VIETNAM BUSINESS NEWS MARCH 11
EVFTA pushes up Vietnam’s exports to Sweden
|Vietnamese rice has many opportunities to enter the Swedish market. - Illustrative image (Photo: VNA)|
Hanoi (VNA) - The EU-Vietnam Free Trade Agreement (EVFTA) has clearly helped promote trade between Vietnam and Sweden, with Vietnam’s export turnover to the country in January surging 99.94 percent year-on-year, according to the Vietnamese Trade Office in Sweden.
With a technology-based knowledge economy and a comprehensive social welfare system, Sweden is one of the nations with the highest living standards in the world, the office said.
Its strengths in innovation, creativity, and high-technology have helped it export key products to Vietnam such machinery and spare parts for industry and telecommunications products.
Meanwhile, it imports agricultural products, footwear, textiles, and wooden products from Vietnam. Notably, Vietnamese rice has many opportunities to enter the Swedish market, the office noted.
Figures from the General Department of Vietnam Customs show that two-way trade hit about 160.89 million USD in January, of which Vietnam’s exports to Sweden were worth 132 million USD, up 99.94 percent over January last year.
According to Vietnamese Ambassador to Sweden Phan Dang Duong, the EU market and Sweden in particular have high demand for tropical and processed agricultural products.
Vietnam holds great potential to expand its exports to Northern Europe, he said.
The EVFTA, which took effect from August 1, 2020, gradually removes barriers and opens the door to Vietnamese goods all over Europe.
Duong said Vietnamese enterprises have quickly taken advantage of preferential tariffs to export agricultural products to the bloc in general and Sweden in particular.
Vietnamese rice has been gradually dominating the market, with export turnover rising nearly 10-fold to over 1 million USD from 100,000 USD in previous years.
Other key products of Vietnam, such as furniture, frozen tropical fruits, coconut milk, frozen vegetables, and textiles and footwear, also hold great prospects in Sweden.
In the opening days of 2020, when the COVID-19 outbreak began and quickly spread around Northern Europe, the Vietnamese Trade Office in Sweden and Northern Europe paid particular attention to strengthening trade promotion activities and supporting Vietnamese exporters.
It developed online trade promotion support tools and a database of over 3,000 Northern European companies. It also published seven e-books in Vietnamese with market information on Northern Europe and two English e-books on Vietnam’s fruits and vegetables and seafood products.
Representatives from the office also attended online seminars and fairs, to promote links between Vietnamese exporters and partners in Northern Europe.
Such measures proved effective, helping Vietnamese businesses access customers while helping Northern European businesses understand more about the EVFTA and the benefits it brings when importing goods from Vietnam./.
Finance minister rules out proposal to rise minimum trading lot to 1,000 shares
The finance ministry plans to adopt the current software system on the Hanoi Stock Exchange for the Ho Chi Minh City Stock Exchange to address the overload, saying the process would take up to four months to complete.
Vietnam’s stock market in short-term would not raise the minimum trading lot from 100 to 1,000 shares.
Minister of Finance Dinh Tien Dung made the statement in a meeting with Vietnam’s leading technology group FPT on March 9, discussing solutions to address the overload of orders that led to interruption of trading in the market.
“Public firms, however, are encouraged to move their stocks from Ho Chi Minh City Stock Exchange (HOSE) to Hanoi Stock Exchange (HNX) to ease the overload issue on the former and ensure the safety for the entire system,” said Dung.
The Vietnam Association of Securities Businesses (VASB) previously expressed concern over the prospect of raising the minimum trading lot as this would limit the participation of small investors, while the vision for stock market is to ensure fairness and equality.
As concern over the issue is mounting and causing frustration among investors, Minister Dung has instructed the establishment of a taskforce led by Deputy Minister Huynh Quang Hai with the objective of resolving the issue substantially.
At the meeting with FPT, Dung asked for greater urgency in dealing with the issue, requiring both short-term and long-term solutions.
Both the Ministry of Finance (MoF) and FPT shared a view that it is feasible to adopt the current software system on the HNX for HOSE, as it takes up to four months to complete and effectively end the current overload issue.
Dung requested stock market authorities to cooperate with FPT in speeding up the process, expecting no disruption to the market and investors activities during the period.
FPT Chairman Truong Gia Binh expressed his commitment in working with the MoF to resolve the issue in a shortest time possible.
During the event “Dialogue 2045” on March 6 between government leaders and the business community, Binh and other business leaders suggested Prime Minister Nguyen Xuan Phuc should allow private firms to address the overload issue on HOSE without using funding from the state budget.
