Machinery is at risk of malfunction if unpredictable power cuts continue Photo: Le Toan

A series of power cuts without specific schedule or durations has impacted the production and export activities of local manufacturers.

The Korean Chamber of Commerce in Vietnam (KoCham), the representative of over 10,000 Korean-invested enterprises generating more than one million jobs in Vietnam, on June 5 sent a document to the prime minister, the Government Office, and Electricity of Vietnam to report the impact of the interruption on its business community.

The chamber has received feedback on the unannounced power interruptions, which had forced firms to suspend operations and miss deadlines for orders, while impacting the working time of their employees.

Chairman Hong Sun said that the operation in factories was consecutively halted due to the unstable power supply. In many cities and provinces, power cuts have gone on for over three days a week, cutting capacity by half at many factories.

“South Korean enterprises suffer dual damage. When having power interruptions without prior notice, the workers still go to the factories and sit idle. Meanwhile, the manufacturing lines have to suspend operations and the companies still must pay salaries,” Sun said.

“Sudden power cuts also make machinery break down and the quality of products and goods are impacted,” he added. “In addition, suspending operations will affect the completion of orders, and even delay exports. Thereby, in the case of compulsory blackouts, firms expect authorities to give specific notice and be proactive in having their workers off production plans, saving production costs.”

According to KoCham, although there are no specific statistics about the damage to South Korean groups due to power interruption, they are sure it causes serious damage to the business community.

Pham Van Tuan, general director of An Phat Holdings, an environmentally friendly plastic group in Vietnam, is worried about the rotational power cut at its factory.

Tuan said that the capacity of the factory is 300 tonnes per day, however, at present, the unstable power has suspended operation. Employees have to work on their day-off to offset the diminished capacity. The company also has to negotiate with partners to offset the remaining goods in the following months.

“Our partners also have foreign-invested enterprises, thus ensuring the deadline for order delivery is a crucial requirement to ensure the prestige of the company,” Tuan said.

In Hanoi and the northern provinces, power outages can last anywhere from half to an entire day. In areas where electricity is heavily needed for production, electricity is prioritised for production during the day and only provided to residents at night.

According to the Ministry of Industry and Trade (MoIT), the total accessible capacity of the northern power system (including imported electricity) that can be mobilised to satisfy electricity demand is around 17,500-17,900MW, approximately 60 per cent of the installed capacity.

During the upcoming heatwave, the demand in the north may reach 24,000MW and the northern grid will fall short by approximately 4,350MW. The MoIT warns that the shortfall of power will have a significant impact on the power supply, not solely in the north but on a national scale, until July.

The European Chamber of Commerce in Vietnam (EuroCham) and the broader business community have expressed growing concerns regarding the ongoing power shortages in Hanoi and northern Vietnam. Many European companies with production and manufacturing facilities in the region, including numerous EuroCham members, have been adversely affected. Swift action is imperative to preserve Vietnam’s reputation as a dependable global supplier, the chamber said.

EuroCham has intensified its advocacy efforts by writing a letter to the MoIT to propose a series of short- and long-term measures designed to alleviate the effects of the ongoing power outages.

Stock market positively responds to interest rate cuts

The stock market has reportedly shown positive response to recent interest rate cuts.

The State Bank of Vietnam (SBV) continued reducing regulatory interest rates on June 19, the fourth cut in a row since mid-March.

Last week, the benchmark VN-Index rose 2.1%, equivalent to 24 points to 1,129.38 points. The money flows tended to be channeled into bank stocks while some steel and chemical ones also went up thanks to high hopes for the pressure from lending interest rates to be eased, the Lao dong (Labour) daily reported.

Since the beginning of 2023, the SBV has slashed the key interest rates for four times, by 0.5 - 2% per year in total.

The downward trend of the interest rates is expected to continue encouraging the money flows to be shifted from bank deposits to other investment channels with higher profitability like securities.

As a result, the VN-Index has jumped 105 points in total, or over 10%, for the last nearly four months since the first regulatory interest rate cut in mid-March.

According to VietinBank Securities, the reduction of the regulatory interest rates should be maintained for a long time with stronger cuts so that it can have observable effects on the stock market, especially when many factors other than the monetary policy are negatively affecting the market.

The company predicted the stock market will become more positive in the latter half of 2023.

Meanwhile, experts held that there remains room for further cuts.

Standard Chartered forecast the SBV will lower the refunding interest rate by 50 basis points in the third quarter to equal the rate during the pandemic-hit years, and maintain the level until the end of 2025.

