VAT proposed to be reduced to 5-6 percent to boost domestic demand

The recent VAT reduction to 8 percent is not sufficient, and a further reduction to 5-6 percent is necessary to stimulate domestic market demand.

At the seminar titled "Removing obstacles, promoting economic development of Ho Chi Minh City", organized by Nguoi Lao Dong (Laborer) Newspaper on May 16, Dr. Truong Minh Huy Vu, Deputy Director of the HCMC Institute for Development Studies, highlighted the challenging economic situation. He mentioned that all forecasts indicate economic difficulty. In particular, HCMC's economy grew by only 0.7 percent in the first quarter of 2023, clearly reflecting this situation.

Currently, HCMC is making strong efforts to accelerate public investment disbursement, but only the disbursement rate of the Ring Road No.3 project has shown a significant increase. Progress in the districts is still sluggish due to the lack of active participation from local authorities.

Dr. Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, shares a similar viewpoint, stating that HCMC's economy experienced a significant decline in the first quarter of 2023. With its special openness, HCMC prospers when the macroeconomic conditions are favorable but faces disadvantages when conditions are unfavorable. Overall, the economic outlook for the first four months of the year is not promising.

According to Dr. Tran Du Lich, there is an opinion that the economy could pick up from the end of the second quarter of 2023, but this is highly unlikely if it is based solely on a few market indicators. While the revenue from goods and services in the first quarter of 2023 showed positive growth, it started to slow down in April, indicating a low market purchasing power. The tourism market experienced some initial recovery, but the number of tourists has been gradually decreasing. Additionally, the pillars of export and public investment have not seen any significant increase.

To expedite economic recovery, Dr. Tran Du Lich recommends increasing market purchasing power through the implementation of domestic demand stimulus policies using tools from both the government and businesses. Specifically, the government should continue to study the reduction of value-added tax (VAT) by industry, as the recent reduction to 8 percent is not sufficient, and further reduction to 5-6 percent is necessary to stimulate domestic market demand. Additionally, efforts should be made to promote consumer credit and encourage businesses, including the tourism sector, to engage in campaigns that offer price reductions. Neglecting domestic market stimulation in the current challenging export environment could lead to inventory constraints and significantly impact production and business operations.

Alongside resolving immediate issues, it is crucial for the authorities to implement structural solutions to attract public investment, particularly in the real estate sector. Dr. Tran Du Lich emphasized that revitalizing the real estate market is essential, as its stagnation would greatly affect associated businesses.

In relation to market revitalization, Assoc. Prof. - Dr. Tran Dinh Thien, former Director of the Vietnam Institute of Economics, highlights the substantial risks in the domestic market while the global market continues to experience volatility. Furthermore, policy risks pose a concern as recently implemented policies are frequently revised, creating challenges in overcoming obstacles. As a result, many units are hesitant to take action due to uncertainties surrounding policies. Consequently, it is imperative to recognize and address these issues effectively.

Specifically, HCMC has put forth numerous commendable initiatives in recent times, such as the urban government model, but they have not been effectively implemented. The existing growth constraints and obstacles, including traffic congestion, flooding, and insufficient infrastructure, have not been adequately addressed and, in some cases, have even worsened. Additionally, there is a dearth of new driving forces to stimulate further development in the city.

To achieve significant progress, HCMC requires pioneering projects like the Can Gio International Transshipment Port, the international financial center, and the commercial center, supported by institutional breakthroughs to attract major investors to the city. It is because the challenges faced by HCMC are not confined to the city itself; they are also national concerns. Breakthrough mechanisms and policies for HCMC have implications for the entire country, as the city plays a pivotal role as the nation's leading locomotive. Only when the locomotive gains strong momentum can it propel the entire train forward.

Vietnam’s digital economy may reach US$49 billion by 2025

Vietnam’s digital economy may take the lead in Southeast Asia with average growth of 31% a year and reach US$49 billion by 2025, said a report by Google, Temasek and Bain & Company.

Vietnam’s online retail sales hit US$16.4 billion in 2022, accounting for 7.5% of the country’s total retail sales of consumer goods and services. The rate is expected to rise to 10% by 2025.

The nation was the third-largest digital economy in the region with US$23 billion in 2022, after Indonesia and Thailand, said the Department of E-Commerce and Digital Economy under the Ministry of Industry and Trade, citing data from the report.

A survey conducted by the department showed that around 78% of Vietnamese internet users purchased goods through e-commerce platforms in 2022.

The figures reflected international optimism about the Southeast Asian country’s digital economy and e-commerce growth.

According to the department, Vietnam was officially hooked up to the internet in 1997. Over the past 20 years, the internet has grown rapidly in the country and has become an important shopping channel for consumers.

Vietnamese companies beat global peers in digitalization – DBS

Businesses in Vietnam ranked higher than the global average regarding digital transformation in customer experience and engagement, according recent research by DBS, a financial service provider based in Singapore.

Some 68% of domestic companies have developed a comprehensive approach to digitizing customer experience and engagement, slightly above the global average of 64%.

