Vietnam remains attractive destination for US investors
Vietnam remains an attractive destination for US investors in the Indo-Pacific, heard a webinar recently held by The Asia Group.
The event aimed to share business opportunities and updates on the fight against COVID-19 and economic prospects in Vietnam, drawing over 40 executives and representatives from US firms in the fields of energy, finance, technology, manufacturing such as Blackstone Group, Google, Facebook, Ford, UPS and Walmart.
Speaking at the event, Vietnamese Ambassador to the US Ha Kim Ngoc highlighted Vietnam's economic achievements, and informed participants about the country’s incentives in foreign direct investment (FDI) attraction.
He underscored the Vietnamese Government's determination to selectively attract FDI and strengthen Vietnam's role in restructuring the global supply chain.
As for the US investors, the active development of the Vietnam – US comprehensive partnership and Vietnam's network of free trade agreements are conducive to their activities in the country, he said.
Vietnam is ready to hold constructive dialogues, deal with difficulties and ensure a stable business environment for US enterprises, he added.
According to the ambassador, the Vietnamese Government has been exerting utmost efforts to effectively fight the pandemic, maintain important supply chains and create favourable conditions for economic development.
He thanked the US administration, people and business community for supporting Vietnam, especially the delivery of two batches of five million Moderna vaccines.
Ngoc also suggested US businesses continue helping Vietnam access more vaccines, medical supplies and COVID-19 medicines, thus contributing to Vietnam's economic development.
On the occasion, he also highly valued the US firms' support for Vietnam regarding the currency valuation investigation, and asked for their continued backing in the case related to timber so as to maintain trade and investment growth for the benefit of both sides.
Participants at the event expressed their trust in Vietnam's determination and efforts against the pandemic. They vowed to continue partnering with Vietnam in the joint effort.
Several firms expressed interest in specific issues such as addressing differences in digital trade, and considering a direct flight between the two nations.
They wished that the Vietnamese Embassy in the US will continue serving as a bridge to collect recommendations and feedback while raising understanding about Vietnam among the US business community./.
HSX temporarily suspends on-site trading from August 9
The Ho Chi Minh City Stock Exchange (HSX) will suspend all on-site activities and switch to online operations from August 9 after discovering COVID-19 infections.
In order to ensure safety and continuous operations, HSX announced that it would temporarily suspend all on-site activities from August 9. The processing of information related to listed companies, securities companies, and related parties is now done entirely online.
HSX asserted that stock trading activities remained stable and unaffected by the rolling out of pandemic prevention protocols.
As of the end of July 30, there were 469 securities codes listed on HSX for trading, including 385 stock codes, two closed-end fund codes, seven ETF codes, 49 covered warrant codes, and 26 bond codes.
The total volume of listed shares reached nearly 105.8 billion, with a total market capitalisation of VND4.92 quadrillion ($213.9 billion), equivalent to 92 per cent of the entire listed stock market and about 78 per cent of the GDP in 2020.
HSX has just celebrated 21 years of operation on July 28 with many remarkable achievements. Starting from 100 point on July 20, 2000, the VN-Index has reached a record high of 1,420.27 points on July 2, 2021.
Overseas remittances to HCM City hit US$3.7 billion in seven months
Despite enduring the adverse impacts of the COVID-19 pandemic, the total amount of remittances sent to Ho Chi Minh City during the seven months of the year surged by over 19% to US$3.7 billion compared to the same period from last year.
Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s Ho Chi Minh City branch, said the remittances were mainly channeled to production outlets and businesses, a factor which has contributed to accelerating the southern city’s economic development and stabilising the source of foreign currency in both the local and the country as a whole.
The amount of remittances sent to the southern city this year is anticipated to reach approximately US$6.5 billion, an increase of 6.5% compared to last year figure of US$6.1 billion.
The World Bank (WB) estimates that remittances flowing to low and middle-income countries will recover and increase by 5.6% to reach US$470 billion.
Despite this, the positive outlook largely depends on the impact of COVID-19 on global growth prospects, along with measures capable of containing the spread of the pandemic.
As part of the WB's updated report detailing global remittance data which was published in mid-May, they adjusted their projection of remittances to the nation last year from US$15.7 billion in October to US$17.2 billion.
Most notably, the country continued to be among the top 10 recipients of remittances in the world.
Furthermore, Vietnam also ranked third in the East Asia-Pacific region, just behind China and the Philippines in terms of receiving overseas remittances last year.
Amid the positive inflows of remittances sent to the country, a number of local banks such as Sacombank, Vietcombank, and Eximbank have invested in upgrading their technologies and improving transactions in an effort to create more favourable conditions for their customers. This has been done while simultaneously implementing promotional schemes aimed at attracting remittances.
