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VIETNAM BUSINESS NEWS JUNE 17

Disbursement of public investment slow in January – May

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The disbursement of public investment was slow in the first five months of this year, meaning greater effort was needed to push up progress as such investment is an important driver for post-pandemic economic recovery.

The Ministry of Transport, one of the ministries and agencies allocated the largest sum of public investment this year, worth nearly VND43 trillion for 61 projects, was seeing slower than expected disbursement.

The ministry’s statistics showed that as of the end of May, the ministry disbursed more than VND13.5 trillion, equivalent to 32.1 per cent of the plan for the full year.

The transport ministry said despite being one of the ministries and agencies with the highest public investment, the progress failed to meet the plan because most projects were focusing on conducting procedures for implementation in the first months of this year and disbursement was expected to be sped up in the second half.

Statistics of the Ministry of Finance showed that realised public investment was estimated at more than VND102 trillion in January – May, or 22 per cent of the Government’s plan and 3.8 percentage points lower than the same period last year.

Only seven ministries, agencies and localities had disbursement rates of more than 25 per cent of the plan while most saw low disbursement rates, with 39 out of 50 ministries and agencies and 17 out of 63 provinces and cities reporting disbursement rates of less than 15 per cent.

Among them, 13 ministries and agencies had not managed to disburse any, while eight saw disbursement rates of less than one per cent.

Deputy Minister of Finance Ta Anh Tuan said that the progress of the public-invested projects was partly affected by the outbreak of the COVID-19 pandemic, skyrocketing prices of building materials and slow site clearance. Especially, some contractors were of weak capacity and there existed a number of problems in implementing official development assistance (ODA)-funded projects, he pointed out.

The Ministry of Planning and Investment said that it was necessary to make good preparations for public invested projects so that the capital could be disbursed from the first months of the year, not left until the final months.

Nguyen Dinh Cung, member of the Prime Minister’s Economic Advisory Group, said that slow disbursement of public investment had existed for many years but little improvement was made despite its important role in accelerating economic growth amid the pandemic.

Economic expert Ngo Tri Long said that the soaring prices of steel and other building materials from the beginning of this year were causing significant difficulties to public-invested projects.

Long urged the Government to raise solutions to cope with this situation and speed up the disbursement of public investment, which would contribute to realising the economic growth target.

Accountability in disbursing public investment must also be enhanced to ensure feasibility of the projects, Long stressed, adding that the waste of public investment would cause damage to the budget and socio-economic development.

The stagnation in disbursing public investment reflected the weak capacity of the relevant ministries and agencies from the evaluation stage of the projects. It was necessary to have strict punishment mechanisms when the slow disbursement of public investment caused waste, Long said.

Vu Hong Thanh, Chairman of the National Assembly’s Economic Committee, said that some major projects were seeing very slow progress, especially component projects of the North-South Expressway, due to the shortage of building materials and high steel prices.

If no effective measures were put forward, it would be difficult to speed up the progress and disbursement of public investment, Thanh said.

The Ministry of Planning and Investment said that a special working group would be set up, which would be in charge of reviewing and tackling difficulties in implementing public invested projects. The proposal was submitted to the Prime Minister for approval. 

Over 170 travel firms in HCMC leave market in five months

Some 171 travel companies in HCMC suspended operations in the first five months of this year as the Covid-19 pandemic continued to severely impact the tourism industry.

Due to the two Covid-19 waves that broke out this year, with the first one beginning in late January, just a few weeks before the Lunar New Year, and the second one in late April, the country has not been able to reopen its doors to international tourists. Travel restrictions, the closure of borders and social distancing measures have prevented the tourism industry from recovering.

HCMC, which is one of the country’s most popular attractions, has been among the most affected localities. According to the HCMC Department of Tourism, the revenues of travel firms in the city from January to May 2021 tumbled 70% year on year, forcing them to close down.

Some large travel firms, which have a strong financial capacity, are still operational but they have had to cut their staff by 50-80% to reduce costs. At present, only 50% of the city’s travel companies are operational, with some 31,500 employees.

The lack of tourists has been devastating for the hospitality industry, with the occupancy rates of hotels in the city dropping drastically. Many hotels have closed down, while the revenues of three- to five-star hotels that are still operational have dropped up to 70%.

The director of a travel company in HCMC said although revenues have plunged, the company still has to pay fixed costs such as premise rentals, salaries for employees and taxes. Therefore, travel companies are now in urgent need of support from the Government.

Data of the HCMC Department of Tourism showed that the city received 7.1 million domestic tourists in the first five months of this year, down 47% compared with the same period of 2019 and up 11.4% from 2020.

The city earned VND35.5 trillion (US$1.54 billion) from tourism from January to May 2021, falling 37% compared with the first five months of 2019 but increasing 23.3% against the same period of 2020.

Viet Nam sees high growth of fruit exports to China in first five months

Viet Nam's agricultural sector gained strong growth in the export of many kinds of fruit to China in the first five months of 2021, despite the COVID-19 pandemic, according to the Plant Protection Department.

Viet Nam exported over 468,000 tonnes of mangoes to China, 12 per cent higher than the export volume in the whole year of 2020; 348,000 tonnes of bananas, or 87 per cent of the exports in the whole year of 2020; 301,000 tonnes of jackfruit, or 92 per cent of the exports in the whole year of 2020 and 1.1 million tonnes of dragon fruit, or 63 per cent.

