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VIETNAM BUSINESS NEWS MARCH 14

HCM City: Real estate most attractive to foreign investors in first two months

 

 

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In the first two months of 2021, Ho Chi Minh City licensed three new foreign direct investment (FDI) projects with total registered capital of US$115 million, 99.7% of which was poured into the real estate industry.
  

This capital source came from Singapore (29.6%) and the Netherlands (70.1%), according to the municipal Statistics Department.

As of February 20, additional pledges of US$53.3 million were made to 22 existing projects in the city, while 168 foreign investors contributed capital to and purchased shares in domestic businesses with a value of US$169.5 million.

In total, Ho Chi Minh City attracted US$337.8 million worth of FDI between January and February, down 29.7% over the same period last year.

Of the figure, real estate was the largest FDI recipient with US$145.1 million (43% of the total), followed by science & technology activities with US$57.5 million (17%), the manufacturing industry with US$41 million (12.1%), education and training with US$27.9 million (8.3%), and commerce with US$25.5 million (7.5%).

Singapore represented the largest share of FDI inflows to HCM City in the first two months (37.1%), while the next four places were occupied by the Netherlands (23.9%), the Republic of Korea (13.2%), Cayman Islands (7.6%), and Japan (3.8%).

HCM City, RoK firm foster cooperation in smart urban building

Ho Chi Minh City and Lotte Properties HCMC, owned by Lotte Group of the Republic of Korea (RoK), have agreed to enhance their cooperation, especially in smart urban building.

The consensus was reached at a working session between Le Hoa Binh, Vice Chairman of the municipal People’s Committee, and Lee Kang Woo, General Director of Lotte Properties HCMC.

Binh said HCM City facilitates the investment and business operation of foreign firms in the city, including Lotte Properties HCMC and other RoK investors.

HCM City, RoK firm foster cooperation in smart urban building hinh anh 2
District 2, in eastern part of HCM City, has the advantage of geographic location and convinent conditions to form a new urban area. (Photo: VNA)

Prime Minister Nguyen Xuan Phuc has allowed Lotte Properties HCMC to continue implementing the Eco Smart City project at the Thu Thiem new urban area in Thu Duc city, which demonstrates local authorities’ efforts in handling bottlenecks to foreign-invested projects, according to the official.

Binh expressed his hope that Lotte Properties HCMC will pour more cash into the southern metropolis, especially Thu Duc city, thus contributing to turning the city into an innovative, highly interactive, worth-living urban area.

For his part, Lee highlighted HCM City’s potential and affirmed that his company wishes to strengthen cooperation with the Vietnamese economic hub, particularly in smart urban building./.

Revamping State management would boost private economic sector: workshop

Experts attending a workshop in Hanoi on March 12 suggested creating an equal competition environment and reforming the system of State resources allocation to spur the development of the private economic sector in Vietnam.

According to the Ministry of Planning and Investment, the sector makes up 42-43 percent of the national GDP and employs around 85 percent of the workforce.

Minister of Planning and Investment Nguyen Chi Dung highlighted the ample space for growth of the sector, which, he said, needs maximum support.

He said management agencies should change their mindset to contribute to the sector’s growth, given good opportunities for local enterprises like those generated by free trade agreements, the fourth Industrial Revolution, and the shift of global production chains.

The minister also pointed out limitations in the sector such as low productivity and poor scientific-technological capacity.

Economist Pham Chi Lan said connectivity between Vietnamese firms has remained weak, and they have yet to paid due attention to improving the connectivity as well as competitive capacity to join regional and global value chains.

Deputy Director of the Central Institute for Economic Management (CIEM) Dr. Phan Duc Hieu stressed the need to identify the State’s role in the market economy and encourage enterprises to play a part in investment and provision of public services.

He also suggested raising the quality and feasibility of incentives, saying apart from the mindset, management methods should also be revamped./.

VINASA, GMO-Z.com RUNSYSTEM cooperate in digital transformation

The Vietnam Software and IT Services Association (VINASA) have signed a cooperation agreement with GMO-Z.com RUNSYSTEM JSC in Hanoi.

It allows GMO-Z.com RUNSYSTEM to sponsor information technology services and RPA solution for VINASA.

GMO is not only an exporter of information technology services for the Japanese market but also an Internet service provider, according to Nguyen Thi Thu Giang, the association’s general secretary.

On the basis of accumulated experience and technology with Japanese partners for many years, GMO has strongly invested for research and development of digital transformation products and services, she added.

Giang said: "The history of companionship and the technology foundation is the basis for VINASA to choose GMO-Z.com RUNSYSTEM as a technology partner in the digital transformation process.

"These technologies will help VINASA accelerate the transformation process, introduce new activities, new services to more effectively support the development of member enterprises and the information technology industry of Vietnam.”/.

German, Vietnamese firms to jointly build water treatment plant in Long An

Germany’s Aone Deutschland AG and Vietnam’s AquaOne Corporation will cooperate in constructing the Vam Co Dong River Surface Water Treatment Plant in the southern province of Long An under a newly-signed agreement.

The project will provide clean water for production and daily life of local people, given that the Mekong Delta has been severely affected by drought and saltwater intrusion.

The framework agreement was signed in Leipzig city, the German state of Saschen, on March 12 by Aone Deutschland chairman Christophe Hug and AquaOne chairman Do Thi Kim Lien in the presence of Mayor of Leipzig Burkhard Jung and Vietnamese Ambassador to Germany Nguyen Minh Vu.

Speaking at the signing event, Mayor Jung highlighted the development of the relations between the two countries in various areas, such as culture, sports and economics, saying the deal signing translates the strategic partnership between the two countries into reality.

Ambassador Vu expressed his delight at the growing ties between Vietnam and Germany in general, and between Ho Chi Minh City and Leipzig city in particular. With the EU-Vietnam Free Trade Agreement (EVFTA) which took effective last year, and the EU-Vietnam Investment Protection Agreement (EVIPA) which will enter into force in the near future, cooperation in economics, trade and investment between enterprises of the two sides will grow further, he said.

Lien said the Vam Co Dong River Surface Water Treatment Plant will apply advanced technologies in managing, operating and monitoring clean water production and supply.

