The export of rice, fruit and vegetables to China and other markets posted a remarkable surge by 34.7% and 64.2%, respectively in the first half, said an official during a meeting of the Ministry of Agriculture and Rural Development (MARD) in Hanoi on July 19 to review the market situation and launch tasks for the coming quarters of this year.

Director of the MARD’s Agro-Forestry-Fisheries Quality Assurance Department Nguyen Nhu Tiep predicted export growth of fruit and vegetables to be maintained in the second half if exporters pay attention to quality, design, packaging and origin tracing to meet market demand.

He said the MARD will sign a Memorandum of Understanding on cooperation in agriculture development and trade in agro-forestry-fisheries China’s Guangxi and Yunnan provinces in September, on the occasion of the 20th China-ASEAN Expo (CAEXPO) in Guangxi. It will also consider working with the Vietnam Trade Office in China’s Nanning to step up the consumption of farm produce at the expo.

Efforts will be made to establish the Vietnam-Guangxi association of agro-forestry-fisheries enterprises and the Vietnam-Yunnan association of agro-forestry-fisheries businesses. The MARD will also expedite technical measures to soon conclude a Protocol with the General Administration of Customs of China on food safety requirements, quarantine and inspection for aquatic products imported and exported between Vietnam and China.

Deputy Minister of Agriculture and Rural Development Tran Thanh Nam said the MARD will focus on trade promotion and market development to boost the export of key agro-forestry and aquatic products to three major markets of China, the US and Japan.

An online forum is slated for July 21 to connect production, processing and export of Vietnamese shrimp to the US.

Trade promotion activities for fruit products will be also held on the sidelines of events marking the 50th anniversary of Vietnam-Japan diplomatic ties and the ASEAN-Japan Summit in Tokyo in this December.

Every quarter, the MARD’s units update the market regulations and consumer preferences through commercial attachés and the Vietnam business associations in various markets.

Vietnam's car sales rebound in June

Vietnam's car sales rebounded in June following five consecutive months of shrinking demand.
 
Vietnamese automakers under the Vietnam Automobile Manufacturers’ Association (VAMA) sold 23,800 vehicles in June, an increase of 15 per cent against May 2023.

Passenger cars recorded a 20 per cent rise in sales last month, reaching 17,334 units. Commercial vehicle sales climbed 4 per cent to 6,344 units, while special-purpose vehicles declined by 17 per cent to 122 units.

A total of 15,488 completely knocked-down vehicles were sold last month, increasing 28 per cent against May 2023. Meanwhile, sales of completely built vehicles decreased by 4 per cent to 8,312 units.

In the first six months of 2023, VAMA member companies sold 137,327 vehicles in total, down 32 per cent compared to the same period last year. VinFast has delivered 11,638 electric vehicle units in the first six months of 2023 while TC Group sold out 28,011 cars under Huyndai brands, equalling to 62 per cent of last year's period.

The government has just greenlit a 50 per cent reduction of the registration fee for new cars manufactured and assembled in the country, effective from July 1. It is forecast that the Vietnamese auto market will recover in the coming months.

In May 2023, Vietnam's car market generated sales of 19,266 vehicles, down 51 per cent over the same period last year and down 7 per cent compared to April 2023.

In April 2023, the market sold 22,409 vehicles, down 47 per cent over the same period last year and down 25 per cent compared to March 2023.

How will Vietnamese exports be affected once the UK joins the CPTPP?

Vietnamese exports to the British market will have to face off with robust rivals from other CPTPP nations.
 
According to the Ministry of Industry and Trade (MoIT), the United Kingdom joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on July 16, marking the country's largest trade agreement since Brexit.

President of the Vietnam Timber and Forest Product Association Do Xuan Lap told VIR on July 17, "The fact that the UK is now the CPTPP's 12th member could have an adverse effect, so Vietnam has to sustain its exports to this country to avoid missing out."

"Various Vietnamese products entering the UK market will have to compete with formidable rivals from other CPTPP countries," said Lap.

Vietnam's export commodities, such as electrical components, cabinetry, textiles, footwear, furnishings, fish, and vegetables, are popular in the UK market.

