Rice prices in the Mekong Delta, Vietnam’s key rice growing region, have inched down over the past week following the strong rally since the middle of last year.

The staple food has dropped by VND1,200-1,400 per kilogram in just over a week, the most significant price fall since India suspended rice exports in July 2023.

The Indian rice export ban last year led to the global undersupply, which sent Vietnamese rice for export soaring to an all-time high in early December 2023.

At the close of the rice trading session on December 4 last year, 5% broken rice shot up from US$650 to US$663 per ton, the world’s highest so far, except 2008 when rice leapt to US$1,000 per ton but then Vietnam imposed a rice export ban.

However, since the beginning of this year, Vietnam rice prices have edged down. On January 22, 2024, paddy (unhusked rice) varieties like IR 50404 in the Mekong Delta slipped by VND500-700 compared to just a week earlier to VND8,600-8,700 per kilogram, and OM 5451 and Dai Thom 8/OM 18 to VND9,200-9,400 per kilogram.

Speaking to The Saigon Times, rice traders just confirmed another drop of VND600-700 per kilogram at VND8,800 for Dai Thom 8 and OM 18, and VND8,200-8,300 for IR 50404.

A rice exporter in the Mekong Delta province of Dong Thap said the facilities that handle rice exports in the Mekong Delta are purchasing less, with some even pausing purchasing.

Meanwhile, major rice importing countries like the Philippines, Vietnam’s top rice market, are pushing for lower prices. They have proposed US$690 per ton for fragrant rice, and US$670 and US$630 per ton for soft rice varieties like OM 5451 and IR 50404.

These levels are below the ask prices of Vietnamese rice exporters.

In the first half of January 2024, Vietnam exported over 194,000 tons of rice valued at over US$134.5 million despite a volume fall of 32,000 tons. Rice export revenue increased by US$20 million compared to the same period last year. The average rice export price in the first half of January reached around US$693 per ton, a substantial increase from the 2023 average of US$578 per ton.

Banks required to disclose minor stakeholders from July 1

Commencing July 1, commercial banks will be required to publicly disclose information about stakeholders who hold 1% of their charter capital and their related individuals as required by the amended Law on Credit Institutions.

The revised law, which was passed by the National Assembly at its extraordinary session in Hanoi on January 18, imposes stricter regulations on shareholding and information disclosure. The law will take effect on July 1 this year, except for some provisions that need to be revised.

Under the revised law, details of stakeholders possessing 1% of charter capital and their related individuals must be made available on the banks’ official websites.

The definition of related individuals has been broadened to include foster parents, step-parents, parents-in-law, foster children, sons-in-law, siblings-in-law, half-siblings, and siblings-in-law of half-siblings.

Grandparents, grandchildren, uncles, aunts, nephews, and nieces are now considered related individuals under the amended law.

The ownership limit for institutional stakeholders will decrease from 15% to 10%, while stakeholders and their related individuals will see their limit reduced from 20% to 15%. In contrast, the ownership limit for individual stakeholders will remain unchanged at 5% of charter capital.

After July 1, stakeholders and their related individuals who possess shares exceeding the specified limit will be allowed to maintain their existing ownership but will not be permitted to increase their share count, except for receiving share dividends.

Revised rules set to expand options for overseas nationals to own property

New laws for next year are expected to help increase remittances into Vietnam, particularly towards the real estate sector.
 
According to real estate law expert Nguyen Van Dinh, new laws coming into effect in 2025 will allow Vietnamese nationals residing abroad to carry out real estate business and own property the same as Vietnamese.

“Overseas Vietnamese will be allowed to invest in building houses and construction projects for sale, lease, or lease purchase, and investing in the technical infrastructure in real estate projects for transfer, lease, and subleasing land use rights that already have technical infrastructure,” said Dinh.

However, he added that those of Vietnamese origin residing abroad who are not Vietnamese citizens were only allowed to do real estate business according to the current law.

“Meanwhile, the new Land Law states that Vietnamese nationals residing abroad who are Vietnamese citizens have full rights related to land, not only rights to residential land, like Vietnamese citizens already in the country,” Dinh said.

The provisions of the related laws that have been passed, on land, housing, and real estate, create a unified and synchronised approach to ensure that overseas Vietnamese still retain Vietnamese nationality and have land use rights and real estate business rights like domestic citizens, thus showing that overseas Vietnamese are an inseparable part of the Vietnam.

According to the provisions of the previous Land Law, overseas Vietnamese who are eligible to own housing in Vietnam could only receive transfer of residential land use rights through the form of purchase, lease-purchase, inheritance, or donation of housing attached to the land use rights or receive residential land use rights in housing development projects only.

