Many businesses face international disputes during the process of either signing contracts with foreign partners or operating abroad, raising the importance of collaboration with international arbitration centres.

On May 8, the Vietnam International Arbitration Centre (VIAC) signed agreements with 19 industry and locality associations in which it will provide legal support and participate in resolving disputes for association members. Besides that, the VIAC will collaborate with other associations in reviewing and offering opinions on laws and policies related to their activities.

The agreement involves the Vietnam Textile and Apparel Association, Vietnam Association of Seafood Exporters and Producers, Vietnam Young Entrepreneurs Association, the Vietnam Leather, Footwear and Handbag Association, and the Beer Alcohol Beverage Association Vietnam, among others.

According to Phung Anh Tuan, executive vice chairman and secretary general at the Vietnam Association of Financial Investors (VAFI), many investors reflect that Vietnam is focusing on attracting new foreign investment capital inflows while maintaining and taking care of existing investors.

“Local authorities have yet to pay attention to implementing investment protection mechanisms effectively, which is one of the leading factors that impacts investment expansion decisions. When foreign investors have a dispute with local management authorities in Vietnam, we do not see the appearance or role of international arbitration in dealing with these problems,” Tuan said.

VAFI has plans, therefore, to foster the collaboration with the VIAC to implement the conciliation segment relating to the investment protection, which Tuan said is an extremely vital segment to retain the investors to expand their operations in this country.

In terms of the importance of the international arbitration centres, according to the Vietnam Textile and Apparel Association (VITAS), one weaving and dyeing joint venture with a US firm is a prime example. The local party and the US firm had a dispute after seven years of operating at a loss. The two parties sought for conciliation in Vietnam but failed to come to a conclusion.

However, in the contract to establish the joint venture, it was stated that if the two parties could not reach a compromise after international arbitration in Vietnam, they have to work with such a centre in Singapore. As a result, the Vietnamese party won the dispute.

The four prevalent methods of business dispute resolution in Vietnam include negotiation, mediation, arbitration, and court. According to the Ministry of Justice, negotiation and court are the most selected practices to resolve business conflict with 57.8 and 46.8 per cent respectively, followed by mediation (22.8 per cent) and arbitration (16.9 per cent).

According to Truong Lang, a representative of consultants Viettonkin, commercial dispute resolution by the court is the most popular, however, this method has several downsides. One of the principles in court adjudication is a public hearing, which is of the most concern to businesses as their trade secrets will be exposed.

Giang of VITAS emphasised that commercial arbitrators play an important role to assist businesses in preventing legal risks. Accordingly, the VIAC needs to promote support and participate with businesses from the moment the businesses sign contracts with a partner, to the payment stage.

Along with the risk in payment method, members of VITAS report that in new markets, when they see a breakthrough increase in orders from Vietnam, they will immediately build technical barriers. Many EU partners offer strict requirements and cut the orders if manufacturers cannot meet their requirements.

For example, although the export turnover of Vietnam to India is not substantial, the price of fibre is lower than in India; thus, they raised technical barriers for products from Vietnam. These requirements, which Giang said are unreasonable, prevent exports by manufacturers here.

VNGGames opens studio in Taipei

Vietnam’s technology unicorn VNG yesterday, May 19, launched the new office of its game publishing brand in Taipei, Taiwan, with 35 employees.

The inauguration came after the firm had expanded to other cities across Asia, including Bangkok, Kuala Lumpur, Jakarta, Shanghai and Beijing.

Since June 2021, VNGGames has dispatched a team to the city to explore business opportunities and has also published several games.

VNGGames first entered the market with the launch of Gunny Origin in 2022, which ranked second in the highest-grossing iOS games in Taipei.

The success laid the groundwork for VNGGames to scale up its business in the region and accelerate its plans to establish a permanent presence in Taipei.

VNGGames plans to continue expanding in international markets, such as Southeast Asia, Latin America and the Middle East.

HCMC FOODEX 2023 to be held next month

The Investment and Trade Promotion Center of HCMC will organize the second HCMC International Exhibition of Food and Beverages on June 28-30 at the Saigon Exhibition and Convention Center, District 7.

HCMC FOODEX will come with the theme “Connecting values for mutual development” in collaboration with the Food and Foodstuff Association of HCMC.

The event will feature over 300 booths and welcome roughly 200 domestic and international businesses in the food industry.