"Vietnam's timber products account for 7.2 per cent of the UK's total wood imports," commented Lap.

This is positive, as the British market is made up of customers who demand high technical standards and exercise restraint in their spending.

However, domestic experts have reservations about whether Britain's accession to the CPTPP signifies that it is willing to open its market to numerous products from the 11 participating member nations in exchange for preferential market access for British exports.

Numerous analysts are also contemplating the possibility that the UK government will enact new trade regulations with higher technical standards in order to achieve the objective of a green economy. If this occurs, Vietnamese exporters will be faced with additional difficulties.

Nonetheless, trade opportunities will expand in the future. The effective implementation of the Vietnam-United Kingdom Free Trade Agreement grew bilateral trade to $6.84 billion in 2022, a rise of 3.4 per cent from 2021, according to MoIT data.

Nonetheless, MoIT statistics indicate that Vietnam's exports to the UK account for less than 1 per cent of this market's import demand, and Vietnam's imports from the UK account for less than 0.2 per cent of the value of British exports.

The UK is presently ranked 16th among the nearly 140 countries and territories with investment initiatives in Vietnam, despite being one of the five countries with the largest foreign investment.

At the end of October last year, Nguyen Canh Cuong, commercial counsellor at the Vietnamese Embassy in the UK said, "Technical barriers are nothing new. Now, exports to the UK must meet the market expectations for each industry."

The export procedures for the UK differ from those of the EU. Since January 1, the UK Conformity Assessed mark has been required for the majority of industrial products in circulation and use in the UK.

In addition, the Trade with Developing Countries Programme, which went into effect in early 2023 and covers 65 countries, provides exporters with reduced tariffs and simplified rules of origin. Cuong is concerned that this may reduce Vietnam's competitive edge."

Vietnam cashew industry flags suspected UAE fraud

The Vietnam Cashew Association (Vinacas) has raised concerns over suspected fraudulent activities impacting one of its members and two other companies, ostensibly perpetrated by a client or financial institution in the United Arab Emirates (UAE).
 
According to local media Tienphong, Vinacas reported that Tin Mai Co., a key local player in the cashew export market, released a consignment to a UAE-based buyer towards the end of June, following an upfront payment amounting to 15 per cent of the total shipment value.

The goods were confirmed as collected and the corresponding container returned on June 27. However, the company has yet to receive the outstanding 85 per cent payment despite numerous follow-up actions.

Vinacas disclosed that Sacombank, the Vietnamese financial institution involved in the transaction, has initiated two separate payment requests to the Sheikh Zayed Road Dubai Branch of Ajman Bank Pjsc, based in the UAE. The requests pertain to the unresolved payment and the return of the shipping documentation, both of which remain unfulfilled.

According to a representative from Vinacas, "Investigations have revealed that the shipping documents were handed over to a security official from Ajman Bank Pjsc by DHL, the courier firm involved. However, the subsequent location of these documents remains uncertain. The shipping company asserts their compliance with standard operating procedures, releasing the goods only after receiving the necessary paperwork."

In addition to Tin Mai, Vinacas revealed that at least two more firms have found themselves ensnared in comparable situations involving the same client and bank. Recognising the hallmarks of a potential scam, Vinacas solicited support from the Vietnam Trade Office in the UAE.

In an attempt to comprehensively understand the situation and formulate an effective response, Vinacas plans to collaborate with the Vietnam Pepper and Spice Association. Together, they aim to convene a meeting with all affected parties to gather comprehensive data and establish recommendations for moving forward.

These are not isolated incidents in the cashew trade, as the industry has faced previous challenges of a similar nature. A notable case involved 100 cashew export containers destined for Italy, which led to substantial concerns over the security of international transactions.

Such instances of suspected fraud within the cashew export sector highlight the inherent risks involved in overseas trade, underscoring the importance of stringent due diligence. It sends a potent message to both corporations and regulators about the necessity for robust checks and balances to safeguard stakeholders' interests in the increasingly interconnected global marketplace.

Positive signs abound for business operation lift

Confidence among the business community is slowly bouncing back, supported by government efforts to provide a more business-friendly climate.

In June last year, Nguyen Van Khai halted the operation of his garment factory in Hanoi due to a lack of export orders. The factory was opened in 2017 and is the third he had opened in the northern region since 2015.