This regulation leads to restrictions on the right to transfer, donate, and inherit residential land outside of housing development projects, and the right to build and own houses on residential land outside of housing development projects.

Lawyer Nguyen Van Hau, deputy chairman of the Ho Chi Minh City Bar Association, said that with the new regulations, it would be easier for overseas Vietnamese to own real estate in the country. “Previously, although regulations allowed overseas Vietnamese to buy real estate in Vietnam, many had to authorise their relatives to be the owner of the property. Because of concerns about complicated procedures and regulations, many overseas Vietnamese hesitate to buy real estate in the country,” Hau said.

“This amendment has created equality between domestic individuals and overseas Vietnamese in terms of investing and doing real estate business. When buying a house and having the rights like domestic citizens, they will transfer remittances to invest and buy a house in Vietnam. Thus, the real estate market will have a great demand from overseas Vietnamese individuals for high-end housing in the market now.”

More than $19 billion in remittances flowed into Vietnam last year, a similar figure to 2022. It is forecast that in 2024, remittances will increase by about 20 per cent compared to last year.

Since 2012, the amount of remittance sent to Vietnam has generally reached over $10 billion per year, of which about one-quarter is poured into real estate.

Le Tien Vu, general director of Cat Tuong Land Real Estate Trading JSC said that houses and land plots were a solid and durable segment, attracting the most remittances.

“Housed attached with land have great accumulated value, especially in times of crisis, so land-based real estate products such as land plots, townhouses, and completed commercial townhouses will be attracted by overseas Vietnamese due to their strong financial source,” Vu said.

Meanwhile, Mai Hai, a real estate broker, said that the populous market and high profits are considered attractive for remittance to pour into Vietnamese real estate. “The rate of overseas Vietnamese buying houses in Vietnam is increasing. Vietnam’s rental profit is also quite attractive, from 5 to 7 per cent, higher than developed markets like Australia or the US,” Hai said.

According to the Business Association of Overseas Vietnamese, in the future, the number of remittances will be abundant because the Vietnamese community abroad is increasing in both quantity and number of territories.

The number of Vietnamese people living abroad, which was about 2.7 million in 2004, has now tripled to about 7 million in 109 countries and territories around the world.

About 80 per cent of overseas Vietnamese live and work in developed countries such as the United States, Australia, Canada, and France, and more than half a million work through labour export programmes, or while studying abroad.

Amendments outlined for VAT refund eligibility matter

The Ministry of Finance has proposed comprehensive modifications encompassing the amendment, abolition, and supplementation of various regulations pertaining to VAT refunds.
 
One notable addition introduced by the amended draft is the stipulation that business establishments engaged in goods production and service provision will be subject to a 5 per cent VAT rate if they possess unreduced input VAT exceeding $12,200 after a period of 12 months. Such entities meeting this criterion are eligible for a VAT refund.

The draft outlines criteria for VAT refund eligibility concerning projects, specifying that projects falling within the ambit of investment law, including approved projects divided into multiple phases or items (excluding those not forming fixed assets), qualify for VAT refund during the investment phase.

Furthermore, the amended draft eliminates the provision denying VAT refund for ventures of business establishments failing to contribute the full registered charter capital and explicitly states that VAT refund will not be granted for projects of businesses with conditional investment and business lines if the requisite conditions are unmet, aiming to preclude implementation issues.

An additional provision addresses VAT refund eligibility for oil and gas exploration and development projects, aligning with the stable regulations articulated in Decree No.49/2022/ND-CP.

Le Thi Duyen Hai, director of the Department of Tax Declaration and Accounting at the General Department of Taxation (GDT) said, “In the first half of 2023, VAT refunds encountered many problems, especially tax refund for exported wood and rubber products, but towards the end of the year, these obstacles have gradually been removed.”

Addressing businesses’ concerns in the latter half of 2023 about delays in receiving tax refunds, Hai acknowledged the concerns while believing these instances are minimal and often have valid reasons.

“The evolving nature of fraud tactics poses increasing complexities, demanding vigilant efforts to combat fraudulent activities. Despite the goal of ensuring quick and timely refunds, the tax industry remains dedicated to adhering to regulations, safeguarding state budget funds, and diligently preventing and detecting tax refund fraud. Delays are not deliberate but rooted in a commitment to thorough processing,” she added.

To streamline and enhance the VAT refund process, the amended draft removes the restriction on VAT non-refunds for goods imported and subsequently exported, as well as for cases involving tax refund in advance subject to later inspection. It also introduces principles for determining input VAT on exported goods and services eligible for refund, in accordance with established regulations found in sub-law documents.

