The official held that growth promotion, macro-economic stability, strong disbursement of public investment capital and achievements in external relations are among spotlights of the Vietnamese economy so far this year, which create a driving force for the economic growth for the whole year.
Phan Duc Hieu, permanent member of the National Assembly (NA)’s Economic Committee, shared the view and highlighted the efforts made by the NA, Government, businesses and people.
He said that the NA and Government have issued many policies to support businesses and people, including tax reduction, exemption, and extension of financial obligations, which is worth about 150 trillion VND (6.14 billion USD).
Lauding Vietnam’s active policy response, Shantanu Chakraborty, Asian Development Bank (ADB)’s Country Director in Vietnam, said that the Vietnamese Government has moved in the right direction and in a timely manner.
Dr. Vu Minh Khuong, a lecturer from Lee Kuan Yew School of Public Policy of Singapore said that the US President’s visit to Vietnam has also brought about new motivations for new sectors, including semiconductor production, which is a good opportunity for Vietnam.
In report released in September, the ADB predicted that Vietnam will continue to take the lead in Southeast Asia with growth of 5.8% in 2023, lower than that of last year but still a good figure. Chakraborty held that the goal of 6% in growth rate set by the Vietnamese Government is reachable.
Vietnam has shown a positive pace in investment and public spending, while the State Bank of Vietnam has well performed its role in controlling inflation, he said, underscoring that comparing to other regional countries, Vietnam has achieved encouraging achievements.
Chakraborty and economic experts also advised Vietnam to mobilise more resources from the private sector for infrastructure development, promoting the domestic consumer market, creating favourable conditions for people to improve income, and at the same time speeding up public investment disbursement, flexibly managing fiscal and monetary policies, and restructuring the labour market.
Vietnam seeking ways to maintain economic recovery speed
Vietnam ends this year’s third quarter with extremely promising economic status, including a stable rise in FDI to reach US$20.21 billion in September, a growth of 7.7 percent compared to this time last year.
Despite a registered capital drop of 4.3 percent in the first 6 months of 2023, the third quarter witnessed a significant recovery of 12 percent. The disbursed capital in the third quarter also came to nearly $16 billion (a rise of 2.2 percent). This is an important driving force for the national economic growth this year and the near future.
This FDI increase is a positive signal of greater confidence from international investors in the stable macroeconomic policies and effective fiscal or monetary policies of Vietnam, creating a safe and open investment environment.
The Foreign Investment Agency (under the Ministry of Planning and Investment) informed that in the capital flow into Vietnam in the past 9 months, the growth rate of new projects (at 66.3 percent) is higher than that of new investments (at nearly 44 percent). This means that small and medium-scaled investors continue to show interest in the investment environment of the country, whereas large-scaled ones are more careful in sizable projects when the global minimum tax policy takes effect on January 1, 2024.
New projects are mainly launched in advantageous locations such as Hanoi, HCMC, Bac Giang Province, Binh Duong Province, Hai Phong City. Many investors come from Asia, a large proportion of which is traditional (Singapore, Japan, China, and the Republic of Korea). Their registered FDI accounts for nearly 79 percent of the total in the first 9 months this year, each over $1 billion. Singapore leads the list with $4 billion of investment.
It is now critical to maintain this positive economic picture and attract even more new investors for large projects. Head of the Foreign Investment Agency Do Nhat Hoang stressed the validity of conventional measures like issuing suitable policies for each industry, perfecting the current institution, eliminating outdated business conditions, accelerating administrative reform, effectively implementing the model of one-stop administrative procedure, updating the human resources level, developing consistent traffic facilities nationwide to form a link among economic zones.
He also mentioned the importance of a legal document for the adoption of the global minimum tax policy next year in order to better help businesses to pay additional taxes in Vietnam. The transparency in this procedure allows those wishing to invest in Vietnam to calculate business costs and profits quickly and precisely. Meanwhile, operative enterprises in the country also need support policies and investment incentives when implementing the global minimum tax policy.
Carrying out these proposals can turn Vietnam into the nation with a more competitive and attractive investment environment in the near future.
Outlook for wood products exports to UK remains optimistic
Wood and wood product exports to the UK, as well as other major export markets, are expected to recover this year after a significant drop, industry experts have predicted.
Ngô Sỹ Hoài, vice chairman of the Vietnam Timber and Forest Products Association, said exports to the UK were worth US$124 million in the first eight months, a year-on-year decrease of 26.5 per cent.
Việt Nam also earned $28 million from the export of non-timber forest products (rattan, bamboo, rush, carpet, etc.) to the UK in the first eight months, a 3.6 per cent year-on-year decrease.
Exports of wood and non-timber forest products to the UK were worth a total of $152 million, he said.
The UK is among the crucial export markets for Vietnamese wood products and serves as their gateway to Europe. Vietnamese woodworking firms have shown great interest in this market.
The export of wood and wood products to the UK is relatively stable and substantial, usually accounting for a third of the total exports to the EU, Hoài said.
“Currently, there are challenges in the global market, with exports to many markets decreasing.
“However, firms should steadfastly continue promoting exports to the UK. Hopefully, these challenges are temporary.