That August, a second factory based in Hung Yen province followed suit, leaving the first factory operating in moderation.

Since February this year, the two factories with suspended operations have resumed operations as a number of major contracts have been landed. This means nearly 1,000 workers have incomes again.

“We are happy that all of our three facilities are in full operation now,” Khai said.

Khai’s company is among nearly 37,700 enterprises resuming operation in the first half of this year throughout the country.

According to the General Statistics Office (GSO), in the first six months of this year, Vietnam saw over 75,900 newly established businesses registered at $29.48 billion, using nearly 509,900 workers. If another $39.94 billion registered by 25,200 operational enterprises is included, the total capital supplemented into the economy in the period is $69.42 billion.

In June, the number of newly established businesses hit nearly 14,000 registered at $5.78 billion, and employing 103,900 workers – up 14.9 per cent in the number of enterprises, 33.7 per cent in registered capital, and 39.2 per cent in the number of workers, compared to May.

Besides this, the economy in June also witnessed 7,100 businesses resume operations – up 19.3 per cent on-month and 3.2 times on-year.

According to the GSO, these are “extremely positive signals” for the economy, as production activities remain challenged.

“Despite difficulties lingering, domestic production and business have been gradually recovering. The confidence of enterprises is also escalating,” the Ministry of Planning and Investment reported to the government last week.

In the first half of the year, the total number of enterprises newly established and resuming operations hit 113,600, down 2.9 per cent on-year.

Under a survey conducted by the GSO in Q2 of 2023, the business community’s confidence in the government’s macroeconomic management is on the rise. Up to 72.6 per cent of surveyed companies forecast that their performance in Q3 will be better than and keep stable as it did in Q2.

Of which state-owned enterprises are the most optimistic, with a rate of 74.5 per cent of respondents projecting their performance will be better than and keep stable as compared to Q2. This rate is 73 and 71.1 per cent for domestic private businesses and foreign-invested ones, respectively.

In reality, the added value of the economy’s industrial sector rose from 0.75 per cent in Q1 to 1.56 per cent in Q2, meaning a gradual recovery in industrial production.

According to global data analysts FocusEconomics, Vietnam’s industrial production is expected to expand 5 per cent in 2023 and 8.4 per cent in 2024.

At the government’s meeting on Vietnam’s economy in the first half of 2023, Prime Minister Pham Minh Chinh said that despite difficulties with a drop in industrial production, the economy was expected to continue bouncing back in the coming months.

“Confidence of enterprises and investors are bouncing back, facilitating the economy to get bigger growth, with more jobs to be created,” PM Chinh said.

With a view to fuelling the economy and supporting enterprises and investors, the government will enact a resolution on the socioeconomic development plan from now until the year’s end, as well as on continuing measures to improve the domestic business climate and enhance national competitiveness.

The resolution aims to achieve the goal of securing an economic growth rate of 6.5 per cent for 2023, with improvements in national economic competitiveness, and in the local investment and business climate.

Structure lacking for LNG activities

The future stable operation of power facilities in Vietnam is being hampered by a lack of infrastructure to import and store sufficient liquefied natural gas.

Thi Vai terminal received its first liquefied natural gas (LNG) vessel on July 10, with a shipment of nearly 70,000 tonnes from the Indonesian port of Bontang. PetroVietnam Gas (PV Gas), the first unit in Vietnam eligible for LNG import and export, announced the arrival the previous week. PV Gas is working to secure a long-term fuel source for future LNG gas power facilities. Pham Van Phong, general manager of PV Gas, and Marion Power, executive for business development at ExxonMobil, convened in Hanoi to discuss refuelling for the commercial operation of the Thi Vai project.

Several additional energy suppliers are actively pursuing opportunities to sell LNG to Vietnam. Elena Golm, head of Oil and Gas Coverage at Novatek, came to Hanoi to debate the possibility of selling LNG between now and 2026 with PV Gas executives. Additionally, the parties reviewed options for partnership and investment in LNG power project chains in Vietnam.

