The UK is currently importing a lot of fresh and frozen tuna products from Việt Nam, and it is forecast to show many positive signs in the coming months.

According to information from the Việt Nam Association of Seafood Exporters and Producers (Vasep), Việt Nam is the 13th largest tuna supplier in the UK market. Ecuador, Mauritius and Seychelles are leading this market.

However, Vasep forecasts that Việt Nam's tuna export activities to the UK will continue to be positive in the last months of the year.

According to Đầu Tư (Investment) online newspaper, the reason is that, the prolonged El Nino phenomenon this year causes rainfall in the Panama Canal to decrease, which affects the transportation of goods from South American countries, including Ecuador, to European countries through the Panama Canal.

Shipping companies must choose alternative routes, for example, going around the Strait of Magellan, at the tip of South America, with an additional travel distance of thousands of kilometres.

Therefore, it could be said that this was an opportunity for Asian countries, including Việt Nam, to raise tuna exports to European countries, including the UK, said Vasep.

Currently, the UK imports a lot of fresh and frozen tuna products from Việt Nam, accounting for 99 per cent of total export turnover.

Compared to the same period, Việt Nam's exports of these products to the UK increased by 98 per cent.

Meanwhile, exports of processed and canned tuna decreased.

Statistics from the General Department of Việt Nam Customs said that after a sharp decrease of 51 per cent in May this year, the country's tuna exports to the UK continued to increase in the following two months.

This growth has contributed to raising the country's total tuna export turnover to the UK in the first seven months of this year to 77 per cent higher than the same period last year, reaching more than US$4.5 million.

Looking at the overall picture, in the context of rising inflation and raw tuna prices, which causes tuna consumption demand in many markets to decline, Vasep believes that Vietnamese tuna products in markets like the UK still maintain competitiveness thanks to advantages from the Việt Nam - UK Trade Agreement (UKVFTA).

Notably, earlier, the UK signed the agreement and officially became the 12th member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on July 16.

The country's accession is expected to boost trade between this country and members of the CPTPP bloc, including Việt Nam.

"Along with UKVFTA, incentives from CPTPP will open up opportunities for Vietnamese seafood products to enter the UK market, including tuna," Vasep expressed its confidence.

It is known that Việt Nam's tuna exports in the first seven months of this year were still 28 per cent lower than the same period, reaching $458 million.

Purchasing power in some main markets was still low, affecting Việt Nam's tuna exports.

In particular, the US was the largest export market for Vietnamese tuna, which has recorded a decline in export turnover of up to 49 per cent year-on-year, down to $171 million.

However, fish export activities recorded positive growth in some other markets such as the UK, South Korea, Thailand, and Germany.

Recently, the EU market had shown signs of recovery, reaching a growth rate of 28 per cent in June and July, with a turnover of $12 million per month.

Notably, within the EU, exports to the Netherlands have continuously grown in the last two months at three digits; and those to Germany maintaining an increase of 30 per cent in June and July.

Tuna exports to Mexico and Chile also increased sharply by 100 per cent and 90 per cent, respectively; while those to Thailand growing at a high rate of 65 per cent in the last two months.

Talking to Công Thương (Industry and Trade) newspaper, Nguyễn Hà, Vasep tuna market expert, said that shipping companies must choose alternative routes.

The Strait of Magellan, at the tip of South America, is a natural waterway but is about 7,000 km from the Panama Canal and almost 6,000 km from the Port of Manta, so is a huge detour for container ships.

Therefore, it could be said that this was an opportunity for Asian countries, including Việt Nam, to increase tuna exports to European countries, including the UK.

There was an estimated trade surplus of $20.2 billion in the first eight months of the year.

Of which, the domestic economic sector's trade deficit was $14 billion. The foreign invested sector (including crude oil) had a trade surplus of $34.2 billion.

Sharing about the overall export picture, Trần Duy Đông, Director of Domestic Market Department under the Ministry of Industry and Trade, said that although export turnover still fell by 10 per cent in the first eight months of this year compared to the same period last year, that of each month alone showed positive signs.

Previously declining from January to April, exports regained positive growth momentum from May to August.

“This recovery is the result of efforts in building institutions and policies to promote trade promotion and expand export markets; at the same time, making effective use of commitments in free trade agreements (FTAs)," Đông said.

Attention seized in data centre growth

International players are devising strategies to develop data centres in both the public and private sectors for Vietnam’s digital evolution.

Nguyen Huu Hong Phong, director of IXT Vietnam Co., Ltd., and his team took part in a data centre convention in Hanoi to seek new opportunities after entering the local market about one month ago.

“The Vietnamese market is witnessing strong development of data centres, not only in state agencies, but also in the private sector. We see a lot of growth potential here,” Phong told VIR.

“We have made preparations for a long time, and are making significant investment in human resources. We expect more new opportunities in 2024,” he said.

Based in Singapore, IXT focuses on turnkey design and build and maintenance services for data centre infrastructure. It is working with some partners in Vietnam to develop infrastructure for data centres, Phong said.