“In the long run, the UK remains a key market for interior and exterior furniture, especially those with high added value.”
The UK-Việt Nam Free Trade Agreement signed in May 2021 is an important continuation of trade facilitation between the two countries after the UK exited the EU.
Tariffs for bilateral trade are replicated from the EU-Vietnam Free Trade Agreement.
The agreement has enhanced opportunities to export Vietnamese products through the increased access to the UK market.
Therefore, there are no policy difficulties when exporting to the UK.
Currently, Vietnamese firms can only export outdoor furniture and handicrafts to the EU, mainly Germany, the Netherlands and Belgium, but can sell a lot of interior furniture to the UK, said Nguyễn Chánh Phương, deputy chairman of the Handicrafts and Wood Industry Association of HCM City (HAWA).
“British and American tastes are similar and they do not have too many requirements in terms of quality or style unlike Europeans,” he added.
But Hoài and Phương shared the opinion that the UK has introduced new initiatives and regulations related to green production and sustainable development to minimise the impacts of climate change, reduce greenhouse gas emissions, curb deforestation, and preserve biodiversity.
This presents challenges for Vietnamese exporters, but businesses must strive to comply with its regulations, they said.
Hoài said: “This is a market with quite strict regulations. However, firms that successfully enter the market can demonstrate their ability to expand their products to other demanding markets since they satisfy strict requirements in terms of the environment, ensuring a legal timber source and sustainable forest management.
“Despite current difficulties, firms should strive to maintain trade ties in the wood sector with the UK market; exports to the market will definitely grow again,” he added.
HAWA Deputy Chairman Phương said total wood and wood product exports declined by nearly 26 per cent in the first eight months of the year to $8.3 billion, with exports to key markets such as the US, EU, and UK experiencing significant drops.
The decrease was primarily driven by high inventories and weak demand due to high inflation, prompting consumers to reduce consumption of non-essential goods, including wood and wood products.
However, since May there have been signs of recovery, with exports averaging over $1.2 billion per month, he said.
“From May until now Vietnamese businesses have also imported large volumes of timber, with the average imports increasing by 5-10 per cent a month.
“This indicates that woodworking firms are actively preparing for year-end orders."
Huỳnh Quang Thanh, CEO of Hiệp Long Fine Furniture Company, said buyers in many markets had "over-ordered" products last year in response to supply-chain issues and shortages, leading to the high inventories.
Statistics from international organisations show global inventories have significantly reduced, and buyers in many markets have resumed ordering since July, he said.
“The number of orders is expected to surge from October to pre-pandemic levels.”
His company has secured enough orders to retain all of its workers until the end of the year, he said.
He added that his company’s key markets include the US, EU, northern Europe, and the Middle East.
Lê Xuân Tân, managing director of Happy Furniture, which exports indoor and outdoor furniture to major markets such as the US, EU, and Australia (with exports to the UK accounting for 15 per cent of its total exports), said demand for furniture typically picks up in the fourth quarter every year as people prepare for the year-end holiday season.
Buyers now tend to order smaller volumes than before, and delivery times are shorter, and so firms need to prepare raw materials, personnel and production facilities well to meet buyers’ demands, he said.
EV maker VinFast aims expansion in 50 markets
VinFast, the electric vehicle (EV) maker of Vietnamese conglomerate Vingroup, on October 5 said it will expand in 50 markets globally by the end of 2024.
It also revealed a plan to set up an assembling plant in India – the third largest automobile market in the world. Some 150-200 million USD will be splashed out on the Indian plant, which is designed with the capacity of 50,000 vehicles a year in the first phase.
According to VinFast, plant construction in new markets allows the firm to capitalise on the incentives of the host governments as well as access raw materials with attractive prices.
VinFast handed over 10,027 electric cars in the third quarter of this year, up 5% from previous quarter. Robust sales in the period was recorded in the Norther American market, especially Canada.
During January-September, as many 21,342 VinFast vehicles were delivered.
Besides, the firm saw impressive sales of electric motorbikes, with 28,220 vehicles sold in Q3, up 177% from Q2, and 113% as compared to the same time last year.
Its revenue rose 4% quarter-on-quarter, and 159% year-on-year to 8.254 trillion VND (342.7 million USD), nearly 7.7 trillion VND of which came from electric vehicle sales.
According to Le Thi Thu Thuy, VinFast Global General Director, VinFast has an ambitious plan to build a green future, and its business result in the last quarters is only an initial step.
A feasible plan was outlined to ensure that VinFast is able to make bold steps to become a global company, she said.
Hai Duong's FDI attraction surpasses target
Industrial parks (IPs) in the northern province of Hai Duong have attracted over 293 million USD in foreign direct investment (FDI) since the beginning of 2023, reaching 146.6% of this year’s set target, according to the provincial IP Management Board.
In the first nine months of this year, the province granted investment certificates for 32 new projects with a total registered capital of over 187 million USD, and allowed 21 FDI projects to add nearly 106 million USD to their investment capital.
Meanwhile, domestic direct investment (DDI) topped 3.9 trillion VND (160 million USD).
