Large livestock enterprises are expected to benefit greatly when the regulation on locations not permitted to run livestock farms takes effect from 2025.

But it's feared the same regulation will cause problems for small households running pig farms.

The Law on Livestock that was effective from 2020 has an article on prohibiting to conduct livestock production in areas not allowed for livestock production in cities, towns and living quarters; except raising ornamental animals and raising animals in the laboratory without polluting the environment.

According to the law, that regulation will come into effect from January 1, 2025 with localities given five years to relocate unsuitable livestock facilities.

Tens of thousands of livestock facilities nationwide will have to move out of residential areas or cease operations. This is considered a great change of the livestock sector.

According to analysts, the new regulation will force small livestock farms to leave, making way for large-scale facilities. This is also an inevitable trend for the livestock industry to be standardised.

According to the January 2024 report released by Agribank Securities Joint Stock Company (Agriseco), many livestock households will have to stop their production. The Ministry of Agriculture and Rural Development has a draft to support those livestock households in the relocation of their farms. But, up to now it has not been approved.

With this change, large listed enterprises of the livestock industry have actively invested in expansion to increase capacity.

Notably, Dabaco Vietnam Group Joint Stock Company (stock code: DBC) and BaF Vietnam Agriculture Joint Stock Company (stock code: BAF) have invested in a series of new livestock farms to increase capacity.

Dabaco has invested in increasing capacity with a series of large-scale livestock farm projects. They include a livestock project with capacity of 5,600 sows and 77,400 commercial pigs in Thanh Hoa, and Dabaco Phu Tho pig breed project's Phase 3 with a capacity of 4,800 sows and more than 70,000 commercial pigs. The total capacity of the two projects increases by nearly 25 per cent.

The large businesses also have an advantage of having food supply chain from farm to table, being less affected by diseases than the supply from livestock households, thanks to ensuring hygiene and safety in production.

In addition, the large businesses will not sell off due to having the disease, reducing price fluctuations in the market.

According to experts, to have stable development in the livestock industry, localities need to actively implement the Livestock Law and livestock development strategies. They need to focus on developing a market-oriented livestock industry, promoting the strengths of each region and each key livestock to improve production efficiency.

They should also promote a high-tech livestock industry, develop key products associated with brand construction and development, and continuously expand livestock production applying VietGAP standards.

In the Livestock Development Strategy until 2030, Vietnam strives to have a total pig herd of 30 million, produce about 6 million tonnes of meat (pork accounting for 60%), and export 15-20% of pork output total.

In 2024, the livestock industry aims to increase production value by about 4-5% compared to 2023, and the proportion of livestock in the overall agricultural production is estimated to reach 28-30%./.

Electricity tariffs subject to review every three months

Reviews of electricity tariffs will be done every three months, starting May 15, according to a recent Government decision.

Deputy Prime Minister Le Minh Khai yesterday, March 26, signed a decision regulating the mechanism for adjusting the average retail electricity tariff. Effective from May 15, 2024, Decision 05 replaces Decision 24 signed in 2017.

As per the new decision, the interval for electricity tariff adjustments has been reduced from six to three months. The average electricity tariffs are calculated quarterly based on production costs.

If the recalculated tariffs decrease by 1% or more compared to current rates, EVN would cut tariffs. On the contrary, if tariffs increase from 3% to below 5%, upward adjustments would be made accordingly, with reports submitted to the Ministry of Industry and Trade (MOIT) and Ministry of Finance (MOF) for review within five working days.

For increases ranging from 5% to less than 10%, EVN must seek approval from the Ministry of Industry and Trade before adjusting tariffs.

If increases exceed 10% or leave significant macroeconomic implications, the Ministry of Industry and Trade will conduct thorough inspections and seek input from relevant ministries and agencies, presenting the case to the Prime Minister for consideration.

The PM has also tasked the Ministry of Industry and Trade with guiding EVN in power tariff calculations, implementing electricity tariff adjustments, and overseeing inspection and supervision procedures.