Khanh Hoa targets 5 million visitors in 2021
The south central coastal province of Khanh Hoa aims to receive 5 million tourists in 2021, including 1.5 million foreigners, and earn 17.5 trillion VND (760.45 million USD) from tourism, heard a meeting held by the provincial People’s Committee with representatives of more than 150 travel firms on March 10.
According to provincial leaders, Khanh Hoa will focus on exploiting the domestic and foreign markets, targeting foreign labourers, experts and diplomats residing in Vietnam.
The locality will increase communications on a “safe Vietnam,” thus introducing the safe and friendly destination of Khanh Hoa.
Alongside, the locality will design tourism stimulus programmes and organise tourism promotion events in some countries such as Russia, the Republic of Korea and China, and optimise the direct air routes to the Cam Ranh International Airport when COVID-19 is basically brought under control in the world.
Addressing the event, Pham Minh Nhut, Vice President of the Nha Trang-Khanh Hoa Tourism Association, travel firms should coordinate with accommodation facilities, tourism sites as well as transport firms to maintain and recover tourism product supply chains.
Meanwhile, Doan Hai Quan, Director of the Nha Trang branch of Vietravel, said that along with the formed connections with a number of localities such as Lam Dong and Dak Lak, Khanh Hoa should expand tourism linkages with localities in the south central coastal, southwestern and Central Highlands regions, thus diversifying tourism products to lure more visitors.
Nguyen Thu Phuong, Sales Director of Vinpearl, said that the firm has prepared for the launching of a new tourism product in Hon Tre island, aiming to attract foreign tourists to Khanh Hoa.
At the meeting, Le Huu Hoang, Vice Chairman of the provincial People’s Committee, lauded efforts made by tourism firms amid difficulties in 2020 due to impacts of COVID-19.
He asked local relevant agencies and travel firms to continue implementing COVID-19 prevention and control measures during their operations.
On the occasion, the Khanh Hoa People’s Committee signed a cooperation agreement with Vietnam Airlines in the 2021-2025 period.
Last year, due to impacts of COVID-19, Khanh Hoa received only 1.4 million visitors, or 19 percent of its target, including 430,000 foreigners, a drop of 88 percent over the previous year./.
Indonesia speaks highly of Vietnam’s digital economy
Indonesia’s Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan has spoken highly of Vietnam’s digital economy which grew by 16 percent in 2020.
Addressing an online workshop held by Indonesia’s e-commerce company Bukalapak and Microsoft on March 8, Minister Luhut highlighted the growth of his country’s digital economy of double digits along with ASEAN countries such as Malaysia and Singapore.
Even though Indonesia is still behind Vietnam, he said.
According to the Minister, the digital economy is strongly developing amidst the COVID-19 pandemic. According to him, the digital economy in Southeast Asia grew 5 percent in 2020, with gross merchandise value of 105 billion USD.
Minister Luhut said according to data from the Global Startup Ecosystem Report 2020, Indonesia is rank first in the world based on the value of the digital ecosystem. The value of Indonesia's digital ecosystem, amounting to USD 26.3 billion or equivalent to 376.09 trillion rupiah.
He attributed the achievements to sound cooperation between the government and the academic circle and private sector./.
Kien Giang prioritises attracting foreign investment in five main pillars
The Mekong Delta province of Kien Giang is carrying out measures to increase the quality and efficiency of foreign investment and create an open and transparent business and investment environment to attract more capital.
Five main pillars have been prioritised, namely high-tech agriculture; clean and renewable energy; tourism; trade-services, education-training, and high-quality healthcare; and developing the sea-based economy in association with ensuring defence-security.
Kien Giang targets attracting 30-40 FDI projects with total capital of 60-100 million USD during the 2021-2025 period and 40-50 projects with 80-120 million USD in 2026-2030.
The province has also set a target of the number of projects using technologies from G7 or OECD countries accounting for 45-50 percent of the total during 2021-2025 and 60-70 percent during 2026-2030, with the localisation rate to equal the country’s average.
It expects to create about 175,000 jobs and collect 545 million USD for the State budget during 2021-2025 and over 680 million USD during the next five years.
To increase the quality and efficiency of foreign investment, it will bolster its administrative procedure reform and publicise investment registration and assessments of FDI projects.
It also encourages projects using clean and environmentally-friendly technologies and employing local workers. It will not consider foreign investors using out-of-date technologies that present a risk of environmental pollution.
Foreign businesses are also encouraged to voluntarily increase technology transfer.
Kien Giang commits to creating favourable conditions for foreign enterprises in training and improving workplace skills./.
Kien Giang’s export turnover picks up 12 percent
The Mekong Delta province of Kien Giang gained more than 103 million USD from exports in the first two month of the year, surging 12 percent from the same time in 2020.
This is a robust sign in the locality’s trade activities amidst complicated developments of COVID-19.