Hug, meanwhile, said his corporation wants to share the latest technologies in water treatment with developing countries, in order to not only provide benefits for people but also fulfil its commitment to promoting sustainable and environmentally-friendly development.

The water treatment plant will be built on an area of 71.5 hectares in Duc Hoa District, Long An at an estimated cost of nearly 5 trillion VND.

Its first phase is expected to complete in the first quarter of 2023 with a designed capacity of 200,000 cu.m per day and night. The second phase, scheduled to finish by 2025, will have a capacity of 300,000 cu.m per day and night. Its total capacity can reach 1.2 million cu.m per day and night once all stages of investment completed./.

Solar power projects to be inspected

The Ministry of Industry and Trade has asked localities and the Vietnam Electricity Group (EVN) to quickly inspect solar power projects with a capacity of 100-kilowatt peak each and above due to the mushrooming of such projects.

As required by the prime minister, the ministry asked EVN to review solar power projects which enjoy preferential electricity prices by the end of 2020. EVN must ask power corporations to make a list of operational rooftop solar power systems with a capacity of at least 100-kilowatt peak each which were offered the preferential electricity selling prices and submit the results to the provincial or municipal Departments of Industry and Trade before March 11.

The list will help review, research and propose effective solutions to operate solar power plants, minimizing losses for investors.

In localities, electricity management agencies will have to assess ground-mounted and rooftop solar power projects with a capacity of at least 100-kilowatt peak each.

In reality, rooftop solar power projects developed in the past few years have reached a capacity 20 times higher than the national target of 800 megawatts. The total capacity of ground-mounted solar power projects has been over 8,800 megawatts, while the combined capacity of rooftop solar power projects has reached some 8,000 megawatts.

The boom in solar power projects has made it difficult for these projects to be connected to the national grid, resulting in losses for investors.

Since early 2021, EVN has worked out solutions to reduce the solar power volume to ensure safety for the national grid.

In related news, Vietnam has become a leading country in the world in terms of solar power development within only three years. The boom has been attributed to the high electricity selling price but low equipment prices.

The output of solar power projects has been sold at 9.35 U.S. cents, applied for 20 years.

All the equipment in solar power projects has to be imported, mainly from China. In addition, many plants have been acquired by foreign investors through merger and acquisition deals.

When the land bank for solar power projects is almost exhausted, investors have rushed to propose developing projects on the surface of lakes. However, management agencies have suspended licensing such projects due to concerns over environmental pollution.

This has led to the mushrooming of rooftop solar power projects. Many investors have poured capital into these projects to enjoy the preferential solar power price, putting pressure on the national grid.

Therefore, the State should promptly handle violators of regulations on solar power developments, especially those abusing the preferential policies. Further, policies should be weighed carefully before being issued.

Online food delivery trend destined to stay

As online food delivery trends have been supercharged by the pandemic, tech platforms are now making strong investments to tap into the surging demand.

Peter Christou, commercial director of Kantar Worldpanel Vietnam, said that the country witnessed a robust growth of online food delivery due to COVID-19, and the growing trend will likely continue in 2021 given the evolving situation of coronavirus and a “cautiously optimistic” perspective of Vietnamese consumers.

There was a rapid adoption in online food delivery from consumers, businesses, and service providers, yet a lasting growth of online food delivery is expected in the coming time.

Christou noted that early signs indicate that this is a habit that will stick, as the spend level of online food delivery remained consistent, even as restrictions eased and out-of-home spend started to recover when restaurants/stores reopened.

Online food delivery is used once a week or more by more than one-fifth of people living in Ho Chi Minh City, which is among the highest markets in the frequency of use, yet some say there is still room to increase.

Realising the vast potential, investors have started to cash in on this market segment. Most recently, Loship has announced its latest investment from Skype co-founder Jaan Tallinn, who participated through his investment vehicle MetaPlanet Holdings.

Commenting on the latest funding, Loship CEO Trung Hoang Nguyen told VIR that there are a few spending items on the table for the company currently. “First is market expansion – Loship already has a winning playbook, and the startup is looking to expand it to more markets. Secondly, a huge portion of funding will be used to upgrade its app and increase its tech capability,” Nguyen said. “Finally, the startup will ramp up marketing strategies to strengthen Loship’s foothold in the existing markets.”

He noted that the online food delivery market will remain competitive for at least the next 2-3 years. Vietnam poses many favourable conditions for food delivery, including the vast market, substantial user base, high internet and mobile penetration rate, and more. As such, it attracts many players to tap into and capture the market share.

“Simplified e-banking systems and improved food-service logistics, coupled with changing customer lifestyles, are also some of the prime factors propelling the food delivery market growth. The pandemic has necessitated the act of home delivery, which drives growth even further,” he said. “Also, Vietnam’s startup ecosystem will continue to flourish and attract investment, allowing local players to compete with foreign ones. We believe that this environment will benefit homegrown players like Loship.”

Likewise, Xiaole Kuang, head of engineering in deliveries at Grab, said that online food delivery will become a mainstay. Grab is building and iterating existing tech with the aim of delivering a delightful experience for users when they browse, order, and wait for their food to arrive. For customers, GrabFood currently offers five types of ordering functions within the app – delivery on-demand, self pick-up, scheduled delivery, group order, and mix-and-match. Meanwhile, Grab has worked on several back-end technology products to make fulfilment more efficient for merchant partners.

Indeed, GrabFood has seen its merchant partners grow three times from the first quarter to the third in 2020 with average order value up 26 per cent. GrabFood covers 18 cities and provinces with average delivery speed of 20 minutes per order.

Last week, Gojek launched a special application for GoFood partners, GoBiz in Vietnam. More than 80 per cent of restaurants and eateries on Gojek are using GoBiz every day, which helps shorten the time from restaurant to customer time by up to 50 per cent and increase the number of completed orders by 300 per cent.

Other players in the market have also stepped up their game. Baemin has recently launched in the central city of Danang, making its expansion in the central region. Meanwhile, Foody’s Now is diversifying its delivery services from food and medicines to flowers to compete with other rivals.