Revised Land Law helps boost Vietnam’s investment appeal

The revised Land Law, which was passed by the Vietnamese National Assembly in January 2024, is expected to lure capital from overseas Vietnamese (OV), said Chairman of the Vietnamese Business Association in Australia  (VBAA) Tran Ba Phuc.

Talking to the Vietnam News Agency’s resident correspondents in Australia, Phuc hailed the amended law, saying it provides greater assurance for OVs by explicitly guaranteeing their rights. This serves as a motivation to encourage them to return to the home country and invest more boldly.

Phuc, who is also Vice Chairman of the Business Association of Overseas Vietnamese (BAOOV), noted that the law has been revised towards greater transparency and more beneficial to OVs.

It is a step in the right direction, adding that it is relevant to the current situation of the country as well as the Vietnamese community abroad, aiming to stimulate economic breakthroughs and create favourable conditions for domestic enterprises and OVs.

Phuc viewed these changes as a reflection of the Vietnamese government's open policy in attracting capital and resources from abroad, as well as fostering connections between OVs and the homeland.

Many OVs want to contribute to the development of the homeland through remittances and reinvestment. Real estate offers a particularly attractive avenue for them to do so.

The revision also underscores the Vietnamese Party and State’s consistent policy of considering OVs an inseparable part of the nation, he stressed.

Phuc suggested that the Vietnamese Government should intensify the dissemination of information about the revised Land Law and show its earnest and active implementation of the law in line with the outlined spirit to instill motivation and confidence among residents as well as the Vietnamese community and foreign businesses abroad who will prepare plans in the coming time and encourage their involvement.

He predicted that the real estate market in Vietnam will recover positively, becoming more vibrant in the coming years, thereby bringing benefits to the people and domestic businesses as well as OVs who are living and working in countries and territories around the world./.

VinFast inks cooperation deals with 15 Thai agents at BIMS 2024

Leading Vietnamese electric vehicle (EV) maker VinFast officially signed its first letters of intent for cooperation with 15 dealers in Thailand on March 27. 

The signing ceremony took place within the framework of the ongoing Bangkok International Motor Show (BIMS) 2024 which is running from March 27 to April 7.

The signing marks an important milestone in expanding VinFast’s distribution network and enhancing its presence, thereby affirming the position and attractiveness of the Vietnamese EV brand in the region's leading auto market.

Under the letters of content, VinFast and its agents will actively work towards exploiting 22 stores, with a specific focus on major roads in the Bangkok Metropolitan Region.

Along with Bangkok and five neighbouring provinces in the Bangkok Metropolitan Region, VinFast's dealer network will also expand to other major cities such as Chiang Mai, Khon Kaen, Ubon Ratchathani, Ayutthaya, and Chonburi.

Vu Dang Yen Hang, general director of VinFast Thailand, emphasised that the partnership with reputable and experienced dealers in Thailand is anticipated to strengthen the firm’s presence in the region, whilst also serving as a solid foundation for the firm’s future development in the Thai market.

“We also aim to expand the EV distribution network to major cities in Thailand, in order to keep pace with the strong green transportation revolution in the country and globally,” she noted.

Dealers in Thailand plan to sell VinFast EV models such as the VF e34, VF 5, VF 6, and VF 7 in the first phase, immediately after these models debut in the market. Furthermore, they will also sell VinFast electric motorbike products.

According to the schedule, VinFast will expand its operations to at least 50 countries worldwide this year. In addition to key markets like the United States, Canada, and Europe, the automaker is seeking to penetrate deep into neighbouring countries in Asia such as India, Indonesia, Thailand, the Philippines, as well as the Middle East and Africa.

VinFast has brought numerous models to BIMS 2024, including the mini-SUV VF 3; the VF 5, VF e34, VF 6, VF 7, VF 8, and VF 9; as well as the A-SUV to E-SUV segments.

Most notably, the VF Wild, an electric pickup truck concept that garnered global attention upon its debut at CES 2024, is also on display at the event.