Vietnamese businesses ranked second among those of the 10 markets surveyed in this score, including Australia, Hong Kong, India, Indonesia, China, Singapore, Taiwan, the United Kingdom and the U.S.

Around 63% of local firms said digital transformation was helping them achieve overall profitability, whereas 61% noted that the effort was improving their customer insight.

More than half of the firms agreed that digital transformation had increased the operational competitiveness.

According to DBS data, only 9% of the Vietnamese firms were classified as “laggards” in digitizing their interactions with customers.

The research found that gaps in human resource quality and concerns over data privacy still prevent local companies from accelerating digital transformation.

Between June and August 2022, the DBS research was done with 1,225 respondents in 15 industries and 22 markets worldwide, with over 60% of the companies posting annual revenue of US$1 billion or more.

In Vietnam, the research covered 75 local businesses whose annual revenues range from US$250 million to US$20 billion.

Over 3,700 firms enter into energy-saving agreements

More than 3,700 enterprises in northern provinces have signed agreements on energy conservation with subsidiaries of the Vietnam Electricity Group (EVN).

They are committed to conserving energy during the noon and evening hours – from 11:30 a.m. to 2:30 p.m. and from 8 p.m. to 10 p.m. – and refraining from simultaneously using multiple electricity-intensive devices.

Electricity suppliers in the north will devise monthly power supply plans to help businesses adjust their production plans.

In a recent report to the Ministry of Industry and Trade, EVN warned of an emergency given the potential shortage of electricity supply, especially in northern Vietnam.

It said power use could increase by 15% annually from May through July, and the northern region may experience a power shortage of up to 1,600-4,900MW.

Power loss in transmission lines stood at 3.46% in April and 4.02% in the first four months of the year, down 0.49% compared to the same period in 2022.

Can Gio urban area project needs over VND76 trillion for infrastructure

The 2,870-hectare Can Gio coastal tourism and urban area will need an estimated VND76 trillion to build its infrastructure. The coastal district of Can Gio has completed a report on the adjustment of the 1/5000 subdivision planning of the Can Gio coastal tourism and urban area.

The project in Long Hoa Commune and Can Thanh Town was approved five years ago but now needs to be revised to make it appropriate for the current situation.

Once approved, the revised planning will be a foundation for preparing a detailed plan and setting up work for investment and construction.

The project still has five subdivisions, A, B, C, D and E, with a population of over 228,000 people. However, some contents relating to the water surface, public beaches, land for tourism, resorts and golf courses of subdivisions A, B, C and D would be adjusted.

Under the revision, the land area of subdivision A would be increased from 771 to 954 hectares which will function as an amusement area including a theme park, golf courses, resorts and commercial centers.

Meanwhile, the 659-hectare subdivision B would be developed as a cultural, sports establishment and stadium complex.

At the gateway to the urban area, there would be public works such as parking lots, hospitals, schools, offices and hotels.

Subdivisions C and D, with a total area of 798 hectares, include sports yards, square and multifunctional works, schools and commercial centers.

Subdivision E has 457 hectares of land that would be used for an open space, an artificial beach and irrigation canals.

In June 2020, the Government approved the revised investment policy to expand the Can Gio urban area with a total area of nearly 3,000 hectares and at a total cost of VND217 trillion. The project would be developed by the Can Gio Tourist City Corporation with a life span of 50 years.

Can Gio, 50 kilometers from downtown HCMC, is the only coastal district of the city with a coastline of 23 kilometers.

Support needed to save enterprises from exiting market

Enterprises were in dire need of support to overcome difficult times which forced many of them to sell assets at a loss or leave the market.

According to the General Statistics Office, about 77,000 enterprises exited the market in the January – April period, increasing by 25.1 per cent against the same period last year.

Minister of Planning and Investment Nguyen Chi Dung at the meeting of the Standing Committee of the National Assembly earlier this month said that many enterprises, even big ones, must sell most of their assets. Enterprises were in a situation where what could be sold had been sold, Dung said, adding that many just sold for just 50 per cent of the actual value.

He was worried that buyers of enterprises’ assets were foreign ones, which must be paid special attention to.

He also pointed out that there was a lack of accountability in ministries, agencies, and local authorities as many investment procedures took years to complete.

According to HCM City Mechanical and Electrical Enterprises Association, some companies were struggling with cash flow and drops in orders which made it impossible for them to maintain operations. Some must sell assets to foreign ones to avoid defaults while some were under negotiation for mergers and acquisitions.

According to Dau Anh Tuan, Deputy General Secretary of the Viet Nam Chamber of Commerce and Industry (VCCI), the health of enterprises reflected the health of the economy, thus, it was necessary to have stronger solutions to prevent the wave of enterprises selling assets and leaving the market.

Enterprises need to be provided with stronger support from the Government to overcome the difficulty caused by rising global uncertainties and a difficult domestic economic context, Tuan said.