Likewise, HSBC experts also projected another interest cut, by 50 basis points, for Q3 which will decrease the regulatory interest rates to 4% and reverse tightening efforts in 2022. The move will also be equivalent to the reduction during the COVID-19 pandemic.

Analysts from the Maybank Investment Bank also said Vietnam still has room to lower the rates between now and the year’s end.

Reorganisation in hand for 2023’s electricity supply

Vietnam can only reduce demand and alleviate the current electricity shortage by utilising energy economically and efficiently, energy leaders are warning.

The National Load Dispatch Centre (NLDC) predicts that extreme temperatures will prevail well into July. If Hoa Binh Hydroelectricity’s stagnant water level falls below 1,920MW, in particular, the scenario will be extremely fraught.

Last week, the centre’s deputy director Nguyen Quoc Trung said, “We require the assistance of our customers to keep up a stable electricity system in the north.”

The Vietnamese government is considering energy conservation as a remedy for the current electricity shortage. Phuong Hoang Kim, director of the Energy Efficiency and Sustainable Development Department at the Ministry of Industry and Trade (MoIT), stated that it is feasible to save energy in Vietnam’s industrial sector, with a potential area of 30-35 per cent.

Vietnam’s industries use more than half of the nation’s total energy, according to a survey by the National Energy Efficiency Programme. Kim estimated that if industrial enterprises conserve at least 2 per cent of their annual electricity consumption, the nation will save approximately 1.6 billion kWh annually, which is equivalent to over $136 million in electricity savings.

“Currently, the country has 3,068 establishments, the majority of which are industrial production enterprises, with an annual energy consumption of at least 1,000 TOE, or six million kWh. These businesses consume an annual average of 80 billion kWh of electricity,” Kim said.

The MoIT launched the National Electricity-Saving Movement in 2023 with the support of all provinces as well as power companies and major energy consumers. The majority of businesses are familiar with the laws and regulations governing the economical and efficient use of energy. However, Kim discovered that a great many firms have not implemented it or enacted it properly.

The related data also highlights Vietnam’s inefficient energy consumption. Vietnam’s current primary energy intensity index of approximately 400 TOE generates $1,000 in GDP.

This number is 30 per cent higher than Thailand, 60 per cent higher than Malaysia, and 4-5 times higher than developed nations like Japan and the United States. Moreover, the electricity elasticity coefficient – the ratio between the growth rate of electricity demand and the growth rate of the GDP – of Vietnam in recent years has tended to decrease but is still at 1.3-1.4, demonstrating that energy consumption is inefficient.

The likelihood of a power shortage persists when annual economic growth exceeds 6-7 per cent. The MoIT has submitted a report to the prime minister regarding the issuance of a directive to increase electricity savings by 2 per cent per year between now and 2025 and in subsequent years, highlighting that electricity demand remains significant at 8.5 per cent.

“It is essential to transition to a mandatory and legalised mechanism, and simultaneously, it’s important to have a financial mechanism for economical and efficient use of electricity,” said Vo Quang Lam, deputy general director of Electricity of Vietnam, providing remedies that provide economic leverage and encourage potential individuals and businesses to participate in electricity conservation.

“At present, encouraging people and businesses to use energy economically and efficiently is insufficient,” Lam said.

In sweltering and arid conditions for an extended period of time, each kWh of electricity saved is “extremely precious,” according to Lam. In the past, the country has conserved more than six million kWh of electricity per day.

“Compared to the present need for electricity, which is about 800 million kWh, this is an enormous amount that helped the electricity industry combat the issue of power shortage,” Lam added.

On June 8, the prime minister issued Directive No.20/CT-TTg on enhancing electricity savings towards 2025 and beyond. This directive requires the entire nation to save at least 2 per cent of its annual electricity consumption while lowering power loss across the entire electrical system to less than 6 per cent by 2025.

The order of the prime minister also specifies that by 2030, half of office buildings and half of residential houses will use self-sufficient and self-consumable rooftop solar power, and that by the end of 2025, all street lighting will use LED.

Vietnamese auxiliary manufacturers must engage in global supply chain

Vietnamese auxiliary manufacturing businesses need to join in and become a component of the global supply chain.
 
Speaking at a press conference on June 20, Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) stated, "Although the proportion of Japanese companies procuring raw materials, components, and spare parts in Vietnam has risen from 28 per cent in 2013 to 37 per cent in 2022, the growth is still exceedingly slow."