Conference promoting mariculture to take place next month
 
 The Conference on Sustainable Mariculture with a View from Quảng Ninh will be organised from March 31-April 1 in Hạ Long City of Quảng Ninh Province, said Nguyễn Minh Sơn, director of Agriculture and Rural Development Department of Quảng Ninh Province.

The conference with the theme "Mariculture for a Green Source of Life for Future Generations" organised by the Ministry of Agriculture and Rural Development, the People's Committee of Quảng Ninh Province and Nông Nghiệp Việt Nam (Việt Nam’s Agriculture) newspaper, expects to welcome 300-350 Vietnamese and international participants.

The conference aims at accelerating the implementation of the project on marine farming in Quảng Ninh Province, identifying the current situation of mariculture in the world and in the country, removing difficulties in licensing and assigning marine areas for aquaculture in Quảng Ninh and the whole country.

The conference will also introduce the potential, strengths, mechanisms and policies to attract investment in developing marine farming in an industrial, modern and multi-value direction, and consult with experts and scientists, and domestic and foreign businesses to promote the sustainable development of marine aquaculture in Quảng Ninh Province.

Trần Đình Luân, director of Fisheries Department, hoped that the conference will be a bridge for management agencies, experts, scientists, businesses, organisations and individuals to evaluate the overall situation of marine farming in Việt Nam as well as in the world with the goal of contributing to the development of a sustainable marine farming industry. 

Business environment reform needs further promotion: expert

Ministries, sectors and localities need to drastically improve the business environment, including improving the efficiency in implementing reform.

That was the message from Nguyễn Thị Minh Thảo, head of the Business Environment and Competitiveness Research Department at the Central Institute for Economic Management (CIEM).

In addition, improving the business environment should be associated with responsibility of the leaders of organisations, she said.

Deputy Minister of Planning and Investment Trần Duy Đông said this year had already seen a number of difficulties for businesses. In January alone, the number of businesses withdrawing from the market nearly doubled compared to those entering.

On January 5, the Government issued the Resolution 02 to promote further this reform, Đông said, to strengthen confidence of investors and enterprises and arouse entrepreneurial spirit to enhance the economic recovery and development.

Resolution 02 requires ministries, sectors and localities to focus on removing legal inadequacies in implementing investment projects. They need to improve the quality of reform for the list of conditional business investment industries and business conditions, and effectively deploy the national single-window information portal.

They also have to complete policies on promoting investment, production and business associated with innovation and digital transformation, sustainable development and the quality of business development services.

According to Thảo from CIEM, the resolution is an encouragement to the business community, creating a driving force to continue carrying out business investment activities. This resolution also creates pressure for the ministries, sectors and localities to make changes for the business community as well as the socio-economic development.

She believes to successfully implement the Resolution 02, the participation of the association and business community is necessary to identify challenges, thereby finding appropriate solutions to improve the business environment.

According to Đậu Anh Tuấn, deputy general secretary of Việt Nam Chamber of Commerce and Industry (VCCI), in Resolution 02, the Government focuses on the capacity and competitiveness of domestic private enterprises, with the goal of increasing the number of newly established private enterprises and minimising the number of enterprises leaving from market. Besides removing market difficulties, the difficulties from mechanisms and policies should be reduced.

Among the solutions, the Government requires ministries, branches and localities to proactively and regularly review the existing regulations and procedures and then propose the removal of contents that are not beneficial to the production and business activities of enterprises.

The policy at this resolution is that Vietnamese goods, businesses and economy can only have more competitiveness if the legal system is simpler, more convenient and more competitive than other regional countries.

Another new point in this resolution is to require the businesses to hold proactively periodic dialogues with VCCI and business associations to point out inadequacies in legal regulations that need to be overcome.

To achieve high growth momentum for the whole year, cutting barriers to the business environment and institutional reform are important tasks.

Authorities need to carry out many other solutions to continuously increase the competitiveness of the business environment, such as improving quality of infrastructure and human resources, and promoting domestic industrial production.