Regarding the phenomenon of selling assets, Tuan said that an enterprise taking over a struggling business was a normal thing. But if a good business faced short-term liquidity problems and was forced to sell its properties or brands, this was a big problem for the economy.

In the long run, the wave of selling assets to foreign enterprises was posing a threat to the economic security, he said.

For example, the acquisitions of enterprises that were doing business with large retail chains across the country would affect the domestic distribution channel.

Enterprises were more cautious with business expansion in an uncertain world and people tended to put money in the bank, Tuan said. If this trend continued, it would affect economic growth, job creation and budget revenue, he said, urging the Government to provide support to encourage the money to flow into production and business.

Strengthening institutional reform and simplifying administrative procedures and business prerequisites together with enhancing accountability is critical to help enterprises overcome the difficult period, he stressed. 

Bac Giang earmarks 3.5 billion VND to encourage industry development

The northern province of Bac Giang will earmark 3.5 billion VND (149,250 USD) to activities to facilitate industrial development in the province. The funds have been approved by the provincial People’s Committee.

The funding will be used to cover technological transfer and the utilisation of cutting-edge machines and science-technology in agro-forestry product processing, food and beverage, support industries in service of garments-textiles, and mechanical and electronic production.

The province will focus on developing typical rural industrial products, improving the management capacity of businesses, raising their awareness of and capacity for clean industrial production, supporting rural industrial facilities in design and packaging, and stepping up the communications work.

This year, it will continue raising the quality and efficiency of industry promotion work with a focus on rural industries based on locally available materials. 

The province has boosted the sectors in which it has potential like agro-forestry product processing, handicrafts and construction materials, and urged and supported organisations and individuals to participate in rural industrial production, with cleaner technologies.

To bring into full play such industry encouragement projects by 2025, Bac Giang will concentrate on some key sectors that have potential, competitive advantages and the capacity to join the global production network and value chain.

The locality will continue supporting garment-textile and leather sectors, with priorities given to high value-added steps, along with others that employ local labourers.

Priorities will also be given to industries that serve agriculture and rural areas, especially agro-forestry-fishery product processing, and more attention will be paid to both traditional and new craft villages, especially in areas where farming land are revoked or those are home to ethnic minority communities.

Hanoi Sales Promotion 2023 kicks off

Hanoi’s Department of Industry and Trade has kicked off “Hanoi Sales Promotion 2023” at Thong Nhat Park and introduced activities within the programme from May to November.

Speaking at the event, Acting Director of the department Tran Thi Phuong Lan said that the city’s promotion programme, mostly taking place in May, July and November, will offer discounts of up to 100%, attracting 1,000-2,000 enterprises.

The programme aims to create favourable conditions for businesses to organise activities to stimulate demand, sell products, reduce inventories, and serve the shopping needs of the people of the capital, thus overcoming difficulties, promoting production, and boosting the city’s economic growth, especially in trade and services.

This month will see two major events – “Consumer Goods and Agricultural Products Promotion Day" from May 19-21 at Thong Nhat Park and “Fashion and Beauty Promotion Day" from May 26-28 in stores, shopping malls or public places in the city.

July will see “Electric & Technology Promotion Day" from July 28-30 in supermarkets, shopping malls, or suitable places.  

“Hanoi Midnight Sale 2023” will take place from November 24-25 across the city with the participation of about 200 businesses, trade centres, supermarkets, production, and business establishments.

Within the framework of the promotion programme, many activities and events to stimulate demand and promote trade will also be considered.

Chan May-Lang Co economic zone needs new development direction to attract investors

The Chan May-Lang Co economic zone (EZ) in the central province of Thua Thien-Hue has not met development expectations 17 years after its formation in 2006.  

The EZ covers a total area of 27,108 hectares in a favourable location with a natural deep-water port and a system of lagoons and bays along with convenient access.

It has so far attracted 57 investment projects with total registered capital of over 87 trillion VND ( 3.71 billion USD at current exchange rate), creating jobs for some 4,700 workers.

However, the zone contributed just 280 billion VND to the province’s budget every year, as most investment projects are in the period of tax exemption.

Economists said the EZ has failed to attract major projects and the number of FDI projects in the zone remains few, with the occupancy rate just at 3%.

The EZ management board said the assessment of investors’ capacity in the early period was not done properly, resulting in many investors not capable of implementing their projects. As a result, many investment projects in the EZ have had their licence withdrawn.   

According to former director of the Vietnam Institute of Economics Tran Dinh Thien, one of the key factors to attract big investors is high-quality human resources, which the Chan May-Lang Co EZ is lacking.

In addition, the Chan May seaport, despite its good potential, has been operating under capacity because industrial production in Thua Thien-Hue remains limited, and the volume of imported and exported goods is not large. Investors in seaport infrastructure urged the province to strive to attract more investment in industrial production in local industrial parks and in the Chan May-Lang Co EZ.

The provincial authority is adjusting the development plan for the EZ in the direction of expanding the space for industrial production, creating a land fund for large-scale projects in infrastructure construction and leasing, acording to chairman of the provincial People’s Committee Nguyen Van Phuong.

