Standard Chartered has predicted that Vietnam's GDP growth will reach 5.1% in Q3, up from 4.1% recorded in the previous quarter.

The bank also maintained its 2023 GDP growth projection at 5.4%, lower than the country’s growth target of 6.5%.

According to details given by Standard Chartered, growth in retail sales in September is expected to stand at 8.2%. Meanwhile, exports are predicted to drop by 6.2% and imports 7%.

Industrial production growth will increase by 3.2%, while the inflation rate may stand at 3.2% this month compared to 3% recorded last month.

This comes after Standard Chartered Bank said in its recent macro-economic update that the Vietnamese economy will recover in the second half of the year, with its growth forecast to pick up to 7% on-year from the 3.7% seen in the first half.

Trade data has improved consistently every month since the beginning of the year, thereby highlighting the clearer recovery ahead in the second half of the year.

FIEs post trade surplus of nearly US$34 billion by mid-September

Foreign-invested enterprises (FIEs) racked up a trade surplus exceeding nearly US$34 billion from the beginning of the year to September 15, according to the latest preliminary statistics released by the General Department of Vietnam Customs.      

Specifically, FIEs’ total import-export turnover throughout the reviewed period dropped by 12.3% to US$320.01 billion compared to the same period from last year.

The first half of September saw FIEs rake in US$10.59 billion from exports, down 18.7%, equivalent to a decrease of US$2.44 billion compared to the second half of August.

By the end of September 15, FIEs’ total export turnover had reached US$176.99 billion, representing a fall of 9.3% compared to the same period from last year, and duly accounting for 73% of the country's total export turnover with key export products including phones, computers, along with garments and textiles.

In contrast, FIEs’ imports in the first half of September fell by 6.5% to US$8.9 billion compared to the second half of August.

FIEs’ total import turnover by mid-September had declined 15.8% to US$143 billion on-year, accounting for US$64 million of the country's total import turnover.

Vietnamese Robusta coffee exports to Japan record double-digit growth

Vietnam’s Robusta coffee exports to the Japanese market during the initial eight months of the year witnessed a double-digit growth rate compared to the same period from last year, according to statistics from the General Department of Vietnam Customs.      

August alone saw the nation export 9,100 tonnes of coffee worth US$28.51 million to Japan, a drop of 3.1% in volume and 2.3% in value compared to the previous month, but up 6.5% in volume and 37.6% in value against the same period last year.

Vietnamese coffee exports to the Japanese market in the opening eight months of the year reached 78,730 tonnes worth US$218.87 million, representing a rise of 1.1% in volume and 11.6% in value compared to last year's corresponding period from.

The average export price of Vietnamese coffee to the East Asian nation during the eight-month period surged 10.4% to US$2,780 per tonne on-year.

Most notably, the proportion of Robusta coffee as part of total export turnover to the Japanese market increased from 66.51% in the reviewed period last year to 69.1% in the same period this year. Similarly, the proportion of processed coffee exports also rose from 23.13% last year to 24.57% this year.

In contrast, the proportion of Arabica coffee exports to Japan decreased from 10.36% in the first eight months of last year to 6.34% in this year's same period.

According to statistics released by the International Trade Center, Japan imported approximately 207,400 tonnes of coffee worth US$873 million during the seven-month period, down 19.1% in volume and 20.4% in value compared to the same period from last year.

Experts attributed Japan's reduction in coffee imports to economic recession and high inflation, adding that there remains a positive outlook ahead for coffee exports to the market as Japan began to increase coffee imports again in July.

Local businesses are therefore advised to comply with the stringent phytosanitary requirements to make further inroads into the demanding market.

Corporate bond market focuses more on quality

The corporate bond market is developing towards a more in-depth approach, focusing on quality, said Nguyễn Quang Thuân, Chairman of FiinGroup.

At the Vietnamese Corporate Bond Market Development Solutions Seminar organised by FiinRatings on Thursday in Hà Nội, Thuân said that it was crucial to review and address the remaining problems of the corporate bond market.

The corporate bond market currently has a slow recovery pace, making it difficult to achieve a breakthrough in issuance volume in the next 12 months, he said.

“In investment, the higher the profit, the higher the risk,” said Trịnh Quỳnh Giao, CEO of PVI Asset Management Company (PVIAM).

“Bond interest rates depend on many factors, including the financial health of the issuing organisation, the stability of the industry, bond liquidity, payment guarantees from banks, and collateral assets,” she said.

“For real estate businesses, if they issue bonds with a 15 per cent interest rate but their project generates a 30-per cent profit, then that interest rate is not considered high, and even a 20-per cent interest rate is acceptable.”

“Usually, banks face stricter risk management by the State Bank of Việt Nam, so the possibility of losing capital invested in bank bonds is low, and therefore, interest rates range from 5-7 per cent,” she said.

According to Nguyễn Quang Thuân, Chairman of FiinGroup, transparency of information is the key issue.

“In reality, the average interest rate of corporate bonds in the first quarter of 2023 is 9 per cent, and there have been successful transactions with bonds issued at an interest rate of up to 14 per cent. Therefore, it should not be assumed that high interest rates are bad or low interest rates are good for the market,” he said.

