in the Đại An Industrial Park (IP) of the Đại An IP Infrastructure Development One Member Company Limited.

The positive results were due to efforts and firm direction by local leaders to enhance investment promotion activities, improve investment and business environment, and raise the competitiveness of the locality.

Apart from focusing on attracting foreign investment in industry and agriculture, the province has also paid attention to luring investment to other fields from health and education to trade and tourism, according to Director of the provincial Department of Planning and Investment Lê Hồng Diên.

In 2023, dozens of investment promotion business trips by local officials to many countries around the world such as the US, Japan, Belgium, the UK and France were arranged to attract more investment into processing and manufacturing sectors, electrical and electronic industry, construction material production, high-tech agriculture, eco-tourism, high-quality services and logistics, he said.

Triệu Thế Hùng, Chairman of the provincial People's Committee, said that investment projects in the fields of high technology, smart technology, biological industry, new materials, processing and manufacturing, supporting industry and environmentally friendly projects with high added value will be prioritised.

Hải Dương is home to 534 foreign-invested projects from 27 countries and territories worldwide with a total registered capital of over $10 billion. The locality has 17 IPs with an occupancy rate of nearly 53 per cent. It has 58 industrial clusters which cover a total area of nearly 3,000 ha.

ADB and BII set to promote green trade in Asia and Vietnam

The Asian Development Bank (ADB) and British International Investment (BII) unveiled a new US$100 million financial partnership to promote green trade in Asia and the Pacific, including Vietnam.

This support will initially focus on Vietnam’s transactions and will be subsequently extended to other countries supported by ADB and BII.

This partnership will also provide financing for local importers of solar panels, wind turbines, electric vehicles, and agricultural goods, thereby supporting the region’s transition to cleaner energy.

“As Asia’s climate bank, ADB is committed to supporting green, climate-smart, and sustainable trade to reduce climate impacts by promoting the transition to renewable energy sources,” said Suzanne Gaboury, director general for Private Sector Operations of ADB.

“Partnerships like this with BII demonstrate ADB’s leadership in convening multilateral institutions to deploy trade financing solutions that promote sustainable, trade-based international development,” she noted.

For his part, Srini Nagarajan, managing director and head of Asia of BII, emphasised that "Green trade finance enables supply chain development of the renewable energy industry and tackles the bottleneck for much needed long-tenor financing in the region.”

“We are delighted to work with ADB on a shared ambition to support the region’s energy transition and build climate resilience,” he added.

VND2.52 trillion approved for power supply to Con Dao

The National Assembly has approved an investment of VND2.52 trillion (USD104 million) from the state budget for an electricity supply project to Con Dao Island in the southern province of Ba Ria-Vung Tau.

The project, part of the country’s medium-term public investment plan for the 2021-2025 period, will be carried out by Electricity of Vietnam (EVN). VND4.95 trillion (USD209 million) has been earmarked for the project by the government with VND2.42 trillion to be sourced from EVN’s budget.

The Ministry of Industry and Trade is responsible for appraising the project’s feasibility study, as well as inspecting and supervising progress and monitoring for potential incompetence or corruption.

EVN will link Con Dao to the national grid via a 73-kilometre undersea cable and a 23-kilometre overhead cable.

The island’s electricity demand is expected to reach 24.5 MW by 2025 and 114.40 MW by 2025.

Currently, Con Dao is facing an electricity shortage, particularly due to the increasing number of tourists.

Under the medium-term public investment plan in the 2021-2025 period, the National Assembly has also approved the allocation of over VND63.72 trillion for public investment projects to transportation, defence, state management and science and technology. Of the sum, VND57.73 trillion will be spent on 32 transport projects. 

Dalat flower farmers hit by economic downturn

Farmers in Dalat City, one of the country's largest flower hubs, are facing slow sales this year.At Van Thanh Flower Village in Ward 8, people are busy preparing for the year's biggest season around the Tet Lunar New Year Festival.

A farmer, Nguyen Hung Vy, said that he has just planted lilies for the Tet festival but has had to reduce the area by 30 percent due to low demand."I've received fewer orders for Tet flowers this year," Vy explained. "Customers said that people seemed to cut spending on flowers and bonsai to save money due to financial difficulties."

Another farmer, Vu Ngoc Thanh, has also planted daisies on his 1,100-square-metre farm.

"These daisies are due to be harvested for Tet," Thanh said, adding that he decided to cut the flower growing area by 20 percent as his customers had placed smaller orders compared to previous years.

"I’ll focus on the quality of the flowers and hope that we get good prices during Tet," the farmer said.

Deputy director of the Lam Dong Provincial Department of Agriculture and Rural Development, Nguyen Van Chau, said that the global economic downturn has badly affected flower and bonsai growers in Dalat City this year, especially in the run-up to Tet.

"Local farmers have been well aware of the situation and have adjusted their production to better adapt to the situation, such as reducing growing areas and focusing on new kinds or those that can last longer," the official said. "I hope that they can overcome this period and maintain the good reputation for Dalat flowers.

According to the chairman of Dalat Flower Association, Phan Thanh Sang, local farmers are going to release some three million orchids for sale for Tet.

"Thanks to favourable soil and weather, Dalat has always been known for growing the most beautiful orchids which live long and are easy to take care of," Sang said. "We have varied sizes to suit customers who can spend from just between VND160,000-200,000 for a small pot or hundreds of millions for larger ones."