HCMC FOODEX will have a broad range of trade promotion activities, with workshops and seminars discussing the latest trends in the food processing sector and sustainable growth strategies for the industry, among others.

The expo serves as a platform for strengthening business opportunities between local and foreign manufacturers and distributors.

The organizer expects to facilitate trade and bring more Vietnamese products to the international market.

Vietnam’s hospitality real estate market

Vietnam possesses the fundamentals for developing hospitality properties, including the rise of its middle class, increasing accessibility to travel thanks to improved infrastructure, and the country’s openness to international trade, which drives business travel, events, and conferences, etc. Investing in hospitality real estate is therefore a smart bet, according to Mr. David Jackson, CEO of Colliers Vietnam.

Though Vietnam’s tourism recovery somewhat lags behind other Asian markets and uncertainties remain due to the economic slowdown, not to mention the freezing of the hospitality real estate market, Colliers nonetheless believes that pockets of opportunities are present in Vietnam.

In 2019, occupancy rates in the 30,000 or so hospitality establishments around the country, such as hotels, resorts, and villas, stood at 52 per cent.

Over the past decade, hotel supply in Vietnam has grown three-fold and roughly 100 new hotel projects are in the pipeline over the next three years. Mid-scale and luxury room supply grew the strongest, up 6.7-fold from 2009 to 2022, while villas and resort shophouses increased 20 per cent and 34 per cent, respectively, year-on-year in 2022. The number of international hotel brands is expected to double over the next three years, from 127 in 2022 to 261 in 2025.

Mr. Jackson noted that there is an increasing market concentration, where domestic players that dominate ownership of hospitality property cooperate with reputable international hotel brands to standardize and raise the bar on quality in hotel services and boost the value of hospitality properties.

M&As and cooperative activities, though slowing last year, are expected to see a deal-making rush in the quarters to come. With capital waiting to be disbursed and favorable valuations in place, foreign investment funds are making a smart bet to expand their market share before hotel revenues meet their full potential during the recovery.

For instance, agreements have been announced by Sun Group and IHG, Accor, Ennismore, and TNR, and BRG and Hilton. Recently, the issuance of Decree No. 10/2023/ND-CP on ownership certificates, with a term for properties built on commercial and service land, set initial conditions for the revival of the condotel, office-tel, and resort villa markets around Vietnam, promising a growth spurt in the years to come.

He added that the development of hospitality real estate projects should weigh up ESG factors to ensure Vietnam’s long-term global tourism competitiveness. “Last but not least, targeting the right mix of domestic and international tourists is critical to optimizing occupancy and room rates.”

As the world began to reopen and people decided to make up for lost time due to Covid-19, the “revenge travel” trend combined with personal savings made during lockdown in 2021 drove an upsurge in travel among Vietnamese in 2022, with 101.3 million domestic travelers, according to the Vietnam National Administration of Tourism (VNAT). However, Vietnam was also among markets in Southeast Asia with the lowest number of foreign tourists last year.

The absence of Chinese tourists is not the only factor, as Vietnam’s tourism sector not thriving to the same degree as neighboring countries had been a topic of much debate prior to the pandemic. In 2019, Vietnam had a tourist-return rate of 10 per cent; much lower than in Thailand (82 per cent) and Singapore (89 per cent). The figure even fell to 5 per cent in 2022.

Besides an over-dependence on certain tourist source markets like Russia and China, for example, problems also lie in visa policies and long-existing bottlenecks in the sector such as uneven transport and tourism infrastructure, and a lack of variety, distinctive positioning, well-executed destination marketing overseas, and human resources post-pandemic.

However, potential looms large in the mid to long term. At the national level, Vietnam has set a target of fully recovering its tourism sector by 2025, with 18 million international arrivals expected out of a total of 134 million tourists. The country aims for 195 million tourists by 2030, including 35 million foreign visitors, with a diversification in source markets to include India, the Middle East, Europe, Australia, New Zealand, Canada, and the US.

There are also multiple discussions in the country on improving the quality of tourism and developing new models such as wellness tourism, eco-tourism, medical tourism, MICE, and bleisure (business + leisure). Vietnam has all it needs for tourist attraction thanks to its beautiful natural landscapes, cultural richness, and gastronomic delights, from street food to modern cuisine.

MoIT: Trade activities targeting markets of potential to boost exports

The Ministry of Industry and Trade (MoIT) has said it will focus on renewing and enhancing trade promotion activities targeting new markets of potential in order to boost exports, such as India, Africa, the Middle East, Latin America, and Eastern Europe.

