VIETNAM BUSINESS NEWS AUGUST 3016:40 HCM City offers tax breaks to household businesses hit by COVID The HCM City Tax Department has waived or reduced taxes worth VNĐ123 billion (US$5.37 million) for 86,197 household businesses affected by the COVID-19 pandemic. It has co-ordinated with local authorities and trade centres and markets to quickly complete procedures for the purpose. Household businesses can also seek other support from the people's committees of wards and communes for losses due to having to shut down. According to the General Statistics Office (GSO), by July 30 some 80,000 businesses in Việt Nam withdrew from the market due to the negative impacts of the COVID-19 pandemic. The number of enterprises halting their business or waiting for dissolution increased significantly by 25.5 per cent compared to the same period last year with 79,700 enterprises. Of which, nearly 40,300 firms halted business, representing a 23 per cent year-on-year increase; 28,000 enterprises stopped operating and were waiting for dissolution procedures, up 28.6 per cent. Another 11,400 companies completed dissolution procedures, up 27.4 per cent. Thus, on average, nearly 11,400 businesses withdrew from the market a month. HCM City’s CPI up 0.33 percent in August The August consumer price index (CPI) of Ho Chi Minh City recorded a month-on-month rise of 0.33 percent, according to the city’s Statistics Office. The rise was attributed to the extended social distancing measures that pushed up demand for essential items like foodstuff while supply was in a shortage and transportation costs rose. Three commodity groups posted rising prices, which are food and catering services with a 1.68 percent increase; beverages and tobacco 0.75 percent; and education 0.003 percent. The prices of pharmaceutical products and health care services remained stable. Meanwhile, declines were reported in the prices of other groups, with housing, electricity, water, fuel, and building materials experiencing the strongest contraction of 0.84 percent. In August, the prices for both gold and US dollar in
the city fell by 0.05 percent compared to the previous month. Long An Province gets approval for $123m infrastructure work in industrial park Deputy Prime Minister Lê Văn Thành has given approval for building infrastructure for the Nam Tân Lập Industrial Park in Long An Province at a cost of VNĐ 2.59 trillion (US$123.6 million). Work on the 245ha facility can only begin after the environmental impact assessment report is approved by the Ministry of Natural Resources and Environment. The province People's Committee has directed its Economic Zone Authority to guide investors on project implementation regulations. Thành has instructed the province to ensure land acquisition and compensation, site clearance and conversion of land use purpose and ensure there are no disputes or lawsuits. Reference exchange rate down at week’s beginning The State Bank of Vietnam set the daily reference exchange rate at 23,142 VND/USD on August 30, down 5 VND from the rate on the last working day of previous week (August 27). With the current trading band of +/- 3 percent, the ceiling rate applicable to commercial banks during the day is 23,831 VND/USD and the floor rate 22,443 VND/USD). The rates at commercial banks stayed stable. At 8:30 am, Vietcombank listed the buying rate at 22,650 VND/USD and the selling rate at 22,880 VND/USD, unchanged from August 27. BIDV kept the buying rate unchanged at 22,685 VND/USD and raised the selling rate by 10 VND to 22,895 VND/USD. During the week from August 23-27, the daily reference exchange rate was revised up on Monday but then down until the end of the week, ending 35 VND lower than the rate at the beginning of the week./. Vietnam remains favoured destination for foreign investment despite COVID-19: Australian newspaper
Vietnam is likely to remain foreign investors’ favoured destination despite the COVID-19 resurgence ravaging across the country, The Australia Financial Review (ARF) said in a story published earlier this week. Though rapidly rising Delta COVID-19 infections have hit manufacturing in Ho Chi Minh City, Vietnam’s commercial hub, the big-picture story of Vietnam being a favoured destination for foreign investment is not expected to change, the daily newspaper said. Even as forecasts are trimmed, economists have faith the nation will bounce back. “In recent decades, Vietnam has excelled in reeling in the big fish in electronics, footwear and clothing,” it said. “Low labour costs, reliable infrastructure and a smooth bureaucratic process have attracted the likes of Samsung, Foxconn, Nike, Adidas, Gap and Levis.” Many factories that are still open are striving to maintain production under the “3 in 1” policy whereby employees eat, sleep and work on site. While some expats have cleared out, many others have stayed. “The small and medium-sized business owners who have investments here have stayed. Most are not panicking. They want to be here, so their companies can recover as soon as possible,” it quoted Simon Fraser, executive director of the Australian Chamber of Commerce (AustCham) in Vietnam, as saying. HSBC has cut its economic growth forecast for Vietnam from 6.1 percent this year to 5.1 percent. “Despite near-term challenges Vietnam’s recovery prospects still look rosy with strong fundamentals,” wrote HSBC economist Yun Liu. “Vietnam will bounce back because it has such a competitive advantage in labour costs,” she said./. Eight-month trade deficit stands at US$ 3.71 billion The first eight month of the year saw Vietnam suffer trade deficit of US$3.71 billion, including US$20.36 billion from the domestic economic sector, according to figures provided by the General Statistics Office (GSO). Meanwhile, the nation’s export turnover during the reviewed period soared