He additionally announced an arrangement for cooperation to reveal the 10th Vietnam-Japan Supporting Industry Exhibition (SIE) in Hanoi, along with the 14th Vietnam Manufacturing Expo.

Director of the Vietnam Trade Promotion Agency Vu Ba Phu stated that Vietnam currently has approximately 2,000 enterprises producing spare parts and components. However, only approximately 300 enterprises partake in the multinational supply chain, generating over 600,000 jobs. Approximately 4.5 per cent of the total number of enterprises in processing and manufacturing industries are presently engaged in supporting industries.

Nakajima stated that all foreign investors are now interested in the process of mechanisation in manufacturing and supporting industries, not just those from Japan.

Nakajima posed the questions, "Can Vietnam make the necessary adjustments to become a crucial industrial production hub in the region in a timely manner? How can businesses learn from one another to keep up with the market-dominating digital transformation and AI trends?"

According to Vu Trong Tai, general manager of RX Tradex Vietnam – an exhibition organiser – Vietnam is establishing itself as a rival production base to China for global semiconductor manufacturers, serving as a foundation for industrial and technological growth, especially in new fields such as AI.

Since September 2003, JETRO has alternately organised the SIE in Hanoi and Ho Chi Minh City with the backing and cooperation of the Vietnamese government in an effort to increase the localisation rate. This year, there are 22 Japanese exhibitors in the SIE display area who wish to purchase products from Vietnamese manufacturers.

28 Vietnamese enterprises were selected to participate as exhibitors. The majority of the selected companies, which are prospective manufacturers in supporting industries, will participate in the exhibition by displaying their products and highlighting their supply capacity.

Economic momentum softens heading into 2024

Economic difficulties have resulted in international organisations lowering their growth forecast for Vietnam, though it still has the highest growth in the region.

In its latest report on global economic prospects released over a week ago, the World Bank predicted that in 2023, lacklustre growth in the global goods trade, which is a key engine of East Asia and Pacific in recent decades, is expected to weigh on activity, particularly in Vietnam where growth is projected to moderate.

The bank has lowered Vietnam’s economic growth for 2023 from 6.3 per cent in its January forecast to 6 per cent this year, 6.2 per cent in 2024, and 6.5 per cent in 2025.

However, these rates are the highest in Southeast Asia, with the growth rate in 2023 being 5.5 per cent for Cambodia, 4.9 per cent for Indonesia, 4.3 per cent for Malaysia, and 3.9 per cent for both Laos and Thailand.

“The Vietnamese economy is facing external headwinds as weakening external demand weighs on exports, translating into weak industrial production. While domestic consumption remains robust, credit growth slowed, reflecting weak credit demand,” the World Bank said in its May bulletin on the Vietnamese economic performance.

According to the Vietnamese General Statistics Office, Vietnam’s index for industrial production (IIP) in the first five months of this year dropped 2 per cent compared to the same period last year, when the IIP climbed 8.1 per cent on-year.

The IIP for the processing and manufacturing sector declined 2.5 per cent against the corresponding period last year, when it rose 8.9 per cent on-year. The electricity production and distribution sector climbed only 0.8 per cent on-year, while the mining sector fell 3.5 per cent on-year, and the water supply, wastewater, and waste management and treatment sector expanded 6.4 per cent.

Spanish global analysts FocusEconomics told VIR that in Vietnam, economic momentum will soften this year due to slower growth in private consumption, fixed investment, and exports.

“That said, stronger fiscal spending would add support, and Vietnam would remain among ASEAN’s top performers,” FocusEconomics said. “Foreign exchange fluctuations, monetary policy, relations with the US, and the impact of China’s recovery on exports are key factors to watch.”

The analysts forecast Vietnam’s GDP to expand to 5.4 per cent in 2023, down by 0.3 percentage points from the firm’s forecast made one month ago, and increase to 6.5 per cent in 2024.

After sliding 11.2 per cent on-year in April, industrial output rose 0.1 per cent on-year in May. This still signals a worsening trend in the industrial sector.

FocusEconomics sees industrial production expanding 5 per cent in 2023, down by 2.5 percentage points from one month ago, and climbing to 8.8 per cent in 2024.

Prompted by economic woes, the International Monetary Fund has also lowered its projection for Vietnam’s growth from 6.2 per cent in January to 5.8 per cent for this year and 6.9 per cent for next year. Despite the revision, this will still be among the highest in the emerging and developing Asia group of 30 economies.