Seeing this growth potential, a delegation of the Association of Telecommunications and Technology Industry of Singapore visited Vietnam’s northern province of Ha Nam on August 25 to forge further business development, including of investment promotion, higher learning on technical and technology training, telecoms, ICT, the cloud, and data centre related sectors, among other areas.

Likewise, Cummins DKSH Vietnam, TechX, Eaton, and others are also betting on the local data centre market. Set up in 2009, Cummins DKSH Vietnam LLC’s core business lines are engines; power generators for data centres, factories, and residences; and after-sales services.

General manager Phan Thanh Nhat said, “Vietnam’s data market is in the early stage of development. Therefore, there is plenty of room for businesses to join. We plan to continue to develop our data centre segment to serve growing demands.”

In data centres, the important factor is to ensure continuation of power sources, Nhat added. “With international-standard power generators, we want to bring advanced technologies to data centres in Vietnam,” he said.

Currently, Cummins DKSH Vietnam LLC is supplying equipment for most of the key digital technology suppliers in Vietnam.

According to industry insiders, Vietnam’s data centre market is growing stronger than ever, driven by growing storage demand, the government’s strategy and high growth potential ahead. This puts the local market on the radar of international businesses.

Prof. Eryk Dutkiewicz, head of the Electrical and Data Engineering School at the University of Technology in Sydney, said, “For successful digital transformation, developing the data centre industry is a must for Vietnam. It needs to invest in national infrastructure and strengthen the training of skilled workers, which will put Vietnam in a competitive position to lead in the region.”

Nokia Vietnam’s general director Ruben Flores added, “According to data from 2016-2020, the sector in Vietnam grew about 12-13 per cent per year. This will continue to be promoted with the national digital transformation programme and then the deployment of 5G.”

Vietnam is accelerating the process of green transformation, digital transformation, and sustainable digital economic development. Along with this process, the country is also accelerating the development of infrastructure for digital transformation, with one of the important platforms being data centres.

The Ministry of Information and Communications plans to increase the number of businesses operating data centres or cloud computing to 14, and the number of data centres will increase to 55 by 2025. Multi-target data centre clusters at regional level are also planned for key economic areas.

Ministry figures show that in 2020-2022, revenues from data centres grew 18 per cent. In the 2023-2025 span, it is projected that revenue growth will be 30 per cent on average higher for both data centres and cloud computing.

As shown in the Vietnam Data Centre Market report 2023 released by Research and Markets, data centre market size in Vietnam is forecast to almost double to $1 billion in 2028 compared to last year.

Vietnam now has nine data centre operators, with Viettel Group and VNPT being the major operators. Private Vietnamese companies are joining the race, with CMC Telecom, FPT Telecom, Netnam, GMO, and BizFly Cloud increasing their share.

Startups look to build synergy with established names

Innovative startups could be ready to act as catalysts for transformative change within well-established corporations.

Director of the National Innovation Centre (NIC) Vu Quoc Huy believes that leveraging the cutting-edge ideas and nimbleness of startups can be a game-changer for established corporations seeking to innovate.

“Startups possess the agility and innovative thinking to develop unique solutions that can significantly benefit established corporations. By tapping into these fresh perspectives, large companies can unlock new avenues for growth and efficiency,” Huy said at Inno Vietnam-Japan Fast Track Pitch 2023, held last week in Hanoi.

Ishikawa Hiroshi, managing director of the Japan External Trade Organization, and a special advisor to the Japanese Ministry of Economy, Trade, and Industry, observes Vietnam’s growing startup scene with optimism.

“The synergy between innovative startups and legacy corporations can be transformative,” he said.

The event garnered substantial interest from Vietnam’s startups and the international community alike. With themes interwoven with the reality faced by six businesses encountering challenges, the programme is poised to yield outstanding solutions to address existing business issues.

This year, notable Vietnamese participants at the event included VinGroup, MoMo, and FPT Group.

From Japan, Kokyu Group, Money Forward Group, and the Fujikin Danang Research, Development, and Production Centre also represented.

Vingroup aims to leverage circular economy principles to harness the potential of used electric vehicle batteries. Meanwhile, FPT’s goal is to establish a cross-border carbon trading platform, integrated with a virtual assistant for smooth legal coordination across departments.

A FPT representative commented, “We aim for seamless cross-border carbon trading, a step towards global sustainability targets. We’re also inviting startups to join hands in this transformative journey.”

Elsewhere, MoMo focuses on refining the digital payment experience, especially for demographics like the middle-aged, elderly, and rural communities. Their spokesperson said, “We envision a universally accessible digital financial landscape, irrespective of technological aptitude or geography.”

Highlighting the importance of the initiative, Huy of the NIC remarked, “It’s a golden opportunity for Vietnamese startups to showcase their offerings to prospective elite clientele. Exceptional products will receive backing for further development, aiding their global market expansion.”