by 21.5% on year to US$212.5 billion, despite a fall of 5.4% in August. The domestic sector contributed US$ 55.6 billion, accounting for 26.2% of the total and posting a year-on-year rise of 10.5%. The foreign-invested sector (including crude oil) constituted 73.8% of the total, or US$ 56.8 billion, up 25.5 %. Throughout the period, 30 export products recorded revenue of more than US$1 billion each and together they made up of 91.8% of the total shipments. The group of industrial processing goods made a lion share of total export revenue, with close to US$189.3 billion, representing a year-on-year increase of 22.5%. Meanwhile, agricultural and forestry products raked in US$15.4 billion, up 14.9% and of aquatic products US$5.58 billion, up 7.1 %. The US remained the biggest export market of Vietnam over the past eight months, with revenue of US$ 62 billion, a year-on-year rise of 32.5%, trailed by China came with US$ 32.7 billion, up 19.8%. The EU and ASEAN followed with US$26 billion and US$18.4 billion, showing respective increases of 14.5% and 23.3 %. The nation spent US$216 billion on imports during the eight-month period, an annual growth of 33.8%, with China being the biggest source of imports. The continual complicated pandemic situation across the country, coupled with the enforcement of social distancing measures have adversely affected trade activities during the eight-month period. Australian-funded project to unleash opportunities in Vietnam’s innovative ecosystem A group of academics from Australia’s University of Technology Sydney (UTS) have secured a grant worth 200,000 AUD (146,271 USD) for a project aiming to connect Australian small and medium enterprises (SMEs) with opportunities in Vietnam’s innovative ecosystem. The grant is sourced from the Australia-Vietnam Enhanced Economic Engagement (AVEG) Pilot Program, a scheme by the Australian Department of Foreign Affairs and Trade (DFAT) to enhance trade and investment between the two countries. During the two-year project from September 2021 to July 2023, UTS and partners in Vietnam, including the Vietnamese Ministry of Science and Technology office in Sydney, Saigon Innovation Hub, and Vietnam National University (VNU)’s Ho Chi Minh University of Technology, will connect Australia’s SMEs with opportunities in Vietnam’s innovative ecosystem in emerging areas, such as Industry 4.0, artificial intelligence, Internet of Things (IoT), environment engineering, and big data. The project will promote bilateral trade and allow industry partners to strengthen relationships that will support collaboration beyond the project’s lifespan. The project team include three Vietnamese researchers – Dr. Nguyen Diep, Dr. Dinh Thai Hoang and Prof. Nghiem Duc Long. According to Prof. Long, partners under the project will create an information gateway on investment opportunities and areas of demand regarding entrepreneurship in technology, clean energy and others in Vietnam. A host of workshops and forums are scheduled to be organised to share information on how to start a business and ways to make innovative technologies more affordable and accessible to SMEs. The UTS has been actively engaged in the innovation ecosystem in Vietnam via UTS Rapido Vietnam, particularly environmental engineering projects, including the application of Industry 4.0 to sustainable water systems./. Vietnam’s export turnover up 21.5 percent in eight months Vietnam’s export turnover in the first eight months of 2021 rose by 21.5 percent year on year to 212.5 billion USD , despite a decline of 5.4 percent in August, the General Statistics Office (GSO) reported on August 29. The domestic sector contributed 55.6 billion USD, accounting for 26.2 percent of the total and representing a year-on-year increase of 10.5 percent. The foreign-invested sector (including crude oil) made up 73.8 percent of the total, or 156.8 billion USD, up 25.5 percent. During the period, 30 export items recorded revenue of over 1 billion USD each and together they accounted for 91.8 percent of the total shipments. The group of industrial processing goods reeled in a largest share of total export earnings, with nearly 189.3 billion USD, up 22.5 percent year on year. Meanwhile, agricultural and forestry products brought home 15.4 billion USD (up 14.9 percent) and of aquatic products 5.58 billion USD, up 7.1 percent. The US remained the biggest export market of Vietnam from January-August, buying 62 billion USD of Vietnamese goods, a year-on-year rise of 32.5 percent. China came second with 32.7 billion USD, up 19.8 percent. The EU and ASEAN followed with 26 billion USD and 18.4 billion USD, increasing by 14.5 percent and 23.3 percent, respectively. Meanwhile, the country spent 216 billion USD on imports in the eight-month period, an annual growth of 33.8 percent, with China being the biggest source of imports. The country posted a trade deficit of 3.71 billion USD during the period./. Vietnam scores high in employee experience A study has found that Vietnamese small and medium size enterprises (SMEs) scored an average of 92 percent in employee experience, 8 percent higher than other countries in the region. The employee experience survey was conducted by Willis Towers Watson and SME Magazine across Vietnam, Singapore, Malaysia and Indonesia to help SMEs better understanding their employees’ perspectives and to raise awareness about the importance of developing strong employee experience. “Our data shows that the ability to build trust and belief within a company is largely driven by how connected employees feel towards their leaders,” said Yeo Ooi Keong, practice leader and organisational psychologist at Willis Towers Watson. The study found that SMEs’ employees are generally proud of their companies as they trust the vision of their leaders and understand how their work contributed to broader goals. Hence, 80 percent of respondents are willing to recommend their company as a good place to work. At the end of last year, 38 Vietnamese SMEs were honoured at the SME Magazine’s SME100 Fast Moving Companies Awards. The SME100 Awards utilises a basket of quantitative and qualitative criteria with a focus on growth and resilience to identify and recognise the top performing SMEs in the region./.
