During Prime Minister Pham Minh Chinh’s bilateral meeting with Japanese counterpart Kishida Fumio in Japan over a week ago, the two nations inked three agreements in which the latter will provide the former with a new official development assistance (ODA) sum worth ¥61 billion (about $500 million).

The money will be used on projects for general post-pandemic socioeconomic recovery and development, improving traffic infrastructure in the southern province of Binh Duong, and ameliorating agricultural development infrastructure in the Central Highlands province of Lam Dong.

At present, Japan is the largest provider of concessional ODA to Vietnam, with more than ¥3 trillion (about $21.67 billion) accumulatively. Japan’s ODA accounts for almost one-third of bilateral aid to Vietnam.

Yuichi Sugano, chief representative of the Vietnam Office for the Japan International Cooperation Agency (JICA), said that it is now carrying out more than 100 projects in Vietnam in many sectors such as education, healthcare, transport, energy, and agriculture.

JICA, together with other donors, has been intensively supporting infrastructure in several sectors in Vietnam. Up to now, about a total length of 3,000km of road in Vietnam have been renovated or constructed with JICA’s cooperation. The renovation of National Highway No.1 under the cooperation of JICA, the World Bank and Asia Development Bank, strengthened the most important traffic corridor along the country.

JICA has intensively worked to improve transport network in the Northern Key Economic Zone, with the renovation of national highways No.10, No.5, and No.18 in parallel with the renovation of Haiphong port. Construction of large-scale infrastructure such as National Highway No.3, Ring Road No.3 of Hanoi, Cai Lan and Lach Huyen deep sea ports, and Noi Bai international terminal all followed a series of cooperation measures with JICA.

In the central and southern key economic zones, Japan’s ODA has been also provided for the construction of the Danang-Quang Ngai expressway, Hai Van tunnel, improvements to Tien Sa port, construction of Cai Mep-Thi Vai port, Ho Chi Minh City-Dau Giay Expressway, Tan Son Nhat International Airport terminal, and urban railway line No.1 in Ho Chi Minh City.

The ASEAN Investment Report 2023 released by the ASEAN Secretariat highlighted Vietnam’s efforts to offer investors opportunities in investing in infrastructure development such as roads, highways, logistics, and seaports.

Under the plan, Vietnam will build thousands of miles of new expressways, high-speed rail routes, deepwater ports, and new international airports. The government intends for the country to achieve a cargo transportation capacity of 4.4 billion tonnes per year, and a road transport capacity capable of moving 2.76 billion tonnes of cargo and 9.43 million passengers per year, the report added. Two of the major projects, Dau Giay-Tan Phu Expressway and Gia Nghia-Chon Thanh Expressway, are to be built using the public-private partnership model.

In addition to consolidating ODA cooperation, the Vietnamese and Japanese prime ministers have also vowed to create the best conditions for Japanese investors and businesses to perform in the Vietnamese market. PM Chinh asked Japan to promote a new wave of Japanese investmen here in high technology and renewable energy.

Vietnam and Japan have also just agreed on boosting bilateral ties in new sectors with enormous potential such as the green energy transition, digital transformation, and reduction of greenhouse gas emissions.

According to Vietnam’s Ministry of Planning and Investment, investment from Japan into Vietnam has risen strongly over the past two years.

Accumulatively as of April 20, Vietnam was home to 5,072 Japanese valid projects with total registered capital of over $69 billion, making Japan the third-largest foreign investor in Vietnam after South Korea ($81.45 billion) and Singapore ($73.04 billion).

SBV Governor explains high lending rates, credit room management

Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong provided explanations regarding the high lending rates and credit room management during a plenary session of the 15th National Assembly’s ongoing fifth meeting in Hanoi on June 1.

Hong pointed out two reasons for high lending rates last year, including rapid and significant hikes in global interest rates while domestic inflation was higher than the same period of 2021. Moreover, there was a great pressure on the devaluation of the Vietnamese dong as countries tightened monetary policies and the US dollar experienced a strong appreciation.

At that time, the SBV saw the need to adopt flexible and synchronous solutions to address these difficulties and avoid currency devaluation, which would result in increased input costs and high inflation, she said, adding that when the exchange rates became stable again and inflation eased, the SBV made three adjustments to reduce lending rates by 0.9% compared to 2021 in the early months this year.

When it comes to policy management, it is unadvisable to let guard down in the face of inflation, Hong noted.

With the recent fluctuations in the US banks, she said prioritising the safety of the banking system is a sound choice of the SBV and Government.