Meanwhile, Truong Ly Hoang Phi, CEO of IBP Vietnam, pointed out the bright spot Vietnam holds in Asia’s startup scene, even with this year’s challenges.

“Over the past three years, Vietnam has emerged as a shining startup hub in Southeast Asia and Asia at large,” Phi highlighted at last week’s investment conference InnoEx 2023.

“The total investment in Vietnamese startups reached a record high of over $1.4 billion in 2021, but decreased to $634 million in 2022. In terms of deal volume and investment scale in the startup sector for 2022, Vietnam ranked third and fourth respectively in Southeast Asia,” Phi added. “Despite capital crunches and stringent investment parameters, Vietnam’s startups remain an investor magnet, particularly from venture capital entities.”

Recent figures from DealStreetAsia indicate a muted investor enthusiasm in key Asian markets during Q2 compared to last year. However, Vietnam’s startups outpaced Indonesia’s, securing a notable $413 million in funding.

Nguyen Khanh Van, director of Private Equity at Thien Viet Securities JSC (TVS), an early investor of MoMo, stated that technology is not necessarily the decisive factor for the success of a startup. Instead, it is the applicability of that technology in a sufficiently large potential market.

“Solutions that have been validated in other emerging markets in Southeast Asia are good indicators. Can you think and make appropriate adjustments when bringing those models to Vietnam with its unique human and cultural nuances? Does Vietnam’s legal framework and macroeconomic landscape facilitate the long-term development of these solutions? These are questions I consider before deciding to invest,” Van said.

Currently, TVS invests in venture capital ranging from $1-5 million for Series A stage startups and also offers short-term loans based on business requirements.

In addition, impact investing is also expected to gain traction. Angela Tay, a representative from AgFunder, advised impact startups to look beyond Asia, highlighting Europe and the Americas.

“While risky investments and private funding have witnessed substantial declines of 40-50 per cent in recent years, investment in the impact sector has only dipped by 7 per cent,” she noted. “This underscores the resilience of this sector during times of crisis. Impact investors still boast considerable funds to allocate towards genuinely high-quality startups, a niche they are actively seeking within the market.”

Promising conditions yet within reach for local exporters

Although there have been several improvements in recent months, global economic headwinds could still blow Vietnam’s exports off course.
In the past four months, Vietnam’s export turnover of goods has increased on-month, confirming the expected improvement for 2023 through the rising comeback of the world’s purchasing power and consumer confidence.

The General Statistics Office reported that total export turnover in August was estimated at $32.37 billion, up 7.7 per cent on-month, while total import turnover was estimated at $28.55 billion, an increase of 5.7 per cent on-month. This on-month growth is increasingly higher than that in previous months.

Specifically, export values in July, June, and May reported a rise of 3.5, 4.5, and 4.3 per cent on-month, while import values reported up 4.4, 2.6, and 6.4 per cent, despite the deep decrease in both export and import turnover during the first four months.

Notably, the soar in total import turnover comes from materials for production, so exports are expected to get stronger in the coming months.

According to the Ministry of Industry and Trade (MoIT), the US economy, which is Vietnam’s one of most important export markets with a total export turnover of $62.3 billion, has reported higher-than-expected growth recently, and commodity inventories continue to decrease, which is a favourable for Vietnam’s exports.

“Moreover, developed countries still maintain the strategies of diversifying supply resources, supply chains, and investments, which will help Vietnam become a major production and export hub in the global value chain,” said Nguyen Thao Hien, deputy director general of the MoIT’s European-American Market Department.

In August, the main export items reporting some growth include computers, electronic products, and components increasing by 8.7 per cent, textiles and garments by 1 per cent, footwear by 3.3 per cent, and the agricultural and aquatic product group by 6.5 per cent on-month.

Tran Anh Khoa, director of shrimp exporter Anh Khoa Co., Ltd. in the southernmost province of Ca Mau, confirmed that exports have shown clear signs of recovery due to the increasing demand for seafood for the mid-autumn season and year-end festivals. “We have worked with some new customers from a variety of countries in Asia. Compared to the same period last year, the number of orders is getting higher, and we expect positive results,” Khoa said.

Vuong Duc Anh, chief of office at Vietnam Textile and Garment Group, said that although there is weak demand, it could increase for year-end festival seasons at about 10 per cent on-month. “The market in the last months of the year cannot be worse than the previous period because the worst status of the textile industry has passed already. More than half of our customers see some positive signals of the market at the end of the year,” Anh said.

Nguyen Xuan Son, director of Huong Que Import-Export Co., Ltd., said that exports have slowed down in all markets since the end of the second quarter, and purchasing power in the export market decreased by 30 per cent.

“Prolonged high inflation in Germany – the main export market of the company – has caused purchasing power to decline sharply by 40-50 per cent,” Son said. “Despite forecasting a difficult situation, the company still expects to sign some orders next months for production in 2024.”

However, experts said that there were still plenty of challenges for exports due to global economic uncertainties. Big economies - key export partners of Vietnam such as the United States and the EU - are tightening expenses on common and luxury products.