In the second half of 2023, the corporate bond market is unlikely to recover as robustly as in previous years because bond maturity pressure will persist until the end of the year, according to VNDIRECT Securities Co.

In the third quarter of 2023, VNDIRECT's estimates indicate that more than VNĐ75.9 trillion of corporate bonds will come due, a rise of 14.9 per cent compared to the second quarter of 2023.

The real estate industry continues to represent the most substantial proportion, with nearly 43.6 per cent of the total value of bonds due in the third quarter of 2023. Concurrently, developers are grappling with construction delays due to liquidity challenges, potentially leading homebuyers to withhold mortgage payments and adversely affecting market sentiment.

According to the Việt Nam Bond Market Association (VBMA), there were 30 private bond issuances in August with a combined value of over VNĐ30.6 trillion. These had an average interest rate of 9.18 per cent per annum and a term ranging from 2 to 5 years.

However, September has seen no issuance tranche.

From the beginning of the year to mid-September, the total value of corporate bond issuances stood at nearly VNĐ140 trillion. This comprised 17 public issuances and 111 private issuances, which made up 88 per cent of the total issuance.

VNDIRECT estimates that in September 2023, corporate bonds worth more than VNĐ25.8 trillion will mature.

As of August 24, about 67 companies were on the list of late payment obligations for either interest or principal on corporate bonds, as per HNX's notification.

VNDIRECT's calculations suggest that the total outstanding bond debt of these companies amounts to approximately VNĐ173.68 trillion. This represents about 15.9 per cent of the total outstanding debt of individual corporate bonds across the market. The majority of these issuers belong to the real estate sector.

VNG delays US IPO amid subdued market appetite

Vietnam's digital stalwart VNG has reportedly shelved its imminent initial public offering (IPO) plans for the US, attributing its decision to the current tepid market response to recent tech listings.

“After seeing generally mixed performances by a trio of newly public companies this month, VNG was advised to hold off until market demand improves,” an inside source disclosed to Bloomberg.

While VNG remained reticent on the matter, the strategic pause mirrors a broader caution in the tech IPO space. Notably, both Arm Holdings Plc, the SoftBank Corporation affiliate, and delivery service Instacart experienced their stocks trading beneath their IPO valuations.

VNG, which debuted as Vinagame in 2004, has transitioned from its initial gaming focus to become a diversified digital powerhouse in Vietnam, offering an array of services from video streaming and news portals to mobile payments. The company has contemplated a US listing since 2017.

Before this revision in plans, the gaming and communications conglomerate had intimated an intention to offload approximately 22 million shares in its proposed IPO, though pricing details remained under wraps.

In 2021, VNG was contemplating a US stock market debut via a merger with a special purpose acquisition company . Should the transaction materialise, VNG's valuation could oscillate between $2 billion and $3 billion.

VNG also owns Zalo, Vietnam’s most widely used messaging application, boasting over 75 million active monthly users, among other digital ventures.

In early 2023, VNG shares commenced trading on the Unlisted Public Company Market in Vietnam. Debuting at VND240,000 (around $10.13) per share in January, they quickly ascended, marking VNG as the highest valued stock on the exchange.

Zhejiang Int’l Trade Exhibition, Export Fair to take place in Hanoi

The 2023 Zhejiang International Trade Exhibition and the 11h Zhejiang Export Fair, the largest and oldest expo independently held by China’s Zhejiang authority in ASEAN, are slated to convenve at Hanoi’s International Convention Centre on September 28.

The 4,000sqm expo will comprise 120 booths, displaying products in hardware and machinery, textiles and inputs, interior and exterior furniture, electronics and household appliances.

The three-day event is hosted by the Department of Commerce of Zhejiang Province, co-organised by Zhejiang Yuanda International Exhibition Co Ltd and the Vietnam National Trade Fair and Advertising Company (VINEXAD).

Launched in 2011, the expo has been a platform not only for product exhibition and promotion but also for Vietnam and China to strengthen economic and cultural exchange and multifaceted cooperation between their localities.

Vietnam is the largest trading partner of Zhejiang Province under The Regional Comprehensive Economic Partnership (RCEP). In 2022, Zhejiang's exports to Vietnam reached US$14.5 billion, an increase of 17.99%, imports were US$6 billion, an increase of 14.21% over the same period last year.

Việt Nam’s Top 10 digital technology companies named for 2023

Việt Nam’s Top 10 digital technology companies in 2023 were announced at a ceremony in Hà Nội late last week.

Among them are Viettel Solutions, OneMount Group, VNPT, Mobifone, Rạng Đông and FPT.

Launched two months ago, the organising board selected from 104 nominations in various fields to honour the top 10 digital technology enterprises in Việt Nam.

According to statistics, the total revenue in 2022 of these 104 businesses reached VNĐ164 trillion (US$6.7 billion), accounting for 43.75 per cent of the total revenue of Việt Nam's software and information services sector.

Speaking at the event, Deputy Minister of Information and Communications Phan Tâm said that digital technology enterprises were the nucleus of the country's industrialisation and digital transformation of all industries.

