VIETNAM BUSINESS NEWS JUNE 8
Vingroup to produce Covid-19 vaccine
Property developer Vingroup has just established a company to produce a Covid-19 vaccine.
According to the National Business Registration Portal, the Vinbiocare Bio-Technology Joint Stock Company was established on June 3, 2021 with charter capital of VND200 billion (USD8.7 million) of which 69 per cent coming from Vingroup.
Vingroup Deputy CEO, Mai Huong Noi, is chair-woman of Vinbiocare.
Based at Techno Park Building, Vinhomes Ocean Park, in Hanoi's Gia Lam District, Vinbiocare focuses on medicine production including vaccines.
Earlier in February 2021, Vingroup Innovation Foundation funded three coronavirus research projects by The Company for Vaccine and Biological Production 1, Pasteur Institute in Ho Chi Minh City and Institute of Preventive Medicine and Public Health.
Budget revenue increases on robust banking, securities, real estate and automobile sectors
The budget revenue increased significantly in the first five months of this year thanks to recovery from 2020 and some sectors seeing strong growth, such as banking, securities, real estate and automobile industries, according to the General Department of Taxation.
Statistics showed that tax collection was estimated to total VND575.6 trillion (US$24.85 billion) in January – May, equivalent to 51.6 per cent of the plan and 114.5 per cent of the same period last year.
The General Department of Taxation said that the budget revenue was quite good from the beginning of this year thanks to the fact that some sectors have benefited from the fiscal and monetary policies introduced in 2020 to aid the economy to overcome the COVID19-pandemic.
With good credit and deposit growth in 2020, which contributed significantly to boost the profit of commercial banks, the corporate income tax which banks paid to the State budget increased by VND4.5 trillion.
The tax collection from transferring property projects also increased by around VND6 trillion as the property market was robust in many localities nationwide.
Mergers and acquisitions became more robust in the first months of this year after the impacts of the virus in 2020, which pushed up tax revenue by VND5-6 trillion.
The Government’s policy of reducing 50 per cent of registration fees for domestically-produced and assembled automobiles till the end of 2020 also promoted car sales and the automobile production industry.
The development of the securities and real estate market from the beginning of this year also helped increase revenue from real estate registration fees, personal income tax from the transfer of securities and real estate assets.
According to the Viet Nam Securities Depository, the number of new accounts opened in the first four months of this year totalled nearly 370,000, increasing by 90 per cent against the whole of 2020, bringing the total number of accounts of individual investors to 3.12 million and organisational investors to 15,800.
Director of the General Department of Taxation Cao Anh Tuan said the outbreak of the fourth COVID-19 pandemic wave in Viet Nam from late April might affect budget collection in the second half of this year.
Tuan asked for a close watch to be placed on the virus development to work out solutions for effective tax collection in the remaining months of this year.
At the same time, the department would study and propose measures to efficiently implement the Government’s policies extending the deadline for payment of value added tax, corporate income tax, individual income tax and land fees in 2021 to support enterprises to overcome the difficult time.
HCM City seeks cashless payment for company transactions
Businesses would be required to use non-cash payments for trading transactions of any value under a proposal submitted to the Government by the HCM City Tax Department.
Currently, trading transactions worth more than VND20 million (US$868) have to be made by cashless payment in order to enjoy tax refunds and corporate income tax reductions as regulated by the law on value-added tax.
The proposal is aimed at improving tax governance and strengthening monitoring of expenditures and turnover of businesses and traders, according to an official at the tax department.
The official said that payments using non-cash methods have become increasingly popular in Viet Nam, and the Government last year issued a resolution to boost cashless payments in the country.
The department also proposed that the Government create regulations for e-commerce or digital-based business activities conducted by foreign companies like Google, Facebook, YouTube, Agoda, Booking.com and Airbnb so that they will have to pay taxes in Viet Nam.
These companies would be required to provide tax agencies information on individuals and businesses in Viet Nam involved in their business activities.
The department also proposed that the Government set regulations concerning investigation of tax fraud and related crimes.
Associate professor Dinh Trong Thinh of the Academy of Finance said it was vital to speed up cashless payments to reduce the risks involved in cash payments and to increase financial transparency.
However, limited payment infrastructure was one of the barriers hindering electronic payment adoption, he said.
Regulations on non-cash payments for all transactions should not be required, he said. There should be a detailed roadmap to implement regulations on non-cash transactions to make it feasible, especially for small enterprises, he added.
US businesses prioritise Vietnamese supply sources
The United States has become the largest export market for Vietnamese businesses during the initial five months of the year with export value increasing annually by 49.8% to US$37.6 billion, according to insiders.
Over the past five years, the nation has consistently ranked second in terms of growth of the market share in the US market, with exports to the fastidious market witnessing stable growth since the beginning of the year despite the impact of the novel coronavirus (COVID-19) pandemic.
Nguyen Huu Tin, director of the Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC), said the US is in the process of shifting from imports of goods from traditional suppliers to those from emerging countries.
Due to this factor, the country is gradually being able to secure its position as the leading partner of the US, the world's largest economy.
Nguyen Tan Thanh, vice president of the Vietnam Chamber of Commerce and Industry (VCCI), said there has been a number of remarkable changes in terms of the structure of Vietnamese export commodities over recent years.