International organisations forecast that Vietnam’s economy will face many difficulties caused by impacts from both inside and outside. Vietnam’s economy is open, so it is likely to be affected by the decline in global economic growth, market fluctuations and policy adjustments of major economies. Therefore, exports will struggle with the mutual challenges of partner markets.

Hien from the MoIT said EU countries and the US had taken many measures to curb inflation, and boost consumption, and export growth. These policies have initially taken effect, and inflation in major markets such as the US, EU, and UK had tended to decrease.

“With many new advantages, exports can recover growth in the fourth quarter. Besides that, the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will open new opportunities for Vietnamese exports,” Hien said.

Tran Minh Thang, head of the Vietnam Trade Office in the US, said that there were signs of recovery in the US market, which was expected to grow higher.

“A large amount of inventory has already been released, employment is improved, and purchasing power in the US will get higher, especially in the shopping season at the end of the year. There should be a slight increase in exports to this market in the fourth quarter,” Thang said.

Do Viet Ha from the Vietnam Trade Office in Germany said, “Vietnam has many products that Germans have high demand for, such as wooden furniture, garments, textiles, footwear, coffee, tropical fruits and vegetables. In addition, Vietnam is one of the few countries in Asia that has a trade deal with the EU, so goods from Vietnam can enter much more easily than from other countries.”

She also revealed that Germany is gradually reducing its dependence on Chinese goods.

FPT to inject $100 million into the US by year-end

FPT Corporation has plans to invest $100 million into the US market by the end of this year and is calling on the US government to foster the growth of Vietnam's semiconductor ecosystem.
 
The announcement was made by Truong Gia Binh, chairman of FPT Corporation, at the Vietnam-US Innovation and Investment Summit on September 11 in Hanoi. He joined US President Joe Biden and Vietnamese Prime Minister Pham Minh Chinh at the summit.

By the end of 2023, FPT anticipates an investment of $100 million and a workforce of nearly 1,000 employees in the US. With continuous investments, it expects to create 3,000 more jobs by 2028 and reach $1 billion in revenue from the US market by 2030.

At the summit, FPT made a proposal to the US government with a focus on two key areas.

Firstly, FPT advocates for comprehensive policies from the US government to nurture Vietnam's growth as a semiconductor ecosystem. The corporation suggested that the government should invest in the training of 30,000 to 50,000 semiconductor professionals to meet this sector’s increasing demands.

Secondly, FPT seeks investment and support for FPT University's initiatives to train engineers specialising in both semiconductor chip design and AI, aiming to bolster the workforce's capabilities in these critical fields.

At the summit, FPT announced a comprehensive strategic partnership with Landing AI – one of the US' leading Computer Vision Platform and AI Software companies – to accelerate AI integration across its educational system – FPT Education.

FPT's strategic priorities closely align with critical agreements between the US and Vietnam, with the semiconductor industry and its workforce development as the centrepiece of the action plan unveiled during President Biden's visit.

Accordingly, Vietnam and the US have decided to strengthen science, technology, and digital innovation cooperation, regarding this as a new breakthrough of the Comprehensive Strategic Partnership. The US asserted its commitment to increasing support for Vietnam in the training and development of a high-tech workforce.

President Biden and PM Chinh pledged to support the rapid development of Vietnam’s semiconductor ecosystem and to work together energetically to improve Vietnam’s position in the global semiconductor supply chain.

To this end, the US and Vietnam have announced the launch of semiconductor workforce development initiatives, supported by initial seed funding of $2 million from the US government and future support from the Vietnamese government and the private sector.

Land use rights for condotels remain stalled amid lack of thorough guidance

Three months after a decree was issued to regulate land and housing rights certificates for condotels, additional guidance for relevant departments is still not forthcoming.

Decree No.10/2023/ND-CP dated April 3 on amendments to the Law on Land, which regulates the issuance of land use and housing rights certificates, known as a pink book, for condotels has been rendered useless.

Pham Nam Son, director of Danang Department of Natural Resources and Environment, confirmed that the central city has not issued pink books for any condotel projects because it is waiting for circular guidance.

“Currently, our department is collecting details of all the issues and sending them to the Ministry of Natural Resources and Environment for a resolution,” Son said.

Meanwhile, in the central province of Khanh Hoa, a hot spot in resort real estate, no new condotel projects have been granted a pink book.

The reason, according to a representative of Khanh Hoa Department of Construction, is because Decree 10 allows buyers of projects such as condotel and officetels on commercial and service land to register ownership. However, no standard procedure for receiving and processing documents has yet been created.

“The main unit responsible for issuing pink books locally is struggling to build a process and send it to related departments to collect opinions and receive applications from unit owners,” the representative said.

Nguyen Thanh Ha from SB Law Office said that to apply Decree 10 in practice, it needed to be accompanied by specific written instructions for localities to apply and handle in the area.