He said that the honoured companies' strategies to conquer the market were valuable lessons, opening the way for many others to confidently enter the international market.

The list of the top 10 digital technology companies and publications introducing their operations are published in three languages - Vietnamese, English, Japanese - on websites www.top10ict.com and www.vinasa.org.vn.

According to statistics of the Vietnam Software & IT Services Association, the IT sector posted nearly $34 billion in revenue with 440,000 workers in 13,800 companies in 2013. Those figures increased five-fold after 10 years, with total revenue reaching $148 billion and a workforce of 1.3 million. 

SOEs management and operation show signs of improvement: MPI

There has been progress made with business management and operation of state-owned enterprises (SOEs) during the first eight months of 2023, according to the latest report by the Ministry of Planning and Investment (MPI).

The report estimated the SOEs' total revenue at VNĐ1,136.621 trillion (US$46.73 billion) or 71 per cent of the annual target, and 102 per cent compared to the same period last year. 

The Vietnam Oil and Gas Group - PVN led the pack at VNĐ350.5 trillion, 84.7 per cent of the annual target and 94.4 per cent compared to the same period last year; Vietnam Electricity (EVN) at VNĐ250 trillion, 109 per cent compared to the same period last year; Vietnam National Petroleum Group (Petrolimex) at VNĐ169 trillion, 88.9 per cent of the annual target and 84 per cent compared to the same period last year; the Vietnam National Coal-Mineral Industries Group (TKV) at VNĐ112.1 trillion, 66 per cent of the annual target and 101 per cent compared to the same period last year.

Total pre-tax profit reached VNĐ27.1 trillion, 72 per cent of the annual target and 133 per cent compared to the same period last year.

Most profitable SOEs were ranked as follows: PVN with VNĐ35.89 trillion, 103.3 per cent of the annual target; Airports Corporation of Vietnam (ACV) with VNĐ6.53 trillion; State Capital Investment Corporation (SCIC) with VNĐ5.29 trillion, 94 per cent of the annual target; Petrolimex with VNĐ3 trillion, 92.9 per cent of the annual target.

On the other hand, some SOEs have been found struggling to cut losses such as EVN and Vietnam Airlines.

Most improved SOEs included the Vietnam Railways Corporation (VNR), which has produced significantly better business performance compared to the same figures the previous year. The VNR reported a pre-tax profit of VNĐ143.9 billion in the first eight months of 2023, 139.6 per cent of the annual target and 193.7 per cent compared to the same period last year.

In last month's meeting of VNR executives, the corporation said an increase in popularity among train passengers was the main revenue drive in 2023. The corporation said ticket sales had increased by 83 per cent compared to the same period last year. 

VNR's Chairman of the Board Đặng Sỹ Mạnh said VNR had been in the process of setting up additional short tracks, adjusting the number of cars available for each track, upgrading services and comforts for passengers. 

Measures had also been taken to reduce waiting time and introduce VNR-sponsored products. Most notably, the corporation had started implementing flexible ticket sales, based on the number of passengers and time of departure, which had been getting positive feedback from customers. 

The report said 5 out of 19 SOEs managed to increase their contributions to the state budget during the same period including the SCIC, the TKV, the Vietnam Coffee Corporation, the Northern Food Corporation, and the Southern Food Corporation.

"A number of difficulties and challenges have resulted in some SOEs, including key players such as the EVN and Vietnam Airlines, underperforming and incurring financial losses.", said the Management of State Capital at Enterprises (CMSC) in a statement. 

Meanwhile, 82 enterprises under the management of the Ministry of Defence, accounting for 17 per cent of the total 478 state-owned enterprises with 100 per cent state capital ownership, were classified as "relatively stable".

These enterprises, as of August 30, reported a total revenue of VNĐ196.9 trillion, 62.3 per cent of the annual target, with pre-tax profit estimated at VNĐ38.25 trillion. 

The MPI has issued several advisories to SOEs with investment projects falling behind schedule, prolonged construction or have been found wanting in the efficient use of resources. 

"Failures today to generate additional business capacity will lead to limited contributions to the economy in the next five years," said the ministry in a statement. 

Measures to move support industry forward

Việt Nam's support industry has grown steadily over the past decade to around 5,000 companies, producing components for domestic demand and exports.

That remark was made by Phạm Tuấn Anh, Deputy Director General of Industry Agency, Ministry of Industry and Trade, at the workshop "Easing hurdles and boosting the resilience of the support industry" on Friday.

He said the companies spared no effort in capacity-building to move up the supply chain. Around 100 had become tier-1 vendors for multinational heavyweights, and 700 had established themselves as tier-2 and tier-3.

"Of the companies, Samsung has chosen about 50 as its tier-1 and 170 as tier-2," said Anh.

Their growing roles in the supply chain led to higher ratios of made-by-Vietnam components being used in assembly lines. For instance, the ratios have reached between 15 to 20 per cent in the mechanical engineering industry.