The amended draft also eliminates regulations concerning VAT refund in instances of business changes, mergers, or terminations. It delineates clear responsibilities for tax authorities and taxpayers in the VAT refund process, highlighting the authority’s duty to validate refund documents and the taxpayer’s responsibility for accuracy.

Additionally, the draft empowers the finance ministry to specify tax refund conditions in line with existing sub-law documents, enhancing the legislative framework’s clarity and solidity.

Hai of the GDT acknowledges that ensuring accurate, complete, and prompt processing is crucial.

“To achieve this, focus must be on amending legal regulations related to VAT, tax management, and electronic invoices to limit fraud, including schemes involving illegitimate businesses,” Hai explained. “Additionally, a robust implementation of IT is recommended to automate and digitise the tax refund process, ensuring transparency, law compliance, and fraud prevention, while maintaining strict control over VAT refund expenditures.”

In 2023, tax authorities issued approximately 20,000 VAT refund decisions, totalling almost $6.2 billion, marking a 100 per cent increase over the figures recorded in 2022. VAT refunds for exported goods experienced a 4 per cent decline compared to the previous year, primarily attributed to the 4.4 per cent reduction in the export turnover of goods.

The upswing in the total VAT refund amount for the preceding year was mostly propelled by a substantial increase in refunds for ventures within conditional business lines, registering a notable 45 per cent uptick. This positive trend can be attributed to the facilitative measures introduced by Decree 49. The decree successfully alleviated challenges and impediments associated with tax refunds for projects in conditional business lines, with a particular emphasis on projects in the electricity sector.

Playing field could be balanced with VAT exemptions

The Ministry of Finance is recommending the exclusion of several specific goods and services from the scope of VAT exemption.
 
According to the ministry (MoF), businesses are currently unable to declare and deduct VAT costs incurred in production, leading to increased production costs and decreased profits.

The mentioned groups of goods and services, including fertilisers, agricultural machinery, offshore fishing vessels, securities depository, market organisation services, public utility postal and telecommunication services, and maintenance services for public spaces, are proposed for removal from the list previously exempted from VAT.

In particular, in the draft law open for public comment, the MoF aims to level the playing field with imported fertilisers, as most imported fertilisers are subject to VAT in exporting countries.

“The proposed change is driven by the observed disadvantages faced by domestic fertiliser businesses in competing with imports,” the MoF said.

The ministry notes that the current situation results in a loss of budget revenue at the import stage, while import taxes are minimal or non-existent. This prompts domestic manufacturers to pass a portion of the tax cost into the price, affecting farmers who face higher prices.

Stakeholders, including fertiliser businesses, the Ministry of Industry and Trade, the Vietnam Fertiliser Association (VFA), and National Assembly delegates, have reported these challenges and advocate for the 5 per cent VAT rate.

Phung Ha of the VFA supports the proposal, citing its potential to create fair competition and reduce fertiliser prices, benefiting both consumers and domestic manufacturers.

“This adjustment would enhance equality for domestic enterprises in international bidding and contribute to reducing fertiliser prices, thereby fostering conditions for investments in high-quality projects,” he said.

Likewise, a representative from a domestic manufacturing business suggests amending the law to raise the fertiliser tax from zero to 4-5 per cent. “This would ensure a competitive environment, and farmers would benefit from reduced fertiliser costs if this tax is applied,” he assessed.

If the proposal is approved, consumers purchasing fertiliser will face an additional 5 per cent VAT. However, the MoF points out that selling prices are determined by market supply and demand, and reverse tax calculation could ultimately benefit consumers.

Based on this analysis, goods and services, when subject to tax, typically fall within a 5-10 per cent tax rate. With a 5 per cent output VAT, domestic fertiliser production enterprises can deduct this tax from input amounts or receive a tax refund, reducing production costs and enhancing competitiveness against imported goods.

The MoF underscores the positive impact of VAT deduction, asserting that businesses would save costs, have more resources for investment, technological innovation, quality improvement, and lower selling prices. This policy benefits consumers opting for domestic goods.

Contrastingly, the MoF refers to the financial statements of the five largest fertiliser manufacturing companies, indicating a combined revenue of nearly $2 billion in 2022. Applying a 5 per cent tax rate would result in an output VAT amounting to almost $98 million.

Internationally, while many countries offer preferential policies on fertilisers, exempting them from VAT, some countries like China, Romania, Croatia, and India collect taxes at low levels. The proposed VAT adjustment in Vietnam reflects a nuanced approach, considering the industry’s dynamics and global practices.

Also in the amended draft, three categories of goods are proposed to not be eligible for the zero tax rate. These include imported and subsequently exported tobacco and alcohol; petrol and oil purchased domestically for sale to various businesses; and goods and services provided to individuals not registered for business within the non-customs zone.