Yoon Hee-seong, director general of the Export-Import Bank of Korea (KEXIM), said future orders for large-scale ventures are anticipated. “KEXIM is going to promote South Korean engineering, procurement, and construction firms that are involved in these projects,” he said.

Hee-seong reported that at the end of June, KEXIM signed an MoU on credit granting to Long An Energy Corporation, a joint venture between VinaCapital and GS Energy, for development of two gas turbine plants and a $3.13 billion LNG storage system in the Mekong Delta province of Long An.

Vietnam’s Power Development Plan VIII (PDP8) calls for the construction of 13 LNG-fired power stations with a combined capacity of 22.4GW by 2030, the first of which is anticipated to enter service by the end of 2024. However, the majority of domestic energy developers argued that the specific level of policy, dedication to output, and electricity purchase price are the determining factors for effectively converting LNG into a primary power source during the current decade, carrying growth of 26 per cent, the highest rate among primary power sources, and accounting for 27 per cent of total power capacity, as outlined in the PDP8.

According to the PDP8, the demand for LNG imports is expected to reach 14.46 million tonnes per year by 2030 and grow by 1.92 million tonnes per year by 2035.

PetroVietnam Power Corporation (PV Power) is one of the businesses that has benefited from gas-to-thermal power development. The corporation implemented the Nhon Trach 3 and Nhon Trach 4 thermal power plant projects in 2019, the first LNG-fired thermal power venture in Vietnam, with a capacity of 1,500MW and a total investment of $1.4 billion.

The global fuel market is currently well-balanced, but the chief of PV Power’s Investment and Construction Department, Vu Van Loi, has reservations about the “lack of expertise” in negotiating the current import contract. “The Vietnamese party frequently misses out on the chance to negotiate an affordable, long-term purchase contract,” Loi said.

Vietnam also lacks a structure for LNG electricity tariffs, offtake rate, and a system to convert gas parity to electricity prices, according to Loi. The country requires regulations and guidelines on design, construction, transportation, and maintenance of import terminals, as well as on the safety of fuel transportation, loading, offloading, and storage, he added.

Nonetheless, the government has an interest in this field. Pham Quang Huy, deputy director of the Electricity Regulatory Authority of Vietnam, said, “Negotiation of a gas power purchase agreement can be challenging because all plants require a high commitment rate of 60 per cent or more of contracted power output in order to borrow capital for implementation and sign long-term contracts.”

According to Huy, Electricity of Vietnam only negotiates contracted power output based on actual demand and the facility’s electricity pricing on the market.

Thai food groups set sights on fresh gains

Dozens of small- and medium-sized Thai groups are looking for partners to spread their operations in terms of agriculture and food in Vietnam.

Kannigar Danpiboon, managing director of processed and freeze-dried food manufacturer Thongpoon Food Co., Ltd, was present at the Thailand-Vietnam Business Networking event on July 13 in Hanoi, which was organised by the Thailand Board of Investment and investment consultancy IPA Vietnam.

“After carefully studying the Vietnamese market, I see that it has potential. Vietnam has abundant fresh fruit resources. However, agricultural production is mostly maintained at a small scale within households, using manual farming methods and limited mechanisation and processing. Thus, most exported products are still raw, bringing low value and profit,” Danpiboon said.

According to Danpiboon, Vietnam has many key products with a competitive advantage compared to that of Thailand. Many fresh fruits from Vietnam, such as lychee and dragon fruit, are being distributed in Thai large retail chains.

“In addition, Thai businesses prefer importing agricultural raw materials for processing, creating an excellent opportunity for Vietnamese businesses to export their agricultural products,” she added.

The representatives of Thai companies such as Hsu Chuan Foods, Boonpornsubrawee, and Shunhenglirungrangshah also said that they will work closely with the Thai investment board and IPA Vietnam to look for suitable locations and partners.

Amnat Chulajata, director of Thailand Board of Investment Vietnam, said, “In bilateral trading relationships in particular, Thailand is currently the largest trading partner of Vietnam in ASEAN, which is a favourable condition to promote two-way trading collaboration. Thus, we are increasing to support Thai investors and manufacturers to look for investment and trading opportunities in Vietnam. I see that many large Thai groups are present in Vietnam, but almost all of them locate in the south region, thus at this networking, I would like to connect Thai firms with local partners in the north.”