It's time for a mass digital literacy campaign It was around this time 76 years ago that saw the beginnings of a popular movement known as the Binh dan hoc vu (Mass Education Movement). It was initiated by President Ho Chi Minh who, at the first cabinet meeting after the Democratic Republic of Viet Nam was proclaimed, said: “An ignorant nation is a weak nation.” The campaign to educate and improve the intellect of the people was launched soon after as illiteracy was considered an enemy as dangerous as foreign aggression and famine, in a country that was then 90 per cent illiterate. It encouraged people of all ages to volunteer to teach others to read and write, and basically helped eradicate illiteracy in Democratic Republic of Viet Nam controlled areas after seven years, despite the ongoing war. Now amid the war against the coronavirus, another campaign is needed to develop society, even as we are struggling to provide disadvantaged people essential support including food and basic daily needs. This time we must work to close the digital divide, which has become more apparent during the pandemic. With social distancing enforced in many cities and provinces, clearly those who can work or study online from home have an advantage over the rest. While over 70 per cent of individuals in Viet Nam are using the internet, according to the Ministry of Information and Communications, this does not mean they can all use the internet for work or study, or earn a living from it. The workable internet environment must be through high-speed cables or strong wifi connections, which are not available and affordable everywhere, especially in rural or remote regions. Even though fixed broadband subscriptions approached 16.7 million and mobile broadband subscribers reached 78 million among the population of nearly 100 million last year, we do not need to second guess to know that those subscribers mainly concentrate in urban areas. Mobile broadband, despite reportedly covering most of the country, is hardly workable in many areas. Many people struggle with unstable communication even in the centre of Ha Noi, and I have heard complaints regarding this from colleagues who have to help their children with online studying. According to the Vietnam Institute for Economic and Policy Research’s Annual Economic Report 2021, although the country saw a boom in e-commerce with nearly two-thirds of businesses using digital platforms last year, facilitated by improving e-government, conditions for digital transformation (e.g. digital infrastructure, connectivity, digital payments, progress in technology absorption) remain limited in comparison with some ASEAN countries. On August 2, telecommunications businesses announced a support package worth nearly VND10 trillion (US$435 million), valuable and timely assistance during the pandemic but only meaningful for those who can afford it. It is high time the State considered an investment to provide universal workable broadband service to all citizens and allocate free data packages to meet their basic needs. The allocation could be managed using the newly granted citizen IDs. Those who want higher speeds or more data should pay the extra. Free workable broadband access means more equal access to basic services: healthcare, aid, insurance, food, education, and more job, social, economic and political opportunities. A universal service also means establishing a huge client/user base, and more efficient management, especially for emerging needs such as public health surveillance. This is fertile ground for business, trade, education, digital finance, and many other services exploiting big data. It will be a big market for home-grown apps and innovation. Competitiveness will still be high as users will use their quotas voting for the better service providers. Businesses will have more incentives creating new and quality digital services and making money out of them. Universal workable broadband service therefore will also lay the foundation for the digital elite to prosper. Now that the Government is increasing investment in infrastructure to boost the economy, which is heavily affected by the pandemic, this should be part of the package as investment in this will create wealth, improving the knowledge of the population and create conditions for a knowledge economy. Of course technocrats have many things to do, but to make full use of the infrastructure we need to address a fundamental condition, that is digital literacy among the population. According to the American Library Association’s digital-literacy task force, digital literacy is the ability to use information and communication technologies to find, evaluate, create, and communicate information, requiring both cognitive and technical skills. This is where a mass education campaign to improve digital literacy, similar in type and scale of the Binh dan hoc vu, is needed. The State should set the skills standards and create a mechanism to encourage broad participation by multiple sectors of society in the campaign. Witnessing the abundance of charitable and community spirit during the fight against the pandemic, it is clear it is not too difficult to mobilise capable people and organisations, especially when the Government has appropriate policies to channel their energy. With the help of modern and creative communication tools their efforts will be multiplied