Work starts on power line projects in north-central region

Vietnam Electricity Group (EVN) and the National Power Transmission Corporation (EVNNPT) have commenced work on multiple projects to improve electricity transmission in the northern and central regions of the country.

The projects include key sections like the 500 kV Quang Trach–Quynh Luu and Quynh Luu–Thanh Hoa transmission lines. The 500 kV Thanh Hoa substation and Nam Dinh-Pho Noi transmission line are integral parts of this extensive undertaking.

These projects are part of the larger 500-kV transmission line circuit 3 project, involving the construction of 500 kV transmission lines spanning over 500 kilometers across nine provinces, including Quang Binh, Ha Tinh, Nghe An, Thanh Hoa, Ninh Binh, Nam Dinh, Thai Binh, Hai Duong and Hung Yen.

The total investment cost is VND22 trillion, with the primary objective of strengthening the power grid and enhancing electricity transmission from the North-Central region to the northern provinces.

These projects focus on increasing transmission capabilities from the north-central region to the northern provinces, playing a pivotal role in mitigating potential overload risks on existing 500 kV lines.

While this initiative is crucial for bolstering power transmission infrastructure, it has faced hurdles, particularly in land clearance in densely populated areas and challenging terrains in Ha Tinh, Nghe An, and Thanh Hoa provinces.

In response to these challenges, EVN has proposed delegating authority to provincial People’s Committees to expedite approvals for forest impact assessments and land clearance to ensure the timely completion of the project. 

Vietnam’s shrimp exports to Australia double in five years

Vietnam’s shrimp exports to Australia have doubled since the nation became a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) five years ago.

Vietnam now secures a shrimp market share of a staggering 70% in Australia, up from the pre-CPTPP market share of 32%.

The Vietnamese seafood industry has capitalized on the trade advantages from the CPTPP. Vietnamese seafood has also gained higher market share in other CPTPP member economies.

In Canada, Vietnam’s seafood market share has risen from 7-8% to a solid 10%, according to the Vietnam Association of Seafood Exporters and Producers (VASEP). Shrimp exports to this country have picked up from 18% to 25%, securing the top position.

While the success story continues, VASEP has highlighted the challenges posed by domestic market competition from CPTPP member economies such as Japan, Chile and Australia.

Logistical hurdles have impacted competitiveness. Vietnam’s seafood export sector heavily relies on foreign logistics systems, rendering it vulnerable in times of instability, as witnessed in the recent Red Sea tension.

The ongoing Red Sea tension underscores deeper issues within Vietnam’s logistics industry, where foreign shipping companies wield significant control over pricing and escalating freight rates, according to VASEP.

Road connecting Vietnam and Laos to be repaired

The Department for Roads of Vietnam has approved a VND66.5 billion project to repair National Highway 15D which links Vietnam’s Quang Tri Province and Laos.

The project will help accommodate the increasing number of vehicles on the road and facilitate the transportation of coal from Laos.

The Quang Tri Department of Transport said that the upgrade of the 12.2-km National Highway 15D, running through Dakrong Province, will commence this year. The project includes repairing road infrastructure and water drainage along the road.

In 2023, the Department for Roads of Vietnam allocated over VND26 billion to repair and renovate some segments of the road to improve traffic safety.

Despite frequent upgrades and repairs, National Highway 15D is continuing to deteriorate due to the rising traffic volume and unfavorable terrain.

National Highway 15D starts at the intersection with Ho Chi Minh Road and ends at the La Lay international border gate. This road is the sole link between Salavan District in Laos and Dakrong District in Quang Tri Province.

Total outstanding loans expected to expand 4.4% in Q1

Total outstanding loans in the economy are expected to rise by 4.4% in the first quarter of this year, signaling a departure from earlier forecasts, according to the State Bank of Vietnam’s Department of Forecasting and Statistics.

The department has projected a more optimistic outlook for the entire year, with a 14.2% increase in credit, 40 basis points higher than the previous forecast of 13.8%.

Citing a survey, the department stated that interest rates at commercial banks might dip 30 to 40 basis points in January-March, with a 20-basis-point decrease expected for the entire year.

It is anticipated that deposits will rise by 2.6% in the first quarter, followed by a robust surge of 12.1% throughout 2024.

Despite hopes for a fall in bad debt, the survey pointed out that the ratio of non-performing loans to total gross loans among banks picked up in the fourth quarter of 2023. However, optimism remains as a mild reduction is projected for quarter one of 2024.

The performance of Vietnam’s banking sector in the final quarter of last year improved mildly compared to the preceding quarter. However, results fell short of expectations, with 78.6% of banks expecting positive pre-tax profit growth in 2023, 17.9% seeing a contraction, and 3.6% experiencing no change.

HCMC leads in FDI attraction

HCMC was the frontrunner among all Vietnamese localities in foreign direct investment (FDI) attraction last year, with US$5.85 billion registered in the city.

The city’s FDI thus accounted for nearly 16% of the country’s FDI attraction of US$36.6 billion last year. Other localities that followed HCMC in FDI attraction included Haiphong, Quang Ninh, Bac Giang, Thai Binh, Hanoi, Binh Duong and Dong Nai.

HCMC has so far attracted over 12,000 projects with total investment capital of more than US$57 billion, also taking the lead in FDI attraction.