A survey by Q&Me shows that GrabFood or Now are the most popular delivery apps, with Baemin and GoFood following close behind. GrabFood and Now are still dominant in the market but Baemin has the best growth for now.

“Obviously, the competition will be fiercer than ever and the winners will be those who embrace partnerships and deliver excellent customer experiences,” Christou said, pointing out the biggest challenge for online food delivery platforms is how to attract investors for expansion.

Steep decline in buyers struck post-pandemic Ben Thanh Market

Failure to attract domestic consumers during prosperous times along with the immediate impact of Covid-19 has proven devastating for shopkeepers in Ben Thanh Market when they struggle to keep business running even as the market opens like usual.

Even though sales improved slightly at the beginning of March, mostly in the dry food, clothing and souvenir sections, the market ground still looks deserted.

“People only opened shops again after news of the Covid vaccine being available, otherwise it would be even more empty around here”, said Thanh, a small trader of dry food in the market.

Meanwhile, a 50-year-old named Xuan said she had to take a risk against the virus to keep business going. “Our family owns 6 food stalls and used to hire 20 salespeople who are all our relatives, but now we can only keep 2 stalls running”.

Many shop owners in Ben Thanh market switched to selling online to survive, while others turned to food delivery services to get more coverage.

Toan, who runs a sweet beverage stall, said the delivery app he was collaborating with charges a whopping 25 percent in commission. “I just hope this virus goes away soon; I would never have worked with those services otherwise”, he lamented.

On the other hand, most domestic buyers, especially the locals of HCMC, have proven uninterested in shopping at Ben Thanh market due to inflated prices.

Now that the market is opened as usual, the very few visitors here are Vietnamese tourists from Hanoi and Danang. Most shopkeepers who previously tried to appeal more to foreign tourists are now beckoning local shoppers.

According to a small trader named Quoc, the rental fee, overheads and taxes for a stall at Ben Thanh market are much higher than any traditional market in the city, causing prices to increase.

Statistics from the Ben Thanh Market Management Board showed 570 shops still open on March 05 compared to nearly 1,500 shops on a normal day before 2020.

“The market ground is still open like usual, but many shopkeepers applied to close shop to avoid paying taxes, some even looking to sell their rights to run a stall here”, said a member of the board.

Farmers in Central Highland region jump for joy as produce prices hike

Farmers in the Central Highland region were full of joy at their produce prices hike after a long difficult time due to impacts of Covid-19. 

Filled with joy, farmers in the region have been busy harvesting cassava, key farm product of the Central Highlands region. Farmer Moc Ngoc Thach and relatives were making a concerted effort to harvest the remaining plant in the field of seven hectares in Klah village in Ia Mo Commune in Chu Prong District of Gia Lai Province .

He delightedly said that a kilogram of fresh cavasses costs VND2,650 at its highest; therefore, the family got profit of VND200 million (US$8,617).

According to Vice Chairman of the People’s Committee in Ia Mo Commune Nguyen Tuan Anh, cassava is grown in 320 hectares and farmers have harvested 80 percent of total cassava while farmers in Krong Pa Commune in Gia Lai Province where cassava is grown in 22,000 hectares have harvested 70 percent of the plant, said head of the provincial Department of Agriculture and Rural Development Dinh Xuan Duyen. With price of VND2,650 per kilogram of fresh cassava, farmers enjoy VND15 million – VND20 million per hectare.

Chairman of the People’s Committee in Dak Ruong Commune in Kon Tum Province Dinh Ngoc Hai revealed that cassava farmers profited from growing the plant. Thankfully, poverty-stricken households in the province can escape their destitution.

General Manager of Focecov Trinh Van Xuan said that this year, the company has purchased approximately 70,000 tons of cassava at the price of VND2,500 - VND3,000 a kilogram and factories in the Central region have also ordered 50,000 tons of cassava.

In addition to cassava, farmers have also enjoyed good prices of watermelons, sweet potatoes, sugar canes and unhusked rice. For instance, watermelon is grown in 1,500 hectares in Gia Lai Province. The fruit was sold at VND1,000 - VND2,000 per kilogram before Tet holiday ( the Lunar New Year); however, the fruit is now priced at VND7,000 - VND8,000 a kilogram in the field while good quality fruit fetches over VND10,000 a kilogram.

Head of the Department of Agriculture and Rural Development in Krong Pa District Dinh Xuan Duyen said that watermelon farmers profited roughly VND200 million per hectare. Moreover, workers who were hired to pick up watermelon received higher wages.

Sugarcane farmers are enjoying a profit of VND25 million - VND30 million per hectare. Especially, farmers in Gia Lai Province this time saw profit tripling that of bean or corn grown before when they sold sweet potato at VND8,800 a kilogram – the highest price so far. Sweet potatoes have been grown for two recent years in the area of 647 hectares in the province.

Seven Business Giants Proposed To Join Large-scale SOEs Development Project

The Ministry of Planning and Investment has proposed seven groups with combined asset value of over VND 20 trillion to join a large-scale State-owned enterprises development project.

These groups include three high-tech ones, namely the military-run Industry and Telecoms Group (Viettel), the Viet Nam Post and Telecommunications Group (VNPT), the Viet Nam Mobile Telecom Services One Member Limited Liability Company (MobiFone).

Other SOEs are the Viet Nam Electricity (EVN) and the Viet Nam Oil and Gas Group (PVN), the SaiGon Newport Corporation, and Vietcombank.

These proposed SOEs have to meet several criteria like asset value, market share, competitiveness, return on equity, and capacity to implement OECD Principles of Corporate Governance, according to Minister of Planning and Investment Nguyen Chi Dung.

The selected SOEs are expected to play a leading role in establishing and expanding domestic, regional and global production and value chains, and in promoting innovation, said Mr. Le Manh Hung, Director of the ministry’s Enterprise Development Agency.

The large-scale SOEs development project is developed by the ministry at the request of the Government in February last year in a bid to promote their role in the country’s socio-economic development.

The Government has asked the Ministry of Planning and Investment to build a project on developing large-scale State-owned enterprises (SOEs) to promote their role in the country’s socio-economic development.

SOEs accounted for 0.07% of the total number of enterprises in Viet Nam./.