Vietnamese, Japanese-funded firms strike strategic partnership in battery energy storage system

VinES, a member of Vietnamese conglomerate Vingroup, and Marubeni Green Power Vietnam, a fully-owned subsidiary of Japan’s Marubeni Corporation, have signed a strategic partnership deal to promote the adoption of battery energy storage systems (BESS) in Vietnam.

Under the pact, they will jointly evaluate, invest in, install and operate BESSs at multiple business locations of Vingroup's companies to provide an energy saving solution, load balancing, and more efficient power management. The systems can potentially be integrated into renewable energy systems to accelerate Vingroup's transittion to clean energy.

VinES will be the BESS manufacturer and solution provider for Marubeni in this cooperation, while Marubeni plans to develop dozens of MWh of BESSs in the first phase and expects further capacity expansion in the subsequent phases.

Reliability remains issue in Vietnam’s electricity policy

Vietnam’s energy issues are still prevalent, even after it bumped up the electricity retail price earlier this month.

On May 4, the average official retail price of electricity was adjusted to 8.2 cents per kWh, excluding VAT, a rise of 3 per cent. Electricity of Vietnam (EVN) believes that the move will help restructure its finances, promote reinvestment, and draw in new funding in electricity, particularly from the private sector.

However Ngo Duc Lam, former deputy director of the Institute of Energy under the Ministry of Industry and Trade (MoIT), stated that the existing method of modifying electricity prices only serves to safeguard the interests of producers and EVN. According to Lam, dispatching, market operation fees, and the wage factor in the electricity price have not been considered by the authorities when formulating the electricity price calculation plan. The wage factor represents labour productivity in the electricity industry.

“The method of constructing electricity tariffs is still predominantly based on EVN’s statistical cost accounting, which is not sufficiently reliable, with the primary goal of compensating for this group’s loss,” Lam said.

According to Lam, this method has not accounted for the causes and measures to reduce costs, has not yet applied the prevalent and contemporary method of long-term marginal cost, and has not constructed a tariff with the two components of capacity and electricity.

The only vendor on Vietnam’s electricity market is EVN. With the proposal to submit an application, the generation of electricity price framed each type as the lowest amount in calculations based on the four options assumed by EVN. Numerous energy developers have asked when investment efficiency will be considered in the policy development process, and when the interests of the merchant, purchaser, and user will be reconciled.

According to the National Load Dispatch Centre, the ceiling price of the electricity market reflects the equilibrium between supply and demand, the development of capacity, and seasonal and power system conditions. By 2022, market capitalisation had almost doubled to 6.8 US cents per kWh, resulting in an increase in market revenue from $1.79 million transactions per day to $22 million per day.

Since 1992, the price of electricity in Vietnam has been adjusted more than 10 times, and the current average price, including VAT, is 6.1 cents per kWh. According to energy analysts, the three primary goals of electricity pricing have not been met: economic efficiency, social equity, and financial sustainability. The electricity tariff during the adjustment periods is unconvincing, caries hefty administrative mechanisms, lacks scientific basis, and lacks transparency, which is the primary reason why scientists and electricity consumers cannot reach a consensus.

Associate Prof. Dr. Nguyen Minh Due, former dean of the Faculty of Energy Economics at Hanoi University of Science and Technology, stated that the establishment and adjustment of electricity prices must adhere to the Law on Electricity. As a basis for establishing and adjusting electricity tariffs, he outlined five principles.

According to the MoIT, electricity prices are progressing towards implementation levels for an aggressive retail electricity market, with three implementation phases. Since last year, electricity customers have been able to purchase electricity on the spot during phase 2, while phase 3 enables consumers to choose their electricity retailer after 2024.

The MoIT believes that the competitive electricity market will be completely operational by the end of 2024 based on this roadmap.

PM calls for end to long-delayed DPPA fulfilment

Prime Minister Pham Minh Chinh last week directed an urgent study of international and regional experiences to review Vietnam’s draft direct power purchase agreement (DPPA) pilot, which has been in limbo for years.

Since 2020, the Ministry of Industry and Trade has created a number of draft legislative instruments on the DPPA pilot scheme, which included a draft circular in May 2021, a draft report in October 2021, and a draft decision in May 2022.

Although the pilot’s expected structure and conditions were revealed by the documents, a particular launch date for the programme was never suggested.

DPPAs are deemed a crucial mechanism to attract investors not only in the energy sector but also where companies have made commitments to renewable energy, carbon reduction, and sustainability.

Such agreements would make it possible for businesses in Vietnam to buy electricity directly from private companies that develop renewable energy, as opposed to doing so through regional power utilities. The policy would also support businesses in achieving their respective renewable energy supply goals.

The current DPPA pilot has been under design and review for around six years. In 2022, private companies in Asia-Pacific signed a record 7GW of DPPAs, an 80 per cent increase from 2021, demonstrating their willingness to drive new clean energy investments.