According to Hoang Trung, Director of the Plant Protection Department under the Ministry of Agriculture and Rural Development, China is one of the major export markets for Vietnamese agricultural products.

Viet Nam is gradually expanding export markets to the US, EU, Japan and South Korea, but this needs time to achieve the targets as expected, so in the near future, China is still the leading export market with a large proportion of Viet Nam’s farming, forestry and seafood products.

However, China is no longer as easy as it was decades ago, Trung said. With the current development trend, China has more and more standards on the quality of agricultural products imported from any country, including Viet Nam. The requirements include standards for design, packaging, packing specifications, product quality and especially the growing area code.

Therefore, from 2018, the Plant Protection Department has actively worked with localities, businesses and cooperatives nationwide to develop code-granted planting areas to meet China's requirements. So far, Viet Nam has granted codes for 3,400 growing areas of many kinds of fruit exported to many markets. Of which, Viet Nam has granted codes for 1,703 planting areas and 1,776 packing facilities that produce fresh fruit exported to China.

In addition, Viet Nam now exports many kinds of fresh fruit to China under the official export method to take tax advantages under trade agreements, including mango, banana, dragon fruit, longan, lychee, jackfruit, pineapple, watermelon, rambutan and mangosteen.

Viet Nam is negotiating with Chinese partners to reach agreements on the official export of many other kinds of farming products, including sweet potatoes and durian, or waiting for further negotiation for grapefruit, passion fruit and coconut.

However, Trung said Vietnamese agricultural products are currently competing with the agricultural products from Thailand, Cambodia, and even domestic products in the Chinese market.

Trung believed that this forces Viet Nam’s businesses and farmers to cooperate in improving quality, reducing production costs and increasing competitiveness of their agricultural products.

Viet Nam successfully negotiated with China many years ago to have permission to ship farming products under official export, but Viet Nam’s enterprises could not increase exports of those products to China, such as rambutan and mangosteen.

Meanwhile, many other traditional products have gained large exports in recent years, including mango, dragon fruit, and jackfruit. Viet Nam has surpassed the Philippines to become the largest banana supplier to the Chinese market.

Viet Nam expects that when COVID-19 is brought under control, Chinese experts can go to Viet Nam to re-evaluate the technical processes for Vietnamese durian. If gaining permission to ship this product to China under the official export method, Viet Nam could become a competitor with Thailand and Malaysia in exporting durian to China, although those two ASEAN countries have permission on shipping this product under official export to this market for decades.

“To improve the competitiveness of Vietnamese agricultural products, the Plant Protection Department has been implementing many tasks, including biological solutions, organic fertilisers, and programmes granting codes for planting areas, and facilities of packaging, irradiation and hot water treatment. As a result, Vietnamese agricultural products now basically meet the requirements of quality, residue, and cost from strict import markets," said Trung.

According to the Ministry of Agriculture and Rural Development, in the first four months of 2021, the total import and export turnover of agricultural, forestry and fishery products reached more than US$5.57 billion, up 27.8 per cent over the same period in 2020.

Of which, the export value was about $4.02 billion, up 36.5 per cent year on year and the import value reached $1.55 billion, up 9.7 per cent. 

Railway businesses focus on cargo transport to reduce pandemic impacts

Heavily impacted by the COVID-19 pandemic, the Vietnam Railways Corporation (VNR) has made great efforts to reduce losses by actively targeting cargo transport instead of just passenger transport.

According to the corporation, due to the impact of the pandemic, revenue from passenger transport in the first five months of this year dropped by 48.6 per cent compared to the same period in 2020.

The corporation transported only 1.15 million passengers in the period, down 35.4 per cent against the same period in 2020, with a revenue of more than VND400 billion, down 48.6 per cent. Especially in May, when the latest outbreak of the pandemic appeared in Viet Nam, there were only 132,300 railway passengers, down 51.6 per cent.

On the holiday of April 30 and May 1, VNR said 11,383 tickets worth nearly VND4 billion were returned. The corporation had to cease the operation of 393 passenger trains last month.

A representative of VNR said the COVID-19 pandemic had caused rail transport businesses to struggle and many workers in the industry had lost their jobs. VNR alone had to temporarily suspend 1,169 workers.

VNR’s two largest transport subsidiaries – Hanoi Railway Transport Joint Stock Company and Saigon Railway Transport Joint Stock Company – estimated losses of nearly VND193 billion and more than VND227 billion, respectively, the representative said.

The main cause of the loss is due to the impacts of the COVID-19 pandemic as people have limited their travel, causing the number of passengers to drop.

Heavily pandemic-affected cities and provinces such as Bac Ninh, Bac Giang, Ha Noi and HCM City have implemented social distancing measures according to Directives 15 and 16 of the Prime Minister.

Many cities and provinces have restricted the pick-up and drop-off of passengers from pandemic-affected localities, and people returning from pandemic areas must be isolated for 14-21 days.

Nguyen Chinh Nam, head of VNR’s Business Planning Department, said to minimise difficulties, VNR had focused on transport cargo instead of just passenger transport as previously. Until now, the growth of freight transport has helped VNR to compensate partly for the loss.