In particular, they should focus on two main groups of solutions on reducing business costs along with reforming law enforcement.

The authorities at all levels need to step up to improve the quality of policy enforcement, because if the policy is good but not implemented well, the efficiency of that policy is not high, according to the VCCI official.

The Pháp Luật TP.HCM (HCMC Law Newspaper) quoted Deputy Minister Đông as saying that many localities had dialogues with the businesses so the latter can directly report and make recommendations to the local leaders.

The ministry always wants business associations, commodity associations and the business community to actively participate in having criticism, building policies and reporting on problems and difficulties, according to Đông.

They need to proactively propose recommendations relating to policies and policy enforcement to ensure effective state management, while creating convenience and safety for production and business activities of enterprises.

The ministry will coordinate closely with ministries, sectors, localities, the business community and relevant parties to promote institutional reform, create an open, favourable and safe business environment to create quick changes in the economic recovery and development. 

Central bank revises regulations on foreign currency transactions

The State Bank of Vietnam (SBV) has revised a circular regulating foreign currency transactions to make it more flexible and proactive in managing the foreign exchange rate in response to changes in domestic and international market conditions.

The draft circular recently published for comments amends Circular 02/2021/TT-NHNN stipulating foreign currency transactions on domestic foreign currency market among banks authorised to make foreign currency transactions. 

According to the SBV, market conditions, exchange rate levels, and domestic and international interest rate differences are changing rapidly and unpredictably. Therefore, the SBV wants to amend the current policy to increase flexibility and initiative in managing monetary and exchange rate policies in response to changes in domestic and international market conditions.

In some periods such as in 2022, the narrowing difference between Vietnamese đồng- and US dollar-denominated interest rates limited the room for the market to determine the USD/VNĐ forward exchange rate, which might affect market liquidity.

The circular has detailed regulations on issues related to foreign exchange management according to market developments, such as policy regulations on forward exchange rates and bases for determining forward exchange rate cap, which may limit the SBV's ability to react to market fluctuations.

Therefore, in order to maintain flexibility and initiative in management and create more favourable conditions for market operations, the SBV has reviewed and amended Clause 3 of Article 5 under Circular 02/2021/TT-NHNN.

Instead of the current specific stipulations in the circular, forward exchange rate between the đồng and the dollar in forward transactions, and forward transactions in swap transactions will be agreed upon by the parties involved in the transaction and in accordance with regulations issued by the SBV in a given time under the draft circular.

The SBV's proposed change aims to create a basis for more flexible and proactive intervention in the foreign currency market through buying and selling dollar futures with banks. Besides, through foreign currency forward transactions, the SBV can also affect the dollar- and đồng-denominated interest rate difference in the interbank market.

The USD/VNĐ exchange rate has increased sharply in the first months of this year and is trading at a historic high.

The dollar buying and selling price at Vietcombank, the bank with the largest foreign currency transaction scale in the Vietnamese banking system, was listed at VNĐ24,590 and VNĐ24,960, respectively, on March 22. This was the highest dollar transaction price in Vietcombank's history, up by about 2.2 per cent compared to the beginning of this year.

At other banks, the dollar selling price is currently listed in the range of VNĐ24,950 - 24,960.

The exchange rate has still shown no signs of cooling down though the SBV has continuously issued bills in the past nine trading sessions, with the total cumulative winning volume reaching nearly VNĐ130 trillion. 

Việt Nam among SEA markets embracing mobile wallets

Việt Nam has emerged as one of the leading Southeast Asian markets embracing mobile wallets as the preferred payment method, a trend set to drive the growth of digital finance, according to Visa, a global leader in digital payments.

During a presentation of its Consumer Payment Attitudes (CPA) study, the company shared insights on Việt Nam's evolving payment landscape, showcasing the increasing shift towards cashless transactions and providing an overview of the future of retail in the country.

