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Dinh Thi Bich Xuan, deputy director of the Office for Business Sustainable Development (SDforB), Vietnam Chamber of Commerce and Industry, said business integrity had become the norm in the international business scene.
As such, Vietnamese firms need to embrace it as an indispensable part of their corporate governance, otherwise they would face the risk of losing ground internationally.
She also said Vietnam had signed 15 free trade agreements (FTAs), of which corporate social responsibility is among the most important. That means Vietnamese firms are obliged to act in the best interest of society as a whole.
A survey conducted by VCCI last year shows that the proportion of Vietnamese firms incurring unofficial fees declined from 44.9% in 2020 to 41.4% in 2021.
More importantly, those that had to set aside over 10% of their revenues to cover the fees fell significantly from 9.1% in 2016 to 4.1% during the period.
However, 'intentional delays in administrative processes to obtain speed money' has become more common with 57.4% of firms facing the problem in 2021 against 54.1% in 2020.
Tomas Kvedaras, a specialist at the Judicial Integrity Network ASEAN, said Vietnam was among the few countries in which the Government and firms had worked closely to improve business integrity and met with some success.
However, he stressed that integrity enhancement needs more than a close government-firm cooperation. Rather, it requires a comprehensive approach based on the involvement of all stakeholders in the economy.
He also urged Vietnam to put corporate social responsibility high on its agenda since global companies normally view it as an acid test of a good investment destination.
Ruth Turner, political and development counselor of the British Embassy in Vietnam, said business integrity is of vital importance to countries aiming to integrate deeply into global supply chains as the notion lies at the heart of many FTAs.
As part of its effort to improve business integrity, Vietnam has pushed ahead strongly with its fight against corruption. Remarkably, the country has moved up from the 113th position in Corruption Perspective Index in 2017 to 87th in 2021.
Vu Tien Loc, president of the Vietnam International Arbitration Centre, told Viet Nam News that corporate social responsibility and business integrity hold the key to the viability and profitability of Vietnamese firms in the future.
From his observations, firms socially accountable to their stakeholders and the public are more likely to be resilient during crises as they gain more support from their customers, partners, and employees.
Strong growth recorded in tra fish exports to ASEAN markets
A surge of 87% was seen in tra fish exports to ASEAN markets in the first 11 months of this year to US$183 million, accounting for about 8% of total export revenue of the product in the period.
The Vietnam Association of Seafood Exporters and Producers (VASEP) reported that more than 45% of ASEAN's total tra fish imports came from the Thai market, with nearly US$83 million.
Thailand was followed by Singapore, Malaysia and the Philippines with a rise of 50-93% year on year.
According to VASEP, compared to other regions, the ASEAN has seen a stronger growth with less impact from inflation in 2022.
Experts held that the ASEAN will continue to be an attractive market for Vietnamese tra fish thanks to advantages in close geographical distance, fewer logistics risks, and preferential tariffs under free trade agreements that Vietnam has signed with members of the group.
According to the Ministry of Agriculture and Rural Development, fishery exports reeled in US$10.14 billion as of November this year, up 27% annually. Of the sum, tra fish and shrimp contributed US$2.2 billion and US$4.1 billion, up nearly 62% and 14.6% year-on-year, respectively.
Substantial recovery for Vietnamese economy in 2022
With this year seeing Vietnam’s GDP growth rate reach a 11-year record high of 8.02%, the local economy has made an impressive recovery amid global uncertainties, according to insiders.
The latest data released by the General Statistics Office (GSO) shows the GDP growth rate during the 2011 - 2022 period reached 6.41%, 5.50%, 5.55%, 6.42%, 6.99%; 6.69%; 6.94%; 7.47%; 7.36%; 2.87%; 2.56%, and 8.02%, respectively.
Nguyen Thi Huong, general director of the GSO, attributed this strong rebound to the Government’s drastic measures, including the implementation of the socio-economic recovery and development programme, thereby leading to stable macro-economy with inflation brought under control and major balances guaranteed.