Specifically, VNR’s cargo transport volume reached 2.42 million tonnes in the first five months of the year, up 26.9 per cent over the same period last year. Revenue from the transport segment reached VND713.5 billion, up 21.8 per cent over the same period of 2020.

Besides actively seeking new cargo transport orders in the domestic market, VNR was continually implementing strict measures on pandemic prevention and control to maintain international freight trains as well as clearing bottlenecks in border policies with Chinese partners to boost transport on the route.

In addition, VNR’s subsidiary – Hanoi Railway Transport Joint Stock Company – was also promoting freight transport through developing warehouse-to-warehouse and door-to-door transport services of goods and luggage through online ordering. 

Vietnam's footwear industry sees robust growth despite COVID-19 pandemic

Despite facing difficulties caused by the COVID-19 pandemic, Vietnam's footwear industry still achieved double-digit growth and some companies have received long-term orders.

Dang Van Ngoc, Director of Tan Phat Leather Shoes and Wallets Company Limited, said since the start of the COVID-19 pandemic, especially during the outbreak in Europe, customers in this market cancelled 80 percent of orders.

“The remaining customers ask for late payments or discounts, causing challenges for the company,” he said, adding that it maintained production in spite of suffering losses for a long time.

“But now, we have reconnected with our customers and reached agreements to share difficulties and profits in the context of the pandemic. Thus, we have sufficient orders to keep us busy for the remainder of the year,” Ngoc was quoted by Sai Gon Giai Phong (Liberated Sai Gon) newspaper as saying.

According to Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso), the number of orders that domestic companies have received are on the rise.

This is an opportunity for businesses to restore production and reconnect the supply chains, he said.

Thuan also said that production and trading activities of all enterprises in the industry have not fully recovered, but in general, many firms have overcome difficulties and taken advantage of market opportunities.

He cited Vinh Yen Shoes Joint Stock Company as an example.

Despite suffering low consumption triggered by COVID-19 as people in European nations and the US tend to reduce shopping while many supermarkets are closed to prevent the epidemic, the company has achieved positive achievements thanks to the adoption of flexible measures.

Its turnover reached 320 billion VND (13.9 million USD) last year with two million pair of shoes. The figure is expected to rise to 380 billion VND (16.5 million USD) this year.

Statistics from the General Department of Vietnam Customs showed the country's export turnover of footwear in the first five months of this year grew 25.5 percent year-on-year to nearly 8.4 billion USD, accounting for 6.4 percent of the country’s total export earnings of goods.

The US remained the biggest importer with an export value of  3.35 billion USD, followed by the EU and China with 1.92 billion USD and 830.9 million USD, respectively.

The Ministry of Industry and Trade (MoIT) attributed the impressive growth of the footwear industry to the fact that it has taken advantage of tax incentives offered by the European Union - Vietnam Free Trade Agreement (EVFTA).

Figures from the ministry revealed that in the first quarter of this year, the ratio of footwear products receiving certificates of origin for export to the EU reached nearly 99 percent.

It was necessary for footwear companies to focus on exploiting domestic materials for sustainable development and make full use of tax incentives as well as opportunities brought about by the EVFTA, according to the MoIT.

In fact, 60 percent of raw materials for the industry comes from mainland China, followed by the Republic of Korea and Taiwan (China).

In recent years, some big enterprises have striven to secure their own material supplies but small-sized businesses failed to do so due to limited resources.

Thuan said footwear companies want to receive financial support policies to develop supporting industries. A tax reduction for enterprises investing in supporting industries would help them manufacture products that are more competitive than those imported from China and other countries, he said./. 

Vietnam sees surge in farm produce exports to China

Agricultural exports to China posted impressive growth between January and May, with shipments of some produce even matching or surpassing the corresponding figures for the entire 2020, data of the Plant Protection Department under the Ministry of Agriculture and Rural Development showed.

During the period, Vietnam shipped over 468,000 tonnes of mango to China, equivalent to 112 percent of last year’s figure; 348,000 tonnes of banana, 87 percent; 301,000 tonnes of jackfruit, 92 percent; and 1.1 million tonnes of dragon fruit, 63 percent.

The Nong nghiep Viet Nam (Agriculture of Vietnam) newspaper cited Hoang Trung, Director of the Plant Protection Department, as saying that China has long been the main importer of Vietnamese farm produce, and although Vietnam is working hard to diversify export markets, this could not be done overnight.

Given this, China will remain the largest buyer of Vietnamese agro-forestry-fishery products in the time to come, he noted.

As China has set increasingly strict standards for agricultural imports from other countries, since 2018, the Plant Protection Department has coordinated with localities, businesses, and cooperatives nationwide to meet the importer’s requirements.

Within three years, Vietnam granted 3,400 production unit codes for many products to serve different export markets. In particular, 1,703 production unit codes were given to farming areas and 1,776 others for packaging facilities in order to meet requirements for exports to the Chinese market, Trung said.

The country has been maintaining smooth exports of several key fruits via official channels to China such as mango, banana, dragon fruit, longan, lychee, jackfruit, and water melon.

The two sides have reached consensus on plant quarantine solutions for sweet potato and durian while pomelo, passion fruit, and coconut are among those awaiting negotiations, the official added.

Regarding the competition from Thai and Cambodian rivals in the Chinese market, which is normal in an open economy, Trung said it will encourage businesses and farmers to cooperate with one another more strongly and professionally so as to improve product quality, reduce production cost, and boost the competitiveness of Vietnamese goods in the global market./.