The deputy director also underlined several factors holding back companies. One centres around the fact that they remain trapped in low-value-added segments. Another involves the loosely-knit ties between the companies and foreign-invested ones.

He called for measures, such as capability-building programmes, to help them move up to high-value-added segments and cement ties with FDI companies.

Nguyễn Quốc Cường, Director of Hanel Plastics JSC, underlined four factors that are top of minds for global heavyweights when they pick their vendors: quality, price, delivery, and environmentally-friendliness.

"A company wouldn't be chosen as a vendor unless its products have an up-to-global-standards quality, competitive prices, efficient delivery, and no environmental impact," said Cường.

As consumers in the EU and the US have become more eco-conscious, his company is wasting no time in shifting to recyclable and environmentally friendly plastics to keep up with the times.

The director urged Vietnamese companies to invest more in technology to boost productivity and stay away from cheap labour. He said many countries out there also offer cheap labour, but only technology makes the difference.

Nguyễn Vân, Deputy Director of Hà Nội Supporting Industry Association, said his association had gone to great lengths to improve the capability of companies in the support industry.

It cooperated with Japanese and Korean counterparts in establishing consultant agencies, whose jobs involved helping the companies with consultation and training on obtaining globally-recognised certifications.

He also said Hà Nội had around 900 companies operating in the support industry currently and aimed to have 1,000 by 2025.

Đặng Trần Thùy, Director General of Kyoyo Vietnam Founding JSC, said his company was facing two difficulties amid the economic downturn.

The first involved input costs, which had climbed by about 30 per cent for some materials. The second centred around labour shortage, which had put it on tight spot since the COVID-19.

"We have to take on workers from distant provinces to take up the slack," said Thùy.

Vietnam's retail sector faces mounting challenges

Currently worth $142 billion, Vietnam's retail segment is projected to burgeon to $350 billion in the coming years.
 
On September 22, Vietnam Report unveiled its annual list of the Top 10 Credible Retail Companies for 2023. The rankings, reflected an industry grappling with significant challenges of considerable interest to investors and stakeholders.

Since the fourth quarter of 2022, Vietnam’s retail sector has witnessed subdued growth.

Profits have been under strain thanks to subdued demand stemming from a dip in public incomes due to export challenges. Additionally, many retailers are navigating the complexities of high interest rates and stringent credit conditions set by consumer finance entities.

The fresh survey conducted by Vietnam Report highlighted that almost all businesses (100 per cent) cited weak consumer demand as a concern, with 92.9 per cent noting the persistent economic slowdown. Early 2023 also saw retailers facing fierce price competition, further straining profits.

To combat this dip in consumer spending, nearly 64 per cent of retailers plan to launch consumer incentive programmes, adopt competitive pricing strategies, and introduce loyalty schemes in the upcoming months. However, not all promotions guarantee success.

Many businesses are therefore leaning into market research, utilising technology and data to better align their marketing strategies with consumer preferences.

Despite current headwinds, Vietnam's retail sector remains robust in potential. Many businesses view the solution to the current challenges in deepening market penetration, streamlining operational costs, and reducing expenditures on underperforming outlets.

Looking ahead, the retail landscape seems promising. The current market valuation stands at $142 billion, with projections estimating a surge to $350 billion in the near future.

One silver lining for the sector is the return of international tourism to Vietnam. As global travel restrictions ease, the influx of tourists is likely to provide a welcome boost to retailers.

Moreover, Vietnam's demographic advantage, with its young and large population, further augments the sector's potential growth.

Fertiliser sector envisions sunny prospects

Businesses in the fertiliser sector expect rosier horizons ahead amid a number of favourable factors globally and domestically.
From early this month, the hint that several major urea fertiliser makers in China have ceased the signing of new export contracts under request from Chinese government has cast a remarkable impact on the global fertiliser market.

As China is a leading urea fertiliser producer and consumer, its restriction on urea fertiliser exports might tighten supply of the product and significantly push up fertiliser price.

Nguyen The Minh, director of Retail Research at Yuanta Vietnam Securities JSC, noted that China has mandated several fertiliser firms to temporarily halt urea fertilser exports following a spike in fertiliser price in this market, which could extend upward price momentum in the global market, with Vietnam no exception.

Morocco is another country among the top performers in fertiliser exports, but was hit by the most tragic earthquake in the century on September 8, which has cast a big influence on the global supply in the short term.

Such events have aided upward price momentum of urea fertiliser in the global market, buoyed by diverse factors such as escalating tension in the Black Sea, a sharp jump in the demand from India due to a shortfall in their domestic production and rising rice growing area, as well as a 30 per cent gas supply cut feeding fertiliser production from Egypt.

Last year, Egypt accounted for 4 per cent of urea fertiliser production volume and 8 per cent of exports globally.

On trading on September 8 alone, urea fertiliser prices fetched $452 per tonne, up by half compared to late June.

In the domestic market, urea fertiliser price is forecast to spike in the fourth quarter of this year.

In the stock market on September 8 the tickers of fertiliser firms responded positively when a raft of tickers ended violet, reaching their peak price in the section.