Cat Lai Port reports dropping revenue while facing overload in H1
According to its consolidated financial report for the second quarter of 2021, the net profit of Cat Lai Port JSC (HSX: CLL) decreased 22 per cent on-year to VND20 billion ($869,570).
Seaport leasing services, merchandise sales services, and other services have made up a growing portion of its revenue. However, revenue from transportation services dropped sharply, and loading and unloading equipment rental service dropped slightly.
In the first six months, the company’s net revenue reached VND145.8 billion ($6.34 million), after-tax profit reached VND41.3 billion ($1.8 million), respectively down 12 and 17 per cent over the same period last year.
In 2021, the company set a revenue target of VND358.3 billion ($15.6 million), with VND88.8 billion ($3.86 million) of after-tax profit. It has achieved 41 and 47 per cent of these targets in H1.
As of June 30, the company's total assets reached VND717.3 billion (31.2 million), up 2 per cent on-year. Fixed assets accounted for 39 per cent with VND281.8 billion ($12.25 million), while short-term receivables made up 11 per cent with VND82 billion ($3.57 million) and long-term financial investment 12 per cent with VND88.3 billion ($3.84 million).
Cat Lai Port is currently experiencing severe overload after several companies were forced to suspend operations during the social distancing, leaving them unable to receive cargo. Many solutions have been proposed to deal with this situation such as transferring shipments to other seaports in Ho Chi Minh City and inland container depots.
HCM City drafts plan to reopen traditional markets
HCM City is planning to reopen traditional markets after carrying out research on safety measures for workers and the public.
Though bottlenecks in the circulation of agricultural products from provinces to HCM City have been removed, locals' consumption rate is still relatively slow, according to Sai Gon Giai Phong (Liberated Sai Gon) newspaper.
Minister of Industry and Trade Nguyen Hong Dien has asked People's Committees of provinces and centrally-run cities to arrange temporary market locations and reopen traditional markets.
HCM City, however, wants to reopen traditional markets with detailed plans to ensure safety against the pandemic. Online sales and alternating between vendors' operating hours and vaccination campaigns are part of the plan.
Tran Tien Khai, lecturer at the HCM City University of Economics, said that traders in wholesale markets could deliver goods directly to retail markets under the supervision of market management boards.
Retail markets should focus on agricultural products and fresh produce in order to reduce the number of people and ensure safe distancing.
At the moment, many wholesale markets are selling on even and odd days, instead of a weekly basis, to avoid inventory of agricultural products. Vendors are required to be fully vaccinated to limit the potential infection of the coronavirus.
A wholesale market manager said that considering the current context, it is extremely difficult for traditional markets to operate smoothly.
Selling food via online and on e-commerce channels has become a solution, but all products need to have clear packaging and labels.
Traditional markets also need to develop an online data system connecting all vendors and make it convenient for them to facilitate transactions and distribution of goods.
Many supermarkets with staff who have tested positive for COVID-19 have been closed for disinfection. It usually takes a week for them to reopen.
As a large amount of fresh food has gone to waste, the president of the Viet Nam Retail Association, Vu Thi Hau, suggested that supermarkets should only be closed for 24 to 72 hours.
Provinces should distribute shopping tickets to locals in order to avoid queues outside supermarkets and traditional markets.
Vietnamese ambassador seeks to expand ties with German state
Vietnamese Ambassador to Germany Nguyen Minh Vu has paid a working trip to Rostock city, Mecklenburg-Vorpommern state, northern Germany.
During a working session on August 6 held at Warnemünde Maritime Simulation Centre, State Secretary in the Ministry of Economics, Labour and Health of the state Stefan Rudolph expressed his wish to enhance cooperation between Germany and Vietnam, and between the state and Vietnam in particular.
He reviewed several successful projects in Vietnam, including health care, medical human resource training, nursing for German hospitals and nursing centres, workforce for Mecklenburg-Vorpommern state's representative office in Hanoi, and the state's foreign language and vocational training centre in Ha Tinh.
Rudolph also hoped that bilateral traditional ties will be expanded in the near future with new orientations, including the transfer of new technologies to defuse bombs and mines, settlement of post-war consequences, and socio-economic development.
Speaking at the event, Vu said Mecklenburg-Vorpommern is one of the states to pioneer in cooperation with Vietnam, including maritime services. Two-way trade between two nations surpassed 14 billion USD last year, and Vietnam is now Germany's largest trade partner in ASEAN while Germany is Vietnam's biggest trade partner in the European Union.
He believed that bilateral ties will be further extended with new cooperation opportunities.
Leaders of the Warnemünde Maritime Simulation Centre also briefed the ambassador about maritime control network in Baltic Sea while representatives of several companies introduced their strength./.
Vietnam among top 10 emerging markets for global data centres
Vietnam has been listed in top 10 emerging markets in the global data centre market by ResearchAndMarkets, the world’s leading market research store.