Additionally, the draft introduces a provision that excludes the zero tax rate for products and services provided on digital platforms, as regulated by the government. This adjustment aims to ensure flexibility in determining whether these products or services are consumed in Vietnam or abroad at the time of supply.

Determining the consumption location for products and services on digital platforms is complex, typically relying on the taxpayer’s declaration.

Fork in road for special consumption tax on alcohol

Industry insiders are worried that changes to taxes on beer will damage the domestic industry in favour of higher priced foreign brands.
 
There are two sets of opinion related to amending the special consumption tax (SCT): to continue to apply the relative tax as a percentage and adjust the rate accordingly; or to use a hybrid system with a mix of relative and absolute taxes.

At last week’s conference on the issue, Nguyen Thanh Phuc, head of Public Affairs at Heineken Vietnam, said that for relative taxes, tax costs were based on the selling prices, regardless of alcohol content, with the government and related agencies hoping to reduce consumption.

“Beer with high prices but low alcohol concentration has less impact on health, while beer with low prices and high alcohol concentration is subject to higher SCT rates. Thus, the relative tax system is creating inequity in tax costs among products with the same alcohol concentration level,” Phuc said.

For the hybrid taxes, although the absolute tax causes a difference in the ratio of tax costs to revenue between products, this difference is not large because products with high consumption are currently a similar price, he added. “If the proportion of relative and absolute taxes is built properly and has a clear roadmap, the hybrid taxes can balance the disadvantages of both relative and absolute taxes,” Phuc said.

The impact of the economic recession and the effect of new drink-driving legislation in 2020 have already pulled down the purchasing power and sales output of the entire industry.

“In 2023, our company’s total sales volume dropped 20 per cent from the previous year, while the effects of conflict and supply chain disruption caused raw material prices to increase by 15-30 per cent,” said Nguyen Hoang Giang, general director of Saigon Beer Trading Company, a company owned by Sabeco.

For some time, the SCT was based on a percentage of the selling price because this was the most suitable method for the alcohol drink industry. It provided fairness in regulatory tax rates among product segments, and an automatic valve to fit with inflation.

“If a hybrid method is applied, imposing an additional absolute tax on a unit of product will immediately create price pressure on the market for low-priced beer, which are mostly popular Vietnamese brands. Because low-priced or high-priced products will be subject to the same absolute tax values,” Giang said.

If the selling price of low-priced popular products is kept constant, the selling price of high-priced products will be relatively cheaper and have a competitive advantage in the market.

“The consequence is that Vietnamese beer brands like Bia Saigon and Bia Hanoi cannot compete with high-priced beer products and will gradually be replaced,” Giang said.

Previously, the Ministry of Finance said that Vietnam’s alcohol tax only accounted for 30 per cent of the selling price, while in many countries, this proportion could be 40 per cent, or even as high as 85 per cent.

“It is sensible to raise tax through increasing SCT rates to sustainably raise revenue sources instead of changing tax calculation methods that can cause serious injury and shock for domestic Vietnamese beer brand manufacturers,” Giang added.

In the dossier of the amended Law on SCT, the ministry also submitted a proposal to the government to apply hybrid taxes for tobacco only, and not yet for beer or wine.

Nguyen Thi Minh Thao, head of Business Environment and Competitiveness Research under the Central Institute for Economic Management, said that alcoholic drinks are subject to the most tax policy changes.

“If we are making policy without impact assessment on the entire industry and relevant subjects, it will cause many issues in implementation. Therefore, consulting carefully with relevant parties is necessary,” Thao said. “When the drafting agency proposes tax calculation methods and tax rates, they should be synchronised and stable for businesses to do production and business. Adjusting policies should not include too many risks for enterprises.”

Vu Sy Cuong from the Academy of Finance said that it was necessary to thoroughly evaluate consumer behaviour, the impact on budget revenue, and the effect on production and business. “There needs to be specific evidence and figures, but the coordination and linkage mechanism between policymaking and research agencies is too loose,” he said.

The amended Law on SCT will be submitted and considered at the National Assembly’s meeting session in May 2025.

Answers promised to increase revenues and cut costs

Lingering difficulties are expected to continue affecting the state budget, with a dent in revenues and a need for more fiscal assistance for the public and businesses.
 
The government last week reported that in 2024, the total state budget is set to be $71.8 billion, around half for the central budget and the other half for localities. This is lower than last year’s realised number of $72.5 billion.

In addition, an additional $803.3 million from localities that failed to be disbursed for salary reform in the public sector in 2023 will be shifted to this year for the same purpose.

Meanwhile, total central budget expenditure for this year will be around $51.7 billion, of which nearly $18 billion is to be used as a supplement for localities.