BIDV Securities JSC predicts that the fertiliser sector would acquire positive prospects in the rest of 2023. The fertiliser price in the domestic market will likely extend growth momentum to keep abreast with that in the global market.

The urea fertiliser price can touch $0.48-0.49 per kg, equal to a 25-30 per cent jump compared to the bottom level in early June.

Amid the resumed urea fertiliser price, PetroVietam Ca Mau Fertilizer JSC (DCM) has eminent prospects for improved revenue and profit due to augmented demands for the summer-autumn price season in the central region, as well as the winter-spring rice season in the northern region.

In addition, DCM’s export prospect is forecast to resume strongly in the second half compared to low base in H1, leveraging the many positive factors.

PetroVietnam Fertiliser and Chemicals JSC (DPM), the producer and trader of Phu My brand fertiliser, they have pushed their output to a maximum to serve soaring demand from farmers.

In the year to date, DPM launched 640,000 tons of Phu My nitrogenous fertiliser into the market and 90,000 tons of Phu My NPK fertiliser.

For the rest of 2023, the company aims to provide the market with additional 500,000 tons of Phu My fertilisers of diverse kinds, holding expectations of apparent improvement in their business results in this H2.

In the case of Binh Dien Fertiliser JSC (BFC), in Q3 of 2023 the company counted $78.8 million in revenue and $2.78 million in pre-tax profit, 10 times more than a year ago.

BFC secures the largest market share in NPK fertiliser production in Vietnam, particularly in the southern region, Vietnam’s major rice growing area.

Vietnam stepping up efforts for growth

The Vietnamese government has made an urgent order to spur on industrial production and boost administrative reforms to fuel economic growth.

Prime Minister Pham Minh Chinh last week required ministries and localities to “double efforts” to remove all obstructions to recover industrial production in a quicker manner, with a focus laid on manufacturing and processing activities.

“Industrial production is beginning to bounce back, so boosting it must now be a pivotal and imperative task to boost economic growth,” PM Chinh stated at last week’s government cabinet meeting on the country’s socioeconomic performance. “Now we have to find out solutions to recover supply chains and accelerate the construction of large-scale projects.”

The Ministry of Planning and Investment (MPI) last week reported to the government that so far this year, Vietnam’s index for industrial production (IIP) decreased 0.4 per cent as compared to the same period last year, when it climbed 9.4 per cent on-year.

The eight-month IIP for processing and manufacturing, which creates more than 80 per cent of industrial growth, reduced 0.6 per cent as compared to the same period last year.

However, the rate has gradually been recovering in August, at 2.9 per cent on-month and 2.6 per cent on-year. Meanwhile, the on-year IIP in July increased only 2.3 per cent, said the MPI, adding that the Purchasing Managers’ Index of the industrial production sector hit 50.5 points in August, “showing an expansion in production with the volume of new orders and output bouncing back.”

The IIP for processing and manufacturing in August ascended 3.5 per cent on-year, still lower than the on-year rise of 3.6 per cent in July but higher than 2.8 per cent in June.

Dao Thu Trang, head of Business Development Services of AHK Vietnam, told VIR that she believes the existing IIP is just for the short term. “Vietnam’s industrial production sector is surging to become a magnet to foreign investors, including those from Germany,” she said.

Trang cited a recent AHK survey as stating that a significant majority, 91 per cent, of German companies have expressed their intention to continue investing in or expanding their production in Vietnam. Additionally, around 40 per cent of these companies are planning to increase their workforce in the next 12 months.

“These figures highlight the attractiveness and potential of the Vietnamese market for German investors,” Trang said.

In an example, German-backed KURZ Vietnam last week inaugurated its state-of-the-art factory in the south-central province of Binh Dinh’s VSIP Binh Dinh to manufacture Luxor and Alufin films.

KURZ’s venture in Vietnam marks the first high-tech initiative from Germany in Binh Dinh. The 12-hectare factory, in its first phase, boasts a total registered investment capital of $40 million, and a production capacity of 15 million square metres of products a year.

“German businesses still consider Vietnam as one of the most potential developing markets in Asia. Moreover, with Germany’s investment diversification strategy, Vietnam is being evaluated as a promising and reliable investment destination for German enterprises,” Trang said.

However, she also added, “To further improve investment in Vietnam and enhance its attractiveness as a destination for foreign investors, the government should continue its efforts to streamline administrative procedures, to invest in infrastructure development, particularly in transportation and logistics.”

PM Chinh last week also ordered ministries to boost administrative reform in favour of investors and businesses. “Enterprises are still facing numerous administrative obstructions. Ministries and localities are requested to focus on reviewing all legal regulations, mechanisms, and policies. Any improper policies and regulations must be removed immediately,” he stressed. “No more unnecessary procedures are allowed to be enacted, as they will increase costs and time for people and enterprises.”

Despite difficulties, the government is still steadfast to an economic growth target of 6-6.5 per cent this year, but global analysts FocusEconomics said that the economy is projected to miss this target due to subdued private spending and exports.

“Nevertheless, stronger public spending and looser monetary policy mean Vietnam should remain among ASEAN’s top performers,” FocusEconomics said. Its panelists see Vietnam’s GDP expanding 5 per cent in 2023 and 6.3 per cent in 2024.

