VIETNAM'S BUSINESS NEWS HEADLINES OCTOBER 19
Vietnam receives over 3.68 million foreign tourists in nine months
|Tourists at Linh Ung Pagoda in Da Nang city (Photo: VNA)|
Vietnam welcomed more than 3.68 million foreign visitors in the first nine months of this year, a year-on-year slump of 67.4 percent, heard a press conference held by the Ministry of Culture, Sports and Tourism in Hanoi on October 14.
There were 37.5 million domestic tourists and 19.2 percent of them stayed overnight. In the period, earnings from tourism stood at 233 trillion VND (10.05 billion USD).
The Vietnam National Administration of Tourism said for the sector to recover, it is planning a stimulus in the remaining months of the year focusing on safe and attractive domestic tourism.
Promotional packages and policies will be launched in this year’s last quarter and the next to attract holidaymakers. Some localities see an increase in bookings in November and December, such as Ha Long, Sa Pa, Da Lat, Da Nang and HCM City.
Also at the conference, the ministry said it has submitted a dossier to bring Dong Ho folk painting into UNESCO’s list of intangible cultural heritage in need of urgent safeguarding, and been working on another seeking recognition for Xoe Thai dance in the list of intangible cultural heritage of humanity./.
Vietnam Growth Investment Fund established
The SSIAM Asset Management Company Limited (SSIAM) and its partners, the Charoen Pokphand Group’s CT Bright (CTB) and Japan’s Mercuria Investment Co. Ltd (MIC), held an online signing ceremony on October 14 to establish the Vietnam Growth Investment Fund (VGIF).
The VGIF is a member fund investing in private equity companies with an estimated size of 150 million USD, targeting Vietnamese sectors of strength such as food and beverages, retail, pharmaceuticals, health care, electricity, and energy and water supply, among others.
Its objectives focus on three main points: companies with competitive advantages and the potential to grow rapidly in the years to come; companies with listing potential or equitised State-owned enterprises with attractive valuations; and companies listed via PIPEs or spin-offs of listed group subsidiaries.
Apart from capital contributions, SSIAM, CTB, and MIC will also work closely together on matters such as fund management, capital mobilisation, enterprise assessment, and investment decision-making.
The SSIAM is responsible for seeking, approaching, and negotiating investment opportunities in promising firms in Vietnam.
CTB has an investment portfolio worth over 10 billion USD and works closely with major partners such as Ping-An, Itochu, and CITIC. It has years of experience in strategic coordination and fueling growth for beneficiary firms.
MIC, with support from the Development Bank of Japan, also possesses strong financial capacity, a global network, and financial management capacity in many markets, especially ASEAN and China. It is also the largest fund management company, with combined assets of 2 billion USD.
SSIAM General Director Le Thi Le Hang said 2020 has been memorable for SSIAM, with the establishment of new funds such as the ETF SSIAM VNFIN LEAD, the ETF SSIAM VN30, and now the VGIF.
She expressed a belief that with Vietnam’s developing economy, various investment needs, and a long-term vision, VGIF will achieve success in the near future.
Hanoi earmarks 8.63 million USD for development of key industrial products
Hanoi has issued an implementation plan for a project to develop key industrial products in the 2021-2025 period, with an estimated cost of 200 billion VND (8.63 million USD).
It has set a target of having 150 to 180 products recognised as key industrial ones by 2025, the Hanoi Department of Industry and Trade has said.
Companies specialising in key industrial products are expected to make up half of the capital’s total industrial production value and 25 percent of its export revenue by that time.
Some 200 businesses will enjoy incentives from the city each year.
Their brands will be promoted in domestic and foreign markets and the companies encouraged to apply advanced technology and equipment in a bid to raise capacity and international integration.
By 2025, Hanoi will have set up large-scale industrial product manufacturers boasting competitiveness in the foreign arena and roles in global supply chains. They are also to act as a driving force for the city’s small- and medium-sized enterprises in the same field.
To realise targets set, the capital is due to select suitable key products and bolster trade promotions.
Local authorities will also exert efforts to improve the investment climate for major industrial firms and provide support in the application of science and technology and human resources development.
Vietnam HR Awards 2020 Gala to take place next month
The award ceremony of the Vietnam HR Awards 2020 Gala will bring the perspectives of more than 10 C-suite speakers in dealing with the COVID-19 pandemic.
The Vietnam HR Awards Gala 2020 Gala will take place on November 25, at GEM Centre.
For the first time at the event, attendees will have the opportunity to learn from real case studies and practical lessons from companies about their responsive HR strategies in 2020. The award-winning businesses will share their success stories in using HR strategies to confront the COVID-19 crisis.
Themed 'Win the unplanned', the event aims to bring thought-provoking discussions between the Government and businesses.
The discussions will focus on Vietnam's measures in response to the pandemic, lessons learned about the collaboration between policymakers and enterprises, exemplary measures from other ASEAN countries, the new normal of business mission towards its employees and communities and more.
The awards are organised by the Lao dong va Xa Hoi (Labour and Social Affairs) newspaper and Talentnet Corporation, with the sponsorship of SeaBank, AA Corporation, Phuc Khang, Adamos, KMS Solutions, VinaCapital and Minh Long.
Vietnam Airlines, Pacific Airlines apply new BFM
Vietnam Airlines and Pacific Airlines have just launched a new Branded Fare Maxtrix (BFM) with notable changes related to the interests of passengers depending on each price group.
Accordingly, the most outstanding feature is that the number of booking classes have been strengthened, aiming to meet the needs of public affairs and organisational customers.
A representative of Vietnam Airlines said that, in the aviation sector, BFM is a set of policies that help passengers know the benefits corresponding to their fare rates.
Vietnam Airlines currently has seven price groups corresponding to three service sections – Economy, Special Economy and Business.
Pacific Airlines has three price groups corresponding to one service section, which is Economy class. Each price group has different prices and benefits to suit the diverse needs of passengers.
According to the newly applied BFM, Vietnam Airlines and Pacific Airlines carry out the following price groups for each service section.
Economy class includes economical, standard and flexible price groups. Special Economy class contains standard and flexible rates. Business class has standard and flexible rates.
In general, the newly issued BFM of Vietnam Airlines and Pacific Airlines has a simple, easy-to-remember, easy-to-understand design and clear information about the interests of passengers according to each price group.
The simplification and unification of the BFM set will allow customers to choose the type of ticket that best suits their needs and affordability. This is also the general trend of international airlines.
Cambodia’s Sihanoukville int’l airport’s runway expansion completed
Cambodia Airports, the developer and operator of the country’s three international airports, has said it had completed the runway expansion and renovation at Sihanouk International Airport as part of its post-COVID-19 era business expansion plans.
It extended the 2,500m runway by 800m, reinforced the current airstrip and installed an LED airfield lighting system to reduce its carbon footprint, The Phnom Penh Post newspaper quoted the company’s statement as saying.
The runway is now a 58 million USD investment programme and is scheduled to be commissioned in the last quarter of this year, the company said.
The project was launched in July 2018 and aims at accommodating larger aircraft such as B-777-300ER or A-350-1000 operating long-haul direct flights to/from Sihanouk International Airport, according to Cambodia Airports.
Its CEO Alain Brun said upgrading the runway was crucial to enable more direct long-haul flights into the southwestern coastal province of Preah Sihanouk, where Sihanoukville is located.
Cambodia Airports communications and public relations director Khek Norinda said the runway will be operational in the weeks ahead.
In September, the airport handled about 20 weekly inbound and outbound flights, a more than 95 percent nosedive compared to the same period last year.
The scheduled flights connect the airport to Phnom Penh and Siem Reap town of Cambodia, and some Chinese cities.
According to Cambodia Airports, the airport has experienced triple digit growth nearly every year with annual passenger traffic soaring from 94,000 to more than 1.6 million between 2015 and last year. The number of passengers grew by a whopping 158 percent last year from 2018.
In the last five years, Sihanoukville has become a destination in the making with its deep-sea port and pristine beaches, attracting both business investors and tourists.
Indonesia’s GDP growth to contract 1.5 percent in 2020: IMF
The International Monetary Fund (IMF) has predicted that Indonesia’s GDP growth may contract by 1.5 percent in 2020 rather than 0.3 percent as it initially forecasted in June this year due to impacts of COVID-19 pandemic.
In its October update of the World Economic Outlook that was released on October 13, the IMF noted that the Indonesian economy remains unstable due to the spreading of the pandemic, which has posed adverse impacts on many sectors, including tourism.
All emerging market and developing economy regions are expected to contract this year, including notably emerging Asia, where large economies, such as India and Indonesia, continue to try to bring the pandemic under control, said the report.
Indonesia has been struggling to contain the outbreak in the country as COVID-19 cases reached 340,622 with more than 12,000 deaths as of October 13. The country has been adding around 3,000 to 4,000 cases daily since September 19.
Indonesia’s GDP was down 5.32 percent year-on-year in the second quarter due to falling household spending and investment, with economists and government officials projecting another contraction in the third quarter, which would mark a recession.
The global economy, meanwhile, is expected to shrink by 4.4 percent this year, a less severe contraction compared to the IMF’s previous estimate of 4.9 percent, due to better-than-expected second-quarter GDP data in countries where activity began to improve after lockdowns and signs of rapid recovery in the third quarter.
The pandemic will reverse the progress made since the 1990s in reducing global poverty and will increase inequality, as the IMF expects nearly 90 million people to fall into poverty this year, according to IMF economic counsellor Gita Gopinath.
The IMF expects the global economy to rebound and grow by 5.2 percent in 2021, while Indonesia’s economy is expected to expand by 6.1 percent.
According to Indonesian Finance Ministry’s Fiscal Policy Agency director for state budget policy, Ubaidi Socheh Hamidi, the Indonesian government’s efforts to contain the pandemic and extended fiscal support will help boost economic growth to 5 percent in 2021./.
Vietnam’s COVID-19 control fuels economic growth: expert
Vietnam’s containing of the COVID-19 pandemic allowed quick reopening of local businesses, and the country is now expected to be the world’s fastest growing economy in 2020, said Ruchir Sharma, the chief global strategist at Morgan Stanley Investment Management.
Sharma made the statement in his article, titled “Is Vietnam the Next ‘Asian Miracle’?” published by the New York Times on October 13.
According to the article, within days following China’s announcement its first COVID-19 case, Vietnam mobilised different resources to stop the spread of the coronavirus. Rapid isolation of outbreaks has kept Vietnam’s death rate among the four lowest in the world, it said.
While many nations are suffering enormous economic contractions and running to the International Monetary Fund for financial rescues, Vietnam is growing at a 3 percent annual pace. Its growth is driven by a record trade surplus, despite the collapse in global trade.
The author noted during their boom years, the original Asian miracles — first Japan, then Taiwan and the Republic of Korea, and most recently China — produced annual export growth close to 20 percent, which were nearly double the average for low- or middle-income nations at the time. Vietnam has sustained a similar pace for three decades. Even as global trade slumped in the 2010s, Vietnam’s exports grew 16 percent a year, by far the fastest rate in the world, and three times the emerging-world average.
He said Vietnam devotes its resources to exports, building roads and ports to get goods overseas and building schools to educate workers, adding that the Vietnamese government annually invests about 8 percent of GDP each year on new building projects.
According to the article, over the last five years, foreign direct investment has averaged more than 6 percent of Vietnam’s GDP, the highest rate of any emerging country. Most of it goes to building manufacturing plants and related infrastructure, and most of it now comes from Asian countries, including the Republic of Korea, Japan and China.
Sharma considered Vietnam a favourite destination for export manufacturers. Average annual per capita income in Vietnam has quintupled since the late 1980s to nearly 3,000 USD per person. Tech, which surpassed garment and textiles to become Vietnam’s leading export in 2015, accounts for most of the country’s record trade surplus this year.
He also highlighted that in a protectionist era, Vietnam is a trend-bending by signing more than a dozen free trade agreements, including a recent landmark deal with the European Union.
The author concluded the article by saying: “Vietnam looks like a miracle from a bygone era, exporting its way to prosperity.”/.
Disbursement of public investment sourced from foreign borrowings still slow
The disbursement of capital sourced from the central budget for public investment purposes had reached 29 percent of the annual plan as of September 30, according to Truong Hung Long, Director of the Department of Debt Management and External Finance at the Ministry of Finance.
The disbursement rate in September rose 8 percent compared to August, Long told a meeting on October 14 in Hanoi between the ministry and localities on the disbursement of public investment sourced from the Government’s foreign borrowings in the first nine months of 2020.
The amount of capital allocated to specific projects and updated on the Treasury And Budget Management Information System (Tabmis) by localities had reached 97 percent of the estimate as of the end of September, up 6.6 percent compared to August.
The amount localities requested to return to the central budget represented 11.73 percent of the estimate, he said.
According to Long, disbursement in September improved significantly against August but is still short of the annual estimate.
He noted that when excluding the amount of capital that localities asked to return, the disbursement of capital sourced from the central budget for public investment purposes has reached only 32.43 percent of the annual target with just four months of the year remaining.
Meanwhile, the amount paid in advance without the submission of invoices has fallen over the months, while actual disbursement has been on the rise, and the average time the funds were spent in advance was shortened from seven months to three or four months. This contributed to reducing the amount of capital spent on paying interest, while speeding up the disbursement process, he said.
A representative from HCM City said that, as of September 30, the city had disbursed about 1.5 trillion VND, or 29.5 percent of the target. It also disbursed 4.8 trillion VND in re-borrowed capital, or 46 percent of the target. Combined, the city reached 40.86 percent of the target. For the year as a whole, it is likely to disburse 8 trillion VND, the representative said.
The impact of COVID-19 was also cited by the representative as being behind the slow disbursement, along with the slow adjustment of investment policies and site clearance.
The Ministry of Finance has urged localities to promptly submit receipts for spent amounts, while working closely with project management boards to update disbursement figures./.
Reforms of checks on imported products would create large room for growth: minister
Reforms of checks on imported products will help improve the business climate while reducing time and costs, which will give significant room for growth, Minister and Chairman of the Government Office Mai Tien Dung has said.
Dung was speaking at the Government Office’s meeting on October 13 to discuss the draft project about reforms of quality and food safety control on imported products following the proposal of the Ministry of Finance.
The minister said there are barriers in procedures for importing products, which is time-consuming and pushing up costs, adding that the project aims to tackle these problems and create a favourable business environment.
The World Bank’s Doing Business 2020 report announced in October last year revealed Vietnam's ranking for the ease of trading across borders dropped four spots from 100th to 104th out of 190 economies while the ease of doing business fell one spot from 69th to 70th.
Detailed measures must be raised to improve ease of trading across borders as well as the business climate and national competitiveness, especially in the context that the Vietnamese Government set the targets of simplifying and cutting at least 20 percent of business regulations and slashing at least 20 percent of compliance costs, Dung said.
“If we do well with reforms on checks on imported products, it will create large room for growth," the minister said.
Deputy Minister of Finance Vu Thi Mai said reforms are being carried out but more drastic measures are needed to create breakthroughs.
Specialised checks on imports remain a burden on business, which increases time spent on customs clearance and undermines national competitiveness in trading across borders, she said.
Mai said the project aims to cut time and costs and create favourable conditions for business, protect the rights of businesses and consumers and improve efficiency in the management of imported products.
The project will focus on reforms which will make customs the focal point for quality and food safety control on imported products.
The finance ministry estimated that the reformed model will help reduce the number of declarations for quality and food safety control per year by about 54.4 percent and help save 2.4 million working days, equivalent to 881 billion VND (38 million USD).
A representative from the Ministry of Industry and Trade said the project needs to clarify the roles of other ministries in carrying out specialised checks and post-clearance checks to have the most appropriate reforms.
Dung also asked ministries to hasten reforms to remove inconsistencies and overlaps which are burdening businesses.
During the past four years, 3,893 out of 6,191 business conditions were removed or simplified, together with removing 6,776 out of 9,926 product lines subjected to specialised checks for customs clearance. This helped save more than 18 million working days, equivalent to more than 6.3 trillion VND.
Singapore’s GDP contracts by 7 percent in Q3
Based on advance estimates for the third quarter of 2020, the Singapore economy expanded by 7.9 percent on a quarter-on-quarter seasonally-adjusted basis, rebounding from the 13.2 percent contraction in the preceding quarter.
On a year-on-year basis, the economy contracted by 7 percent, an improvement from the 13.3 percent contraction in the second quarter, according to the Singaporean Ministry of Industry and Trade.
The improved performance of the Singapore economy in the third quarter came on the back of the phased re-opening of the economy following the Circuit Breaker that was implemented between April 7 and June 1 this year.
The manufacturing sector grew by 2 percent on a year-on-year basis in the third quarter, a reversal from the 0.8 percent contraction in the previous quarter. Growth of the sector was supported by output expansions in the electronics and precision engineering clusters, which were in turn driven by robust global demand for semiconductors and semiconductor manufacturing equipment.
Finance-insurance and information-communications sectors recorded steady growth during the quarter, the ministry said.
Meanwhile, the service sector contracted by 8 percent on a year-on-year basis in the third quarter, representing an improvement from the 13.6 percent decline in the previous quarter.
Within services, aviation- and tourism-related sectors like air transport and accommodation continued to see significant contractions, as global travel restrictions and sluggish travel demand brought air travel and visitor arrivals to a near complete standstill.
Other trade-related services sectors, such as wholesale trade, were also weighed down by weak external demand as major economies around the world continued to grapple with the COVID-19 pandemic.
Earlier, the ministry narrowed Singapore’s GDP growth forecast for 2020 to “-7.0 to -5.0 percent”, from “-7.0 to -4.0 percent”.
Singapore’s overall unemployment rate rose to 3.4 percent in August, climbing past the high of 3.3 percent recorded in September 2009 during the global financial crisis.
G-bonds valued at nearly 358 million USD mobilised at latest auction
Some 8.295 trillion VND (357.9 million USD) was mobilised for the State Treasury through a Government bond auction at the Hanoi Stock Exchange (HNX) on October 14.
The Treasury offered 10 trillion VND worth of G-bonds, including 3 trillion VND worth of 10-year bond, 4 trillion VND worth of 15-year bonds, 2 trillion VND of 20-year bonds, and 1 trillion VND of 30-year bonds.
It raised 3 trillion VND worth of 10-year bonds with an annual yield rate of 2.53 percent, down 0.22 percent from the auction on September 30.
A total of 3.35 trillion VND was mobilised from 15-year bonds with an annual interest rate of 2.7 percent, up 0.04 percent from the October 7 auction.
Bonds with 20-year maturity raised 945 billion VND with an annual interest rate of 3.25 percent, down 0.23 percent compared to the previous auction.
As many as 1 trillion VND was raised from 30-year bonds with an annual yield rate of 3.25 percent, equal to that of the auction a week earlier.
So far this year, the State Treasury has collected over 248.14 trillion VND from G-bond auctions at the HNX./.
Wood product makers told to take actions to optimise US market
Vietnam has enjoyed a surge in timber and wood product exports to the US this year, but businesses need to choose the right items to focus on in order to tap into this major market, insiders said.
The export of timber and forest products brought home some 8.97 billion USD in the first nine months of 2020, up 12 percent year on year. The revenue includes 8.38 billion USD worth of timber and wood products, rising 11.2 percent, according to the Vietnam Administration of Forestry under the Ministry of Agriculture and Rural Development.
Growth has been recorded in timber and wood product exports to most large markets like the US, China, the Republic of Korea, Canada, and Australia.
Notably, shipments to the US surpassed 4.19 billion USD in the first eight months, up 27.4 percent from a year earlier. This market accounted for 55.1 percent of total timber and wood product exports, representing a year-on-year increase of 7.2 percentage points, statistics show.
The Vietnam Timber and Forest Product Association (Vifores) pointed out that so far this year, while office and bedroom furniture exports have dropped compared to the same period last year, overseas shipments of kitchen and bathroom furniture have been on the rise.
Vifores Chairman Do Xuan Lap explained that items with strong export growth benefit from the US anti-dumping and anti-subsidy duties on the Chinese ones, which have encouraged US firms to switch to Vietnam to partly make up for supply shortages.
Nguyen Liem, Chairman of the Lam Viet JSC’s Board of Directors, said COVID-19 has given a boost to the wood industry, especially kitchen cupboard and bathroom cabinet sales as people spend more time staying at home amidst the pandemic and thus, have more demand for house repairs and furniture.
The wood industry of Vietnam now has a number of advantages in the US market, but risks are also relatively high since this is a big market with stringent actions against tax evasion and trade fraud, he said.
Timber and wood product exports are predicted to hit 12.5 billion USD this year thanks to the sharp rise in sales to the US and the peak export season that falls in the final months of the year.
Lap said kitchen cupboards and bathroom cabinets are the sector’s strategic products for the time ahead. They generated nearly 1 billion USD in export turnover between January and September, shooting up over 80 percent year on year.
The supply chains of these items were not disrupted during the peak of the COVID-19 outbreak, he added.
However, the Vifores Chairman held that businesses’ moves have yet to match one another’s, suggesting them fine-tune strategies and improve competitiveness to join in supply chains so as to export more to the US.
Instead of manufacturing many products at a time, they should focus on certain items in demand, Lap recommended.
Vifores is set to establish a sub-association for kitchen cupboards, bathroom cabinets and decorative planks in November with a view to forming a widespread network of producers of strategic commodities so supply for strategic markets./.
Japan to provide financial support for tech projects in Southeast Asia
The Japanese government will provide financial assistance for 23 tech-related cooperation projects between the country and Southeast Asian companies, the Yomiuri Shimbun of Japan reported on October 13.
Accordingly, the projects aim to address challenges such as agricultural productivity and medical quality faced by countries in Southeast Asia by utilizing the private sector.
The Yomiuri Shimbun said the Japanese government will announce the plan before Prime Minister Yoshihide Suga visits Vietnam and Indonesia in his first diplomatic trip from October 18-21.
As planned, Japan will provide a total of 500 million JPY (nearly 4.75 million USD) for the 23 projects in nine ASEAN member states.
Among the projects, Sojitz Corp. will provide pig farmers in Vietnam with an IT-based production management system. They can adjust the amount of feed and manage health conditions by analyzing the movement of pigs with a camera to improve product quality.
In Cambodia, Toyota Tsusho Corp. will team up with Grab, a company that operates car-hailing services throughout Southeast Asia, offering services combining sightseeing and various modes of transportation, including buses and taxis.
In Thailand, Hitachi Co., Ltd will use artificial intelligence to analyze medical data at major local hospitals to improve medical services, such as personalized treatment and medication.
Meanwhile, Japanese and Indonesian auto parts makers will work together to enhance production efficiency.
Previously, Japan and ASEAN agreed to work together on putting digital services into practical use in order to enhance the sustainability of economic activities in the face of the spread of the Coronavirus SARS-CoV-2.
The assistance is hoped to help Japanese companies expand into new businesses in Southeast Asia and stimulate the creation of more digital services in Japan at the same time.
American newspaper details Vietnamese economic "miracle"
The New York Times published an article by Ruchir Sharma, the chief global strategist at Morgan Stanley Investment Management, on October 13 titled "Is Vietnam the Next ‘Asian Miracle?”.
Throughout the article Ruchir outlines that controlling the novel coronavirus (COVID-19) has allowed Vietnam to swiftly reopen its businesses and forecasts that the nation will have the fastest growing economy in the world this year.
Within days of China announcing its first COVID-19 case, Vietnam mobilised all resources in a bid to stop the spread of the disease. Indeed, the rapid isolation of outbreaks has served to keep the local death rate among the four lowest in the world.
While many places are suffering from enormous economic contractions and have been forced to ask the International Monetary Fund (IMF) for financial rescue packages, the nation is growing at an annual rate of 3%. Even more impressively, growth is being driven by a record trade surplus, despite global trade essentially collapsing, the article states.
Following World War II, “Asian miracles” grew their way out of poverty by opening up to trade and investment and becoming manufacturing export powerhouses. This first occurred with Japan, followed by Taiwan (China) and South Korea, with China being the most recently example.
During their boom years the original Asian miracles recorded annual export growth of close to 20%, nearly double the average for low- or middle-income nations at the time. Most notably, Vietnam has been able to sustain a similar pace for three decades.
Even with global trade slumping in the 2010s, Vietnamese exports grew by 16% a year, by far the fastest rate in the world and three times that of the emerging-world average.
According to the Ruchir, the country devotes resources to its exports by building roads and ports to get goods overseas, in addition to building schools to educate workers. The Government invests approximately 8% of GDP annually on new building projects and now enjoys a higher quality of infrastructure compared to other nations at a similar stage of their development.
Furthermore, it also helps see foreign money invested in similar sectors. Over the past five years, foreign direct investment (FDI) has averaged more than 6% of Vietnamese GDP, the highest rate of any emerging country. The majority of it goes to building manufacturing plants and other related infrastructure, with the majority of it coming from fellow Asian countries, including the Republic of Korea, Japan, and China.
“Vietnam has become a favourite destination for export manufacturers. Average annual per capita income in Vietnam has quintupled since the late 1980s to nearly $3,000 per person. Tech surpassed clothing and textiles as Vietnam’s leading export in 2015, and accounts for most of its record trade surplus this year,” the article notes.
As many countries tend to increase their trade protectionism, the nation has signed more than a dozen free trade agreements, including the European Union-Vietnam Free Trade Agreement (EVFTA).
“For now, Vietnam looks like a miracle from a bygone era, exporting its way to prosperity,” the author concludes.
Coffee exports enjoy major surge to EU market
Germany, the United States, and Italy continued to make up the three largest consumers of Vietnamese coffee during the first eight months of the year, with market shares making up 13.2%, 9.1%, and 8% respectively, according to figures released by the General Department of Vietnam Customs.
This comes as strong export growth was recorded in a number of markets, including Poland with a rise of 46.2%, Denmark with a boost of 32.9%, Cambodia up by 30%, and the Netherlands climbing by 28.5%.
In contrast, coffee exports to Mexico, Laos, and Hungary all endured a downward trajectory of 76%, 74.7%, and 74.2%, respectively.
According to preliminary statistics compiled by the General Department of Vietnam Customs, the nation shipped 100,188 tonnes of coffee abroad with a value of US$184.35 million in August, representing a decline of 8.9% in volume and 6.3% in turnover compared to July’s figures.
Throughout the eight-month period, the country exported over 1.15 million tonnes of coffee, earning US$1.97 billion in the process, with the average price standing at US$1,711 per tonne. This therefore represented a fall of over 2% in both volume and turnover, although marking a slight rise of 0.1% in terms of price compared to the same period from last year.
During the opening nine months of the year, coffee exports reached 1.25 million tonnes worth US$2.16 billion, an annual decrease of 1.4% in volume and 1% in turnover.
Binh Duong expects wave of billion-dollar foreign investment
Thanks to its advantages regarding security, infrastructure and labor source, Viet Nam has impressed billion-dollar businesses around the world, with a number of global giants planning to choose the country as the location for their production bases and headquarters after the COVID-19 pandemic.
In that context, hubs of industrial parks are now standing a chance of booming, of which the southern province of Binh Duong being deemed as an odds-on candidate.
Binh Duong becomes “top dog” as Viet Nam expects billion-dollar foreign investment
Binh Duong has maintained high economic growth and been considered the most modern industrial hub in the southern region with 48 industrial clusters and parks covering a total area of more than 10,000 hectares.
The province has always been among the leading recipients of foreign direct investment (FDI), only after Ho Chi Minh City and Ha Noi.
It is expected that by the end of 2020, FDI inflows in Binh Duong will reach over US$11 billion. Such a figure is still posing no sign of stopping as the locality is seizing a golden opportunity from the wave of shifting global supply chains thanks to its indisputable advantages.
Owning a modern infrastructure network and being located in the key economic triangle Ho Chi Minh City – Binh Duong – Dong Nai, Binh Duong is considered the focal point of all economic connections in the Southeastern region.
The large land fund and flat land terrain suitable for the construction of large-scale factories and export processing zones (EPZs) are also the province’s strengths.
In addition, with an abundant labor force supplied from more than 30 cities and provinces nationwide, as well as simple administrative procedures and numerous incentives for investors, Binh Duong has been becoming one of the “top dogs” in the face of opportunities to attract FDI capital after the disease.
Chance for Binh Duong’s real estate to boom
Attracting FDI capital is a direct lever that creates a quality supply source for real estate. This source of supply comes from a large number of senior experts and foreign experts with high to very high income, who are seen as a “quality” output for real estate projects in Binh Duong.
There is no need to wait until the global supply chains have been officially shifted into Viet Nam. Many real estate businesses have leapfrogged such a potential by landing the province with large-scale projects.
It can be said that in the danger from the complicated COVID-19 context, the chance has still been created under the name of FDI waves.
Alongside that fact, Binh Duong’s available advantages will be a lever to enable the real estate market in general and the apartment segment in particular in the southern province to boom, not only in 2020 but also in the following year.
Trung Nam kicks off Vietnam's largest solar farm project
Trung Nam Group has officially inaugurated the 450MW Trung Nam-Thuan Nam solar farm, the largest of its kind in the country, along with a 500kV transformer station and a 220/500kV transmission line in Ninh Thuan province.
Situated in the central coastal province of Ninh Thuan, the VND14 trillion($608.7 million) solar farm is connected to the national grid via a 17km (10.6 miles) transmission line, also built by Trung Nam. Covering an area of 557.1 hectares, the project also covers the 17km transmission lines of 500kV, 220kV stretching from Ninh Thuan to Binh Thuan province.
Trung Nam has started the project since May 2020 with a view to complete it in the fourth quarter of 2020. The company has finished site clearance in the first 45 days with over 8,000 employees, experts, and workers.
In fact, as of June 30, 2019, there were over 80 solar power plants with a total capacity of about 4,464MW approved and online. These projects were mainly in Ninh Thuan and Binh Thuan province. However, as many solar farms were put into operation in a short time, it has caused an overload on distribution and transmission networks in the two provinces. Many projects fail to connect with the national grid so they have to reduce power capacity by 30-35 per cent or up to 60 per cent to ensure stable electrical system operation. This has caused tremendous difficulties for investors to cover expenses to invest, operate, as well as expand their projects.
This issue reflects the asynchronous development of the national transmission infrastructure, making it difficult for localities and investors to catch up with the fast-paced development of solar power projects. Other challenges related to site clearance work and procedures also caused stagnation for solar power development in the province. In addition, while it only takes six months to complete solar power projects but it will take at least 3-5 years for developing transmission lines of 500kV and 220kV. Thus, Trung Nam has decided to invest in the national transmission grid to ensure sustainable development.
The solar farm started operating on September 29 and is expected to produce 1.2 billion kWh of electricity in the first year and more than 1 billion kWh from renewable sources every year. The solar farm, along with a 500kV transformer station and 220/500kV transmission line, is expected to help ease the overload of the national transmission grid as well as Vietnam's imminent power shortage.
“Vietnam’s solar and wind energy potential is immense and the country is on the right track to rapidly and effectively tap into this potential,” Trung Nam chief executive officer Nguyen Tam Tien said, noting that the project will contribute important capacity for regional power grids in Ninh Thuan and the south-central coast.
Japanese favouring a Vietnam+1 strategy
A series of Japanese businesses are forging partnerships with local vendors in an attempt to diversify business strategies.
Juki Vietnam Co., Ltd., specialised in manufacturing industrial sewing machines, is now seeking local outsourcing partners to ramp up production in Vietnam.
“We deal with a large number of companies and a wide range of contract production is currently possible. With more than 20 years of production experience in Vietnam and quality control of Japanese standards we will deliver safety, stability, and security together,” said a company representative.
Meanwhile, Panasonic Life Solutions Vietnam, a member of Panasonic Vietnam Group companies, will begin operations of its new factory in the southern province of Binh Duong in January 2021, covering an area of 24,000 square metres of the total 50,000sq.m of land for future growth.
Panasonic is manufacturing diverse products in Vietnam ranging from television sets, air conditioners, and refrigerators to electrical home appliances. Therefore, it has a high demand for suppliers of components and accessories.
Hirai Shinji, chief representative of the Japan Trade Promotion Organization in Ho Chi Minh City, told VIR that these companies are among many more from Japan that are pursuing a “Vietnam+1” approach to expand their production here, prompting local suppliers to step up the game to meet their requirements.
Many other big Japanese investors are also planning to shift their manufacturing operations to Vietnam, including Able Yamauchi and Showe producing coats, gloves, and medical masks; Techno Global making medical face shields; Hashimoto Cross producing hats and medical masks; and Nikkiso manufacturing medical equipment.
Such Japanese operations mean they must seek more local vendors who they believe have sufficient quality to have a working agreement with.
“We have witnessed more Japanese companies embrace this approach. Unlike the China+1 strategy which focuses on diversification by having a factory in China and another in a developing country in the Southeast Asian region, this strategy involves Japanese companies in Vietnam expanding production there, opening up opportunities for local suppliers,” Shinji said.
Le Nguyen Duy Oanh, vice director of the Ho Chi Minh City Centre of Supporting Industries Development (CSID) also told VIR that it has received many requests from Japanese companies to connect with local suppliers.
Not only Japanese corporations like Panasonic, Sharp, and Juki, but also small- and medium-sized Japanese ones want to team up with local partners to beef up production in Vietnam. They are looking for local producers who can ensure mass production in a stable manner.
However, Oanh cited a CSID survey of 60 Vietnamese companies in supporting industries, revealing that over 50 per cent of companies have small production depending on each order. This is in contrast to the high demand for output by Japanese investors.
“Japanese investors need local partners to supply materials and spare parts with sufficient output in a timely manner. To meet the requirements of Japanese companies, Vietnamese vendors need to optimise their production and invest in modern technology to improve both productivity and competitiveness,” she said.
Some Vietnamese companies are qualified to join the supply chain of some Japanese manufacturers including Hiep Phuoc Thanh, Cat Thai, and Tien Thinh.
Hiep Phuoc Thanh, for example, has provided plastic inputs to brand names such as Samsung, Toyota, and Panasonic. Cat Thai provides accessories for Japanese electronics manufacturers, while Tien Thinh is supplying wires for some projects by Toyota and Canon.
The demand for local suppliers is set to continue as more Japanese companies look to ramp up investment in Vietnam. The Japanese government is paying about ¥12 billion ($114 million) to 30 companies to increase production in Southeast Asia, in the first round of a multi-billion dollar programme to diversify supply chains after COVID-19.
SSIAM teams up with CP Group and Development Bank of Japan for $150 million PE fund
SSI Asset Management (SSIAM) and its partners have organised an online signing ceremony for agreements on setting up Vietnam Growth Investment Fund (VGIF) today.
VGIF is a member fund which is investing in private companies with the estimated size of $150 million, 10-year term, 5-year investment period, and is officially established as of October 14, 2020. With a flexible investment method, the fund’s main investment focuses are consumers goods and other sectors with high competitive advantages in Vietnam, mainly in essential industries that have many driving growth factors such as the change in demand/consumption, attractive supporting policies, and high annual growth rate including food and beverages; retail; medicine/health; electricity/energy; and water.
The VGIF's objectives focus on three main points, including companies that have competitive advantages and the potential to grow rapidly in the coming years; companies with listing potential or privatize state-owned companies with attractive valuation; listed via PIPEs, or spin-offs of listed group subsidiaries.
The two partners of SSIAM which are CTB and MIC are both big names in the international market. CTB is CP Group’s flagship investment platform and has over $10 billion investments and board participation with Ping-An, Itochu, and CITIC.
CTB has been working actively with the portfolio companies to forge a strategic partnership. Meanwhile, MIC – with the backing of the Development Bank of Japan – also possesses strong financial potential, global network, and financial investment management capacity at many markets, especially ASEAN and China. The MIC is also the leading fund management company in Japan with assets under management of about $2 billion.
The VGIF will receive support from advisors who are the most influential and reputable leaders in the Asian business world like Nguyen Duy Hung – founder and chairman of SSI Securities Corporation, Soopakij Chearavanont – chairman of CP Group, and Yang Xiaoping – senior vice chairman of CP Group and CEO of CP China and CTB.
In addition to co-investment in capital contribution, the three fund founders are SSIAM, CTB, and MIC will coordinate with each other in all aspects such as the management of fund operations, capital mobilisation, enterprise appraisal, and investment decision making. SSIAM, as the “host”, is responsible for finding, approaching, and negotiating investment opportunities in potential businesses in the Vietnamese market. Furthermore, the investment team of SSIAM will directly participate in the Board of Directors of the investee enterprises to improve management capacity and operational efficiency for the business, as well as protect investors' interests.
Bond issuance power play in energy sector
With vast potential and attractiveness, investors are very much keen to increase their foothold in the energy sector by expanding their operations, with the demand for fund mobilisation via corporate bond issuance burgeoning in Vietnam.
Bamboo Capital Group (BCG), the parent company of Bamboo Energy, is betting big on energy. Last week, the group signalled its upcoming batch of bond issuance, with Bamboo Energy to issue VND220 billion ($95.65 million) of bonds.
BCG announced that it will issue more than 68 million shares offered at the price of VND10,000 (43 cents) per share. The expected offering time is in the current quarter, after receiving the certificate of public offering from the State Securities Commission.
BCG has established relationships with organisations such as Hanwha Energy Group of South Korea and JAIC Investment Fund from Japan. A number of investments have been made – for example, Hanwha Energy has poured $5 million into Bamboo Energy to invest in renewable energy projects. With its latest bond issuance, the expected proceeds are around VND680 billion ($29.56 million), with VND420 billion ($18.26 million) used for renewable energy projects, including Phu My 1 Solar Power Plant and Vinh Long Solar Power Plant.
Data compiled by the Hanoi Stock Exchange, financial information provider Finnpro, and Techcombank Securities revealed that among the VND171 trillion ($7.4 billion) of corporate bonds issued in the first six months of this year, renewable energy companies made up for 4 per cent.
The average interest rate of energy bonds was 10.3 per cent per year, only second after the real estate sector which stood at 10.6 per cent per year.
Last month, Nang Luong Son La (Son La Energy) Co., Ltd. also issued five-year bonds to raise more funds.
As of August, Xuan Thien Group’s energy subsidiaries, which include Ea Sup 1, 2, 4, and 5, Xuan Thien Thuan Bac, and Xuan Thien Dak Lak have altogether mobilised funds of around VND12.17 trillion ($529 million).
Xuan Thien Group is the major investor of Xuan Thien-Ea Sup, with the total registered investment of VND50 trillion ($2.17 billion) and capacity of 2,000MW. Local media stated it is one of the largest solar energy plants in Southeast Asia.
Trung Nam Group, one of the country’s prominent energy companies, has mobilised up to VND4.5 trillion ($196 million) via this debt instrument so far this year, with an interest rate of 10.5 per cent per year.
According to local media, Hong Phong 2 Energy JSC has also mobilised VND1.6 trillion ($695.6 million) from 6-year bonds with an interest rate of 10 per cent annually. In August, My Son 1 Solar Power Co., Ltd. successfully issued VND300 billion ($13.04 million) of three-year bonds with an interest rate of 10 per cent per year.
Duong Duc Hieu, head of Equity Research at KB Securities, believes that demand of electricity in Vietnam is expected to grow at around 10 per cent annually. However, there are some delays in the construction of big thermal power plants, which will cause shortages in electricity in the next few years in Vietnam.
Renewables can be a replacement to counter the electricity shortage as their advantages include short construction period, decreasing equipment price, and favourable borrowing policies for green plants.
“Besides this, the supporting selling price policies of the government are also a strong motivation for investors in the renewable energy industry. Therefore, we believe that the renewable energy industry in Vietnam will continue to develop strongly in the next few years,” Hieu told VIR.
On the other hand, the Ministry of Finance previously flagged corporate bonds as risky assets with no credit ratings and no collaterals, as some are issued by overleveraged businesses with significant default risk.
“Normally, each energy project is financed by bank loan rather than corporate bond. Besides bank loans, energy companies issue bonds using company shares and cash flow from existing projects as collateral,” Hieu added.
Money raised from bonds is used to develop new projects and the risks of those bonds arise in two scenarios, Hieu said. “Firstly, when companies use money to develop risky projects not in their core business, it may lead to failure. Secondly, the existing energy projects encounter problems that lead to shortage of cash flow to pay duties to banks and bondholders.”
“Investors should be aware of those risks and be careful in selecting energy corporate bonds,” he added. “They should keep an eye on the company’s leverage ratios, quality of current energy projects, and cash flow statements.”
According to Matthew Smith, head of Research at Yuanta Securities, renewable energy has a bright future in Vietnam. He estimated that electricity demand should grow at 11 per cent per year in 2020-2025, which translates to a shortage of 48 billion kWh or more by 2025. The implications for the environment will be obvious if this increased demand is met with traditional carbon-based energy production. However, this rapid increase in demand is occurring at a fortunate moment for the energy industry because the costs of renewable energy (both in terms of its installation and generation costs) have been decreasing quickly. This makes renewable energy economically competitive.
Most recently, Vietnam has announced aims to raise its renewable energy sources to 15-20 per cent of the total energy mix by 2030 and 25-30 per cent by 2045. The targets have been set in the government’s action plan on the implementation of Vietnam’s National Energy Development Strategy by 2030.
“Green bonds are a great example of where industrial technology is being developed and global finance is being tapped to address very urgent environmental pollution problems,” said Smith.
“In terms of the risks, obviously, each case must be analysed on its individual merits. However, supportive government policies are in place to reduce the overall risks for renewable energy production. These policies include attractive pricing for renewable power, tax reliefs, free or low-cost land, and long PPA contracts. This has led to a quick ramp-up of solar power capacity in the past few years. We also expect wind power capacity to deliver similarly rapid growth heading into 2021. My understanding is that there are issues with the power grid that need to be addressed, but certainly, the industry has made very positive progress,” he added.
Supa Waisayarat, Vietnam’s country director at Super Energy – one of the most prestigious and largest Thai-invested energy firms, told VIR, “Super Energy has issued bonds in Thailand for Thai investors, but we would also consider issuing bonds in Vietnam. We select the projects via our high potential partners such as HBRE Ggroup or Hung Hai Group. They are powerful players in the renewable energy scene in Vietnam and are close to the high ranking people.”
“We are planning to invest more into potential wind and solar projects to capitalize on the high energy demand in Vietnam,” Waisayarat emphasised.