Prime Minister Pham Minh Chinh chaired the plenary session of the fifth Vietnam Economic Forum in Hanoi on December 17.
The event was held both online and in-person formats, with over 1,000 delegates taking part.
Before the plenary session, four thematic discussions were co-chaired by leaders of ministries and agencies, featuring the topics of creating development space and new economic growth drivers, healthy financial and real estate markets for rapid and sustainable economic development, removing bottlenecks in public investment and capital for enterprises, ensuring social welfare and employment in combination with 2023 economic development.
Speaking at the session, Chairman of the Party Central Committee’s Economic Commission Tran Tuan Anh said the event will point out what Vietnam needs to do to maintain macro-economic stability and ensure major balances of the economy; identify the right opportunities, difficulties and challenges; suggest response policies and guidelines to step up industrialistion and modernisation, and fulfilling national development goals till 2030 with a vision to 2045 set in the Resolution adopted by the 13th National Party Congress and other resolutions.
Reporting Vietnam’s economic performance 2022 and orientations to 2023, Minister of Planning and Investment Nguyen Chi Dung said with COVID-19 under control, Vietnam’s inflation stood at 3.02% in January-November and is below 4% for the whole of this year. Industrial production went up 8.6% during the period while the total retail of goods and services rose by 20.5%. The total number of newly-established firms surged by 33.2% annually to 195,000. The foreign direct investment hit a five-year record to 19.68 billion USD, up 15.1%.
Apart from achievements in social welfare, anti-corruption, national defence-security, external affairs and global integration, delegates raised concern over inflation pressure due to external uncertainties, low labour productivity, slow disbursement of public investment capital; risks in securities, corporate bond and real estate markets; high input costs and shortage of materials, among others.
Dung said next year, Vietnam will encounter difficulties and challenges in meeting development goals amid fluctuations in the world. Hence, it requires not only the unanimity, efforts and determination of the entire political system, people and businesses to perform tasks but also support from the global community, governments, international organisations, scientists and experts at home and abroad.
Compal Electronics signs investment agreement in Thai Binh province
Green i – Park JSC and Compal Electronics, a leading electronics corporation of Taiwan (China) on December 16 signed an agreement on land and infrastructure sublease in the northern province of Thai Binh.
Accordingly, Compal Electronics will lease more than 40 hectares of land from Green i – Park JSC to build a factory which specialises in manufacturing and assembling electronic equipment in the Lien Ha Thai Industrial Park.
General Director of Green i – Park JSC Bui The Long said after exploring the investment environment in Thai Binh province, Compal Electronics has decided to pour 260 million USD into the project, adding that this is also the 7th largest project in Lien Ha Thai Industrial Park.
CMSC’s members post revenue of over 47.8 billion USD in 2022
Negative effects of the COVID-19 pandemic and uncertainties in the global markets caused some enterprises under the Commission for the Management of State Capital at Enterprises (CMSC) to see sharp declines in profits this year, with some even posting great losses and reductions in equity.
However, with great efforts and determination, corporations have successfully restored production and business activities, contributing to socio-economic development, generating significant revenue for the state budget, stabilising the macro-economy, building the infrastructure system, and creating a driving force for the development of industries, CMSC Chairman Nguyen Hoang Anh said at a conference on reviewing the work of CMSC and its corporation members in 2022.
Accordingly, the total revenue of 19 groups and corporations is estimated to reach over 1.1 quadrillion VND (47.8 billion USD), equal to 114% of the yearly plan and 133% compared to 2021.
Except for Vietnam Electricity (EVN) which reported a sudden loss due to objective reasons (being unable to increase electricity prices), the total profit before tax of 18 groups and corporations was estimated at more than 39.2 trillion VND, an increase of 73% compared to the plan and 17% over last year.
Of which, 15 out of 19 groups and corporations completed and exceeded the revenue plan; 17 out of 19 groups and corporations completed and exceeded the plan in terms of profit before tax, and 16 out of 19 groups and corporations have completed and exceeded the plan for payment to the state budget.
Some groups and corporations have made great efforts, achieved many positive results, and exceeded the plan in many production and business targets compared to previous years such as Petrolimex, Vinachem, Vietnam National Coal and Mineral Industries Group (TKV), and Vietnam Electronics and Informatics (VEC).