According to her, the SBV carefully considered the solutions and timing of its policies to achieve macroeconomic stability, ensure the safety of the banking system, and create a business environment conducive for enterprises and the public.

Sun Taxi signs deal to buy 3,000 VinFast electric cars

The Sun Taxi JSC on June 1 signed a contract to purchase 3,000 VF 5 Plus electric cars from carmaker VinFast, marking the biggest vehicle purchase contract in Vietnam so far, with delivery scheduled from now until 2025.

It is part of Sun Taxi's strategy on green transformation, business expansion and service quality improvement, thus promoting Vietnam's green transportation revolution and supporting the country's overall goal of achieving net-zero emissions by 2050.

In the initial phase, Sun Taxi will deploy electric taxi services in cities and provinces such as Quang Binh, Hue, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen, Nha Trang (Khanh Hoa), Phan Thiet (Binh Thuan), Gia Lai and Kon Tum. By 2025, all 3,000 VinFast electric cars in Sun Taxi's fleet will be running throughout Vietnam.

Since joining the taxi transportation market in October 2013, Sun Taxi has to date owned a fleet of 2,900 vehicles across 17 cities and provinces. With the addition of 3,000 VinFast electric cars from now until 2025, Sun Taxi will provide unique experiences for customers while elevating its brand in the green business transformation trend and contributing to promoting a green lifestyle.

Budget estimate shortcomings require modern fix

The low-quality formulation of state budget revenue estimates needs to be improved, as it will continue having unwanted direct impacts on the country’s financial landscape.

The government last week reported that under its latest calculations, the state budget revenue last year hit about VND1.815 quadrillion ($78.93 billion), which is VND201.4 trillion ($8.75 billion) or 12.5 per cent higher than a previously reported figure.

“The revenue has sufficiently met all tasks on expenditures for development investment, social security, salary reform, and other necessary tasks,” the government stated.

Such a revenue increase was thanks to a rise in many items, with enterprises performing relatively well despite massive difficulties. For example, the economy’s most updated export turnover last year reached $371.3 billion, higher than the $368 billion earlier reported to the National Assembly – with the exact trade surplus of more than $12.4 billion, far higher than the only $1 billion earlier reported to the legislative body.

However, the National Assembly Economic Committee (NAEC) found that the government’s formulation of state budget revenue estimates has failed to exactly reflect the reality of such revenue performance.

According to an NAEC report on appraising the government report on Vietnam’s state budget situation in 2022 and in the first four months of this year, the aforementioned state budget revenue figures are 28.6 per cent higher than initial estimates.

“This mirrors the fact that estimates were too low, narrowing down the fiscal space and badly affecting the state budget revenue estimates for the next year. This is a shortcoming that has failed to be overcome for many years,” the NAEC stressed.

It is recommended that the government draw experience and must have a proper solution to overcome this issue and improve the quality of formulation in state budget revenue estimates of every year, the committee continued.

In addition, many localities made low revenue estimates but they have been assigned to collect higher revenues. Some 43 provinces and cities nationwide set up revenue estimates higher than the assigned figures from the government.

According to the latest figures from the Ministry of Finance (MoF), in this year’s first four months, the state budget revenue is estimated to have touched VND632.5 trillion ($27.5 billion), tantamount to 39 per cent of the year’s estimates – with the policy of extending the time for payment of taxes and land rental since mid-April. This is also equal to 93.1 per cent of that in the same period of last year.

However, the four-month domestic revenue equals 39.5 per cent of estimates and 95.8 per cent of that in the corresponding period last year. Tending to decrease as compared to the initial estimates, this type of revenue reached 16.1 per cent in January, 7.1 per cent in February, 8.6 per cent in March, and 7.6 per cent in April.

In addition, revenues from crude oil exports stood at $952.17 million, down 9.6 per cent on-year. Revenues from export-import activities are estimated at $3.68 billion – down 19.9 per cent on-year.

“Business, production, and investment activities are facing difficulties coupled with a reduction in trade, which will likely hurt state budget revenues in Q2 and the entire year, pressuring fiscal policy monitoring,” stated Minister of Planning and Investment Nguyen Chi Dung.

According to the World Bank, difficulties in domestic production and trade are expected to cause a reduction in state budget revenues in the coming months. “Vietnam faces heightened risks associated with external headwinds and domestic vulnerabilities. Persistent inflationary pressures and the prospects of more aggressive monetary tightening could induce volatility in global financial markets,” it said.