According to the provincial Department of Industry and Trade, growth was seen in the shipment of seafood (over 37 million USD, up 25.6 percent), and leather shoes (over 22.6 million USD, up nearly 3 percent). Meanwhile, export of rice fell 35.37 percent year-on-year to 17 million USD.
With a view to boosting exports, the province has sharpened focus on trade promotion activities, as well as worked to consolidate traditional markets and expanding markets for local key products, particularly rice and seafood.
In the meantime, the department keeps local exporters updated with the import-export situation and measures to contain the spread of COVID-19 through goods which go through border gates or unofficial border crossings.
It has provided local firms with domestic and foreign market information so that they can pen suitable production plan.
The provincial authorities have ordered the Department of Industry and Trade to join hands with competent departments and agencies to keep a close watch on the business and exports of local firms so as to remove bottlenecks for them in a timely manner.
Along with seeking more markets for local products, the department has worked to raise the firms’ awareness of the signed free trade agreement, helping them adjust their production to meet import demands of international buyers./.
Kien Giang looking to turn eco-tourism into key service sector
The Mekong Delta province of Kien Giang is planning to develop eco-tourism in the U Minh Thuong National Park into an important service sector through making the most appropriate use of the forest’s potential.
Local authorities have been exerting every effort to improve the quality of and diversify tourism activities in the park.
Nguyen Hoang Chia, Director of the eco-tourism and environment education centre at the park, said a series of measures have been adopted to improve the quality of eco-tourism, environmental education, and scientific study tours to the park.
One of the two most important peatland areas in Vietnam, U Minh Thuong National Park boasts unique and rare features that are hard to find elsewhere in the country or the world.
Located about 65km southwest of the provincial capital city of Rach Gia, it forms part of the Kien Giang Biosphere Reserve.
Founded in 2002, the park is surrounded by a 60km-long embankment and covers 21,122 ha in U Minh Thuong district, including 8,053 ha in the core zone and 13,069 ha in the buffer zone.
The park is in the core area of the Kien Giang Biosphere Reserve, which was designated as part of the World Network of Biosphere Reserves by UNESCO in 2006. Among forest ecosystems on acid sulphate soil in the Mekong Delta, only U Minh Thuong has the characteristics of a purely primeval forest.
A survey in 1995 revealed that it boasts more than 8,000 ha of primeval forest, about 3,000 ha of which dates back some 6,000 years ago.
The park is also one of the two most important peatland areas in Vietnam, with the other being U Minh Ha in the neighbouring province of Ca Mau.
The local cajuput forest ecosystem on peatland holds special importance, as it nurtures hundreds of wild animals, including birds, mammals, reptiles, amphibians, fish, insects, and many aquatic species.
Thirty-two mammal species have been found in the park, including 10 species listed in Vietnam’s Red Book on Endangered Species and the International Union for Conservation of Nature (IUCN) Red List, such as the hairy-nosed otter, fishing cat, Asian palm civet, Finlayson’s squirrel, and Sunda pangolin. It is also the habitat of 188 bird species, including eight threatened globally, such as the spot-billed pelican, greater adjutant, black-headed Ibis, sociable weaver, grey-headed fish eagle, and black eagle; 54 reptile and amphibian species, including eight in Vietnam’s Red Book, such as the reticulated python, banded krait, and king cobra; together with 34 fish species.
Moreover, it has the richest biodiversity in terms of plants in the Mekong Delta, harbouring more than 254 species.
Seventy-two rare animal and plant species listed in Vietnam’s Red Book (2007) and the IUCN Red List (2012) have been spotted in U Minh Thuong National Park.
Given the park’s natural beauty and rich biodiversity and its function as a national standard sample of an alum-flooded Melaleuca forest ecosystem, the park has favourable conditions for developing eco-tourism services in connection with scientific study tours.
The eco-tourism and environment education centre at the park has also combined environment education activities with tours visiting local communities, offering opportunities for tourists to join the daily activities of local people, thus understanding more about the locality’s cultural identities and customs.
Tours to the park contribute to raising awareness about environmental protection, conserving cultural and historical relic sites, and promoting cultural exchanges.
Its tourism products are expected to help exploit the biodiversity, forest landscapes, and environment found at U Minh Thuong National Park and its buffer zone, towards implementing the tourism development strategy and forestry development planning of Kien Giang province.
The park’s eco-tourism and environment education centre welcomed over 43,200 visitors last year, representing 61.17 percent of the plan./.
Ecotourism a boon for southeastern region post-pandemic
As tourism has borne the brunt of disruptions caused by COVID-19, ecotourism and resort tourism in southeastern localities are being viewed as priorities to trigger a prompt recovery and sustainable development in the sector.