Visa disclosed that approximately four out of every five Vietnamese consumers utilise mobile wallets, with Gen X and more affluent individuals serving as key influencers, positioning Việt Nam as a frontrunner in mobile finance adoption.

At the event, Dung Đặng, Visa's country manager for Việt Nam and Laos, revealed that by the year's end, all Visa cards issued in Việt Nam will be contactless-enabled, and all local banks are equipped to accept such cards.

"The study's findings validate the growing preference for contactless transactions, evidenced by a notable 53 per cent surge in contactless transactions on Visa cards and a 19 per cent increase in Visa card purchases. Moreover, the significant rise in the value of cross-border transactions showcases heightened regional connectivity and economic activity. Through continued collaboration with partners and stakeholders, Visa is committed to advancing digital payment solutions and delivering seamless, secure payment experiences for consumers," said Dung.

Visa also highlighted the transitioning payment landscape in Việt Nam from cash to digital transactions. A majority of Vietnamese respondents, 56 per cent, shared that they now carry less physical cash compared to a year ago, signaling a progressive shift towards embracing modern financial technologies.

The adoption of cashless payment methods, particularly mobile wallet payments, is on the rise among merchants in various sectors, including food and dining, retail shopping, and convenience stores, reflecting changing consumer preferences.

The retail experience is evolving with merchants incorporating artificial intelligence technologies to boost customer engagement and enhance sales.

Real-time payment solutions have gained traction in Việt Nam, showcasing the nation's embrace of cutting-edge financial technologies. These solutions offer enhanced convenience and efficiency, propelling further digitisation of the economy.

In the Vietnamese market, real-time payments are increasingly popular, with a significant number of consumers leveraging such services for various purposes, including cross-border transactions, peer-to-peer transfers, merchant payments, and bill settlements.

Moreover, Buy Now Pay Later (BNPL) services are gaining popularity among Vietnamese consumers due to their flexible payment options, which drive consumer engagement and convenience.

Việt Nam's ongoing shift towards cashless payments presents vast opportunities for economic advancement and innovation, unlocking new possibilities for consumers and businesses as the country progresses towards becoming a fully cashless society. 

Vietnam Airlines signs global communications deal with T&A Ogilvy

Vietnam Airlines has signed an agreement with T&A Ogilvy as its global communication partners for 2024-2025 period to run advertising campaigns in the Vietnamese and international markets.

The partnership aims to enhance communication and strengthen interaction with customers through innovative campaigns.

The deal is expected to bring tangible results, contributing to market stimulation as the Vietnamese aviation industry recovers and accelerates post-pandemic. According to the International Air Transport Association, the Asia-Pacific aviation market, including Vietnam, is anticipated to fully recover by the end of 2024. By signing the partnership, Vietnam Airlines and T&A Ogilvy set to enhance and enrich customer experiences at every touchpoint, following the motto of “Customer Centric” in all the products and services.

Vietnam Airlines is looking to elevate services both on the ground and in the air. Thriving to become the leading digital airline in the region, Vietnam Airlines has upgraded its technical infrastructure, website, and mobile apps, enabling customers to be proactive throughout the entire process of booking tickets, tracking luggage, changing itineraries, or purchasing additional services.

Recently, the airline has digitalised menus for meals and beverages on both domestic and international flights, ensuring faster and easier customer satisfaction. These attempts have resulted in Vietnam Airlines being honoured as a “5-star international airline” (2023) by The Airline Passenger Experience Association.

Major US groups taking long-term investment view

As Vietnam and the US enter a new phase of economic relations, American companies are preparing to offer an expansion in investments.

Intel Products Vietnam joined a huge business delegation to Vietnam last week, led by its vice president and general director Kim Huat Ooi, to meet with Vietnamese Deputy Minister of Trade and Industry Nguyen Sinh Nhat Tan.

The delegation included well-known names such as 3M, Abbott, Amazon, Bell, Chubb Life, Coca-Cola, and many others.

Ooi said that Intel has carried out initiatives to reduce power use at its factory and wants to do more, but is waiting for more specific support to improve the company’s operational efficiency in Vietnam.