The city’s project count comprises nearly 32% of the nation’s total FDI projects and contributes around 13% of the overall registered capital.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, Vietnam attracted a total of 39,140 FDI projects with pledged capital nearing US$469 billion by the end of last year.

The 10 localities securing the most significant FDI inflows were HCMC, Hanoi, Binh Duong, Dong Nai, Ba Ria-Vung Tau, Haiphong, Bac Ninh, Thanh Hoa, Long An, and Quang Ninh.

In contrast, the provinces with the lowest FDI levels by the end of last year were Lai Chau, Dien Bien, Ha Giang, Cao Bang, Bac Kan, Gia Lai, Son La, Ca Mau, Tuyen Quang, and Dong Thap. Among these, Lai Chau and Dien Bien each hosted only one FDI project, with respective pledged capital of US$1.5 million and US$3 million.

Vietnam in top-10 countries with leading e-commerce growth rate

The Industry and Trade Ministry yesterday shared that e-commerce activities in Vietnam last year effectively exploited the purchase power of the market, resulting in a significant rise compared to the overall growth rate of the national economy.

Accordingly, the revenue increase in the total retail sales and services via e-commerce in 2023 surpassed the industry’s set target of 8-9 percent.

The domestic merchandise supplies are abundant and can easily answer the demands of the community, leading to quite static prices and successfully contributing to controlling inflation and stabilizing the market.

The Industry and Trade Ministry further informed that e-commerce became one major goods distribution channel in Vietnam besides conventional ones like markets, supermarkets, department stores, and convenience stores. E-commerce helped boost the consumption of produce and food, especially during harvesting time.

Various businesses enjoyed remarkable growths thanks to e-commerce.

In 2023, Vietnam’s retail e-commerce market earned about US$20.5 billion, accounting for 8 percent of the country’s revenues on consumer goods and services. It reached the growth rate of 25 percent, entering the list of top-10 nations with the leading e-commerce growth rate in the world.

Vietnam serves as strategic platform for diversifying global supply chain: AMRO

Vietnam continues to be a preferred destination for investors, given its attractiveness as a strategic hub for diversifying the global supply chain.

Chief Economist of the ASEAN+3 Macroeconomic Research Office (AMRO) Hoe Ee Khor told The Hanoi Times at the launch of its quarterly update of the ASEAN+3 Regional Economic Outlook (AREO).

According to Khor, the Vietnamese economy faced significant challenges last year and experienced a significant slowdown.

“However, it exhibited a robust rebound in the latter half of the year to reach a GDP growth of 5.1%, surpassing our initial expectations for GDP growth [4.7%],” he added.

Khor noted the economy would continue the growth momentum to hit an estimated economic expansion rate of 6%.

With the rate slightly below the official target of 6.5%, Khor pointed attributed the assessment to concerns over the export sector's recovery that displays a robust resurgence, due to sluggish external demand.

“Vietnam’s GDP growth rate remains high compared to other countries in the region,” he continued.

Meanwhile, the economist pointed out that Vietnam remains a preferred destination for investors, particularly in the context of the China+1 strategy.

Despite a slight dip to $23.2 billion in foreign direct investment (FDI) attraction compared to the previous year, the country continues to inspire optimism among investors.

Khor also pointed out that much of the investment comes from Chinese investors, given the rising costs in China.

“The attractiveness lies in Vietnam's potential to serve as a strategic platform for diversifying the global supply chain,” he noted. However, it is crucial to acknowledge Vietnam's vulnerability to external shocks, as evidenced by the recent downturn in the electronics cycle and manufacturing exports.

To enhance economic resilience, Vietnam should prioritize diversifying its export markets, moving away from dependence on a few countries. Additionally, there is a pressing need to ascend the value chain by shifting towards higher-value manufacturing exports.

These strategies will not only mitigate the risks associated with economic fluctuations but also position Vietnam for sustained and diversified growth in the long term, Khor suggested.

For the ASEAN+3 region (including China, Japan, and South Korea), AMRO expected an average growth forecast of 4.5%, thanks to strong domestic demand and moderating inflation.

The region is forecast to end 2023 with full-year growth of 4.4%, slightly higher than last October’s projection of 4.3%. The upward revision reflects China's higher growth of 5.2%, up from last quarter’s forecast of 5%.

Stabilizing industrial and service activities in the Chinese economy are helping to provide additional momentum for the region in 2024, alongside gradual improvement in exports to other key markets.

“The recovery in the global tech cycle is starting to be felt in the region’s export performance, especially in electronics,” said Khor. “But non-tech exports are lagging in terms of recovery, which is why recent manufacturing sentiment surveys are relatively mixed.”

Price pressures continue to recede across member economies, mirroring the trend in global commodity prices. Inflation in the ASEAN+3 region—excluding Laos and Myanmar—is forecast to moderate to 2.6% this year from an estimated 2.8% in 2023. Upside risks to inflation remain salient, however, and core inflation continues to be high in many economies. 

“Spiking global commodity prices remains the main risk to growth, but there are several other wild cards. We still cannot rule out a US recession, for one,” Khor cautioned. “The lead-up to the US election in late 2024 could also exacerbate policy uncertainty and volatility in financial markets.”  

AMRO estimates that a recession in the US and the eurozone this year could potentially halve the region’s GDP growth. The negative impact on the region’s growth would be amplified if the momentum in China’s economic recovery weakens in tandem.