Tourism firms bolster digital transformation for long-term development

Tourism firms are speeding up digital transformation to better adapt to the circumstances in the pandemic through switching to new models and methods of business administration and operation, while creating novel and unique products.

Digital transformation is deemed an evitable trend which helps the firms surmount the adverse impact of COVID-19, as well as a key to sustainable development.

The pandemic has dealt a major blow to this economic sector with over 95 percent of companies severely affected.

CEO of Travelogy Vietnam Vu Van Tuyen said that IT applications help businesses to optimise personnel and system management, so as to improve efficiency and competitive edge.

In addition, technology also creates connection between firms, fostering transparency and sustainable development, he added.

To meet demand of tourists, travel companies have devised virtual or interactive tours embellished with images, videos, sound effects and music.

When it comes to applying digital transformation, firms are advised to take consumer psychology into account in an attempt to build a suitable roadmap.

The acceleration of digital application is vital to supervise tourism activities and support COVID-19 prevention and control measures, as well as ensure long-term business of the sector, Ha Van Sieu, Deputy Director General of the Vietnam National Administration of Tourism (VNAT), has said.

To support stakeholders, the VNAT has rolled out a project on a smart tourism operation centre that will connect with customers and coordinate with telecommunication units.

Localities are asked to guide firms in signing up for a COVID-19 safety self-assessment system and an app on safe tourism, which have seen the registration of all 64 provinces and cities in the country./.

Online ads earn big amid COVID-19 pandemic

Online advertising, as the first choice of firms and brands amid the pandemic, is thriving in Vietnam and could reach the milestone of 1 billion USD in revenue this year.

According to the Vietnam Digital Marketing Trends 2021 report by Novaon, Vietnam’s online ad market will continue growing during the 2020-2025 period, with a compound annual growth rate of 21.5 percent. Despite the pandemic last year, online ad revenue still reached 820 million USD, which is forecast to rise to 955.7 million USD this year.

Chairman of the Clever Group Nguyen Khanh Trinh expressed his optimism about the annual growth of 10-20 percent in the sector.

Last year, Vietnam’s digital economy was worth 14 billion USD, which is forecast to reach 52 billion USD by 2025. In particular, e-commerce expanded by 46 percent as Vietnamese spend 3.5 – 4.2 hours per day on the internet, which gives an edge for the online advertising sector to earn 1 billion USD this year.

However, the sector also faces unfair competition with cross-border platforms like Facebook and Google accounting for over 80 percent of online ads revenue in Vietnam.

At present, Facebook, Google Ads, YouTube and channels of key opinion leaders are the first choices of domestic firms for online ads, which spent an average 17 percent of their revenue on digital marketing in 2020.

Statistics showed that only about 5 percent of firms do not or have yet to use Facebook for their marketing campaigns. Many others spent more than 50 percent of their online ads budget on Facebook instead of other channels.

Nguyen Dang Ngoc, Deputy Director of the VCCorp, said customers prefer using ad services by cross-border platforms because they do not have to fulfill taxation and fee obligations.

The Decree No.38//2021/ND-CP regulating administrative fines in culture and ads, which took effect on June 1, 2021, is expected to fill gaps to promote fair competition in the field, making it easier for domestic firms to win market share from foreign giants./.

FDI supports Vietnam climb the global value chain

Vietnam has successfully transformed into a manufacturing-oriented economy, supported by stronger global value chain (GVC) participation thanks to a rise in foreign direct investment (FDI), especially in the manufacturing industry. However, amid the post-pandemic GVC reconfiguration, FDI policies need to be carefully aligned to Vietnam’s development strategy.

Over the past few years, Samsung, hailing from the Republic of Korea, has become a good example of a multinational corporation (MNC) in Vietnam supporting the country in climbing the global value chain (GVC).

Having been operating in Vietnam for 13 years, Samsung has raised its investment capital from an initial US$670 million to US$17.5 billion, with six plants in the northern provinces of Bac Ninh and Thai Nguyen, and in Ho Chi Minh City, and an under-construction research and development (R&D) centre worth US$220 million in Hanoi.

In 2020, Samsung Vietnam earned US$67 billion in revenue, accounting for 25% of the country's GDP of US$270 billion. Samsung Electronics' Thai Nguyen arm contributed the most revenue among the four subsidiaries, at US$26 billion last year.

Also last year, Samsung Vietnam posted some US$57 billion in export revenue - or nearly 20% of Vietnam's total export turnover - a little below its target of US$60 billion, but still a positive result amid the pandemic

According to the Ministry of Planning and Investment, the great contributions of such firms as Samsung to Vietnam's economic growth are significant. The country's economy grew 2.91% last year, and 4.48% in the first quarter of 2021.

The Vietnamese government has always underlined the major role of foreign direct investment (FDI) in spurring its exports via global value chain (GVCs) participation, as well as boosting economic growth.

In the first five months of this year, total newly-registered and newly-added FDI capital was nearly US$14 billion, up 0.8% over the corresponding period last year.

FDI disbursement from January to May 20 is estimated at US$7.15 billion, an increase of 6.7% as compared to the same period of 2020.

Manufacturing was the most attractive sector in Vietnam, attracting US$6.14 billion in FDI in five months.