compared to what our predecessors did many decades ago. If people find opportunities in the new environment, they will make efforts to master new skills to join it. While we still have to fight the coronavirus and try to control the pandemic with whatever tools we have, we have to accept that we may have to live with it forever and just strive to minimise its destructive effects on our lives. But just like previous generations who successfully strived to eradicate illiteracy while struggling against famine and foreign aggression, we should together make effort to create a comfortable environment to live and work for all, whatever the adversities. Enterprises assisted in maintaining jobs and training for employees The Department of Overseas Labour Management has asked enterprises specialising in sending workers for overseas employment to provide information on getting support regarding the maintenance of jobs and training for their employees under the Government Resolution No.68/NQ-CP. Enterprises sending workers for overseas employment are requested to provide specific information on their difficulties in making dossiers for getting support in training their workers. They also need to declare in detail the number of eligible workers under Government Resolution No.23, dated July 7, 2012, to get assistance due to effects of the COVID-19 pandemic. Enterprises are requested to send their information to the Department of Overseas Labour Management via email dolabvanphongcuc@gmail.com. Previously, in July, the Department of Overseas Labour Management issued a document to enterprises about a number of policies in support of employees and employers facing difficulties due to the COVID-19 pandemic. About VND4.5 trillion from the Unemployment Insurance Fund will be used to help enterprises train and retrain their workers under the Government’s support policy. Credit risk provision and backup profit As bad debt is now a looming threat in some cases, the provisioning for potential losses due to credit risks has become the focus of attention. Perhaps, now is the time to review how banks should tackle this risk management. The State Bank of Vietnam (SBV) has recently promulgated Circular 11/2021/TT-NHNN, replacing Circular 02/2013/TT-NHNN on classification of assets, risk provisioning, and use of provisions to handle risks in the operations of credit institutions and foreign bank branches. A notable addition in this circular is that from now on, banks have to classify and make provisions for assets acquired from the following activities: debt trading, trading of government bonds on the stock market, forward trading of valuable papers between banks, purchase of promissory notes, treasury bills, certificates of deposit and bonds sold by other credit institutions in the country. Therefore, aside from outstanding loans, off-balance sheet commitments or corporate bonds, those assets considered safe such as government bonds or valuable papers issued by banks must now also be regularly reviewed, classified and taken into risk assessment in order to work out a mechanism for provisioning. Regarding collateral for loans, the new circular clearly defines the re-valuation period at least once every quarter for movables and every six months for real estate, at least once a year for those worth VND200 billion or more. In the context that the value of various assets has changed constantly, and collateral was commonly overestimated far beyond their true value in the past, the regulation concerning the re-valuation period is to oblige banks to take more prudent steps when extending loans. The biggest change is that credit institutions must classify their debts at least once a month, within the first seven days of the month, instead of every quarter, within the first 15 days of the first month of each quarter as stipulated in Circular 02. On the basis of debt classification according to the Credit Information Center (CIC), banks must set aside a sufficient amount as a provision and use it to deal with risks as prescribed, and refer to the results of their previous debt classification to do the same for the next period. According to the SBV, the additional regulation is to make sure all credit institutions act in sync. In addition, the new circular revises the concepts of specific provision, general provision, bad debt, and on-balance sheet bad debt ratio, while supplementing the concept of debt restructuring. It also adjusts the principle of classification of syndicated loans, sold debts, entrusted loans, and purchased debts to be done by lenders themselves. As bad debt is now a looming threat in some cases, the provisioning for potential losses due to credit risks has become the focus of attention. In fact, there have been quite a few differences between banks over the years. While some banks were serious and careful about provisioning, certain others chose to ignore the risks and did not make enough provisions for fear this would affect their profits. Statistics show that by the end of June 2021, the gap between banks when it comes to the ratio of bad debt coverage (a gauge of the level of provisioning against bad debt) had widened. While the majority of banks have this ratio below 100%, with only 30-40% as the lowest, the figure is very high at a handful of banks, above 100%, such as Vietcombank, Techcombank, MBBank, ACB, TPBank, BacABank, Agribank, BIDV, VietinBank, SCB and Sacombank. Apparently, most of the aforesaid banks are the large-scale ones, with some of them achieving handsome profits and impressive growth in recent years, a helpful factor for this group to boldly make provisions. It should be clarified why the bad debt coverage ratio, which results from the division of the estimation for credit losses on the balance sheet at the end of an accounting period by the figure