Under an MoF report on Vietnam’s budget situation estimates for 2023, the state budget revenue structure will embrace $58 billion from domestic revenues – far lower than $61.8 billion recorded last year; $1.83 billion from crude oil exports if about eight million tonnes are exploited domestically and an average price stays at around $70 per barrel; $239.1 million from foreign assistance; and $10.39 billion from export and import activities – much lower than $12.17 billion last year.

Meanwhile, it is estimated that Vietnam’s total state budget expenditure this year will be about $90.26 billion – up 16.3 per cent as compared to the expenditure estimations of 2022.

Support to continue in form of VAT cut

Many types of goods and services currently subject to a 10 per cent VAT rate are to continue being eligible for a 2 per cent reduction in this type of tax, which is scheduled to get the official thumbs-up from the legislature in late June.

The National Assembly (NA) will discuss the VAT reduction from the existing 10 per cent rate to 8 per cent on June 1 before receiving an approval from NA deputies in a resolution slated for June 24, the last day of the ongoing fifth session.

The VAT cut proposed by the government is set to be applied from July 1 to the end of 2023 for all types of goods and services currently subject to a 10 per cent VAT rate. The initiative is part of Resolution No.43/2022/QH15 released early last year on fiscal and monetary policies supporting the Programme on Socioeconomic Recovery and Development.

Under Resolution 43, the 2 per cent cut was applied last year for goods and services subject to a 10 per cent rate, except for various goods and services such as telecommunications, IT, financial and banking activities, securities and insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products, and goods and services subject to excise tax.

Specifcially, total goods retail and consumption service revenues in 2022 increased 19.8 per cent on-year, while revenue from domestic VAT did not decrease, but rose 10 per cent on-year.

However, since the initiative terminated at the end of 2022, people and enterprises remain in difficulties.

Under the report, business establishments including business households and individuals that calculate VAT by the method of percentage on turnover are entitled to a 20 per cent reduction in tax calculation when they issue invoices for goods and services currently subject to the 10 per cent rate.

Nguyen Manh Dung, director of home appliance trader Manh Dung JSC in Hanoi, said that many businesses like his are pleased the policy will be continued.

The European Chamber of Commerce said VAT reduction has played a key part in speeding up economic recovery, and has been a boon to businesses and consumers. Such a reduction has helped with the government’s efforts in bringing inflation under control, boosting consumption and encouraging enterprises to invest in expanding their operations.

Consumers have also benefited from the lower VAT, which is in line with the government’s policy to aid the population post-pandemic. With this initiative, the MoF estimates, the budget will reduce revenues by VND4 trillion ($173.9 million) per month and VND24 trillion ($1.04 billion) in the second half of 2023.

According to the MoF, enterprises that produce and trade in goods and provide services subject to VAT at the rate of 10 per cent will benefit when the policy is issued. The reduction of VAT will contribute to reducing production costs, lowering product costs, thereby helping businesses increase resilience and expand production and business activities.

What is more, with the orientation to stimulate economic demand, increase production and business to promote economic development, the MoF also proposed many other support policies, such as lowering the collection rate of 35 fees and charges in the second half of the year, equivalent to a decrease in revenue of VND700 billion ($30.43 million) to support businesses and people.

Additionally, to assist the public and businesses, the government last month also enacted Decree No.12/2023/ND-CP on extending the deadline for paying VAT, corporate income tax, personal income tax, and land rental in 2023.

However, the National Assembly’s Financial and Budgetary Committee cited some who proposed that the scale of those subject to the 2 per cent VAT reduction should be expanded as all sectors in the economy are facing massive difficulties.

$5 billion measure not to prop up real estate market

In lieu of real estate aid, a $5 billion plan government plan seeks to develop at least one million social housing units.
 
"The distribution of the $5 billion package has no intention to shore up the real estate market, but rather towards achieving the goal of establishing at least one million social housing apartments by 2030," said Deputy Prime Minister Tran Hong Ha at a May 24 meeting on the status of this credit package.

He said the majority of problems are related to the procedures and processes of social housing programmes, worker housing, and the conditions for purchasing this sort of residence.

The Law on Housing is being amended and complemented, and the Law on Land has been submitted to the National Assembly. After the aforementioned laws take effect, these issues will be thoroughly resolved, he said.

He added that he had requested that the State Bank of Vietnam (SBV) and the Ministry of Construction (MoC) to proceed with investigations and recommend suitable measures and duration of interest-rate assistance for investors and homebuyers eligible for loans from the package.