Attention will also be given to markets that are less affected by inflation and have recorded positive growth, such as ASEAN.

MoIT will promote the effective exploitation of free trade agreements (FTAs) and facilitate digital transformation in granting certificates of origin to help businesses make full use of FTAs.

Measures will be taken to boost the development of logistics services to help cut costs and improve the competitiveness of Vietnamese exports.

The ministry will regularly organize meetings between relevant agencies, localities, businesses, and associations to keep parties updated on demand and new regulations in various markets.

It will also promote imports and exports via cross-border e-commerce.

Assessing export results in the first four months of the year, MoIT said a decline was recorded as a result of falling orders from key export partners such as the US and Europe. Meanwhile, industrial production sectors depend on the global market for consumption, particularly sectors like textiles and garments, footwear, and electronics. Around 10 per cent of products in these sectors are for the domestic market while the remaining 90 per cent are exported.

Prices of many export products have also fallen, especially agricultural products such as cashew nuts, coffee, pepper, and rubber, affecting production and exports.

Moreover, China reopening its borders has created competitive pressure for many products from Vietnam, while local enterprises still face a range of difficulties due to high production costs, falling orders, low domestic consumption, and problematic access to credit.

The global economy still faces difficulties and recovery is uneven among countries, resulting in lower global consumption, according to the MoIT.

However, it also said there remain positive signs. Giant economies such as China and the US have recorded higher growth than forecasted and some emerging economies in Asia have posted positive development.

At the same time, certain State policies have proved effective in promoting production activities. The Index of Industrial Production is heading upwards and imports of materials are also on the rise, signaling positive development in export activities.

Total trade value in the first four months of this year reached $206.76 billion, a year-on-year decline of 15.3 per cent, figures from the General Department of Vietnam Customs show.

VinaCapital, A.P. Moller Capital set up joint platform for logistics investment in Vietnam

VinaCapital, Vietnam’s most diversified asset manager, and A.P. Moller Capital, a global fund manager focused on high growth markets, have set up a joint platform to grow and scale investments in transportation and logistics infrastructure in Vietnam.

With a population of close to 100 million, a consistent GDP growth rate of over 5%, and a strong and stable regulatory and investment climate, Vietnam offers clear high growth opportunities in transportation and logistics.

The partnership, which will be majority-owned by a fund managed by A.P. Moller Capital, brings together this sector expertise with the regional knowledge and expertise of VinaCapital, both leaders in their respective spheres, to build and scale a portfolio of assets that target top quartile returns in a private capital structure. Investment and other major decisions will be made jointly.

Andy Ho, Chief Investment Officer at VinaCapital, said logistics is a critical part of Vietnam’s economic growth story, and VinaCapital has a successful track record in the sector over the two decades, including investments in Gemadept and Transimex, as well as warehouses and industrial parks. Partnership with A.P. Moller Capital brings together two of the most experienced players in their respective fields and creates an investment platform that has the potential to transform the logistics industry in Vietnam.

Vietnam’s banking sector liquidity crunch eases

Property-sector risks have made operating conditions more difficult for banks in Vietnam in the short term, but the liquidity crunch is easing and the banking system is likely to avert a sharp slowdown due to the concerted response of policymakers and banks, says Fitch Ratings.

In a report released last week, the rating agency said headwinds may persist into the second half of 2023 and banks' financial performance is likely to diverge according to the strengths of their funding franchises and appetite for risk, but long-term fundamentals and business prospects for the sector remain positive.

Liquidity and interest rates in the banking system have eased in recent weeks, although loan growth remains relatively subdued and was at a decade-low in April 2023.

Narrow spreads between Vietnamese dong and US dollar market interest rates limit the extent by which policymakers can reduce banks' funding costs further, which has eaten into net interest margins (NIMs) – especially for smaller banks.

Public pressure to cut lending rates is also likely to compress lending margins, but banks have headroom in lending spreads to maintain substantial pre-provision profitability.

Fitch said the Government and the State Bank of Vietnam (SBV) have demonstrated a clear policy will unclog liquidity flows. This includes conventional cutting of red tape and fiscal and monetary stimulus, but also encouraging credit and granting forbearance on bank regulations.

Many banks have not reduced real-estate lending or bond holdings significantly in Q1 2023, suggesting that such debt will be refinanced to avoid crystallising wider defaults and losses. Primary-market bond issuance remains a mere shadow of recent years, but is starting to thaw amid conspicuous state endorsement.