Bilateral trading turnover has seen consecutive growth since the two countries became members of the ASEAN Economic Community in 2015. Especially, participating in the Regional Comprehensive Economic Partnership has helped to remove tariff barriers, opening up numerous opportunities for import and export. Moreover, Vietnam and Thailand can cooperate in building supply and production chains as well as promoting exports to a third country.

Statistics published by the General Department of Vietnam Customs showed that in the first five months of this year, the bilateral import-export turnover was $7.85 billion, with $3.11 billion worth of Vietnam’s exports. The two countries expect that the figure will increase to $25 billion for the whole year.

“Thai food and agri-groups have a favourable foundation to expand the distribution channels and manufacturing facilities in Vietnam because at present, many retailers are setting their solid foot in the Vietnamese market, which are the backbone for fostering the export of Thai goods to Vietnam. In addition, Thai authorities are also encouraging these retailers to invest in this Southeast Asian country,” Chulajata said.

The Department of International Trade Promotion (DITP), a division of the Thai Ministry of Commerce, has urged Thai entrepreneurs to carefully examine the potential of harnessing Vietnam’s thriving retail market, which is poised to reach a staggering $350 billion by 2025.

In addition to this, the DITP has encouraged Thai enterprises to prioritise commercial enhancements, engage in environmentally friendly production practices, and demonstrate a keen focus on circular and green economies – all of which are instrumental in stimulating growth within Vietnam’s retail landscape.

Central Retail Corporation, the largest retailer in Thailand, in February announced its biggest investment in Vietnam at ฿50 billion ($1.45 billion) for the 2023-2027 period to accelerate its market presence in the country, which could help create distribution advantages for smaller Thai companies in Vietnam.

The corporation invested more than ฿10 billion ($288.6 million) to expand its retail business in Vietnam over the past decade. It has more than 340 stores across 40 cities and provinces.

Banks buckle up to tackle security issues head on

Many local banks are wading through troubled waters as they strive to comply with personal data protection regulations, navigating the delicate balance between privacy rights, regulatory compliance, and cybersecurity.

Vietcombank and Techcombank last week updated data protection policies in accordance with Decree No.13/2023/ND-CP outlining new regulations on personal data protection, which took effect on July 1.

The revised conditions aim to comply with new regulations on personal data protection. These updates are part of the banks’ commitment to respecting customers’ privacy rights and include detailed information on data processing, rights, and obligations. 

According to the new directive, their customers, by virtue of using the bank’s array of products, services, or digital platforms, are deemed to have accepted these terms. A withdrawal of consent or non-acceptance could potentially limit the provision of the bank’s services.

In such instances, banks holds no liability for any subsequent losses, and it explicitly reserves their legal rights regarding any restrictions, suspensions, or cancellations.

In a parallel stride, other financial institutions such as FE Credit, VPBank, HDBank, Shinhan Bank, Shinhan Finance, Home Credit, and Mirae Asset Finance have also made similar updates.

The impetus behind this wave of policy reform stems from the Vietnamese government’s enactment of Decree 13, a landmark legislation that establishes a critical legal framework to regulate data protection obligations and cybersecurity in personal data processing activities. By implementing it, Vietnam aims to align its personal data protection standards with international best practices.

Pham Anh Tuan, head of the Payment Department at the State Bank of Vietnam (SBV), appreciated the significance of Decree 13 in bringing Vietnam’s personal data protection standards closer to international benchmarks. However, he underscored the anticipated challenges during the implementation phase.

“Decree 13 should not be regarded as the sole governing document, as it interacts with other laws that regulate credit organisations and financial institutions operating under the Law on Credit Organisations. Clarification and guidance from relevant authorities are thus imperative to navigate these intricacies effectively.”

To facilitate effective implementation, the Vietnam Bankers Association (VBA) proposes further guidelines that provide standardised interpretations and applications of Decree 13. The VBA also suggests the inclusion of a transition period to help institutions adapt to the new requirements.

During this transitional phase, joint circulars issued by the Ministry of Public Security (MoPS) and the SBV could offer much-needed explanations and provide practical guidance to financial institutions as they navigate the regulatory landscape.