At the National Assembly, Minister of Planning and Investment Nguyen Chi Dung said, “The crucial thing for enterprises is that they must have orders as soon as possible because orders will help them boost production and business activities. However, they are facing numerous burdensome administrative procedures. Many businesses are lamenting that such procedures in many localities are very slow as state cadres don’t want to work, and instead shirk responsibility.”

According to the World Bank, one of the biggest drivers for economic growth in Vietnam is to boost public investment.

“Acceleration of public investment disbursement could support aggregate demand and economic growth in the short run while ensuring investments in human capital and resilient and green infrastructure will bolster long term economic development,” the bank said

Vietnam’s GDP grew 8.02 per cent last year, the highest in 10 years, while total per capita income hit $4,110.

Hai Duong requires $24 billion investment

A meeting to appraise the Hai Duong provincial development plan for the 2021 - 2030 period, with a vision to 2050, was held on June 20 at the Ministry of Planning and Investment headquarters under the chairmanship of Minister Nguyen Chi Dung, chairman of the Planning Appraisal Council.
 
Discussing how planning plays a significant role in the development of the country and its localities, Minister Dung said, "Hai Duong has achieved many positive results in its development as it is located in an economic development corridor. However, it is still underdeveloped due to low per-capita income, an economic growth rate placing it 8th out of the 11 provinces in the region, an unsustainable budget, and an inability to entice adequate investment to the province."

Minister Dung requested a clear indication of where the bottleneck is and what the greatest obstacles are to shift the necessary resources to speed up a development breakthrough.

The minister agreed with the development of an economic zone in Hai Duong, as recommended in the draft provincial master plan, due to the province being landlocked with no port or even an airport.

"Foreign investors in the semiconductor sector are actively looking for investment opportunities in Vietnam's economic zones. This is a precious opportunity for the province to rearrange development spaces based on attractive policies for investors in this field," said Dung.

According to Chairman of Hai Duong People's Committee Trieu The Hung, the province is aiming to become a modern, civilised, industrialised province through sustainable development and with a rich cultural identity. "Average regional GDP growth for each person will be higher than that of the whole country by 2030 and will be the dynamic industrial centre of the Red River Delta region," Hung said.

The draft provincial master plan sets the regional GDP growth in the period 2021 - 2030 at 9.5 per cent per year. The current GDP per person in Hai Duong province will hit about VND100 million ($4,250) by 2025 and VND180 million ($7,650) by 2030.

To realise these goals, the total capital needed is estimated at VND582 trillion ($24.7 billion), according to the draft of the master plan.

The development of Hai Duong will be based around the North-South development axis, that connects the two major cities of the province, Hai Duong and Chi Linh with easy connections to Hanoi, and the East-West development axis of the provincial centre, based on Hanoi to Haiphong Expressway.

The East-West axis passes through the northern region of the province through Chi Linh city, connecting to Noi Bai International Airport. A new motorway between Noi Bai and Halong will be complete by 2030, further strengthening the regional economy.

The economic development along the river routes will be focused on the Thai Binh River and will promote water transport and develop local agricultural and tourism activities.

Ho Chi Minh City emerges as a prominent startup hub in global rankings

The Global Startup Ecosystem Report 2023 by Startup Genome highlights Ho Chi Minh City's significant progress, placing it among the top emerging startup markets worldwide.
 
In the recently published Global Startup Ecosystem Report (GSER) 2023 by Startup Genome, Ho Chi Minh City secured its position within the top 100 emerging startup markets worldwide, specifically placing in the range of 81-90.

The report provides an evaluation based on six key indicators, namely performance (40 per cent), funding (30 per cent), market reach (12.5 per cent), experience and talent (12.5 per cent), connectedness (2.5 per cent), and knowledge (2.5 per cent).

In the first three indicators, Ho Chi Minh City has maintained its scores compared to the 2022 rankings, scoring one point for performance, five points for funding, and one point for market reach – all on a scale of 10.

Regarding the experience and talent indicator, Ho Chi Minh City has made significant improvements, increasing its score from one point in the previous year to seven points in this year's report.

The two new indicators, connectedness and knowledge, both received preliminary evaluations of one point.

In mid-June, Ho Chi Minh City's People's Committee also released a report on the results of implementing the Plan 672: Support for the Development of the Innovative Startup Ecosystem in Ho Chi Minh City during the 2021-2025 period.