Sharing this perspective, Deputy Minister of Planning and Investment Tran Quoc Phuong emphasised the growth rate for 2022 should have been higher if there were not many difficulties in the fourth quarter of the year.
The GSO statistics showed the country’s total import-export turnover has for the first time surpassed the US$700 billion mark, bringing in US$732.5 billion this year, an increase of 9.5% over the previous year. Vietnam has also recorded a trade surplus for seven consecutive years, with the figure rising to US$11.2 billion.
Most notably, all three key economic sectors have enjoyed strong recovery, with agro - forestry – fishery expanding 3.36%, industry and construction 7.78%, and services 9.99%.
Despite securing a spectacular economic recovery, think tanks predict Vietnam will endure numerous challenges over the course of next year.
Deputy Minister Phuong pointed out that there will be a number of difficulties occurring in export markets, particularly as the country’s major foreign economic partners face the risk of recession. Meanwhile, local businesses must also deal with hurdles related to the capital and real estate markets, and cash flow.
The Deputy Minister also revealed that the country’s export turnover has decreased in recent months, with November and December recording declines of 8.4% and 14%, respectively.
Businesses operating in the garment, footwear, agriculture, fisheries, and furniture sectors anticipate that export orders will fall sharply in the opening months of 2023, even until the end of the second quarter of next year, he said.
Phuong expressed his concern as Vietnam’s Purchasing Managers' Index (PMI) in November fell to 47.4 points, indicating that local businesses face many difficulties in signing new orders.
In the fourth quarter of the year, the Industrial Production Index (IIP) only increased by 3% over the same period from last year, while December’s IIP is estimated to decline by 1% compared to the previous month and only increase by 0.2% year on year.
Major financial institutions such as the Asian Development Bank (ADB), the World Bank (WB), and the Hong Kong Shanghai Banking Corporation have warned about challenges facing the country’s export next year, saying the Vietnamese economy is required to rely on public investment and domestic consumption.
More than VND700,000 billion of public investment is set to be pumped into the economy in 2023 that will continue to fuel economic recovery and support exports, helping the economy to fulfill its 6.5% growth target.
Deputy Minister Phuong expressed his belief that China moving to relax anti-pandemic measures would facilitate Vietnamese exports to the northern neighbour moving forward.
Phu Quoc needs solutions to develop a sustainable fish sauce industry
The fish sauce-making industry on Phu Quoc Island has existed for more than 200 years and has become the main traditional craft of the island in the Mekong Delta province of Kien Giang.
However, the craft faces many difficulties and challenges and needs synchronous solutions for sustainable development.
Phu Quoc is home to about 60 fish sauce production establishments, mainly concentrated in Duong Dong and An Thoi wards, with estimated output reaching over 18-20 million litres per year.
The number of production establishments has reduced by about 40 per cent compared to the 2011-2012 period, Tin Tuc (News) newspaper reported.
Fish sauce is mainly sold to businesses in Rach Gia, HCM cities and Can Tho Province for bottling and consumption.
Only 20 fish sauce makers on the island bottle their products and have their brands.
Seven local businesses are eligible to export fish sauce to Europe, South Korea, China, and Japan, and the remaining meets food safety standards for domestic consumption or exporting through distributors.
Chairwoman of the Phu Quoc Fish Sauce Association, Ho Kim Lien said Phu Quoc fish sauce was granted protection of geographical indication (GI) in 2021 and was the first product in Viet Nam to secure such status.
However, the management of the local fish sauce products with geographical indications has still shown shortcomings.
It includes the overlap in product labels between the products with a non-geographical indication of enterprises inside and outside the province.
The legal corridor is unclear, and the products with GI recognition have not been protected strictly, Lien said.
Phu Quoc fish sauce faces fierce competition from traditional fish sauces in other regions with lower prices and different industrial fish sauces.
MARD promotes measures to attract investment in agriculture
The Ministry of Agriculture and Rural Development (MARD) will continue to implement solutions to attract investment in agriculture and rural areas next year, Nguyen Truong Thang, deputy head of MARD's Enterprise Management Department, has confirmed.
