VIETNAM BUSINESS NEWS MARCH 27
Programme supporting enterprises in optimising opportunities from EVFTA debuts
A cooperation programme to help businesses to optimise advantages from the EU-Vietnam Free Trade Agreement (EVFTA) through the Vietnam-EU e-commerce platform made debut in Hanoi on March 26.
The programme was signed among the Ministry of Industry and Trade (MoIT)’s Department of E-Commerce and Digital Economy, the Vietnam Institute of Business Management Science and Digital Economy (VIDEM), the Association of Small and Medium-Sized Enterprises, and the Kim Nam Group.
Addressing the signing ceremony, MoIT Deputy Minister Cao Quoc Hung hailed efforts of all parties in putting the Vietnam-EU e-commerce floor into operation as soon as possible, thus helping Vietnamese firms to grasp opportunities from the EVFTA.
He underlined that amid the fourth Industrial Revolution, the improvement of competitiveness and the development of infrastructure system may create breakthroughs.
Hung noted that last year, under impacts of the COVID-19 pandemic, e-commerce in Vietnam grew 18 percent to over 11 billion USD, enabling people to shop for almost everything online.
The Deputy Minister said e-commerce platforms such as Alibaba and Amazon have helped micro-sized enterprises and business households to export their products, which seemed to be impossible in the past. He held that with technology advances, it is necessary to seek solutions to create breakthroughs in assisting Vietnamese businesses in getting access to foreign markets such as the EU.
The official affirmed that the programme is expected to be the first step in the roadmap of designing fundamental technology-cored solutions to assist enterprises, especially SMEs and business households in improving capacity and opportunities to reach international markets, thus optimising opportunities offered by the EVFTA.
For his part, Dang Hoang Hai, Director of the Department of E-Commerce and Digital Economy said that along with difficulties, COVID-19 has also brought in opportunities for Vietnam in speeding up transition.
The Department has cooperated with agencies representing the SME community of Vietnam to help them grasp chances from the deal, he said.
Hai adding that the Vietnam-EU e-commerce floor is expected to realise the goal of connecting relevant digital solutions to build a complete digital ecosystem, helping businesses to make trading activities on a single platform.
VIDEM Director Nguyen Kim Hung said that the floor is a national-scale project that aims to create a B2B Marketplace, while building an “expressway” connecting Vietnamese firms with international partners, especially those from Europe.
Hung said that the floor is connected with the existing trading floors of cities and provinces, helping to build a national database facilitating the transparency in origin of products, and providing information to the business community of Vietnam and other countries on trade deals and relevant policies.
The trading floor is also expected to contribute to bolstering the partnership between Vietnam and the EU, especially in economy and trade.
Nguyen Van Than, a representative from the Association of Small- and Medium-Sized Enterprises, proposed that the VIDEM seek solutions to facilitate Vietnamese firms’ integration and protect them from risks and challenges while the trading floor becomes officially operational.
Statistics showed that the EU is one of the leading trade partners of Vietnam with two-way trade reaching 56.45 billion USD in 2019, including 41.5 billion USD worth of Vietnamese exports./.
Vietnam looks to address bottlenecks in logistics infrastructure
Removing bottlenecks in transport infrastructure and policy mechanisms is considered an important solution to help cut logistics costs and improve the competitiveness of Vietnamese businesses and goods in the time to come.
Figures show that Vietnam boasts 630,546 km of roads, including less than 2,000 km of expressways.
It also lacks infrastructure connecting roads with seaports, resulting in logistics costs being insufficiently competitive.
According to Tran Thanh Hai, Vice Director of the Department of Export and Import under the Ministry of Industry and Trade, Vietnam has been building more expressways and national highways and has large seaports that play a role as international transit gateways.
Vietnam has also upgraded existing airports and developed new ones, he added.
However, railway infrastructure remains underdeveloped and has not yet promoted the role of transport in development, he noted.
Vietnam has regularly posted annual GDP growth of 6-8 percent over the last decade.
The rapid growth of goods production and trade has caused a sharp increase in demand for logistics infrastructure and services. But Vietnam’s logistics infrastructure and services are yet to meet demand, resulting in high costs.
To improve the situation, it is necessary to adopt comprehensive measures, Hai said.
The Government needs to issue specific policies and build appropriate orientations on logistics development, including those related to the development of localities, according to Hai.
He also underlined the necessity of promoting administrative reform and the digitalisation of administrative procedures, increasing links between logistics infrastructure networks, and paying due regard to training and improving the quality of human resources in the industry./.
Rising costs might force EVN to increase retail electricity prices: SSI
Rising production costs might force Viet Nam Electricity (EVN) to raise retail power prices but no official decisions had been made for this year, according to SSI Research.
In a recent report about the electricity industry, SSI Research pointed out that the contracted output of thermal power plants decreased significantly mainly due to the increases in output of hydroelectricity and solar power.
Thermal power was also adversely affected by rising input costs, including coal and gas prices.
“The increase in input costs for the power system is mainly due to the high selling price of renewable energy, plus the increases in gas prices, which is forcing EVN to try to control production costs,” the report wrote.
“It is likely that EVN will have to raise retail electricity prices to partially offset rising input costs, although EVN has not made any official decision for 2021,” SSI Research said.
According to SSI, average sales price of traditional power sources, including hydroelectricity, gas-fired power and thermal power was VND1,169 per kWh.
Comparing the average sales price (ASP) and feed-in-tariff (FIT), SSI Research pointed out two scenarios.
If the FIT was kept the same at 8.38 cents per kWh, EVN must spend an additional sum of around VND12.7 trillion to switch to using solar energy or VND17.7 trillion if wind power was included.