Vietnam inflation predicted to average 3% in 2021: HSBC

While there are several upside risks, moderating food prices should keep Vietnam’s inflation under control.

Vietnam’s inflation rate in 2021 is set to average around 3% in 2021, mainly reflecting the impact of moderating food prices, which should more than offset recovering oil-related prices, according to HSBC. 

“That said, inflation should remain below the State Bank of Vietnam (SBV)’s 4% inflation ceiling this year, allowing the SBV to maintain its accommodative monetary policy throughout 2021,” stated the bank’s latest report, adding it expected the central bank to keep its refinancing rate unchanged at 4%.

“As global economic prospects improve, there are concerns about inflation volatility,” it noted.

Coincidentally, Vietnam’s February month-on-month inflation momentum rose by an eight-year-high pace at 1.5%.

Although Tet distortion played a role, the main driver was a sharp increase in electricity prices. After a one-off electricity subsidy from Electricity Group Vietnam (EVN) in January, electricity prices jumped 20% month-on-month. Meanwhile, rising food prices and higher transport costs also helped to push up headline inflation.

“While electricity price volatility is perhaps a one-off administrative adjustment, food prices and transport costs are worth watching closely, as they both weigh heavily in the overall CPI basket, with weightings of 34% and 10%, respectively,” stated the HSBC.

Since the end of 2019, higher pork prices have pushed up food inflation, even to the extent that headline inflation temporarily breached the “4% inflation ceiling” for four consecutive months. 

However, pork prices have largely moderated, given gradually improving conditions since the second half of 2020 and a 382% year-on-year increase in pork imports.

The African Swine Flu (ASF) has caused the loss of about six million pigs in Vietnam, but the total number of pigs have increased to more than 26 million, equivalent to 85% of the pre-ASF level.

While it is encouraging to see slower growth in pork prices, soaring global grain prices are posing upside risks. In the case of Vietnam, there has been a notable increase in the price of rice over the past couple of months, driven by several factors including seasonally tight supply and delayed harvest in parts of the Mekong Delta as a result of unfavorable weather conditions.

That said, while grain food prices can be a source of concern, its CPI weighting is quite small (3.7%), thus the upside risk is likely to be limited. Overall, the HSBC expected food prices to moderate significantly after last year’s 10% year-on-year jump.

Another key supply-push concern comes from oil base effects. In Vietnam, the Ministry of Industry and Trade and Ministry of Finance usually reviews domestic petrol prices and makes adjustments in accordance with global oil price fluctuations every two weeks. In recent years, the correlation between local transport costs and international oil prices is increasingly evident, typically with the lag of about one month. Not surprisingly, domestic transport prices fell 11% year-on-year, the main drag to headline inflation in 2020.

However, as the dampening effect will eventually dissipate throughout 2021, the report expected some upside pressure from higher transport prices. As a result, this is likely to be offset by slower growth in food prices, given its smaller CPI weighting.

Beyond supply and demand factors, foreign exchange (FX) is also another consideration that directly impacts the inflation prospects. That said, the impact appears to be muted, as exchange rate stability reduces the pass-through to inflation.

As an exporter with high import-intensive components, Vietnam’s FX pass-through is the highest in ASEAN. According to HSBC estimates, 100bp currency depreciation is associated with an approximate 0.25ppt increase in Vietnam’s headline CPI.

Indeed, previous episodes of a sharp depreciation of VND has been associated with a spike in inflation. Fortunately, the VND has been relatively stable in recent years, in part thanks to rapid accumulation of international reserves as a result of an improving current account position.

HSBC expect the USD/VND exchange rate to be steady in 2021, with an end-year forecast of VND23,100. 

Could Vietnam benefit from $1.9 trillion US fiscal stimulus package?

The $1.9 trillion US fiscal stimulus package waiting for approval will likely have positive spill-over effects on emerging markets. Vietnam expects to see the largest benefits in exports and the securities market. 

The Biden administration’s $1.9 trillion fiscal stimulus package is waiting for the approval of the US Senate. The package would include $750 billion for COVID-19-related expenses such as vaccines, $600 billion for direct allowances for households ($1,400 each), $400 billion for allowances for fiscally challenged families ($400 after each week of unemployment), and $150 billion for small businesses.

Economist Phan Minh Ngoc said that equivalent to 10 per cent of the US GDP, if it is approved, the package will “make a great impact on not only the US economy but others too, including Vietnam”.

Brookings Institution calculated that the fiscal stimulus package will add 4 per cent and 2 per cent to the world's largest economy in 2021 and 2022. In 2023, the US economy will rebound and reach the growth rates forecast before the pandemic.

Consumption demand is expected to recover in 2021 and 2022, as reflected by the 10 per cent increase in January brought about by the $300 billion first fiscal stimulus package carried out last December. As consumer expenditure makes up about two-thirds of the US economy, resulting in a GDP growth of 2.4 per cent in the same month, the highest rate since last June.

The US’ import turnover in January reached $260 billion, up 1.2 per cent on-year, the highest rate over the past year. Consumer goods led the imports with the on-month increase of $3.7 billion while automobiles and spare part imports grew $2 billion on-month.

Increased imports could well benefit Vietnam as a trade partner. In January, the export turnover of Vietnamese goods to the US hit $8.2 billion, up 70.3 per cent on-year and 6.2 per cent on-month, making up 28 per cent of the total export value of Vietnamese goods in January. Meanwhile, the import turnover of US goods to Vietnam also increased by 12.6 per cent on-year.

Additionally, volatility in overseas capital flows to emerging markets has soared. The ratio between stock market capitalisation and GDP, which Warren Buffet described as “the best single measure of where valuations stand at any given moment”, was 228 per cent on February 11, even higher than the pre-market figures of the dot-com crash in March 2000. In other words, the US securities market is at such a high value that an adjustment could be coming anytime soon.

As a result, capital flows could be rechannelled from the US to emerging markets like Vietnam where stock and bond prices are quite low and have growth potential.

“However, 'hot money' comes and goes easily. Therefore, the US fiscal stimulus package will extend potential risks for the Vietnamese macro-economy, including fluctuations in exchange and interest rates if capital flows to Vietnam is not controlled strictly,” said Ngoc.