The growth in the Vietnamese data centre market was driven by government projects and initiatives, the report said.
Data protection is a matter of global concern and is becoming an important issue on the agenda of the Vietnamese Government.
The data localisation requirement under the Cybersecurity Law, plus the need for better processing speeds to assist Vietnamese users are the main drivers, which are anticipated to significantly enhance the demand for data centres in the country.
The Vietnamese Government’s inclination toward digitisation has further bolstered the demand for data centres across the country./.
Recruitment demand, applicants' quality soar in textile and garment industry: Report
The competencies of job candidates in the textile and garment industry met employers' requirements in the first half, according to the latest report by recruitment company Navigos Group.
Compared to the last five years, their technology and foreign languages skills have improved thanks to improvements in training.
In the past 10 years more and more training programmes pertaining to the textile and garment industry have become available at colleges and universities.
Besides, thanks to tie-ups between the industry and universities in designing technical programmes, fresh graduates come with 50-60 per cent of the skills they need, and other skills are taught through internships.
The greatest advantages Vietnamese candidates enjoy are their willingness to work hard, eagerness to learn and skill.
However, despite the improvements of the past five years, Vietnamese candidates still have limited foreign language skills especially when compared to their Indian or the Philippine counterparts.
Textile and garment companies have yet to hire foreign candidates for important positions. But these positions require good negotiation skills and other soft skills such as leadership and time management, which Vietnamese candidates still admittedly lack.
Candidates meeting these requirements are usually from China, the UK, Hong Kong, Thailand, and India.
The textile and garment industry has been witnessing a boom in recruitment demand this year as orders poured into the country due to the unstable situation in some neighbouring countries.
In the past Vietnamese manufacturers only reproduced items designed and already made abroad.
But now, huge investments in the country, by both foreign and Vietnamese enterprises, has led to changes to production chains, facilities, infrastructure, quality of the workforce, and human resources policies.
As a result, global customers have begun to work directly with Vietnamese manufacturers, who thus have huge demand for personnel, especially in supply and sourcing and technical jobs such as engineers and production innovators.
Construction firms see divergent earning results amid rising material prices
Construction enterprises have reported divergence in the first half of 2021 as a sharp increase in raw material prices has put them under pressure.
Steel currently accounts for roughly 20 per cent of the input costs.
In the first half of this year, the prices of many construction materials continuously increased to record highs, steel alone recorded a rise of 40 per cent. The price of cement with the composition of coal, electricity, gasoline, gypsum and additives also climbed from VND30,000-40,000 per tonne.
The rising prices were attributed to a decline in demand caused by miners facing many difficulties amid the COVID-19 pandemic, a fragmented production chain and China's policy of cutting steel production to protect the environment.
A number of contractors had to temporarily suspend and stop construction of projects to wait for steel prices to drop to avoid losses.
In the second quarter and the first half of 2021, many construction companies listed on the stock market recorded a decline in earnings while some others achieved impressive business results thanks to cost reductions and diversification.
Coteccons Construction Corporation (CTD), traded on the Ho Chi Minh Stock Exchange, reported Q2 revenue of VND2.55 trillion (US$111 million), down 36 per cent over the same period last year.
Deducting the cost of goods sold, the company earned VND135 billion in pre-tax profit, only half of that in 2020. As a result profit margins decreased to 5.2 per cent. Administrative expenses continued to record sudden increase from VND70.7 billion to VND122 billion, which, according to CTD’s, was due to the pre-payment of expenses payable to employees.
Deducting expenses, CTD’s after-tax profit was VND45 billion in the second quarter, down 71 per cent over the same period last year. Except for the loss in the fourth quarter of 2020, this is the company’s lowest quarterly profit in recent years. In the first half of 2021, CTD reported an after-tax profit of only VND99 billion, down 65 per cent, fulfilling less than 38 per cent of the profit target.
In the market, CTD stock is on an upward trend, trading around VND63,000 per share.
Ricons Construction Investment JSC announced second-quarter revenue of VND1.83 trillion, an increase of 10 per cent over the same period last year. However, cost of goods sold rose significantly, thereby causing pre-tax profit to decline 27 per cent year-on-year to VND70 billion. In addition to the pressure of rising raw material costs, the company’s administrative expenses also soared 49 per cent to more than VND42 billion.
As a result, the second quarter’s after-tax profit decreased by 44 per cent to VND33 billion. In the first six months of 2021, Ricons achieved VND3 trillion in revenue. Deducting expenses, the company reported a 38 per cent decrease in after-tax profit to approximately VND57 billion.
On the positive side, Hoa Binh Construction (HBC) in the second quarter achieved net revenue of VND3.18 trillion, up 8 per cent. The higher cost of goods sold caused a decrease in pre-tax profit of 17 per cent, down to VND195 billion.