In the second scenario, if the FIT was lowered to 7 cents per kWh as being drafted, the costs would increase by around VND7.8 trillion or VND10.7 trillion (including wind power).
With a seven per cent growth in power consumption nationwide, SSI said that it would be difficult for renewable energy plants to run at full capacity. In addition, from the end of 2021 to 2022, there would be new wind power projects becoming operational.
According to the Ministry of Industry and Trade’s plan of power supply and national power system operation in 2021, the total power output (both domestically produced and imported) was estimated at around 262.4 billion kWh this year, not increasing much against 2020’s plan at 261.45 billion kWh.
However, the percentage of power generation sources changed significantly. The output of renewable energy sources was expected to total 23.4 billion kWh, or 8.9 per cent of the total output of the power system.
Solar power output totalled 10.6 billion kWH last year, accounting for 4.3 per cent of the total output of the power system.
Vietnam Airlines to provide 12,000 seats per day on Hanoi-HCM City route
National flag carrier Vietnam Airlines will operate up to 34 flights per day on the Hanoi-HCM City air route, equivalent to over 12,000 seats, the highest number among Vietnamese airlines.
All flights on the route connecting the country’s two leading economic hubs will use wide-body aircraft Airbus A350 and Boeing 787 since March 28, a representative of the airline said. The carrier is also the one having the most frequent use of the twin-aisle aircraft on the route.
The airline will use the narrow-body Airbus A321 airplane only for flights in early morning or late evening.
Vietnam Airlines has seriously observed COVID-19 prevention and control measures, such as asking passengers to make medical declarations, checking their body temperature, and providing them with hand sanitiser.
According to the Centre for Asia-Pacific Aviation (CAPA), the Hanoi-HCM City is the world’s second busiest route in terms of seat capacity, just after Seoul-Jeju in the Republic of Korea./.
National food security to be ensured in all circumstances, says Gov’t
Under recently issued resolution, the Vietnamese Government has identified national food security as an immediate and long-term issue that should be ensured in all circumstances.
Vietnam has set a target of ensuring a sufficient food supply for local consumption and partly for export up to 2030.
Vietnam has been able to guarantee national food security in all situations over the past 10 years, despite facing challenges such as a global economic crisis, natural disasters, market fluctuations, and COVID-19 outbreaks, making an important contribution to socio-political, economic stability and national development, the Government says in the resolution.
The Government goes on to point out several shortcomings in terms of food production and management that should be addressed in the coming time. Accordingly, food production has failed to keep up with planning in some places, thereby leading to a surplus of food and affecting the livelihood of farmers. There remain challenges relating to the organisation of food production, processing, trading, and the assurance of food quality and safety, in addition to people’s ability to access food in remote or mountainous areas.
Set out within the resolution, the Government maintains that national food security is an essential and urgent issue as food supply and accessibility are strongly impacted by a number of factors, such as climate change, natural disasters, environmental pollution, and unpredictable transnational epidemics, coupled with the ongoing rapid process of urbanisation and industrialisation.
Furthermore, national food security is closely linked to economic restructuring, water resources security, environmental protection, climate change adaptation, and sustainable development. Ensuring food security for all citizens in every circumstance can be considered the responsibility of Party organisations, administrations, and society as a whole. Resources are therefore pooled for the research, application, and transfer of science and technology to diversify food products and ensure a nutritious balance and food safety in people’s diet.
Considering the current situation and challenges moving forward, the Government has set the target of ensuring a sufficient food supply for domestic consumption in all circumstances and partly for export up to 2030.
To meet the target, the Government has outlined major tasks and solutions, including accelerating market-based food production restructuring, developing infrastructure for food production, and increasing scientific and technological research in the application and transfer of food production, preservation, and processing.
Hopes escalating for post-pandemic growth in M&A
Vietnam’s mergers and acquisitions, though rather muted in the beginning months of 2021, are expected to revive on the back of both vaccination programmes and legislative changes.
Vietnam has witnessed only a few merger and acquisition (M&A) deals since the beginning of 2021. Thailand’s SCG acquired 70 per cent stake in Duy Tan Plastics while Danish group BioMar scooped up a majority share in Viet-Uc.
Commenting on this trend, Masataka Sam Yoshida, head of the Cross-border Division of RECOF Corporation, said that this situation is just temporary, and a bright future is expected ahead. For instance, Japanese investors have become more cautious than ever after the latest wave of the pandemic in Japan.
Vietnam has been extremely successful in keeping the pandemic under control, but the strict travel restrictions make it difficult for Japanese companies to arrange short-term business travels, which are fundamental and crucial in considering and proceeding with M&A transactions. “Having said that, the rationale for the investment in Vietnam has not changed. Vietnam has much higher growth potential than Japan where the economy is too mature. We are aware that Japanese companies remain interested in Vietnam, even though they are not active at this moment,” he said.
According to RECOF’s M&A database, the number of outbound transactions from Japan decreased by 33 per cent to 557 transactions in 2020, while the same number in Vietnam declined by 30 per cent to 23. Vietnam ranked sixth as the destination country for Japan among all countries worldwide, and second only to Singapore in Southeast Asia.
Sam Yoshida added, “COVID-19 has been the sole reason for the recent sluggish M&A transactions between Vietnam and Japan, so assuming the COVID-19 will be subdued with the start of vaccinations and the removal of travel restrictions, we are more than confident that the market will recover in the latter half of 2021.”
Meanwhile, Vo Ha Duyen, chairwoman of Vietnam International Law Firm, cited data by the Corporate Investment and Mergers & Acquisitions Center showing that the value of M&A deals in Vietnam in 2020 dropped by about a half from 2019. Various factors may have affected such activities, she said – the pandemic has had a significant impact on the global economy and also caused difficulties to dealmaking, while travel bans and lockdowns have hampered M&A due diligences and negotiation meetings.