In April 2023, the MoC and SBV streamlined procedures and accelerated the application evaluation process to ensure that firms could access loans sooner.

The $5 billion credit programme is an incentive loan package for investors and purchasers of social housing projects and worker housing, with interest rates between 1.5 and 2 percentage points below-market rates. Since its implementation on April 1, nobody has borrowed money for almost two months.

Chairman of the Government Office Tran Van Son, analysing why the credit package was unable to be disbursed, said that the demand for social housing was exceptionally high, but the execution handle still has many issues in terms of land availability and a lack of social housing planning in the region. Consequently, certain companies were awaiting the implementation of the amended Law on Housing, which includes more transparent processes and procedures.

Faced with this issue, the deputy prime minister instructed localities to expedite the organising and preparation of land funds for the erection of social houses and workers' houses in appropriate, practical, and large-scale positions with complete technical infrastructure, particularly in major cities such as Hanoi, Ho Chi Minh City, Haiphong, Danang, and Can Tho.

The report from the MoC indicates that there are presently approximately 100 licensed social housing and migrant housing projects in 36 municipalities. Approximately $3 billion was invested in more than 85,660 units from these developments.

Localities with seven-flat renovation and construction projects have a loan demand of approximately $176 million. In addition, Bac Giang province announced twelve loan-eligible initiatives. Other provinces, such as Binh Duong and Dong Nai, are implementing worker housing and social housing initiatives.

In Hanoi alone, there are presently more than 4,000 social housing apartments for sale and approximately 40 projects in development.

Employees at risk of losing livelihoods

A number of foreign enterprises have had to make tough decisions to let go of workers due to the gloomy business situation and a sharp decline in orders.
 
Over the next few months, workers in areas like garments and textiles are bracing for bad news, photo Le Toan
PouYuen Vietnam, a subsidiary of Taiwan-based Pou Chen Group, will lay off more than 5,700 workers in the next few weeks.

The termination of labour contracts will be divided into two phases, with around 4,520 employees to be fired by the end of June and 1,225 others at the beginning of July.

PouYuen, a company specialising in manufacturing leather and footwear, once boasted 100,000 employees at its peak. However, the number has declined drastically since the pandemic – it let go of more than 2,300 employees in February this year alone, and the total for the first five months of 2023 has reached nearly 8,000 people. The company has cited falling orders in the main export markets as the cause of the redundancies. It has also had to deal with customers offering prices at half of what they used to be.

According to a socioeconomic report by the National Assembly Economic Committee, in the first four months of this year the number of businesses nationwide with halted operations reached nearly 50,000, up 21.8 per cent on-year. Nearly 21,000 enterprises stopped operations and waited for dissolution procedures, up nearly 40 per cent. Some 6,100 businesses completed such procedures, up 10.1 per cent. On average, each month saw 19,275 enterprises kicked out of the market.

The report also quoted the Vietnam General Confederation of Labour from September 2022 to January 2023, in which nearly 547,000 employees at 1,300 enterprises had their working hours reduced or lost their jobs due to reduced orders, of which labour in foreign-invested enterprises (FIEs) accounted for three-quarters.

According to the Department of Labour, Invalids and Social Affairs in Ho Chi Minh City, 10 FIEs in the city have had to reduce their workforce in the first four months of the year with a total of more than 19,000 lay-offs, including employees at PouYuen, Footgearmex Footwear Co., Ltd.

In the southern province of Dong Nai, three FIEs have had to cut more than 2,000 employees due to lack of orders this year so far. Pousung Vietnam reduced by 1,000 workers, Pou Phong Vietnam laid off 227, and Taekwang MTC has terminated the contracts of nearly 800 employees.

Meanwhile, in the nearby province of Binh Duong, more than 36,000 workers were laid off due to a lack of orders, dissolution, or suspension of production and business.

In the north, the number of workers who lost their jobs in industrial zones in Bac Ninh and Bac Giang was 14,000 and 7,700 respectively by the end of April.

Textiles and footwear are the sectors that are being affected the most, and many businesses have had to look for more sustainable employment solutions such as production downsizing, reduction of working hours, and staff reductions.

Dinh Sy Phuc, head of the trade union at Taekwang Vina Industrial JSC in Bien Hoa 2 industrial park in Dong Nai, said, “Currently, there are not many orders, so the company only allows employees to work four days a week. We are trying to maintain production, but if we continue to face difficulties, we will have to reduce working hours further in the near future.”