Speaking at a forum on enterprises in the development of agriculture and rural areas held in Ha Noi on December 28, Thang said the ministry would continue to implement solutions to innovate the mechanism to support businesses in expanding markets.
It will coordinate with the Ministry of Industry and Trade to develop a project on promoting the application of information technology and market forecasts and build brands of products.
As the global COVID-19 pandemic is still complicated, the ministry will continue to support enterprises exploiting the domestic market and gradually overcoming difficulties to resume normal production and business.
At the same time, it continues to restructure State-owned enterprises and agricultural and forestry companies to attract investment from all economic sectors in agricultural and rural development.
MARD will develop a project to build the Vietnam Agricultural Product Supply Center by 2030.
In 2022, the State issued many major policies on agriculture, rural areas and farmers to attract investment in the agricultural sector and officially export farm produce with high value. Agriculture continues to maintain its role as the backbone of the economy, said Ho Xuan Hung, chairman of the Vietnam General Association of Agriculture and Rural Development.
According to MARD, it has implemented solutions to encourage businesses to invest in agriculture and rural areas this year.
The ministry had documents guiding the implementation of Decree 57/2018/ND-CP on mechanisms and policies to encourage enterprises to invest in agriculture and rural areas, Decree 109/2018/ND-CP on organic agriculture and Decree 98/2018/ND-CP on policies to encourage cooperation and association in the agriculture.
Legal streamlining required for business support package
While businesses are thirsty for capital, removing legal obstacles is now essential to enable the confidence of businesses, commercial banks, and local authorities to unlock resources for growth and production.
Tran Duc Huy, owner of a warehouse and logistics business in Ho Chi Minh City, said that according to the provisions of a previous government-led pandemic bailout, his business was qualified to benefit from it. However, although he contacted a bank that sent staff to work with him on the issue, no further feedback was offered for a month.
“This is not the first time. The policy is supposedly easy to apply, but when submitting the application, customers are struggling with it. Some banks asked us to show all our assets and ownership certificates, along with providing fees like appraisal and notarisation costs,” said Huy.
Some other small- and medium-sized enterprises (SMEs) and cooperatives that have no assets or poor-value assets also cannot access the 2 per cent interest rate support package. Moreover, banks have almost expired credit room. Thus, it is difficult to borrow as normal.
According to the State Bank of Vietnam (SBV), as of end-October, only VND45 billion ($1.95 million) of interest rates supported businesses for total loans of VND21 trillion ($913 million), equalling 2.6 per cent of total loans and nearly 0.3 per cent of total supporting interest rate amount. October marked six months after Decree No.31/2022/ND-CP, on interest rate support from the state budget for bank loans extended to enterprises, cooperatives, and household businesses, came into effect.
Some business leaders are concerned over applying for the bailout for fear of post-inspection after receiving supporting interest rate loans. Bui Danh Lien, vice chairman of the Hanoi Transport Association, said that very few businesses are eligible for the supporting interest rate bailout. Some businesses in industries like transportation, warehousing, tourism, accommodation, catering, and education may be beneficiaries of the supporting interest rate bailout, but cannot meet the conditions.
MPI to attract investment capital in chip production
The government has assigned the Ministry of Planning and Investment (MPI) to study and build a policy for attracting foreign investment capital in the chip manufacturing sector.
The government asked the MPI to prepare the draft policy and submit it to the government in the first quarter of 2023.
The government’s assignment was issued after the publication of an article in The Youth newspaper on December 28 which mentioned the shifting of high-tech, foreign-invested enterprises to Vietnam. In the article, experts suggested that the government should continue to offer more incentives relating to tax and land rental.
In addition, it is necessary to prepare the technical infrastructure of industrial parks, factories, and modern logistics systems, as well as social infrastructure, to create a favourable living and working environment for investors.
In 2019, the Politburo enacted Resolution No.50-NQ/TW which provides the nation’s general orientation for completing institutions and policies and improving the quality and efficiency of foreign investment cooperation for this decade.