According to Duyen, the ongoing changes to the laws of Vietnam have also contributed to some uncertainties. Under the new Law on Competition, a substantially higher percentage of M&A deals are subject to merger control filing requirements than under the old laws. Investors initially hoped that the introduction of the 30-day “preliminary review” track to the merger control filing procedure under the new law would help reduce procedural burdens.
Nonetheless, because sub-law regulatory guidance has not been issued, it seems that a majority of filing cases have not seen application of the 30-day preliminary review and have been subject to complex and uncertain evaluations which last for months.
In addition, local departments of planning and investment have had difficulties in applying the new Law on Investment as documents guiding the implementation of the law have not been issued. This could increase cases in which the licensing authorities have to seek opinions from other relevant authorities, which may contribute to delays in the M&A process.
“We hope that new decrees and circulars providing detailed and favourable regulatory guidance will be issued soon to support the competition and investment authorities in dealing efficiently with M&A transactions and to effectively reduce the time gap and uncertainties in the procedures, helping boost the recovery of M&A activities when the pandemic settles down,” Duyen said.
According to Vietnam M&A Forum Research Team, a number of mega deals are expected to be secured in 2021. Foreign investors from South Korea, Japan, Singapore, and Thailand will continue to dominate the market with the value of deals reaching up to $500 million. At present, Vietnam’s M&A market remains attractive to investors despite the impact of the global health crisis – in particular, in the second and third quarter of 2020 Vietnam witnessed more M&A deals after the country successfully contained the summer wave of infections.
That being said, Vietnam is hopeful about potential for post-pandemic M&A growth. Some experts have forecast that the main sectors that will contribute to the recovery of value in Vietnam are telecommunications, energy, infrastructure, pharmaceuticals, education, and e-commerce.
Sam Yoshida from RECOF said that Japanese companies are concerned with stability of global supply chains. Vietnam is not only competitive as a location for manufacturing, but also it stands at the crossroads in terms of free trade agreements with major economic zones and so is well positioned.
“Additionally, more Japanese companies are paying attention to sustainability and technology innovations, and they are eagerly looking for opportunities to apply their expertise, such as in renewable energy, smart cities, AI, and more in Vietnam, where the people are open to new ideas,” he said. “As for the pandemic, we highly evaluate Vietnam’s success in keeping the pandemic under control, and this fact makes the country even more attractive for the Japanese investors.”
Despite decreasing rice-growing area, farmers still earn profits
The Ministry of Agriculture and Rural Development (MARD) stated that although the rice-growing areas reduced, increasing rice yields, stable export of rice, and high selling prices have been beneficial for farmers at a conference to preliminarily summarize the production of the winter-spring rice crop 2020-2021, and deploy production of the summer-autumn, autumn-winter, and the winter rice crops in the South, held on the morning of March 24 in Can Tho.
Mr. Le Thanh Tung, Deputy Director of Department of Crop Production under MARD, said that farmers in the Mekong Delta had harvested more than 1 million hectares of winter-spring rice, accounting for more than 60 percent of the total rice-growing area, without being damaged by saltwater intrusion and drought, and the profits of rice farmers were above 45 percent.
According to the MARD, in the winter-spring rice crop, provinces in the Mekong Delta sowed over 1.51 million hectares of rice, down 27,210 hectares. Due to drought and saline intrusion, Tien Giang, Tra Vinh, Kien Giang, and Soc Trang provinces actively reduced the cultivation area. However, thanks to the application of many effective methods in production, rice productivity exceeded 7 tons per hectare, an increase of 0.2 tons per hectare, the highest in the past five years. Rice production is estimated at 10.7 million tons, up 144,000 tons compared to the last winter-spring rice crop.
Mr. Nguyen Ngoc He, Vice Chairman of the People's Committee of Can Tho City, said that the rice yield of the winter-spring crop in 2021 reached 7.6 tons per hectare. This is the year in which local farmers saw the best rice production and the highest yield. The farmer's profits were above 50 percent.
According to the Department of Crop Production, the proportion of farmers using high-quality seeds, providing for the high-end rice export segment is increasing. Accordingly, the fragrant and specialty rice groups accounted for 22 percent of the total rice-growing area, up 0.2 percent; the high-quality rice group accounted for 55.5 percent, up 1 percent compared to last winter-spring rice crop.
According to the MARD, in the summer-autumn rice crop of this year, Mekong Delta provinces will grow 1.52 million hectares of rice with estimated productivity at 5.62 tons per hectare and estimated output at 8.55 million tons of rice. Currently, farmers have sowed rice on 300,000 hectares.
At the conference, representatives of the Directorate of Water Resources and the Southern Regional Hydro-meteorological Center forecasted the upcoming developments of saltwater intrusion and drought, recommending that provinces in the Mekong Delta need to develop water supply plans following the possible scenarios, mobilize resources to proactively implement appropriate solutions to ensure irrigation for agricultural production.
Besides, localities need to direct the units exploiting local irrigation works to monitor the weather changes, water sources inside and outside the sewer system, operate and regulate water according to the operating process, and ensure fair, rational, and efficient water distribution. The harvested rice cultivated areas need to get water to carry out desalination, preparing for the summer-autumn rice crop when the source of freshwater is stable.
Interest rates stabilized to stimulate credit demand
With an abundant source of money, many banks have launched credit stimulus packages and reduced lending interest rates for corporate and institutional customers.