Tran Thi Minh Tam, vice president of legal under the VBA, underscored the complexity faced by banks. Tam pointed out that, within the existing legal framework governing banking, activities involving the collection and processing of customer data, including personal data, are regulated by relevant legal documents.

However, challenges arise concerning the requirement for customer consent to process their data. Tam believed the practical difficulties in seeking consent from millions of customers, particularly when banks rely on data analysis to drive innovation and enhance their products and services.

“Striking a delicate balance between legal compliance and operational agility becomes crucial in these circumstances,” she said.

The implementation of Decree 13 coincides with a transformative period in the banking sector, characterised by the rise of open banking, increased connectivity with multiple partners, and a relentless focus on delivering superior user experiences.

Compliance with the decree’s requirements presents a formidable task, especially considering the evolving landscape of cyber threats.

Banks are taking proactive measures by adopting technological solutions to fortify their cybersecurity posture. The shift towards electronic systems and the digitalisation of transactions introduces new challenges, as criminals continuously adapt their tactics. However, even countries at the forefront of technology are not immune to data breaches, highlighting the persistent need for robust security measures.

Furthermore, in addition to Decree 13, banks must prepare for upcoming regulations that encompass categorising, assessing, and fortifying systems to ensure safety and mitigate the risk of data leaks. These endeavours contribute to effective and holistic management practices within the banking sector.

Underlining the gravity of the situation, lieutenant colonel Trieu Manh Tung, deputy head of the Department of Cybersecurity and High-Tech Crime Prevention under the MoPS, emphasised the constitutional importance of protecting personal data, as rampant online trading of leaked personal information persists.

The VBA also stressed the critical nature of implementing Decree 13, recognising the formidable task faced by Vietnamese banks. Achieving the delicate balance between maintaining customer trust, legal compliance, and safeguarding sensitive data against evolving cyber threats remains a top priority for the industry.

AEON Vietnam obtains $41 million loan to secure stronger footprint

AEON Vietnam has been issued a $41 million loan from the Japan Bank for International Cooperation (JBIC) and Mizuho Bank to facilitate a greater footprint in the southern region. 
The JBIC will provide credit worth $24 million, while Mizuho Bank will lend $17 million.

AEON Vietnam will use the fresh funds to open two new general merchandise stores in the southern provinces of Binh Duong and Long An. The move will also support the development of a distribution network for Japanese ingredients and processed food in Vietnam through AEON's stores.

AEON has identified Vietnam as its second key investment market behind Japan, recording a 20 per cent increase in revenue last year when compared to pre-COVID levels.

The Japanese retailer currently runs six large stores in the country, with plans to open a further 30 by 2030. It is expected to inject tens of billions of yen into the opening of new stores in Vietnam.

Another report by the Ministry of Industry and Trade found that Vietnam's retail industry currently has a market size of $142 billion, and is expected to grow to $350 billion by 2025 – contributing 59 per cent to GDP. These figures prove the attractiveness of the Vietnamese market for retail giants like AEON.

Vietnam's pre-built warehouse sector encounters growth downturn

The southern region of Vietnam is witnessing a lull in its pre-built warehouse sector following an era of energetic growth, as outlined in a recent review by Jones Lang LaSalle (JLL) Vietnam. This market cooldown was predicted in Q1/2023, forecasting a slowdown in demand.
 
The region has experienced a net absorption downturn by nearly 50,000 square metres, alongside an uptick in vacancy rates observed in pre-built warehouse ventures in Thu Dau Mot, Ben Cat (Binh Duong), and Long Thanh (Dong Nai).

JLL associates these emerging patterns to a stagnant cross-border commercial environment coupled with low-yield business operations, prompting manufacturing firms to scale down their ventures. This reduction is directly impacting the leasing efficiency of pre-built warehouses, particularly those located in manufacturing centres catering to the export sector.

During Q2/2023, the modern pre-built warehouse market did not record any additional supply, thus sustaining the existing stock at 1.8 million sq.m. Dominant market shares remain with developers BWID and Mapletree, representing 32 per cent and 22 per cent of the total supply respectively.