Along with traditional groups such as textiles, footwear, and seafood, other categories like electronics, components, and furniture have also enjoyed a rise to the top position in terms of export turnover to the US market.
At present, there are more than 10 groups of local commodities to the US market which record a turnover of over US$1 billion.
According to the US publication Material Handling & Logistics, 43% of surveyed businesses in the US confirmed that the Vietnamese market ranks among the top three destinations they prioritise as they seek supply sources this year, a two-fold increase compared to the previous year.
Despite this growth, domestic enterprises have been advised to gain greater insights into issues relating to the rule of origin, trademark protection, and the regulations of food safety and hygiene by the US Food and Drug Administration (FDA) in order to avoid risks in terms of trade remedies in the stringent market.
End-of-term review of anti-dumping measures on imported galvanized steel
The Ministry of Industry and Trade (MoIT) has announced the implementation of the end-of-term review of anti-dumping measures on galvanized steel products imported from China and the Republic of Korea.
On March 30, 2017, the ministry issued a decision on the application of official anti-dumping measures on imported galvanized steel products in five years from April 14, 2017 to April 13, 2022.
According to the Law on Foreign Trade Management and Decree 10/2018/ND-CP, for the end-of-term review, the investigation authority will comprehensively assess the possibility of imported goods being dumped and the possibility that the domestic industry will suffer material injury or be threatened to material injury if anti-dumping measures are removed.
It will also consider the causal relationship between the possibility of dumping and the possibility of damage suffered by the domestic industry, as well as the necessity, rationality and socio-economic impacts of the continued application of anti-dumping measures.
The MoIT also stated that the review will serve as a basis for the investigation authority to collect information and evaluate domestic producers' production and business activities, balance supply and demand, and monitor price movements of galvanized steel products in Vietnam, especially in the context that the steel market is experiencing strong fluctuations.
Therefore, it can make recommendations on whether to continue applying anti-dumping measures or adjust the level of application in accordance with the law and based on the information and practical data collected./.
Vietnamese firms win bids for rice exports
Vietnamese firms continue to win bids for rice exports to the EU and the Republic of Korea (RoK) since the beginning of the year.
Pham Thai Binh, General Director of the Trung An Company, said it won a bid to ship two batches of rice weighing over 22,000 tonnes to the RoK, which is scheduled for delivery in September and October.
Earlier, on April 19, the company signed a contract to export 11,263 tonnes to the RoK at a price of 584 USD per tonne. Delivery is due this month.
The RoK has a quota of importing over 50,000 tonnes of rice from Vietnam this year. Trung An alone has won bids for more than 33,000 tonnes.
Compared to the same period last year, the rice export value increased 16-17 percent while the volume has stayed the same. ST24 rice fetched up to 970-1,000 USD per ton when shipped to the EU.
With many free trade agreements having been signed, different types of high-quality Vietnamese rice have been shipped to the EU, the RoK, the Middle East, and regional countries such as Malaysia.
Jasmine and glutinous rice cultivation has increased since 2014, with prices rising in the Mekong Delta. In particular, demand for the IR50404 rice variety has grown due to high productivity and less pestilence./.
Banks boost fundraising through bonds
A number of banks have increased bond issuance to attract mid-term and long-term capital, leading to changes in capital mobilisation in the corporate bond market in the second quarter.
Bond issuance of the real estate sector led the bond market in the first quarter of 2021 with a value of nearly 15.6 billion VND (679.6 million USD), but this sector fell into second place at the beginning of the second quarter.
The market bulletin compiled by the Vietnam Bond Market Association (VBMA) showed that from early April to May 4, the total value of bond issuance of real estate companies reached more than 10.94 trillion VND (476.9 million USD). Meanwhile, total bond issuance of the banking sector was worth 15.2 trillion VND (662.2 million USD), surpassing the real estate sector.
The order continued in May when the total value of bonds issued by banks reached 15.7 trillion VND (638.8 million USD), accounting for 73 percent of the total bond issuance, while bond issuance from the real estate sector was worth 3.62 trillion VND (157.8 million USD), accounting for 17 percent. The data was published by Fiingroup, a company that provides financial and business information services.
Recently, VietinBank (CTG) issued 8-year bonds with a value of 1.5 trillion VND (65.4 million USD) and 15-year bonds worth 85 billion VND (3.7 million USD) with interest rates ranging 6.5 - 6.7 percent per year.
Asia Commercial Bank (ACB) also just announced the issuance of 2 trillion VND (87.2 million USD) of 3-year bonds to two domestic securities companies with an interest rate of 4 percent/year.
In May, VPBank (VPB) also issued bonds three times, including an issuance of 500 billion VND (21.8 million USD) of 3-year bonds.
Previously, VPBank also raised 4 trillion VND (174.4 million USD) by issuing 3-year bonds in late April.
“Bonds are now a hot asset in the financial market, attracting many individual and institutional investors because its deposit interest rates are higher than that of savings,” Dr. Nguyen Tri Hieu, senior financial expert, told Bnews.
Bonds issued by banks are assessed to be the safest assets because of their high liquidity. In addition, banks operate under the strict supervision of the State Bank of Vietnam (SBV).
Meanwhile, for bonds issued by real estate companies, although the interest rates are 3 - 4 times higher, it will be difficult for investors to control how these bond issuers spend the money.