After a long period of cutting interest rates, from the beginning of March this year, some commercial banks, such as Techcombank, VPBank, and ACB, have started to raise deposit interest rates. However, in the market, the number of commercial banks reducing deposit interest rates is more, such as KienlongBank, PGBank, GPBank, and OCB. These lenders cut their deposit interest rates by 0.05-0.3 percentage points.
Many banking experts said that this conflicting interest rate change is only local. Some banks raise interest rates to increase the attractiveness of the deposit channel because other investment channels, such as stocks, bonds, and real estate, are fairly attractive. As for banks that reduce interest rates, they possibly had increased interest rates earlier to mobilize money for the capital needs during the Tet holiday, and now lower their interest rates due to low credit demand while liquidity remains abundant.
The fact that interest rates fluctuate in a small range is a very normal phenomenon and cannot be the basis for setting up a higher interest rate level. Mr. Nguyen Hoang Minh, Deputy Head of the State Bank of Vietnam (SBV) Ho Chi Minh City Branch, said that although some commercial banks had increased deposit interest rates, it was not the general trend of the market. The mobilizing interest rate level in the first two months of this year is still the same as that at the end of last year.
On the other hand, it must be admitted that although the number of banks raising deposit interest rates is small and currently has not put great pressure on the lending interest rate level in general. However, this will cause a certain pressure on the possibility of lowering the lending interest rates of other banks. Moreover, according to many experts, at present, the lending interest rates cannot be reduced following the savings interest rate because bad debts of banks are on the brink of increasing because they have to restructure and keep the debt group for customers affected by the Covid-19 pandemic. Profits are higher, but banks also have to set aside provisions. Therefore, the lending interest rates currently cannot be reduced in tandem with the deposit rates.
Besides cutting input interest rates to lower lending rates, commercial banks have entered the race to attract cheap capital from demand deposits. The interest rate of demand deposits is much lower than that of time deposits, only around 0.2 percent per annum. If the ratio of demand deposits is higher, it will help banks to increase their net interest margins and have more conditions to compete in terms of lending interest rates in the market.
To attract demand deposits, commercial banks have added more services and utilities to serve demand deposit customers. In the market, there are some commercial banks with the CASA ratio exceeding 45 percent, like Techcombank. Some other banks also have a high CASA ratio, including MBBank with 39 percent and Vietcombank with 30 percent. Many other commercial banks are trying to achieve increasing CASA ratio levels to reduce capital costs.
From the perspective of State management, SBV Governor Nguyen Thi Hong has asked commercial banks to build business plans in the direction of reducing profit targets in 2021 so as to reduce lending interest rates, especially for old loans, medium, and long-term loans. In HCMC, Mr. Nguyen Hoang Minh said that city-based commercial banks were trying to reduce lending interest rates to support enterprises. From the beginning of the year until now, the lending interest rate level has decreased by about 0.3-1 percentage point compared to the end of last year, depending on borrowers. Many banks have been implementing many solutions to boost capital flows to the market.
According to reports of securities companies, it is forecasted that at the end of the first quarter of this year, the credit of many banks grows quite positively. One of the measures evaluated to have positively supported credit growth is that besides proactively structuring loans to customers, banks have focused on stimulating credit demand by lowering lending interest rates or launching preferential credit packages. Specifically, Vietcombank simultaneously reduced lending rates for all existing loans and new loans of customers within three months.
According to the lender's calculation, the total outstanding loan that receives interest rate reduction is about VND350 trillion, so the profit that it shares with customers is about VND200 billion. BIDV has also deployed a short-term preferential credit package with a scale of up to VND10 trillion to support small and medium-sized import-export enterprises to overcome difficulties caused by the Covid-19 pandemic. For individual customers with demand to buy houses, cars, and consumer loans, BIDV launched a medium and long-term loan package with a scale of up to VND50 trillion, with preferential interest rates only from 7 percent per annum. HDBank is implementing a preferential credit package of up to VND5 trillion for small and medium-sized enterprises, with interest rates from 6.2 percent per annum.
According to many experts, the liquidity in March is forecasted to remain abundant, thanks to excellent deposit mobilization. Meanwhile, the central bank still maintains the orientation of cautiously loosening the interbank interest rates. These factors will facilitate banks to reduce lending rates for enterprises and people.
Cronyism a hindrance in small-medium enterprises
Private conglomerates in Vietnam have grown rapidly over the last decade, especially after a boom in the local real estate market following the country’s move towards global integration.
In essence, private companies have higher productivity rate than state-owned companies, yet in Vietnam, private companies have the lowest productivity rate than even state-owned or Foreign Direct Investment (FDI) companies.
Most large-scale private companies in Vietnam have only recently emerged on the top, mainly by focusing on real estate activities, and accumulating wealth from land ownership by exploiting close relationships with government officials and related agencies who reserve the right to distribute pieces of public land managed by the government. During the last few years, some large-scale companies diversified some of their business activities to lucrative areas such as manufacturing, energy, banking, trade, transport, healthcare, education and even some hi-tech fields.
The Vietnam White Book on Information and Communication Technology 2019, released in 2020, shows that the return on equity (ROE) ratio of private businesses in 2016 and 2017 were 4.4% and 6%, respectively. Their return on assets (ROA) ratios were 1.4% and 1.8%, respectively; and capital turnover or return on invested capital reached just 0.71 and 0.73, respectively. Although the average profit margin increased, the percentage of companies operating at a loss was between 40% and 50% during the years from 2011 until 2017.
Risks from loans have also been a big problem for private businesses, with their debt-to-capital ratios reaching 2.3 times in 2016 and 2017. The quality and performance of companies in terms of added value and labor productivity have been low and falling far below other neighboring countries. The manufacturing value added (MVA), and MVA per capita in Vietnam have been low in production and processing industries, and even in the export sector. Vietnam's MVA in 2016 reached USD 29.28 bn and per capita income was USD 310, which were much lower than China and ASEAN-6 countries.