This is the first thematic resolution issued by the Politburo on foreign direct investment. It clearly states that foreign-invested enterprises are an important component of the Vietnamese economy that should be facilitated for long-term development and healthy cooperation and competition with other economic stakeholders.
At present, the construction of semiconductor component manufacturing sites is being accelerated with hopes to offset the shortages around the world. The projects have been invested in by a series of foreign companies, such as Samsung, Hana Micron Vina, and Amkor Technology, among others.
Responding to the opportunity to attract global semiconductor manufacturers, Do Nhat Hoang, director general of the Foreign Investment Agency under the MPI said, “During meetings with foreign investors, we see that many semiconductor manufacturers have plans to invest billions of dollars in Vietnam. Offering tariff incentives is one of the largest competitive advantages we have. The MPI is studying the policy to harmonise global regulations with the particular situation in Vietnam.”
Steel sector anticipates brighter prospects in 2023
A number of factors are expected to underpin a brighter performance in the steel sector in 2023.
Last week Hoa Phat Group (HPG), Vietnam’s leading steel maker holding 34 per cent of the country’s steel market, raised the retail price of its steel bar and construction rolled steel products by $6.5 per tonne.
Compared to the end of Q3, negative factors leading to the sector losses are fading, but weakening demand remains a thorny issue with no sign of relaxing, with the real estate market almost frozen, a declining export market, and spiking interest rates causing a deep dip in people’s construction demands.
Attuned to a steel price surge, the market value of steel tickers also saw a strong rebound since falling to their bottom in mid-November, with vibrant liquidity compared to the previous gloomy days, even taking the role of leading the stock market trend.
For instance, the market price of the HPG ticker spiked 51.2 per cent in more than a month from mid-November; HSG was boosted by 70.7 per cent, and NKG and SMC tickers inched up 79.7 per cent and 48.5 per cent, respectively.
The strong rise of steel companies shows the upward movement along with the market's general recovery. Many investors expect positive factors to influence steel firms’ performance in the remainder of the year and getting ready for the new year.
VNDirect Securities believes that China's reopening will help resume construction activities and boost infrastructure investment, helping steel demand in Vietnam recover.
This is one of the biggest driving forces supporting the export output growth of steel in 2023. Along with that, the increased demand for industrial production in China will also help the global supply chain to be restored and galvanise steel exporters to benefit indirectly.
Galvanised steel companies such as HSG and NKG will have the opportunity to boost export volume amid global industrial production.
Meanwhile, HPG has the ability to export steel to China thanks to competitive production costs. During 2020 - 2021, HPG sold 1.7 and 1.2 million tonnes of steel billet to China, respectively.
VNDirect experts also found that steel companies have reduced their inventories to only two-three months in the fourth quarter of 2022, compared to four-five months at the end of Q2. This alleviates the risk of inventory value reduction.
One more favourable factor for steel businesses is the government’s commitment to public investment, triggering soaring demand for iron and steel products, partly compensating for the stagnant real estate market.
According to the 2023 plan, about $3.44 billion will be disbursed into public investment projects, an increase of 34 per cent compared to the 2022 plan.
The government has committed to accelerating public investment progress and supporting domestic steel firms to maintain market share and gain development momentum in the steel sector faces mounting difficulties.
Economy preparing for tricky 2023
Growth in Vietnam’s economy may slow down next year due to massive complexities, including a reduction in global demand caused by tightened spending.
This week will see the government officially announce the country’s whole-year economic growth figure, which is expected to stand at around 8-8.2 per cent. But the government has also said that such a high rate may not be maintained in 2023 due to numerous risks caused by global geopolitical tensions, which will have direct negative impacts on the Vietnamese economy.
It is partly why the government and the National Assembly have set out a less optimistic target for economic growth to reach 6.5 per cent for 2023.
However, the Asian Development Bank (ADB) foresees even more challenges for the economy moving into next year.
Under the ADB’s calculations, while trade continues to expand, signs show weakening global demand for the country’s exports. The price manufacturing index (PMI) dipped from 50.6 in October to 47.4 in November, and employment was down for the first time in eight months. Little liquidity is left for economic recovery after recent monetary tightening, a decline in corporate debt issuance from January to October, and a slowdown in disbursement of public investment.