But financial activities saw revenue soaring 7.5 times higher than the same period last year, reaching more than VND65 billion, mainly from nearly VND51 billion from the transfer of investments. The second-quarter after-tax profit jumped to nearly VND66 billion, nearly 35 times higher than the second quarter of 2020.
HBC’s revenue in the first half of the year reached nearly VND5.4 trillion. Deducting expenses, the company reported an after-tax profit of more than VND73 billion, 5.6 times higher than the same period in 2020.
Thanks to its wind power projects, FECON Corporation (FCN) achieved six-month revenue of VND1.34 trillion and after-tax profit of VND50 billion, up 12 per cent and 39 per cent, respectively over the same period in 2020. In the second quarter, FCN reported an after-tax profit of VND35 billion, up 66 per cent year-on-year.
In 2021, the company expects revenue to reach VND3.9 trillion, profit after tax of VND175 billion. Thus, in six months, the company has completed 27 per cent of revenue and 29 per cent of profit targets for the whole year.
Hung Thinh Incons Joint Stock Company (HTN) also recorded impressive results in the first half with revenue up 2.5 times higher than last year, reaching VND1.7 trillion. Pre-tax profit soared by 399 per cent to approximately VND145 billion, the gross profit margin reached 8.5 per cent.
It reported after-tax profit of nearly VND83 billion in the second quarter, nearly 46 times higher than the same period last year.
In the first six months, HTN achieved VND2.9 trillion in revenue and VND120 billion in after-tax profit, up 66 per cent and 3.3 per cent year-on-year, respectively.
Vietnam to open e-payment for 80% of population by 2025
Mobile money services will be promoted in Vietnam, with priority given to regions where the prevalence of banking services is still low.
Vietnam strives to gain 80% of its population having an e-payment account and attain the rate of e-commerce payments of 50% by 2025.
These are the targets set out in the Prime Minister’s Draft Decision on the National Strategy for Digital Economy and Society Development to 2025, with a vision to 2030 which is under public consultation.
This draft decision is aimed at developing digital infrastructure, digital data, digital identity, digital payment, digital skills, digital human resources, creating the foundation for the development of the digital economy and digital society.
According to the draft, 75% of electricity and water payment will be cashless and 90% of the points of sale will apply non-cash payment methods.
The draft also targets 90% of Vietnam's population who will buy goods on e-commerce platforms. Those who are capable of using basic digital skills will make up about 70%. At least 50% of farmers are trained in basic digital skills. Meanwhile, 100% of high-school students and students are equipped with digital skills.
By 2025, 70% of the population will have a digital identity for use in all digital services. Each digital identity will be used on average 100 times per year.
The draft sets out the development of 5G and next-generation mobile network infrastructure, commercialize 5G mobile networks, and universalize smartphones by 100%. The rate of universalization of 4G/5G mobile broadband network services will reach 100% and fiber optic broadband network infrastructure will cover 100% of households.
To achieve the goals, the Ministry of Information and Communications proposed to review and amend financial regulations and policies, fees, and charges in the direction of eliminating cashless payment barriers in order to encourage people to make cashless transactions.
The ministry will submit to the Prime Minister for approval and carry out the Cashless Payment Development Program in Vietnam in the 2021-2025 period.
A program to promote mobile money services will be implemented, with priority given to regions where the prevalence of banking services is still low.
According to the State Bank of Vietnam, in the first quarter of 2021, the country recorded 156.2 million internet transactions with VND8.1 trillion (US$355.3 million), rising 28.4% in value.
In the same period, 395 million transactions were carried out via mobile phone with a total value of more than VND4.6 trillion ($201.8 million), an increase of 103% and 5.3 million transactions through QR code with nearly VND4.5 trillion ($197.5 million), up 146% in value.
Millions of tons of rice in Mekong Delta seek ways for consumption
Hopeless and disappointed is the current feeling of thousands of Mekong Delta farmers when summer-autumn rice is being massively harvested because many households are waiting for traders, but they still have not come to buy paddy yet.
In the first days of August, the Mekong Delta provinces have massively harvested summer-autumn rice. However, farmers have encountered many difficulties when they need to sell paddy in the context that many localities are applying social distancing to prevent the Covid-19 pandemic. Rice consumption has become a hot topic, especially when the Ministry of Agriculture and Rural Development (MARD) proposes to purchase and temporarily store rice to help farmers consume paddy and stimulate production.
In An Giang Province, some farmers have agreed to lower paddy prices, but traders still abandon the deposits and do not return. "Currently, rice exporting enterprises are also facing difficulties in consumption, and the export prices of rice have decreased. The fact that enterprises limit rice purchases makes traders have no source of consumption, so they do not buy rice from farmers,” said the director of a rice exporting enterprise in the Mekong Delta. The paddy prices in many places decreased to VND4,500-VND5,500 per kilogram, down VND500-VND1,500 per kg compared to the winter-spring rice crop.