Rental prices for these warehouses have held steady at $4.7 per sq.m per month, marking a nominal 0.1 per cent increase compared to the preceding quarter. In light of the market's current sluggish momentum, landlords continue to exhibit flexibility, facilitating negotiations and offering support to their lessees.

Facilities located in north Binh Duong and south Dong Nai have noted a downward adjustment in rental prices, correlating with the heightened vacancy rate. These areas are primarily comprised of manufacturing plants with manufacturing firms as the principal tenants.

JLL predicts that the warehousing market, in the short term, will continue to be propelled by domestic demand. Although export activities are projected to rejuvenate growth towards the end of the year or early next year, the pace of recovery is expected to be gradual.

"Given the oscillations in the global economy, a trend towards downsizing is discernible among manufacturers. Investors and tenants have adopted a more prudent stance towards expanding business operations and initiating new projects, maintaining a 'wait and see' approach," according to JLL.

Cushman & Wakefield's prior report also indicated a persistent domestic demand for pre-built warehouses, while a deceleration was observed in the manufacturing and export sectors. The demand for warehouse space is principally maintained by domestic markets, specifically the retail, e-commerce, and logistics sectors serving the domestic arena. However, the manufacturing and export sectors have witnessed a notable downturn.

This trend led to a net absorption of just 6,400sq.m and a fill rate of 73 per cent is stable quarterly, but marks a 4 percentage point decrease on-year.

Simultaneously, the market recorded nearly 46,000sq.m of fresh supply from the Emergent Le Minh Xuan 3, a Grade-A project in Ho Chi Minh City. This has pushed the total market supply up to 5.14 million sq.m, a surge of 11.4 per cent on-year.

By 2026, the market is projected to welcome an additional 1.3 million sq.m of warehouses, indicating an annual growth rate of 5.1 per cent.

Trang Bui, general director of Cushman & Wakefield Vietnam, suggests that the escalating competition due to the plentiful pre-built warehouse supply could prompt landlords to propose more compelling rental policies and incentives to draw tenants.

Significant real estate deals remain on shelf

While the demand for real estate deals is rising, legal tussles and low liquidity mean genuine transactions remain limited for now.
VietinBank a fortnight ago shocked the market with a list of nearly 400 secured assets for sale at a total value of more than $330 million.

The list of assets to be sold includes over 350 real estate properties and almost 40 vehicles or pieces of equipment. They will be auctioned or sold off after negotiations.

In addition to residential houses and land plots, the lender is also selling a series of 4-star and 5-star hotels, homestays, and villas in Hoi An, Danang, Nha Trang, and Cam Lam.

Several other banks are also promoting debt sales worth millions of dollars, such as Agribank, BIDV, and Sacombank.

In February, Sacombank saw 18 assets secured by property rights at Phong Phu Industrial Park in Binh Chanh district of Ho Chi Minh City for auction. The project spans 134 hectares, including land for developing industrial, houses, supermarkets, and hospitals.

Some businesses have spent heavily to seek opportunities to expand and improve profit margins. However, the number of successful transactions are still few, industry insiders noted.

The difficult economic situation has forced companies to focus on their core business and only move forward with small- and medium-value deals. Meanwhile, there are very few domestic real estate developers who can still arrange capital flows to buy in the context of reduced liquidity and high financial costs.

According to Nguyen Quoc Anh, deputy general director of batdongsan.com.vn, despite huge supply with hundreds of projects being on sale, eligible projects with the right conditions for transfer are limited.

“Potential investors are willing to put down money and demand is large, but the number of successful deals remains modest. Big merger and acquisition (M&A) deals are not yet present, but a wave could certainly appear towards 2024,” Anh said.

Vietnam Association of Realtors (VARS) data shows that the number of foreign groups interested in learning about M&A in real estate projects here is still increasing, mainly from Singapore, South Korea, Taiwan, Japan, and Malaysia. However, most of the potential new deals are still in the process of appraisal or negotiation.

In addition, legal bottlenecks mean many projects cannot see transactions even if their owners are eager to make a deal.

To ensure successful M&A deals, VARS recommends competent bodies create better conditions for investors who do not have enough resources to transfer the entire or a part of their projects, if they have already cleared land and completed compensation activities.