Thus, Dr Hieu advised investors to be careful with high-interest bonds because the higher the rate of return, the more risks there will be. And investors need to learn carefully about the financial situation of the businesses and the liquidity of the products.
In the second quarter of 2021, experts from SSI Securities Corporation (SSI) said that SBV’s strict control of credit in potentially risky fields such as real estate and securities will increase demand for capital mobilisation through the bond channel of real estate businesses, especially those with limited collateral for loans.
Interest rates of real estate bonds, therefore, may increase and be more attractive than other bonds. But SSI also warned investors to be cautious because the real estate market is quite hot, the number of unsecured bonds or backed by stocks is also rising, which will increase risks for investors.
On the other hand, experts forecast that demand for issuing bonds of commercial banks in 2021 will be higher, especially bonds to increase capital to help banks supplement tier 2 capital (supplementary capital), increase the proportion of medium and long-term capital and improve the capital adequacy ratio (CAR).
Hence, bond interest rates issued by commercial banks are also expected to slightly increase in the second half of 2021 when the competition on deposit interest rates among banks increases to ensure credit growth./.
Import-export activities likely to be vibrant over remainder of 2021: Expert
Bright prospects are likely to be seen in foreign trade over the rest of this year thanks to the effective and comprehensive implementation of free trade agreements (FTAs) and rising prices for strong export products of Vietnam, according to Deputy Director of the Ministry of Industry and Trade (MoIT)'s Agency for Foreign Trade Tran Thanh Hai.
Hai noted that demand in the global market has been recovering along with the gradual easing of lockdown measures in the US and Europe, which presents an opportunity for Vietnam to promote its exports.
However, he advised exporters to bolster their competitiveness and adaptive capacity in order to overcome the difficulties posed by the ongoing fourth COVID-19 outbreak in Vietnam, while actively adjusting their business strategy to seize opportunities in the new circumstances.
He asked MoIT agencies and Vietnamese Trade Offices abroad to provide up-to-date information on the COVID-19 situation in their host countries and propose measures to expand export markets, while supporting Vietnamese firms seeking input sources for production.
He said the MoIT is working with the Ministry of Transport and the Vietnam Logistics Business Association as well as shipping firms to provide consultancy to exporters on dealing with logistics issues.
In the first five months of 2021, despite the impact of COVID-19 on industrial parks in the northern industrial hubs of Bac Giang and Bac Ninh, Vietnam still posted a year-on-year increase of 30.7 percent in export revenue, to 130.94 billion USD.
Of this, the domestic sector contributed 33.06 billion USD and the FDI sector (including crude oil) 97.88 billion USD, increases of 16.6 and 36.3 percent year-on-year, respectively.
During the period, 22 products recorded export value of over 1 billion USD each and together accounted for 87.3 percent of Vietnam’s total exports.
Exports by the group of heavy industrial goods and minerals reeled in some 70.7 billion USD, up 33 percent against the same period last year. It was followed by the groups of light industrial goods and handicrafts, at 47.32 billion USD (up 33 percent), and agricultural and forestry products, at 9.69 billion USD (up 13.5 percent). The group of aquatic products posted 3.24 billion in export revenue, an annual increase of 12 percent.
The US remained Vietnam’s largest export market, outlaying 37.6 billion USD on imports from the country, a year-on-year rise of 49.8 percent. China followed with 20.1 billion USD, up 26 percent, then the EU and ASEAN, with 16.1 billion USD and 11.5 billion USD, increases of 20.8 and 23.7 percent, respectively.
In May alone, Vietnam’s exports were valued at 26 billion USD, down 2.1 percent against April but up 35.6 percent year-on-year.
Meanwhile, the country’s imports in the five-month period hit 131.31 billion USD, for annual growth of 36.4 percent, with China the country’s largest source market./.
Bac Giang lychee safe from COVID-19
As the latest outbreak of COVID-19 continues to make its presence felt in Bac Giang province, local lychee growers are focusing on protecting their crop. A host of measures have been adopted to ensure their lychees are safe from the disease.
Never before has the quality of the lychees grown in the orchard of Ngo Van Cuong’s family in Phuc Hoa commune, Tan Yen district in Bac Giang province been as good as this year. For nearly a month, the orchard, which meets GlobalGAP standards, has ended the spraying of pesticides and replaced them with microbial products.
Tan Yen district has more than 1,300 hectares of lychees with an estimated output of 14,000 tonnes. It expanded the planting area under GlobalGAP standards this year. In order to establish a COVID-19-free lychee growing area, seven control stations have been set up and strict measures taken to ensure the fruit is free from disease.
Nearly 100 tonnes of lychee for export have been ordered. The first batch of lychees from Tan Yen district has already been exported to Japan./.
PetroVietnam’s five-month pre-tax profit triples
The Vietnam Oil and Gas Group (PetroVietnam) posted 144.9 trillion VND (6.31 billion USD) in pre-tax profit during January-May, 2.3 times higher than the targeted number set for the period and tripling that of 2020.
At an online meeting on June 7, PetroVietnam General Director Le Manh Hung said in May and over the first five months, the group recorded positive outcomes in almost all fields following its plans and goals.
Oil exploitation output was a highlight, with the volume exceeding the target by 18 percent in May, resulting in good growth in financial indexes for the five-month period.