The government is expecting that for the entire year, the total commodity export-import turnover will be $735 billion, split almost equally in terms of exports and imports. Vietnam’s total 11-month commodity trade turnover is estimated to stand at $673.82 billion, up 11.8 per cent on-year. The export turnover touched $342.21 billion, up 13.4 per cent, and the import turnover was $331.61 billion, up 10.1 per cent.
However, such an attainment has revealed some signal of risks. Specifically, the export growth has far largely comes from the increase in prices as opposed to volume. Additionally, businesses are facing numerous difficulties, with a big decline in orders due to weak demand.
Figures from the General Statistics Office’s showed that monthly trade values over during September-November dipped to about $29.5 billion of exports and over $28 billion of imports, from $31.3 billion and $31 billion, respectively, in the March-August period. Notably, the year’s end often see a rise in exports thanks to global demand rising.
The Ministry of Industry and Trade forecast that the situation will continue into next year, which will continue affecting Vietnam’s economic growth. Currently, export-import turnover is doubling GDP.
Under its calculations, Vietnam’s industrial production increased 10.4 per cent on-year in November, which was lower than the on-year rise of 16.5 per cent in October.
FDI inflows slightly decrease in 2022
This year, the total foreign direct investment (FDI) inflows reported a decrease of 11 per cent, while disbursement saw an increase of 13.5 per cent compared to last year.
The total newly-registered capital, adjusted capital, capital contributions, and share purchases stood at $27.7 billion in 2022, equivalent to 89 per cent of last year, according to the Ministry of Planning and Investment's Foreign Investment Agency.
Specifically, 2,036 projects were granted investment registration certificates over the year with total registered capital of almost $12.5 billion, down 18.4 per cent from last year. Adjusted capital reached over $10.1 billion, up 12.2 per cent on-year. A very similar number of projects registered for capital adjustment this year.
There were 3,566 capital contributions and share purchases as of December 20, equivalent to $5.2 billion (a decrease of 25.2 per cent over 2021). One bright spot was disbursed capital, which topped $22.4 billion over the year (13.5 per cent higher than in 2021).
The FIA census also showed that foreign investments were seen in 19 out of the 21 economic sectors during the period. Of which, processing and manufacturing took the lead with $16.8 billion. Real estate was next with a total investment of $4.5 billion, followed by electricity production and distribution with $2.3 billion and scientific and technological activities with $1.3 billion.
It is also worth noting that wholesale and retail, processing and manufacturing, and scientific and technological activities were the sectors with the largest number of newly-registered projects, accounting for 30 per cent, 25.1 per cent, and 16.3 per cent of respectively.
By partner, 108 countries and territories poured money into Vietnam this year. Singapore was on top with $6.5 billion, accounting for 23.3 per cent of the total foreign investment into the country. South Korea came second with $4.9 billion and Japan was third with $4.8 billion. Other names further down the list included China, Hong Kong, and Taiwan.
Ho Chi Minh City attracted the largest amount of FDI at just under $4 billion, followed by Binh Duong with $3.1 billion, and Quang Ninh with $2.4 billion.
The export turnover of foreign-invested enterprises (FIE) continued increasing by about 12 per cent on-year to roughly $276.5 billion, making up about 74 per cent of the country's total export value. Their import turnover was estimated at $234.7 billion, up 7.4 per cent on-year and accounting for 65.1 per cent of the total.
The FIE trade surplus was $41.8 billion (including crude oil) or $39.5 billion (excluding crude oil). Local businesses reported a trade deficit of $30.8 billion.
The over 36,278 valid foreign-invested projects accumulated across the country boasted total registered capital of more than $438.7 billion. Their disbursement was about $274 billion, equivalent to 62.5 per cent of the valid registered capital.
Enterprises exporting to Europe face pressure to go green
The European Union's (EU) policy of imposing environmental protection taxes is putting Vietnamese exporters under pressure to convert to green production.