According to a recent study by the ASEAN+3 Macroeconomic Research Office (AMRO), as the biggest foreign direct investor in Vietnam, it is not surprising that Samsung has a sizeable influence on the way Vietnam participates in GVCs, particularly in terms of backward linkages. Prior to 2019, among around 100 of Samsung's suppliers who collectively accounted for 80% of its transaction volume, 28 were listed as operating in Vietnam, although these appear to be foreign-owned. More than half were based, or had operations, in the Republic of Korea, 30 in China, and 16 in Japan.

This sourcing breakdown is largely consistent with Vietnam's top imports from the Plus-3 economies, also mostly electronic in nature. In particular, these are mostly intermediate goods such as semiconductors and electronics.

As Vietnam continues to be a highly attractive production base for other multinationals, the influx of these new MNC projects will also help shape its future GVC participation. For example, the media reported Apple shifting nearly 30% (up to four million units) of its wireless headphones production (AirPods) into Vietnam and away from China. As a result, its leading supplier Goertek also confirmed plans to move its production in the same direction.

Google is also reportedly looking at moving to Vietnam from China for its Pixel 4A smartphone.

These investment movements will have a significant impact on how the foreign and/or domestic value added content of electronics and electrical exports will change in the future.

Similarly, the ongoing movement of international footwear and apparel firms such as Adidas, Nike, and Puma to Vietnam will also influence the backward linkages of the equally-significant garments sector.

Vietnam has seen many impressive economic achievements over the past two decades. Since Doi moi launched in 1986, Vietnam has actively opened up its economy, participating in the regional economic cooperation in 1995 and joining the World Trade Organization in 2007.

Such transitions have helped the economy maintain rapid growth of around 7% since the early 2000s, except during the 2008-2009 global financial crisis (GFC) and the 2011-12 domestic financial turbulence. In particular, amid a general slowdown of emerging markets in the post GFC period, Vietnam has maintained its strong growth momentum, and more recently, has seen an explosive growth in exports amid strong FDI.

According to AMRO, Vietnam's exports have diversified and grown exponentially over the past two decades. Vietnam's gross good exports reached US$264.2 billion in 2019, a 48-times increase in 25 years from the figure of US$5.5 billion in 1995 when it joined ASEAN.

During these two decades, Vietnam's exports have become more diversified and sophisticated. From the 1990s through to the first half of 2000s, primary products, such as food and mineral fuels, accounted for more than half of total exports. From the early 2000s, miscellaneous manufactured goods, such as textiles and clothing, began to increase their contribution to Vietnam's exports. And since 2013, the share of machinery, transports and equipment - in particular mobile devices - in total exports, has grown exponentially and exceeds other manufactured and primary products.

In terms of end-use, Vietnam's exports comprise mainly intermediate and final consumption goods, while mixed end-use and capital goods having grown in prominence recently.

The Ministry of Industry and Trade reported that in 2020, Vietnam's total export-import turnover hit US$545.36 billion, up 5.4% year-on-year. Of which, export turnover reached US$282.65 billion, up 7% or US$18.39 billion, and import turnover sat at US$262.7 billion, up 3.7% or US$9.31 billion.

In the first five months of 2021, the nation's total export-import turnover is estimated to have hit US$262.21 billion, including US$130.94 billion from exports - up 30.7% year-on-year, and US$131.31 billion from imports - up 36.4% year-on-year.

"FDI has played an important role in the rapid growth of exports," said AMRO in its recently-published report titled "The role of Vietnam's FDI inflows in global value chains participation and economic growth".

"Since Samsung Electronics' large investments in Bac Ninh in 2007, Vietnam has emerged as a major final assembly hub for ICT hardware and electronic related products," said the report.

According to the World Bank Group (2017), about 80% of electronics/ ICT hardware and over 30% of electronic-related products produced in Vietnam are destined for export markets, and mostly manufactured by foreign firms.

Growing interest in Vietnam as a production base has led to strong FDI inflows, particularly in the manufacturing sector. For example, as of May 20, 2020, FDI-led manufacturing can be found in 15,323 valid projects, registered at US$232.78 billion - accounting for 45.58% and 58.65% of the total number of foreign-invested projects and registered FDI in Vietnam, respectively.

Additionally, FDI in higher value-added non-manufacturing sectors has increased recently too, in particular in professional, scientific and technical activities, which will help improve
Vietnam's business environment and total factor productivity going forward.

However, AMRO said that amid the post-pandemic GVC reconfiguration, FDI policies need to be carefully aligned to Vietnam's development strategy.

Vietnam appears to have successfully weathered the COVID-19 pandemic's impact on trade and investment activities. Realising the vulnerabilities of the existing supply chain network, several multinational companies, especially those in electronics and textiles businesses, are now moving or diversifying their production facilities to Vietnam and other ASEAN countries, which could further strengthen Vietnam's GVC participation.

"Amid this re-configuration of global supply chains, there should be scope for Vietnam to take advantage of these ongoing changes to propel itself up the production value chain with greater domestic companies' participation," said the report. "Additionally, recent increases in FDI in the service sector, such as in ICT, telecommunications, retails, and financial intermediation, could provide new opportunities for Vietnam to participate in the higher value tiers of GVCs. A deliberate strategy to attract FDIs open to engaging domestic firms in providing intermediate inputs would be needed to complement policies to develop and support domestic suppliers."