It also said that the demand for real estate M&A is currently high. In the market, there are about 1,000 projects delayed due to different reasons and waiting for legal issues to be resolved. Many of those owners have exhausted their internal resources, and transferring projects to restructure their financial status would be a crucial way for them to survive in the coming months, it added.

Expectations not yet met in real estate FDI

Although foreign direct investment into real estate reached just over $502 million in the first half of the year, down 43 per cent from 2022, it is still forecast to return to growth in the second half.

According to the General Statistics Office, real estate business accounted for 3.38 per cent of Vietnam’s GDP in the period, compared to 3.32 per cent of the same period last year.

As of June 20, the total foreign capital registered in Vietnam reached $13.43 billion, down 4.3 per cent over the same period last year. The segment continued to hold third position with total registered capital of $1.53 billion, down 51.5 per cent.

Accumulated in the first six months, realised foreign capital in Vietnam was estimated at $10.02 billion, up 0.5 per cent over the first half of 2022.

However, in his visit to Vietnam in May, Matthew Bouw, chief executive for Asia-Pacific at Cushman & Wakefield, said that the Vietnamese market was becoming a more institutional investor one, which is a positive sign.

“We had a large client event in Singapore about two months ago where we welcomed 80 of the world’s largest investors, a number of which operate in Asia. During the event, we asked them to rank their preferred real estate investment markets and the responses were often Japan, Australia, and Vietnam. The positive sentiment around Vietnam is due to a number of factors, including the fast-growing manufacturing sector and the growth dynamics more broadly,” Bouw said.

He added that it was important to keep in mind that institutional investors will look for stable and reliable markets.

“I have noticed a number of new regulations issued in Vietnam, and many other positive initiatives the government is undertaking to improve compliance and the general business environment. These initiatives are a positive step for Vietnam as an investible market for commercial real estate,” he said.

“It is exciting to see so many large multinational companies setting up here like Lego, Panasonic, Samsung, LG, Sharp, and others. This is a really positive sign for institutional investors because where companies like these go, institutional investors will follow.”

Industrial and logistics are the preferred asset class, whilst some will look at grade-A offices since Ho Chi Minh City is still a landlord-favourable market.

“If the asset has a good location, all the necessary environmental, social, and governance credentials, a good tenant mix, strong rental growth, attractive lease terms, and high occupancy, it will be an attractive asset,” he added.

Besides the office market, residential apartments, multifamily, or build-to-rent is becoming a more sought-after asset class in many cities around the world. With city density increasing due to urbanisation, and supply often falling short of demand, the multifamily/residential living sector is likely to be a fast-growing asset class in a number of markets across Asia-Pacific this decade.

Figures from Cushman & Wakefield show that since 2022, the foreign real estate investment sector in Vietnam has attracted a lot of attention as transaction opportunities started to appear. The north of the country has been a vibrant area during the period, with a total investment value of $1.1 billion, while the southern region received $760 million.

Looking more closely at the proportion, the capital market in Vietnam is mostly focused on the housing market, followed by commercial industrial and non-industrial properties.

The south in recent years has not attracted as many large manufacturers as the north, but the investor market is diversified, with transaction types including new project development, and some ventures in progress. Cushman & Wakefield added that the process of developing and purchasing projects has been operating stably. In addition to key economic zones, peripheral and remote areas are also attractive to investors.

HCMC has introduction, exhibition point for OCOP products for first time

The Southern Agriculture Trade Service Center under the Ministry of Agriculture and Rural Development this morning opened an introduction and exhibition point for OCOP products.

Nearly 300 One Commune One Product of Vietnam (OCOP) products being rated from three stars to four stars were displayed and traded at 135A Pasteur, District 3, Ho Chi Minh City.

This is the first time, Ho Chi Minh City has had the model to support the consumption and advertisement of craft village products, OCOP products and typical rural industrial products under the model of the value chain via the fair and e-commerce platforms, social networks Facebook, Zalo, Tiktok and so on.

On this occasion, customers also have opportunities to meet and listen to start-up stories from businesses.

It is expected that the Southern Agriculture Trade Service Center will continue to cooperate with supermarkets and shopping centers to organize the fair once a quarter.

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