On the implementation and disbursement of investment capital in 2022, after four years of transferring to CMSC, the Commission’s corporation members have approved, carried out, or completed 41 projects in group A, and 125 group B projects, according to Anh.
New hub for technology, arts communities launched in HCM City
Within the framework of the programme “Ready for Next 2022” held from December 4 to 11, the University of Economics HCM City (UEH) officially launched a ArtTech Fusion Hub connecting technology and arts communities for sustainable development.
The ArtTech Fusion Hub (ATFH) creates a network connecting universities, experts, governments, businesses, and domestic and international management agencies to resolve social issues relating to urban and industry development based on technology and art.
ATFH is expected to become an internationally integrated platform and the intersection between art and technology to develop creative activities towards sustainable values.
The hub will carry out the mission of applying ArtTech as a tool to solve urban and industrial problems through education and research to contribute to a better quality of life, and nurture an environment of innovation to encourage changes and inspire the arts towards sustainable development.
It will be the convergence of the community of scientists, researchers, and domestic and foreign experts to discuss, consult, research, and spread knowledge and innovation tools to solve specific and urgent problems.
Enterprises to assess competitiveness capacity of HCM City’s departments, districts
As many as 15,000 enterprises, cooperatives, and business households are expected to take part in surveys and assessments of the competitiveness capacity of departments, agencies, and the People’s Committees of districts and Thu Duc city.
The information was unveiled at a meeting organised on December 16 by the Ho Chi Minh City People’s Committee to launch the implementation of the Department and District Competitiveness Index (DDCI HCMC) 2022.
Up to 8,000 enterprises will assess the local sector (22 districts and Thu Duc city), and 7,000 will evaluate the departments and agencies. The response rate is estimated to reach 25-30% .
The DDCI assessment will last until the end of January next year and its results will be announced in mid-March.
Early warning system for financial market discussed
The National Financial Supervisory Commission and the Korea International Cooperation Agency (KOICA) held a seminar in the northern province of Vinh Phuc on December 16 to look at building an early warning system for the financial market.
At present, Vietnam’s financial market comprises three major sectors – banking, securities and insurance – which are growing but still face risks, such as a high credit/GDP ratio compared to other countries in the region and the world, and high credit volume in real estate, while bad debts and assets remain within an underdeveloped debt trading market, said deputy head of the commission’s general supervision board Duong Hong Ha.
In the securities sector, the volatility of stock indices remains high. Individual investors account for about 80% of stock transactions. Up to 95% of corporate bonds are issued through private placements, and the finance – real estate – construction sector accounts for nearly 70% of market capitalisation and liquidity.
The scale and penetration of Vietnam’s insurance market remain low, given that the ratio of premium volume to GDP in 2021 was 2.5% compared to ASEAN’s average of 3.35%. A number of insurance providers have also failed to follow regulations on information disclosure.
Ha suggested fine-tuning the legal framework to deal with bad debts and restructure weak credit organisations, improving policy forecasting, and facilitating the issuance of corporate bonds to the public.
There should be a roadmap for the equitisation of the Vietnam Stock Exchange, he said, adding that regulations on information disclosure and penalties for violations committed by insiders and major shareholders should be stricter.
In order to improve the resilience of banks in Vietnam, Deputy Director of the State Bank of Vietnam’s Department of Safety Policy in Bank Operation, Inspection and Supervision Le Trung Kien called for a supervision handbook to be issued to replace that issued in 2017, with guidelines on inspecting the resilience of foreign credit organisations and branches.
Dr Phung The Dong from the commission advised policymakers to actively and flexibly adjust prices of goods under the management of the State to prevent shocks to consumers. At the same time, exports should grow sustainably in both quantity and quality to ensure foreign exchange reserves.
Experts at the event also presented studies on the supervision of financial groups in Vietnam, and the impacts of macro-economic factors on the securities market and currency supplies in the country.
Hanoi boasts great potential for MICE tourism
Boasting a number of high-class accommodation facilities, Hanoi enjoys favourable conditions to wlcome large groups of MICE (meeting, incentive, convention, exhibition) tourists, according to the Hanoi Department of Tourism.