According to the MARD, Mekong Delta farmers have harvested over 600,000 hectares of summer-autumn rice, while about 900,000 hectares will be harvested in August and September this year. In a recent online meeting, Deputy Minister of Agriculture and Rural Development Tran Thanh Nam could not hide his concern about the situation that farmers harvest rice, but there are no traders to buy it, and how rice will be stored. This is a problem that needs resolving quickly. Therefore, the ministry suggested that the Government allow the purchase and temporarily stockpile of paddy to stimulate production, encourage farmers to continue farming, and ensure the plan for the next crops.
Statistics show that there are still 900,000 hectares of rice in the Mekong Delta under harvest, with an estimated output of about 5 million tons of paddy, equivalent to 2.2 million tons of rice. "The proposal of the MARD to buy paddy for temporary stockpiling is appropriate amid the current context. However, I am a bit confused about how to make it effective,” said Mr. Pham Thai Binh, CEO of Trung An High-tech Agriculture Joint Stock Company.
According to Mr. Pham Thai Binh, it is essential to pay attention to some issues when purchasing paddy through the national reserve channel, including the regulation that enterprises must bid for procurement packages following regulations of the Ministry of Finance. However, amid social distancing, it is hard to participate in bidding.
In the context of the complicated development of the Covid-19 pandemic, Vietnam’s rice exports made an impression in 2020 and the first months of this year. The quality of Vietnamese rice has been recognized positively by many countries. There was a time when the export price of Vietnamese rice approached that of Thai rice. However, over the past time, some activities lack transparency in rice import and export. According to some rice experts, the current price decrease and congestion of summer-autumn rice are the resonance of many reasons. The fact that domestic enterprises imported rice from Cambodia and India in the past time is said to be the same as bringing sand to the beach.
Prof. Dr. Vo Tong Xuan, Rector of Nam Can Tho University, analyzed that it was difficult for enterprises to buy paddy as high as the winter-spring crop because India was releasing its rice reserves, following the cycle of selling old rice to buy new rice into the warehouse. Therefore, the plan to purchase rice for temporary storage in the current context is necessary. However, it is essential to focus on helping farmers in production cooperatives temporarily store rice.
Accordingly, the State or enterprises advance farmers in cooperatives who have just harvested paddy a part of the money so that they can stockpile paddy at home but still have money to cover essential expenses. Or enterprises can buy paddy for temporary storage and advance farmers a part of the money and pay the rest when exporting rice.
At present, a feasible countermeasure is to let rice exporters participate in buying paddy from farmers to reserve and wait for the right time to export. Basically, export enterprises hardly use the annual bank loan limits to purchase paddy for stockpiling because they have already bought paddy. Therefore, the Government needs to direct the banking system to handle capital for enterprises to collect paddy from farmers for temporary storage. Enterprises are solely responsible for profits and losses in trading,” said Mr. Pham Thai Binh.
Along with temporary storage, rice exporters in the Mekong Delta said that local authorities and relevant sectors need to create more favorable conditions for traders to move and purchase paddy for farmers.
According to some enterprises, most of Vietnam’s rice in bags of 5-10 kilograms has not entered supermarkets in Europe and the US because it has not met the quality requirements of these markets. Rice packed in 5, 10, 50, and 100-kilogram bags are mainly consumed by Asian populations. Small bags of rice are being sold to foreign traders under their packaging, but the quantity is not much.
Another difficulty is that Vietnamese enterprises do not have representative offices and stores in major markets. It is difficult to build brands, packaging, and labels for Vietnamese enterprises in the EU and US markets. Initially, enterprises have to negotiate with supermarkets in importing countries to put their goods up for sale. After being put on the shelves, supermarkets immediately promote Vietnamese rice products to assess the quality. However, that is how foreign supermarkets survey for buyer satisfaction. If sales increase and consumers accept the product, supermarkets will discuss with Vietnamese enterprises about packaging and labeling under supermarkets' brands, but rice is still of Vietnamese enterprises. It is difficult for enterprises to sell rice when they pack rice for supermarkets because supermarkets can lower prices to compete. Therefore, the fact that Vietnamese enterprises only process and pack rice under the labels of imported enterprises is still a stable plan.
Nguyen Trung Kien, General Secretary of the Vietnam Food Association, analyzed that to export high-quality rice to fastidious markets, farmers need to ensure standards when cultivating rice, improve quality, limit the use of chemical fertilizers, and use microbial fertilizers instead. To ensure stable rice quality, enterprises need to associate with cooperatives in production areas to minimize intermediaries, reduce production costs, and increase competitiveness.
State budget revenue rises over 13% in Jan-Jul
Positive budget collection during the first seven months is thanks to economic recovery from late 2020 to June this year.