According to Fitch, the SBV became one of the first central banks in the region to cut policy rates to ease funding pressure for borrowers, although exchange-rate stability priorities could limit how much more it can inject liquidity without pressuring the dong.

Non-performing loan (NPL) ratios rose across most major banks in Q1 2023, but Fitch does not expect a spike in 2023 as Circular 02/2023 issued in April permits banks not to downgrade restructured loans between now and mid-2024.

The SBV nevertheless requires banks to provision for half of such loans by end-2023 and the rest by end-2024. Transparent disclosure and timely provisioning will guide Fitch assessment of banks' risk profiles and asset quality.

FTA to offer big opportunities for Vietnamese exports to Israel: Insiders

The conclusion of negotiations towards the signing of the Vietnam - Israel Free Trade Agreement (VIFTA) has opened up new and potential opportunities for Vietnam's exports, and now is time for businesses to understand Israeli people’s needs and tastes to promptly enter this new market, according to insiders.

After seven years with 12 negotiation sessions, recently the Ministry of Industry and Trade (MoIT) announced that it had officially concluded VIFTA negotiations with the Israeli Ministry of Economy and Industry to reach agreements in accordance with both countries’ aspirations and interests.

In the coming time, Vietnam and Israel will promote the final internal and legal works towards the signing of the agreement, which is expected to take place in 2023 in celebration of the 30th anniversary of the establishment of the two countries’ diplomatic relations, they said.

Director of the MoIT’s Multilateral Trade Policy Department Luong Hoang Thai said that with a mutually complementary economic structure and strong growth in two-way trade turnover, Vietnam and Israel will gain more benefits when the deal’s incentives and advantages are effectively utilised.

The two sides will continue to strengthen coordination and exchange delegations between ministries, sectors, associations and enterprises to jointly seek and promote opportunities for trade and investment cooperation, and to build and popularise trade brands at fairs and exhibitions held in both nations.

According to the MoIT, Israel is currently the third largest export market and the fifth largest trading partner of Vietnam in West Asia, and considered a large and potential market for Vietnamese goods in the. Last year, the bilateral trade reached 2.2 billion USD, up 17.9% year-on-year, of which Vietnam’s exports were valued at 785.7 million USD and  its imports hit 1.4 billion USD.

Vietnam mainly exports phones and components, seafood, cashew nuts, coffee, shoes, pepper, garment and textiles, wood and wood products to Israel. Meanwhile, it imports computers, electronic products and components, machinery, equipment and spare parts, fertilisers, vegetables and fruits from the West Asian country.

General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP) Truong Dinh Hoe said that the VIFTA, once signed, will create big opportunities for Vietnamese aquatic product exporters, with a distinct advantage in tariffs compared to other countries that have not had FTAs with this country.

This is also a "springboard" for Vietnamese enterprises to expand their exports to regional markets.

Elaborating on this market, Trade Counsellor in Israel Le Thai Hoa said that Israel has diverse needs and stable purchasing power and high spending. The country’s enterprises in general are very dynamic, and do business quite methodically and seriously. This market requires imports to strictly comply with specific local standards. Besides, Israel also applies the standards of the European Union and the US and implements quite strict inspection and control.

Vietnamese enterprises need to focus on offering processed products with high added value, competitive prices and appropriate quality; and to comply with requirements of the newly-issued Israeli import regulations and standards, Hoa advised.

Timber exporters face sharp decline in orders

Vietnamese wood and wooden furniture enterprises have been facing many difficulties as export orders have dropped 50-60% since the beginning of this year, pushing firms to cut off at least half of their production capacities. 

Data from the General Department of Customs showed that the export turnover of wood and wooden products reached 3.9 billion USD in the first four months, down 30.6% year-on-year. The export of wooden goods saw a yearly decline of 38% to $2.6 billion. 

At the same time, the import value of wood and wooden products also decreased significantly to 634 million USD, down 33.6% over the same period last year.

During the four months, Vietnamese exports of these goods to major markets all decreased sharply such as the US (2.02 billion USD, 38%); Japan (556 million USD, 1.5%); the Republic of Korea (274 million USD, 22%) and China (481 million USD, 13%).

Analysts and businesses have said that the decrease in wood and wooden goods exports was foreseeable. They attributable the decline to inflation surges in some countries, which were also major importers of Vietnam’s wood and wooden goods, resulting in sluggish demand for these products. 