The figures released by the General Statistics Office in 2018 indicate that workers in the private sector made VND 58 mn per person annually, compared with VND 248 mn earned by workers in FDI companies and VND 339 mn in state-owned enterprises (SOEs). This was primarily because private companies operate on a very small scale, and especially household businesses, which make up 90% of the private sector, participate mostly in simple activities like making traditional items, or providing commercial services for local consumers. They are small scale, lack resources and support, and are severely hampered by private businesses from increasing their productivity.
Vietnam's labor productivity is extremely low, compared with other countries in the region. Based on the buying power in 2011, Vietnam's labor productivity in 2017 was USD 10,232, just 7.2% of that in Singapore, 18.5% in Malaysia, 36.2% in Thailand, 43% in Indonesia and 55% in the Philippines. The difference in labor productivity between Vietnam and these countries is still increasing.
The differences in several aspects between private companies and state-owned and FDI businesses have their roots in the business environment with unfair competition among economic sectors. Though the Constitution, laws and resolutions introduced by the Party Committees have repeatedly stressed fairness for all economic sectors, the problem of discrimination and unfairness between most private companies and state-owned and FDI businesses has been static for the last 30 years, and still commonplace and serious.
SOEs belong to the economic sector with a pivotal role, that bonds them tightly to the state, which reserves the ultimate power in designing and enforcing laws, polices and plans for socio-economic development, and in holding and distributing the most important resources of the country. Though controlled and managed directly by several state agencies, SOEs are generally protected from competition with domestic and international private companies and have different privileges, access to various resources, and trading rights in highly profitable areas and projects.
This is also a reason why a few SOEs have become a huge burden to the entire economy because they have made losses and been in debt for ages, causing ineffective use of resources, increasing costs and prices of products they provide, and continue to take opportunities and valuable resources away from other businesses.
Additionally, the problem of group interests and crony businesses have become common in recent years, resulting in unfair competition between crony businesses and those without any close relationships with government officials. According to a report on the Provincial Competitiveness Index (PCI) jointly made and released by Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID) in 2018, upto 70% of companies believe that business resources like contracts and land have fallen into the hands of companies that have close ties with government officials or agencies. Access to information is also unfair, with 69% of companies saying that only special bonds can ensure access to reliable sources of information or documents from competent provincial agencies.
Under such unfair competition in a business environment, private enterprises face a different kind of pressure which severely hampers their growth. Their access to resources, trading rights and business opportunities are all seriously restricted or even taken away unfairly by preferred companies. They have to pay a higher price for different resources and products because the interest groups control the market, especially with regards to land, premises for production, and business activities and transport, which then raises market prices and reduces their profits. Their profit margins are too small and unstable, making it more and more difficult for private companies to make further investments and hindering them from thinking big or making long-term plans for their sustainable development.
Such an oppressive environment has not encouraged cooperations to grow, but rather, it has caused separation and suspicion among different business sectors, and distrust among favored companies and ones discriminated against. An unfair business environment is also a favorable ground for corruption to grow, causing irreparable losses of resources and opportunities for any hope of the sustainable development of the country.
Adjusting to new energy methods in Ninh Thuan
The development of renewable energy is deemed necessary to generate benefits for all aspects of socioeconomic development. However, some unwelcome risks have yet to be solved, especially when it comes to citizens in the vicinity of huge wind turbines or solar panels in some Vietnamese environments.
Over the last few years, renewable energy has blossomed in the south-central province of Ninh Thuan, with wind turbines and solar rooftop panels found in nearly every locality. Energy has since become somewhat of a keyword in the province in addition to the sunshine, wind, and the poor-quality soil mixed with sand that usually dominates Ninh Thuan’s landscapes.
Along with the physical development, the lives of many local people have been enhanced in the wake of the emergence of these modern energy models.
Talking to VIR in his hometown of Phuoc Minh commune in Thuan Nam district, grocer Tran Van Sang said he received almost VND2 billion ($87,000) in compensation last year in return for over three hectares of agricultural land. The amount has since been spent on building a new two-storey house along with some modern equipment and even new bikes for all family members.
“Instead of feeding some cows or cultivating some plants, which could not generate enough money for us to improve our lives, we have received all this money which has enabled most of our dreams to come true. Now, I only run this shop to earn money for everyday expenses,” Sang said.
Across other roads, there are numerous newly-built houses with tall gates standing before huge mountains, and newly-bared plots of land which have already been handed over to investors. Pham Viet Khac, head of Quan The 1 Village, told VIR the land compensation price for renewable energy projects is currently around VND140-800 million ($6,000-35,000) per hectare in this province – a price which has been rising as each year goes by.
“In the 2000s we were paid only VND800,000 per hectare for a salt project from the local government. My house was the most beautiful in the village, but now it is mediocre compared to the newly-built ones thanks to renewable energy projects,” said Khac.
According to Ninh Thuan People’s Committee, as of the start of February around 37 solar power projects have been granted investment certificates at a total capacity of 2,576MW, including 32 projects put into commercial use; while 15 wind power projects have been granted certificates with a total capacity of over 766MW, including three for commercial use.
Amid the rapid development of the economy, demand for energy has inevitably been on the increase. While primary energy sources like coal, oil, and gas are limited, renewable energy is considered a suitable solution for Vietnam and every country to fill the lack of energy.
In this country, Ninh Thuan is the locality with the lowest annual rainfall in the country, while sunshine and wind are plentiful enough to develop renewable energy.