Margin loans to securities firms on rise

Since the stock market is gaining ground, margin loans are becoming more popular, with some Vietnamese and foreign lenders betting bigger on securities-based loans.

A variety of stimulative efforts by the Vietnamese government to support the domestic economy has consequently created a springboard for stocks to surge. The fear of missing out has also pushed many local and foreign banks to allocate more funds into brokerages under the so-called margin loans, thus giving investors greater buying power.

The financial statements of 25 securities firms with large outstanding loan balances to customers showed that as of the end of 2020, their total debts reached VND84.97 trillion ($3.66 billion), an increase of 48.9 per cent against the beginning of the year and up 24.9 per cent against the third quarter of 2020. Meanwhile, short-term loans from banks were VND76.85 trillion ($3.31 billion), up 65 per cent against the beginning of this year and 28.6 per cent compared with three months earlier.

However, the closing term loan balance only reflects a part of the capital channel flowing into the securities industry in 2020. Securities firms have increased their loans during the period and paid the debt at the end to lower the balance.

A staggering 20 out of 25 securities firms have borrowed short-term loans from banks up to VND461.467 trillion ($20 billion), six times higher than the short-term loan balance at the end of the period. Meanwhile, domestic banks remain the main funding sponsors for securities firms, including those dominated by foreign financial groups.

According to company reports, Vietcombank is the leading capital backer for the stock market, with a rising amount of over VND27.51 trillion (over $1 billion) in 2020 or about five times the bank’s short-term loan balance for such companies.

Some securities firms that are backed by Vietcombank are SSI Securities Corporation (SSI) with VND17.35 trillion dong ($747.42 million), KB Securities Vietnam JSC (KBSV) at VND6.88 trillion ($296.29 million), ACB Securities Co., Ltd. (ACBS) at VND1.35 trillion ($58.14 million), and MB Securities JSC (MBS) at VND1.23 trillion ($52.97 million).

Trailing behind Vietcombank is BIDV with a loan amount of more than VND21.2 trillion ($914.11 million), four times higher than the short-term loan balance at the end of the period. BIDV offers large loans to SSI at VND14.1 trillion ($607.75 million), KBSV at VND1.829 trillion ($78.84 million), KIS Vietnam Securities Corporation (KIS) at VND1.827 trillion ($78.75 million), and Phu Hung Securities Corporation (PHS) at VND3.21 trillion ($137.93 million).

Vietnam Maritime Joint Stock Commercial Bank (MSB) had provided loans of VND6.08 trillion ($262 million) to securities companies, mainly KBSV and MBS. Meanwhile, VPBank had backed VND5.14 trillion ($221.51 million) of loans to KBSV, MBS, Techcom Securities JSC (TCBS), and ACBS.

In addition, Saigon-Hanoi Commercial Joint Stock Bank has sponsored Saigon-Hanoi Securities JSC. Vietnam International Commercial Joint Stock Bank and Tien Phong Commercial Joint Stock Bank also poured more capital into securities companies last year.

Some foreign financial institutions such as Wooribank, CTBC, Indovinabank, and Shinhan Bank Vietnam have actively backed securities firms in 2020. Wooribank had lent more than VND2.81 trillion ($121.16 million) to KIS, MBS, ACBS, and KBSV. Indovinabank has issued loans to securities firms such as MBS, KBSV, and TCBS.

Meanwhile, Vietnamese financial institutions are the main capital backers for securities firms, including those with large foreign investments and ratios from 50 to 90 per cent. For KBSV, up to 90 per cent of its loan value came from domestic banks. Meanwhile, this figure sits between 60 and 80 per cent for MBS, ACBS, PHS, and FPT Securities JSC.

Nguyen Tuan Anh, director of the Credit Department under the State Bank of Vietnam revealed that the floundering economy and soaring stock market have brought about a sharp increase in credit for stock trading, especially in the last two months of 2020. By the end of December, credit for the securities sector reached VND45.784 trillion (nearly $2 billion), up 49.37 per cent on-year. The figure, however, only accounted for a very modest proportion (0.5 per cent) in the total outstanding loans of the economy.

Anh emphasised that abundant resources have enabled banks to boost their loans to brokerages through sponsoring these companies to trade government bonds.

Tran Khanh Hien, head of the Analysis Division at VNDIRECT Securities believed that the current risk management of the banking system and brokerage have been much improved.

According to Circular No.36/2014/TT-NHNN, the total outstanding credit that commercial banks and branches of foreign banks extend to clients for stock investments and business is not allowed to exceed 5 per cent of the charter and allocated capital of commercial banks and foreign branches. “Moreover, investors are also aware of financial leverage-related risks, so the bad debt ratio arising from securities loans is relatively low,” Hien said.

Pepper farmers in dire need for direction for consumption

Farmers in the Southeast are entering the peak of the harvest season of black pepper in the 2020-2021 crop. Low pepper prices, declining yields, and high labor costs are causing many difficulties for pepper growers. It is time to come up with plans to reduce pepper growing area, convert crops, and supplement technologies.

Although it is in the harvest season, peppercorns have ripened profusely and vigorously and fallen around pepper vines, because of low pepper prices and rising labor costs, many black pepper farming households in Chau Duc District in Ba Ria - Vung Tau have been desperately looking for harvesters. There was a time when up to 90 percent of people in Quang Thanh Commune lived off black pepper. Mr. Pham Van Hai said that more than five years ago, his family had more than 2 hectares (ha) of black pepper. After harvesting and deducting expenses, a profit of a few hundred million was normal. However, in the past few years, the prices of black pepper plunged, so his family has gradually reduced the pepper growing area to only about one-third, and the fertilization and care have been at a moderate level. However, in the harvest season, although he searched everywhere, he only managed to find less than a dozen of workers to pick pepper for VND240,000 per day.