The strategy and master plan on Vietnam’s tourism development in 2020 and vision to 2030 stipulates that the Southeast is among seven regions with an important role in regards to the sector, adding that sea- and forest-based ecotourism combined with cultural and historical values are the region’s prominent products.
The southeastern region boasts a tropical equatorial climate with high and almost unchanged temperature all the year round, and is endowed with big rivers, lakes and diverse forest ecologies along with 180 km of coast lines, which experts say are great advantages in tourism.
Of note, HCM City boasts strengths in ecotourism, primarily with destinations on its outskirts, raising its competitiveness even among major tourism centres in the region and the world. An official of the city’s Tourism Department said the city’s latest tourism promotion programme has focused on local destinations in the context of the COVID-19 pandemic.
Meanwhile, Dong Nai province has invested in improving the quality of local destinations. It is noteworthy that orchard tours have gained popularity, with Long Khanh city serving around 4,000-5,000 tourists each weekend.
Before COVID-19 broke out, southern localities welcomed 50 million holidaymakers each year on average, which was still below its potential, experts noted.
Concerted and appropriate measures are greatly needed to fully tap into the strengths of each locality and the region as a whole.
Southern localities are advised to further conserve resources at ecotourism sites and apply scientific and technological achievements in the endeavour.
Communications should be bolstered to raise public awareness, especially among local residents.
Localities in the region have been working to build regionally-linked tours that showcase their outstanding destinations and products./.
Plenty of room for export growth into French market
Vietnam remains the largest commodity supplier of the ASEAN bloc to France despite accounting for a modest share of their overall imports, according to the General Department of Vietnam Customs.
Vietnamese merchandise exports to the European country soared by 28% to over US$308.3 million in January 2021 compared to same period from last year
Simultaneously, Vietnamese imports from France surged by 92% to US$175 million, with the country recording a trade surplus of US$133.3 million.
Amid numerous challenges posed by the impact of the novel coronavirus (COVID-19) pandemic, some goods such as transportation and spare parts, leather and footwear, and rice witnessed robust growth rate of 222%, 160%, and 110%, respectively. These stellar increases can largely be attributed to tariff reduction commitments which were implemented following the enforcement of the EU-Vietnam Free Trade Agreement (EVFTA).
Despite limited export scale, fruit and vegetable exports also recorded an increase of 17% to over US$3.5 million from last year’s corresponding period.
With France representing the second largest export market of Vietnamese fruit in the EU, there is plenty of room to boost the export of these products to the market due to substantial tariff reductions through the EVFTA.
According to data compiled by the Vietnamese Ministry of Industry and Trade, France has consistently been one of Vietnam’s leading trade partners in the EU over recent years.
Most notably, the European country makes up the fourth largest Vietnamese export market in the EU, behind the Netherlands, Germany, and Austria, thereby accounting for approximately 10% of the total exports to the bloc.
Yet, the proportion of Vietnamese goods exported to the market remains modest, representing a mere 1.1% of France’s total imports.
Local merchandise exports to France are forecast to grow at the end of the first quarter due to the COVID-19 pandemic being brought under control and lockdowns subsequently being lifted.
‘City within a city’ among hottest property market trends: experts
City within a city’ is likely to become a new trend in the housing market this year, experts predict.
Property consultant Jones Lang LaSalle (JLL) explained that the concept refers to large-scale integrated developments.
It has grown in popularity recently as developers seek to attract buyers with holistic, well-planned communities within a city as people seek to avoid the chaos created by rapid urbanisation and lagging infrastructure in shared facilities.
Nowadays developers taking part in city planning have to carefully understand the fundamentals of city planning to create sustainable value for their large-scale projects, according to Trang Bui, head of markets, JLL Vietnam.
According to JLL, the beauty of any large-scale development is the ability to offer a diverse range of housing types to various groups of potential buyers.
While each building should be custom designed for a specific group, the overall living environment should still be harmonious, it said.
For example, in Phu My Hung City Centre in District 7, developers build smaller apartments in the urban heart of the development targeted at single expats and young tenants.
Family-oriented buyers who buy larger units tend to prefer the quieter area of the development.
‘City within a city’ is one of five trends JLL predicts the market would see.
The Covid-19 pandemic has left hardly any business or industry untouched, according to JLL.
But other parts of life and business have continued apace, sustainability initiatives are forging ahead, interest rates are low, and demand for commercial real estate continues to rise.
Offices would change, but workers are eager to head back, and as the world looks ahead to 2021, it is worth looking back at a year that changed real estate and, crucially, at trends that have either stayed the course or evolved to match current needs, according to JLL.
Developers are turning their focus to health and life science real estate
"How investors refocus during an economic downturn is always closely watched, and in 2021 there has been increased interest in sectors that are important during the health crisis," it explained.