PetroVietnam reeled in 222.3 trillion VND in revenue, 14 percent higher than the target and increasing 16 percent against the same period last year. The group contributed 32.4 trillion VND to the State budget, exceeding the plan by 23 percent and up 20 percent on-year.
All member units maintained stable production and business activities, with their inventories put under control, according to Hung.
Amid the complicated developments of COVID-19, the outcomes were attributable to the group’s prompt implementation of specific measures and update on pandemic prevention measures.
PetroVietnam and its member companies have to date donated 480 billion VND for the nation’s fight against the epidemic./.
Vietnamese lychees head for EU markets
The first batch of Hai Duong province’s Thanh Ha “thieu” lychees left Noi Bai International Airport in Hanoi on June 7 for the European Union (EU).
The export was conducted under the EU-Vietnam Free Trade Agreement (EVFTA). The fruit is scheduled to be available in the Czech Republic in a couple of days.
Next week, a batch of Bac Giang province’s Luc Ngan “thieu” lychees is expected to be shipped to the 27-member bloc.
Vu Ba Phu, Director of the Trade Promotion Agency under the Ministry of Industry and Trade said that despite the impact of the COVID-19 pandemic, the ministry has cooperated with the Ministry of Agriculture and Rural Development in implementing many synchronous solutions from the 2021 crop year to find consumption markets, especially export markets.
Currently, tens of tonnes of lychees from Hai Duong and Bac Giang provinces are available on shelves at supermarket chains in Japan and Singapore and in EU countries in the next few days./.
Vietnam-Thailand trade ties flourishing despite COVID-19: Thai Deputy PM
Thai Deputy Prime Minister and Minister of Commerce Jurin Laksanawisit has affirmed that economic, trade and investment cooperation between Thailand and Vietnam is flourishing with bilateral trade in the first four months of 2021 increasing by 20 percent year-on-year despite the COVID-19 pandemic.
Jurin made the statement at a reception on June 7 for newly-appointed Vietnamese Ambassador to Thailand Phan Chi Thanh, during which the Thai Deputy PM affirmed his desire to further expand the bilateral relations.
He highly valued the traditional friendship and strategic partnership between the two countries. Vietnam and Thailand are celebrating the 45th anniversary of diplomatic ties in this year.
He suggested the two sides closely coordinate to resolve technical issues relating to import and export between the two countries, towards lifting the two-way trade to 25 billion USD by 2025.
Jurin agreed to promote the early organisation of the Vietnam - Thailand Joint Trade Committee co-chaired by the two countries’ trade ministers.
For his part, Ambassador Thanh affirmed that he will coordinate with Thai agencies to further promote the Vietnam - Thailand Strategic Partnership.
He highlighted fruitful development of the relations between the two sides in all fields, especially in trade and investment, saying that Thai investors have trusted to choose Vietnam as a long-term investment destination.
Thanh affirmed that the Vietnamese Embassy in Thailand will work closely with ministries and sectors of both sides to create favourable conditions for Thai investors to do business in Vietnam./.
Kien Giang’s industrial production value rises over 7 percent in five months
The industrial production value of the Mekong Delta province of Kien Giang reached over 20.4 trillion VND in the last five months, up 7.4 percent from the same period last year.
According to the provincial Department of Industry and Trade, sectors seeing stable growth in are beer, shoes and leather, ready-to-wear clothes, frozen shrimp, canned fish, cement, commercial electricity, and unburnt bricks.
Notably, the province's export turnover in January-May totalled about 317 million USD, up nearly 16 percent year-on-year. It has helped revitalise other industries of the locality.
In the reviewed period, 625 new businesses were established, up 28 percent compared to the same period last year.
The department said that the complicated developments of the COVID-19 pandemic has adversely affected production and business activities of local enterprises.
It has taken a series of comprehensive solutions to complete the dual goal of COVID-19 containment and economic development, especially in industrial parks.
Many businesses have had appropriate business solutions to adapt to the pandemic situation and promptly implement supply contracts, it noted.
The local industry and trade sector has kept close watch on the developments of the pandemic, thus outlining measures to remove difficulties facing local businesses and guiding them to build scenarios to respond to the pandemic.
The local authorities have paid attention to promoting administrative reform to facilitate investors’ operation, while accelerating the construction of essential infrastructure facilities in industrial parks and cluster in order to call for more investment into the province./.
Australia: Vietnamese pipes, tubes neither dumped nor subsidised
There is no evidence that Vietnam has exported dumped or subsidised precision pipes and tubes to Australia, according to the Ministry of Industry and Trade’s Trade Remedies Authority of Vietnam (TRAV).
There appears to be insufficient grounds for the publication of a dumping duty notice and a countervailing duty notice in respect of precision pipes and tubes exported from Vietnam, TRAV quoted the Australian Anti-Dumping Commission (ADC) as saying in its newly-released Preliminary Affirmative Determination, following a probe into such products from Vietnam, Taiwan (China), China, and the Republic of Korea.
The ADC found no evidence of significantly different prices for raw materials in Vietnam compared to other Asian countries nor official Government plans to control or otherwise influence Vietnam’s steel industry.
The ADC said it is also unaware of any intervention by the Vietnamese Government in terms of affecting the normal value of the product.
There exists no evidence of a continuing impact from the Steel Master Plans, developed by the Vietnamese Government, as these plans have been invalid since 2019.
Recommendations will be sent by the ADC to Australia’s Minister for Industry, Science and Technology for final determination.