To achieve these encouraging results, the management board has closely worked with relevant units to create favourable conditions for investors, including reforming administrative procedures in accordance with the ISO 9001:2015 quality management standard system. All administrative procedures under the board's jurisdiction have been published on the board's website and the province's administrative procedure portal.
The board's head Nguyen Trung Kien said they are striving to reduce half of the processing time in handling administrative procedures.
In the time ahead, the management board will continue to collaborate with departments, sectors to advise provincial leaders about development orientations for IPs during 2021- 2023 with vision to 2050, to be integrated in the province’s development master plan. The board will also work with local administration and relevant agencies in ground clearance work to create a clean land fund for investors.
The Prime Minister has approved planning for IP development in Hai Duong, comprising 21 IPs and three expanded complexes with a total area of about 4,508 hectares. So far 17 IPs have been established, of which 12 IPs have been put into operation with a total planning area of 1,650 hectares.
As of September 7, the 12 operational IPs attracted 340 secondary investment projects, including 265 FDI projects from 23 countries and territories with a total registered capital of over 5.17 billion USD and 75 DDI project with a total registered capital of about 11.9 trillion VND, creating jobs for nearly 110,000 labourers.
Wood pellet, wood chip exports – a bright spot: official
Wood pellets and wood chips are a bright spot in the shipment of forestry products, said head of the Wood Chip Section under the Vietnam Timber and Forest Product Association (Viforest) Thang Van Thong.
Statistics from the General Department of Vietnam Customs showed that wood chip exports brought home 1.1 billion USD in the first seven months of this year while wood pellets earned 380 million USD.
Following the heated growth in the last half of 2022, the average export price of wood pellets decreased by nearly 3% to around 157 USD per tonne in the first half of this year.
The Republic of Korea (RoK) and Japan have been the two major importers of wood pellets from Vietnam, accounting for nearly 100% of the total volume and value of Vietnam’s exports to all markets since 2019.
During January-June, Japan spent over 195 million USD on importing more than 1.16 million tonnes of pellets from Vietnam, up 5.65% in volume and 28.88% in value year-on-year.
Meanwhile, the RoK imported over 840,000 tonnes of pellets valued at nearly 116 million USD, down over 33% in volume and almost 43% in value annually.
For wood chips, China and Japan were the largest importers of this product from Vietnam, making up nearly 95% of the total volume and value of Vietnam’s exports in 2022 and over 90% in the first half of this year.
China consistently accounts for over 60% of Vietnam’s total export value. However, there has been a significant decrease in demand in China this year while Japan also experienced a slight decline, leading to a drop in the export prices of wood chips.
In September, Vietnam’s total forestry product exports surpassed 1.28 billion USD, up 7.3% after a prolonged period of decline. As a result, the overall decrease in forestry product exports was reduced to 20.6%, with a total value of 10.44 billion USD in the first nine months of this year.
Thong noted with delight that following the direction of the Prime Minister and with the drastic actions by the Ministry of Finance, the General Department of Taxation and local tax authorities, businesses in the wood industry, primarily those involved in wood chip and pellet processing, have been refunded 2 trillion VND in value-added tax (VAT).
This will provide capital to support their operations in the coming time and ease the challenges faced by the wood industry due to limited orders, he said.
Customer experience, business expansion driving conversational AI investment
Brands in Vietnam and the Asia Pacific region are strongly investing in commercial conversation to improve the customer experience, experts said.
About 77.9 million Vietnamese residents use the Internet out of a total population of 98.5 million as of January 2023, which contributes to the popularity of social networking platforms.
Therefore, the potential for conversational commerce in Vietnam is incredibly wide.
Telecommunications service providers in the country have used conversational commerce platforms for account notifications and to offer hyper-personalised promotions and discounts to customers.
In addition to Facebook and Instagram, Vietnamese are very active in using communication apps such as Zalo and Viber.
Furthermore, e-commerce is one of the fastest-growing business segments in the country.
Many online retailers in Vietnam are using conversational AI and chatbots to address customer queries in real time and keep customers apprised of order updates.
For instant messaging, brands use communication platforms as a service (CPaaS) and software as service-based (SaaS) solutions as crucial tools, empowering organisations to seamlessly integrate real-time communication features such as voice, text, video, instant messaging, and social media into their internal and external applications.
Nikhil Batra, Research Director, Telecommunication, IDC Asia/Pacific, stated that contextualised customer interactions boost profitability and foster emotionally fulfilling engagements. The rapidly increasing use of social networks in Vietnam further fuels businesses' desire to improve customer experience. Investing in conversational commerce will thus help brands grow more quickly.
According to Infobip’s research Revolutionising Customer Experience through the Power of Conversational Commerce, a majority of organisations in the region, about 70%, plan to increase communication platform spending over 2023-2024 in order to provide unique, unparalleled customer experiences for the region’s growing social media users, who are mostly young, active, and aware of the power of their own influence.
The research revealed that Asia Pacific companies including those from Vietnam are increasing investments in cloud-based solutions for enhanced customer experiences and operational efficiencies.
As businesses embrace the potential of conversational commerce, they leverage AI technology to create meaningful connections and unlock new growth opportunities.