According to the report, the estimated average investment in science and technology as a percentage of the regional GDP in Ho Chi Minh City reached 0.88 per cent during the 2021-2023 period.

Specifically, from 2021 to date, Ho Chi Minh City has supported the enhancement of the innovative capacities of 5,063 businesses, surpassing the target set for the 2021-2025 period by 168.8 per cent.

It has also nurtured and developed 693 projects, achieving 69.3 per cent of the target for the entire period. Furthermore, it has supported 236 innovative startup enterprises in accessing venture capital investment.

Ho Chi Minh City will continue implementing the effective measures outlined in Plan 672. These include organising and deploying specific policies for the management of science, technology, and innovation, establishing advanced technology and innovation institutes, opening startup innovation centres, and fostering the formation of world-class research bases.

The city will focus on researching, developing, and applying high-tech solutions, products, and services to support the Smart City Initiative, digital transformation programmes, and key industries.

On the other hand, Hanoi is absent from the Startup Genome rankings for both 2022 and 2023, despite previously being listed in the 91-100 range in 2021.

The top 100 emerging ecosystems currently have a value of approximately $1.5 trillion, with Europe providing the highest number of representatives in this ranking. Europe's representation has increased from 37 per cent in the GSER 2022 report to 41 per cent this year.

In addition to the top 100 emerging ecosystems, GSER also ranks the top 30 global ecosystems. The top three positions have maintained their performance since 2020, with Silicon Valley continuing to hold the first position, followed by New York and London.

In Southeast Asia, Singapore has made its debut in the top 10 global startup ecosystems, rising from the 18th position last year to the eighth this year.

This achievement is attributed to Singapore's successful completion of several divestment deals worth over $50 million, four of which were valued at more than $1 billion. Singapore currently boasts 18 unicorns, including the KuCoin cryptocurrency exchange, valued at $10 billion.

Rosy prospects for online exports

Increasing numbers of local firms have been joining global e-commerce platforms after overcoming the initial barriers, leading to expectations that the country’s online exports could soon break the $10 billion revenue mark.

For nearly three years now, An Phat Holdings – a leader in environmentally friendly plastic production – has been selling its bioproducts on Amazon to consumers in the US and EU markets.

Nguyen Le Thang Long, deputy CEO of An Phat Holdings said, “Online exports prove a smart move in the digital era. Doing business on Amazon helps the company to directly approach the end-users. Our sales revenue through this platform rose 21-fold last year compared to 2021.”

Similarly, in 2021 Long An Food Processing Export JSC (Lafooco) started selling its cashew nut products on Amazon.

To achieve this, the company has had to implement many procedures required by Amazon, such as acquiring a certificate from the US Food and Drug Administration, and compliance with US stamp and packing requirements.

As of now, the company’s diverse processed cashew nut products are selling well on Amazon. Having exported cashew nut products reach US consumers bearing the Vietnamese firm's brand was a big motivating for Lafooco to make strides selling products on Amazon.

According to Lai Viet Anh, deputy director general of the E-commerce and Digital Economy Agency under the Ministry of Industry and Trade, overseas e-commerce has helped Vietnamese companies to upscale their businesses, which in turn has significant spillover effects on many other firms.

The global business-to-consumer revenue through e-commerce platforms is estimated to reach $2.88 trillion in 2023.
The product sectors with bright export potential on the Amazon platform include consumer goods, fine handicrafts, wooden furniture, and processed agricultural items.

More businesses join training programmes offered by Amazon to facilitate their business on international e-commerce platforms and access more end users.

Figures by the UK-based public policy consultancy Access Partnership show that Vietnam’s business-to-consumer (B2C) online export revenue approximated $3.5 billion in 2022, and is expected to reach $5.5 billion by 2027.

In a more upbeat scenario, this firm even puts Vietnam’s online export revenue at $13 billion by 2027.

The global B2C revenue through e-commerce platforms is estimated to reach $2.88 trillion in 2023.

The constant development of e-commerce markets among Vietnam’s major training partners such as China, Japan, South Korea, and the EU ushers in multiple opportunities for firms with solid products and business acumen.

CEO of Amazon Global Selling Vietnam Gijae Seong reported that, in 2022, the export value of Vietnamese businesses selling on Amazon showed a 45 per cent jump on-year.

Vietnamese partners sold nearly 10 million items on Amazon’s online platform across the globe.