Full steam ahead to expedite key transport projects from early new year

Since the early days of 2024, transport contractors have been driving hard to complete key projects, as assigned by the government.

Three days after the government enacted Resolution No.01/ND-CP dated January 5 to present major tasks for socioeconomic development and the state budget estimate for 2024, Nguyen Xuan Sang, Deputy Minister of Transport, signed a dispatch to the Maritime Project Management Unit urging it to accelerate the pace of the project to upgrade the Cai Mep-Thi Vai channel route – the section from buoy zero to the Cai Mep container terminal.

Valued at just $59 million, the project is deemed one of the key projects in the maritime sector and the Ministry of Transport (MoT) has been tasked with ramping up efforts for its completion as soon as possible.

Once completed, the new channel will be capable of receiving vessels from 160,000-200,000DWT, significantly bolstering the capacity of the whole channel network going to and from the Cai Mep-Thi Vai deepwater port system.

Aside from directly driving down transportation costs and time for Vietnamese exports to anchor at seaports in Europe and North America, the project also creates motivation to spur socioeconomic development in the southeastern region.

“Hence, both the contractors and implementation units have been urged to forge ahead in the spirit of the PM's guidance,” said DM Sang.

Along with this, the MoT has mandated that the Maritime Project Management Unit needs to upscale its manpower, materials, and equipment, striving to complete the aforementioned channel route in January, and finalising the remaining construction work in May.

With this schedule, the project will require just 18 months for execution.

Vu Quang Minh, director of the Maritime Project Management Unit said, “The current tempo is very positive. If the weather supports progress, the project can reach the target of opening the channel to traffic before the Lunar New Year 2024.”

A raft of other crucial transport infrastructure projects have received instructions to continue working during the holiday period, particularly component projects under the North-South highway’s eastern section and Long Thanh International Airport.

Vu The Phiet, CEO of Airports Corporation of Vietnam, the developer of component project 3 for the T3 passenger terminal at Long Thanh International Airport, noted that after undergoing myriad hardships, the project has secured certain achievements, with important bid packages being kick-started from August 2023 at a total contract value approximating $2.2 billion.

So far, the project items have closely followed the schedule, matching the government’s guidance.

In 2024, the MoT aims to complete 23 projects, including the important Dien Chau-Bai Vot and Cam Lam-Vinh Hao sections of the North-South highway’s eastern part, bringing the total highways in use to 2,021km.

The MoT is also set to accelerate the implementation of key transport infrastructure projects of national significance, such as Hanoi’s belt road 4, Ho Chi Minh City’s belt road 3, the Khanh Hoa-Buon Ma Thuot and Bien Hoa-Vung Tau expressways, and more.

Nguyen Duy Lam, Deputy Minister of Transport, stated that as most of the pivotal projects are in an acceleration phase, the MoT’s many construction sites might not stop work during the Lunar New Year holidays.

“We have assigned the Vietnam Transport Trade Union, the Vietnam Expressway Authority, and the Transport Construction Investment Management Authority to launch an emulation campaign, particularly during Lunar New Year, and work on activities to reward deserving individuals and units at various transport construction sites across the country,” said Lam.

VNR encouraged to stay hungry for railway headway

Vietnam Railway Corporation is being urged to step up its progress to help fund a high-speed railway project on the North-South axis.

Speaking at last week’s conference to launch production and business plans and tasks for VNR in 2024, Prime Minister Pham Minh Chinh requested that it make a breakthrough in revenues and profit to accumulate resources for investment and exploitation of the high-speed railway project.

“VNR should not be satisfied with the normal growth rate, with changes revolving around renovating and renewing some stations and locomotives. The group should make efforts to turn the impossible into the possible. VNR needs to take advantage of its available resources, from railways to land banks, nearly 300 stations, 22,000 employees, and the world’s most beautiful railway landscape,” the prime minister said.

A north-south high-speed railway has been on paper for some time, identified as a backbone to connect urban railways, major economic centres, domestic transportation hubs, and international borders.

VNR and its member companies collectively recorded a successful business performance in 2023 after three consecutive years of mounting losses. It posted a consolidated revenue of about $347 million and an after-tax profit of $3.86 million, reaching 101.7 and 115 per cent of the year’s plan, respectively.

VNR itself witnessed improvement as it generated a revenue of $253 million, fulfilling 96 per cent of the target. Meanwhile, its after-tax profits reached $183,600, representing 150 per cent of the target.

Commending on the progress, the prime minister said, “Over the past time, we have seen positive changes with the corporation attaining new business leaders. However, while the railway sector has had more than 140 years of establishment, development is still not commensurate with the wishes of the people.”

VNR incurred huge losses during the 2020–2022 period. However, the corporation has taken drastic measures to restore business and production activities, thereby escaping losses in 2023. This was deemed a great achievement for VNR amidst the economic slowdown and shrinking demand for cargo transportation via railway.

Director Hoang Gia Khanh said, “2023 witnessed a change in the flow of freight transport due to high inventories among retailers, weak consumer demand, and fierce competition in freight rates between rail and ocean transportation, which led to a decrease in the market share for rail freight.”

To make a breakthrough, VNR will continue to maintain its growth trajectory in 2024. Accordingly, the parent company aims to achieve $236.5 million in revenue and nearly $204,000 in after-tax profit this year. Meanwhile, transport output will increase by about 7.3 per cent over the same period.