On December 13, the EU announced it would implement the Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tax on exports based on the intensity of greenhouse gas emissions in the production process.
The CBAM will be applied to electrical products, steel, fertiliser, aluminium, and cement in the pilot period of 2023-2025, all imported goods with high pollution risk. According to experts, implementing CBAM could create obstacles for Vietnamese goods to take advantage of the EU-Vietnam Free Trade Agreement (EVFTA), making it difficult to export to this market.
In 2022, Vietnam's export turnover to the EU is expected to reach about $50 billion. The EU is one of the four largest export markets for Vietnamese goods.
In 2025, the European Commission will assess CBAM’s performance. It could expand its scope to include more products and services, including “indirect emissions,” which refers to carbon emissions from using electricity to produce goods, if it is officially applied in 2026.
Accordingly, CBAM will likely take effect officially for goods imported from Vietnam since January 2026. Thus, Vietnamese enterprises exporting steel, cement, iron, and fertilisers to the EU will have three years to prepare. If enterprises do not promptly reduce carbon emissions now, they will face the risk of being imposed tax, making exported goods more expensive and affecting their competitiveness.
The Viet Nam National Cement Association expressed its concern that the export of cement to the US and EU markets will suffer due to the imposition of carbon emission tax.
Reducing greenhouse gas emissions is considered an inevitable trend. Many large markets, such as the United States, Japan, and South Korea, have also built similar mechanisms. Therefore, it is necessary for Vietnam’s enterprises to transform production towards going greener and protecting the environment by reducing emissions in the production process.
The Vietnam Trade Office in Sweden said that to respond well to this new EU regulation, manufacturing enterprises in high-risk industries, such as steel, aluminium, oil refining, cement, paper, glass, fertiliser, and energy, should have plans to reduce the carbon footprint of the manufacturing process, to not exceed the EU standard threshold.
At some point, all goods exported to the EU could be required to meet green standards. Currently, enterprises in two sectors that export about $8 billion to the EU each year, leather footwear and textiles, need to convert to green production to meet the EU's requirements.
According to Vietnam National Textile and Garment Group (Vinatex), green production will push costs up, affecting profit. But given the medium-term benefits, Vinatex has to invest in the green and circular economy.
Dak Lak records highest-ever coffee export volume
The Central Highlands province of Dak Lak – Vietnam’s capital of coffee – pocketed 798 million USD in coffee exports in 2022, accounting for 53.2% of the locality’s total export turnover.
This year, the province shipped abroad 380,000 tonnes of coffee bean out of its 550,000 tonnes harvested, the highest ever export volume.
The average export price of local coffee in the 2021-2022 crop reached 2,037 USD per tonne, 363 USD higher than that of the previous crop.
Deputy Director of the provincial Department of Industry and Trade Huynh Ngoc Duong said that Vietnam's participation in new-generation free trade agreements has created more opportunities for the province's coffee production, business and export activities.
In particular, after the European Union-Vietnam Free Trade Agreement (EVFTA) was signed, the EU relaxed the control over processed coffee. Therefore, local enterprises have focused on processing and producing instant coffee to increase the output of processed coffee exports.
To increase export volume and turnover, in 2023, the local industry and trade sector will continue updating other countries’ regulations related to import-export activities and their demand, improving product quality, stepping up digital transformation, and seeking more markets, Duong added.
Vietnam imports golden geoduck from Canada
The Canadian Consulate yesterday said that Royal Seafood International Trade Company was the first company to import golden geoduck from Canada to Vietnam.
According to Hoang Gia Company, after more than three years of carrying out import procedures, the Ministry of Agriculture and Rural Development approved the import of golden geoduck from Canada. Unlike Mexico's heliotrope, which is yellow-brown, Canada's heliotrope is yellow.
Mr. Behzad Babakhani, Consulate General of Canada in Vietnam, shared that thanks to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, seafood products have the opportunity to enter the Vietnamese market. Currently, Vietnam has spent $87 million on seafood from Canada.
Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes
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