According to statistics compiled by the General Department of Vietnam Customs, the export turnover of Vietnamese precision steel pipes to Australia in 2019 reached more than 15 million USD./.
Hoa Phat steel sales up despite higher raw material prices
Vietnam’s largest steelmaker, the Hoa Phat Group, sold a total of 3.7 million tonnes of steel products in the first five months of this year, up nearly 70 percent against the same period last year.
The sale of construction steel hit 1.6 million tonnes, an increase of 27.5 percent, while that of square steel billet reach 576,000 tonnes, more or less the same year-on-year.
Hoa Phat also produced nearly 3.4 million tonnes of pig iron in the first five months, surging 56.5 percent year-on-year.
It produced 1.1 million tonnes of hot rolled coil (HRC) for the domestic market, along with 334,000 tonnes of steel pipe and 123,000 tonnes of coated steel sheet, posting year-on-year rises of 21 percent and 270 percent, respectively.
Despite a rise in material prices in May, the sale of Hoa Phat’s construction steel in the central region saw the highest growth in the country, of 45 percent, while in the northern region the growth hit 22 percent.
It sold 695,000 tonnes of steel products during the month, comprising 324,000 tonnes of construction steel, up 25 percent, and 225,000 tonnes of HRC.
The steelmaker shipped 70,000 tonnes of construction steel and 52,000 tonnes of billet abroad in the period.
Hoa Phat currently boasts a production capacity of 8 million tonnes annually. This year, it aims to produce 5 million tonnes of construction steel and billet, 2.7 million tonnes of HRC, 920,000 tonnes of pipe, and more than 300,000 tonnes of coated steel sheet./.
Pangasius exports rebound on rising global demand
Vietnam’s pangasius exports has got back on track on the recovery of many economies following their successful control of the COVID-19 pandemic, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).
The US has continuously increased its pangasius imports from Vietnam. (Illustrative image)
By the end of May 2021, pangasius exports reached over US$600 million, an increase of more than 10% compared to the same period in 2020, the VASEP reports.
All major pangasius consumers such as China. China, the United States, Brazil and Thailand increased their import from Vietnam, says the association.
Data from the VASEP show Vietnam’s pangasius exports to Brazil and Thailand rose 38.7% and 8.5% to US$27 million and US$26 million respectively over the same period last year.
Meanwhile, the US consumed more than US$35 million worth of pangasius imports from Vietnam in May alone, up 120% against May 2020. The world’s largest market increased the import of frozen pangasius fillets due to a sharp fall in the output of locally raised catfish.
The five-month export value of the pangasius to Hong Kong (China) also hit US$146 million, accounting for nearly one fourth of Vietnam’s total export value of the product, and making it the country’s largest pangasius consumer.
VASEP General Secretary Truong Dinh Hoe forecast pangasius exports are expected to enjoy impressive growth in the coming months thanks to successful COVID-19 containment in foreign countries.
Enterprises donate to help battle the pandemic
Many enterprises have donated large sums of money to the national COVID-19 vaccine fund following Prime Minister Pham Minh Chinh’s appeal to all citizens, local and foreign businesses and organisations to contribute. They have also provided great support to localities in combating the pandemic. Masan Group Corporation donated VND60 billion (US$2.6 million) at the event to mark the debut of the fund in Ha Noi on Saturday.
A representative of Masan Group said that through this contribution, Masan wants to help the Government repel the pandemic.
In addition to contributing VND60 billion to the COVID-19 vaccine fund, the group and its member companies have donated hundreds of thousands of essential products worth nearly VND10 billion ($434,531) to support frontline teams in the COVID-19 fight, quarantine areas and hospitals.
Also at the event, Sacombank donated VND10 billion to the Government's efforts to purchase vaccines.
In addition, the bank has set aside another VND10 billion through its branches to support organisations such as the Fatherland Front Committee, Department of Health, Labour Confederation, and Red Cross Society in provinces and cities across the country in the prevention and control of the COVID-19 pandemic.
Sacombank and its staff have so far donated nearly VND32.5 billion ($1.4 million) for the prevention and control of the pandemic of the central and local governments, and support the medical teams on the frontlines.
Prudential Vietnam Assurance Private Limited contributed VND5 billion to the fund and registered to buy vaccines for its employees and their families.
This activity is Prudential's effort to contribute to the Government in the prevention and control of the COVID-19 pandemic, helping life return to normal soon, protecting people's health and continuing socio-economic development.
On Saturday, Prudential collaborated with the Vietnam Red Cross Society to donate 2,345 level 2 prevention outfits to teams working at frontline hospitals and isolation areas in Bac Giang Province, one of the localities hardest hit by the fourth wave of COVID-19.
Many other companies donated to the fund, including Long Thanh Golf Investment and Trading Joint Stock Company, Viettel, Vingroup, Novaland, Sovico Group, HDBank, Vietcombank, BIM Group and others.
Prime Minister Pham Minh Chinh said the fund was established to mobilise social resources for the purchase and import of vaccines as well as for research, development and production of domestic vaccines.
Though Viet Nam has been one of the most successful countries in the world at containing the COVID-19 pandemic as evidenced by low infection and death rates, the pandemic is still evolving with new strains first found in India and the UK behind the recent surge of domestic cases in Viet Nam.