According to company leaders, to open up more business space for railway enterprises like VNR, state management agencies need to remove lingering problems related to the management mechanism, use and exploitation of national railway infrastructure, and preferential policies on land use for railways. Another bottleneck is linked to the issuance of land use rights certificates for railway land areas that do not have legal records.

To promote the development of the railway sector, PM Chinh requested relevant authorities to work closely with the sector to effectively carry out approved policies.

He stated that VNR should play a significant role in implementing the National Railway Transport Development Strategy with a view to delivering a secure and practical mode of transportation for individuals and companies. The corporation needs to complete its 2025 restructuring plan immediately in order to present it to the PM for approval.

The VNR oversees a vast railway system covering over 3,100km and five main routes, including two international inter-modal routes connecting with Chinese railways.

Limited supply poses a risk of electricity shortages

Limited supplies, a rise in demand, and exorbitant electricity purchase expenses could potentially result in electricity scarcity in 2024.

There is tremendous urgency to guarantee a reliable electricity supply this year. The Ministry of Industry and Trade (MoIT) mandated two weeks ago that Vietnam Electricity (EVN) submit the electricity assurance plan for the national power system by March 15. The plan must detail strategies for supplying fuel to thermal power plants, with a particular focus on the northern region during the dry season’s peak months in 2024.

The north could lack 1,200–2,500MW from late May to July, according to the general superintendent of Northern Power Corporation (NPC), Nguyen Duc Thien.

“The corporation has devised two power supply scenarios to prevent a recurrence of power shortages similar to the one that occurred in the summer of 2023. In doing so, the group was compelled to decrease its load capacity by approximately 3,952MW, which is equivalent to a reduction in output of 608 million kWh,” Thien said.

The NPC provides electricity for major industrial sites and manufacturers, with a concentration in the provinces of Nghe An, Hung Yen, Bac Giang, Phu Tho, Quang Ninh, Thai Nguyen, Nam Dinh, Thanh Hoa, and Vinh Phuc.

Importing electricity from China is part of the NPC’s strategy to ensure the north has an adequate power supply this year. Thien disclosed that the organisation intends to procure electricity from two different sources in China.

EVN is preparing power sources for a high development scenario in which the electricity growth rate is 9.4–9.8 per cent and GDP increases by 6–6.5 per cent.

The general director of EVN, Nguyen Anh Tuan, is apprehensive that alterations in the source structure could potentially introduce hazards and repercussions to the power supply strategy in 2024.

“At present, EVN possesses a mere 37.2 per cent of the overall power capacity, while PetroVietnam and Vinacomin each own roughly 10 per cent. The remaining capacity is under the ownership of the private sector,” Tuan said. “The overall system capacity has been recorded at 80,556MW in 2023. However, actual mobilisation is considerably lower, and the power reserve is also quite limited.”

The escalating expense of procuring electricity contributes to further complications for the power source. At present, market prices account for an exclusive 45 per cent of electricity production, with the cost of renewable energy being equivalent to the production expenses of EVN. The mean cost of electricity purchased by EVN is 8.6 US cents per kilowatt-hour, whereas the electricity is sold for approximately 8 US cents per kWh. This forces EVN to sell its electricity at a loss of 0.6 US cents per kWh.

EVN’s accumulated losses exhibit a persistent upward trend in 2023, notwithstanding the implementation of two price adjustments for electricity – a 3 and 4.5 per cent increase, respectively.

Tuan verified that the group’s financial situation “is insufficient to cover the costs of electricity production.” The aggregate cost of electricity generation, transmission, and distribution amounts to approximately 8.6 US cents per kWh. However, the prevailing average retail electricity price of merely 8 cents per kWh results in an accumulated loss for the group for the second year in a row.

In early December, EVN submitted a report to the MoIT disclosing its financial setbacks for 2023, which amounted to an estimated $696 million. Of this amount, EVN alone incurred a loss of just over $1 billion. This group incurred a similar loss in 2022 due to electricity production, trading, and other associated activities.

“Fundamental deficiencies within the electricity price mechanism are imposing economic strains on the group. We will be unable to achieve financial equilibrium if the practice of selling at a loss persists,” Tuan said. “We advise the MoIT to expeditiously present amendments and supplements to EVN’s regulations for governmental approval, along with the policy of importing electricity sources into Laos.”

The MoIT has issued Decision No.3376/QD-BCT authorising the electricity supply plan for April through to July 2024, the high months of the drought season. The ministry approved the plan to provide operational backup in response to EVN’s request, ensuring power supply for the national power system.

During the peak months of the dry season in 2024, the entire nation will import 109.183 billion kWh of electricity produced by power plants at generator terminals.

Vietnam moves into gear to ensure petroleum supply

Vietnam has placed priority on ensuring a robust supply of petrol in 2024 to avoid any fuel shortages amid market fluctuations.

The Ministry of Industry and Trade (MoIT) estimates that Vietnam’s fuel demand will reach 28.42 million cubic metres in 2024. According to the Vietnam Petroleum Association, petroleum demand shrunk in 2023 after Vietnam’s economic growth slowed to 5.05 per cent last year.

However, domestic petroleum demand is forecast to increase dramatically in 2024 as prices and supply are affected by complex fluctuations in the global market, including unpredictable supply and prices of strategic materials, as well as geopolitical conflict.