Meanwhile, workers in car manufacturing and some other related fields fear losing their jobs as sales are also plummeting.

According to a sales report for April from the Vietnam Automobile Manufacturers Association, sales of its members decreased by almost half compared to the same period last year, and dipped 21 per cent compared to March.

As one of the largest foreign-invested enterprises in Vinh Phuc province, Toyota Vietnam also saw a 37 per cent decrease in quarterly output, with sales decreasing by 24 per cent.

Na Huong, general director of helmet producer Protec Vietnam at Ba Thien II Industrial Park in the northern province of Vinh Phuc, said that her business has no plans to cut workers, but is facing many difficulties as its two main markets, the US and Europe, have registered a serious decline in orders.

According to a report published by the Vietnam Association of Foreign Invested Enterprises in mid-April, besides the positive contributions to the labour market, there are still limitations as the economic downturn has caused many businesses to show signs of exhaustion and face the risk of withdrawing from the market.

Meanwhile, the Provincial Competitiveness Index report published by the Vietnam Confederation of Commerce and Industry in April said that in Q1, about 60,200 enterprises withdrew from the market, an increase of 17.4 per cent.

Ngo Xuan Lieu, director of the National Centre for Employment Services under the Ministry of Labour, Invalids and Social Affairs, said that about 70 per cent of unemployed workers are unskilled. The high number of unemployed unskilled workers will put great pressure on localities in creating jobs as well as social security.

Data centre appeal poised to expand

Vietnam’s data centre sector is poised for substantial growth, although challenges surrounding regulations, construction, and mounting demand for energy efficiency need to be effectively navigated.

In Hanoi last week, chairman of the Vietnam Software and IT Services Association, Nguyen Van Khoa, emphasised the urgent need for a comprehensive national data strategy to accelerate the country’s digital transformation.

Talking at the Vietnam-ASIA DX Summit 2023, Khoa said the strategy would entail a methodological approach and plan for generating, connecting, and utilising data to achieve socioeconomic advancements, supported by workforce readiness, robust data architecture, and effective data governance models.

Khoa underscored the significance of collaboration between the private sector and governmental entities in driving Vietnam’s digital transformation.

Vietnam stands out as the seventh of 10 emerging colocation markets globally, according to a recent KPMG report published earlier this month, and expected to reach $1.5 billion in market size by 2026. Colocation is the practice of renting space for servers and other computing hardware at a third-party provider’s data centre facility.

Meir Tlebalde, merger and acquisition director for KPMG in Vietnam, told a KPMG seminar on the issue on May 12 that large tech investment traditionally tended to take place in tier-1 markets like Singapore, Hong Kong, Sydney, and Tokyo, which account for 82 per cent of Asia-Pacific’s total data centre capacity.

While the demand is massive, the supply has not yet been accommodated, she added, saying it creates a great opportunity for existing or new players to come in and capture more market growth.

Some key growth drivers for Vietnam’s colocation market are attributed to the lowest development cost in Southeast Asia and capable internet system, reliable power resource at the region’s lowest price, and the accelerated digital transformation. In terms of connectivity, Vietnam is ranked 39th globally in download fixed broadband, the KPMG seminar heard.

As the government is committed to a net-zero policy, this allows Vietnam to become an eco-friendly data centre market for investments in upcoming years. “While the roadmap for that target is not always obvious to investors, we have high hopes that governments will definitely drive the agenda,” Tlebalde noted.

As of April 2023, the country has 28 data centres with approximately 108,700 sq.m total computing space. Hanoi and Ho Chi Minh City are the two major locations, with 11 and 13 centres respectively. The market is concentrated with 11 operators, among which five major players hold 89 per cent of the country’s total computing space.

Experts at the KPMG event also believed that the major challenges for development in Vietnam are the need for a clear and streamlined regulatory framework, as well as power stability. They highlighted the importance of a well-defined licensing process that provides clarity, while high financial costs and liquidity issues also pose obstacles for potential investors.

According to Wallace, Google stands out as a prominent name, bringing its proven approach to operations. Microsoft, AWS, and several Chinese companies have also entered the scene, emphasising the importance of tailored facilities to meet their specific needs.

For foreign businesses exploring the Vietnamese market, Wallace emphasised that energy efficiency has become a major focus, prompting adoption of cooling solutions.

Newly established firms decrease 24% in May

Vietnam had more than 12,000 newly-established enterprises with a total registered capital of 103.7 trillion VND (4.44 billion USD) in May, according to the General Statistics Office (GSO).