For example, the US imported 1.24 billion USD worth of timber and wooden products from Vietnam in the first three months, a year-on-year drop of 42%.

In the context of inflation and the banking crisis, US banks have tightened credit, making importers unable to finance import goods in large quantities. The demand for US wooden furniture imports has plummeted, analysts said. 

According to wood exporters, their export orders from the US market have decreased between 50% and 55% depending on the type of wood products. Meanwhile, orders from the EU - another key export market, also dropped 60%. 

Chairman of the Binh Duong Woodworking Association Nguyen Liem said amid the current difficult context, the provincial wood enterprises had slashed their production capacities by 60%.

Liem also predicted that when the market situation improved, and the inventory decreased, foreign customers would continue to order but not sooner than early 2024.  

Around the beginning of 2024, the market would be less difficult, and businesses would have export orders again. Still, only small ones, he said, forecasting that the market would likely recover at the end of 2024. However, the recovery growth would depend on the world's economic and political situation.

Despite a sharp slump in orders, trade experts said the US remained a key export outlet for Vietnam’s wood industry. Therefore, businesses need to maintain the US market by updating information and converting production according to the market's consumption trends.

In addition, management agencies should support businesses to bring Vietnamese wooden goods into large distribution systems such as Walmart, Costco and Amazon. This was an effective way for the firms to develop their brands, avoiding relying too much on intermediaries, trade experts said. 

In the current context, the Ministry of Industry and Trade and the Ministry of Foreign Affairs should continue to help businesses find out information about the market situation of products, consumer demand and tastes, Liem suggested. 

They should also support the enterprises in updating the national mechanisms and policies of importing countries on quality, design, legality and sustainability of imported wood products and providing them with information on requirements as well as changes in the trade policy of key markets such as the US, the EU and Northeast Asia, he said. 

The chairman added that early warnings from the ministries to help the firms minimise commercial disputes should also be included.

Chairman of the Vietnam Timber and Forest Products Association Do Xuan Lap proposed to the Ministry of Foreign Affairs and the Vietnamese embassies in foreign countries to better promote international furniture fairs in Vietnam.

Meanwhile, embassies should also provide information and support Vietnamese businesses to participate in international furniture fairs, Lap said.

He also petitioned the embassies to assist wood enterprises in opening companies, representative offices and stores in potential export markets.

More support needed for mechanical industries

Domestic mechanical industries need additional support programmes in order to thrive, according to industry experts and economists.

The industries have been struggling in recent years with a shortage of orders, increased costs and decreased demand, with many businesses forced to operate at minimal capacity, according to Dao Phan Long, chairman of the Vietnam Mechanical Enterprises Association (VMEA).

Long said domestic industries have now developed decent technical capabilities in moulding, mechanical components, electrical cables, plastic and rubber. Many businesses have been making significant investments to improve production capacity and product quality to meet the high standards set by FDI enterprises, their main customers.

"To establish a strong foundation for Viet Nam's mechanical industries, businesses must be able to rely on public investment projects and the State's support programmes," Long said.

He added that a series of shortcomings and limitations in the country's policy had hindered the development of the industries.

VMEA called for additional infrastructure development and support policies to encourage businesses to invest in the production of raw materials for manufacturing industries, which have been mostly dependent on foreign imports.

Long said there should be preferential policies for businesses and investors who source from domestic firms and longer payback periods for investments in the industries.

Do Phuoc Tong, chairman of the HCM City Electrical and Mechanical Enterprises Association, a preferential tax scheme for domestic manufacturing enterprises has been long overdue. He said it doesn't do much to entice businesses to source locally for parts if they can import a whole machine at a 0 per cent tax rate.

Other inconsistencies in tax policies have contributed to Vietnamese manufacturing being unable to compete with regional peers.

For example, domestic firms have long voiced concerns over perceived "unfair treatment" compared to FDI firms searching for land and factory investment and accessing support funds.

In addition, domestic firms often find it difficult to join the supply chain due to FDI firms often prefer imported products.

"There should be policies that require a certain percentage of domestic products to promote cooperation between FDI enterprises and domestic enterprises," he said. "This will also allow supporting industries in Viet Nam to access new technologies."

National Assembly deputy Hoang Van Cuong from the National Economics University said it's critical for domestic industries to maintain a strong presence on home turf or risk missing out on a 100-million consumers market in the future.