The government told the National Assembly (NA) that the state budget estimates for 2024 had been calculated based on assumptions that economic growth will be 6-6.5 per cent, and inflation will be 4-4.5 per cent. The government’s policies on tax reduction and exemption in 2024 are expected to be the same and implemented as in 2023.

Last year, the total value of all policies used for supporting the public and enterprises amounted to about $8.37 billion, including $6.96 billion worth of tax-related assistance.

For example, the government reported that the VAT reduction from July to October helped provide a financial support worth $658.2 million for businesses and the public, contributing to decreasing the price of services and goods, helping to boost production and enhancing employment.

In November, the NA decided to maintain the 8 per cent VAT rate until June at least for various goods and services. It is estimated that this continued VAT reduction will cause a fall in the state budget revenue of $176 million a month.

However, according to the Ministry of Finance, if the reduction in environmental protection tax for fuel and the VAT rate for 2024 is taken into account, it is estimated that the total state budget revenue will sit at $74.17 billion. In 2023, total state budget revenue and expenditure reached $72.48 billion and $73 billion, respectively, leaving a deficit of $520 million.

“New solutions will be used to increase revenue and save expenses, and also to closely control the budget deficit, public debt, government debt, the nation’s foreign debt, and the government’s direct debt repayment within the NA’s permissible limits,” Prime Minister Pham Minh Chinh said. “We will also ask the NA to allow us to continue implementing policies on exempting and reducing taxes and fees, while promptly enacting effective policies related to the global minimum tax.”

Resolution No.01/NQ-CP on key tasks to implement the country’s socioeconomic development plan and state budget estimates for 2024, from last week, stated that the government would thoroughly save expenditure, especially recurrent spending.

The beginning of 2024 will see the reduction and saving of 5 per cent of recurrent expenditure estimates. The government will strictly control overspending, public debt, government debt, and national foreign debt within the permissible limits, the resolution added.

In 2023, total public debt was equivalent to 39-40 per cent of GDP, while the government debt was tantamount to 36-37 per cent of GDP. The nation’s foreign debt hit 37-38 per cent of GDP, and the government’s direct debt repayment was 20-21 per cent of the total state budget revenue.

Late last year, the government submitted a plan for borrowing and paying public debt for 2024 to the National Assembly Standing Committee. Under the plan, the government’s total loans for 2024 will be $28.52 billion, including $15.73 billion for borrowing to offset the central budget deficit, $12.1 billion for borrowing to pay the principal debt of the state budget, and $680.3 million for lending.

Central bank policies will address modest slowdown

The global economy currently presents a complex landscape, marked by both challenges and opportunities. From the modest slowdown in global growth to the burgeoning economic sectors in various regions, the picture is as varied as it is interconnected.
 
The global growth rate for 2024 is projected at approximately 2.9 per cent, a slight decrease from the 3.1 per cent observed last year. This trend indicates a modest slowdown, yet it’s important to note that the economy remains above the recessionary threshold, typically marked by growth rates below 2 per cent.

In the United States, we predict that the economy is poised for a soft landing, with a projected growth rate of 1.8 per cent, down from the previous year’s 2.5 per cent.

Particularly, this deceleration is attributed to the US Federal Reserve’s recent rate hikes, which have impacted both businesses and consumers, coupled with a softer labour market. However, with subsiding inflation, we expect that the Fed is likely to cut interest rates, potentially totalling 100 basis points, to foster economic stability.

The US dollar has seen significant appreciation, about 7-8 per cent against major currencies, since the end of 2001. This strength is partially attributed to the Fed’s aggressive rate hikes. With the expected rate cuts, however, the dollar’s dominance may soon reach its peak.

Meanwhile, China’s economy is projected to grow at 4.8 per cent this year, a deceleration from last year’s 5.2 per cent. Factors contributing to this slowdown include soft domestic confidence and a sluggish real estate market. Despite these challenges, certain sectors like electric vehicles and renewable energy, alongside urban renewal and infrastructure projects, are showing potential for robust growth.

The ASEAN region is forecasted to experience a growth rate of 5 per cent in 2024, an increase from the previous year’s 4.3 per cent. This growth is primarily driven by exports, especially in electronics, and strong domestic activity.

Remarkably, the region has attracted 17.2 per cent of global foreign direct investment (FDI), despite accounting for less than 4 per cent of the global GDP, a testament to its growing economic significance.

Turning to Vietnam, there’s a robustly positive outlook on its economy, consistent with the trends observed in the broader ASEAN region. However, caution is advised in the first half of the year due to global uncertainties. Vietnam is expected to see growth rates of 6.2 per cent in the first half, improving to 6.9 per cent in the latter half, with an overall annual growth of around 6.7 per cent.