Financial institutions ready to provide greener agro-loans

Financial institutions have a significant role in advancing agriculture’s net-zero agenda by channelling green finance, educating the market, and helping agricultural companies build a sustainability mindset.
 
HSBC is in the process of closing a green loan for a local company in the farming and seafood industry, following ASEAN’s first Push facility to Nutifood to support capital expenditures and working capital.

HSBC is leading the way to meet the client’s sustainability needs and making good progress with its commitment, achieving roughly 14 per cent of its targets by completing a number of notable green transactions for clients with solutions ranging from green trade financing options to sustainability-linked loans to sustainable supply chain finance.

Such climate commitments of financial institutions open up a world of opportunity for agriculture companies to tap into green finance to support their growth and sustainability agenda.

Surajit Rakshit, head of Global Trade and Receivables Finance at HSBC Vietnam, said, “As one of the world’s largest financial institutions with far-reaching international connectivity, which has committed to and seriously involved in net-zero transition since the very early stage, our support for agriculture companies goes beyond banking solutions. Whether they need guidance, financing or insights, we can support their business to prepare for the transition.”

“This is clearly in line with HSBC’s overall sustainability strategy, and we have been helping clients to foster this with our strong capability in the space. Our sustainability strategy has, at its core, a commitment to support our customers to understand and act on their transition to lower emissions and to help them achieve their wider sustainability ambitions,” he said.

In 2022, HSBC Vietnam announced a commitment to arrange up to $12 billion of direct and indirect sustainable financing for Vietnam and the corporate sector in the country by 2030.

Green loans from international organisations are a critical buoy for agriculture companies as increasingly firms are paying more attention to support their ecosystem and have become more interested in solutions such as supply chain financing or distributor financing. This also becomes one of their competitive advantages when competing in the fierce pricing environment.

Minister of Agriculture and Rural Development Le Minh Hoan said one of the industry’s major targets in 2023 is to optimise international financing in agricultural development.

“The local authorities target to earn $70 billion from exports of agricultural, forestry, and fishery products by 2030, while foreign direct investment is expected to reach roughly $25 billion. Vietnam will also likely benefit from 30 gratis-aid initiatives with $300 million over the next five years,” Hoan said.

Data from the State Bank of Vietnam’s (SBV) Credit Department for Economic Sectors showed that as of the end of last year, outstanding loans for green projects increased by 12.96 per cent against the end of 2021 to more than VND500 trillion ($21.25 billion) accounting for more than 4.2 per cent of the total outstanding loans of the whole economy. The loans mainly focus on green agriculture, renewable energy, and clean energy.

The government is also focusing on tackling one of the most pressing challenges – climate change – to help the agriculture sector to thrive sustainably. Due to Vietnam’s geographic exposure, it is particularly susceptible to climate change, which has a serious effect on agriculture.

The government in the recent past approved the National Green Growth Strategy for the decade, an important policy move for the country’s economic growth and sustainable development, with specific goals related to greenhouse gas emission reductions. The commitment to reduce agricultural emissions has also been declared in the Ministry of Agriculture and Rural Development’s action plan to implement the strategy.

Since the adverse impacts of climate change are better understood, many financial institutions operating in Vietnam are taking bold steps to finance and facilitate green and eco-friendly loan packages as an essential part of their sustainable investment and net-zero pledges.

The SBV said that the country had 31 financial institutions involved in green credit, with a total credit of more than $12.4 billion, mainly in green agriculture and renewable energy. Eco-friendly credit and green bond issuance have received great attention, as these debt instruments can promote a lower-carbon and a more resilient economy.

Myriad of issues hinder livestock firms

Rampantly smuggled meat and a soar in livestock production costs have exhausted some businesses, and some associations are crying out for help as a result.

The Vietnam Poultry Association (VIPA) has revealed that tens of thousands of tonnes of discarded live chickens are smuggled across the border into the country every month, along with many low-priced livestock by-products such as legs, heads, necks, wings, skins, gizzards, and offal.

These items also carry risk of avian influenza virus strains and other dangerous infectious diseases imported from abroad.

Moreover, the cost of input materials and animal feed are increasing, and the poor selling prices are causing headaches for farmers and businesses. At times, the selling price of some poultry products can currently be 20-30 per cent lower than the production cost, pushing the poultry industry into numerous burdens.

Some businesses and poultry farms have already gone bankrupt, while thousands of farms have reduced their breeding scale or suspended operations due to prolonged losses.