VN to complete the development of national system for origin tracing

It is pressing for Viet Nam to complete a national system for origin tracing as the market has increasing demand for transparency of product quality and origin tracing was becoming mandatory for products to enter foreign markets, according to Nguyen Hoang Linh, Deputy Director of the Directorate for Standards, Metrology and Quality.

Linh said that origin tracing remained scattered due to the lack of connection and sharing among sectors and localities.

The portal for origin tracing was expected to be completed by the end of this year, Linh said, adding that it would be an effective tool to promote traceability not only in Viet Nam but also with other countries.

Linh said that origin tracing also contributed to promoting the digital transformation at enterprises, optimising operational efficiency, improving productivity, product quality and enhancing brand and building trust with consumers as well as creating a transparent business environment.

The system would also provide accurate data for market analysis and building plans, strategies and policies to orient production towards international standards.

In fact, origin tracing was not a new thing, he said. Previously, origin tracing aimed to serve enterprises to control production quality but now it became a requirement of consumers and markets.

Bui Ba Chinh, Deputy Director of the National Numbering and Barcodes Centre under the Ministry of Science and Technology, said that a portal to manage origin traceability was becoming a pressing requirement.

The portal would be connected with other domestic and international origin tracing systems to manage, update and share databases about products. It was also the place to receive complaints and recommendations.

The national traceability portal would also rely on data, statistics and AI technology to provide analysis.

Focusing on building many new planting area codes and improving the quality of existing ones was an important direction to open up export opportunities.

Planting area codes should be considered an asset of owners, requiring effort to increase quality and protect the codes.

Statistics showed that there were about 6,500 planting areas and 1,600 packaging facilities in 33 provinces and cities that granted codes for exports.

To date, 710 codes were revoked due to failure in meeting the quality requirements of importing markets.

Dang Phuc Nguyen, General Secretary of the Vietnam Fruit Association, said that it was very difficult to obtain a planting area code and it would cause damage if the code was revoked. He added that it took a lot of time to apply for the code, once revoked, again, not to mention the costs and effort, which was around 2-3 times longer than applying for a new one.

Currently, many countries have increased inspection and supervision of quality at planting area codes.

Localities must attach special attention to supervising quality at existing planting areas which had been granted codes to avoid revocation, he said.

Any fraud in using codes must strictly be handled to protect brands, he added. Thailand, for example, had regulations with very strict punishments for fraud.

Nguyen Dinh Tung, general director of Vina T&T, said that owners of planting areas should be active in improving quality and applying for codes to get ready for exports.

According to Hoang Trung, Director of Plant Protection Department under the Ministry of Agriculture and Rural Development, the codes of planting areas and packaging facilities were compulsory for sustainable exports.

He urged localities, enterprises and owners to protect the codes and ensure production to meet requirements of markets. 

Bad debts running rampant in construction sector

Little is known about the exact amount of bad debts being incurred by construction firms, but the non-payment is eating into their bottom line day by day.

Le Hong Minh, Chairman of the 2T Corporation, claimed that he had never witnessed such a serious situation in the construction sector for 40 years. Debt collection has now become a high priority for small- and medium-sized firms.

And his firm is no exception. The debts owed by construction investors to 2T have amounted to over VND200 billion (US$8.5 million), two times higher than its charter capital of VND100 billion.

The firm has no option but to withhold the transfer of some finished units to the investors to press for payment. Dozens of condotel apartments have been put at its disposal as a result of their defaults.

The chairman remarked that investors' non-payment had pushed many contractors into financial distress and some others into bankruptcy. Several investors went so far as to refuse payment even though they made huge profits from the sale of transferred units.

Very few contractors have taken legal action against their defaulted investors. It took them around three to five years to have their cases heard but the plaintiffs got their money back in just 30 per cent of the cases.

The chairman underlined two factors behind investors' tendency to default on their payments: their upper hand in negotiations and legal loopholes.

Investors have more bargaining power than contractors in negotiations because there are few investors but plenty of contractors in the market. Their higher position has put the latter at a disadvantage when it comes to payment clauses.

Regarding legal loopholes, contractors are required to have various types of bank-issued guarantees, including performance security, to be qualified for a contract. Meanwhile, the requirement applicable to investors is far more lenient.

On top of that, certain bank-backed guarantees presented by investors can only be activated with proof of their acceptance of construction work. That means if the investors deliberately refuse to accept contractors' work, the latter would be unable to, by any means, request the banks to pay in the event of investors' default.