At present, the Vietnamese capital is home to 3,425 tourist accommodation facilities with 64,800 rooms, of which 598 hotels and apartments are rated between one to five stars, accounting for 17% of the total. In addition, the city also has dozens of shopping malls, restaurants, entertainment centres, and sports complexes that are capable of serviing large MICE groups.
Recognizing the development potential for this type of tourism, experts agree attracting MICE visitors will bring great benefits to the capital’s tourism industry.
Vu The Binh, chairman of the Vietnam Tourism Association, emphasised that Hanoi, which is the country’s political and cultural centre, and is home to a number of tourist attractions and high-class resorts, has the potential to develop MICE tourism and turn it into one of the capital’s key products.
Sharing this perspective, Nguyen Duc Anh, chairman of Vietnam MICE Tourism Club, noted that MICE tourism often serves high-class guests who are often businessmen, thereby bringing in revenue of up to six times that of other competitors.
However, experts say Hanoi still lacks large-scale event venues that are fully equipped with sufficient accommodation services necessary to serve thousands of people.
Furthermore, there are inadequacies in terms of strengthening connectivity among destinations, event centres and travel agencies, leading to hindrances for the development of MICE tourism.
Dang Huong Giang, director of the Hanoi Department of Tourism, reveals that the capital will hold a seminar on MICE tourism in December in an effort to develop the service in an effective manner.
Livestock groups report gloomy profit
Many livestock companies may fail to reach their profit targets for the whole year due to the low selling prices of pork and a surge in input costs.
With just weeks left of 2022, many livestock companies face challenges to reach their business targets. Dabaco Vietnam announced financial statements for the first three quarters of 2022. It acquired around $405.6 million in revenues, up 20 per cent on-year. In the third quarter alone, the company reported revenues of nearly $154.8 million and $8.5 million in after-tax profit, signifying increases of 33 per cent and 49 per cent respectively.
Nevertheless, the bright business results cannot offset the gloomy results of the consolidated business results in the first two quarters of 2022, which came with the surge in input costs.
According to statistics from the Department of Livestock Production under the Ministry of Agriculture and Rural Development (MARD), Vietnam’s animal feed industry is largely dependent on imported materials. Out of a total of 35 million tonnes of feed ingredients used domestically every year, Vietnam is only self-sufficient for about 13.1 million tonnes, accounting for around 37 per cent. The rest has to be imported.
According to the MARD, one of the key crops for the livestock industry is maize, but maize kernels’ domestic output can only meet one-fifth of the demand, while the remainder must rely on imports.
Meanwhile, the selling prices of pigs remains at a low level, and the imbalance in input cost and selling prices is corroding manufacturers’ profits.
According to the Vietnam General Confederation of Labour, 1,230 businesses and manufacturers in 44 cities and provinces have been forced to either cut working hours or lay off some of their employees. Accordingly, approximately 41,500 people have lost their jobs and over 430,000 people have lost some working hours.
As the domestic livestock industry is facing difficulties, in late October, MARD Deputy Minister Phung Duc Tien signed a document for the Ministry of Finance (MoF) that proposed an adjustment on the import tax on animal feed – namely, eliminating the import tax on soybean meal from the current 2 per cent to promote domestic livestock production.
To reduce dependence on imported raw materials, the MARD is also preparing a draft decree on investment policies to support the production, processing, preservation, and consumption of domestic raw materials.
At the same time, the MARD has mentioned policies to develop maize and soybean material to take the initiative in growing at least 50 per cent of the needed raw materials domestically, thus gradually reducing dependence on imported feed.
Cargo action underlines market future
Vietnam’s cargo space has seen notable fluctuations in recent weeks with the expansion of one group and the full exit of another.
Seven years after the first direct flight from Frankfurt to Ho Chi Minh City came into operation, German group Lufthansa Cargo has decided to open another cargo route to Hanoi, doubling its capacity to Vietnam with four flights per week.
Ashwin Bhat, chief commercial officer at Lufthansa Cargo, said that in addition to adding new aircraft, the main reason why the airline decided to open more routes at this time was the future potential that the Vietnamese market can offer. Lufthansa’s decision moved in the opposite direction of another company that has failed to get off the ground.