The total sunshine time is around 2,600-2,800 hours in the province every year, equal to 200 sunny days. The average total heat radiation is also high at 5.2kWh per square metre, higher than in both northern provinces (4kWh per sq.m) and southern provinces (5kWh per sq.m). Meanwhile, wind speed there is also fastest across the country at 7.5m per second on average, while the country’s average of wind speed is six metres per second only.
“Utilising the advantages of natural conditions, Ninh Thuan has planned to become the centre of renewable energy for the country, enabling this industry to become a major economic sector and a driving force for the breakthrough and socioeconomic development of the province,” said Ninh Thuan People’s Committee Chairman Tran Quoc Nam.
He confirmed that the potential of developing renewables and mobilising investment into the province in the draft of the coastal wind power development plan in Ninh Thuan during 2021-2030, with vision to 2045, and solar power plan in the 2016-2020 period, with vision towards 2030, submitted to the Ministry of Industry and Trade in January.
At present, five locations on an area of over 21,400ha are in the plan for wind energy with the total capacity of 1,429MW or 2,000MW (if equipped with the most cutting-edge technologies), while total capacity may be 4,380MW by 2045. And total capacity of solar power could rise to around 8,180MW by 2030.
“Renewable energy has been contributing remarkably to the economic restructure of the province, raising industrial production and especially enabling Ninh Thuan to be in the top five highest-growth localities over the last five years,” Nam said, highlighting the contribution of renewable energy.
In addition to practical benefits that renewable energy generates to improve transport infrastructure, use huge areas of wasteland, and reduce greenhouse gas emissions, the speedy and alluring development of renewable energy projects has nevertheless raised some concerns among the people who know the local environment best.
Clearing all plants and weeds on mountains and other land creates bare hills that facilitate dangerous rainfall. In last November, heavy rains over a few days flooded around 1,000 houses in Ninh Thuan and destroyed 500ha of rice and other plants in districts such as Thuan Bac, Ninh Hai, Thuan Nam, and Bac Ai.
“My house, even next to the National Highway No.1, was immersed in almost a metre of floodwater,” said Khac at Quan The 1 Village. “I have lived here for more than 70 years and have never seen such an incident like this.”
Nguyen Ngoc Huy, an expert from non-governmental organisation Oxfam, explained that millions of solar panels in Ninh Thuan are tilted in the same direction, causing flow concentration. “The sewer system is quite narrow and investors may not pay enough attention to the drainage system. Flow concentration can make a small flood in the province even through only light rain,” said Huy.
Last October one of Vietnam’s biggest renewable energy developers, Trung Nam Group, launched the largest solar farm in Southeast Asia in Thuan Nam district, after only three months of construction and installing 1.4 million panels. Additionally, the construction of these solar farms has caused issues for locals in the form of spoiled roads, broken sewerage systems, and noise and dust pollution.
“The investor promised to rebuild or fix the road but they have yet to do so,” said one local resident living next to the project. “I have filed a lawsuit to local government but there was no response. It has been five months since the solar farm was put into operation, yet we still live here with broken sewers and damaged roads.”
Before the Trung Nam project, BIM Energy in partnership with the Philippines’ AC Energy and France’s Bouygues Energies & Services also launched one of Southeast Asia’s largest solar farms in mid-2019 with a total capacity of 300-330MW in Thuan Nam district.
Dozens of solar farms covering areas of around 100ha are already deployed in the province, including Re Sun Seap farm in Ninh Son district, Trung Nam Group in Thuan Bac district, Singapore’s Sinenergy in Ninh Phuoc district, and Vietnam Electrical Equipment JSC alongside Gelex in Thuan Nam district.
Big space for private businesses over the next 10 years
Vietnam will continue adjusting and improving its business climate with a new socioeconomic development strategy for the next 10 years, in which full protection of business and investment activities will be ensured.
The recent 13th National Party Congress adopted a hallmark political report, which sets out the overall goals for the country's development orientations until 2045. Specifically, the country will become a developing nation with a modern-oriented industrial sector, exceeding the level of lower middle income by 2025.
In 2030 when the country will be celebrating the centenary of the Party, it will become a modern industrial developing nation, with a high income level. By 2045, when Vietnam will be celebrating the centenary of its independence, it will have become a developed nation with a high income level.
The 13th National Party Congress also adopted the Party Central Committee's wrap-up report of the 10-year Socioeconomic Development Strategy (2011-2020) and the building of the next 10-year Socioeconomic Development Strategy (2021-2030), shaping Vietnam's future development path over the next 10 years.
The country has set the target that the economy will grow 6.5-7 percent per year between 2021-2025. By 2025, the per capita GDP will be around US$4,700 - 5,000, with the ratio of the total-factor productivity (TFP) in the economy's growth at 45%. TFP is a measure of the efficiency of all input into a production process. Increases in TFP usually result from technological innovation or improvement. Also, the rate of urbanisation will reach 45%, and the proportion of manufacturing and processing in GDP will hit more than 25%, while that of the digital economy in GDP will be about 20%.
Under the new strategy, Vietnam is set to grow about 7% a year in the 2021-2030 period. Among the measures to be implemented, Vietnam will ensure full rights for enterprises to conduct business and investment activities, and will also effectively ultilise all national resources based on market principles. This would mean that the private economic sector will have a bigger space to perform and the state will narrow down its role as a trader and increase its role as a facilitator for the market to operate in an effective manner.
"Enterprises' rights and safety will be ensured in conducting business, while all resources will be effectively mobilised, allocated, and utilised based on market principles. Legal frameworks have to be bettered and implemented on a pilot basis, firstly focusing on the law regarding enterprises, startups, intellectual property, trade, and investment so as to enable the national digital transformation and development of new products, services, economic models, and digital economy under the market principles," the report stated.