These figures were sharply down by 24.2% and 32.9% in the number of newly registered enterprises and the registered capital respectively from the previous month, reflecting a downward trend in the business climate among individuals and enterprises as difficulties and risks facing the economy may last long.

Besides, 33,000 enterprises returned to operation, down 7.4% over the same period last year, bringing the total number of newly established enterprises and those returning to operation in the five months period to nearly 95,000, a fall of 3.7% compared the same period last year. On average, nearly 19,000 businesses were newly established and returned to operation every month.

In the first five months of this year, there were 623 newly established enterprises in the agriculture, forestry and fishery sectors, down 31.8% compared to the same period last year; 14,800 enterprises in industry and construction, down 8.2%; and 46,500 enterprises in the service sector, up 1.4%.

In general, in the period under review, there were 55,200 enterprises temporarily suspending business, up 20.3% over the same period last year; 25,500 halted operating and waited for dissolution procedures, up 34.1%; and 7,300 enterprises completed dissolution procedures, up 6.5%. On average, 17,600 businesses withdrew from the market every month.

Recently, the government issued a resolution dated April 21, 2023, on a number of key policies and solutions to support businesses to proactively adapt, recover quickly and develop sustainably until the end of 2025.

Besides, the central bank's reduction in interest rates is also a positive move to support businesses and stimulate credit demand to help the economy grow in the coming time along with the Government's fiscal policies.

Many manufacturing enterprises also suggested that, in order to reduce costs for businesses, the government should continue to strengthen simplification and transparency of customs procedures to reduce costs and increase predictability for businesses.

Vietnam Airlines increases flight frequency to Singapore

Vietnam Airlines has announced that it will increase the frequency of flights between Hanoi and Singapore from one to two flights a day on all weekdays from June 15 to meet the travel demand between the two countries.

At the same time, the flight frequency on the Ho Chi Minh City-Singapore route is kept at three flights a day for weekdays.

On this occasion, the national flag carrier is offering a special incentive programme for passengers buying tickets on all of its sales channels from agents, websites, and mobile apps.

Specifically, a round-trip ticket between Hanoi and Singapore is from 5.799 million VND (246.9 USD) (including taxes and fees); and that on the Ho Chi Minh City-Singapore route is from 4.971 trillion VND (including taxes and fees). The offer is applied to passengers who buy tickets from now until December 31, 2023, and depart from June 15 to December 31.

In addition, Vietnam Airlines offers one free baggage allowance for each passenger who buys an Economy Flex or Economy class ticket from now until July 31, 2023, applicable for the period of departure from June 15 to July 31, 2023.

Vietnam Airlines is continuing to promote international flight routes, including opening new routes, increasing frequency, and restoring a number of routes to serve passengers during the summer peak. It launched a direct route linking Hanoi/Ho Chi Minh City with Mumbai (India) on May 20 and will open another between Hanoi and Melbourne (Australia) from June 15.

The airline will also restore the Hanoi - Chengdu (China) route from June 4, and the Hanoi - Luang Prabang (Laos) - Siem Reap (Cambodia) route from July 1; and increase the frequency of the routes of Da Nang - Narita (Japan), Hanoi - Fukuoka (Japan), Hanoi/Ho Chi Minh City- Hong Kong (China), Hanoi/Ho Chi Minh City- Siem Reap (Cambodia), Ho Chi Minh City- Sydney/Melbourne (Australia)/Paris (France).

Ho Chi Minh City’s CPI falls by 0.09% in May

Ho Chi Minh City’s consumer price index (CPI) in May decreased slightly by 0.09% from April, the municipal Statistics Office announced on May 30.

Six of the 11 groups of main consumer goods and services witnessed price increases, three others saw price decreases and two remained unchanged.

During the month, prices of housing, fuel and construction materials increased by 0.59%, equipment and household appliances by 0.01% and other services and goods rose by 0.43%.

Meanwhile, a decline was seen in the transportation sector (2.95%) and post and telecommunications (0.29%).

According to the office, the city’s CPI increased by 4.01% in the first five months of this year, except for the post and telecommunications group which decreased by 0.26% and the transportation by 3.23%.

Groups with high growth include restaurants and food service increased by 4.51%; beverages and tobacco (4.62%); housing and construction materials (5.13%); culture and entertainment (5.29%) and education (15.29%).

Gold price in May increased 0.1% while the price of US dollar fell by 0.06 compared to those in April.