In terms of monetary policy, the State Bank of Vietnam is likely to maintain lower interest rates initially, with a potential increase in the latter half of the year as inflationary pressures emerge.

On the FDI front, Vietnam has experienced a noticeable rise, with a focus on attracting high-quality, sustainable investments. The diversification of FDI, including increased investments from China, underscores Vietnam’s growing appeal in the global investment community.

Competition for FDI is inevitable and constant. Each country offers unique incentives to attract foreign investment. Vietnam’s success in this regard is evident – it has become the largest exporter in the ASEAN region, which in turn is the third-largest exporter globally.

This achievement underscores the need for Vietnam to be selective in pursuing FDI, focusing on quality over quantity. However, we believe that Vietnam is still in a strong position to draw in high-quality investment, given its robust growth rates exceeding 5 per cent.

The key lies in diversification – not just in expanding existing sectors, but in branching out into new ones. This approach is critical for Vietnam to remain competitive in the face of increasing investment relocation, particularly from China.

The concept of diversification extends beyond sectoral expansion. It also encompasses the types of investments being pursued. Vietnam’s focus should be on attracting investments that align with its long-term strategic goals, emphasising quality and sustainability. This approach will benefit Vietnam’s economy and contribute positively to global economic dynamics.

Recent interactions between Vietnamese finance officials and US investors have highlighted Vietnam’s expanding influence and recognition beyond the Asian continent. This global attention is mirrored in the growing interest from equity investors, who are increasingly keen on opportunities in Vietnam’s stock exchange market.

Such interest underscores Vietnam’s potential as a multifaceted investment destination, appealing to a broad spectrum of international investors. The sentiment among investors towards Vietnam remains positive, buoyed by strong government support and favourable economic fundamentals. The country’s strategic position in the China+1 strategy places it as a top choice for diversification for many global companies.

Looking ahead, Vietnam’s focus on attracting diversified, high-quality investment is seen as not just beneficial for the country but also a positive move for the global economy.

Gaps closed thanks to credit law reforms

Vietnam’s revised Law on Credit Institutions introduces broad reforms aimed at enhancing banking sector governance, transparency, and efficiency.
 
The National Assembly (NA) last week ratified the amended Law on Credit Institutions, a comprehensive legal framework encompassing 15 chapters and 210 articles, set to take effect from July.

This significant legislative overhaul aims to rectify longstanding gaps in the governance of the banking system, enhancing the safety and efficiency of credit and monetary operations.

“The amended law marks a decisive step in refining our financial system’s governance, ensuring a safer, more transparent, and effective framework,” said Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council. “It’s a timely response and fills a critical legal gap in managing non-performing loans. The implementation of this law is imperative for ministries and local authorities.”

The legislation addresses the need to curb manipulative practices and affiliated dealings within the financial sector, focusing on risk control and protecting the interests of various stakeholders.

Experts consider the law to be comprehensive, and having a profound impact on financial and monetary policy, economic stability, and the banking system’s sustainability.

“This law is pivotal in aligning our banking practices with international norms and principles of a market-oriented socialist economy, enhancing competitiveness and reinforcing the banking sector’s role in the economy,” Dr. Luc said.

Key aspects of the reform include mitigating cross-ownership issues and preventing undue influence of banks.

Vu Hong Thanh, chair of the NA Economic Committee, emphasised the law’s focus on transparency. “Alongside measures to reduce shareholding ratios and limit credit issuance, the law introduces provisions for public disclosure of information. This move ensures that shareholders owning 1 per cent or more of a credit institution’s capital are held to a standard of transparency,” he said.

Tran Thi Khanh Hien, head of Research at MB Securities added, “Central to the reforms are measures addressing cross-ownership and control issues within credit institutions, insurance agency operations, and proactive strategies for managing weaker financial entities and their secured assets. These are expected to be the most influential factors on the operations of Vietnam’s listed banks.”

Tran Minh Hai, director of law firm Basico, noted the challenges banks might face due to these new provisions.

“The revised law introduces more stringent limits and administrative requirements for banks,” Hai said. “For instance, the restriction on credit provision has been tightened, reducing the loan limit to 10 per cent of a bank’s own capital per customer, down from the previous 15 per cent, and tightening the group customer loan limit from 25 per cent of own capital to 15 per cent.”

The real issue in banking violations has not been the ratios but the quality of credit and assets, Hai added, and the increased restrictions could potentially make it more challenging for banks to conduct business in the future.

The amendments to the law are part of a broader initiative to enhance governance and operational transparency in banks, aiming to curb the influence of large shareholders and other manipulative practices. The law introduces regulations to reduce the shareholding ratio of institutional shareholders and groups, along with a phased reduction in credit limits.