State budget revenue in the first seven months of this year rose by 13.1% against the same period of last year to VND763.8 trillion (US$33.24 billion), or 68.4% of the year's estimate, according to the General Department of Taxation (GDT).
Despite the current Covid-19 outbreak, the budget revenue saw a 3.2% increase year-on-year in July to VND104.4 trillion ($4.5 billion), noted the GDT.
"Positive budget collection during the first seven months was thanks to economic recovery from late 2020 to the first half of this year," explained the tax agency, noting certain economic fields and sectors have enjoyed strong growth from the Government's fiscal and monetary policies, including banking, securities, real estate, and automobile production.
According to the GDT, the majority of banks performed well in 2020 with rising revenue from banking services, high credit growth, and capital mobilization rate.
For the January-July period, accumulated corporate income tax from banks rose by 73% year-on-year, equivalent to VND6 trillion ($261 million).
The real estate market, meanwhile, heated up from late 2020 to early 2021 with growing property transactions, leading to a 61.7% year-on-year in tax revenue in this regard, or VND9.5 trillion ($413.3 million).
The stock market has also emerged as a steady source of revenue with a 2.5-fold increase year-on-year in tax payment, or VND3 trillion ($130.5 million).
The GDT attributed Government's supporting policies for the automobile industry, including a 50% cut in the registration fee for domestically-produced cars, that have led to a doubling of car sale number in December against the same period of last year, and eventually a 47.1% increase in budget revenue from car sales, or VND11.2 trillion ($487.3 million).
Amid severe Covid-19 situation in a number of major economic hubs in the southern region, including the Ho Chi Minh City, Binh Duong, and Long An, the GDT is expected to continue supporting businesses through extending and waiving taxes and fees payment, aimed at sustaining long-term sources of revenue for the State budget.
"The GDT is expected to work with localities to step up efforts in tax management and prevent potential tax losses," it added, especially from e-commerce and online businesses in Vietnam through multinationals such as Facebook, Google, Youtube, and Netflix.
Fitch Solutions estimated Vietnam's fiscal deficit this year to stand at VND259 trillion ($11.26 billion), or 3.8% of the GDP and below the 4% rate recorded last year.
"A continued recovery in economic activity over the coming months led by exports manufacturing and supported by construction and services will help to drive an increase in corporate and personal income," noted Fitch Solutions.
While a continued fiscal deficit will mean more borrowing, Fitch Solutions added that real GDP recovery this year with estimated GDP growth of 5.8% would help to offset the rise in the public debt load and see public debt's share of GDP fall to 55.0% in 2021, from 56.8% in 2020.
This will bring public debt further below the statutory limit of 65.0%, it added.
Putting corporate bond market in the right track
The corporate bond market is going in the right direction after the government has tightened control over market performance, yet potential risks are still looming.
According to statistics by Pham The Anh, chief economist at the Vietnam Institute for Economics and Policy Research (VEPR), in the first six months this year, businesses conducted 306 bond issuances, including 293 private placements with a total value of VND176.828 trillion ($7.7 billion), a more than 8 per cent jump compared to the same period last year, and 13 issuances to the public earning VND15.375 trillion ($668.5 million), equivalent to 50.3 per cent of the public issuance volume in 2020 (not including the issuance of international bonds by some major players like Vingroup or BIM Group).
Commercial banks took the lead with a total issuance value of VND68.113 trillion ($2.96 billion); real estate came second in issuance volume, but the value dropped by a sharp 12 per cent compared to the same period in 2020, to just VND61.988 trillion ($2.7 billion).
The Anh added that the volume of bonds issued to the public, albeit still modest compared to private placements, has reached 8 per cent of the total volume of bonds issued, higher than the 6 per cent in 2020.
Businesses are showing more willingness to issue bonds to the public to raise capital. This is a good signal and will help increase transparency and reduce risks, he added.
Meanwhile, Nguyen Hoang Duong, deputy director of the Finance and Banking Department under the Ministry of Finance (MoF) said that since the beginning of 2021, new regulations related to corporate bond issuance have had a strong impact on the market by restricting small and individual retail investors from buying privately issued corporate bonds as well as by reducing the proportion of bonds issued through private placements and increasing public issuances.
Duong noted that since 2021, the public issuance of corporate bonds must be licensed by the the State Securities Commission when enterprises meet the set requirements, such as having a credit rating for high-value issuances, and after issuance, enterprises must list their bonds on the stock market.
Although rules have been tightened for bond issuances through private placement, looking at the corporate bond market in the first six months of the year, many experts shared that a huge chunk of money is still being poured into this market, including bank loans.
The Anh argued that although the vast majority of enterprises faced difficulties due to COVID-19 and the demand for loans decreased sharply, in the first six months of this year, credit growth reached 5.47 per cent, more than 2.2 times higher than in the same period in 2020. Meanwhile, State Bank of Vietnam figures mirror a low growth in credit volume earmarked for securities and real estate. This means a large amount of money has been pouring into privately-issued corporate bonds.