Logistics, already one of the hottest sectors in recent years, is set to receive increased allocations amid the boom in online shopping, according to JLL.
Data centres and multifamily and life sciences real estate are also increasingly in investors’ crosshairs.
Both domestic and international investors have long been interested in this sector, and they are in need of more cold storage locations closer to customers to serve the growing demand for heat-sensitive products such as cosmetics, food and pharmaceuticals.
Special health care products like Covid-19 and other vaccines might become a driving force behind cold supply chains and life science real estate in future.
Corporates are striving for sustainability.
When money gets tight, initiatives supporting the environment could be among the first to be sidelined, but, despite some difficult times that lie in wait, companies and investors are expected to stay the course.
In property, assets with high environmental, social and corporate governance ratings could get a 33 per cent rental premium over comparable non-green certified buildings, it said.
The real estate sector needed to play a critical role in creating a de-carbonised environment, helping society prepare, respond, re-enter and ultimately re-imagine a sustainable future, it said.
Another trend this year would be e-commerce driving the logistics sector.
E-commerce accelerated massively in 2020 as people stuck at home flocked online.
A recent JLL report points out that e-commerce provides a tailwind for consumption-driven demand for logistics real estate.
With Vietnam being one of the fastest growing e-commerce markets in Southeast Asia, in recent years the supply chain has become increasingly consumer driven.
Delivery speed was already a major factor in the buying decision, with major online retailers offering same day delivery options. A surge in online grocery orders and that of other essential items has pushed businesses to look for more cold storage space near their customers.
Compared to traditional logistics operations, e-commerce is more labour intensive and requires three times the warehouse space, part of the reason for increased investor demand for industrial real estate across the world.
In 2020 a work from home experiment took place globally and showed that businesses could continue to operate effectively by leveraging technology.
But many aspects of work would not change, and people still need to collaborate, innovate and liaise with managers on projects and their careers, one reason why people missed the office and why it would retain a central role in corporate life.
Local rubber exports to China enjoy impressive growth
Vietnam exported a total of 1.36 million tonnes of rubber worth a total of US$1.83 billion to China last year, representing an increase of 17.4% in volume and a rise of 18.1% in value, according to the General Department of Vietnam Customs.
Of the total, natural rubber and synthetic rubber were the most exported commodity to China, making up 83.32% of the country’s total rubber exports to the northern neighbour.
The export of both products reached 1.13 million tonnes worth US$1.55 billion, marking a boost of 23.7% in volume and 24.7% in value compared to the same period from 2019.
Last year witnessed several types of rubber exported to China achieve positive growth in both volume and value compared to 2019, with latex topping the list, rising by 52.6% in volume and 67.3% in value.
The impressive growth of Vietnamese rubber exports to China is attributed to the importer’s launch of a policy aimed at boosting the use of small cars, thereby encouraging tire manufacturers to increase production.
Furthermore, rubber production within China endure a decline due to significant storms hitting Hainan island and droughts affecting Yunnan, thereby having a negative impact on rubber harvests.
According to statistics released by the Chinese General Administration of Customs, last year saw China's rubber imports reach US$10.94 billion, up 4.6% compared to 2019. Thailand, Vietnam, Malaysia, Indonsia and the Republic of Korea represent the five largest rubber suppliers to the Chinese market.
It’s important to enhance enterprises’ competitiveness
It is important to improve the capacity of enterprises and not just develop them in term of quantity, experts said.
The General Statistics Office (GSO) said there were about 810,000 firms by the end of last year, missing the Government’s target of one million.
But the Government still has set the goal of 1.2-1.5 million enterprises by 2025 based on the fact that the business climate kept improving.
Statistics from the Ministry of Planning and Investment pointed out that the number of enterprises in Viet Nam increased by 10.5 per cent in the 2016-19 period with around 100,000 new firms launching every year, twice as high as the 2011-15 period. However, most were of small and medium sizes.
GSO’s Director Nguyen Thi Huong said the COVID-19 pandemic was significantly affecting the socio-economic development and health of enterprises.
Research by the Ministry of Planning and Investment pointed that the health of the Vietnamese enterprises was at the most pessimistic level in recent years. The number of new firms established in 2020 was 2.3 per cent lower than 2019 and the total number of employees of new firms was 16.9 per cent lower.
Economic expert Ngo Tri Long said Viet Nam is looking to develop big enterprises to lead the economy. However he noted that small and medium sized enterprises (SMEs) played a very important role but the policies introduced to support SMEs were proved not to work effectively as expected. For example, the SMEs support funds did not operate efficiently as it remained difficult for firms to get accessed to financial supports from these funds.
Long said that the support policies for SMEs must be more practical.