Farmer Tran Van Be in the southern province of Dong Nai, who owns a 10-hectare chicken farm, said that his establishment has stopped work for more than two months because of heavy losses. He explained that the price of animal feed is at an average of 56 US cents per kg. To produce 1kg of broilers, they need 1.6kg of feed at least. So, all the costs for a 2kg chicken are around $2.25, while the selling price of a chicken is around $2.

Dinh Nhat Minh, a representative of Thanh Cong Livestock and Trade Co., Ltd., said the company was dissolved because it could not suffer the high input costs. Besides this, the price of animal feed has increased to 54 US cents from 41.7 US cents in the same period last year. 

Against this backdrop, the VIPA has proposed to the prime minister, the National Assembly Standing Committee, and relevant ministries and agencies in early June to consider a number of urgent and long-term solutions to remove difficulties for the poultry industry.

The association requests that competent authorities regularly inspect, control, prevent, and strictly handle organisations and individuals that are carrying out illegal transport and trade in poultry and poultry products across the borders.

The government should also promptly issue a document banning the import of meat products from countries that use growth stimulants like ractopamine and cysteamine, as well as review and cut some quarantine fees and unnecessary administrative procedures, it said.

The VIPA added that the current regulations on shipments for calculating quarantine fees for animals and animal products are not clear or reasonable. In fact, the customers of cattle and poultry slaughter plants are quite diverse. For example, a small customer can order about 5-10kg of meat only, but during quarantine, officials consider it as a shipment and charge $4.20, as much as the quarantine fee for a container. This regulation has raised the costs at poultry slaughterhouses.

On the other hand, while livestock and poultry breeding and slaughtering businesses are suffering, some other regulations like quarantine fees and independent conformity are adding more pressure on enterprises. “Therefore, we recommend ministries and agencies review and coordinate with each other to implement solutions reducing the cost of raw materials and inputs for agricultural production,” a VIPA representative emphasised.

Drinks chains tinker with new models

Many beverage chains have been forced to close their out-of-date business models, despite being effective during the pandemic and being good for brand building.

The kiosks of Phuc Long tea and coffee brand have disappeared at the Winmart and Winmart+ supermarket chains since the end of May, officially ending the existence of the kiosk model after nearly two years of operation.

Nhung Nguyen, a salesperson at the Winmart+ store on Hoang Hoa Tham street in Hanoi, said that the closure of these kiosks was inevitable as they had little business and took up quite a large area in the store.

Phuc Long was the first beverage chain to put the kiosk model to the test, opening a series of kiosks of other coffee and beverage brands such as The Coffee House.

Two months after Masan spent $15 million buying a 20-per cent stake in Phuc Long in May last year, 41 kiosks of the chain were opened at Winmart+ stores in Masan’s retail system.

At its peak, nearly 1,000 kiosks and 111 flagship stores made Phuc Long the second-largest food and beverages brand in Vietnam, after Highlands Coffee. However, the number of kiosks decreased to 760 at the end of last year until they were completely discontinued in May.

After failing with the kiosk model, Phuc Long continued to test a similar model called Hub-and-spoke. A representative of Phuc Long said that the new model works by transferring online customers from flagship stores to neighbouring kiosks during peak hours.

“Hub-and-spoke will reduce the pressure on flagship stores and contribute to increasing daily sales of kiosks by up to 2.8 times during the pilot phase,” the representative said.

According to the financial report published in March, Phuc Long achieved $68.6 million in revenue in 2022, mainly from the business of more than 100 flagship stores.

Previously, a number of other coffee and beverage chains also quickly said goodbye to the kiosk model.

The Coffee House opened up to eight new kiosks in a row in October 2021, but after that, there was no move to show the model could be replicated. This brand has just reopened its Signature store in Ho Chi Minh City in January after more than a year of closure.

Ngo Nguyen Kha, CEO of The Coffee House, said that the new model has a different space with an open bar, aiming to serve visitors with better incomes looking for new experiences.

“In its growth journey, The Coffee House has continually pondered how to reinvent itself but maintain its identity. We feel fortunate customers are growing up with us, with higher and higher requirements for products and experiences,” Kha said.

“With the return of our signature high-end store model, customers are still willing to spend time and pay more for the new experiences. This group of customers is not large enough for The Coffee House to open hundreds more stores, but enough to open a few in some areas.”

The model has many similarities with Starbucks’ Reserve Bar. In Vietnam, two Starbucks Reserve Bar stores located in Han Thuyen street in Ho Chi Minh City and Nha Tho street in Hanoi, work as high-end store models that attract a vast number of customers.