Senior finance-banking expert Nguyen Tri Hieu assumed that as there is a huge amount of money pouring into the corporate bond market, lax management would pose risks to the financial market and cause economic uncertainties.
"The market contains many potential risks, the MoF and the SBV therefore need to strictly control corporate bond issuance activities,” Hieu proposed.
Duong from the MoF said that according to regulations, enterprises raise capital through issuing bonds on the principle of self-borrowing, self-paying, and self-responsibility for capital efficiency and debt repayment ability.
Issuing large volumes of bonds with high interest rates but inefficiently using capital sources or facing difficulties in production and business activities would lead to a failure in returning bond principals and interests to investors, negatively affecting the bond market and the general financial market.
"Investors need to be aware that high interest rates will come with high risks, so they must be very cautious and carefully evaluate the risks before deciding to buy bonds. Investors need to request the bond issuers and brokerage organisations to provide full information such as which bonds are issued by which enterprises, the purpose of issuance, whether there is collateral, and more," said Duong.
He added that investors should pay special attention not to buy bonds through lucrative offers by service providers, often banks or securities companies, without carefully understanding the financial situation of the enterprise in question, as well as the terms and conditions of the bonds.
Urgent support needed for pandemic-hit workers to retain long-term human resources
Although there are no statistics or assessment of the impact of the phenomenon of people returning to their hometowns from southern epidemic hotspots, many risks exist both in terms of health and finance. The problem for authorities at host cities at this moment is to take care of people’s lives at all costs to retain production forces and keep human resources in long-term.
Establishing a door-to-door support network
Many employees working in southern provinces had to rush back to their hometowns to avoid the COVID-19 pandemic and faced a lot or risks due to unsafety regarding travelling, health and expenses.
The situation only temporarily calmed down when the Government issued express dispatch No. 1063 – requesting local leaders to absolutely not let people move out of their residences from July 31 until the end of social distancing.
Tran Hoang Ngan, director of Ho Chi Minh City Institute for Development Studies Tran Hoang Ngan told Nhan Dan reporter that “Going home is a very normal thing, but not at this time. As a city resident, I understand that you are very worried about the risk of infection and no income to pay for meals and daily expenses. But please stay calm, Ho Chi Minh City is determined not to abandon anyone.”
Ngan has delivered this message at a time when the Government is prioritizing vaccines for the city and the vaccination capacity has been raised to 100,000 doses a day. In addition, dozens of hospitals are being invested rapidly in both equipment and human resources from the central level.
Relief work has also saw changes as the city has begun to set up a door-to-door support network to provide essentials to residents, ensuring that no one is left behind.
Moreover, the Government is directing the reduction of prices of electricity, water and telecommunications. Meanwhile, many landlords are providing free accommodation to ease difficulties for workers.
"There are many reasons that may motivate you to return your hometowns, but staying in the same place is patriotic. If you still decide to return to your homeland, please wait until you are vaccinated and only leave when there is the help and coordination from the authorities. Please think about exhausted medical workers, who are always ready to rush to emergency rooms, to join hands with the frontline forces," Ngan said.
Nguyen Quang Dong, an expert in public policy, said that people need to go back to their hometowns at this time because they cannot continue to maintain their lives in the epidemic area with empty hands and zero income.
To keep them in the city, there is no other way but for the authorities to speed up the vaccination schedule and have a clear message about the relief policy of providing essentials and even handing out cash so that people do not miss any meals and can cover living expenses.
The relief must be maintained until the pandemic is under control, maybe for months, depending on the situation in pandemic prevention and control.
Before the issuance of the Government dispatch No.1063, some central provinces announced to stop receiving people from pandemic areas because the health system was overloaded and could not afford to organise concentrated isolation.
However, Dong said that the responsibility of the localities is to receive returning citizens and if there is a shortage of resources, they can ask for support from the Government.
"Local leaders are facing difficulty in taking charge of pandemic prevention and control, but many localities have limited capacity. The state budget must be responsible for immediately supporting poor provinces to solve the relief problem. The policy at this time must be implemented under the state of emergency, even if it is acceptable to pay support to the wrong objects to some extent, such that no one is missed," Dong emphasised.
Associate Professor, Dr. Pham The Anh, head of the Department of Macroeconomics under the National Economics University, said that the responsibility to help people stay at the same place belongs to both the host authorities and local authorities. The host authorities need to quickly disburse the social security support package to the people. Meanwhile, the local authorities at their hometowns should provide food or cash support to their citizens living in epidemic areas.
Thus, overload will be eased for the pandemic areas while central provinces will also avoid the risk of infection and potential burdens if people continue to repatriate.