of bad debt, can go higher than 100%. Those without knowledge of the banking industry may have the same question: can a bank’s provision for credit losses be greater than their bad debt? As per the regulation on the level of provisioning, which has been unchanged in the new circular, the specific provisioning rate for each debt group is as follows: 0% for standard debt (Group 1), 5% for debt needing special attention (Group 2), 20% for subprime debt (Group 3), 50% for doubtful debt (Group 4), and 100% for potentially irrecoverable debt (Group 5). However, additionally, banks have so far had to make a general provision for their total outstanding loans (applicable to the first four debt groups) at the rate of 0.75%. In other words, every loan worth VND100 billion requires banks to immediately set aside VND750 million as a provision. As Group 1 debts are currently making up a major part of the total outstanding loans of banks, the 0.75% provision for this group alone and for first four groups in general proves to be a heavy burden on the estimation for credit losses. Therefore, given the specific provision included, it is normal for the credit loss estimation to be bigger than a bank’s bad debt. For this reason, besides the bad debt coverage ratio, to calculate the size of provision against bad debt more accurately, general provision may be excluded, at least for Group 1, from the closing provision balance, before it is divided by the figure of bad debt. These days, people often talk about how some banks are taking swift action to make provisions, which have become a tradition, as a way to save profits for the future. Indeed, all the provisions they make means that if banks manage to resolve and recover their bad debts, these provisions will someday be paid back as a source of extraordinary income and contribute to their annual profits. It should be reminded that, according to the regulation on provisioning, the specific amount to be set aside as a provision is determined via the subtraction of the value of the collateral from the principal balance of a loan, which is then multiplied by the specific provisioning rate depending on the debt group. In case the value of the collateral is even greater than the principal balance, the specific provision to be made is zero. This has significantly affected the provisioning mechanism currently adopted by banks. Those who do not want to make too large a provision (which will likely scale down their profit) may deliberately value the collateral higher than its market price, thereby reducing the level of provisioning. On the contrary, some banks choose to set the value of collateral assets to a lower level than their actual worth, which thus increases the figure of provision to be made. These are usually banks that generate relatively high profit and better growth than in the preceding period. They therefore take the initiative to make big provisions to repress profits and save room for growth in the following period. It is because excessive profit growth may badly affect their reputation, especially when the economy and the business community are mired in troubles, while also exerting considerable pressure on profit growth in the coming years. IFC provides funding to boost trade in Vietnam With the funding, local banks have issued 974 guarantees valued at US$686 million to support exporters and importers. Close to 2,000 exporters and importers in Vietnam have benefitted over the past fiscal year from trade financing from the International Finance Corporation (IFC) designed to help businesses withstand the impacts of Covid-19 and preserve jobs. Given the business disruptions caused by the pandemic and the consequent liquidity constraints, IFC has ramped up its trade finance and supply chain finance in the past 12 months to help local companies in Vietnam, especially garment and agribusiness suppliers, continue importing and exporting goods while protecting thousands of jobs. In 2020, Vietnam’s resilience enabled the country to increase production and exports while businesses in most countries faced significant disruptions, helping it achieve a record-high trade surplus and maintain productive jobs. IFC first expanded trade finance limits for Vietnamese banks to pre-empt potential trade finance challenges triggered by the first outbreak of the pandemic in February 2020. This year, IFC continued expanding trade finance operations in Vietnam to further support increased trade flows to help accelerate Covid-19 recovery. IFC’s Global Trade Finance Program (GTFP) has boosted the capacity of six banks in Vietnam to cover payment risks in granting trade financing to local companies, mostly small and medium enterprises. With IFC’s support, the banks have issued 974 guarantees valued at US$686 million to support exporters and importers. The six banks include An Binh Commercial Joint Stock Bank, Southeast Asia Commercial Joint Stock Bank, TienPhong Commercial Joint Stock Bank, Vietnam International Commercial Joint Stock Bank, Vietnam Joint Stock Commercial Bank for Industry and Trade, and Vietnam Prosperity Joint Stock Commercial Bank. “The Covid-19 pandemic has impacted the capacity of banks to deliver trade finance solutions while limiting their customers’ access to them. IFC’s support has allowed VPBank to extend payment relief to more clients and provide new credit to SMEs that have been affected by the pandemic. This helped facilitate a smooth flow of goods across borders, easing the liquidity constraints,” said Vo Hang Phuong, Director of Financial Institutions and Transaction Banking Center, Vietnam Prosperity Joint Stock Commercial Bank (VPBank). IFC also provided $418 million to local suppliers, helping them maintain liquidity given payment term extensions required by buyers. This support came under the IFC Global Trade