Although not interested in the kiosk model, Starbucks has recorded a transformation in its operating model by opening a number of smaller stores for take-away and delivery during the pandemic.

“We believe that in the food and beverage segment, there must be the right formula to develop. We will continue to open more stores and create opportunities in addition to places that we have visited,” said general director of Starbucks Vietnam Patricia Marques.

As of the end of last year, Starbucks had 87 outlets spread across eight cities and provinces nationwide. The US chain plans to open its 100th store in Vietnam this year as a way of marking the 10-year journey of presence in Vietnam.

According to Mordor Intelligence Inc., Vietnam’s food and beverage industry will achieve a compound annual growth rate of up to 8.65 per cent from 2021 to 2026.

Vietnamese, Japanese firms seek stronger partnership

A conference was held in Tokyo this week to strengthen partnership among Vietnamese and Japanese businesses, drawing representatives from more than 100 firms of both sides.

Addressing the event, Trade Councilor Ta Duc Minh highlighted that the two countries have become each other’s important trade partner, as their import-export structure can supplement each other without direct competition.

Japan has high demand in agro-forestry-fisheries products, processed food, consumer goods and garments, which are strong products of Vietnam.

Meanwhile, the two sides are both members of many free trade agreements, providing them opportunities to broaden their trade relations with partners, increase import-export activities and engage deeper in the regional and world supply chains, he noted.

Nakamura Makoto, an economist from the Manufactured Imports Promotion Organisation (MIPRO) under the Ministry of Economy, Trade and Industry (METI) of Japan, said that all Vietnamese products entering the Japanese market must meet strict requirements of the local market from material origin to production stages, which means a strong collaboration among businesses of the two countries is crucial to bring Vietnamese products to Japanese consumers.

During the event, Vietnamese firms introduced their products to Japanese firms and sought partnership opportunities

Japan is currently the leading economic partner of Vietnam, the country’s biggest ODA provider, the second largest labour export market, the third largest investor, the third largest tourism market, and the fourth biggest trade partner. The number of Vietnamese products sold in Japan has increased and they are welcomed by local consumers.

The conference provided a good chance for businesses of both sides to seek partnership opportunities, bringing more strong products of Vietnam to the Japanese market on the basis of optimising the Vietnam-Japan Economic Partnership Agreement (VJEPA).

International wood fair to open in Binh Duong

The BIFA Wood Vietnam 2023 fair will return to the southern province of Binh Duong from August 9-12, the event's organisers announced at a press conference in the locality on June 22. 

The upcoming fair is expected to attract more than 100 Vietnamese and foreign exhibitors including those from the Americas, Europe, mainland China, Hong Kong, Taiwan, Malaysia, Indonesia and Thailand. 

They will showcase advanced wood processing technologies, machinery and raw materials in more than 700 booths, organisers said. 

Several conferences will be held on the sideline of the fair such as a seminar introducing Canadian wood and its market, a seminar discussing intra-regional trade promotion and a workshop on accessing capital for timber enterprises. 

Deputy director of Binh Duong Department of Industry and Trade Nguyen Thanh Hà described the event as a good chance for manufacturing enterprises to access new technology and the world's legal source of raw materials in Vietnam.

The fair will also create opportunities for domestic and international organisations to meet, and establish long-term cooperative relationships to contribute to enhancing the sustainable development of Vietnam’s processing industry, she said. 

During the press conference, Ha also suggested the State and relevant ministries and sectors support wood processing enterprises in improving their capacity to be able to deal with commercial competition.

Assistance in developing and expanding material areas to provide timber with certificates of sustainable forest management to meet the needs and tastes of consumers should be also included, Ha said. 

She also emphasised the importance of facilitating the development of supporting industries of the wood sector and issuing supportive policies on tax, insurance, and credit to create favourable conditions for businesses in the current difficult time. 

Organised by Viforest Fair Co, a joint venture between five wood processing industry associations (VIFOREST, HAWA, BIFA, DOWA, and FPA Binh Dinh), the fair will take place at the WTC Expo Binh Duong. 

Do Xuan Lap, General Director of Viforest Fair Co said the fair would not only offer opportunities for businesses in the wood industry to meet, exchange information, and cooperate, but also create linkage chains among raw material and part suppliers; machinery and technology providers, manufacturers and traders. This will help businesses to team up and develop sustainably right here in Vietnam.

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