Having been operating in Vietnam since 2006 with a total investment of $1.5 billion, its chip factory has seen success, with total export value at $10-11 billion in 2023, contributing to enabling Vietnam to join the global semiconductor supply chain.

Semiconductor production is among the most appealing areas for US businesses in Vietnam currently. While Intel, Meta, Synopsys, and Qualcomm are also making strong moves in the local industry, the list of interested US companies continues to expand. For example, semiconductor manufacturing equipment provider Lam Research and Seojin of South Korea announced a collaboration in chip production in Vietnam on March 20.

Vietnam’s growing attention to developing AI, the vehicle industry, and semiconductors, as seen through a number of new policies and strategies, gives motivation for foreign-led enterprises.

At last week’s Vietnam Business Forum, Prime Minister Pham Minh Chinh said, “Vietnam aims to prioritise high-tech and environmentally friendly projects in its attraction to create motivation for digital transformation, green transformation, and circular economy development. This is in addition to emerging fields such as semiconductor chips, AI, hydrogen, and others to deeply participate in regional and global production and supply chains.”

According to the US-ASEAN Business Council, US companies are eager to explore new opportunities and potential in Vietnam. Moreover, the US business community seeks to identify ways to support the implementation of initiatives and deliverables outlined in the upgraded Vietnam-United States relations to a comprehensive strategic partnership, which occurred last September.

US Ambassador to Vietnam Marc Knapper said the US business delegation to Vietnam last week not only reflected the commitment of the government but also the initiative of the US private sector.

“Vietnam has a crucial position in the global supply chain to ensure peace, security, and prosperity for the region,” he said. “US businesses are interested in Vietnam and want to promote cooperation in many fields to have good products that serve the interests of both countries. Now is a critical time in the relationship between the two countries, and towards the goal of enhancing long-term relations.”

US-Vietnam relations in the past six months have already helped to deepen commercial, economic, and tech ties between the two countries.

Vietnam attracted $626.32 million worth of US funding in 2023, being among the top 10 foreign investors in the country. More importantly, despite considerable challenges posed by headwinds in the global economy, the US remains Vietnam’s biggest export market, driving growth throughout Vietnam.

Le Net, a lawyer at LNT & Partners said, “US businesses have taken the last few months to seek more ways to support future initiatives. I have been working with a number of new clients from the US who want to enlarge investment in the country, while some others are studying the market. There will probably be a big rise in US funding in the future.”

While making new plans, US corporations are proposing supporting policies to facilitate their next steps ahead.

Specifically, Intel suggests that tax certainty is important to make long-term business decisions, so a competitive tax landscape that supports manufacturing and innovation (including tax rate relief) remains important.

Dak Nong province lures eight projects worth more than $8.4 billion

Dak Nong province in Vietnam's Central Highlands has issued investment certificates for four projects valued at VND1.7 trillion ($69.35 million) and memoranda on investment cooperation for another four projects worth $8.4 billion.
 
Dak Nong hosted a conference on March 23 to highlight the province's investment promotion plans.

Within the framework of the conference, the province granted investment certificates and memoranda on investment cooperation for projects in minerals, renewable energy, high-tech agriculture, healthcare, and real estate.

The investment certificates were granted to four projects with total investment of VND1.7 trillion ($68.6 million).

Vietnam ARABICA Coffee JSC will invest VND440 billion ($17.76 million) to develop the Cao Nguyen hotel and commercial Complex.

Gia Nghia Real Estate JSC will develop a residential area in Nghia Trung ward with VND880 billion ($35.5 million), and Trans-Asia Hospital Investment JSC will build the Trans-Asian Hospital, Gia Nghia, worth VND260 billion ($10.5 million).

SEJIN F&S INC. also plans to invest VND150 billion ($6 million) in a factory to produce frozen sliced sweet potatoes in Tam Thang Industrial Park.

In addition, Dak Nong awarded memoranda on investment cooperation to four companies with total registered capital of $8.4 billion.