In order to return life to normal, the Party and State set the goal to administer free vaccines to all people to soon achieve herd immunity, considering it a fundamental, long-term, strategic and decisive solution to get rid of the pandemic, he said.
As of 8pm on June 5, the fund, which was approved by the Government on May 26, has received VND1.036 trillion ($45 million). Several major companies have pledged around VND6.6 trillion ($285 million), Finance Minister Ho Duc Phoc said.
He said Viet Nam aims to secure 150 million doses of vaccines to immunise 75 million of its population this year, and the cost is estimated at VND25.2 trillion. The government is expected to provide VND16 trillion and localities nationwide as well as private sources will make up the rest.
To Thi Bich Chau, chairwoman of the HCM City Vietnam Fatherland Front Committee, said the committee has received nearly VND2.2 trillion donated by businesses and citizens in the city to support the national COVID-19 vaccine fund and buy vaccines for the city.
The committee transferred VND500 billion to the fund. The committee is waiting for instructions from authorities to buy and vaccinate people in the city as soon as possible and share with other localities.
So far, over 1.2 million people have been vaccinated, mainly frontline workers in the COVID-19 fight. Of these, more than 33,000 have received the prescribed two doses.
Foreign investors seek PPP guarantees to incite interest
While new public-private partnership ventures and new legislation are in the gun barrel waiting for potential investors to join, possible concerns over risk protection are still in the way, possibly threatening the bankability of the country’s future transport plans.
Hanoi and the northern provinces of Hung Yen, Bac Ninh, Vinh Phuc, and Bac Giang are now waiting for the nod from the prime minister to develop a $5.9 billion road project, besides a sum of VND25 trillion ($1.1 billion) for site clearance.
The Belt Road No.4 project, thus enabling preparations for development, including calling for private investors to join public-private partnership (PPP) sections.
Experts said that private and foreign investors are interested in transport infrastructure, including beltways in Vietnam, where infrastructure covers more than roads and railways. However, investors are still concerned about some of the new regulations in Decree No.35/2021/ND-CP dated March 29, guiding the Law on Public-Private Partnership Investment that might affect their interests in PPP ventures.
Tony Foster, managing partner of the Vietnam offices at Freshfields Bruckhaus Deringer LLP told VIR, “The levels of foreign investor interest in PPPs will depend on the protections available. This is not because foreign investors do not take risks but because lenders do not. The lenders could push risks back onto the investors but when the size of the project is too large for the investor to take such risk, the PPP will not be completed.”
However, as shown in Decree 35, it does not assist much in this allocation of risk and hence does not assist much in making PPPs more likely to be successfully project financed. One of the main risks that lenders are cautious of is termination risk. If a project ends and it is not as a result of a breach by the developer, lenders want the outstanding amount paid to them by the government. Nonetheless, Decree 35 does not state such a principle, or any lesser variation of it.
“Unless there is a clear policy on minimum protections, it is unlikely to be achieved in practice, at least in the immediate future. Developers may not even spend the time and money required to test whether it is possible to negotiate the required protection,” Foster explained.
Worse still, Decree 35 also fails to provide any protection to a developer against a change in law. Such a change can put up the costs for a PPP venture, even if the revenue is fixed. This reduces the amount that can be paid back to lenders or that can be retained as profits.
One lawyer told VIR that the PPP law does have some revenue risk protection in that if revenues from a project falls below 75 per cent of the agreed projections, the state will pay 50 per cent of the difference between actual revenue and 75 per cent of the amount agreed, subject to various conditions. But this alone may not be sufficient enough for overseas lenders in large projects.
Some of these investors have expressed interest in the eastern cluster of the North-South Expressway project, which was earlier planned to be split into 11 sub-projects with eight being PPPs. However, this interest went nowhere – indeed, there were no domestic takers for five of the eight sections. Of the three remaining, the first contract for the Nha Trang-Cam Lan section was signed recently with the Ministry of Transport (MoT). The state has to fund the other eight sub-projects.
Meanwhile it is unlikely that there will be significant foreign interest in railways, which have proven difficult for the PPP model in many parts of the world.
Vietnam is planning to develop a number of transport infrastructure in the future. The more concerns are solved; the more investors the country attracts to achieve their goals. By 2025, the country aims to complete the North-South Expressway’s eastern cluster. And by 2030, the country strives to have around 5,000km of expressways while also developing Long Thanh International Airport and expanding Noi Bai International Airport.
Vietnam will also invest in seaports to improve their capacity.
In the Mekong Delta, furthermore, the MoT is making preparations for development of nearly 40 new projects on roads, maritime, inland waterways, and aviation with the total investment capital of $5.14 billion, of which $4.29 billion is needed for the 2021-2025 period.
Belt Road No.4 gets new lease of life with fresh projects
A billion-dollar interprovincial road initiated by Hanoi and its three neighbouring provinces, if approved, may create numerous opportunities for private investors, with the build-operate-transfer format expected to be used.
Le Thanh Quan, director general of the Ministry of Planning and Investment’s (MPI) Department of Infrastructure and Urban Development, told VIR that the Belt Road No.4 project is expected to be the highlight of attracting investment into transport infrastructure in the north, especially after the approval of the Law on Public-Private Partnership Investment and its guideline documents, which are considered a good measure in terms of mobilising investment.