Supplier Finance program, which provides short-term financing to suppliers exporting to international buyers, by discounting invoices once they are approved by the buyer. “IFC’s facility enables suppliers to convert sales receivables to immediate cash as soon as buyers approve the receivables. This has helped us improve cash flow and ease the working capital pressure during the time of global trade disruptions,” said Ha Van Tien, Chief Finance Officer, Son Ha Garment JSC., a participant in IFC Global Trade Supplier Finance. Demand for supply chain finance surged during the pandemic due to the liquidity gap faced by suppliers as a result of disrupted supply chains. In response, IFC increased its financing for Vietnamese garment and agribusiness suppliers by 28% in fiscal 2021, allowing 31 companies to sustain operations and securing more than 100,000 jobs. “As in previous crises, IFC’s extensive global experience contributed to maintaining trade flows vital to business operations and to preserving jobs in Vietnam during the early stage of the Covid-19 pandemic. IFC will continue supporting businesses to shore up their working capital and increase trade activities as production cycles recover and economies rebuild after the crisis,” said Nathalie Louat, IFC Global Director of Trade and Supply Chain Finance. 13 enterprises register to sell goods by using cars and buses Thirteen enterprises have registered to sell agricultural products directly to citizens using cars and buses in Hà Nội, according to the city’s Department of Industry and Trade. Twelves companies registered to sell products using cars, including big companies such as Lotte Vietnam, Aeon Vietnam, Ba Vì Milk JSC and Dafusa Vietnam, as well as other private food companies and agricultural cooperatives. Particularly, Bảo Yến Construction Services, Tourism Co registered 10 mobile sales points using buses. Trần Thị Phương Lan, acting director of the department, said cars and buses of these enterprises will sell products to boarding houses and densely populated areas to limit contact. Up to now, nine districts in the city organised 45 mobile sales points and 63 field sales points in the areas where markets or businesses were closed. To be ready for a more worsening situation, the city’s People's Committee has also directed districts, towns and businesses to register their demand for mobile sales. Currently, six districts have registered 62 selling points using buses and cars. The city’s Department of Industry and Trade also said it would strengthen inspection and control of prices. Haiphong attracts $1.4 billion of FDI in first seven months In the first seven months of the year, Haiphong lured in nearly $1.4 billion in foreign direct investment (FDI) and VND3.48 trillion ($151.3 million) of domestic investment capital. The figures were reported by Haiphong Economic Zones (EZs) Management Authority. Cumulatively, as of the end of July, Haiphong has attracted 418 FDI projects with the total investment capital of $17.37 billion. In the first six months, the management authority worked with over 60 investors both online and offline. Industrial zone (IZ) infrastructure investors were actively looking for options to work with partners in the context of the tightening local pandemic prevention measures. For example, Sao Do Group has used VR technology to recreate Nam Dinh Vu Industrial Park (IP) and utilities in 3D space, allowing investors to visit from afar. Nguyen Thanh Phuong, CEO of Sao Do Group, said, “Due to the COVID-19 pandemic, the group's overseas investment promotion activities had to be suspended. All activities take place only via email or online meetings. By surveying investment locations using technology, we can close new contracts, even if we do not work directly.” As a result, since the beginning of the year, Nam Dinh Vu IP has attracted 10 new investment projects with a total investment sum of $315 million, contributing to nearly a quarter of Haiphong's total FDI capital. Meanwhile, at the beginning of this year, LG Group increased the capital of its project in Trang Due IZ by $750 million. By the end of the year, another $1.5 billion is expected to be poured into the project. “LG Group also wants to expand its scale when the third phase of Trang Due IZ is completed,” said Dang Thanh Tam, chairman of the Board of Directors of Kinh Bac City Development Holding Corporation, the developer of the IZ. According to Koen Soenens, sales and marketing director of DEEP C Industrial Zones, it is necessary for Haiphong to keep the area safe and stable against the COVID-19 pandemic. He claimed that besides the infrastructure, policy, and political stability, foreign investors pay special attention to places where the COVID-19 vaccination rate is high. Haiphong has organised the first round of vaccination for nearly 1,700 experts and senior personnel working in IZs and EZs. As of the middle of last week, more than 120,000 of the 160,000 workers in IZs and EZs had registered for vaccination. Up to now, 104,777 people have received the first shot and 26,620 got both. VietinBank to divest from VietinBank Securities and VietinBank Leasing VietinBank (HSX: CTG) is allegedly looking for a strategic
partner to sell part of its ownership in two of its subsidiaries, VietinBank