Flooring producers tackle shifts within global market

Despite the recovery of the American construction market, Vietnam’s top stone plastic composite flooring manufacturers are facing barriers to export due to wider global issues.
 
Stone plastic composite (SPC) flooring orders for the US market should rebound in the last months of this year. However, Le Quang, CEO of Neo Floor, one of the five largest SPC flooring manufacturers in Vietnam, is not so upbeat.

Quang’s market analysis team, which has closely followed the US market to evaluate new developments and competitiveness, has noted that it will be tough for the company to compete with Chinese equivalents.

In the early September meeting at the company’s headquarters in Hanoi, a member of the analysis team said, “As well as China, the company is struggling to vie for market share with counterparts from Thailand, Cambodia, and India. These nations not only boast advantages of scale and competitive prices but also enjoy a zero tariff rate in the US market.”

Despite the slowdown of the US economy post-pandemic, the demand for SPC flooring has levelled off thanks to the good absorption rate of residential and commercial building projects. This has saved SPC flooring manufacturers and traders from recession, according to Quang.

“Neo has made efforts to adjust its business strategy and access and negotiate new orders with major distributors like Calibamboo, Mohawk, and Anatolie,” Quang said.

“The company has also formed a partnership with MS International, Inc., which is one of the US’ leading material distributors,” he added.

Neo’s SPC products, made of tiling material made from PE plastic, calcium carbonate (CaCO3) stone powder, and anti-expansion additives, have also been available at many large supermarket chains in the US such as Home Depot since the start of 2021.

The company has also updated its plan to increase profit margins for the last quarter of 2023. The update is based on the completion of the distribution system and the scale of output meeting the requirements of large buyers, such as Discount Hardwood Floors, Old Master, Town and Country Ceramic Tiles, Tucsun, and CA Flooring.

At its AGM earlier this year, Neo announced that domestic consumption only accounted for 10 per cent, with the remaining products being exported. The company has also purchased the copyright for key technology from an American partner.

Neo boasts two advantages to create a competitive edge for the company. Firstly, 75 per cent of the materials for SPC flooring are CaCO3. Neo owns a CaCO3 quarry in the central province of Nghe An, with reserves of more than five million cu.m. Thanks to the raw material area, the company can ensure the quality and origin of its products exported to the US.

Secondly, the company has made heavy investments in research and development. After two years of investing in such activities, Neo’s scientists have come up with a formula for mixing additives, thereby completing the entire SPC floor production line.

However, there are grounds for the company’s concerns. American consumers used to benefit from China’s low-cost construction materials. Analysts pointed out that despite the US’ lingering tariffs on Chinese imports over the years, China remains the largest goods supplier to the US.

Trade in goods between the US and China rose to a record high in 2022 and US imports of goods from China totalled $538.8 billion, slightly less than the record import level in 2018.

The increasing domestic costs, coupled with the nearly five-year trade dispute with the US and rounds of sanctions, have shaken China’s position in the global value chain.

Exports are an important driving force for China. However, customs data showed that its exports fell by 8.8 per cent in August on-year. China’s shipments to Western countries also decreased significantly in August compared to the same period last year. Specifically, goods to the US decreased by 17.4 per cent, while imports contracted by 7.3 per cent in August from a year ago.

US goods imports from China totalled $203 billion during the first six months of 2023, down by one-quarter against last year’s period, according to the US Commerce Department.

According to some SPC manufacturers in Vietnam, the recent recovery of the American construction market signifies a potential growth of SPC flooring imports from Vietnam to the US. However, the opportunities for Vietnamese SPC manufacturers will be snapped up by Chinese counterparts, which are extending their reach to international markets.

The S&P Homebuilders Select Industry stock index is up 40 per cent this year as of mid-July, outpacing the S&P 500’s 18.6 per cent gain. Share prices for D.R. Horton, Lennar, and PulteGroup, the three largest home builders, have performed even better.

Nguyen Quang Cung, vice chairman of the Vietnam Association for Building Materials, said that in August, China’s exports to the US fell 17.4 per cent from a year earlier to $45.03 billion.

“Meanwhile, Chinese policymakers are focusing on domestic economic challenges, especially the real estate market, which directly impacts the construction materials industry. Therefore, many Chinese construction material manufacturers are facing a shortage of markets,” Cung said.

“Chinese manufacturers are paying more attention to cash flow for business and production. Many Chinese businesses have introduced their products and sought investment opportunities at recent industrial exhibitions in Vietnam,” he added.

In 2021, the total value of SPC exports from Vietnam to the US reached $784 million, accounting for 14 per cent of consumption value in the US. Export output reached 84 million sq.m or 19.2 per cent of consumption in the US.

In 2022, the total value of SPC exports from Vietnam to the US reached $939 million, accounting for 17 per cent of consumption value in the US. Export output reached 125 million sq.m or 28.7 per cent of consumption in the US.

Vietnamese cassava exports to China recover

Vietnam’s cassava and cassava product exports to China surged in August amid sharply rising demand.