A weakness of Vietnamese enterprises was that most of them failed to participate in the global value chain, adding that it was critical for enterprises to participate in global value chain to develop in the integration process.
He said that support policies should be introduced for enterprises which were selected to be capable of engaging in the global value chains.
Early this year, the Government assigned the Ministry of Planning and Investment to develop a resolution about developing enterprises in 2021-2025 with a vision to 2030 which aimed to have 1.5 million firms by 2025, 15 to 20 of which are private and have capitalisation of more than US$1 billion.
To achieve this goal, there must be around 100,000 – 150,000 new firms every year in the next five years or the number of enterprises must increase around 12-14 per cent per year.
According to To Hoai Nam, Deputy President of the Viet Nam Association of SMEs said that while the quality of enterprises was the top concern, it was also important to develop a big enough enterprise community to create breakthroughs.
Nam said that it was critical to create a favourable business environment to achieve the goal in the next five-year period, adding that barriers related to administrative procedures must be removed and compliance costs reduced for firms.
Positive growth projected for 2021
With its relatively impressive economic growth last year, Vietnam is garnering some high-profile optimism from the international community in terms of a strong recovery this year, with the private sector to having an even bigger role to play.
Last year, Vietnam astounded the entire world with its effective control of the COVID-19 pandemic and its striking level of aeconomic growtht 2.91%. This made the nation one of the world's top 10 countries in terms of economic growth, and also one of the 16 most successful emerging economies on the planet last year.
Last year, the economy's GDP was worth as much as VND6.3 quadrillion (US$273.9 billion), increasing by VND263 trillion (US$11.43 billion) as compared to the previous year, ranking fourth in Southeast Asia, with total export-import turnover of US$543.9 billion, up 5.2% year-on-year, raking in a record trade surplus of US$19.1 billion.
According to the International Monetary Fund (IMF), a robust recovery is expected in 2021 despite some economic scarring.
"Growth is projected to strengthen to 6.5% as normalisation of economic activity continues, businesses recover, and private consumption and business investment rebound. Manufacturing and retail sales are expected to lead the recovery, while travel and hospitality services will remain subdued," the IMF stated in a report released over a week ago. "Net exports will continue to contribute positively to growth as external demand picks up. Economic scarring due to disruptions to domestic activity and the labour market will temporarily weigh down potential growth as labour re-allocation gradually takes place, and capital stays idle in the hardest-hit sectors."
The ASEAN+3 Macroeconomic Research Office (AMRO), a regional macroeconomic research organisation based in Singapore, has also said Vietnam's economic growth had slowed to 2.91% in 2020 due to the pandemic but "is expected to rise to 7% in 2021."
"The rebound is expected to be underpinned by a recovery in external demand, a resilient domestic economy, capital inflows, and increased production capacity," said AMRO lead specialist Seung Hyun Luke Hong.
After a sharp drop in the second quarter, economic growth started to rebound in the third quarter of 2020. The recovery was broad-based. Manufacturing activity was boosted by a robust export sector, which benefited from Vietnam's relatively resilient export mix, as well as trade diversion from US-China trade tensions.
Meanwhile, domestic consumption recovered following the relaxation of mobility restrictions, a result of the authorities' effective COVID-19 containment efforts. Furthermore, the rebound benefited from an acceleration in the disbursement of public investment.
According to Fitch Solutions (part of the global rating firm Fitch Group), one of the key drivers for Vietnam's economic growth this year will be a rise in public investment and foreign direct investment (FDI). In reality, Prime Minister Nguyen Xuan Phuc has set up seven task forces to speed up the disbursement of public funds as well as warning that officials would face disciplinary action if their ministries or localities fail to realise their respective public investment disbursement targets for 2020.
"In 2021, we forecast state budget expenditures will grow by 16.6% as a rebound of economic activity as well as government e?orts to expedite public capital expenditure drive rapid growth in expenditure," said the statement. "We forecast real GDP growth to recover to 8.2% in 2021, from 2.91% in 2020, although we do ?ag some downside risks to our 2021 forecast from persisting economic challenges brought about by the pandemic."
A few weeks back, Standard Chartered published its latest projection on Vietnam's economic prospects in 2021, expecting the country's economic growth to "rebound to 7.8% in 2021 from 2.91% in 2020, with manufacturing likely continuing to drive the economy and helping Vietnam outperform the rest of Asia," said the bank in a recent press release.
"The economy emerged from the worst of the COVID-19 downturn in the third quarter of 2020, and we think the recovery remains intact. Vietnam has been one of the best-performing economies globally for the past decade, and we expect this to continue," said Tim Leelahaphan, Standard Chartered economist for Thailand and Vietnam.
In the same vein, the World Bank is also expecting the country's economy will continue bouncing back strongly this year.