Ten transport projects to be launched in second quarter

The Ministry of Transport said that it will push investors and project management boards to quickly finalise procedures to launch construction of 10 projects and complete nine others within the second quarter of this year.

These projects include some important routes such as Chau Doc-Soc Trang-Can Tho, Khanh Hoa-Buon Ma Thuot, Bien Hoa-Vung Tau, Belt Road No.3 of Ho Chi Minh City, and the Belt Road No.4 of the Capital Region, it said.

The ministry reported that it has so far approved the investment policy for 59 transport projects using public investment capital for the 2021-2025 period. Among them, 41 have had their investment project approved.

For the 18 remaining projects, 11 are scheduled to be approved in the second quarter, six in the third quarter and one in the fourth quarter, the ministry said.

Within this year, the ministry plans to start construction of 28 projects and finish 29 others.

To date, six projects have been launched as scheduled, including the upgrade of the Hanoi-Vinh and Vinh-Nha Trang sections of the Hanoi-Ho Chi Minh City railway route, two projects upgrading the Cai Mep-Thi Vai waterway route and the waterway route leading to ports in Nam Nghi Son area of Thanh Hoa province.

Nearly 60,000 tonnes of durian shipped to China via Huu Nghi Border Gate

More than 1,600 shipments of fresh durian totaling nearly 60,000 tonnes have been officially exported to China since the beginning of the year via the Huu Nghi International Border Gate.

Following recent negotiations with the Chinese side, customs clearance procedures have been conducted for more than 100 trucks carrying fresh durian via the Tan Thanh - Po Chai border gate since May 26.

The latest move has contributed to enhancing the efficiency of customs clearance, reducing costs and time faced by businesses, as well as easing the backlog of container trucks at Huu Nghi International Border Gate.

Experts say in order to ensure convenience for customs clearance, local firms are required to proactively meet the stringent requirements on food safety and hygiene control, strictly comply with packaging regulations and ensure traceability regarding information and product quality before exporting the fruit to China.

Furthermore, they suggest that Vietnamese businesses should abide by the provisions under the protocol inked between Vietnam and China, as well as regulations concerning growing area codes and packaging facility codes.

The General Administration of Customs of China (GACC) has recently granted an additional 47 growing area codes to Vietnamese durian, bringing the total number of planting area codes up to 293.

Israeli businesses seek to promote trade in Vietnamese retail market

Vietnam is rapidly becoming an attractive retail market for companies all over the world, and Israeli businesses are seeking to expand distribution network in the Vietnamese market in the near future.

The statement was made by Gal Saf, trade counselor and head of the Economic and Trade Mission at the Israeli Embassy to Vietnam, during a meeting held on May 29 in Hanoi with Nguyen Anh Duc, chairman of the Association of Vietnam Retailers (AVR).

Saf expressed great appreciation for the potential of the Vietnamese retail market and highlighted the important role the AVR plays in connecting both the Vietnamese and Israeli business communities.

Duc for his part stated that AVR would strive to organise an array of activities aimed at supporting domestic enterprises to increase exports to foreign markets, along with seeking to connect Vietnamese companies to foreign distributors.

Most notably, the association will host two major events, including a Vietnam retail forum where delegates will discuss global retail trends and modern solutions to serve customers.

A strategic cooperation forum on import-export goods between Vietnam and other countries, including Israel, will also be held, revealed Duc.

Five-month trade deficit with RoK sees 38.3% fall

Vietnam slipped into a trade deficit of US$10.8 billion with the Republic of Korea (RoK) in the first five months of this year, marking a decrease of 38.3% compared to the same period from last year.

Of the total, Vietnam spent US$20.4 billion on importing goods from the RoK, a decline of 26.8% year on year, while it earned US$9.6 billion from exports to the RoK, a 7.1% reduction against the same period last year.

For many years, the RoK has represented a large market providing machinery and equipment to FDI enterprises with 100% Korean capital in Vietnam. However, Vietnamese imports from the RoK have decreased sharply due to the lack of export orders over the past five months.

Last year saw bilateral trade turnover rise 10.4% to US$86.4 billion. Of the total turnover, exports reached US$24.3 billion, up 10.7%, while imports hit US$62.1 billion, up 10.3%. As a result, Vietnam’s trade deficit from the RoK was worth US$37.8 billion, up 10% compared to 2021.

Rice exports surge 40.8% in volume over five months

Vietnam earned US$2.02 billion from shipping 3.9 million tonnes of rice abroad in the first five months of the year, marking year-on-year increases of 49% in value and 40.8% in volume, respectively.      