According to the Vietnamese General Department of Customs, in August, Vietnam exported 221,300 tonnes of cassava and cassava products worth USD103.26 million, up 7 percent and 6.6 percent on-year respectively.

Of the sum, up to 212,230 tonnes worth USD98.04 million were imported by China, accounting for 96 percent. 

August marked the first growth in Vietnam’s cassava export value following five consecutive months of decline.

Vietnam exported 1.86 million tonnes of cassava products worth USD768.76 million between January and August this year, down 12.4 percent and 18 percent respectively compared to the same period last year. Of this, 1.69 million tonnes were exported to China worth USD687.24 million, down 13.4 percent and 19.9 percent on-year.

Cassava demand is projected to remain high in the coming time due to China’s increasing grain reserve demand for both domestic consumption and livestock feed production.

China has imported more cassava for production activities from now to the year-end.

However, Vietnam’s cassava productivity this year will fall as cassava cultivation in some localities have been affected by cassava mosaic disease.

Since early this month, fresh cassava prices in Tay Ninh Province have been on the rise. Meanwhile, cassava starch product prices have also been raised to VND12,500 a kilo for export and VND12,800 per kilo for domestic consumption. 

Recruitment soaring in tech titan positions

A number of foreign-invested enterprises are relocating their operations to the north, creating greater demand for local recruitment.

In the working session between Chairwoman of Bac Ninh People’s Committee Nguyen Huong Giang and Goertek Group on September 12, the leader of Goertek reported on construction progress of its third plant located in Nam Son-Hap Linh Industrial Park.

According to Goertek, one of Apple’s largest acoustic products suppliers, the construction of this third facility is accelerating. To prepare for the operation, the corporation is continuously placing notices on the recruitment information on its website as well as at online job fairs.

The $300-million factory in Nam Son-Hap Linh Industrial Park, which will produce consumer electronics, communication equipment, and optical equipment, will go into operation in April 2024, with the total recruitment demand up to 50,000 people.

Foxconn and Luxshare ICT Vietnam have simplified recruitment procedures and offer competitive incomes to employ a large volume of employees.

Nguyet Ha, HR staff of Foxconn Quang Chau, said that the company planned to employ a large volume of workers from now to the end of the year with the monthly income of over VND10 million ($420).

Meanwhile, director of Bac Giang Employment Service Centre Nguyen Van Hue said that it had completed the recruitment of more than 10,000 unskilled workers for Luxshare ICT in August alone.

These companies are all vendors for Apple, which has finalised the relocation of 11 of its audio device production facilities to Vietnam, marking a significant shift in the company’s global supply chain strategy.

Nguyen Thang Vuong from the Europe-America Market Department of the Ministry of Industry and Trade said, “Along with this relocation, several prominent American corporations, such as Boeing, Google, and Walmart, have announced plans to extend their supplier networks and manufacturing bases in Vietnam following extensive research into the local investment environment.”

“Particularly noteworthy is the colossal shift by Samsung in relocating its entire mobile phone production line, predominantly to Vietnam and India. Remarkably, 60 per cent of Samsung’s global smartphone output is now manufactured in Vietnam,” Vuong said at an online forum on Vietnam’s role in the global supply chain on September 6.

According to Apple’s supplier list for fiscal year 2022, there are currently 26 suppliers with 28 factories in Vietnam servicing the tech giant’s electronics manufacturing needs. These factories are spread around 15 provinces, with the majority located in the north.

For Apple, this has materialised in three key manufacturing hubs in Bac Ninh, Bac Giang, and Haiphong. This is also leading to a snowball effect, whereby greater investment in the manufacturing sector means bigger investment in surrounding infrastructure, facilitating smoother and easier transportation of goods.

The relocation and expansion also create a surge in recruiting workers to these factories. During July and August, many online job fairs were organised by employment service centres in the north, with the participation of nearly 200 employers and the recruitment demand of tens of thousands of positions. Which, monthly salaries for these job opportunities varying VND5-15 million ($200-600) depending on the positions and localities.

In late July, an online job fair connected nine northern cities and provinces, offering 40,000 jobs across various industries. Of the available positions, over 1,200 job vacancies were in Hanoi, primarily in the trade, transport, and education sectors. Meanwhile, other provinces, including Bac Giang, Thai Nguyen, Ninh Binh and Phu Tho, had significant job openings available, employing 17,500 workers, 8,400 workers, and over 3,000 workers, respectively.

The fair emphasised the need for manual workers, with over 18,200 positions seeking candidates with basic qualifications. Additionally, industries requiring intermediate and tertiary-level skills offered around 10,000 positions each. The electronics and textiles industries hired more than 21,600.

Vietnam’s first local currency sustainability-linked bonds aim to boost economy

The International Finance Corporation (IFC) is investing around $150 million in local currency sustainability-linked bonds (SLBs) to be issued by BIM Land JSC and its subsidiary Thanh Xuan JSC.
 
As the first local currency SLBs in Vietnam, they aim to help issuers expand their businesses while creating jobs, boosting competitiveness, and supporting the country’s low-carbon growth model.