"Organisations need an actionable, customer-centric strategy and the ability to invest in the right set of tools to grow their business and keep customers happy, which will empower organisations to stay ahead in a dynamic marketplace,” said Velid Begovic, vice president of Revenue at Infobip.
According to the report, customers born and raised in the digital age have high expectations and carefully evaluate their interactions with brands throughout the buying journey.
This has resulted in brands moving away from traditional transaction-level experiences to relationship-based ones.
Capitalising on the advancements in Artificial Intelligence, conversational commerce has gained significant traction among businesses in the Asia Pacific region.
According to the study, at 74%, the banking, finance and insurance sector leads the industry in increased CpaaS investments in 2023-2024. Retail and government/healthcare come in second and third, at 72% and 66%, respectively.
Cold storage supply remains behind requirements
Although Vietnam’s cold storage industry is forecast to have a bright future, the current supply on the market is still very limited.
The country’s cold storage industry is expected to reach a value of $295 million by 2025, with an annual growth rate of 12 percentage points, according to Savills Vietnam.
At the end of August, Hau Giang Cold Storage Logistic Co., Ltd. started construction on its first outsourcing cold storage project in the same province.
The scheme includes six cold storages equivalent to a capacity of 88,000 tonnes.
With an estimated investment of around $21.7 million, the project will use modern technology from the EU and applying digital management. It is scheduled to be ready for operations by 2027.
A Savills Vietnam report released in August shows that, although it only accounts for 11.4 per cent of the total number of transactions in the industrial real estate segment, the cold storage real estate market recorded an annual growth rate of nearly 30 per cent from 2017 to 2022, far exceeding other types in the market.
The report shows that the fresh food industry revenue in the country increased by 6.3 per cent annually in 2020-2022, from $40.4 billion to $45.7 billion.
In addition, the e-commerce market also witnessed a significant growth rate, reaching 21.5 per cent in 2017-2022, promoting the expansion of all supporting services.
As a result, the online food delivery industry also recorded a rapid growth rate, reaching an increase of 5.5 per cent in 2020-2022.
The strong demand for fresh food amid booming e-commerce is the main driving force for the development of the cold storage market. However, the market in this country is still developing and small in scale, with just over 40 projects and concentrated in a few large cities only.
The majority of cold storage supply is concentrated in Ho Chi Minh City and neighbouring provinces such as Binh Duong, Long An, and Dong Nai, with a total area accounting for 87 per cent of the total supply in the country.
In the northern market, Hanoi, and Bac Ninh and Hung Yen provinces have also recorded a significant increase in supply, but are still limited in relation to the south.
Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), acknowledged that Vietnam was seriously lacking in cold storage facilities.
“Cold storage is not only a necessary condition for businesses to purchase all the shrimp and fish raw materials produced by farmers, but also a key link to help businesses create a large source of goods, meeting export contracts when market demand arises,” Hoe said.
The domestic market also needs cold storage to distribute food that needs to be refrigerated and this need is increasing as modern retail develops, Hoe added.
“Current seafood processing factories also have on-site cold storage, but the capacity is small, only meeting part of the demand, and the rest must be outsourced. If the storage capacity is larger, businesses can buy more raw materials from farmers and have better output,” Hoe acknowledged.
The VASEP has proposed that the State Bank of Vietnam offer zero interest rates for the first two years, and reduce interest rates by half over the next four years for long-term loans invested into building cold storage with a capacity of 5,000 pallets or more.
Thomas Rooney, senior manager of Industrial Services at Savills Hanoi, said that cold storage rental prices in different markets were very diverse. Ho Chi Minh City has a rental price of about $50 per tonne each month, nearly twice as high compared to northern regions, due to better facilities and many other value-added services.
“The market in the south has recorded more dynamic development due to greater demand for food, seafood, and retail products,” Rooney said. “Change in consumer habits will be the main driving force driving to develop the cold storage and logistics services segment in the long term.”
The current supply of new cold storage mainly comes from domestic enterprises. Some typical units include An Viet Solution and Technology Co., Ltd., Hung Vuong JSC, and ABA Cooltrans.
Foreign businesses such as Lineage Logistics, SK Logistics and Lotte Logistics are also actively investing in their own storage systems in the Vietnamese market.
However, supply remains behind the demand. In the medium and long term, infrastructure development is the key to increasing cold chain supply, including specialised logistics centres and multimodal connections, Rooney added.
Logistics investors heat up the market
The race to expand logistics market share continues to heat up, as both domestic and foreign enterprises increase investments in this field.
The very first logistics centre from Vietnam-Singapore Industrial Parks (VSIP) is now being constructed in the south-central province of Quang Ngai, and will be completed and put into use by the end of this year.
Being built according to Lotus standards of the Vietnam Green Building Council, the 6-hectare Sembcorp Logistics Park will boast three modern single-storey warehouse blocks.
Singapore’s Sembcorp Development, a wholly owned subsidiary of Sembcorp Industries, and its state-owned joint venture partner in Vietnam, Becamex IDC Corporation, in August also announced the addition of four new VSIPs.
According to Charles Chong, director of Sembcorp in Vietnam, the country has developed strongly in recent years and will continue to be an important manufacturing country in the Asian region.