In addition to these restrictions, the law revises the definition of related persons and mandates information disclosure for shareholders owning at least 1 per cent of a credit institution’s charter capital. It also updates standards for management and executive roles, emphasising the independence and expertise of board members.

Director of law firm ANVI, Truong Thanh Duc, said, “The integration of establishment and operation licences with the business registration certificate is in line with government efforts to reduce bureaucratic hurdles, supporting business activities.”

Furthermore, the law introduces a prohibition on such institutions and their personnel from linking non-mandatory insurance product sales with banking services. “This regulation is set to reduce consumer risks and limit unfair practices in the sector,” Duc said.

HCMC promoting live-streaming commerce

Despite multiple challenges, the economy of HCMC is on the road to recovery thanks to various demand stimulation strategies and the promotion of e-commerce.

The ability to resume manufacturing and exporting activities this year in HCMC, and Vietnam in general, is quite high even though there are still many obstacles ahead. This is because of the careful and systematic preparation of the city for the past two years via a series of promotion events for trade connection with 38 provinces and cities in the country. This year is a suitable time to boost the value chains of trade, service, and tourism.

Another chance comes from the salary reform policy in the public sector, effective as of July 1, 2024, and a drop in consumer loan interest rates. These are expected to help the purchasing power grow in the last half of the year.

The third and most promising opportunity for economic recovery in HCMC is the strong development of e-commerce, creating a new shopping habit in the community and becoming the main flow of the domestic consumption pillar as well as the major driving force for the growth this year. Selling and buying goods online through live streaming sessions has gradually become popular in the city.

HCMC is considered the cradle to nurture digital content creators, to encourage new consumer behaviors on social network sites and online platforms. This is because of a large quantity of software programmers and related human resources for online advertising, as well as the introduction of technological applications imported from other countries or developed domestically.

The last two factors for a strong recovery of the city’s economy are the dense traffic network to serve logistics purposes and reliable financial applications to boost online payment on digital platforms.

These elements have been the foundation for the completion of an ecosystem for the ‘live-streaming economy’, which will then lead trading activities and the digital transformation process in the city.

In 2024, it is advised that suitable mechanisms and policies for the project to turn HCMC into an e-commerce center (approved in 2020) should be applied and updated to include new business models like shopping on the commercial floor, shopping on social networks (social commerce), to shopping combined with entertainment (shoppertainment).

The municipal authorities have organized various e-commerce activities so far, showing their support to the ideas, projects, and plans that the market and society are forming. This participation of the state agencies plays the leading role in addressing product information lack and limits in geographical distance so that consumers can choose their products conveniently with reasonable prices.

Obviously, online trading can stimulus the city economy in the short term and create driving forces to increase the total supply in the long term.

It is now wise for HCMC to encourage purchasing via credit – an effective tool applied in many countries. Interest-free installment purchase programs or credit cards with different denominations will help consumers have the ability to spend immediately. Along with that should be merchandise with clear origin and high quality, good after-sale services or customer care. These are expected to form the core and sustainable values for the city’s commerce.

In related news, on January 25, Thu Duc Online Market was launched in response to the campaign ‘HCMC Shopping Festival’. This platform attracts the participation of 50 retailers and businesses, as well as 100 ‘Key Opinion Consumers’ (KOCs) and ‘Key Opinion Leaders’ (KOLs), content creators, students in Thu Duc City.

These livestreaming commerce activities, including product sampling, product introducing, community events, last until January 28. Many participating companies will send a part of their revenues to the charity fund ‘Loving Thu Duc’, chaired by Thu Duc City Social Security Center.

In one of the livestreaming sessions, Chairman of the Thu Duc City People’s Committee Hoang Tung enthusiastically marketed ao dai and ornamental plants. He also called upon the support of businesses to help the socio-economic development in Thu Duc City.

Da Nang shares investment cooperation chances with partners, investors

Meet Da Nang 2024, a programme aimed at introducing the central city’s image, strength, and readiness for international integration, was held by the municipal People’s Committee on January 26.

The programme, the first event of external affairs in Da Nang this year, saw the presence of Deputy Foreign Minister Nguyen Minh Hang and over 300 guests from Vietnamese ministries and sectors, international organisations, other countries’ agencies of international cooperation in Vietnam, non-governmental organisations, along with foreign invested businesses and those invested by overseas Vietnamese.

It looked to connect the city with domestic and international partners, diplomatic agencies and investors, introduce its integration orientations and development priorities, and provide an occasion for guests to share their viewpoints and expectations for the city.

Following the opening plenary session, delegates attended two discussions about how to facilitate resources of international cooperation to promote socio-economic development, and about Da Nang’s readiness to welcome new waves.