"By all standards, Vietnam has managed the COVID 19 crisis very well. Looking ahead, Vietnam's prospects appear positive as the economy is projected to grow by about 6.8 percent in 2021 and, thereafter, stabilise at around 6.5 percent. This projection assumes that the COVID-19 crisis will gradually be brought under control, most notably through the introduction of an effective vaccine," said the World Bank in its recent economic update for Vietnam. "Vietnam's economic resilience is explained by the behaviour of both its domestic economy and its external sector. After three weeks of national lockdown in April 2020, most industrial and service activities rebounded as domestic consumers and investors regained confidence. Not only has the private sector reacted positively to the gradual easing of social distancing and mobility measures, but the government has changed the course of its fiscal policy to support the recovery."
However, according to these high-profile organisations, in order to reach higher levels of economic growth this year and beyond, as they have proposed many times, Vietnam should create more conditions for the private economic sector to flourish as it is now considered a backbone of the economy, responsible for a significant proportion of GDP.
At present in Vietnam, the private sector creates more than 50% of economic growth, 30% of state budget revenue, and 85% of the labour force.
The country has nearly 800,000 operational enterprises, of which about 98% are of small and medium size. According to the General Statistics Office, in 2020, there were 134,900 newly established enterprises, with total registered capital of over VND2.23 quadrillion (US$96.96 billion), employing more than one million people. This was down 2.3% in terms of the number of registered enterprises, but up 29.25% in registered capital.
In the first two months of 2021, Vietnam witnessed 18,100 enterprises newly established, registered capital of VND334.8 trillion (US$14.55 billion), employing 172,800 workers - up 4% in the terms of the number of enterprises, 52.2% in capital, and 9.7% in the number of workers as compared to the same period last year.
The average registered capital of each newly-established business in the first two months of the year was VND18.5 billion (US$804,347), up 46.4% year-on-year. If an additional VND385.6 trillion (US$16.76 billion) registered by 6,500 operational enterprises is included, total registered capital inserted into the economy in the first two months was VND720.4 trillion (US$31.32 billion).
According to a report adopted at the recent 13th National Party Congress, over the next five years, with a view to further facilitating private sector development, "all state-owned enterprises (SOEs) will continue being reorganised, investing in only key realms of the economy, and in geographical areas which are important in security and defence, and in the areas not invested by other economic sectors."
"The process of reshuffling SOEs must be open and transparent, especially in equitisation and divestment. By 2025, the process will have to be completed, with loss-making groups and corporations to be addressed radically."
The state will be exclusively invested in only four fields including the provision of indispensable products and services for the society; defence and security; natural monopoly; large-scale high-tech application with big investment creating momentum for the rapid development of the economy's other fields.
According to experts, furthering SOE reforms is needed more than ever in order to speed up the growth of national productivity and to raise incomes and living standards.
In fact, conflicts of interest would arise if the state is both the owner and regulator. and these generate inefficiency. As has been seen in Vietnam and globally, such conflicts of interests lead to pressures for state owning agencies to regulate in a manner not in the national interest.
For example, by imposing business conditions or other restrictions on new businesses, the state agency can reduce the competition faced by SOEs. Policies and institutional structures that constrain competition are not in the national interest. While constraints to competition can make individual SOEs more profitable, the resulting lack of competition stifles innovation and an overall growth in productivity.
This will hurt consumers because of higher costs as well as less innovation and variety; workers will suffer as reduced growth in productivity means reduced growth in wages; the other investors whose firms are being constrained, and; the government because of increased space for corruption.
To know how reasonable tax regulation is
One of the important roles of the tax sector is to ensure social equality through the regulation of the income gap between high-income and low-income groups. However, it’s hard to know whether the regulation is reasonable or not if attention is paid only to personal income tax but not the overall tax system.
It is questionable that why there are countries where their governments impose the high personal income tax but their people still agree with the policy and which are the dream place for living and working by many people worldwide, while there are countries where the personal income tax seems not high but the life of middle and low-income people is getting more difficult.
The revenue from taxes, fees and charges is always the largest share in the budgets of governments; among them three important taxes are the value added tax (VAT), the corporate income tax (CIT) and the personal income tax (PIT). The percentage of these three taxes is a factor with which one may know whether the low-income group is “shared” as finely expected by the tax sector.
When the percentage of the PIT in the total tax revenue is low (projected at 10% in 2021 in Vietnam), the burden will shift to the VAT, which low-income people must also pay for what they buy. The issue is what goods and services are subject to the VAT and the tax rates for them.