“With the positive growth momentum of production activities and investment attraction, along with the government’s infrastructure upgrade plan, the central region promises to become the next development region in the country,” Chong said.
In September, VSIP commenced the development of VSIP Can Tho in Vinh Thanh district. It will span 900ha and create jobs for 100,000 workers when complete, attracting $3.5 billion in investment.
Meanwhile, after the Cainiao P.A.T Logistics Centre with an area in Ben Luc district of the Mekong Delta province of Long An came into operation in mid-2022, Alibaba Group has marked a new step in the race to expand market share in the logistics field with its member company Cainiao Network, which continues to develop a second logistics chain in Trang Bom district in the southern province of Dong Nai.
This project was approved by Dong Nai People’s Committee earlier this year.
According to Xing Zhang, general director of Cainiao Network Vietnam, the Dong Nai Smart Logistics Centre has a total area of 16.8ha. “With high-standard logistics facilities, the centre will serve as a regional distribution hub to support logistics activities in the Southern Key Economic Region. We believe that Cainiao Dong Nai will help businesses take advantage of their competitive advantage to achieve higher growth,” said Zhang.
Meanwhile, in mid-September, Frasers Property Vietnam and Gelex Group started construction of Yen Phong 2C Industrial Centre in the northern province of Bac Ninh, with 34,500sq.m of ready-built factories and high-quality logistics. This project will be put into operation in 2024.
Frasers Property Vietnam currently owns more than one million square metres of factories and warehouses in key industrial areas in both the south and north and is accelerating investment in new projects.
With the growth rate of import-export and e-commerce always at double digits, Vietnam is becoming an attractive destination for logistics activities in the Asia-Pacific region.
According to Tran Thanh Hai, deputy director of the Foreign Trade Agency under Ministry of Industry and Trade, in recent years Vietnam’s logistics industry has made significant progress with average growth of 14-16 per cent per year, with a scale of $40-42 billion per year.
“The number of businesses and the quality of logistics services are increasing, contributing significantly to the result of import and export of goods reaching an all-time high of $732.5 billion in 2022, confirming positioning Vietnam’s important position on the international trade map,” Hai said.
According to a World Bank Report published in 2023, Vietnam ranks 43rd in the logistics efficiency index, and among the top five countries in ASEAN.
Michael Kokalari, director of Macroeconomic Analysis and Market Research at VinaCapital, said that the rapid growth of the logistics industry in Vietnam is sustainable, due to the continuous expansion of the manufacturing sector driven by the production of high-tech products.
“The continuous influx of foreign capital has helped build a foundation for Vietnam’s industry that is essentially guaranteed for many years to come. Vietnam also is one of the destinations to benefit from the China+1 strategy of multinational companies,” Kokalari said.
He confirmed that there are three potential strategies: investing in top logistics companies to develop them into an integrated platform that can provide customers with cost advantages; identifying specific assets that require capital to upgrade and driving growth by increasing operational efficiency; or via mergers and acquisitions.
“Also, an attractive sector in Vietnam’s logistics industry is customs clearance services, in which well-qualified agencies can speed up the customs clearance of domestic and foreign goods by ensuring compliance with complex regulations is required,” he added.
Vietnam poised to become large-scale carbon credit market
The Emissions Reduction Purchase Agreements (ERPAs) for 11 forests in the south central region and Central Highlands will lay the foundation for Vietnam's large-scale carbon credit market.
The Organisation for Forest Financing (Emergent) and members of the Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition visited Vietnam from September 26 to 29 to negotiate ERPAs.
The south central and Central Highlands regions, with a total forest area of about 4.29 million hectares (3.16 million ha of natural forests and 1.13 million ha of planted forests) account for over 29 per cent of the country's forest area and are of considerable importance. To implement the LEAF initiative, forest resources that are high in biodiversity have been selected.
Nguyen Thi Bich Ngoc, a representative of Emergent said, "The LEAF Coalition was established in April 2021 with the view to putting an end to deforestation and forest degradation by providing financing for tropical forest protection on a scale of more than 2.5 million ha.
All forest carbon credit transactions via the LEAF Coalition are registered and issued by the independent Architecture for REDD+ Transactions (ART) programme under the REDD+ Environmental Excellence Standard (TREES).
The LEAF Coalition is supported by four governments (the United Kingdom, the United States, Norway, and South Korea) and over 25 major companies (including Amazon, PwC, and Unilever) that have committed to tackling deforestation.
LEAF only buys credits that meet ART’s TREES, consulting and sharing the benefits with local communities and ethnic minority communities, and strictly controlling the use of proceeds. LEAF’s strict buyers’ criteria also ensure high levels of integrity from private sector clients.
"Up to $1 billion is available for distribution to nations with forest protection initiatives, such as Vietnam. It stands as a testament to the nation's efforts to fulfill its COP26 and Paris Agreement commitments," Ngoc added.
In the same vein, Mette Moglestue, Norwegian deputy head of mission in Vietnam said, "The world's current deforestation and forest degradation rates are partly due to the lack of financial mechanisms for investment. We will continue our support for Vietnam's forest protection and development efforts while maintaining the livelihoods of local people and communities."