Increases in port charges must be carefully considered: Administration

Careful consideration is needed before increasing seaport services charges to limit negative impacts on the economy during the COVID-19 pandemic, according to the Vietnam Maritime Administration.

Responding to the Vietnam Ship Agents, Brokers and Maritime Service Providers Association (VISABA)’s proposal to raise container handling charges, the maritime administration said while the COVID-19 pandemic was still complex and hitting firms hard, the logistics costs must not cause any more burdens for import and export firms.

The Government also asked to keep service charges stable at this time.

VISABA recently proposed the minimum container loading and unloading charges at some ports in the northern region be increased by 10 percent annually for three consecutive years, starting from July 1, 2021.

For deep-water seaports, Lach Huyen and Cai Mep - Thi Vai, the increase was proposed to be at least 20 percent from July 1 and 10 percent for the next three years.

Nguyen Xuan Ky, general director of Tan Cang - Cai Mep International Terminal Company Limited, said seaports played an important role in the circulation of goods, adding it was necessary to increase services changes so enterprises could have resources for reinvestment.

According to the Vietnam Maritime Administration, foreign shipping lines collect a terminal handling charge of around 114-173 USD per container on their customers in Vietnam. However, Vietnam’s ports collect very low container handling charges, about 33 USD per 20ft-container at Dinh Vu, 52 USD at Cai Mep and 41 USD at HCM City.

The container loading and unloading charges of Vietnam remained low, only equivalent to 80 percent of Cambodia, 70 percent of Malaysia, 61 percent of Indonesia and 46 percent of Singapore.

The low container handling charges were considered a competitive advantage of Vietnam’s seaport system to attract big cargo container ships to deep-water seaports, including Cai Mep - Thi Vai and Lach Huyen.

Vietnam has attracted 40 foreign shipping lines with the transported cargo volume increasing by an average of 13 percent each year, helping promote the development of the logistics system and accelerate trade, according to the maritime administration.

The maritime administration said reasonable seaport service charges helped not only attract shipping lines but also stabilise the market and prevent unhealthy competition among service providers.

Port companies have reported profits, with Hai Phong Port earning 173 billion VND after-tax profit in the first quarter of this year, while Da Nang and Quy Nhon reported increases by 7 percent and 27 percent, respectively.

The maritime administration said that Circular 54/2018/TT-BGTVT only regulated the minimum services charges and enterprises could charge higher fees than the minimum levels.

However, most seaports were applying the minimum fees under the circular to attract shipping lines./.

Hanoi’s tourism sector moves to counter COVID-19 resurgence’s impacts

Facing the COVID-19 resurgence that is spreading fast and strongly affecting the entire society, travel firms in Hanoi are taking actions to minimise losses and prepare for recovery in the new context.

The start of the fourth coronavirus wave coincided with the National Reunification Day (April 30) and May Day holidays, which has severely impacted the tourism sector, the Ha Noi Moi (New Hanoi) daily reported.

About 90 percent of customers cancelled their booked tours slated for May and early June while programmes stimulating travel demand in summer, expected to be the “golden season” for tourism businesses, have yet to begin due to the complex COVID-19 situation in many provinces and cities.

In the face of those difficulties, many enterprises have adopted new business forms.

VietFoot Travel has switched to providing transportation services, mostly handling visa application procedures, seeking flights, and arranging coaches, for foreign experts and overseas Vietnamese since the beginning of 2021.

Its director Pham Duy Nghia said though the number of customers is not big, these services have proved helpful for the company to sustain its operations and retain employees.

Director of AZA Travel Nguyen Tien Dat noted as tourism activities have been suspended, his firm has assigned several staff members to work in the field of beverage manufacturing.

VietSense, another travel company, has had part of its employees running a restaurant which only sells takeaways to comply with COVID-19 prevention and control rules, Director Nguyen Van Tai said, adding that this restaurant can help supply travel services when its customers have demand.

However, the Ha Noi Moi daily noted, the moves taken by many travel firms are just temporary solutions.

To shore up the local tourism sector amid the ongoing coronavirus outbreak, the Hanoi Tourism Association recently held a teleconference gathering nearly 30 businesses to seek solutions.

Vice chairwoman of the association Trinh Thi My Nghe recommended that since the current outbreak is more dangerous and spreading faster than the previous ones, travel enterprises should have plans to “live with the pandemic” and resume tourism activities in a new form that meets both anti-COVID-19 requirements and travellers’ demand.

Phung Quang Thang, Chairman of the Hanoi Branch of the Vietnam Society of Travel Agents and Director of Hanoitourist, said to resume tourism activities, authorities need to seal off pandemic-hit areas and publicise the ones “safe” for visitors.

Only when Hanoi and other localities ease restrictions on certain activities can tourism be resumed, he said, noting that tourism activities should only be carried out in a small scale with a controlled number of visitors.

Service suppliers should suggest travellers come to “safe” destinations and enjoy leisure tourism instead of adventure or experimental tourism, Thang added.

Meanwhile, Director of Pattours Vu Giang Bien held that businesses need to step up applying digital technology into the development of new products as well as the management of tourists’ health and health declarations.