Specifically, TH Group will invest in minerals, renewable energy, high-tech agriculture, with $3.6 billion.

Duc Giang Chemical Group JSC has committed to making a $2.3 billion investment in minerals and other fields. Meanwhile, Viet Phuong Investment Group JSC plans to inject $1.5 billion into minerals and renewable energy.

Vietnam Mining Company Limited has also pledged $1 billion.

TH Group is the largest investor in Dak Nong, with $3.6 billion. The group plans to apply high-tech solutions towards sustainable development, and transform Dak Nong into its second hub for high-tech dairy farming and processing, after Nghe An.

Lending slowdown threatens to delay real estate recovery

Commercial banks are taking a firm grip on lending activities, especially for the real estate sector.

Vietnam has witnessed a downward trend of credit growth in the beginning month of 2024, with lending decreasing by 0.33 per cent against the end of last year, as of March 18.

Phan Duc Tu, chairman of BIDV’s Board of Directors, said, “Over the first 80 days of 2024, BIDV has disbursed loans totalling $18.95 billion to the economy. However, the figure is lower than its debt repayment of $19.55 billion. As of March 11, the bank’s outstanding balance contracted approximately 1 per cent compared with the end of 2023.”

Nguyen Duc Vinh, CEO of VPBank, reported a similar trend. “VPBank has more than 40,000 enterprises, with a credit limit of $9.67 billion. However, currently, only over $2.42 billion has been disbursed due to various reasons,” he said.

Agribank chairman Pham Duc An said, “After the first three months of 2024, Agribank’s income and expenditure gap decreased by $80.6 million compared with the same period last year.”

There are several reasons behind the slowdown in lending. Among them, corporate customers are qualified for loans, but they do not have manufacturing plans or good consumption markets. The collateral mechanism lacks flexibility. Furthermore, there is no guarantee from regulatory bodies when providing loans to businesses suffering losses.

In the real estate sector, the hottest segment for bank loans, debt servicing capacity will remain weak even as cash flow improves due to high leverage and substantial debt maturities in 2024. The sector’s debt/earnings before interest, taxes, depreciation, and amortisation ratio rose to 8.7-fold in 2023 from 7-fold a year ago, as debt growth surpassed profit growth, according to a report released by VIS Rating last week.

The report noted that around $5.24 billion worth of developer-issued bonds are maturing in 2024, the highest level in the last five years. Developers who are embroiled in legal issues and/or speculative projects are the most at risk of poor sales and cash proceeds, weak debt coverage, and defaults, and hence, are most in need of refinancing.

Phan Thi Van Anh, director and senior analyst of VIS Rating, said, “The banking sector’s capital level will generally move sideways in 2024. Only a few banks have announced plans to increase capital. In general, the capital adequacy ratio of the banking sector will remain at a low level of about 11-12 per cent.”

“The bad debt coverage ratio of small- and medium-sized private banks will be lower than the sector’s average. The main reason is that it takes longer to improve the provision ratio after a sharp decline in asset quality in 2023,” she added.

In addition, the State Bank of Vietnam (SBV) has recently drafted a number of amendments to current circulars on operational safety ratios and on lending activities to be consistent with the Law on Credit Institutions.

Nguyen Thu Ha, deputy director of SSI Investment Consulting and Development Center, said, “The amendments show SBV’s determination in keeping a strict management perspective on the lending activities for borrowers whose purpose is to make deposits under land/project transferring contract. Accordingly, the clause on putting such disbursement into an escrow account was kept unchanged in the new draft, opposing developer requests.”

There were also stricter requirements on disclosing related parties in the loan contract to address the issue of related lending activities, Ha added.

“These are in line with our expectations that one of the key focuses of the SBV going forward would be mitigating related lending activities to ensure the system’s safety. Although the purpose of this clause is clear, effective enforcement essentially hinges on both the truthful statements of the borrowers, as well as the time and effort banks spend during the verification processes,” Ha said.

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