They talked about investment cooperation chances and strengths of the city, its policies and commitments towards domestic and international partners and investors, solution and policy recommendations, and the preparations for welcoming new investment inflows, especially into the chip, semiconductor, and artificial intelligence industries.

Chairman of the municipal People’s Committee Le Trung Chinh said the Prime Minister had approved the Master Plan of Da Nang for the 2021 - 2030 period, with a vision to 2050, opening up numerous development opportunities. In the coming time, the city will call for investment to the fields it is strong at such as high technology, seaport, aviation, smart city building, innovation, and digital transformation.

Da Nang has geared up land reserves, abundant human resources, and outstanding support mechanisms for investors. In particular, with strong political resolve, it will provide maximum assistance and an open, favourable, equal, and transparent investment environment for investors, he stated.

At the event, the municipal People’s Committee and agencies signed memoranda of understanding with the Asian Development Bank (ADB), the US Agency for International Development (USAID), and such large businesses as Synopsys International Limited and Intel.

Da Nang also handed over a certificate of investment policy approval for KP Aero Industries Co., Ltd of the Republic of Korea, which will invest in an aircraft component factory project worth 20 million USD.

US$20 million invested in aviation components factory in Da Nang

The Management Board of Da Nang Hi-Tech Park and Industrial Parks has just granted an Investment Registration Certificate to investor KP AERO INDUSTRIES CO., LTD, which will see US$20 million injected into the KP VINA Aviation Components Factory project.

The project aims to produce, process, and assemble aircraft parts, including auxiliary engine door (APU Door), MIC tip, wing box, winglet, and flap support fairing of Boeing 787 and Boeing 737 Max aircraft.

This marks the second project in the aerospace sector invested in the Da Nang High-Tech Park after the project run by UAC Vietnam Company Limited.

​Attracting two foreign direct investment (FDI) projects in the aerospace industry from the United States and the Republic of Korea (RoK) contributes to the goal of turning Da Nang into a technology centre for the whole country by 2030 under the Politburo’s Resolution 43 issued back in 2019 on building and developing Da Nang city by 2030, with a vision towards 2045.

The investor commits that immediately after signing the land lease contract, they will urgently carry out construction procedures in accordance with the law and expect to start construction in early February, with every effort made enter official operations by the end of the year.

​KP AERO INDUSTRIES CO., LTD is a partner of leading companies in the aviation field such as Boeing, Airbus and Korean Air. The implementation of Da Nang’s socio-economic development factory project will create the first foundation for the formation of an aviation and aerospace technology complex in the Da Nang High-Tech Park.

This will help to attract more companies and aviation groups around the world which are interested in researching and surveying the investment environment whilst also implementing projects in Da Nang Hi-Tech Park as a way of promoting technology transfer activities regarding the aviation sector in Da Nang High-Tech Park. This is along with raising the central city’s position in particular and Vietnam in general in terms of the world aviation industry.

Last year saw the Management Board of Da Nang Hi-Tech Park and Industrial Parks granted 19 new projects with a total investment capital of US$258.6 million.

As a result, the Da Nang High-Tech Park and industrial parks have managed to lure 526 projects with a total investment capital reaching US$3,413 million.

With regards to this year’s goal, Da Nang is striving to attract at least three investment projects into the Da Nang High-Tech Park with the total capitalized at around US$200 million.

The projects will focus on three main spearheads, including aerospace technology, semiconductor microchips, and the high-quality medical industry.

Hanoi attracts more than US$41.1 billion in FDI

Hanoi has attracted more than US$41.1 billion in foreign direct investment (FDI) to rank second in the country behind only Ho Chi Minh City in terms of FDI, according to the Foreign Investment Department under the Ministry of Planning and Investment.

At present, Hanoi has lured 7,363 foreign-invested projects with a total registered capital of US$41.170 billion, accounting for 18% of the total projects and 8.77% of the nation’s total FDI inflows.

Last year saw the capital attract US$2.73 billion in FDI, including 408 new projects, 174 adjusted-capital projects, and 318 transactions of capital contribution and share purchases made by investors.

This year the city is striving to attract about US$3.15 billion in FDI and roughly US$2.7 billion by 2025.

Currently, Hanoi has identified a number of priority investment fields in accordance with the overall development trend, with some industries seeing bright prospects for participating in the global value chain. This includes smart cities, supporting industries, finance and banking and human resource training, high-tech agriculture, as well as clean and safe food.

The capital city is also devising a plan aimed at developing industrial zones and clusters, as well as accelerating transportation infrastructure to attract more foreign investors, especially in the fields of urban development and production, science and technology.

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