“Although the Ministry of Transport (MoT) has yet to release official information on each component project, I believe that this will be good chance for local and foreign investors to contribute to the socioeconomic development of the country, especially cities and provinces such as Hanoi, Bac Ninh, Hung Yen, and Bac Giang,” Quan added.
After calculating the central and local budgets, along with the effectiveness and return on investment of components, the MPI in collaboration with other ministries will comment on the solutions of capital allocation and mobilisation to the government and call from investment from the private sector into the project.
“Amidst a lot of difficulties like the pandemic, calling for investment is challenging, but it is quite necessary for infrastructure development. The project will be tendered in accordance with the Law on Public Investment and create numerous opportunities for the private sector,” Quan said.
Nearly two weeks ago, the leaders of the MoT and people’s committees of Hanoi, Bac Ninh, Hung Yen, and Bac Giang agreed to develop the Belt Road No.4 and submitted the plan to the prime minister. The total investment for the project is estimated at VND135 trillion ($5.9 billion), in addition to the costs for land clearance at VND25 trillion ($1.1 billion).
The central budget is requested for land clearance in Hanoi, Hung Yen, Bac Ninh, and Bac Giang, while the local budget of localities is asked for the total amount of VND50 trillion ($2.2 billion) for building the road. The remainder will come from the private sector.
Hanoi is proposed to be the focal point to implement procedures for selecting potential investors with enough experience and financial capacity. The elevated highway project is meant to be fulfilled under the build-operate-transfer (BOT) model for the whole road.
“If the government approves the proposal, the project will be included in the capital plan for the 2021-2025 period,” said Duong Duc Tuan, Vice Chairman of Hanoi People’s Committee.
As the total investment amount is high, Hanoi proposed to develop the project within a public-private partnership (PPP) model under a BOT contract. One year ago, Hanoi was considering three documents proposed to develop the Belt Road No.4 in the PPP form. Of this, T&T Group asked to construct the part connecting Noi Bai, Lao Cai, the National Highway No.32, and Phap Van-Cau Gie Expressway with a length of 34km and the total investment of VND16.28 trillion ($708.7 million) in the form of a build-transfer contract.
The venture of Phuong Thanh Tranconsin and Nguyen Minh IDJ requested to build the part from Phap Van-Cau Gie Expressway to Hanoi-Haiphong Expressway with a length of 13.9km and total investment standing at VND9.8 trillion ($426 million) in the form of a BOT contract.
Hoanh Son Group also offered to develop the part connecting Hong Ha Bridge, Van Khe commune (in Me Linh district), and Hong Ha commune (in Dan Phuong district) with the total investment of VND9.88 trillion ($429.4 million).
The participation of the private sector in infrastructure projects such as the above seems unavoidable. In addition to the Belt Road No.4 in Hanoi, the Belt Road No.3 surrounding Ho Chi Minh City has been conceptualised and is welcoming foreign investors to join phase 1 connecting Tan Van in Ho Chi Minh City’s District 9 and Nhon Trach in the southern province of Dong Nai.
Previously, the Belt Road No.3 project in Hanoi was developed by Samwhan-CIENCO 4 for the Mai Dich-Trung Hoa section; Sumitomo Mitsui Construction for Trung Hoa-Thanh Xuan; and the joint venture from Thang Long Group, CIENCO 8, and CIENCO 4 for Thanh Xuan-Linh Dam Lake.
The Belt Road No.2 in the capital was developed by local investors like Trung Nam E&C-Trung Chinh venture and Vingroup.
According to the Capital Transport Planning Project and the decision on approving the road that the prime minister had already signed, the Belt Road No.4 will be located at the south section of the National Highway No.18, starting at Noi Bai-Lao Cai Expressway in Hanoi’s Soc Son district and ending at Noi Bai-Halong Expressway in Bac Ninh city’s Nam Son commune. The length of the entire road is estimated at 98km across three cities and provinces, and the width of the roadbed cross section is 120m with six lanes.
Ten years ago, the total investment of the project was estimated at VND66.5 trillion ($2.9 billion) in Decision No.1287/QD-TTg approving the detailed master plan on the Belt Road No.4 of Hanoi, for which the Ministry of Transport was appointed to be the investor to develop the project by 2020. Difficulties in mobilising capital has delayed the project thus far.
Drawing up plans to buttress recovery
The ongoing fight against the COVID-19 pandemic has led to huge demands for capital for Vietnam to support local production. The country is cementing cooperation with the international community to fuel its efforts, amid expectation of a continued deficit in the state budget.
For over a year now, the government has been deploying drastic measures to support businesses as the world struggled to get to grips with the coronavirus pandemic. The State Bank of Vietnam has deployed assistance worth VND180 trillion ($7.82 billion) for enterprises and households, in the form of debt payment deferral and preferential loans.
On April 19 this year, the government signed and issued Decree No.52/2021/ND-CP on extension of time limits for payment of VAT, enterprise income tax, personal income tax, and land rental in 2021. The total size of the package was estimated at VND115 trillion ($5 billion). The World Bank said if implemented well, this fresh policy could help businesses and households maintain their economic activities, particularly in tourism, which remains at a near standstill.
However, according to experts, such financial solutions are “never sufficient” because COVID-19 will continue causing incalculable damage to the economy, forcing the government to devise inclusive measures.