Additionally, at COP26, the Vietnamese Ministry of Agriculture and Rural Development inked a Letter of Intent with the Director of Emergent, LEAF's administrative management agency, on emissions reductions. This lay the foundation for the two parties to negotiate, sign, and implement the ERPAs for forests in 11 provinces in the south central and Central Highlands regions.
According to the letter, Vietnam aims to transfer 5.15 million tonnes of CO2 emissions reductions to LEAF and Emergent between 2022 and 2026, at a minimum price of $10 per tonne. The credits transferred to LEAF will be counted towards Vietnam's National Determined Contributions (NDC) commitment.
To realise its NDC, Vietnam aims to use its national resources to reduce 15.8 per cent of its emissions, equivalent to 146 million tonnes of CO2, with claims that the figures could be raised to 43.5 per cent and 403 million tonnes with international support.
Vietnam seeks to remove stagnancy in VAT refund
Notwithstanding the constant supervision and direction of the National Assembly and the Government, the problem of delayed VAT refunds has not yet been improved.
In early June 2023, Vietnam Timber and Forest Products Association blamed the delayed VAT refunds, which amounted to more than US$249 million (VND6,100 billion) for the lack of production capital and worker welfare in wood processing and exporting enterprises.
Similarly, Vietnam Rubber Association sent a document to the HCMC Tax Department claiming VAT refunds of more than $7 million (VND171 billion) for 10 rubber trading and exporting businesses. This can also be seen in large enterprises with foreign direct investment (FDI).
In the meeting with leaders of HCMC on August 16, leaders of Samsung Electronics HCMC CE Complex said that its VAT refund had been delayed for more than 2 years, the total amount of which reached $44 million.
According to the 2022 audit results reported by the State Audit, in some localities, the inspection and verification of VAT refund applications of export enterprises remains stagnant.
Statistics from the General Department of Taxation showed that in the first 7 months of 2023, the tax industry just refunded VAT of over $2.9 billion (VND71,800 billion), reaching 39 percent of the estimate, equal to 85 percent compared to the same period in 2022. By the end of August, the tax agency had just refunded more than $3.5 billion (VND87,100 billion), reaching 46.9 percent of the estimate for 2023 and equal to 90 percent compared to the same period in 2022.
In HCMC alone, from July 1, 2020 to June 30, 2023, there were 4,916 tax refund decisions issued, equal to more than $1.2 billion (VND30,600 billion). However, only 66.4 percent of them were resolved on time. As of June 30, the HCMC Tax Department was processing 612 tax refund applications, equivalent to $276.7 million (VND6,767 billion), including 520 applications for refunds after inspection and 92 applications for refunds before inspection.
Until mid-July this year, the question regarding the total amount of unrefunded VAT, which is very important to business operations, remained unanswered.
The Chairman of the National Assembly has clearly stated that it is the rights of the businesses to receive and the obligation of the State to pay VAT refunds. The National Assembly's Finance and Budget Committee is to hold an explanation session to monitor this issue and stop it from hindering production and business activities.
In response to the disillusionment among businesses, recently, the National Assembly and the Government have implemented many policies, such as Official Telegram No. 470 dated May 26 directed by the Prime Minister to urgently inspect, evaluate and urge the General Department of Taxation to immediately facilitate the procedures for VAT refund promptly and effectively.
Accordingly, the General Department of Taxation has taken drastic action and up to now, nearly 80 percent of applications requesting VAT refund have been classified by the tax industry as being subject to tax refund first, inspection later.
On August 9, the Director General of the General Department of Taxation continued to issue Official Telegram No. 07 requesting local tax departments to speed up the processing of VAT refund applications. Explaining before meetings of the Government and the National Assembly, leaders of the General Department of Taxation always affirmed that constant efforts had been made, in terms of tight supervision and weekly reports on the localities.
In fact, the current difficulties stem from the General Department of Taxation's directive documents requiring local tax departments to limit tax refund risks by implementing a range of measures, some of which are highly demanding.
To be more specific, Official Dispatch 1873 dated June 1, 2022 requires verification of invoices and the origin of goods to the final stage in the case of complicated invoices. It also involves checking the actual warehouse and delivery information of each shipment.
Similarly, in Official Dispatch 194 dated January 18, 2022, businesses asking for VAT refund on the export of rubber, cassava chips, and agricultural products must carry out the whole process of verification to the final stage of afforestation, with accurate inspection results from intermediary businesses. At the same time, the report verifies whether transportation, loading, gasoline, and road fees are consistent with the transportation route, documents, and goods volumes of each batch.
According to the tax industry, the above instructions were issued out of caution, given the many tax violations detected in recent times. For example, in 2022 and early 2023, the dossiers of 9 businesses requesting VAT refunds on wood and products made from wood, wood chips, and wood pellets have been transferred to public security agencies to coordinate investigation and verification as these enterprises showed signs of using false invoices for tax refund. Besides, there were said to be 524 businesses with high invoice risks.
The Ministry of Finance is proposing to amend the VAT Law, including an important part relating to tax refund. In addition, the business community in particular and the public in general are also paying close attention to the upcoming explanation session of the National Assembly's Finance and Budget Committee on tax refunds, by which businesses hope can resolve the existing problems related to tax refunds.