“Localities will be responsible and urgently implement the decree’s contents, thereby creating motivation to regain the confidence of investors when participating in resort real estate investment,” Ha said.

“This is just at the stage of issuing a decree and there are no specific instructions yet, so to promote the issuance of pink books for condotels, there needs to be guidance from the government to ministries and localities, especially from certification registration agencies and this guidance has to be issued as soon as possible.”

According to Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA), Decree 10 stipulates certification of ownership of construction works attached to land for commercial and service land use for tourist accommodation purposes, but the revised regulations do not cover the entire market.

“Decree 10 does not stipulate the issuance of certificates for all construction works used for residential purposes on commercial and service land,” Chau said. “Therefore, the scope is very narrow, only regulating issuance for construction works used for tourist accommodation purposes according to the provisions of the law on tourism, and leaving a large portion of condotels outside the scope of regulation.”

Nguyen Chi Thanh, vice chairman of the Vietnam Real Estate Association of Realtors, said that condotels, resort villas, and officetels were not recognised as residential units because they are not accompanied by other necessary facilities such as education and healthcare services.

“Therefore, it is necessary to continue to improve legal regulations for resort real estate to ensure the proper development of the tourism industry, as well as to develop a stable real estate market, and create belief for investors,” Thanh said.

According to the HoREA, by the end of 2022, for condotels alone, the country had about 83,000 units waiting for a pink book, most of which belonged to tourist resorts, using commercial and service land for terms of 50-70 years.

Industrial hubs to propel innovation

Increasing emphasis on integrating innovation hubs into industrial parks is signifying a fresh direction in collaborative initiatives aimed at enhancing Vietnam’s industrial advancement.

Vietnam’s Becamex IDC Corporation and Singapore’s Sembcorp, two pivotal stakeholders of the Vietnam-Singapore Industrial Park (VSIP), has unveiled the Vietnam-Singapore Innovation Centre in the southern province of Binh Duong.

This marked another step in a longstanding collaboration that has borne much fruit, including ventures such as the Vietnam-Singapore Industrial 4.0 Innovation Centre, the Advanced Entrepreneurship and Production Centre, and Block71 Saigon.

Spanning 27 years, the VSIP’s success in fostering industrial growth across Vietnam is clear. But with this new centre, the focus sharpens on innovation.

A representative from the newly minted Vietnam-Singapore Innovation Centre said, “Our mission goes beyond mere technological advancement. We’re striving to elevate Binh Duong’s brand presence, develop scientific acumen, nurture top-tier talent, and offer a vision for a tech-forward industrial park.”

Taking inspiration from Sweden’s Triple Helix Model of Innovation, the centre will actively facilitate a threefold synergy between academia, industry, and the government.

Pham Hong Quat, director-general of the National Agency for Technology Entrepreneurship and Commercialisation, said “While innovation hubs have become staple institutions in regions like Europe, Vietnam is only beginning to explore their potential. Hurdles, including the absence of an integrated ecosystem, have stunted their growth,” Quat said.

Earlier in July, Bloom., the nation’s debut centre for food and beverage (F&B) innovation designed by Tetra Pak in collaboration with DenEast, was launched in Binh Duong. The centre will fast-track the transition of F&B brand ideas into concrete concepts and enable small-scale production for market testing.

CEO of DenEast Vietnam Johan Boden said, “One standout characteristic is its ability to provide a comprehensive service under one roof, transforming mere ideas into tangible products.”

“The centre is interconnected with all Tetra Pak development hubs worldwide, enabling us to tap into a global pool of competencies for efficient problem-solving. We’re committed to forming robust partnerships with industry leaders in ingredient sourcing and recipe development. This approach allows us to establish a vast network capable of resolving queries from all angles and swiftly launching new products,” he said.

Eliseo Barcas, managing director of Tetra Pak Vietnam said, “Bloom. demonstrates our long-term commitment to Vietnam, playing a vital role in the nation’s innovative and transformative goals, and unlocking the vast potential of the local F&B sector.”

According to Quat, the key to a successful innovation hub lies not only in its physical infrastructure but also in its ability to connect with talent, provide training, and integrate with local businesses.

Quat illustrated this by giving the example of beautifully packaged water bottles, emphasising that customers are not only buying the water but also purchasing a fusion of creative design, environmentally friendly packaging, and design talent.

“It is the epitome of a circular economic model where design revolves around cultural and artistic values. Innovation centres are playing a crucial role in fostering the best innovative ideas and cultivating invaluable intellectual assets,” he said.

“In ASEAN’s innovation rankings, Vietnam holds the third position, a significant leap some five years after the country’s innovation drive began. However, the country is yet to establish connections with Europe’s innovation hubs,” Quat said. “I propose we intensify our efforts to foster relationships and collaborations with universities, vocational training institutions, faculty, and students. These breeding grounds for new technological ideas will be crucial in propelling Vietnam’s innovation drive forwards.”

Nguyen Trung Tin, director of Binh Duong Industrial Zones Management Board, underlined that out of the 29 zones established, 27 were already operational.