With the disruption and price hike concerns, the prime minister has sent an official document requesting the MoIT and relevant ministries to implement solutions to avoid supply shortages in any situation.

Accordingly, the ministries will direct large petroleum traders, businesses, and petroleum retail stores across the country to formulate feasible business plans, ensuring sufficient stock to meet market demand. They should allocate sufficient manpower to meet demand during the Lunar New Year.

Minister of Industry and Trade Nguyen Hong Dien said, “It is important we plan beyond annual demand cycles to cover monthly and quarterly intervals as well. This plan should be adjusted flexibly. Key petroleum enterprises should ensure the strict implementation of the allocated total minimum petroleum supply with contingency plans.”

In any unusual cases, businesses should proactively report and propose policy mechanisms or situational solutions to state management agencies, Dien added.

“Petroleum is an important strategic material that has a great impact on the consumer price index and macroeconomic stability. Therefore, it is vital to operate according to market mechanisms while still ensuring the state’s role in regulating this commodity to maintain supply and avoid disruption,” the minister added.

Many companies are gearing up to ensure a stable supply of petroleum in 2024. MoIT has allocated Vietnam National Petroleum Group (Petrolimex) to source 1.5 million cu.m per tonne of petrol. This figure is up 12 per cent compared to Petrolimex’s sales output in 2023. For diesel products assigned by the MoIT, the increase will be 22 per cent compared to the group’s sales output in 2023.

Tran Ngoc Nam, deputy general director of Petrolimex, said, “This month the group has secured purchasing sources from two factories in Vietnam as well as exports, an increase of about 10 per cent compared to the average assigned output. With early preparation and close collaboration with two local oil refineries and trading partners, the group is committed to fulfilling its responsibility. The group develops purchasing plans to ensure an effective business plan and supply.”

Likewise, PetroVietnam will ensure petroleum supply equal to 2023 when its supply exceeds the proposed target. Meanwhile, Military Petroleum Corporation is assigned a 2024 quota that is 30 per cent higher than that of 2023.

In 2023, Nghi Son Refinery and Petrochemical and Binh Son Refining and Petrochemical recorded the output exceeding its designed capacity, contributing to the stable supply for the local market. However, there were some sporadic shortages across the country. Some key enterprises have not strictly complied with the allocated total minimum petroleum supply as well as other regulations such as warehouses, yards, minimum trade reserves, compliance with tax obligations, or management and use of stabilisation funds.

Therefore, the MoIT proposed that the Ministry of Finance, the State Bank of Vietnam, and other ministries coordinate to regulate petroleum, proposing solutions to avoid disruptions for the rest of the year.

The blueprint for smart city

Dozens of cities and provinces across the country will have to accelerate their plans if they want to reach their smart city ambitions by the end of this decade.

Ahead in the race currently is Binh Duong province. At the end of last year, the World Intelligent Community Forum honoured Binh Duong as one of 21 communities with an outstanding smart city development strategy for the third year in a row. Mai Hung Dung, Standing Vice Chairman of Binh Duong People’s Committee, said that its infrastructure system is heavily invested in, while the innovation ecosystem is constantly developing.

“Since 2016, Binh Duong has achieved positive results, the economy continues to grow, the economic structure continues to shift in the right direction, GDP per capita increases, and the urbanisation rate has reached 82 per cent,” Dung said. “Those are a solid foundation for Binh Duong to build a smart city, with a strong focus on balancing economic development with social progress and green growth.”

Binh Duong’s smart city project for this decade covers people, technology, business, and foundational elements, but these pillars can and will be adjusted to be consistent with the current situation and the key challenges ahead.

Meanwhile, Danang is the first city chosen by IBM as one of 33 cities worldwide to receive sponsorship from the IBM Smarter Cities Challenge competition.

IBM’s three-year, $50 million initiative involves the direct participation of experts from IBM, who research and make detailed recommendations to help solve important urban problems in each locality. It focuses on using smart central operating solutions to ensure water quality, provide the best public transportation, and minimise traffic congestion.

In its smart city building plan towards 2030, Ho Chi Minh City is looking at a smart urban operations centre, shared data warehouse, open data ecosystem development, a centre for socioeconomic simulation and forecasting, and a centre for information security.

In particular, its smart city operation centre started phase 1 in 2019. Phase 2 for 2021-2025 is focused on smart solutions in a range of sectors in specific fields, and phase 3 after 2025 will aim towards strengthening technology foundations as well as restoring capacity and security.

Hanoi has also taken specific steps to implement different aspects of smart cities. At the Vietnam-Asia Smart City Summit in November, Tran Sy Thanh, Chairman of Hanoi People’s Committee said, “The sustainable smart city model that Hanoi aims will bring a truly quality, convenient, safe, and friendly living environment for all. At the same time, it will help build a local government system for the development of both organisations and businesses.”

The most important issue of digital transformation is building databases, according to Thanh. “Data must be accurate, complete, and transparent, and use the shortest time and cost,” Thanh said.

According to Matthew Powell, director of Savills Hanoi, at the city level, many local governments have been making efforts to build smarter cities such as improving the efficiency of electricity use, water, and social utility infrastructure.

“At the project and building level, investors and buyers are aiming to smarten management and operations, from security systems, to internet connections, from electricity usage to other factors to minimise impact on the environment,” Powell said. “At the apartment level, products have gradually appeared on the market that are integrated with smart support systems and synchronously connected to the internet provided by third parties.”