Tourism workers should also be vaccinated against COVID-19, which will help travellers feel at ease and the industry secure long-term safety, Bien said.

The Hanoi Department of Tourism has devised a plan of activities for the second half of this year.

Its director Dang Huong Giang said the department is working to improve the quality of tourism products and destinations and preparing for this year’s gift, tourism, and “ao dai” festivals.

Once the outbreak is basically brought under control, the department will submit proposals to the municipal administration so as to identify “safe” areas and localities for travel, thereby helping enterprises create their tourism service plans, she said.

As safety must be prioritised during tourism recovery and development, relevant parties need to seriously comply with anti-pandemic rules, proactively tackle difficulties, and work out solutions for each COVID-19 response plan, Giang noted./.

Collective economy, cooperatives forum to return in Q3

Prime Minister Pham Minh Chinh has approved a plan for the organisation of the 2021 forum on collective economy and cooperatives in the third quarter of this year.

The Ministry of Planning and Investment is tasked to consult with the Party Central Committee’s Economic Commission and the Ministry of Agriculture and Rural Development on the organisation of the forum, and cooperate with the Vietnam Cooperative Alliance (VCA) to prepare its contents and programmes.

Attention must be paid to ensuring the effectiveness of the event which should be held when the COVID-19 pandemic is brought under control, the PM requested.

The event provides a platform for dialogues between the Government and cooperative businesses and for strengthening partnerships among cooperatives as well as between cooperatives and other business models to seek broader access to markets and technologies.

This year, the forum also aims to review the 10-year enforcement of the 2012 Law on Cooperatives.

Last year’s event took place in December, focusing discussions on measures to develop the collective economy by promoting links among cooperatives and with other business models in the era of the fourth Industrial Revolution.

According to the Ministry of Planning and Investment, the collective economy contributed around 4 percent to the country’s GDP.

As of June 2020, there are 22,861 cooperatives in operation in Vietnam, including 13,856 agricultural cooperatives, 1,183 people’s credit funds and 7,822 non-agricultural cooperatives, which altogether attracted six million members.

The annual average revenue of cooperatives was 4.4 billion VND (189,600 USD) in 2018, 5.2 times higher than 2003. Average profit also increased from 74 million VND in 2003 to 240.5 million VND in 2018.

There were 74 unions of cooperatives, 39 of which were operating in agriculture. The unions of cooperatives attracted 375 member cooperatives and created jobs for 25,200 labours. The unions of cooperatives had average revenue of 994 million VND per year and profit of 148 million VND.

Cooperatives and unions of cooperatives provided jobs for two million labourers.

Besides, there were 101,400 cooperative groups with 1.34 million members./.

Transport Ministry speeds up public investment disbursement

The Minister of Transport has issued Directive 06/CT-BGTVT on speeding up public investment disbursement in 2021 to successfully realise the socio-economic plan and State budget estimate for the year.

Under the directive, the ministry aims to disburse at least 90 percent of public investment planned for the year by the end of December and 100 percent by January 31, 2022. Capital left from 2020 is expected to be disbursed within 2021.

The minister asked leaders of investors, project management boards and consultancy agencies to overcome difficulties and speed up the implementation and disbursement of projects with high quality.

They should assign specific responsibilities to individuals to follow up the progress of projects and report to the ministry regularly, he stressed.

They were also requested to promptly complete bidding procedures to choose contractors and consulting units, while finalising procedures on design and estimate adjustments and settlement process of projects, and strengthening supervision over projects’ progress and quality.

For projects which have just been added to the plan, it is necessary to ask investors and project management boards to update the detailed disbursement plan for each month of 2021, the minister requested.

Currently, the ministry is implementing 19 major works and projects. Investment procedures are being prepared for six projects, while 10 others are being implemented and three are to be put into operation.

This year, the ministry is tasked with disbursing about 43.4 trillion VND (1.89 billion USD). So far, the ministry has allocated nearly 41 trillion VND to its units, reaching 95.2 percent of the yearly plan.

At the end of May, the ministry had disbursed about 13.51 trillion VND, completing 32.7 percent of its plan and 32.1 percent of the plan set by the Prime Minister./.

HCM City works to ensure adequate supply of goods amid social distancing

Ho Chi Minh City's Department of Industry and Trade has taken measures to ensure sufficient supply of essential goods as the city decided to extend social distancing measures until June 30.

Nguyen Nguyen Phuong, deputy director of the department, said since the beginning of June when social distancing measures were applied, it has asked production and trading enterprises participating in its price stablisation programme so that adequate goods will be supplied to locals in a timely manner.

They have been instructed to stock a large volume of goods for reserve and be ready in all scenarios related to the developments of the COVID-19 pandemic.

Retailers, and production and business units are also encouraged to promote sales, sharing the burden with consumers in the context of the pandemic.

Nguyen Anh Duc, General Director of the Saigon Union of Trading Cooperatives (Saigon Co.op), said in addition to joining the programme which helps stablise prices on the market, it has carried out promotion programmes in a variety of goods categories.

From now until July 10, its Co.opmart and Co.opXtra  chains across the country will reduce prices from 25-50 percent or buy one get one free for more than 3.5 million anti-pandemic products including cloth masks and hand sanitiser, he said, adding that more than 10,000 essential products will be added to the list of discounted goods.