According to the report, the state will perform its function as the builder of strategy planning, mechanisms, and policies, and distributor of national resources under the market mechanisms. Enterprises' and people's rights to possess legal assets and their freedom in doing business and carrying out contracts have to be ensured in accordance with the law.
The private economic sector will also be encouraged to develop across all sectors not banned by the law, especially in the sectors of production and business, and services. It will also be supported to grow strong companies and groups with high competitiveness. In addition, it will also be encouraged to forge co-operation with state-owned enterprises, co-operatives, and business households, and to develop joint stock companies engaged in by all entities in the society, especially labourers.
Meanwhile, foreign-invested enterprises are considered an important part of the national economy, and will play a major role in mobilising investment capital sources, technology, modern management methods, and the expansion of export markets.
Two months ago, Prime Minister Nguyen Xuan Phuc released a letter to the Vietnamese business community.
He underscored the significant contributions of Vietnamese businesses to the country's socioeconomic development achievements over the past 35 years of economic reform.
"In the new period, with both massive opportunities and challenges, Vietnamese businesses and entrepreneurs need to enhance patriotism, national pride and the aspiration to rise up, while continuing to make great strides and undertake proactive reform," PM Phuc said.
He expected the business community will further bolster its social responsibility by supporting the disadvantaged, protecting the environment, complying with the law and saying no to corruption and irregularities in business activities.
"The Party and the state will continue accelerating administrative reforms as steadfast assistance for Vietnamese enterprises' sustainable development," the prime minister stressed.
Recently he called for the consolidation of confidence among people and enterprises, via a healthy, fair and transparent business environment.
"We will continue offering the best conditions, space, resources, and opportunities to the private economic sector to develop further, with the keywords of 'creating equality', 'be protected', 'be encouraged', and 'offering opportunities'," he stressed.
According to him, 'creating equality' means the private sector is to be equally treated before the law and in competition and the allocation of resources with the other economic sectors.
Meanwhile, 'be protected' means private enterprises' assets will be protected, with freedom in business given to them under the law.
'Be encouraged' means private enterprises, especially those with a sense of social responsibility, are to be extolled by the state, while 'offering opportunities' means that private enterprises are to be offered opportunities in access to resources, technologies, and markets with lower costs.
According to the Party Central Committee, in the time to come, Vietnam will continue conducting "drastic and effective reform of administrative procedures, with the removal of all impediments to the freedom to conduct business", and "healthy, fair, and transparent competition will be ensured."
It is expected that by 2030, Vietnam's business climate will be ranked in the world's top 30 nations with the best corporate environment, and the Vietnamese private sector will be strongly developed quantitatively and qualitatively as an impetus for national economic development.
According to the Ministry of Planning and Investment, the number of active Vietnamese private enterprises increased from about 324,700 in 2011 to 346,800 in 2012, 373,200 in 2013, 402,300 in 2014, 442,500 in 2015, 477,800 in 2016, 561,000 in 2017, and about nearly 800,000 at the end of last year.
In 2020, as many as 135,000 enterprises were newly established with a total registered capital of about US$97.2 billion, down 2.3% in the number of enterprises but up 29.2% in capital, as compared to the previous year. In addition, operating businesses also raised their levels of capital by an additional US$145.3 billion. Furthermore, more than 44,100 firms resumed operation, representing a 11.9% increase as compared to 2019.
Ha Tinh to have huge wind farm operational late this year
The north-central province of Ha Tinh has given the green light for the HBRE Ha Tinh wind power plant project with its investment capital exceeding VND4.6 trillion and its capacity reaching 120 megawatts.
The Office of the provincial People’s Committee on March 22 said that the province had recently issued a decision approving the environmental impact assessment report of HBRE Ha Tinh Wind Power JSC, the project’s developer.
Covering an area of over 30 hectares in the province’s Ky Anh Town and Ky Anh District, the wind farm will have 25 turbines capable of generating over 350 gigawatt-hours of electricity per year.
According to the developer, the construction of the project was scheduled to begin early next month and it will be put into operation in early November this year.
The company has signed a feed-in tariff agreement with the State-run utility, Vietnam Electricity Group.
SOEs chosen to lead sector growth
The Ministry of Planning and investment has named the key players for a proposed pilot project on reinforcing 17 state-owned juggernauts to break a path and guide Vietnamese companies into a tech-enhanced new era.
The Ministry of Planning and Investment (MPI) plans to include seven substantial state-owned enterprises (SOEs) with a combined total asset value of over VND20 trillion ($869.57 million) for the pilot project on positioning a handful of giant SOEs to fuel the growth of other stakeholders in their respective sectors.
According to the initial proposal, three high-tech groups (Viettel, VNPT, and MobiFone), two energy groups (Electricity of Vietnam and PetroVietnam), the seaport and logistics operator Saigon Newport Corporation, and commercial banking giant Vietcombank were picked for the initiative.
These seven fit the bill in terms of having registered capital of over VND1.8 trillion ($78.26 million); having at least 30 per cent share of their prospective markets with the potential to expand this to a controlling stake; having an efficient corporate governance model; and applying high technology throughout their operations. Besides that, they operate in fields with high spillover effects.
While the pilot will feature these SOEs, the plan is to have a total of 17 groups and corporations once the programme is fully underway.
Developing the SOE ecosystem was set as a crucial task by the closing resolution of the recent 13th National Party Congress, which outlined the country’s main development directions.
MPI Minister Nguyen Chi Dung emphasised that throughout their participation in the project, “selected SOEs must become true leaders, guiding others. Each of them must become an innovation centre from which others can learn. Besides that, they will have to build an ecosystem and a value chain to support private enterprises.”