At the micro level, many real estate businesses also promote the development of smart urban projects for their real estate projects.

A typical example is North Hanoi Smart City in Dong Anh district of Hanoi, funded by a joint venture between BRG Group and Japanese-led Sumitomo Corporation. With a total investment of $4.2 billion, this project is expected to be a premise and driving force for urban development in Dong Anh district in Hanoi, and the area north of the Red River in general.

To be operational by 2032, the project will apply Industry 4.0 towards a sustainable city model, driven by green living style and modern technology application, highlighted by the application of new-generation smart services system.

Vietnam’s largest private enterprise, Vingroup, is also developing an urban area called Vinhomes Smart City. With an area of 280 hectares, Vinhomes Smart City has learned and organised application operations according to smart urban models in the world such as Singapore, Songdo of South Korea, and Fujisawa of Japan.

Real estate yearning for brighter prospects

At the Vietnam Real Estate Forum early this month, Nguyen Hoang Hai, director general at the Ministry of Construction’s Housing and Real Estate Market Management Agency, said the market has passed its most challenging period yet.

“In general, the market still includes some difficulties, but it is getting easier to breathe month by month, quarter by quarter, particularly in Ho Chi Minh City,” Hai said.

Specifically, in the last quarter of 2023, Masterise Homes released three projects to buyers in Ho Chi Minh City, including Grand Marina (Saigon), Lumiere Riverside, and Masteri Centre Point, while ventures like The Aurora, Privia Khang Dien, and Akari City have been put in the limelight from other developers.

According to the Vietnam Association of Realtors (VARS), the market has become more bustling in recent months, with many projects released for sale.

“Although we cannot confirm that the market will be brilliant in 2024, there is now a foundation for the new development cycle of the Vietnamese real estate market. The residential real estate segment, especially social housing and affordable commercial housing will play a pivotal role, leading the entire market from mid-2024,” Nguyen Van Dinh, chairman of VARS said.

Dinh said that 2024 could see the real estate market overcome challenges. The market will go ahead the stable development and the overview will have positive changes.

“Although new policies have yet to take effect, there are positive signals for developers and investors to be confident, especially if the Land Law will be amended in consistence with the amended Law on Housing and Law on Real Estate Business,” Dinh said.

He added that there will be some positive signals in the market in the first half of 2024, and the recovery of real estate will be clearer in the second half.

Economist Nguyen Minh Phong said at the forum, “The government’s strong policy, along with the gradually decreasing interest rates, will enable businesses to easily access capital, and people to pay more attention to real estate investment. From then, the market will have obvious changes.”

As of end-November, credit in the economy reached about $550 billion, an increase of 9.15 per cent compared to the end of 2022. Currently, deposit and lending interest rates have decreased on average by 2-3 per cent compared to the end of 2022 and will continue to decrease in 2024.

In particular, the penetration and effectiveness of policy dismantling and improvement of the legal environment are becoming clear after numerous legal documents in 2023.

“One of the biggest problems in the market today is the legality of projects, accounting for about 70-80 per cent of all difficulties. If in 2024–2025, bottlenecks in approving projects in residential areas are resolved, the real estate market will recover,” Phong said.

The report from VARS also pointed out some macro-positive impacts on the market in 2024. Of these, loan interest rates for buying houses continue downward, and social housing continues to be the focus of development of the government. Local planning approvals, which are being considered, will be strengthened to be completed soon. Public investment will be boosted as a driving force of some key regions across the country.

The market in 2024 is also expected to be stable and welcome the resumption of about 30-40 per cent of real estate brokers. The residential real estate segment will lead the market from mid-2024 with a total apartment supply estimated at over 30,000 products, including 15,000 in Hanoi, and 5,000 in Ho Chi Minh City, and about 10,000 in Binh Duong province.

For the past year, numerous legal frameworks and policies related to real estate have been building and improving to ensure the synchronisation and connectivity of the legal system related to land, construction, housing, real estate business, securities, credit, as well as cut down the time to do administrative procedures.

While the Law on Housing, and the Law on Real Estate Business have just been approved, the government is submitting to the National Assembly for consideration and approval of the Land Law and the Law on Credit Institutions.

New legislation released in recent times have covered land use right certificates, ownership of houses, and other land-attached assets; updates to decrees on bond offering and trading individual enterprises in the domestic market and offering corporate bonds to the international market; and instructions for credit institutions and foreign branch banks on debt rescheduling and retention of debt categories to assist borrowers in difficulties, among others.

A working group has reviewed and urged the removal of obstacles in implementing real estate projects for localities and businesses. They have received over 130 reports of difficulties and recommendations from localities, businesses, associations, and individuals related to almost 200 real estate projects. The working group and the Ministry of Construction have reviewed, classified, and sent to the agency and authority for handling.

It is expected around 470 social housing projects for low-income people and industrial park workers will be either underway or completed this decade in Vietnam.

Vietnam's construction industry expected to rebound

Vietnam's construction industry is expected to grow steadily over 2024, following its lull period, according to the latest report by Research and Markets that was released on January 16.
 
The growth momentum of Vietnam's construction industry is expected to continue over the forecast period, recording a compound annual growth rate of 13 per cent from 2023 to 2027. Construction output is expected to reach VND903 trillion ($38.1 billion) by 2027.