Greg Testerman, chairman of the American Chamber of Commerce in Ho Chi Minh City and Danang, said, “DPPAs are a mechanism that has been used in many countries, and we hope it can come into force here this year. We believe that Vietnam’s approval of a pilot would also unlock billions in investment, especially from companies that have committed to renewable energy and carbon reduction,”

The MoIT has been developing the mechanism and was collecting opinions through various web portals since September last year. The ministry initially planned to pilot the mechanism in 2021-2023, with total capacity of about 1,000MW.

Under the plan, after a pilot is eventually carried out, the Electricity Regulatory Authority of Vietnam (ERAV) will evaluate the market as well as technical, financial, and legal aspects, before finalising the content to be reported to authorities for consideration and decision to widely apply the mechanism.

According to ERAV, a pilot would ensure that a competitive wholesale electricity market is completed, a more competitive retail electricity market is implemented, and direct electricity purchase and sale would become reality.

Over the years, international businesses have increased their calls for a DPPA pilot. In 2019, 26 top international companies and organisations signed a statement supporting such a model in Vietnam, and purchased more than 16 million mWh of electricity for an estimated $1.57 billion.

Modern objectives to consider in developing electricity market

The objective of electricity market reform has shifted globally. If previously the objective of electricity sector reform was primarily economic efficiency, it now simultaneously seeks to achieve three goals: economic efficacy, energy security, and environmental tolerance. This objective is crucial for governments committed to reducing emissions and decarbonising.

In Vietnam, the Law on Electricity of 2004 outlines the principles of electricity market development, and the prime minister oversees the development and implementation of the electricity market development roadmap, the reorganisation plan of Electricity of Vietnam (EVN), and the power sector. Nonetheless, implementation is not always seamless. Organising the implementation of the Vietnamese retail electricity market, for instance, necessitates amending the pricing law in order to identify the distribution price and the system and market operation price, delaying the implementation of the retail market.

The fundamental conditions have been met, but the proportion of the electricity market is still low, making it difficult for the market to advance to a higher development stage.

Since July 2012, the electricity market has been operational in Vietnam’s competitive generation market, bringing with it some favourable results and forming a more professional legal system, technical infrastructure, and human resources.

During this time, the owners of the power plants themselves decided whether to connect to the grid and increase or decrease the generating set’s capacity. When the total cost of producing electricity makes up over 70 per cent of the cost of electricity sold to final consumers, the calculation of electricity prices in the market for electricity for each 30-minute transaction cycle has grown into a significant advance towards greater transparency of the production of electricity price as part of the total cost structure to final consumers.

Ten years have elapsed since the development of the electricity market, but there has been little improvement. Specifically, close around 60 per cent of power facilities on the electricity market have not yet participated, so competition in market operation cannot be guaranteed.

Currently, the proportion of participants in the electricity market is still low, and the fact that EVN must continue to sign long-term power purchase agreements (PPAs) and not through competitive forms in accordance with government and Ministry of Industry and Trade (MoIT) regulations may hinder the industry’s sustainable development. In comparison to the government’s roadmap for the development of the electricity market, this is the main reason why the transition to a competitive wholesale electricity market is two to three years behind schedule.

The MoIT has not yet authorised the Vietnam wholesale electricity market (VWEM) at this time, which renders the power corporations in the model in operation as of January 2019 to play only a passive role. Also, since there is still a mechanism for bulk supply tariffs, there is little incentive to limit risks in the electricity market.

Still, the influence of the electricity market on investment in novel sources is limited. Theoretically, the operation of the short-term market ought to produce new investment signals via the full market price and impact new investment drivers through the market or regulatory framework established on the market.

In Vietnam, the effect of the electricity market on investment decisions for new power sources is becoming more and more evident. Firstly, in negotiation of electricity prices with independent power producers, where build-operate-transfer is a direct negotiation and feed-in tariffs or avoided costs for renewable energy are a negotiation without competition. Secondly, the MoIT’s governing circulars pertaining to the construction and approval of the electricity generation price framework serve as the basis for price negotiation; there are no provisions pertaining to the spot electricity market.

Currently, the electricity market is advancing at the VWEM level, but only five additional distribution corporations – EVN member entities – have joined the buyer side, and there have been no participants from outside EVN. In addition, the government has not issued the direct PPA prototype mechanism. This is an effective mechanism on the wholesale electricity market for encouraging businesses to develop renewable power sources and reducing EVN’s input costs for the production of electricity.

In accordance with the roadmap, the fiercely competitive retail electricity market has been operational since 2014. Therefore, it is necessary to supplement and modify the Law on Electricity and related regulations in order to expand the wholesale market and permit participation in VWEM by businesses other than EVN.

In addition, concluding the legal corridor for the implementation of the electricity retail market, which includes the electricity distribution price, the electricity system dispatching price, and the electricity market transaction management price and cross-compensation, is contingent on amending the Law on Pricing in the near future.

Furthermore, it is essential to revise and add to regulations pertaining to relevant circulars regarding the determination of electricity generation prices, power purchase and sale contracts, and the resolution of PPA agreement issues.