Anh also noted that the massive movements of people from their residential areas in recent days will certainly affect long-term resources in the southern key economic zones. At the same time, it creates the burden of creating jobs and ensuring social security for the provinces with repatriated workers.
In economic regions, once the pandemic is under control, it will be not easy to immediately call workers back to work. Labour shortages in industrial parks and manufacturing plants will be quite possible in the near future, Anh added.
Without labour forces for production, there will be no economic development and no contribution to the state budget. Therefore, the economic damages to Ho Chi Minh City, Binh Duong, Dong Nai, and others will be very severe if they do not try their best to retain workers at this time," Anh warned.
The large shortage of labour resources is a visible threat to the textile and garment industry, the largest labour-intensive industry today. Chairman of the Vietnam Textile and Apparel Association Vu Duc Giang said that many of the people in the rush to return to their hometowns in the last days of July and early August were workers of the garment and textile industry. They are workers who had to quit their jobs or suspend working and cannot afford to pay for their accommodations.
Currently, textile and garment enterprises have received orders until the fourth quarter of 2021 and early 2022, but they are concerned that when production recovers, only about 60% of the workers who returned to their hometowns will come back to work. The situation will delay the delivery schedule and affect the export performance of the economy.
Textile and garment sector earns huge profits in first half
The local textile and garment industry continued to enjoy robust growth during the first half of the year as export turnover saw an annual increase of 15% to reach US$15.2 billion, according to the Ministry of Industry and Trade.
These positive signs can largely be attributed to an increasing consumer demand for garments in several major markets, such as the United States, the EU, Japan, and the Republic of Korea, many of which have been able to bring the COVID-19 pandemic under control.
Most notably, the Vietnam National Textile and Garment Group (Vinatex) has taken the lead among profitable businesses after recording after-tax profit of VND292 billion, a nine-fold increase compared to the same period from last year.
Industry insiders say the ongoing political crisis in Myanmar and the fresh coronavirus outbreak in key garment makers of India and Bangladesh have prompted importers to shift to the Vietnamese market.
In addition, Vietnam has also benefited from numerous free trade agreements (FTAs), such as the the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU–Vietnam Free Trade Agreement (EVFTA). Indeed, the implementation of these FTAs have made the selling price of Vietnamese products in the EU market become more competitive.
The country's success in COVID-19 containment efforts last year has served to build considerable trust among foreign partners, leading to an increase in order numbers. Many textile and garment companies have even received production orders until the end of the year.
However, social distancing measures against COVID-19 recently adopted in various localities have seen numerous local firms encounter difficulties in export activities, leading to delays in delivery or the cancelation of orders, according to Tran Nhu Tung, chairman of the Thanh Cong Textile and Investment Joint Stock Company (TCM)’s board of directors,
The TCM representative anticipates that there will be several hurdles for the industry, particularly with a decrease in output in the near future as the latest wave of COVID-19 is hitting Vietnam leading to lockdowns in several localities.
The Vietnam Textile and Apparel Association (VITAS) forecasts that garment exports will rebound providing that the pandemic is brought under complete control after August.
In line with this scenario, the garment industry is anticipated to earn export turnover of between US$32 – 33 billion this year, says the association.
Agro-aquatic firms eye CPTPP benefits in exports to Japan
With numerous benefits coming through the enforcement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), there remains plenty of room for local agro-aquatic items to penetrate the Japanese market, according to industry insiders.
Data from the General Department of Vietnam Customs indicate that Vietnamese exports to Japan during the opening four months of the year posted an increase of 2.67% to US$6.6 billion compared to the same period from last year.
Most notably, strong export growth was recorded in several advantageous Vietnamese products, including peppers soaring 35.23%, cashew nuts 20.35%, and coffee 14%.
Despite this growth, the export value of agro-aquatic products made up just 8.2% of the country's total exports to the Japanese market.
Japan possesses a huge import demand for products like agro-forestry-fishery and processed food which are Vietnam's highly competitive products. However, it primarily imports those items from markets such as the United States and China, with their market shares making up roughly 23.3% and 11.8%, respectively.
The market share of ASEAN nations for this commodity group in the Japanese market accounts for 13.4%, of which imports from the Vietnamese market made up only 18.3% of total ASEAN imports and roughly 2.4% of total Japanese imports.
Both Vietnam and Japan are members of the Vietnam – Japan Economic Partnership Agreement (VJFTA), the ASEAN – Japan Comprehensive Economic Partnership Agreement (AJCEP), and the CPTPP, helping them expand bilateral trade co-operation across multiple fields due to preferential tariffs, according to experts.
Japan is a demanding market which is notable for implementing a range of stringent food hygiene and safety regulations. Vietnamese businesses have been advised to pay special attention to their product quality, technical standards, and prices before exporting to this market.
Source: VNA/VNS/VOV/VIR/SGT/SGGP/Nhan Dan/Hanoitimes
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