“Moving forward, the province aims to pivot its investment attraction strategy towards specialised, eco-friendly, and innovative zones to foster a fresh appeal,” Tin said.

Real estate rebound anticipated

Real estate developers are scaling up efforts to bolster sales in a bid to offset the shortfall earlier in the year.

In recent months, a raft of real estate developers began to launch their products plus lucrative incentives to aid the anticipated rebound wave for the rest of this year.

At Tran Anh Group, aside from handing over housing units to customers at their Japanese-style Phuc An Ashita urban complex in the southern province of Binh Duong, the company is pushing sales at their Phuc An Asuka project in Chau Doc city in the Mekong Delta province of An Giang.

Tran Viet Thanh, managing director at the Phuc An Asuka project, revealed that after nearly a year of construction, the project has almost completed. The apartments have acquired full legitimate papers and each plot has its own number.

“In the recent past, Tran Anh has handed over land use and housing rights certificates to the first residents at this urban township. Residents here, apart from locals, come from different neighbouring localities such as Can Tho, Dong Thap, Tien Giang, and even more distant locations such as Ho Chi Minh City,” Thanh said.

One of the highlights of the southern realty market in recent months is that over 2,000 apartments out of a total nearly 3,200 units at Glory Heights bloc within Vinhome Grand Park urban metropolis in Ho Chi Minh City’s Thu Duc city were deposited by customers in just 34 hours, with price ranging from VND42 million-VND80 million ($1,770-$,3370) per square metre.

“The realty market has possibly undergone its most challenging time and began to rebound from May until. Transaction figures in Q2 were better than Q1,” said Can Van Luc, member of National Monetary and Financial Policies Advisory Council, adding that stock market figures indicate that the ticker price of real estate firms have inched up 18 per cent and that of construction firms showed 30 per cent jump in the year to date.

Pham Lam, CEO of DKRA Group, however, held a cautious look, saying that high inflation and interest rates have cast a dent on homebuyers’ purchasing power.

At this point of time, investors are fairly cautious and take a wait-and-see approach. The money flow into the real estate market is therefore not very fruitful, and only those having available cash eagerly join the market.

In respect to the current real estate market current, Nguyen Van Hau, CEO of Asian Holding, assumed that the market would not boom as previously because the ‘conservative’ sentiment still dominates investor mindset.

Producers have faced mounting hardships, leading to falling incomes. This has affected the cash flow into the real estate market.

In addition, real estate firms have also encountered multiple challenges. Besides legal issues, other factors on finance and high-quality human resources are roadblocks hampering business development.

“Currently, our firm focuses on recruiting manpower for training, actively preparing to expedite our business plan in 2024. Quality manpower is decisive to business success,” Hau said.

With expectations that roadblocks will be quickly removed, Nguyen Dinh Trung, chairman and CEO at Hung Thinh Corporation, proposed banks flexibly revise lending requirements based on specific periods.

This will help increase liquidity in the market as well as create more jobs and incomes for people.

“In addition, relevant management agencies such as the Ministry of Natural Resources and Environment, the Ministry of Finance and the Ministry of Construction need to consider using official land prices (called the K coefficient), as with this measure, businesses might calculate their actual land rent before making a decision, and relevant management agencies would find it easier in land price fixing,” Trung said.

Economic conditions taint consumer finance prospects

The challenges facing the consumer finance sector have become evident this year, as numerous companies reported declining business results in the first half.

FE Credit last week released its financial report for the first six months of 2023, revealing a post-tax loss of $124.5 million, compared to a profit of $5.9 million during the same period the previous year. The return on equity for FE Credit decreased from 0.9 per cent to about minus 29 per cent.

FE Credit’s equity capital as of June 30 also decreased by 35.6 per cent compared to the same period the previous year. Additionally, the company recorded a reduced capital adequacy ratio as per industry regulations, dropping from 23 to 13.89 per cent.

According to analysis by VCBS Securities, FE Credit currently has one of the highest non-performing loan ratios in the consumer finance sector. Meanwhile, VNDirect suggests that the unfavourable economic conditions have affected low-income customers, who comprise a significant portion of FE Credit’s clientele. VNDirect projects a 5 per cent loan growth for FE Credit in 2023 and a pre-tax loss of approximately $29 million.

During VPBank’s AGM, the bank’s leadership acknowledged that 2023 would continue to be a challenging year for FE Credit, its parent company, especially the first six months.

“FE Credit’s operations are anticipated to gradually stabilise and turn profitable in the last six months of 2023. While loan growth is expected to slow down, the focus will be on customers with lower risk profiles,” a VPBank representative said.

Meanwhile, VietCredit reported an accumulated loss of $3 million for the first six months of the year in its semi-annual financial report.

The reason given is a decrease in revenue from credit card issuance activities, while the company’s borrowing costs increased. The company’s bad debt ratio also surged to 20.2 per cent at the end of the second quarter of 2023, whereas at the end of last year, this ratio was only 11.9 per cent.