The nation's construction industry faced considerable challenges in 2023. Rising material prices, higher debt taken by builders, and dampened demand during the pandemic have all resulted in the downfall of hundreds of construction firms in the Vietnamese market in recent quarters.

To spur economic growth and development in the country, the government has been increasingly investing in transport infrastructure. Several projects were completed in the second half of 2023, with many more planned to be finished over the next 2-3 years. These projects are set to keep supporting the recovery of the struggling industry in Vietnam over the short to medium term.

The report also pointed out that developers stalled more than a thousand projects in Vietnam last year due to the funding crisis. The crackdown by the government on corruption and builders taking on too much debt are among the various factors that have triggered a property crisis. According to the Ministry of Construction, this has affected more than 1,800 builders, forcing 340 companies into insolvency in the first quarter of 2023.

The Vietnamese Real Estate Association also revealed that the government has frozen resources, leading to a funding crunch for developers. As a result, builders have suspended more than 1,200 real estate projects totalling $34 billion.

The association also revealed that each of the 63 provinces and cities in Vietnam has an average of 20 suspended projects. The stoppage of these construction activities is impacting the growth of the domestic market.

Meanwhile, construction material prices further increased in the second half of 2023. Despite the government's attempts to boost demand for iron and steel by reducing supply through measures such as cutting public investment, defunding crucial projects, and emphasising social housing initiatives, construction material prices remained high in the first half of 2023.

This has added further pressure to the market's growth. In the first half of last year, the surge in material prices resulted in many firms halting their projects, as they were unwilling to take on the financial risks.

Banks get go-ahead for capital increases

Many banks in Vietnam have received approval for substantial capital hikes, signalling a strategic effort to fortify the financial sector and enhance several essential ratios.

The State Bank of Vietnam (SBV) has green-lit capital hikes for a range of domestic banks, signalling a major shift towards strengthening the country’s financial institutions.

PGBank, formerly known as Petrolimex Bank, announced last week that it is set to elevate its charter capital by around $50.6 million. The move will raise PGBank’s charter capital to $177.22 million. PGBank previously held the position of having the lowest charter capital in the system.

LPBank also received approval from the SBV to increase its charter capital to over $1 billion. This positions LPBank among the highest capitalised privately owned commercial banks in Vietnam.

Likewise, NCB has been authorised to boost its charter capital to more than $498 million, with a planned issuance and sale of 620 million shares.

Elsewhere, SaigonBank is set to augment its capital by approximately $13 million, primarily through issuing shares for dividend payment to existing shareholders.

Throughout 2023, the SBV approved capital increases for 21 joint-stock commercial banks, mainly through internal sources such as retained earnings and reserve funds. This included names like HDBank, MB, SeABank, ACB, VIB, TPBank, and VPBank.

In addition to local financial institutions, foreign-invested banks in Vietnam are actively strengthening their financial base. For example, Singapore-backed UOB Vietnam has substantially increased its charter capital from $211 million to $338 million.

“This capital increase, the second in three years, aims to strengthen UOB Vietnam’s position in retail and wholesale banking services. Vietnam is a strategic market for UOB. This capital enhancement underlines our long-term commitment to the country’s prosperity and potential,” said CEO Victor Ngo.

Some experts believe the ongoing emphasis on increasing charter capital is a key component for bolstering the capital adequacy ratio (CAR) and enhancing credit institution rankings. This strategy aligns with the minimum CAR being set at 8 per cent, following international Basel II standards.

Specifically, the restructuring plan for the credit institution system for 2021-2025 aimed to elevate the CAR of commercial banks to a minimum of 10-11 per cent last year and 11-12 per cent in 2025. However, despite continuous capital increase plans, especially in the last quarter, Vietnam’s banking system remains thinly capitalised with a CAR lower than many regional counterparts, many of whom have started implementing Basel III standards.

Economist Nguyen Tri Hieu observed that private commercial banks continue to target a higher CAR, thanks to proactive capital management and closer adherence to Basel III standards.

“These banks maintain a higher than average CAR and showed slight improvement in 2023. Conversely, state-owned banks face more challenges in capital increase due to limited budgets and slow approval processes,” he said.

Fitch Ratings also indicated that Vietnam’s rapid credit growth in recent years necessitates banks to increase capital to maintain safe ratios.

“The banking system needs an additional $10.7 billion (approximately 2.9 per cent of GDP) to ensure risk reserves and maintain a CAR of 10 per cent,” it said.

Many banks are planning to raise capital from foreign investors, as domestic long-term investment has stagnated. Banks like LPBank, Vietcombank, and BIDV are planning private issuances to foreign investors. BIDV aims to complete a plan to sell 9 per cent of its capital to foreign investors, while Vietcombank anticipates a 6.5 per cent private issuance.

In a report last week, KB Securities Vietnam forecasts that the low-interest-rate environment prevailing at the end of 2023 is likely to continue into the following year, thereby acting as a catalyst for credit growth and improving the cost of capital for banks.

“Credit growth in 2024 is projected to revolve around 12-13 per cent amid a backdrop of a modestly recovering economic outlook. The primary growth driver is expected to stem from the sustained low-interest rates, spurring credit demand for production activities, coupled with the anticipated effective implementation of government support policies to boost domestic consumption,” the brokerage said.

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