“There has not been sufficient fiscal support from the government. The support was mainly in the form of deferral of taxes and land rental, and the size of the support remained modest,” Andrew Jeffries, country director for Vietnam of the Asian Development Bank (ADB), told VIR. “For some businesses that were heavily affected by COVID-19 with revenue deterioration and no profit, deferral of VAT and corporate income tax have less impacts than the tax cuts.”
Consequences caused by COVID-19 have forced the country to pour a great deal of money into both eradicating the pandemic and spurring on economic recovery, especially given the limited state budget.
A number of high-profile international organisations have proposed support for the country to reach this target. Immediately after COVID-19 broke out in early 2020, the World Bank Group shared a series of five policy notes with Vietnamese policymakers, especially the prime minister.
A World Bank source told VIR that best practices were shared with the government to shape its policy response, from health crisis management to stimulating the recovery of the economy and taking advantage of long-term opportunities emerging from COVID-19.
The first note proposed an early assessment of the pandemic on the economy, while the second developed a comprehensive strategy to cope with the crisis over time. The third focused on the fiscal package announced by the government in April 2020, with the ambition to alleviate the financial burden of the crisis on the most vulnerable businesses and people.
The fourth and fifth notes included suggestions on how to jumpstart the economy in the post-pandemic period, and offered concrete ideas on how to take advantage to reshape the economy in the longer term, through the adoption of “no-regret” policies.
A number of recommendations were taken into consideration by the government including the adoption of safety nets to protect the most affected businesses and people, the speeding up of the digitisation process by firms and government agencies, and the acceleration of the public investment programme that was viewed as the main instrument to jumpstart the economic recovery, leading to a positive GDP growth rate of 2.91 per cent in 2020, according to the World Bank.
On the financing front, in April last year, the World Bank Group announced a set of emergency support operations for developing countries around the world, using a dedicated, fast-track facility for COVID-19 response, and has set aside $160 billion to support related measures to help countries respond to immediate health consequences of the pandemic and bolster economic recovery.
“As part of this package, an envelope of $12 billion was earmarked for purchase and distribution of vaccines, in addition to regular financing to activities such as research and production of vaccines. Vietnam was eligible for $50 million from this source,” said the World Bank source.
Meanwhile, the ADB has also been offering Vietnam its financial packages. “The ADB stands ready to disburse about $400-500 million for loans already signed between it and the country,” a source from the ADB in Vietnam told VIR. “In the time to come, it is expected that the bank will offer Vietnam another package worth about $500 million. However, the bank’s board of management has yet to approve this package, and the Vietnamese side has also yet to show its interest in it.”
Official negotiation about this package has not been conducted yet, and the bank will continue working with Vietnam about the package.
In March 2020, the ADB announced an initial $6.5 billion package to address the immediate needs of its developing member countries as they respond to the pandemic. It is now proposing to expand its response by making available additional regular ordinary capital resources up to $13 billion to finance countercyclical expenditures and allocate additional grant and technical resources, increasing the total scale of the response package to about $20 billion.
Along with the World Bank and the ADB, the International Monetary Fund (IMF) is also providing financial assistance and debt service relief to its member countries facing the economic impact of the pandemic. So far, the IMF has provided financial assistance to 85 countries amounting to approximately $110 billion. For Vietnam, it has continued to provide policy advice and technical assistance.
Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, also told VIR, “I think the government has enough money to fight the pandemic. Many private companies will help pay for vaccines if the government can move forward quickly and get proven vaccines to the people.”
According to the Ministry of Finance, the economy enjoyed a $3.52 billion surplus in the state budget in the first four months of this year. Last year, the nation suffered from a total state budget deficit of $11.87 billion.
This was due to the ongoing pandemic causing a decline in businesses’ performance, making it difficult for them to contribute to the state coffers, and because of the government’s application of policies on supporting healthcare, production, and social security.
Policies on deferred tax payments and directly supporting businesses and the public have also mounted to tens of billions of US dollars.
Last November, the National Assembly (NA) adopted a resolution on budget estimation for 2021. In which, total state budget revenue and total state budget spending will be over $58.4 billion and $73.34 billion, respectively. Total state budget deficit will be $14.94 billion, accounting for 4 per cent of GDP.
Experts said if Vietnam has more policies to assist enterprises and the public, there will be a big dent in the state budget as the country would need tens of billions of US dollars for its fight against COVID-19 and supporting enterprises.
Thus, if Vietnam borrows more international loans, the country’s efforts to control public debt will be affected.
The government recently sent a report on the national budget to the NA, stating that as of late 2020, the economy’s public debt was equivalent to 55.3 per cent of GDP, in which foreign debt held 47.3 per cent of GDP.
The government’s debt decreased from 52.7 per cent of GDP in 2016 to 49.6 per cent of GDP by late last year, creating a bigger room for fiscal policy.
“A lower debt level will require more fiscal consolidation. Looking ahead, Vietnam will need to create more fiscal space for infrastructure development, large demand for healthcare and education, climate change mitigation and adaptation, and demographic challenges,” said the ADB source.
In the context of tariff reduction from Vietnam’s commitments within various free trade agreements and the decrease of revenue from oil which may affect the government’s revenue, official development assistance and concessional lending therefore remain critical financing sources for Vietnam to maintain the strong growth momentum, the source continued, which in turn provides more opportunities to reduce public debt and improve the quality of fiscal consolidation which would not have been carried out otherwise.
Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes
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