Vietnamese unicorn VNG targets $100 million in funding round to fuel expansion

VNG Corporation, a prominent Vietnamese internet company supported by Singapore's sovereign wealth fund GIC, is pursuing a fresh funding round with the goal of raising $100 million.

The GIC-backed company operates various businesses, including online gaming, payment services, cloud solutions, and the widely popular messaging app Zalo.

Sources revealed to Reuters that the company has engaged with Maybank to facilitate the fundraising efforts, although Maybank declined to comment on the matter.

VNG's prominent backers include Singapore's Temasek Holdings, Facebook co-founder Eduardo Saverin, and Raj Ganguly's B Capital Group, along with GIC.

Earlier this year, VNG listed 35.8 million shares on UPCoM – a Vietnamese bourse with a valuation of approximately $366 million at the time.

Following the conclusion of this funding round, VNG's long-term plan is to go public on the Singapore Stock Exchange, potentially as early as next year, cited Reuters.

Founded in 2004, VNG became Vietnam's first unicorn and previously signed a preliminary agreement with Nasdaq Inc. in 2017 to explore an initial public offering.

To date, VNG has not yet disclosed its audited financial report for 2022, citing the simultaneous preparation of financial statements according to both Vietnamese and international financial reporting standards.

Operating not only in Vietnam but also in multiple countries worldwide, it currently boasts 33 subsidiaries and affiliates (18 domestic companies and charitable funds in Vietnam, and 14 foreign companies) that are subject to different accounting and legal regulations.

Regarding its investment ventures, VNG continues to face setbacks in the first quarter of 2023. It reported substantial losses, including those from its involvement in Telio, Ecotruck, Rocketeer, Dayone, and Tiki Global.

Around 77,000 firms exit market in Jan-Apr

The Government has sent a report on the nation’s socio-economic performance to the National Assembly, emphasizing that around 77,000 businesses have pulled out of the market in the first four months of the year, surging 25% year-on-year.

Nearly 78,900 enterprises came into existence or returned to business in the January-April period, down 2% year-on-year.

The Government stated that during the four-month period, the index of industrial production (IIP) declined by 1.8% year-on-year. Many businesses in key manufacturing and export industries, such as seafood processing, leather and footwear, iron and steel, cement and construction materials, have experienced a sharp decrease in orders and a surge in inventory.

Many businesses have been facing formidable challenges, such as dwindling cash flow, higher capital costs and difficult access to bank loans.

In addition, numerous firms, especially those in the real estate sector, have come under pressure over the maturity of the corporate bonds they issued.

The total value of corporate bonds that will fall due this year is VND284,000 billion, with real estate accounting for 40%. Meanwhile, bonds worth around VND363,000 billion will fall due next year.

Many large companies were forced to sell off most of their assets at a price only half of their actual value, with foreign businesses being their buyers. Some were acquired and merged into others.

Hundreds of thousands of workers in industrial zones saw their working hours cut or were left unemployed.

The Government will continue to navigate monetary policy and assist businesses in reducing input costs, boosting production and attracting investment, as well as allocate funds for public investments and execute programs for economic recovery and development.

Moreover, local banks will lower their interest rates, stabilize lending rates, and create favorable conditions for businesses and individuals to access credit loans.

The local authorities will strive to simplify legal procedures and improve the investment environment.

Vietnam’s textile exports plunge in April

Vietnam’s textile and garment industry generated only US$3.06 billion in export revenue in April, down 20.6% year-on-year, according to the Vietnam National Textile and Garment Group, or Vinatex.

The export value of textiles and garments in the first four months of the year reached only US$11.7 billion, down 20% over the same period last year.

There was a noticeable drop in the export value of textile and garments to major markets in April.

Particularly, the textile and garment shipments to the U.S. market totaled only US$1.15 billion, down 30% year-on-year, while the revenue from exporting products to the EU was just US$349 million, down 9%.

Meanwhile, Vietnam gained only US$237 million from exporting textile and garment products to South Korea in April, down 21%.

During the first four months of the year, textile and garment exports to the U.S. and China declined over 30%. Only exports to Japan gained 6.6% in value.

HCMC wants to re-apply BOT, BT investment forms

Ho Chi Minh City wants to re-apply the investment forms of BOT (build - operate - transfer) and BT (build - transfer) to mobilize all possible resources for the city’s transport infrastructure investment and development.
 
Many vehicles slowly travel on National Highway 1A from Binh Dien Bridge to Nguyen Van Linh roundabout, Binh Chanh District, Ho Chi Minh City.
In order to reduce traffic pressure, Ho Chi Minh City has planned to upgrade and expand bridges and roads for many years but the projects still have not been started or have not been finished yet.

Amid the obstacles, a draft resolution was released to replace Resolution 54 which allows Ho Chi Minh City to apply BOT contracts for investment, upgrade and expansion of road projects, including overhead roads.