Securities (HSX: CTS) and VietinBank Leasing. Vietinbank Securities has witnessed impressive growth in the first half of 2021. The brokerage recorded a revenue of more than VND413 billion($17.96 million), up 76 per cent on-year. After-tax profit reached VND167 billion ($7.26 million), equivalent to a 17-fold increase on-year. In April, VietinBank Securities has bagged a $90 million syndicated loan package from a consortium of foreign banks including WooriBank (Bac Ninh Branch) and Cathay United Bank Vietnam to diversify its sources of funding. Simultaneously, VietinBank is also lowering its capital in VietinBank Capital to VND300 billion ($13 million). Furthermore, the bank is also waiting for approval from the State Bank of Vietnam to divest 50 per cent of its capital in VietinBank Leasing by December this year. Last year, Japan’s Mitsubishi UFJ Lease & Finance Co., Ltd. has acquired a 49 per cent equity interest in VietinBank Leasing. The deal size, however, has not been disclosed publicly. KB Securities predicted that proceeds from expected deals will not have a significant impact on the bank’s size. However, after successful divestment, VietinBank could boost the efficiency of its core business, banking services. Labor shortages may impede companies’ recovery Adversely affected by the Covid-19 pandemic, the economic growth of Vietnam’s key cities, such as Hanoi and HCMC, has been slower. The exodus of migrant workers leaving HCMC may make the path of recovery planned by enterprises more bumpy. Retaining the work force the size it used to be in the context of shrinking market is one of the most difficult conundrums to be solved by businesses. More than half a year has elapsed, and more workers have left HCMC for their home provinces due to lackluster performances of their companies and risks of contracting the coronavirus. The wave of workers departing this city will even worsen the dilemma of enterprises that seek to fulfill their orders to be delivered by the end of this year or want to implement their recovery plans. To reach long-term goals, many businesses have done whatever they could to retain their work force. Serious losses of work force The exodus of leaving workers bound for their home provinces also means factories and enterprises are losing an important part of their labor force. As this is a social phenomenon, it is beyond employers’ reach with some being deprived of half of their staff or more after only a short time. A veteran name in the consumer goods industry, Masan, with a network of over 30 factories nationwide, is also facing a high rate of labor turnover. One of the reasons is the application of the “three-on-the-spot” model (workers do their jobs, have meals and rest on the same spot), which causes inconveniences to female workers as they have families to take care of. “Our rate of turnover in the entire group this year may amount to 100% [rotating leaves, mainly in the retail division], the highest ever rate,” said Nguyen Thi Phuong, permanent general director of VinCommerce. Labor-intensive industries—such as textile and garments, leather and shoes and woodwork—are among the “hardest-hit” when it comes to labor shortages. According to Nguyen Chanh Phuong, secretary general of the Handicraft and Woodwork Association of HCMC (HAWA), the labor crunch has been long underway; however, since the outbreak of the fourth wave of the coronavirus, it has further deteriorated. The woodwork industry is performing very well and some enterprises in this sector have received orders which are due next March or April. However, the “homecoming” of the labor force is causing difficulties to them in carrying out production plans. “HAWA’s almost 600 members’ factories mostly based in Binh Duong, Dong Nai, Tay Ninh provinces and some localities in the Mekong Delta are what they can to fulfill orders of export goods,” said Mr. Phuong. “However, the remaining work force is only from 60-70% of our need.” Meanwhile, a representative of the Vietnam Textile and Apparel Association (VITAS) argued that the garment supply chain is running a risk of disruption as the pandemic has become more complicated. The industry is operating at only 10-15% of its capacity. The same situation occurs when a huge number of factory workers in southern localities, such as HCMC, Binh Duong and Dong Nai, have fled home. The seafood industry, another sector which requires huge contingents of workers, is in the same shoe. According to statistics released by the Vietnam Association of Seafood Exporters and Producers (VASEP), some 30% of its southern members are still working as they meet the “three-on-the-spot” conditions. Yet the number of workers is only from 30-50% of the normal rate because many of them have returned home.” Higher costs spent to retain the work force Enterprises with urgent export orders to fulfill have to comply with the “three-on-the-spot” requirements to race against time. However, nothing is perfect. This model is still somewhat risky and does not ensure total safety. Moreover, to keep this model running and retain the work force to operate production lines, employers have to spend remarkable extra costs. ABC Bakery, for instance, detected infections among its workers while running in line with the model. Subsequently, its factory had to be closed. The infected cases and hundreds of workers had to be in quarantine or treated. So far, some 20 workers have returned to the company and stayed at assigned accommodations near the factory. ABC Bakery also sets up a team tasked with taking care of these workers, both materially and spiritually. “That’s what we need to do to retain our workers so that when restarting, our factory could operate again quickly,” said Kao Sieu Luc, general director of ABC Bakery. “Although we have to spend more to maintain the work force, it is worthwhile.” According to Nguyen Thi Tuyet Mai, deputy secretary general of VITAS, to make workers stay with their workplace, aside from perks and salary increases, Covid-19 vaccination is the most effective way to lure them back. The recovery does not simply mean a return to the state prior to the pandemic. It also involves necessary changes to keep pace with what is happening in a post-Covid world. Quite a few businesses are fully aware that without effective measures to retain their skilled work force, even when the