Many sought-after essential goods during the social distancing period are also discounted by 20-30 percent. They include cooking oil, sugar, rice, packaged foods and nutritious drinks. Particularly, the prices of fresh foods such as pork, seafood, vegetables and fruits were reduced by 15-20 percent.

Other retailers namely Big C is carrying out the "Fruit Festival Programme" to encourage customers to buy seasonal fruits from other provinces and support struggling farmers.

Municipal authorities on June 14 decided to prolong city-wide social distancing in line with the Government's Directive No. 15 until the end of June, amid complicated developments of coronavirus outbreaks in the city.

Currently, HCM City has 237 markets, 236 supermarkets, 45 trade centres and 2,735 retail stores../.

Increases in port charges must be carefully considered: Administration

Careful consideration is needed before increasing seaport services charges to limit negative impacts on the economy during the COVID-19 pandemic, according to the Vietnam Maritime Administration.

Responding to the Vietnam Ship Agents, Brokers and Maritime Service Providers Association (VISABA)’s proposal to raise container handling charges, the maritime administration said while the COVID-19 pandemic was still complex and hitting firms hard, the logistics costs must not cause any more burdens for import and export firms.

The Government also asked to keep service charges stable at this time.

VISABA recently proposed the minimum container loading and unloading charges at some ports in the northern region be increased by 10 percent annually for three consecutive years, starting from July 1, 2021.

For deep-water seaports, Lach Huyen and Cai Mep - Thi Vai, the increase was proposed to be at least 20 percent from July 1 and 10 percent for the next three years.

Nguyen Xuan Ky, general director of Tan Cang - Cai Mep International Terminal Company Limited, said seaports played an important role in the circulation of goods, adding it was necessary to increase services changes so enterprises could have resources for reinvestment.

According to the Vietnam Maritime Administration, foreign shipping lines collect a terminal handling charge of around 114-173 USD per container on their customers in Vietnam. However, Vietnam’s ports collect very low container handling charges, about 33 USD per 20ft-container at Dinh Vu, 52 USD at Cai Mep and 41 USD at HCM City.

The container loading and unloading charges of Vietnam remained low, only equivalent to 80 percent of Cambodia, 70 percent of Malaysia, 61 percent of Indonesia and 46 percent of Singapore.

The low container handling charges were considered a competitive advantage of Vietnam’s seaport system to attract big cargo container ships to deep-water seaports, including Cai Mep - Thi Vai and Lach Huyen.

Vietnam has attracted 40 foreign shipping lines with the transported cargo volume increasing by an average of 13 percent each year, helping promote the development of the logistics system and accelerate trade, according to the maritime administration.

The maritime administration said reasonable seaport service charges helped not only attract shipping lines but also stabilise the market and prevent unhealthy competition among service providers.

Port companies have reported profits, with Hai Phong Port earning 173 billion VND after-tax profit in the first quarter of this year, while Da Nang and Quy Nhon reported increases by 7 percent and 27 percent, respectively.

The maritime administration said that Circular 54/2018/TT-BGTVT only regulated the minimum services charges and enterprises could charge higher fees than the minimum levels.

However, most seaports were applying the minimum fees under the circular to attract shipping lines./. 

Businesses continue to utilise incentives from EVFTA

The EU-Vietnam Free Trade Agreement (EVFTA) has been effectively utilised by local firms, with 180,551 EUR.1 certificates of origin (C/O) being issued for goods exported to the EU worth a total of US$6.6 billion since the enforcement of the trade deal in August 2020.

According to details provided by the Ministry of Industry and Trade, the majority of certified goods included footwear, aquatic products, textiles and garments, agricultural products, cereal products, and electronic goods.

Tran Thanh Hai, deputy director of the Import and Export Department, said the robust export growth to the EU market can largely be attributed to domestic firms' efforts to maximise the numerous advantages of the EVFTA and effective dissemination on the trade pact’s incentives through channels such as the FTA Portal, the Internet, and Facebook.

Furthermore, the recent shipments of Vietnamese fresh lychees to the EU market, in particular France, has affirmed the quality and brand of the fruit and other Vietnamese goods in the international market.

Experts have noted that the EVFTA also poses a range of challenges for Vietnamese enterprises, forcing them to adjust production methods and enhance their overall competitiveness by investing in advanced technologies and equipment that are capable of launching products in line with the stringent requirements of the EU market.

With regard to agricultural products, the nation has 39 sets of geographical indications that are protected in the EU, thereby paving the way for local farm produce to gain entry to the demanding market.

Most notably, more than 6,335 hectares of fruit growing areas nationwide have applied VietGAP/GlobalGAP standards and have been granted area codes for export to the fastidious market.

With regard to the local textile and garment industry, domestic businesses have also invested in yarn production with a higher localisation rate as several raw material production areas have been successfully established on a larger scale.

Furthermore, enterprises are gradually shifting to importing raw materials to markets that have signed trade agreements with the EU in order to meet the rules of origin set out as part of the trade pact.

The EVFTA is ultimately considered to be the gateway that can help Vietnamese goods make deeper inroads into the potential EU market of approximately 500 million people.

The trade deal is expected to increase Vietnamese export turnover to the EU by 42.7% in 2025 and 44.37% ahead in 2030.

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

VIETNAM BUSINESS NEWS JUNE 16

VIETNAM BUSINESS NEWS JUNE 16

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