Similarly, after the Tet holiday, the family of Mr. Nguyen Van Man in Binh Gia Commune also desperately found people to harvest 4,000 square meters of pepper. Because his family cut the costs for fertilization and care, the peppercorn yields merely reached about 1.5 tons per 1,000 square meters. But if they did not harvest pepper, the output would be lower and even would have a bad crop next year. Therefore, despite high labor costs, many households still have to find people to harvest pepper to maintain their pepper plantations. With the prices ranging from VND51,000 to VND53,000 per kilogram as currently, pepper farmers find it difficult to make profits. According to the Chairman of Quang Thanh Commune Farmers' Association, in the past two years, from a locality with the largest pepper growing area in Chau Duc District with about 890ha, now there are only about 500ha left. Partly because the pepper vines were old, so farmers cut them off. Meanwhile, other farmers have switched to grow fruit trees, such as Thai jackfruit and durian, or industrial crops, such as cocoa and cashew. According to statistics, Ba Ria - Vung Tau Province currently has about 11,000ha of pepper, and the yield of most pepper plantations has decreased by over 50 percent compared to the previous year.

In Dong Nai Province, Cam My District, which is considered the capital of pepper, with an area of nearly 7,000 hectares, is also in the same situation. Although it is the peak of the harvest, this countryside is not as bustling as in previous crops. Many farmers chopped down pepper plantations to convert to other crops, such as jackfruit and pomelo. In Lam San Commune in Cam My District, there was an area of more than 2,200ha of pepper two years ago. But in this crop, there is only 1,500ha left. Mr. Truong Dinh Ba, Chairman of the Farmers Association of Lam San Commune, said that pepper yield dropped sharply this year. In recent years, pepper prices had been continuously plunging and now have reached the bottom, so many pepper growers feel discouraged and do not want to invest in pepper anymore. Currently, the purchasing price of pepper in Lam San Commune is about VND52,000-VND54,000 per kilogram. At this price, pepper farmers are suffering a loss of VND25,000-VND30,000 per kilogram compared to the production cost. The labor cost for harvesting pepper is about VND230,000-VND240,000 per day, but workers are not available. Amid this situation, many pepper farmers have bought nets and tarps and spread them on the ground to gradually collect fallen peppercorns.

Building a VietGAP standard production chain

Mr. Truong Dinh Ba said that despite the difficulties, many farmers are still sticking with black pepper. They have changed their production habits and switched to organic planting to increase product quality instead of running after productivity. Especially, they have joined in Lam San Export Cooperative. Therefore, this year, despite the impacts of the Covid-19 pandemic, the life of pepper growers participating in Lam San Cooperative remained stable. The cooperative purchased all pepper output of its members at a price higher than or equal to the market price.

Not only ensuring consumption, at the end of the crop, households participating in the cooperative also received a bonus of VND4,000 per kilogram of the amount of pepper that they had sold. According to Mr. Ba, this is a good model that the province needs to invest in maintaining and expanding. Moreover, Mr. Ba is currently joining the organic pepper production club to improve the quality of pepper, aiming at fastidious export markets. Although the organic pepper growing model is under trial, initially, there are positive signs.

Vice-Chairman of the People's Committee of Dong Nai Province Vo Van Phi said that the province currently has a fairly large pepper growing area of 12,000 ha, and pepper is in the group of key crops. In the coming time, the province will support pepper growers to build a production chain from clean production to consumption following the VietGAP standards for export. At the same time, localities and departments need to have practical support policies to help farmers to overcome difficulties and contribute to the sustainable development of pepper plants.

In Ba Ria - Vung Tau Province, with organically-grown seedless pepper, Bau May Agriculture, Trading, and Tourism JSC exported tens of tons of preliminarily processed pepper at the price of VND22 million per kilogram. Besides, the company also creates many products under the Bau May brand name, such as pickled fresh pepper, pickled green pepper, and partially-dried pepper for domestic consumption. According to Mr. Lam Ngoc Nham, Director of the company, the value of deep-processed products increases by about 250 times compared to that of the unprocessed ones. Many foreign partners have visited the company’s pepper plantation and placed orders. Particularly, a Japanese partner signed a contract to buy pepper products from Bau May Cooperative for five years.

Japan consumed Vietnamese shrimp most last year

Vietnam retained its position as the largest shrimp supplier to Japan last year, with its exports to the market enjoying a boost compared to the previous year, according to the Ministry of Industry and Trade (MoIT). 

The MoIT reports Vietnam shipped 55,050 tonnes of shrimp to Japan last year, accounting for one fourth of the latter’s imported volume. 

The figure represents drops of 5.3% in volume and 7.6% in value to JPY64.4 billion, compared to 2019.

The adverse impact of the COVID-19 pandemic can be seen as the main factor in causing the average import price of shrimp into Japan last year to decrease by JPY78.7 per kilo to JPY1,108 per kilo, the MoIT says.

According to the MoIT’s Import-Export Department, Vietnam exported 137,000 tonnes of aquatic products in February worth US$400 million, marking a drop of 17.2% in volume and 20% in value compared to the same period from last year. 

During the opening two months of this year, Vietnam shipped 259,100 tonnes of aquatic products abroad with a value of US$1.011 billion, representing an annual increase of 5.5% in volume and a fall of 0.7% in value. 

Bright outlook for domestic timber industry

Vietnam should develop a generation of young entrepreneurs in the timber industry, and consider it a sector for startups, said President of the Handicraft and Wood Industry Association (HAWA) of HCM City Nguyen Quoc Khanh.

At a recent conference between businesspeople and Prime Minister Nguyen Xuan Phuc, Khanh said Vietnam now ranks second worldwide in wood export, even outstripping Italy and Germany.

“We have completed the five-year target set by the Prime Minister in 2018 two years in advance,” he said.

Despite the COVID-19 spread, Vietnam earned 13.17 billion USD from wood exports in 2020, up 16.4 percent year-on-year, surpassing the yearly target by 5.4 percent, Khanh said, adding that the sector ran a trade surplus of 10 billion USD last year.

He stressed that it is the only industry in Vietnam that has posted double-digit growth over the past 18 years.

According to Khanh, about 1 million labourers are working in the sector, and the number is predicted to stand at around 2-3 million by 2045.

Emphasising the important role by the industry to the national economy, Khanh expressed his belief that the sector can maintain the strong growth and its present position in the world market in the next decades.

However, to achieve the goal, the industry should continue to engage in environmental protection, step up forestation and ensure markets for farmers’ products, he suggested.