pandemic is under control, factories will not operate normally. To persuade workers to stay in the city, employers have to give them basic income and pay social and health insurances for them no matter whether the enterprises concerned run or not. In this case, a great deal of employers accept to pay extra costs to be able to reach their long-term goals. Le Thi Giau, general director of Binh Tay Food, said to take care of and retain workers, her company has paid them higher than the basic salary, VND7 million a month on average, even they are off work. “Their income must meet their basic needs so that workers are willing to wait for work to start again and be faithful to our company,” said Ms. Giau. “Although we are in difficulty, we have to spend more so that we can come back strongly and quickly after the pandemic is put under control.” According to the Center of Forecasting Manpower Needs and Labor Market Information HCMC (Falmi), from now to the end of the year, HCMC is in need of 150,000 jobs in the fields of commerce, information technology, healthcare, garments, leather and shoes and food processing. These are the sectors which are relatively less affected by the pandemic and whose demand remains great. The need for labor in these industries is expected to rise in the future. During a recent roundtable meeting, Assoc. Prof. Tran Hoang Ngan, rector of the HCMC Institute for Development Studies, contended that when the city obtains herd immunity, production and business will accelerate. It is this reason that the retention of the work force is a way to “rescue” businesses and ensure the city’s economic stability. Room remains for Vietnam economy to end 2021 at high note While the current Covid-19 outbreak has brought both ups and downs in the economy during the first seven months of this year, experts suggested there remains room for the economy to end 2021 on a high note. The fourth outbreak, which flared up in late April, has impacted Vietnam’s major industrial hubs in the southern provinces/cities, including the Ho Chi Minh City and Binh Duong. The Index of Industrial Production has subsequently been on the decline with an expansion rate from over 26% in April to just over 8% in June. Director of the General Statistics Office Nguyen Thi Huong expressed concern over a number of major challenges for the economy in the coming time, including rising input materials and transportation fees on the global market; shortage of labor force due to restriction measures; potential disruption to movements of goods; and slow recovery process of businesses after the pandemic. While the pandemic continues to put pressure on the economy, trade stays as a bright spot to aid economic growth at present. For the seven-month period, trade turnover rose sharply by 30.2% year-on-year to US$373.36 billion, mainly thanks to the recovery of Vietnam’s major export markets, including the US, China, or EU. Of the total, agricultural trade revenue obtained encouraging results with $53.3 billion, or a surge of 33.25% year-on-year. Along with higher budget collection against last year, Huong expects these are the main contributors for Vietnam’s economy to continue its recovery process in the coming months. Based on the current situation, the Government set two growth scenarios, with a baseline case of 6% for the whole year, for which the growth rate in the third and fourth quarters would be 6.2% and 6.5% respectively. In a more positive scenario, Vietnam could reach a GDP growth rate of 6.5% but would require growth of 7% and 7.5% in the last two quarters. In need of measures for both short- and long-term To push for high growth, the Government has issued resolution No.63/NQ-CP on measures to aid economic recovery, with the first priority being to contain the Covid-19 pandemic. Among other measures, Vietnam is expected to accelerate the vaccination program and mobilize the required resources to acquire vaccines supplies. The resolution called for greater discipline in finance-budget management, speeding up public investment, and promoting digital infrastructure development. Professor Tran Tho Dat, president of the National Economics University, said the GDP growth target of 6% is within sight in case Vietnam can soon put the pandemic under control. “Vaccination program continues to be the sustainable solution for Vietnam to move forward,” Dat said. “We should adopt a more flexible twin goal in both containing the pandemic and boosting growth, depending on the actual situation in each province/city,” Dat added. Vice Director of the Institute of Economics-Finance Nguyen Duc Do noted public investment, exports, and domestic consumption would be the three key factors for Vietnam’s economy this year. “The Government has been making drastic solutions to boost disbursement of public investment,” he noted. Meanwhile, Do expect the digital economy, including e-commerce, would open up new room for Vietnam’s economy to grow and adds more resilience against future external shocks. Another key priority for the Government would be to ensure timely and fast implementation of current support programs for businesses and individuals. Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc noted such supports would provide the lifeline for many companies that are struggling for survival. “This, however, is also an opportunity for Vietnam to continue its administrative reform,” Loc stated. One month into the launch of the social support package worth VND26 trillion ($1.1 billion), hundreds of thousands of laid-off workers received financial support worth VND1 trillion ($43.7 million) and over 11.2 million have been entitled to lower premium payment for a combined of VND4.3 trillion ($188 million). Source: VNA/VNS/VOV/VIR/SGT/SGGP/Nhan Dan/Hanoitimes |
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