The profitability of various other consumer finance firms such as Mcredit, HD Saison, VNFinance, and others has also witnessed a notable decline.

Another notable case is Home Credit, which reported a profit of over $8.7 million for the first six months of the year, less than half of the same period last year. As of late August, Kasikornbank, the second-largest bank in Thailand, was negotiating to acquire Home Credit with an estimated transaction value of $1 billion.

If successful, this deal will be the second-largest of its kind in the Vietnamese consumer finance industry, only surpassed by the sale of FE Credit’s $1.4 billion equity capital to Japan’s Sumitomo Mitsui Banking Corporation in 2022.

Nguyen Quoc Hung, secretary-general of the Vietnam Banks Association (VNBA), noted that now is the most challenging period for finance companies, after being hit by the pandemic and the lingering economic difficulties from last year, particularly in debt collection.

“The rate of customers failing to repay loans, and even jointly accumulating debt, is increasing, while measures against these customers are not yet in place. Legal action against these customers is also challenging due to the generally low value of the debts,” he said. “In this context, financial companies are cautious about providing consumer loans due to the difficulties in debt recovery.”

According to VNBA data, by the end of 2022, the non-performing loan ratio for financial companies increased by 23.09 per cent compared to the previous year and is expected to continue rising.

A senior lawyer emphasised that based on recent developments in the consumer lending market, regulatory authorities need to separate debt collection activities from wrongful practices, and normalise debt recovery services.

“The management of these activities should be professionalised, instead of imposing bans. Approval for debt recovery as an official service, regulated by the law, is necessary to protect both borrowers and lending businesses,” the lawyer said.

According to him, in principle, all organisations and individuals should be equal before the law, and protecting the people, specifically borrowers, is essential to ensure compliance with legal regulations. However, it is also crucial to protect both borrowers and pawnshop service providers, which includes lending businesses.

“The issue currently faced by the entire consumer finance sector is the legal aspects of debt recovery,” he added.

Borrowing trends reflect weak demand

While multiple banks are creating liquidity by allowing customers to borrow to repay other banks, experts assess that this may not increase overall credit.

Talking to VIR, a TPBank representative revealed that for the past few weeks, deposit customers have been sparse. Term deposits, when mature, are transferred to other banks because interest rate is too low, and it is anticipated that this is not the bottom yet.

“Some customers even confess that despite economic fluctuations, they are closing their savings accounts to be ready to buy real estate or even gold for investment,” the representative said. “Previously, customer loans for buying cars were quite common, but now, personal consumer loans are almost inactive with only a few customers opening cards, while business customers are also hibernating.”

According to the State Bank of Vietnam, credit growth as of August 30 was 5.56 per cent, much lower than the target of 14.0 per cent for the entire year.

“This trend reflects weakened credit demand and investment activities due to the sluggish economy,” said Dorsati Madani, senior economist at the World Bank in Vietnam.

Meanwhile, Vietcombank has just implemented a policy for individual customers to borrow money to repay their loans early at other banks, with an interest rate for loans starting at 6.9 per cent per annum. The policy took effect immediately after Circular No.06/2023/TT-NHNN became effective on September 1.

Accordingly, customers can borrow with a loan period of up to 30 years (but not exceeding the remaining loan term at the bank they are borrowing from) with a maximum loan amount of 100 per cent of the principal balance of the loan at the bank they are borrowing from. Customers are granted a maximum grace period of 24 months and are in compliance with Vietcombank’s regulations.

Similarly, BIDV has also announced its policy to individual customers to borrow money to repay their loans early at other banks with interest rates starting at 6 per cent per annum, along with several incentives. BIDV’s leadership said this is a timely solution to reduce interest payment burdens for customers with high-interest loans.

According to Truong Thanh Duc, director of ANVI Law, borrowing from one bank to repay a loan at another bank is a necessary move that meets market demand.

“The transfer of debt from one bank to another was previously regulated in another circular, but it only applied to loans for production and business purposes, not for personal life needs. With Circular 06, banks are allowed to consider and decide on customer loans to repay loans at other banks for the purpose of serving personal life needs such as buying houses or cars,” Duc said.

“However, getting a loan to repay a loan early is not easy due to many accompanying strict conditions, and the real effectiveness of the loan is also a crucial issue,” he added.

Regarding liquidity, Tran Trung Kien, an analyst at VNDirect, believes there have been some positive signs from real estate businesses actively repurchasing corporate bonds before maturity. This helps reduce the value of maturing bonds in the second half of 2023 and into 2024 by 12 and 10 per cent respectively compared to before the repurchase, thereby reducing the pressure of bond maturity, especially for real estate businesses facing difficulties in cash flows.

“In the first six months of 2023, we saw a slight decrease in the risk of payment default by real estate businesses, as they extend the bond maturity period and extend bank debts,” Kien said.