According to the Ministry of Agriculture and Rural Development, the average export price of rice also rose 5.8% to stand at US$517 per tonne.

The Philippines was the largest importer of Vietnamese rice during the reviewed period, purchasing 1.29 million tonnes for US$647.5 million from the market, up 40.6% in volume and 53.4% in value from the same time in 2022.

The strongest growth was recorded in rice shipments to Indonesia which leapt up by 26.3 times. Meanwhile, the market with the largest decrease in Vietnamese rice export value was the Ivory Coast which fell by 49.8%.

The Vietnam Food Association (VFA) recently outlined that there is positive outlook ahead for Vietnamese rice exports in the remaining months of the year due to the demand for food reserves rising.

Furthermore, China’s recent reopening is expected to create favourable conditions for rice exporters in the near future.

Canada to review duty taxes on Vietnam's corrosion-resistant steel

The Canada Border Service Agency (CBSA) updated the timeline for auditing the anti-dumping tax on corrosion-resistant steel (COR) of Vietnam and Turkey, according to the Trade Remedies Authority of Vietnam.

Particularly, CBSA will stop gathering information on June 15, and the parties will submit their arguments on June 22. The deadline for submitting information is June 29, and CBSA will announce the result on July 17. 

Previously, CBSA proposed anti-dumping and anti-subsidy investigations against COR steel imported from Turkey, the United Arab Emirates (UAE), and Vietnam in November 2019. 

Vietnam’s anti-dumping tax rate is ranging from 2.3% to 71.1% and is not subject to anti-subsidy tax because the subsidy level is only from 0.1% to 0.2%.

However, the export turnover of Vietnam's taxed products still increased strongly in 2020 and 2022, therefore, CBSA initiated an anti-dumping, and anti-subsidy investigation on COR steel to ensure the stability of Canadian manufacturers and avoid affecting the national economy.

The Trade Remedies Authority encourages relevant parties to cooperate during the investigation as updated by CBSA.

How bad debts influence lending rates

Last week the State Bank of Vietnam continued reducing diverse regulatory interest rates in a bid to help remove impediments for borrowers, as well as support credit institution efforts to drive down input costs, and from there be able to reduce lending rates.

Latest figures from the central bank show that in late February the on-balance sheet non-performing ratio of the banking system stood at 2.91 per cent, an increase compared to 2.46 per cent in late 2016, 1.49 per cent in late 2021 and most recently, 2 per cent in late 2022.

However, according to a State Bank of Vietnam (SBV) assessment, several sorts of debts have the potential to be turned into bad debts in the future, such as investment into corporate bonds for debt restructuring, hard-to-collect receivables, among others.

One positive point is that credit institutions have been taking practical measures to ensure operational safety through boosting their loan loss reserve (LLR) funds for their bad debts.

Accordingly, credit institutions have maintained a fairly high LLR ratio approximating 125 per cent in late 2022, which is well above the five-year average level at 109.4 per cent, and double that a decade ago, 61 per cent in late 2012.

By the end of last year, the LLR ratio at leading state lender Vietcombank touched 317 per cent, at MB 238 per cent and at BIDV 215 per cent, for instance.

Le Thanh Quy Ngoc, Risk Management director at Ho Chi Minh City-based commercial lender OCB, noted that dealing with bad debts and collaterals was a constant requirement of credit institutions particularly and the banking sector generally, alongside developing credit scale and lending products.

Recent vulnerabilities economically and socially at home and abroad are posing fresh challenges when it comes to tackling bad debts of the banking system.

Hence, it urgently needs more active support from management authorities at all levels and relevant management agencies to remove difficulties, and from there create the necessary legal corridor to aid credit institutions’ efforts in dealing with bad debts in a substantial and efficient manner.

A leader at major private lender Eximbank opined that bad debts is one of the factors casting big impacts on the operation of banks, as credit still holds the highest proportion in banks’ total asset value.

Credit brings the largest income source, yet it is the most risky business for banks. Hence, for efficient operation, banks need to pay top attention to the credit and service quality, and bad debt management.

Can Van Luc, chief economist at BDIV, said that although the government, the SBV, ministries and sectors are very proactive and taking radical measures to support businesses, including issuing fiscal policies on reduction, exemption and payment extension of taxes and fees, the banking system’s bad debt might be further swelled in 2023.

Senior economist Le Xuan Nghia said, “Amid rising bad debts, banks must put more into their provisioning funds, leading to augmenting credit costs and lesser room to soften the lending rate.”

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