He pointed to the ample space in the world market for the Vietnamese timber industry, as it now makes up only 6 percent of the 450 billion USD global market.

Khanh also suggested more investments in technology and digital transformation, and raising added value for the sector./.

Tightened regulations needed for rising e-commerce activity

Accelerating e-commerce management policies in Vietnam may be a necessary step to create an equal footing with physical retailers, but the multitude of trading platforms and a lenient approach may throw stones in the path of lawmakers.

Bruno Jousselin, managing director of MM Mega Market Vietnam, said that in comparison with e-commerce platforms, traditional retail businesses such as MM Mega Market have been fulfilling plentiful regulations related to goods.

“For now, when listing packaged products within any supermarket distribution system, these need to oblige with the strict regulations of the Vietnamese government and MM Mega Market Vietnam’s MM Quality Assurance Department,” said Jousselin. “Those include a quality profile – including self-declarations and documents proofing conformity with regulations – and labelling information that follows statutory requirements and shows the origin of products.”

In Vietnam, there are no official regulations requiring sellers to fulfil criteria regarding an item’s origin and quality. Furthermore, overseas vendors potentially take advantage of gaps in the legal framework and often sell low-quality goods. Most of the current e-commerce platforms are running under the customer-to-customer (C2C) model, playing an intermediate role, and have to be responsible for buyer-related problems. That is also the part of the reasons behind the rampage of fake and low-quality goods on the platforms.

Although some sites have been operating with business-to-customer (B2C) models, which forced them to take care of the goods’ quality of the end-users, the number of B2C vendors remains relatively small against the C2C ones. As a result, quality issues continue to grow.

Last month, intellectual property advisor Rouse based in the United Kingdom noted that Shopee “was reported by stakeholders in 2020 for allowing high volumes of counterfeit goods” including watches, clothing, food and beverages, and many more items. “Their platforms in Malaysia, Taiwan, Thailand, Indonesia, and Vietnam offer more counterfeit goods compared to other local national platforms,” Rouse said.

It stated that prominent issues with Shopee include “a lack of responsiveness, inconsistency, and failure to deter and apply a repeat infringer policy”.

Tran Tuan Anh, managing director of Shopee Vietnam, told VIR previously that the platform has constantly updated its filter system aiming to remove fake goods right after receiving notice. “We also focus on investing in infrastructure and specialised human resources to expand the ability of monitoring and managing selling activity,” he said.

In a move to redeem its reputation, Shopee together with competitor Lazada signed an MoU with several international and local brand owners in the Philippines, including Unilever Philippines, GlaxoSmithKline, Globe Telecom, and more. The MoU requires the e-commerce sites to restrict sale of counterfeit goods online “in a timely and efficient manner” when these are reported by brand owners, as well as to verify and maintain data of sellers and share any infringer’s information with authorities. A similar move in Vietnam could help Shopee regain some of its customers’ trust.

Recognising the various inadequacies in the legal framework, the local government since last year has carried out legal revisions. Earlier this month, the government approved the development of a decree about the customs administration on imports and exports through e-commerce transactions and assigned the Ministry of Finance and other agencies to build required regulations, with the first draft expected in the last quarter of this year. The Ministry of Industry and Trade previously published the amended Decree No.52/2013/ND-CP that supplements some responsibilities of the operators of e-commerce platforms where overseas vendors are running the business.

Assessing the potential efficiency of the amendment, lawyer Dang Van Cuong from Chinh Phap Law Office said, “Stiffening conditions in entering the market will enhance qualified merchants’ business in Vietnam, and also help to eliminate fraud on online shopping sites. Also, each platform is different, so local authorities should research carefully to complete the regulation.”

Vietnam may rely on West African crude oil as domestic output falters: S&P

Nigerian and Angolan grades are seen as cheaper than Southeast Asian oil.

Vietnam is poised to actively venture into Africa to secure a regular dose of light and medium sweet crude supply for the coming years, as the country's domestic crude production continues to decline due to naturally aging fields, according to S&P Global Platts.

Meanwhile, state-run Binh Son Refining and Petrochemical (BSR) finds Nigerian and Angolan grades cheaper than Southeast Asian oil.

BSR, the operator of the 148,000 barrel per day Dung Quat refinery in central Vietnam, is under pressure to find a steady stream of feedstock supply from external sources as the supply of various domestic crude grades that primarily feeds the plant is running dry.

State-run oil firm PetroVietnam produced 11.47 million metric ton of crude oil in 2020, down 12.4% from 2019 and marking the fifth consecutive yearly decline. Vietsovpetro, a stakeholder and operator of some of major domestic upstream projects, produced estimated 3.42 million metric ton of crude oil in 2020, down 8.8% from a year ago, the company said.

Dung Quat was originally designed to process primarily domestic crude grades, including Bach Ho Light and Bach Ho Heavy, Su Tu Den, Chim Sao, Thang Long, as well as some import grades from neighboring producers, including Malaysia's Labuan and Brunei's Seria Light.

BSR had in the recent past picked up a few odd light sweet crude cargoes from the Mediterranean market and the US to cover Dung Quat's short position, but for a more steady and regular flow of feedstock procurement, the state-run company is looking at Africa for the right answer.

According to S&P Global Platts, the company is currently testing Qua Iboe crude from Nigeria and Cabinda crude from Angola, for its Dung Quat refinery.

The trial testing of the two West African grades is part of BSR's strategy to diversify its feedstock choices and reduce dependence on domestic grades including Bach Ho, the company said.

Reflecting Vietnam's faltering upstream output and its growing dependence imports for refinery feedstock requirements, the country imported 11.74 million metric ton of crude oil in 2020, up 51% from 2019.

In November 2019, the government had removed 5% import tax on crude oil to support the refining sector's growing reliance on more feedstocks from external sources and suppliers.

Vietnamese rice records new price peak

The prices of Vietnamese rice has reached a new record of US$567 per tonne, whilst continuing to exceed regional peers such as Thailand, India, and Pakistan, according to figures released by the Ministry of Agriculture and Rural Development.

This comes following the Vietnam Food Association (VFA) unveiling on March 7 that local rice export prices reached between US$513 and US$517 per tonne for 5% broken rice and between US$488 and US$492 per tonne for 25% broken rice.