Le Manh Hung, director of the MPI’s Enterprises Development Agency, said that the target of the leadership and guidance to be offered by these SOEs will be to create closer links with the private sector, make way for new sectors, improve technology adoption, and promote domestic innovation.
The pilot project outlines orientations for each participating SOE to ensure they can fulfil the role meant for them.
Notably, plans for PetroVietnam include bolstering its already impressive financial and technological potential as well as competitiveness and its capacity to promote international integration. At the same time, within 2025-2030, PetroVietnam will take up a majority share in the domestic oil and gas market and achieve a stature on par with leading oil and gas groups from Thailand and Malaysia.
Meanwhile, Viettel will be a dynamic and modern economic group and set out to become a global group – while remaining a key player in Vietnam’s defence development.
MobiFone will reinforce its position as a key national telecommunications operator while deploying new technologies to develop mobile services, focusing on data, integrated, and value-added services.
“The proposal also requests policies to facilitate these SOEs by encouraging the development of digital services, the establishment of a technology development fund for Viettel, and mechanisms to support port clusters. In the finance-banking sector, there will be mechanisms to promote investment banking and set up investment funds, including venture capital funds,” Hung said.
Nguyen Quang Dong, director of the Institute for Policy Studies and Media Development, said that prioritising the development of the defence industry and promoting Viettel’s role is reasonable. However, he called for caution in selecting enterprises in the sectors of energy, telecommunications, banking, and logistics. Recalling the previous failure of large-scale state-owned groups like Vinalines or Vinashin, he stressed that SOEs can only develop with competition.
“These guides will have to be clear on their role as the builders of the foundations and infrastructure that will allow the development of other stakeholders in the economy. Their focus cannot be on simply dominating the market,” Dong said. “The development of SOEs will have to result in the optimisation of the use of state power. Thus, the MPI proposal needs a clause urging SOEs to develop basic infrastructure to promote the development of digital technology.”
Dong also asked why no agricultural SOE is included in the proposed pilot, despite this sector being a particular strength of Vietnam that is also vulnerable to fluctuations.
Reacting to feedback, Minister Dung said that the MPI will continue carefully studying the pilot project proposal before submitting it to the prime minister for approval soon.
AEON Vietnam to build new shopping mall in Bac Ninh province
AEON Vietnam will kick off construction of a new shopping mall worth some 190 million USD in the northern province of Bac Ninh next year, per an MoU on cooperation signed between the company and local authorities on March 26.
Bac Ninh will facilitate AEON in conducting research and will prepare the related paperwork for the establishment of the new mall.
Once in operation, it is expected to create about 3,000 jobs and put local farm produce and traditional products on shelves.
Speaking at the signing ceremony, Vice Chairman of the provincial People’s Committee Vuong Quoc Tuan highlighted the importance of the project and pledged maximum support from local authorities.
AEON’s investment will be a driving force for Bac Ninh province to boost its investment attraction in trade and services, he said.
AEON Vietnam General Director Nakagawa Tetsuyuki vowed to soon begin construction and contribute to improvements in the quality of the local urban area and meet residents’ demands./.
Nghi Son 2 Thermal Power Plant connected with national electricty grid
The first phase of a 500kV transmission line project connecting the Nghi Son 2 Thermal Power Plant with the national electricity grid was put into operation on March 26.
Invested in by the National Power Transmission Corporation (EVNNPT), a subsidiary of the Vietnam Electricity (EVN) Group), and managed by the Central Power Projects Management Board (CPMB), the project was launched on April 9, 2018 and spans the central provinces of Thanh Hoa and Nghe An.
It consists of two 500kV dual-circuit power lines, at a length of 39.6km, with 219 post positions.
Approved by the Prime Minister in March 2016, the project aims to transmit power from the Nghi Son 2 BOT Thermal Power Plant to the national electricity grid, thus strengthening the stability and operational safety of the northern power grid and the national grid in general.
The CPMB is working closely with local administrations in Thanh Hoa and Nghe An provinces to settle issues surrounding site clearance compensation, and will complete the entire project in May./.
High demands push Vietnamese rice's prices up: Business Recorder
Vietnam’s rice export prices hit a more than nine-year high this week as fresh orders trickled in, while rates for the Indian variety held near a one-month peak on healthy demand from buyers in other Asian countries and Africa, according to an article published on Pakistan’s news website Business Recorder.
The article noted that Vietnam’s 5 percent broken rice prices rose to 515-520 USD per tonne on March 25, their highest since December 2011, from 510-515 USD in the previous week.
“Demand is picking up and we’re seeing more ships docking at Ho Chi Minh City port for rice loading,” a trader was quoted as saying, adding that: “Prices are expected to stay high as global demand for the grain is still strong amid the coronavirus pandemic.”
Traders said on March 24 that the Vietnam Southern Food Corp had won a contract to export 50,000 tonnes of 5 percent broken rice to Bangladesh, which is traditionally the world’s third-biggest rice producer but has turned to imports after repeated floods.
A food ministry official in Bangladesh said the country had approved the purchase of 100,000 tonnes of rice, 50,000 tonnes each from India and Vietnam.
In India, the top rice exporter, prices for the 5 percent broken parboiled variety were unchanged at their highest since mid-February, at 398-403 USD per tone, it said.
Thailand’s benchmark 5 percent broken rice was offered at 500-518 USD a tonne, versus 505-513 USD last week. Some traders attributed the price change to a fluctuation in the exchange rate. The baht has dipped 2.9 percent versus the US dollar since the start of the month./.
Source: VNA/VNS/VOV/VIR/SGT/Nhan Dan/Hanoitimes