Ho Chi Minh City also proposed a mechanism to increase the ratio of state capital in projects from the current level of 50 percent to 70 percent because the compensation for site clearance of many traffic projects accounts for more than 50 percent of the total investment capital.

Besides, HCMC proposed a cash payment mechanism under the form of BT to organize bidding, selecting investors having the financial capacity to participate in the projects.

The fact showed that BOT and BT forms have attracted active participation from investors. In the period of 2005-2020, Ho Chi Minh City implemented 22 projects with a total investment capital of VND51 trillion (US$2.2 billion).

Therefore, the re-application of BOT and BT forms for projects and deferred payment using the city budget to investors will have many advantages and be more suitable than the implementation of traffic projects under other forms of Build-Transfer-Lease (BTL) and Build- Lease- Transfer (BLT) contracts and the method of using the land fund for paying back investment capital to investors.

According to Deputy Director of Ho Chi Minh City Department of Transport Phan Cong Bang, if the draft resolution is approved, the current obstacles and difficulties will be removed, thereby the transport sector will urgently call for investments in expansion projects of national highways and inter-regional roads, creating a driving force for socio-economic development for Ho Chi Minh City in particular and the region in general.

Asian investors leaning towards going greener across Vietnam

Asian investors are leading foreign investment inflows into Vietnam, with the trend towards a greener transition.

In late April, Taiwan-based Quanta Group signed an agreement with Nam Dinh Industrial Park Management Board and Dai Phong Infrastructure Construction JSC to develop a computer manufacturing project in Vietnam’s northern province of Nam Dinh, making it the company’s ninth factory globally.

Chairman of the provincial People’s Committee Pham Dinh Nghi said, “Nam Dinh will create the best possible conditions to support investors in dealing legal procedures during the construction and operation process.”

Also late last month, Malaysian group Petmal Oil Holdings proposed an oil refinery in the central province of Phu Yen worth $2 billion and spanning 500 hectares.

CEO Dato Paduka Affendi expressed his interest in the initiative. “When the project is put into operation, it will contribute to the provincial budget and create jobs for workers,” he said.

The refinery would be aligned with the province’s foreign investment strategy, which focuses on projects with high technology.

The first months of this year also witnessed new investment commitments from South Korean businesses. At a green growth promotion conference in Vietnam, a representative of SK Group said that they were considering making a big investment in Vietnam through a project to produce hydrogen gas.

Elsewhere, Seoul-based proptech startup Rsquare attended a high-tech investment promotion conference in

Danang in April to learn about opportunities in Vietnam.

Similar actions were taken in March when South Korea’s SEP expressed their plan to invest more than $200 million in the first carbon-neutral industrial complex for the shoe industry, and carbon reduction infrastructure in Vietnam in the southern province of Binh Duong.

About 20 member enterprises of SEP will participate and invest in carbon-neutral solutions. This project is expected to contribute to reducing greenhouse gas emissions and protecting the environment.

According to the Korea Trade-Investment Promotion Agency (Kotra), some key trade and investment trends relevant to Vietnam include the country’s vast infrastructure needs, energy, and telecommunications infrastructure, as well as renewable energy.

Lee Jong Seob, president of Kotra in Southeast Asia and Oceania, told VIR, “There is a growing demand for sustainable products and services, driven by concerns about climate change and social responsibility. Vietnam has a robust manufacturing industry that might be used to generate sustainable products. Regulatory frameworks and the ability to access green financing may hinder this trend.”

Japanese firms have also joined the investment trend. They attended the Vietnam-Japan investment conference in the northern port city of Haiphong to seek business and investment opportunities.

At a recent meeting with Vietnamese Minister of Planning and Investment Nguyen Chi Dung, Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi, stated that Vietnam was an investment destination that Japanese businesses “cannot ignore.”

He mentioned new projects by Japanese firms in Vietnam, including a trade centre by AEON and a research and development centre in Danang by Fujikin.

In a JETRO survey of more than 3,000 Japanese companies conducted at the end of 2022, Vietnam was ranked second worldwide as a country in which to expand business in the future. The United States and China ranked first and third, respectively.

The manufacturing industry will likely accelerate its trend from manufacturing general-purpose products to high- value-added products and sales functions, according to JETRO.

In the non-manufacturing sector, respondents who will strengthen domestic sales increased by nine points over last year, reflecting the expectation of economic recovery after the pandemic and the expectation of medium- to long-term market growth, he added.

Nakajima said that another promising space was Vietnam and Japan’s co-creation. Digitalisation will strengthen ties between Japanese companies and Vietnamese startups, and between Japanese startups and Vietnamese firms to expand into the Vietnamese market and third-country markets. Last year alone, collaboration occurred with Japanese company Gakken and Vietnamese companies Kiddihub, Denso, and Salex Motors.

Singaporean investors have also joined the wave. CapitaLand Group, at a meeting with leaders of the southern province of Binh Duong in mid-March, sought support of the local government for its project.