Hanoi’s Beltway 4 cost rises by VND2.9 trillion
After one year of construction, the cost of the Beltway No. 4 project in the Hanoi Capital area has increased by nearly VND2.9 trillion against the original estimate approved by the National Assembly (NA).
This road spans over 113 kilometers across three localities in the Hanoi Capital area: Hanoi, Hung Yen and Bac Ninh. The project has seven components, with construction work started in mid-June.
In a report submitted to the NA, the Government said that the estimated cost of the project’s implementation phase would rise as market prices are taken into account to determining the value of land for compensation.
In comparison to the original design, the total area of land for the project soared by 56 hectares to 1,397 hectares.
The Hanoi People’s Committee has plans to amend the investment plan for the project, according to the report. For now, the feasibility studies for six out of the seven components of the project have been completed by local authorities.
The project is expected to be completed by 2026 and will be opened to traffic a year later.
The Hanoi Capital area encompasses Hanoi City and nine neighboring provinces — Hai Duong, Hung Yen, Vinh Phuc, Bac Ninh, Ha Nam, Hoa Binh, Phu Tho, Thai Nguyen and Bac Giang, according to the Government’s Decree No. 91 in 2021.
As for 2030, Hanoi City has sought to complete beltways No. 4 and No. 5, as well as the expressway network that links Hanoi and nearby provinces.
SOEs reap substantial profits from overseas investments
A total of 72 overseas projects of State-owned enterprises (SOE) brought back to the country combined profit of around US$2 billion, the Government said in a report to the National Assembly.
As of the end of 2022, 30 SOEs had collectively invested a total of US$6.62 billion in overseas projects, either directly or indirectly through first and second-tier subsidiary companies.
Among those, PetroVietnam (PVN) has invested over US$4 billion, accounting for nearly 61% of the total overseas investment capital of SOEs, followed by Viettel with US$1.5 billion and Vietnam Rubber Group (VRG) with over US$770 million.
In 2022 alone, 16 SOEs executed 72 overseas projects, resulting in profit of over US$427.4 million. Out of this profit, US$235.7 million was repatriated to Vietnam.
Key contributors to this profit included PVN, Viettel, Vietnam Airlines Corporation, VRG, and Vietnam Electricity Group (EVN).
After decades of overseas investments, these enterprises collectively amassed profits exceeding US$4 billion, with half of it returned to Vietnam. PVN led in terms of profit, with a total of US$2.9 billion, US$1.1 billion of which was repatriated.
In 2022, 94 overseas projects generated combined revenue of over US$9.6 billion, a 24.4% increase against 2021.
Office rents in HCMC decline, vacancy rates rise: report
The third quarter of this year saw office rental prices falling and vacancy rates surging in HCMC, according to a new report by real estate consultancy Knight Frank.
The report, released on October 3, said that the vacancy rate for office spaces in the city had increased by 18%.
Grade-A office rents have dropped by 2.2%, while Grade-B rents have decreased by a slight 0.2% compared to the second quarter. Currently, around 73,000 square meters of Grade-A office space remains vacant, with an average asking rent of US$57.60 per square meter per month.
The decline in Grade-A office rents is partially attributed to the opening of new office buildings in the Thu Thiem Peninsula, which offer more competitive rates than central District 1. This has provided tenants with additional options, contributing to the rise in vacancy rates.
Knight Frank forecast that another Grade-A office building will become operational in the fourth quarter of this year, adding 50,000 square meters to the market. This is expected to push the vacancy rate over 20% by the end of the year. Grade-B office rents are also projected to decline by 6%, settling at around US$32 per square meter per month.
Alex Crane, managing director of Knight Frank Vietnam, said that the price drop was in line with expectations. He also noted that the total available office space now exceeds the levels seen in 2011. “The difference over the past 12 years is not just in the quality of the office buildings but also in the expanding needs of multinational corporations present in Vietnam, particularly in HCMC,” he said.
Real estate bond issuance heats up
Amidst the market headwinds, several real estate developers with healthy operational records have secured large sums for project deployment through bond issuances.
On September 28, Nam Long Investment Group finalised the issuance of bonds with a term of five years valued at VND500 billion ($21.1 million) through a private placement.
This round of bonds has a coupon rate of 9.6 per cent per year for the first six months and was sold to a single owner – the Ho Chi Minh City-based commercial lender OCB. After the first six months, the coupon rate will be set by referencing OCB’s 12-month term deposit interest rate plus 2.5 per cent.
Nam Long plans to use all the proceeds to expedite the Nam Long Central Lake Can Tho project in the Mekong delta region.
The project’s 1:500 scale detailed plans and its investment policy have already been approved.
On October 1, Khai Hoan Land also ratified the issuance of bonds through private placements with a total value of $35.4 million.
The birth of a separate corporate bond trading system in mid-July signalled a good start, helping to reboot the demand for corporate bonds.
The bonds are unconvertable, do not have any warrants attached, and are guaranteed by a credit entity.
Even though the capital use plan has yet to be unveiled, the company’s Board of Directors has assigned CEO Dinh Thi Nhat Hanh to finalise the bond issuance plan and pen a detailed strategy for the use of the proceeds that suits the business' operational needs and ensures the maximum benefit.