Minh called for new regulations that require investors to present bank-backed guarantees unconditionally covering all the feedstock and equipment employed by contractors.

Nguyen Quoc Hiep, Chairman of the Viet Nam Association of Construction Contractors, said the debt defaults were vertically spilling over into other construction players. The long chain of defaulters has thrown the sector into disarray.

He cited legal loopholes as the main cause of the situation. He called for new regulations to fix the loopholes and hedge contractors against non-payment. He also believed that "arbitration and litigation should only be used as a last resort".

Dogged by non-payment, many contractors have begun to shun all-inclusive contracts with investors to reduce default risks. They engage in nothing more than procuring workers for the investors or acting as sub-contractors to foreign companies.

Green funds prompt need for fund-managing institution: insiders

The growing availability of green funds has exposed the need for professional institutions in Viet Nam to take charge of the green money granted to the country, according to insiders.

Former head of the Banking Strategy Institute Pham Xuan Hoe said that green funds to Viet Nam will be more abundant in the next few years on the back of the Just Energy Transition Partnership launched in December 2022.

At least US$15.5 billion initiated by the partnership will come in the form of preferential loans for three to five years to support the country's energy transition. The EU and the UK also got in on the act with committed assistance of $7.8 billion.

Given the growing availability of green funds, Hoe called for a professional institution to manage the green money delivered to the country. He stressed that such an institution will act as an intermediary that would improve domestic firms' access to green capital.

In the long term, he urged the establishment of an up-to-international-standards financial taxonomy that works in line with other financial systems, including taxation and carbon credit.

Professor Vu Sy Cuong at the Academy of Finance opined that the transition to green growth in Viet Nam requires vast investments. Between now and 2040, the country will need an annual amount of finance equivalent to 6.8 per cent of the GDP to improve its resilience against climate change.

International institutions and banks are willing to dig deep into their pockets to fund the country's effort on 'going green'. However, the availability of green funds is one story, and the absorbability of the funds is another.

The absence of a climate bond taxonomy and a legal framework for the bond in the country has stymied those who want to finance green projects. On top of that, the low awareness of ESG (Environmental, Social, and Governance) among firms has made scores slip through the cracks.

To unlock the full potential of green funds, the professor called for establishing a carbon credit market and granting financial assistance to firms cutting back on stranded fossil-fueled assets.

According to DARA International, Viet Nam will incur an annual cost of $15 billion (5 per cent of the GDP) in the next years owing to climate change. If the country fails to take early action, the cost can soar to 11 per cent of the GDP by 2030. 

Vietnam manages to achieve economic growth of 6.5 percent amid difficulties

Vietnam leaders have managed to achieve economic growth of 6.5 percent amid considerable difficulties.
 
In 2023, the National Assembly and the Government set an economic growth target of 6.5 percent. However, in the first quarter, GDP growth was only 3.32 percent. Worse, in the first 4 months of the year, up to 77,000 enterprises stopped operation while approximately 78,900 enterprises across the country registered for new establishment and returned to operation after a hiatus.

According to many experts, it is crucial to help enterprises overcome their current problems, especially in accessing and mobilizing capital so that the country can achieve expected economic growth. According to the recently announced Provincial Competitiveness Index (PCI) 2022 survey results, businesses said that they are facing problems with hard accessing credit. Specifically, not many of them can borrow money from a 2-percent interest rate support package because they are unable to satisfy the requirements of the package.

Meanwhile, capital mobilization through the bond channel is almost stagnant. In 2022, individual corporate bonds issued decreased by 44.9 percent compared to 2021 reaching VND 337,000 billion while they mobilized over VND 25,000 billion from selling corporate bonds in the first quarter.

In April, the corporate bond market only recorded one bond issue worth VND671 billion, resulting in the month's issue size equivalent to only 2.5 percent compared to March and 2.25 percent compared to the same period in 2022. Not only that, many businesses are facing the pressure of bond maturity.

According to the Vietnamese credit rating agency FiinRatings’ data, it is estimated that VND 220,770 billion of bonds will mature from March to the end of December. Real estate businesses have a bond balance of VND93,200 billion of mature bonds. The total individual bonds worth VND 36,200 billion will reach maturity in the second quarter and it is VND 35,400 billion in the third quarter.

The above data shows that businesses are suffering huge pressure on capital. The Government and the State Bank thus directed to reduce interest rates for the promotion of production and business recently.