Chairman Wong Kan Seng said, “In Vietnam, besides developing housing complex projects in Ho Chi Minh City and Hanoi, CapitaLand is currently expanding its investment to neighbouring localities, including Binh Duong, a dynamic developing locality.”

According to the Ministry of Planning and Investment, Vietnam attracted $8.9 billion worth of foreign investment in the January-April 20, 2023 period. About 750 new projects were licensed during the period with a total registered capital of over $4.1 billion, up 65.2 per cent in the number of projects from the same period last year.

Asian investors, such as those from Singapore, Japan, China, Taiwan, Hong Kong, and South Korea, continued to lead the list, making up three-quarters of Vietnam’s total foreign investments in this timeframe, with Singapore coming in first and South Korea second.

Government proposes 2% VAT reduction

The government has proposed a 2 per cent cut to value added tax (VAT) rates on goods and services subject to a 10 per cent rate, from July 1.

The reduction would be in place until December 31, 2023, according to the latest government proposal submitted to the National Assembly Standing Committee for approval.

It would not apply on the following goods and services: telecommunications, financial activities, banking activities, securities, insurance, trading of real estate, metals, precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products, and goods and services subject to excise taxes.

The government said the policy is aimed at boosting consumption demand to accelerate production and trade and help businesses recover and develop to contribute to the State budget and the economy.

Vietnam-Thailand trade expected to hit $25bln by 2025

Vietnam and Thailand have committed to promoting trade exchange in order to boost two-way trade turnover to $25 billion by 2025, according to Thai Ambassador to Vietnam H.E. Nikorndej Balankura.

Speaking at a workshop on supply chain connectivity held by the Thai Embassy on May 17 to mark the tenth anniversary of the establishment of a strategic partnership between the two countries, he said Vietnam and Thailand are each other’s largest trade partners within ASEAN.

Thailand currently ranks ninth among countries and territories investing in Vietnam and is expected to become its fifth-largest investor in the next few years.

Regarding investment, Thailand will enhance investment in renewable energy projects in Vietnam while encouraging Vietnamese enterprises to invest and do business in Thailand, the Ambassador said.

Speaking at the workshop, Jareeporn Jarukornsakul, Chairwoman and Managing Director of the WHA Corporation PCL from Thailand, said it has targeted expanding its operation in Vietnam in such fields as energy and real estate logistics to promote sustainable economic development for the country.

Public investment disbursement acceleration supports economic growth: WB

The acceleration of public investment disbursement could support aggregate demand and economic growth over the short term, while investments made in human capital and green infrastructure will bolster long term economic development, according to the World Bank (WB).      

This assessment was made by experts in the May edition of the WB’s monthly Vietnam Macro Monitoring.

According to details set out in the report, industrial production improved slightly but remained weak. Specifically, the industrial production index increased marginally by 0.5 % on-year in April.

Retail sales registered an annual growth rate of 11.5% in April, comparable to figure of 11.5% on-year recorded in March. Sales of goods slowed, although sales of services continued to register robust growth, with this being largely driven by the expansion of hospitality services.

April witnessed exports and imports of goods contract by 17.1% on-year and 20.5% on-year, respectively. This is reflecting weakening global demand, especially in the United States and the EU, with exports to these two markets falling by 22.1% and 14.1% on-year, respectively, in the first four months of the year.

Consumer Price Index (CPI) inflation declined further from 3.4% in March to 2.8% in April, with food and housing being the two major contributors. Elsewhere, core inflation moderated from 4.9% in March to 4.6% in April.

Despite SBV’s policy and lending rate cuts in March coupled with ample market liquidity, credit growth decelerated to 9.2% on-year in April, dropping from 9.9 % on-year in March and 12.2% on-year in February, thereby signaling a slowing economy.

Think thanks have assessed that while FDI performance remained solid, global uncertainties continued to weigh on investor confidence.

FDI commitment reached US$3.4 billion in April, marking an increase of 46% compared to March. However, cumulative FDI commitment during the first four months of the year only reached US$8.8 billion, 17.9% lower than the same period from 2022.

The FDI disbursement amounted to US$1.5 billion in April, similar to the previous year. Meanwhile, cumulative FDI disbursement reached US$5.8 billion for the January to April period, similar to the same period from last year.

Insiders have outlined that the monthly budget balance registered a small surplus of US$0.16 billion in April, with the cumulative budget surplus to April standing at $5.6 billion. Revenue collection saw an annual decrease of 24.7% whilst public expenditure in April increased by 13.8% from the previous year.

According to WB experts, the economy is in the process of facing external headwinds amid weakening external demand continuing to weigh on exports, thereby translating into weakening industrial production.

While domestic consumption remains robust, credit growth has slowed, reflecting weak credit demand. They underscored the importance of flexible foreign exchange management in order to accommodate external conditions amid a further tightening of global financial conditions.

Moreover, economists also emphasised the need to accelerate the public investment disbursement, which could support aggregate demand and economic growth in the short term.

Most notably, ensuring investments in human capital and green infrastructure will contribute to bolstering long term economic development, they noted.

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