He admitted that the liquidity of real estate businesses is still a concern, as many businesses are slow to pay interest and principal on corporate bonds due to difficulties in capital recycling channels along with sharply reduced sales volumes due to market sentiment.

Phu My 3 to rely on costlier LNG

The Phu My 3 power plant faces challenges as it transitions from BOT (build-operate-transfer) to Vietnamese control in March next year, marking the culmination of a 20-year contract, according to a recent announcement from the Ministry of Industry and Trade (MoIT)
 
The handover also signifies the expiration of Phu My 3's contractual agreements, including its gas and electricity purchase contracts. “This means the plant will not have ready access to the necessary fuels and resources for continuous operation, nor can it ensure stable power delivery immediately after the transition,” said an official source.

At present, the MoIT is supporting Vietnam Electricity (EVN) as it prepares to assume operational responsibilities for the plant, aiming to ensure a seamless transition, uninterrupted power supply, and the maintenance of quality standards.

While the official recipient of Phu My 3 is yet to be determined by the government, the pressing issue is sourcing the requisite fuel to sustain its operations.

The facility, boasting a contractual capacity of around 717MW, employs mixed-cycle gas turbine technology, primarily sourcing natural gas from Vietnam's Oil and Gas Group (PetroVietnam) via its subsidiary, PV Gas. The plant consumes approximately 0.85 billion cubic metres of gas annually.

Initially, the BOT Phu My 3 power plant saw investments from Sembcorp, and Kyuden International and Sojitz. Since commercial operations began on March 1, 2004, the plant has generated around 92 billion kWh as of August this year.

According to PV Gas, following the handover in March next year, Phu My 3 will rely solely on imported liquefied natural gas (LNG) as domestic natural gas allocations have been earmarked for long-term contract holders.

PV Gas forecasts indicate that by 2024, natural gas supplies in the southeastern region will amount to 3.06 billion cu.m, dropping to approximately 2.61 billion cu.m in 2025. This would cover a mere 33 per cent of the fuel requirements of power plants in the area.

"There is no more available domestic gas. Hence, fuel for soon-to-be-transferred BOT power plants, such as Phu My 3 and subsequently Phu My 2.2, can only come from imported LNG," revealed a reliable industry source.

The cost of importing LNG into Vietnam currently stands at between $10- $12 per million BTU. After accounting for storage, regasification, and transportation expenses, the price at the plants' gate could rise to $12-$14 per million BTU - a staggering 1.5 times higher than existing domestic gas prices.

PetroVietnam, the entity responsible for managing the domestic gas extraction resources, holds a vested interest in the Nhon Trach 1 (450MW) and Nhon Trach 2 (750MW) power plants, both of which share gas resources in the Southeast region. Additionally, the Phu My Fertiliser Plant, in which PetroVietnam also has a controlling stake, relies on domestic natural gas resources from the same region.

PV Gas has completed the first phase of the Thi Vai LNG storage facility, boasting a capacity of about 1 million tons per year with an LNG tank with a volume of 180,000 cu.m. This corresponds to additional gas supplies of 5.7 million cu.m per day and 1.4 billion cu.m per year, readily available for the power plants in Phu My and Nhon Trach.

Energy experts suggest that if PetroVietnam prioritises cheaper domestic natural gas for the power plants it has direct and indirect stakes in, these plants will have a significant competitive advantage over other regional plants that rely on pricier imported LNG.

This approach would stifle innovation and optimisation in power plants using imported LNG, as fuel costs account for 70-80 per cent of electricity prices. The disparity in gas costs translates to a difference of more than VND1,100 per kWh in electricity prices.

Given this, it is imperative for regulatory authorities to ensure consistent gas pricing for electricity in the Southeast region.

Overall, from 2024 onward, Vietnam's power grid is expected to be increasingly fed by electricity derived from imported LNG. "This means new pressures are on the horizon, and without early and effective preparation, the challenge of providing a stable, continuous power supply will become more daunting," an industry insider told VIR.

Forum promotes Vietnam-Japan trade and investment in Kansai

A forum on promoting Vietnam-Japan trade and investment in the Kansai region took place in Osaka prefecture on September 15, attracting representatives from over 200 Vietnamese and Japanese businesses.

At the forum, speakers discussed a series of topics including trends and investment needs of Japanese businesses in Vietnam in the near future, Vietnam’s economic situation, and information on the participating Vietnamese provinces.

Vietnamese Consul General Ngo Trinh Ha told the Vietnam News Agency on the sidelines of the event that the forum took place in the context of the 50th anniversary of the countries’ diplomatic relations, with commemorative activities held across various fields such as investment, trade, tourism, and people-to-people exchanges. The Consulate General pledged to continue to support the plans and collaboration between localities and businesses from both sides in the time to come.

Trade between Kansai and Vietnam hit 12 billion USD in 2022, up 24.2% year-on-year. As of the end of 2022, the region invested in approximately 850 projects worth over 9 billion USD in Vietnam. Currently, there are approximately 90,000 Vietnamese people living, studying, and working in Kansai.

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