Other types of rice such as Jasmine fluctuated from US$ 563 to US$567 per tonne, whilst 100% broken rice is being sold at between US$438 and US$442 per tonne.

With regard to the same type of rice, the price of Vietnamese rice is being traded at US$5 to US$7 per tonne higher than that from Thailand, and is far exceeding that of both India and Pakistan.

In comparison to regional peers, the price of 5% broken rice in Thailand is currently being put on sale at between US$508 and US$512 per tonne, while Indian and Pakistani rice is being traded at US$398 to US$402 per tonne and US$438 to US$442 per tonne, respectively.

The VFA believe that free trade agreements (FTAs) has served to open doors to boost Vietnamese rice exports.

During the opening days of the year, several companies won a large bid from the European market and other locations participating in the Regional Comprehensive Economic Partnership (RCEP).

Nguyen Nhu Cuong, director of the Department of Crop Production, said the nation exported over 608,768 tonnes of rice of all types worth US$336.1 million during the opening two months of the year, representing a decline of roughly 34% in volume and a rise of 22% in turnover.

Vietnamese rice has so far failed to achieve such a high price due to its high value and improved quality, Cuong noted.

Assoc. Prof. Dr. Dao The Anh, deputy director of the Vietnam Academy of Agriculture Sciences, said this year is likely to witness rice exports continue to enjoy impressive growth in value and outstrip other countries, including Thailand.

Furthermore, the enforcement of the EU-Vietnam Free Trade Agreement (EVFTA) is anticipated to help the country make further inroads into the European market.

Dr. Anh therefore advised Vietnamese enterprises to seize upon opportunities to dominate this market amid regional rivals facing an array of difficulties.

He also underlined the need to focus on overall product quality and form close linkages between enterprises and farmers as a means of establishing a stable material zone.

Vietnam – Algeria – Senegal matchmaking seminar to take place next month

Over 100 representatives of organisations and enterprises from Vietnam, Algeria and Senegal are expected to attend a virtual matchmaking seminar on farm produce among the three countries next month.

Co-hosted by the Vietnamese Ministry of Industry and Trade’s Department of Trade Promotion (Vietrade) and Asia-Africa Market Department, the event will take place from April 5-6, connecting three main locations – Hanoi (Vietnam), Algiers (Algeria), and Dakar (Senegal).

It is expected to provide an opportunity for the three countries to introduce about their strengths, strengthen cooperation in trade and investment, and connect their agricultural and food producers amid the ongoing COVID-19 outbreak.

According to the General Department of Vietnam Customs, Vietnam’s exports to Algeria totalled around 150 million USD last year with main export items including coffee (94 million USD), fishery products, pepper, rice, cashew nut, aluminium and other metals, chemicals, fabrics, footwear and machinery. Vietnam’s imports from the African country, mostly chicken feet, scrap paper, cattle feed and pharmaceuticals, only valued about 3 million USD.

Meanwhile, in 2019, Vietnam shipped to Senegal more than 52.5 million USD worth of goods, mainly rice, pepper, confectionery, textile and garment, fruits and vegetables, fishery products, vehicles and parts. The Southeast Asian country spent some 41.3 million USD on imported goods, mostly raw cashew nut, cotton, fishery products and cattle feed, from Senegal.

Last year, due to impacts of COVID-19, Vietnam’s shipments to Senegal plunged to 39 million USD, nearly 38.5 percent of which came from rice. The African nation is in need of 800,000 to 1 million tonnes of imported rice annually for domestic use and re-export./.

Da Nang to step up economic diplomacy over next five years

The central city of Da Nang will press ahead with the research and forecasting of the world’s political situation and new trends in global economic transformation to serve its development policy making over the next five years.

This is one of the major orientations announced at a meeting on the city's economic diplomacy jointly held by the municipal People’s Committee and the Ministry of Foreign Affairs on March 12.

Vice Chairman of the municipal People’s Committee Ho Ky Minh said Da Nang will put forth long-term plans, orientations, and key tasks for economic diplomacy between 2021 and 2025 in order to realise the city’s socio-economic development plan by 2030.

It will also optimise the support of ministries and centrally-run agencies, use existing resources and advantages, and pay more attention to multilateral diplomacy to step up economic integration and exchange, and international trade in line with its development orientations, targets, and demand, while effectively utilising new-generation free trade agreements.

The city will also revamp methods of economic diplomacy and work to raise the efficiency of investment, trade, and tourism promotion activities in the new circumstances.

Da Nang will make efforts to improve the international integration capacity of local agencies, individuals, and businesses, and set up links with overseas Vietnamese, experts, enterprises, and foreign partners to spur the city's socio-economic development.

The city attracted 530 FDI projects worth over 1.04 billion USD over the last five years, six ODA projects valued at 5.93 trillion VND (256.36 million USD), and 351 programmes, projects, and non-governmental aid, with total funding of 598 billion VND.

It also established friendship and cooperation relations with 45 localities in 20 countries and territories, and joined international networks such as CityNet, Asia Pacific City Summit, and ASEAN Smart City Network.

Mekong Delta’s first solar power plant underway in Hau Giang

A solar power plant was put into operation in Hau Giang province on March 12, the first of its kind in the Mekong Delta.

Covering 33 ha stretching Hoa An and Long Binh communes in Phung Hiep district and Vinh Tuong ward in Long My town, the plant received investment of 700 billion VND (30.3 million USD) from the Halcom Vietnam JSC and Japan’s Shizen Energy Group.

It features 79,000 solar panels and is expected to generate some 80 billion VND in annual revenue.

Chairman of Halcom Vietnam Nguyen Quang Huan said the project is just the beginning of its long-term investment plan in Hau Giang, adding that it marks the firm’s new successful step towards generating 300-500MW of clean energy by 2025.

Vice Chairman of the provincial People’s Committee Nguyen Van Hoa said the project is useful for environmental protection and natural resources conservation and will contribute to job creation, higher budget revenues, and socio-economic development in the province.

Solar power development matches local socio-economic development orientations for 2020-2025, he noted, while asking that investors consider project expansion as well as investment in other solar power projects in Hau Giang./.

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

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