IFC’s investment comprises two elements, with about $100 million to be issued by BIM Land – a tourism and property developer in Vietnam – and approximately $50 million to be issued by Thanh Xuan JSC. Both the issuers are subsidiaries of BIM Group, a multi-sector corporation in Vietnam.

The proceeds will be used to develop the Thanh Xuan Valley project in Vinh Phuc province, including an eco-friendly and unique residential community alongside a hotel complex (under the InterContinental brand), as well as other relevant services and infrastructure.

IFC’s funding will also help the developers implement water- and energy-saving solutions at two BIM Land hotels – InterContinental and Regent – on Phu Quoc island.

An innovative financing tool to support global sustainable development, these SLBs will provide financial incentives for both BIM Land and Thanh Xuan JSC to improve water conservation and energy efficiency in three of their hospitality assets that hope to be accredited by EDGE – IFC’s green building certification system.

This is expected to avoid an estimated 4,000 metric tonnes of CO2 annually – equivalent to greenhouse gas emissions from 890 gasoline-powered passenger vehicles driven for a year.

Doan Quoc Huy, BIM Group’s vice chairman and CEO said, “Sustainability is a critical part of our strategy to position BIM Land as a leading property developer and operator in Asia with a long-term vision. We hope to attract international investors as we develop high-quality, green tourism infrastructure across the country.”

“Most importantly, IFC’s financing and advice will help catalyse our green transition in line with the industry’s best practices and global climate goals,” he added.

IFC has also helped BIM Land develop its sustainability-linked financing framework with tailor-made performance targets.

Thomas Jacobs, IFC country manager for Vietnam, Cambodia, and Laos stated, "Private capital is key to Vietnam’s green transition. The issuance of the first local currency SLBs in the country will signal the viability of innovative green financing instruments as an alternative source of capital for climate-smart projects."

“IFC’s funding will also encourage developers to align their interests with responsible investment and to mobilise funding from green capital markets, paving the way for the sustainable tourism sector,” Jacobs continued.

In line with the government’s twin goals of becoming a high-income country by 2045 and achieving net-zero by 2050, climate and sustainability have become stronger focus areas for the IFC engagements in Vietnam.

To date, IFC has allocated over $900 million in long-term finance to support climate-related projects in the country. IFC’s commitments in Vietnam reached close to $1.9 billion in fiscal year 2023, helping local companies recover and navigate the challenging environment.

Electricity prices must reflect production costs for green transition

Nguyen Xuan Thanh, a lecturer at the Fulbright School of Public Policy and Management in Vietnam, has suggested that for a successful green transition, Vietnam must accurately adjust electricity prices to mirror the costs of renewable energy production.
 
Speaking at the 2023 Vietnam Economic Forum on September 19, Thanh said, “To achieve a green economic transition and boost renewable energy, electricity prices must fully reflect production costs.”

According to Thanh, there has been an influx of new energy sources, many of which are costlier than the current average electricity price. As a rough estimate, if the cost of renewable energy stands between 5-7 US cents per kWh, with the addition of transmission costs, the retail price should rise to 10-12 US cents per kWh. Currently, the average retail price hovers around 8.1 US cents per kWh. This suggests the need for an upward revision, taking the new production costs into consideration.

"Naturally, the idea of raising electricity prices will receive pushback. However, without a clear roadmap for such price hikes, transitioning to renewable energy becomes unfeasible," Thanh said, adding, "Energy pricing needs to be more reflective of economic and societal costs. Such measures could discourage industries from excessive power usage, compelling businesses to innovate in terms of technical solutions and enhance energy efficiency."

The National Assembly's Economic Committee submitted a report to the assembly in early September, observing that current electricity retail prices do not mirror market developments accurately, considering the fluctuating supply and demand and input fuel costs. The report highlighted the absence of a refined legal framework for competitive wholesale electricity markets, and how renewable energy plants, built under the feed-in tariff price mindset, face substantial risks in electricity auctions.

Thanh also stressed the importance of reinforcing the electricity grid to efficiently transmit renewable energy from production sites to consumers. "Investments should be geared towards a 'smart' grid that can dynamically respond to fluctuations in supply and demand," he said.

Despite the strategic calculations in Power Development Plan VIII, experts believe that excessive frugality in grid investment could lead to regional energy imbalances and short-term crises. Thanh further emphasised the need for an expedited bidding process for renewable energy producers, saying “Given that solar, wind, and hydro energy have negligible operational costs, with most of those costs being fixed, they naturally hold a competitive edge in electricity auctions compared to coal or gas-based power.”

"Renewable energy producers invariably desire guaranteed contracts. However, they would be equally content with a transparent bidding mechanism overseen by an independent regulatory body," Thanh added.

While the auction mechanism has yet to be established, an alternative approach lies in long-term guaranteed contracts at predetermined prices, bearing similarities to fossil fuel energy projects. Such contracts could facilitate access to bank loans and more extended, low-cost international borrowings. However, these contracts may place an additional burden on the state, as the risk of energy dispatching gets shifted from wind and solar projects to electricity purchasers.

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