In the socio-economic examination report at the 23rd session of the Standing Committee of the National Assembly just took place, the Economic Committee also suggested that the Government should consider lowering the operating interest rate to support growth in the context of inflation pressure while the exchange rate is not as stressful as at the end of 2022.

From now until the end of the year, economists forecasted that the national economy will face many challenges; therefore, the country must struggle to achieve the expected growth targets.

Economic experts emphasized that the Government needs to persistently implement the goal of stabilizing the macro-economy, controlling inflation, and strengthening the adaptive and resilient capacity of the financial and banking system to achieve the set goals in addition to the implementation of synchronous solutions to remove difficulties of financial, currency, corporate bond and real estate markets and reduction of deposit and lending interest rates to ensure balance and harmony between exchange rates and interest rates, between interest rates and inflation and increase the ability to access capital and absorb capital of people and businesses.

Last but not least, the government should have policies to support interest rates for each specific business in each field.

For the revival of the corporate bond market, the government should provide tools, methods and methods for enterprises to issue bonds with conditions and solvency to bondholders following regulations with the aim to strengthen investors’ confidence.

4M rice exports at $1.56bln

Rice exports in the first four months of 2023 stood at 2.95 million tons, for revenue of $1.56 billion, figures from the General Department of Vietnam Customs show.

The result represents a year-on-year increase of 43.6 per cent in volume and 54.5 per cent in value; the highest growth among key agricultural exports.

The Philippines remained Vietnam’s largest importer, with rice exports totaling $647.5 million in the period, up 53.4 per cent year-on-year. Following was China, with $292.5 million, surging 88.2 per cent year-on-year.

The average rice export price in the first four months was $526 per ton.

Government tightens management over construction investment consultancy

Deputy Prime Minister Tran Hong Ha has issued a directive requesting relevant ministries and agencies to tighten management and handle shortcomings relating to construction investment consultancy for transport projects.

The directive said investment consultancy has seen positive results but still exhibited shortcomings, especially in design and surveys without full and comprehensive information.

The estimated amount of investment capital in some projects have also failed to meet actual circumstances, leading to adjustments in investment plans and capital that negatively affect project progress and investment efficiency.

The Ministry of Transport was instructed to enhance management over the selection of consultants and consultancy contracts when conducted feasibility studies.

Those found to illegally transfer or sell bids will be strictly punished, according to the directive.

The Ministry was also required to increase inspections and supervision over the granting of licenses and certificates for construction consultants.

Hai Phong targets becoming growth pole of Vietnam

Northern Hai Phong city targets developing into an important growth pole of the country under its adjusted master planning to 2040 and vision towards 2050, according to local authorities.

The plan was approved by the Prime Minister in March.

By 2050, it is expected to become one of the most developed cities in Asia and the world.

Its population is expected to reach 2.8-3 million and 3.9-4.7 million by 2030 and 2040, respectively.

The urbanization rate is projected to increase to 74-76 per cent by the end of this decade and 80-86 per cent by 2040.

The city targets building high-tech agriculture zones in Kien Thuy, An Lao, Tien Lang, Vinh Bao, and An Duong districts.

Vice Chairman of the Hai Phong City People’s Committee Le Anh Quan told a recent workshop held to announce the planning that local authorities are pleased to cooperate with investors and businesses for the city’s rapid and sustainable development.

The city committed to strongly implementing administrative reform and creating a favorable business environment for investors, he said.

Government issues resolution on tourism development

Vietnam is working to join the group of 30 countries with the world’s top tourism competitiveness.

The Government issued Resolution No. 82/NQ-CP on May 18 on tasks and solutions to accelerate the recovery and boost the effective and sustainable development of the tourism industry.

Key tasks and measures include promoting the restructuring of the tourism industry to be professional, modern, and sustainable, creating conditions to attract foreign visitors to Vietnam, and increasing investment in developing key tourism products.

Communications and promotional activities will be strengthened while tourism businesses will receive more support, according to the resolution.

Other tasks and measures include improving human resources training and speeding up digital transformation, startups, and innovation in the tourism industry.

With the motto “Excellent products - Professional services - Convenient and simple procedures - Competitive prices - Clean and beautiful environment - Safe, civilized and friendly destination”, Vietnam aims to turn tourism into a spearhead economic sector and is striving to enter the group of 30 countries with the world’s top tourism competitiveness.

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