Nam Long and Khai Hoan Land are not the only entities to raise capital through the bond channel. In the third quarter alone, at least a dozen real estate firms were reported to successfully raise capital through bond issuances with private placements, reaching a total value of approximately $1.14 billion.
Meanwhile, in the first half of this year, the Vietnam Bond Market Association reported that real estate firms had raised nearly $1 billion from bond issuances.
During the period, Capitaland Tower Co., Ltd. raised the most, with four bond rounds valued at a total of $516.4 million. They all have a 60-month term, maturing in July 2028.
Capitaland Tower developed the premier mixed-use complex The Sun Tower Bason on over 6,000 square metres facing the Saigon River in Ho Chi Minh City’s District 1.
The Sun Tower Bason complex consists of five basements and 55 floors, with exceptional hanging gardens from the 35th to the 43rd floors.
Another major bond was issued by BIM Land, which successfully raised $98.4 million on August 31.
This round of bonds will reach maturity in July 2030 with a fixed coupon rate of 10.4 per cent annually.
As the bond volume can be bought back before maturity, either wholly or partially, by giving at least 30 days notice to the bond owners, BIM said that the bonds will be bought back gradually to coincide with yield payments.
Nguyen Quang Thuan, chairman of FiinGroup, a provider of financial data analytics platforms, business intelligence, and industry research services, believes that the bond market will develop strongly for the remainder of this year and into next, focusing on quality and correcting the previous shortcomings.
“Most of the issuance volume recently is earmarked for restructuring activities. Banks have excess capital and businesses are under significant pressure to repay debt, so there is a situation where banks and other organisations will step in to replace old bondholders,” Thuan stated.
Thuan also said that besides the above signals, the birth of a separate corporate bond trading system in mid-July signalled a good start, helping to reboot the demand thanks to institutional investors who have abundant capital and the need to diversify their portfolios.
Vietnamese green products showcased at int’l food trade fair
Vietnam’s environmentally friendly agricultural products are on display at the Anuga 2023 – International Food Industry Trade Fair, which is taking place in Kohn city, Germany on October 7-11.
Themed “Sustainable Growth”, the trade fair drew the participation of some 7,800 businesses from 200 countries and territories across the globe, including over 80 Vietnamese firms who brought to the event their high-quality seasoning, vegetables, rice, honey, processed food, among others.
Speaking at a ceremony to open the Vietnamese booths at Anuga 2023, Director of the Trade Promotion Agency Vu Ba Phu said that prestigious trade fairs like Anuga help Vietnamese enterprises expand their markets, and seek new business opportunities, while creating a good opportunity for them to update the market trend, learn experience from partners to improve product quality and better competitive edge.
An array of activities are organised on the sidelines of the trade fair by the Trade Promotion Agency, helping Vietnamese firms promote their brands and enhance trade connectivity, Phu stressed.
Particularly, throughout the trade fair, Vietnamese enterprises get a deeper insight into the global market and its new standards, including “green” and “sustainable” standards, as well as green transition in production and export over the past time, he added.
The Trade Promotion Agency has given warning related to market trends to Vietnamese exporters, in which the agency highlighted that without promotion of study and green transition, Vietnamese businesses are not able to break their products into stringent markets such as the EU, the US and Japan in the next 3-5 years due to failure to satisfy their green standards.
With a view to supporting businesses to meet the standards, the agency has worked with international organisations and experts to give consultancies to the firms in promoting green transition in production and consumption.
Petrovietnam leads SOEs in terms of profits from overseas projects
Minister of Finance Ho Duc Phoc has recently submitted a comprehensive report to the National Assembly, detailing the oversea investment landscape of state-owned enterprises (SOEs) in 2022.
Ending December 2022, a total of 30 Vietnamese state-owned enterprises, including companies with state capital, invested more than 6.6 billion USD in foreign ventures. The Vietnam Oil and Gas Group (Petrovietnam) led the pack, contributing 4 billion USD, or 60.8% of the total.
On the repatriation front, 72 foreign projects from 16 enterprises brought in over 4 billion USD. Petrovietnam spearheaded the recoveries, reclaiming 2.9 billion USD, equivalent to 71.1% of the total. This includes profits of 1.1 billion USD, with the remainder from principal, interest and other sources.
Assessing the operational results of foreign investment projects, the Government's report acknowledged while several projects experienced positive revenue shifts, overall profits suffered due to inefficient cost utilisation. Among profitable projects is Petrovietnam's oil exploration project in Block 04, Nhenhexky (Russia), which demonstrated high efficiency, robust revenue, and a substantial capital recovery surpassing the initial investment.
The joint venture Rusvietpetro, formed by Petrovietnam and Zarubezhneft, actively explored 13 oil fields in Block 04, Nhenhexky with estimated reserves stand at 244 million tonnes (geological) and 96 million tonnes (recoverable). Since its inception in 2008, Rusvietpetro has been hailed as one of Petrovietnam's most effective international ventures.
Source: VNA/SGT/VNS/VOV/Dtinews/SGGP/VGP/Hanoitimes