The low-income group is obviously not “shared” at all when there are essential goods and services which must be subject to the VAT instead of zero tax and the tax gap is offset by the VAT for goods and services generally reserved for high-income people. Many low-income people who are not in the category of PIT payment do not know that they still have to pay tax through their everyday purchases, directly such as the VAT, and indirectly through taxes included in the prices of goods and services. Take for example, people already pay tax when they buy a kilo of rice, a liter of fish sauce, a cubic meter of water, a kilowatt hour of electricity or a liter of gasoline.
With regard to cases of high PIT (over 30% in most developed countries, with Denmark in particular imposing a rate of 52.38% in 2019), what matters are the taxable incomes and the tax rates. It may come as a surprise that around 55% of households in France are not in the category of PIT payment, as the taxable income in France starts from 10,064 euros/“part”/year (for example a couple with two children are counted as three “part”) with the progressive tax rate of 11% for the first threshold of 10,064-25,659 euros and 45% for the fifth or final threshold of 157,806 euros upwards. So, the low tax levels and the high tax differences and thresholds are really the sharing of the high-income group with the low-income group.
The second factor which is equally important for knowing whether the tax regulation is reasonable or not is the payment for items which must be counted as per salary (also seen as a tax on salary, including social insurance and other payments depending on countries) and social welfares provided by the government.
In some countries, the percentage of payment for such items is very high. The average payment is 36% in countries in the Organization for Economic Cooperation and Development (OECD), and is higher in such countries as France, Austria, Italy and Germany with over 45% and Belgium 52%. In return, the social insurance and more generally the social welfare in these countries are very good. For example, medicine and healthcare are basically free, public education is very cheap and almost free, and vulnerable people in society have good allowances.
Because of the transparency of the government, social welfare policies must be good so that people do not have to manage for saving or to worry much when risks occur; and so no matter how high the tax on salary or the personal income tax is, people are still satisfied because they and their families are protected, and further it is the sharing with more disadvantaged people in society.
The issue or adjustment of tax policies is never simple, as inclination towards one group will be disadvantageous for another. A reality is that the percentage of the high-income group or the rich is much lower versus the low- and middle-income groups but they have more influence on policies. A large part of people in the high-income group, generally those with high education and good jobs, will be willing to share with people in the low-income group if their tax money is used legitimately; otherwise, low-income people will bear a heavier tax burden (as per the percentage of income and net savings).
To make tax really a tool for income regulation, governments should balance the three important taxes towards a heavier burden of the VAT and the PIT for the high-income group. The CIT and the property tax for rich people are also the buffers for tax reduction for low-income people, but the side-effects should be considered, as the high CIT will negatively affect employment and rich people will seek to declare tax in another country.
Vietnam seeks to welcome international tourists back
Many local tourist sites are preparing plans to welcome international tourists back as Covid-19 vaccinations are being ramped up worldwide.
Nguyen Huu Tho, chairman of the Vietnam Tourism Association, told the Saigon Times that some tourist destinations near Vietnam had reconnected with foreign tourism markets.
If Vietnam is not prepared, it would lag behind other regional countries with the same source markets.
Many entrepreneurs agreed that the later the country opens its borders to foreign tourists, the more it will lose when it comes to competing with regional rivals to attract international tourists.
Vietnam will have a greater edge if it opens its market before Thailand does, but this may be hard due to the short preparation period, said Pham Ha, CEO of Lux Group.
He expected the Government would reopen its borders to international travelers in the third quarter of this year so that local travel firms can bring in tourists in the last quarter. The country’s success in the fight against the pandemic and its plan to vaccinate locals against Covid-19 will make the country safe for foreigners.
However, tourism management agencies and travel companies have to prepare to reconnect with source markets, including issuing tourism safety protocols, resuming visa-waiver policies, launching promotion programs and developing new products and services suitable to each market.
In positive news for the resumption of the international tourism segment, Deputy Prime Minister Vu Duc Dam is allowing people who have receive Covid-19 vaccine in other countries to enter Vietnam without being quarantined.
Nguyen Thi Thanh Huong, deputy head of the Vietnam National Administration of Tourism, said the administration and the Vietnam Tourism Association are working on a plan to allow international tourists to get back. However, a specific plan has yet to be worked out, but the resumption would be weighed carefully, with safety being the top priority.
In the initial stage, tourists from big source markets and those of all-in tours to isolated resorts may be welcomed first.
According to Tho, Vietnam should open its market for countries in the Asia-Pacific region as tourists from these markets had earlier accounted for three fourths of the country’s total foreign visitors. They can also easily access the country by air and many countries in the region have brought the pandemic under control.
During the pandemic, Vietnam conducted several online promotion programs to retain customers and build their confidence in the country’s ability to combat Covid-19.
In the coming periods, local tourist sites should continue informing customers of the local measures being taken to fight the pandemic and develop products appropriate to the new tourism trends during and after the pandemic.
Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes