Korean enterprises satisfied with Vietnamese entry process: survey
|A factory of Samsung Electronics Vietnam in Thai Nguyen province|
The survey was conducted among 303 ROK enterprises that enjoy special entry procedures in Vietnam. Of the firms questioned, 20.1% said it felt “normal”, while 12.6% stated that they were unsatisfied with the process.
According to the survey, thanks to the special entry process, ROK firms have finalised contracts worth KRW30 billion (US$26.4 million) with Vietnamese firms.
The number of Korean businesses coming to Vietnam via the special entry process counted 1,528 (including those due to enter the nation on November 5), with more than 2,790 businesspeople and their 453 family membersinvolved, from whom no positive COVID-19 cases have been recorded so far.
Vietnamese manufacturing continues recovery in October
The start of the fourth quarter of the year saw the continued recovery of the Vietnamese manufacturing sector, with the country’s Manufacturing Purchasing Managers’ Index posting 51.8 in October.
The COVID-19 pandemic continued to cause issues in supply chains during October. Suppliers’ delivery times lengthened to a greater extent than in September. Alongside the direct impacts of the pandemic, shortages of materials and poor weather conditions reportedly contributed to delivery delays.
Reports from the General Statistics Office also showed Vietnam’s industrial production rose by 5.4 percent year-on-year in October, after a 3.8 percent gain a month earlier.
This was the strongest increase in industrial output since June, amid intensive public health measures to contain the spread of the coronavirus outbreak in the country, with output expanding much faster for both manufacturing./.
Cheap fruit floods HCM City streets as exports to China fall
Many kinds of Vietnamese fruits are flooding streets in HCM City because of the sharp decline in exports to China.
On Nguyen Thai Son Street in Go Vap District, it is easy to see piles of oranges grown in southwestern localities sold on local streets. Each kilo costs between VND12,000-25,000.
Nguyen Han, a fruit seller on the street, said that the current orange prices were just 60% of last year.
On Cach Mang Thang Tam Street in District 10 and Kinh Duong Vuong Street in Binh Tan District, each kilo of avocado is around VND15,000-20,000 compared to at least VND35,000 in previous years.
Other kinds of fruit such as dragon fruit, durian and mangoes are in the same situation. Each kilo of durian is now being sold in HCM City at just between VND55,000-60,000.
According to fruit traders in HCM City, the price drop is attributed to difficulties in fruit exports to China amid the Covid-19 pandemic.
In the first nine months of this year, Vietnam’s total fruit export value to China was estimated at only USD9.8 bilion, down 8.6% on-year. Most of the country’s spearhead fruit export value to China fell in the phase.
Besides being affected by Covid-19, China has applied a tighter inspection policy for imports into the country through borders. So exporters have to correctly declare the types of goods they export, especially for the nine agricultural products that Vietnam has signed with agreement with China, so that their vehicles won’t be detained and result in a lengthy and complex handling process.
The Ministry of Agriculture and Rural Development (MARD) has worked with the Chinese Embassy in Vietnam and other concerned Chinese agencies on measures to help speed up Vietnamese fruit exports to the country.
The MARD has also urged localities and Vietnamese exporters to pay more attention to China’s tighter import regulations to facilitate their exports.
Vietnamese car makers import 80% of components
Vietnamese automobile makers import 80% of spare parts according to the Ministry of Industry and Trade.
In a report presented at the meeting with the Vietnam Automobile Manufacturers’ Association on November 3, Luong Duc Toan, deputy head of the department of industrial manufacturing under the Ministry of Industry and Trade said that the Vietnamese automobile industry has yet to reach its real target.
“There have not been proper co-operation between local carmakers and components suppliers,” the report said. Vietnam’s localisation rate was poor compared with other countries in the region.”
According to the official, Vietnamese auto manufacturers are now importing 80% of key parts such as engines, control systems and transmission gears; and this has led to the domestic car prices of between 10-20% higher than cars imported from other Southeast Asian countries.
The report also said that Vietnam produced 330,000 cars in 2019 and despite the challenges posed by the Covid-19 pandemic, over 160,000 cars were made in Vietnam in the first nine months of this year.
Speaking at the meeting, deputy director of the General Department of Vietnam Customs Luu Manh Tuong said that more than half a billion dollars in tax returns have been awarded to firms since 2017 in a bid by the government to boost the country’s auto industry and supporting industry.
“The tax incentives are in line with Government Decision 57/2020/NĐ-CP, a policy package aimed at bolstering the development of the auto industry in the next four years, he said.
Nguyen Trung Hieu from Vietnam Automobile Manufacturers’ Association (VAMA) told the meeting that the automobile industry of Vietnam, though formed some 30 years later than some neighbouring countries like Thailand, Indonesia, or Malaysia, has seen fast development thanks to due attention from the government and efforts from local firms. The number of cars made or assembled in Vietnam has risen sharply.
The country is now home to more than 40 auto manufacturers with some strong companies including TC Motor, Truong Hai (Thaco), and VinFast.
The VAMA representative said the policy package gave the auto industry a much-needed boost to catch up with the competition in Southeast Asia.
Binh Duong to shoot for $9 billion of FDI capital by 2025
The southern province of Binh Duong aims to complete its plan to attract over $9 billion in foreign direct investment (FDI) in the period of 2020-2025.
Speaking at a recent meeting with foreign investors and business associations, Nguyen Hoang Thao, Chairman of Binh Duong People’s Committee, said that the 11th Provincial Party Congress 2020-2025 has been successfully organised, outlining the province’s development targets. Accordingly, Binh Duong aims to attract $9 billion in FDI capital in the next five years.
In fact, Binh Duong province is one of the top destinations in Vietnam for FDI. The province has completed and even surpassed its plan for FDI attraction.
“In the period of 2016 and 2020, Binh Duong set targets to attract $7 billion in FDI capital. The province successfully achieved the target one year earlier,” he said, noting that the plan to luring $9 billion is expected to be completed soon.
For socioeconomic development, although the domestic economy has been heavily affected by COVID-19 epidemic and natural disasters, storms, and floods, the province still ensures a stable growth rate in the past 10 months.
Industrial production has shown several positive signals while export and import activities continue to recover. Enterprises have recorded increased orders and are focusing their efforts on production at the end of the year.
Over the past 10 months, the Index of Industrial Production increased by 6.77 per cent over the same period in 2019 (the same period increased by 6.1 per cent). The total retail sales of goods and service revenue reached more than VND208 trillion ($8.92 billion), increasing by 11.7 per cent over the same period, export turnover reached over $22 billion, increasing by 6.85 per cent over the same period last year.
Domestic investment attraction as of October 15, 2020 reached nearly VND59.5 trillion ($2.56 million), an increase of nearly 21 per cent over the same period. Accumulated up to now, there are nearly 47,600 enterprises in the province with a total capital of VND424 trillion ($18.29 billion). Foreign investment attraction reaches nearly $1.7 billion, exceeding the plan by 19 per cent in 2020. Up to now, there are 3,909 foreign investment projects in the province with a total capital of $35.2 billion.
At the meeting, representatives of companies and business associations, raised their voice about the press issues to recover operation post-COVID-19 pandemic. Specifically, enterprises need a new source of capital with preferential interest to raise their competitiveness and improve facilities after disruptions caused by COVID-19 crisis.
In addition, enterprises also expect the provincial authorities to boost investment in transport infrastructure and logistics to keep up with the fast-paced development of the province. Traffic roads in Binh Duong need to be upgraded and expanded to improve connectivity with Ho Chi Minh City and Long Thanh Airport. Binh Duong also needs to complete short roads connecting with ports on Dong Nai River and Saigon River soon to reduce traffic jams on the main roads.
Tran Van Nam, Secretary of the Binh Duong provincial Party Committee, said the province pays special attention to infrastructure development and looks for solutions to address the issue. Specifically, the province will accelerate the transport projects connecting Binh Duong with Ho Chi Minh City, including expanding Highway 13, opening the entire My Phuoc-Tan Van route, and developing the Bus Rapid Transit route connecting Binh Duong New City with Suoi Tien (Ho Chi Minh City). Binh Duong province is negotiating and coordinating with neighbouring localities to propose many infrastructure projects in the southeast region to the government.
“Provincial leaders are committed to listen to enterprises and solve any problems of foreign businesses and investors in a timely fashion,” he said.
Indonesian groups eager for expansion
More Indonesian companies are gearing up their expansion efforts in Vietnam banking on the prospect that economic ties between the two countries will continue to thrive.
Beauty startup Social Bella has recently made an official foray into Vietnam – its first international market. Christopher Madiam, co-founder and president of Social Bella, said that the company was excited to expand its market further.
“As one of the fastest-growing beauty and selfcare markets in Southeast Asia with a population of a digitally literate young generation, Vietnam bears a resemblance to Indonesia. We’re certain that Vietnam is the right country for our first international expansion.”
In August, Indonesian unicorn Gojek finally announced that its official mobile app is now accessible in Vietnam. The announcement comes on the heels of Vietnamese affiliate GoViet’s revealed plans to merge its app and branding with its parent company. The unification of services and brand identity resolves a period of upheaval at GoViet, which burst onto Vietnam’s ride-hailing scene in 2018 with plenty of promise.
GoViet was originally envisioned as a local, autonomous Vietnamese partner for Gojek, offering ride-hailing and logistics services at the outset, with food delivery and digital payments being added later on. The launch of GoViet two years ago – complete with its own standalone branding and management team – was the start of Gojek’s ambitious, $500 million international expansion plans.
Gojek CEOs Kevin Aluwi and Andre Soelistyo said in a statement, “The event marks a significant moment in Gojek’s journey, and in their long-term commitment to Vietnam. The company continues to see immense potential for growth and impact in the country, and we are excited to introduce the Gojek Super App experience to an existing and new generation of users.”
Meanwhile, Southeast Asia’s largest online travel startup Traveloka is reported to have reached profitability, as demand for travel accommodation gradually recovers. The Indonesian company emphasised that a positive trend was recorded in that country, as well as in Vietnam and Thailand. Especially, transaction volumes are returning to pre-pandemic levels in Vietnam with Thailand not far behind, cited The Jakarta Post.
“Vietnam continues to be important as one of our biggest markets. Traveloka saw that Vietnam offers enormous business opportunities in the tourism sector,” said Apple Thy, country manager of Traveloka Vietnam. “In view of the fact that there’s a positive evolution of the tourism sector in Vietnam complemented by support from the government, we see that Vietnam offers various exciting opportunities for us to expand our business and we will continue to innovate our products and services to cater to the evolving needs of our users.”
She added that the group also is looking for collaborations with key stakeholders, especially the government, and fostering a supportive ecosystem. “We believe that with this extraordinary situation, customer preference and lifestyle would be impacted and even altered. Thus, we are still in our mission to continue delivering the best end-to-end lifestyle and travel experience for Southeast Asia. In the long run, we are looking for new growth drivers within and outside our existing travel and lifestyle offering,” Thy explained.
Meanwhile, PT Mitra Adiperkasa Tbk (MAP), Indonesia’s leading lifestyle retailer, has also ramped up its footprint in Vietnam through a diversified portfolio including sports, fashion, food and beverages, and lifestyle products. In 2016, the company made its venture into Vietnam with the launch of its first Zara store in Ho Chi Minh City. As part of its ambitious Indochina strategy, the company launched Zara in Hanoi, as well as Massimo Dutti, Pull & Bear, and Stradivarius in Ho Chi Minh City one year later.
Elsewhere PT Pharos, a leading Indonesian pharmaceutical company that develops and markets innovative products for Southeast Asian countries, has also actively participated in the emerging market of Vietnam with pharma retailer Century Healthcare. The company aims to bank on Vietnam’s pharmaceutical retail market, which is expected to be $7.7 billion in 2021 and reach up to $16 billion in 2026.
Speaking at last week’s seminar on reflections of the 65 years of Vietnam-Indonesia relations and the way forward, Indonesian Deputy Foreign Minister Mahendra Siregar said that the two officially established diplomatic relations as an important milestone for the friendship between the two countries. The establishment of a strategic partnership in 2013 promoted bilateral relations and multilateral cooperation between the two countries based on the two key agencies of ASEAN and the United Nations.
He noted that Indonesia is among the first countries in ASEAN to have made direct investment in Vietnam. As of present, Indonesia currently ranks fifth in ASEAN and 28 out of 130 countries and territories investing in Vietnam with 74 projects registered at $556 million.
Meanwhile, bilateral trade between Indonesia and Vietnam increased from $3.3 billion in 2010 to $9.1 billion in 2019. However, due to the ongoing pandemic, the volume of bilateral trade between Indonesia and Vietnam touched over $5 billion, down 14 per cent against last year’s period. Despite the disruptions caused this year, many Indonesian companies are still eager to expand their footprint in Vietnam, especially via mergers and acquisitions.
ASEAN-wide tax analysis urged
Establishing rules for the good governance of tax incentives in ASEAN member states is being raised as one of the main solutions to prevent a race to the bottom on taxation.
ASEAN countries are currently far apart on many macro-level indicators, with each country tending to prioritise its own interests when implementing fiscal policies and compete for gains, rather than sitting down with its neighbours and designing a mechanism for the common good, according to a new report.
Published by Oxfam and the Vietnam Institute for Economic and Policy Research, the report on sustainable tax policies and incentives in ASEAN explains that countries have set varying standard rates for corporate income tax (CIT), determined by numerous factors depending on the priorities of the government, levels of development, and the nature of the economy.
The average standard CIT rate across the region has been gradually falling, from 25.1 per cent in 2010 and 22.6 per cent in 2015 to 21.7 per cent this year. The average rate in 2020 is 1.7 percentage points lower than the average rate in selected countries in the East Asia-Pacific region.
The report confirmed that Laos, Thailand, and Vietnam have seen the sharpest declines in their standard CIT rates over the past 10 years at 35 to 20 per cent for Laos, 30 to 20 per cent for Thailand, and 25 to 20 per cent for Vietnam. Meanwhile Indonesia has seen its rate decline by three percentage points and Malaysia by one point, with rates of 22 per cent and 24 per cent, respectively in 2020.
Singapore offers the lowest CIT rate of any ASEAN country at 17 per cent of taxable corporate income, and this has remained unchanged for the past 10 years. Brunei’s rate of 18.5 per cent is the second lowest.
Experts and researchers have said that the decline of CIT has contributed to the fiscal pressure of ASEAN countries, where spending in essential services such as healthcare, education, and social protection is still not meeting the needs in most countries in the region.
One of the biggest challenges for member states, they explain, is how to come together and address complex emerging issues at the regional level, in particular corporate tax incentives. However, if ASEAN wants to remain cohesive, its member states must converge.
To resolve these obstacles, member states are being recommended to draw up a whitelist and a blacklist of tax incentives.
“ASEAN members should draw up a blacklist of all tax incentives that should no longer be allowed and establish a plan to phase them out across the region by a certain date. In parallel with this, they should agree on a whitelist of tax incentives that are acceptable and allowed,” explained Nguyen Quang Thai, a researcher at Oxfam Vietnam.
According to Thai, the blacklist should include first and foremost profit-based tax incentives – for example, incentives that offer a low rate of tax on profit made such as tax holidays, significant tax exemptions, loss carry-backs, and preferential rates.
In recent years, academics and international organisations had already called on countries in ASEAN to stop offering these kinds of incentives due to their harmful nature and marginal positive effects.
Meanwhile, a whitelist should include investment-based tax incentives – for example, those that focus on the investment itself. Such incentives are proven to be much more productive than profit-based equivalents. However, these incentives should be monitored for the effectiveness and abuses should be avoided, such as super deductions or super tax credits.
“A mechanism should be put in place at the ASEAN level to monitor developments in tax policy and to decide which incentives should be blacklisted or whitelisted. This mechanism should be transparent and involve technical experts from governments, civil society, and academia in its operation,” Thai added.
Meanwhile, Pham Van Long from the Vietnam Institute for Economic and Policy Research agrees with a minimum tax standard across the ASEAN region. “The race to the bottom across ASEAN needs to stop, and while international policy developments towards a worldwide minimum tax rate are ongoing, countries need to agree on an approach tailored to the region at a possible range of 12.5 to 20 per cent,” Long said.
Monetary policies narrow after rate dip
As interest rates have fallen dramatically during the first 10 months of the year, the State Bank of Vietnam’s leeway for monetary policy has been squeezed to a great extent, with likely solutions possible to foster growth of the public and private sectors while focusing on industries and services with highest development priority.
After the first 10 months of 2020, credits at all state-owned, joint-stock, and foreign commercial banks increased just 6 per cent compared to the end of 2019, regardless of both input and output interest rates.
Interest rates even dropped to the point that the difference between the average lending rate and the average deposit interest rate was smaller than the basic inflation for the same period, showing that the economy’s credit absorption is weaker than the braking effect of the monetary policy to fight inflation.
In the last week of October, deposit interest rates ranged only between 3-3.8 per cent per year for terms of less than six months and 3.7-5 per year for terms of 6-12 months, as well as 4.9-5.6 per year for terms of 12 and 13 months. Since the beginning of the year, total interest rate reduction has dropped from 1.2 to 2.4 per cent to a record low in the capital mobilisation market, even as most commercial banks mobilised interest rates below 4 per cent per year, lower than the State Bank of Vietnam’s (SBV) latest ceiling at 0.5 per cent points.
However, mobilised capital still increased, even though input interest rates have continuously been decreasing throughout the market, thereby proving the capital potential of domestic commercial banks. Meanwhile, domestic and foreign credit institutions in Vietnam are competing to attract depositors, borrowers, and other customers. Thus, as domestic interest rates have been decreasing, foreign competitors, such as Indovina Bank, Standard Chartered, and HSBC all announced corresponding rate reductions.
In the second October week, maximum short-term lending rates in VND stood at 4.5 per cent per year, down 0.5 per cent from the week before. For USD, lending interest rates ranged from 3 to 6 per cent per year, depending on the term. In which, short-term interest rates in USD were ranging from 3 to 4.5 per cent per year, while middle- and long-term interest rates stood between 4.2-6 per cent per year.
Average interbank interest rates for foreign currency credits, meanwhile, went sideways at 0.1 per cent per year for overnight and 1-week terms, while for 1-6 month terms, interest rates increased from 0.03 percentage points to 0.25 points, ranging from 0.37-1.15 per cent per year. Concurrently, the USD deposit interest rates of both local and foreign credit institutions must remain at zero according to the SBV’s anti-dollarisation policy.
According to the International Monetary Fund, Vietnam’s current lending interest rate is not higher than that of other countries in the region with similar development levels. As of July, the average lending interest rate of ASEAN-6 economies stood at about 5.7 per cent per year, that of ASEAN-4 countries was at about 4.82 per cent, and of Vietnam at 7.2 per cent per year. The maximum short-term lending interest rate for the country’s priority areas was only 4.5 per cent per year, which is lower than the average lending interest rate of ASEAN-4, according to the SBV’s report sent to the National Assembly.
At present, although the interest rate on loans has decreased, the SBV is still closely monitoring unsafe credit flows. On the output credit market, the overnight lending rate among commercial banks at the end of October was still around 0.1 per cent per year, the lowest level in history. At times, this interest rate was even lower than the same interest rate at the US Federal Reserve and was considered an unprecedented phenomenon in Vietnam’s interest rate market.
In addition, up until the end of October, the SBV has repeatedly announced to reduce the ceiling interest rate to also lower the corresponding lending interest rate. However, this tool is also directly related to stabilising the financial market and exchange rates on foreign exchanges, thus room for SBV’s monetary policy has been narrowed to the greatest extent possible.
Experts say that finding solutions to increase the margin for monetary policy and the credit market, regardless of the SBV or capital market, depends on solutions such as promoting the growth of public and private sectors and increasing services that have a higher development priority.
These solutions, they say, will both drive investment from the state budget and attract additions with low-interest credits. The main driving force now is to widen the scope for the capital and bank credit markets, thereby creating efficiency in activating the whole economy.
Workshop disseminates EVFTA opportunities for farm produce exports
The Hanoi Promotion Agency (HPA) in coordination with the Export-Import Department under the Ministry of Industry and Trade (MOIT) held a workshop on November 5 to provide businesses with a better insight into the core contents of the EU-Vietnam Free Trade Agreement (EVFTA) in agriculture as well as support mechanisms.
At the event, themed “EVFTA – Opportunities for Vietnamese farm produce exports”, representatives of relevant ministries elaborated on tariff commitments, the tariff elimination roadmap and the rules of origin on goods under the EVFTA, as well as on how to take advantage of incentives from the deal.
Trinh Thi Thu Hien, head of the goods origin section under the Export-Import Department, stated that agro-products are classified into two types of goods. Accordingly, goods of pure origin (crops grown and harvested in member countries) will be subject to a 0% import tariff from the EU, while goods of non-pure origin will only enjoy preferential tariffs if meeting criteria concerning basic conversion, material quota, and processing stages.
Regarding the MOIT’s support for enterprises, the ministry issued an official dispatch on September 22 stipulating that batches of goods exported to the EU can still be registered for the certificate of origin (C/O) to enjoy preferential tariffs under the EVFTA, she said.
If businesses face problems with the importing countries, they may inform the C/O granting organisations or the Export-Import Department to receive timely assistance in the issue of goods origin, the official added.
* On the same day, the 2020 Vietnamese Craft Village and OCOP Product Fair opened in Hanoi, featuring more than 150 pavilions representing organisations and units from 30 cities and provinces across the country.
The annual event, held by the Ministry of Agriculture and Rural Development, is introducing and selling traditional craft village products including jewellery, ceramics, crystal, mosaic sculpture, lacquer, rattan, embroidery, brocade weaving and silk. In addition, many agro-forestry and fishery products are also on display and sales, such as food, foodstuff, fruits and beverages of clear origins, especially OCOP-certified products.
Within the framework of the fair, the organisers also presented prizes and honoured the winners of the 2020 Vietnamese handicraft and fine arts product contest. A total of five first, five second, five third and 27 consolation prizes were awarded.
Budget revenue flourishes post-COVID-19
State budget collection in recent months has witnessed positive signs thanks to the effective control of the COVID-19 epidemic in Vietnam.
According to the General Department of Taxation (Ministry of Finance), total estimated budget revenue by the end of October stood at VND979.7 trillion (US$42.3 billion), accounting for 78.1% of the estimate and as much as 93.9% over the same period in 2019.
Revenue from crude oil reached VND29.4 trillion, equalling 83.8% of the estimate. Domestic revenue was estimated at VND950.2 trillion, equivalent to 77.9% of the yearly estimate and 95.4% of the figure from the same period last year.
Thanks to the effective control of COVID-19, socio-economic activities have entered “new normal” state, helping to facilitate budget collection.
Industrial production in October continued to prosper, especially the processing and manufacturing sector, with an increase of 8.3% over the same period last year.
Domestic trade also continued its uptrend last month, with total retail sales of consumer goods and services increasing by 2.4% MoM and 6.1% YoY.
According to the tax authority, in addition to the positive signs of the economy, tax agencies across the nation are also putting great effort into implementing synchronous collection solutions to attribute to the above results.
The departments have continued to implement tax administrative procedure reform following IT projects to facilitate the work. Especially, they have accelerated the implementation and expanded the model of online tax declaration, electronic tax payment, electronic invoices with authentication codes from the tax authorities and electronic tax refund.
There were 794,134 enterprises participating in electronic tax declaration as of October 19, reaching 99.32% of the total.
From January 1 to October 19, businesses have made over 2.5 million electronic tax payment transactions with the total amount of over VND508 trillion and nearly US$28 million.
Also during the period, a total of 8,131 enterprises participated in electronic tax refund, reaching 95.85%. The tax system received and processed 15,367 records with total refunds reaching more than VND91 trillion.
Regarding electronic invoices, from January 1 to October 19 this year, over 1 million invoices have been issued with codes with the total revenue reaching more than VND28.3 trillion on issued invoices, including the tax collection worth VND2.5 trillion on such invoices.
In the last two months of the year, the taxation authority would have to collect around VND274.5 trillion (21.9% of the estimate) to fulfil this year’s set target. According to the department, it is quite a difficult task amid the complicated developments of COVID-19 around the world, as well as great damages due to natural disasters and flooding in the central region.
In striving to fulfil at the highest level for this year’s budget collection task, the General Department of Taxation has asked its chapters across the nation to review each revenue, tax rate, and estimated total budget revenue to seek for best solutions for State budget collection.
Vietnam Airlines’ five-year revenue vaporizes in nine months
Vietnam Airlines saw combined revenue of over VND10.3 trillion in the last five years, but a loss of more than VND10.6 trillion between January and September this year, showed the national flag carrier’s financial report in the third quarter of 2020, with losses similar to previous estimates.
Its combined revenue was some VND7.2 trillion in the period, down 70% year-on-year.
Its accumulative loss was VND3.2 trillion, while the after-tax loss was nearly VND4 trillion. The company racked up a loss of more than VND4 trillion in the second quarter although its revenue reached VND1.6 trillion.
The third quarter was earlier predicted as a fresh restart for the aviation sector as international flights resumed in June and July. However, the second outbreak of the Covid-19 pandemic beginning in the central beach city of Danang continued to drown local airlines in losses.
According to the Civil Aviation Authority of Vietnam, Vietnamese carriers operated nearly 160,000 flights between January and September, down 36.5% year-on-year. Of this, Vietnam Airlines had 64,400 flights, a 35.5% year-on-year decline.
During the period, the firm reported VND32.4 trillion in revenue, plunging by 57% year-on-year, with its total loss soaring to VND10.6 trillion. In the same period of 2019, it obtained a profit of VND2.5 trillion.
Earlier, the board of management of Vietnam Airlines had estimated a loss of around VND10.7 trillion for the nine months.
The carrier’s nine-month loss outpaced its combined revenue from 2015 to 2019 at more than VND10.3 trillion. To secure a cash flow, it strengthened asset liquidation and sales, debt recovery and took out more loans.
Its unexpected income reached over VND3.1 trillion during the period, while the sales of debt papers at other organizations fetched over VND3.6 trillion.
Besides this, Vietnam Airlines spent VND354 billion paying dividends to shareholders and took out loans worth VND18.7 trillion.
Given the hefty losses and liquidation risks, Vietnam Airlines has suggested borrowing VND12 trillion from the Government which now owns 86% of the carrier.
The firm may face payable debts hitting VND6 trillion at the end of this year. If Government aid is not forthcoming, it will continue taking out bank loans to maintain operations, said a representative of Vietnam Airlines.
Rice exports to EU market remain modest
According to the Department of Crop Production, the EU’s total demand for imported rice is 2.3 million tons per year, with a value of 1.4 billion euros in 2019. In comparison with other countries in the ASEAN, Vietnam’s rice exports to the EU are only one-sixth of Thailand’s, one-tenth of Myanmar’s, and a quarter of Cambodia’s.
Many enterprises export fragrant rice to the EU after the EVFTA became effective. (Photo: SGGP)
In the first nine months of this year, rice exports to the EU reached over US$10 million, up 23.49 percent over the same period last year. Vietnam exports from 6.4 to 7.0 million tons of rice to more than 30 countries and territories every year. Of which, fragrant rice varieties on the export list of to the EU enjoying preferential tariff quotas account for about 43 percent to 46 percent of the total annual rice export volume, with over 3 million tons.
Rice is a commodity with great potential for export to the EU when quotas are expanded. This is a market with plenty of room. It is expected that rice exports, including fragrant rice, to the EU from now until the end of this year, will continue to increase. In recent years, the MARD has actively restructured the sector and implemented international commitments. In which, it drafted and revised legal documents to submit to the Government and the National Assembly for approval to accord with the EU-Vietnam Free Trade Agreement (EVFTA) in the negotiation process of the EVFTA.
According to the Vietnam Food Association (VFA), from the beginning of September to the end of October, ten enterprises had applied for certification with a volume of about 5,932 tons of fragrant rice. Expectations for exporting fragrant rice to the EU in the coming time will be more optimistic because this is a great opportunity for Vietnamese rice to compete in this market in terms of price and quality. To prepare for long and steady strides in the coming time, rice exporters must build their position to grasp and realize this opportunity.
VFA said that enterprises should research, improve technology, and organize closed production lines under international quality standards, such as HACCP, HALAL, or BRC, to ensure the capacity to supply products suitable to the tastes and demanding requirements of high-end consumer markets like the EU.
HCMC proposes to recognize area for future Thu Duc City as first class city
The People’s Committee of HCMC has sent a proposal to the Prime Minister, the Ministry of Construction and the Ministry of Home Affairs to consider recognizing the area, where Thu Duc City is expected to be established, as the first class city to create a foundation for Thu Duc City establishment.
The eastern part of HCMC where Thu Duc City is proposed to be established
The new city will be developed into an innovation hub of industry, scientific research and service. It will be designed and built up in accordance with standards of urban planning, quality of life, high quality service to ensure the development of modern industries and meet demands of residents and enterprises.
After receiving the approval, HCMC will set up the urban evaluation and classification project to submit it to funactional agencies to recognize Thu Duc City as as the first class city.
E-commerce to become indispensable instrument for Vietnam enterprises
E-commerce has been a spotlight of the Vietnamese economy with an average growth rate of 14% in the first three quarters of this year.
Amid the complicated Covid-19 situation globally, e-commerce would become an indispensable instrument for local enterprises to expand their operation and trading activities, according to Vice Director of Hanoi’s Department of Industry and Trade Tran Thi Phuong Lan.
While e-commerce is an inevitable trend and expected to enhance enterprises’ competitiveness, it would gradually change customers’ behavior and enterprises’ way of doing business, Ms. Lan said at a conference discussing export opportunities for Vietnamese enterprises from e-commerce on November 3.
The Covid-19 pandemic is hurting Vietnam’s exports in general, and those of Hanoi in particular as many major partners have canceled or delayed orders, not to mention the slow customs clearance process due to tightened anti-Covid-19 measures.
Vice Director of Hanoi’s Department of Industry and Trade Tran Thi Phuong Lan. Photo: Khac Kien.
Amazon, along with other e-commerce platforms, is playing an increasingly important role as a convenient and safe shopping option for Vietnam’s traders, stated Ms. Lan.
According to the World Trade Organization (WTO), trade in Covid-19 pandemic situation has made it clear that e-commerce can be an important solution for consumers in a time of crisis, and that it is also an economic driver, including for small businesses.
Nguyen Thi Minh Huyen, deputy director of the E-commerce and Digital Economy Department under the Ministry of Industry and Trade, said resorting to e-commerce and digital economy is a must amid the Covid-19 crisis.
While global economy is falling into a recession in 2020, Vietnam remains among a handful of economies with positive economic growth, albeit at a lowest growth rate over the past 10 years.
This showed the strong efforts from the government in pursuing the dual target of both containing the pandemic and boosting economic recovery. During this context, e-commerce has been a spotlight of the Vietnamese economy with an average growth rate of 14% in the first three quarters of this year, noted Ms. Huyen.
Referring to Amazon as the world’s largest e-commerce platform, Ms. Huyen said it is essential for local enterprises to understand its policies and regulations.
In the January – October period, the volume of goods sales via e-commerce increased by 10 – 30% in average, while revenue from online sales in Hanoi made up 8% of total retail sales and services.
55% of population to shop online by 2025
A government’s plan for the development of e-commerce by 2025 targets around 55% of the population to shop online with an average spending of US$600 annually by 2025.
Additionally, revenue from online sales of business-to-consumer e-commerce, known as B2C e-commerce, is set to grow by 25% per year to US$35 billion, accounting for 10% of total goods retail sales and service revenues.
Meanwhile, the government expects the rate of population using related services, including non-cash payment services, at 50%, and intermediary payment services at 80%.
The plan aims to keep delivery costs at around 10% of product prices in e-commerce.
By 2025, 80% of e-commerce websites should be integrated with online shopping and 70% providing e-invoices.
Notably, Hanoi and Ho Chi Minh City would make up half of e-commerce revenues in the next five years.
Vietnam four major state-owned banks can raise registered capital with gov’t funding
Under the new regulation, state-owned commercial banks where the state holds more than 50% can now be able to raise their registered capital to maintain the government control.
The Vietnamese government has recently issued decree No.121/2020/ND-CP in replacement of the Decree No.91/2015/ND-CP, which regulates the state capital invested in state-owned enterprises and management of state capital and assets at enterprises.
Under the new regulation, state-owned commercial banks where the state holds more than 50% can now be able to raise their registered capital to maintain the government control at these banks. As a result, Vietinbank, Vietcombank, BIDV and Agribank could now turn to funding sourced from state budget to increase their registered capital.
Major state-run commercial banks are pushing for higher registered capital. Photo: Thanh Hai.
As of August, registered capital of four major state-owned commercial banks, namely Agribank Vietcombank, BIDV and Vietinbank make up 23.1% of the total in the banking system, representing an increase of 6.3% against late 2016.
Meanwhile, that of joint-stock commercial banks accounts for 46.1% of the total, up 44.4% during the period.
A representative of Agribank said for many years, the lack of investment from the state means the growth rate of registered capital remained lower than that of total assets, resulting in a decline in the bank’s CAR, which now stands at 9.2%, slightly above the minimum requirement of 9% for Basel II.
According to the bank, in case it is not allocated a full amount of VND3.5 trillion (US$150.6 million) to raise its registered capital this year, Agribank’s credit growth could be around 4.5 – 5%.
Before the issuance of decree No.121/2020/ND-CP, state-run commercial banks were looking for ways to raise their registered capital and meet the market’s credit demand.
Notably, BIDV sold a 15% stake to South Korea’s KEB Hana Bank in deal worth VND20.3 trillion (US$875 million) in late 2019. As a wholly state-owned commercial bank, Agribank could only seek an increase in registered capital via financing from state budget, and is scheduled to receive around VND3.5 trillion (US$150.6 million) this year.
Meanwhile, Vietinbank has not increased its registered capital since 2014, therefore, right after the issuance of Decree No.121, the bank is in the process of applying for a higher registered capital in an earliest time possible and meet the minimum requirement in Basel II standards.
As of the end of September, total assets of Vietcombank were estimated at over VND1,180 trillion (US$50.8 billion), down 2.8% year-on-year, largely due to Covid-19 impacts. The bank’s bad debt increased by 15% against the beginning of the year to VND7.9 trillion (US$340.11 million).
Banking expert Nguyen Tri Hieu said a declining profit amid growing bad debt would significantly impact its CAR. Without being allocated sufficient fund to raise registered capital, all four banks would struggle for their responsibility of being a source for credit demand, he noted.
Essential for banks to meet CAR requirements
Under the government’s instruction, state-owned commercial banks have to foregone around 40% of their profit to cut interest rates. Financial statements of four banks in the third quarter have also reflected declines in profit and higher bad debts as a result.
Among four major state-run banks, BIDV has the highest registered capital of VND40.2 trillion (US$1.73 billion), followed by Vietinbank (VND37.23 trillion or US$1.6 billion), Vietcombank (VND37.08 trillion or US$1.59 billion) and Agribank (VND30.64 trillion or US$1.31 billion). At present, the total assets and outstanding loans at these four banks account for nearly 50% of the total in the country’s banking system.
Therefore, higher registered capital in these banks would help lower interest rates and contribute to higher credit growth in the final months of the year.
A report from SSI securities company said insufficient registered capital remains a challenge in the banking sector, especially with growing bad debts in banks. For every 1% growth in a bank’s bad debt, its CAR would decline by 40 – 80 basis points, it noted.
For banks with CAR of over 11%, the pressure for increasing registered capital would not be too high in 2021 in case bad debt rises by 1 – 2 percentage points. However, it is a clear opposite situation for BIDV, Vietinbank and Vietcombank in 2021, stated SSI report.
Vietnam boasts faster V-shaped recovery in Southeast Asian: Maybank
Vietnam’s manufacturing purchasing managers’ index has risen a lot more quickly and strongly than the rest of ASEAN.
Vietnam and Singapore are reporting a faster-than-expected V-shaped recovery compared to the rest in the Southeast Asian region, according to Singapore-based Business Times, citing a report from Malaysia’s largest bank Maybank Kim Eng.
Maybank’s report suggested generous government subsidies, record low interest rates, high household savings rate and work-from-home policies may be driving these “V” recoveries.
Vietnam is the only major economy in ASEAN that escaped recession, the economists said. Exports and retail sales have normalized after a brief contraction, while the “V” recovery in freight carried confirms the strong pick-up in domestic business and transport activities, they said, adding that the country’s manufacturing purchasing managers’ index has risen a lot more quickly and strongly than the rest of ASEAN.
In Singapore’s case, semiconductor production and exports have staged a sharp “V” rebound, while container throughput has also climbed back to pre-pandemic levels, they said. At the same time, property transactions in both private and public housing markets have jumped to 40% above pre-pandemic levels, boosted by record low mortgage rates and ample liquidity.
In 2021, ASEAN’s recovery could start to broaden when a vaccine becomes more widely available, according to the report.
Specifically, it expected a vaccine to help improve domestic mobility, ease strict lockdowns and social distancing rules, a shift that will make a significant difference to the larger pandemic-hit domestic economies, particularly the Philippines and Indonesia.
The International Monetary Fund (IMF) predicted Vietnam would be the only country among major economies in ASEAN – 5 (Thailand, Malaysia, Indonesia, the Philippines, and Vietnam) expected to deliver positive growth this year at 1.6%.
Additionally, the Philippines is set to have the biggest GDP decline this year among ASEAN countries, with a contraction of 8.3%, compared to a 3.6% decline projected in June. It is followed by Thailand (-7.1%), Malaysia (-6%), and Indonesia (-1.5%).
Overall, ASEAN-5 economies are expected to contract by 3.4% in 2020, before expanding 6.2% in 2021.
For this year, the Vietnamese government targets economic growth of 2% in normal conditions and 2.5% if favorable factors emerge.
Corporate culture crucial to growth of businesses: Deputy PM
Developing corporate culture is a core issue and crucial to the growth of businesses, Deputy Prime Minister Truong Hoa Binh told a forum on economic reconstruction in the “new normal” situation from the perspective of corporate culture which took place in Hanoi on November 8.
The forum was held by the organising committee of the campaign on building corporate culture in Vietnam (Organising Committee 248) to honour outstanding enterprises in building corporate culture in Vietnam and to mark Vietnam Corporate Culture Day (November 10).
In his remarks, Binh spoke highly of the event as it was organised at a time when the government and the entire business community are making all-out efforts to fulfill the dual goals of fighting COVID-19 and boosting economic recovery.
Over the last two decades, Vietnamese enterprises have contributed to mobilising resources for the country’s socio-economic development, maintaining its economic growth and stability, boosting exports and increasing State budget revenues.
To become prosperous, Vietnam must have a strong and sustainably developed business community, he said, adding that enterprises are the economic driver which contribute the most to the size and the growth rate of the national economy.
The COVID-19 is posing unprecedented impacts on all of the country’s social and economic aspects. From the perspective of corporate culture, the pandemic has affected consumer culture and businesses’ ethics, behaviour and social responsibility among others, Binh said.
To mitigate the pandemic’s impacts, the government has adopted various solutions and policies to support affected firms and individuals while many enterprises and organisations have backed the government’s efforts to revive the economy in the “new normal” situation. But there were no specific solutions related to corporate culture, Binh said.
He went on to say that proposals and recommendations presented at the forum will be submitted to the Prime Minister so they can be translated into reality in the near future./.
The first Viet Nam Card Day 2020 opens
The “Viet Nam Card Day 2020”, the first of its kind, officially begun in Ha Noi’s Bach Khoa Stadium on Saturday with the launch of “Song Festival” programme participated by 17 banks, credit institutions and more than 100 booths showcasing products and services.
The event, co-organised by Tien phong (Vanguard) newspaper and the National Payment Corporation of Viet Nam (NAPAS) under the instruction of the State Bank of Viet Nam (SBV) aims to promote the development of non-cash payments in the country.
Speaking at the event, Nguyen Kim Anh, Deputy Governor of State Bank of Viet Nam said: “The advances in technology and digitalisation have brought opportunities for card payments to become safer, faster and easier in connecting buyers and sellers in social distance time. It has been considered as a push to change people’s payment habits, contributing significantly to social stability and promoting the development of the economy again during the period affected by the pandemic”.
Le Xuan Son, editor-in-chief of Tien Phong newspaper said the organisation board wanted to act as a bridge for young customers to access and experience modern payment services as well as convenience provided by commercial banks and credit institutions. In addition, the programme would enhance young people’s creativity to contribute to the country’s economic development.
Nguyen Quang Minh, NAPAS’s deputy general director said “Song Festival” said this is an opportunity for young people to access to the safe and modern payment technology. The bank card uses chip technology with high security along with contactless payment suitable for many specific forms of payment such as at shopping centres, shops, buying petrol, and paying public transport fees.
Customers participating in the events are receiving promotional programmes when paying by bank cards at booths and online shops.
Banks issue more than 10,000 contactless prepaid cards with available amounts of VND50,000 each as a gift for customers to use at the event. Customers can use a local chip card, international cards, contactless prepaid cards to make payment at the booths, and all POS machines at the event which are designed to be compatible with chip contact and contactless cards.
The event was participated by Vietcombank, LienVietPostBank, CIMBBank, SSI, MasterCard, VietinBank, Agribank, MKgroup, ACB, HDBank, VPBank, SHN, PVcomBank, ABBank, BIDV, Sacombank, SeABank.
International agricultural fair underway in Thai Binh
An international agricultural fair from the northern region of Viet Nam is taking place in the northern province of Thai Binh.
Co-organised by the provincial People’s Committee and the Ministry of Industry and Trade, the year-end annual fair aims to bolster trade and flow of goods, especially farm produce, in the Red River Delta. The event opened its doors last week.
This year, the fair brings together 16 provinces and cities in the region and attracts nearly 300 booths of domestic and international businesses, about half of which feature agricultural products. Thai Binh’s staples are introduced at 32 pavilions of the event.
The fair will run until Wednesday.
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