Just a few days earlier, IPP Air Cargo – hoped to become the country’s first cargo airline – had to suspend its flight licence due to uncertainties in the cargo market. It cited fluctuating fuel prices and the risk of recession.
IPP Air Cargo was founded last year by Johnathan Hanh Nguyen, chairman of IPP Group. The cargo arm had hopes to become the first specialised air cargo project in Vietnam with total investment of about $100 million.
According to the plan, IPP Air Cargo was to operate five cargo aircraft in the first year, then increase to seven aircraft in the second year and 10 after three years. With the licensing process not carried out, IPP Air Cargo will have to re-submit the application from the beginning if there is a desire to return to the aviation market.
Although IPP Air Cargo’s plan to establish itself has not been realised, the air logistics market has still been a fertile ground for some domestic airlines. In 2014, low-cost private airline Vietjet established Vietjet Air Cargo, a subsidiary operating in commercial exploitation of goods throughout Vietjet’s route network.
In September this year, new domestic airline Vietravel Airlines also cooperated with ASEAN Cargo Gateway (ACG) to establish VUAir Cargo.
According to data from the Vietnam Logistics Business Association, the total volume of goods transported by air in Vietnam has increased 2.5 times over the last decade and is expected to reach 4.1 million tonnes by 2030. The continued expansion of more export markets and taking advantage of free trade agreements will open up great growth opportunities for the air logistics market.
However, Vietnamese airlines hold an international freight forwarding market share of only 12 per cent, while nearly 30 foreign carriers hold the remainder.
Since the beginning of 2022, a series of foreign cargo carriers have been active in the country such as China Central Longhao Airlines, China Southern Cargo Airlines, Air Incheon of South Korea, India’s SpiceJet, and US groups Kalitta Airlines and Western Global Airlines.
Le Duy Hiep, chairman of the Vietnam Logistics Business Association, said that the scale of import-export turnover of Vietnam is set to reach over $700 billion by the end of 2022, of which over half are exported goods.
According to statistics from the General Department of Vietnam Customs in 2021, 17 per cent of export goods from Vietnam are phones, 15 per cent are computers, 11 per cent are machinery and equipment, and 10 per cent involves fashion and apparel.
Reform imperative to tackle red tape in business
Despite efforts of the government in administrative reforms and simplification of business conditions, enterprises are still struggling with cumbersome procedures.
At last week’s conference on promoting economic freedom on doing business and enhancing market efficiency, held in Hanoi by the Vietnam Institute for Economics and Policy Research and the Friedrich Naumann Foundation, experts emphasised that there have not been many actual changes in reforming admin procedures and business conditions.
The Law on Investment 2014 defined 267 conditional business sectors, reduced to 243 in the amended law in 2016 and to 227 in 2020.
However, in the view of Nguyen Minh Thao, head of Business Environment and Competitiveness at the Central Institute for Economic Management (CIEM), preliminary reviews of some sectors have showed that the number of business conditions, in reality, is much more than noted in the law.
In construction, there are too many certificates requested. “In six areas of the construction sector, there are dozens of certificates, and they define some types for every certificate. It is too complicated for enterprises to comply with regulations and procedures that overlap and are unclear,” Thao said.
In the 2017-2019 period in particular, the government issued 40 guiding documents on improving the business environment, leading to the drastic implementation and plenty of business conditions removed. However, inevitable restrictions in recent years has stalled the process.
CIEM former general director Nguyen Dinh Cung said that businesses are not finding conditions any easier than a decade ago. “In addition to external factors from around the world, enterprises also claim that regulations related to investment procedures and land are getting stricter, and compliance costs more than ever before,” Cung said.
Vietnam lacks breakthrough reforms to create new vitality for development, while state agencies are not flexible in adjusting some policies and management methods, Cung added, noting that the number of inspection and administrative sanctions is seemingly getting higher.
According to the results of the 2021 Provincial Competitiveness Index, 60 per cent of enterprises find it difficult to implement a conditional business licence. The percentage of enterprises paying informal expenses for the issuance of conditional business licence was 61.4 per cent, and conditional business licence troubles are the reason for 21.7 per cent of enterprises to postpone or cancel business plans.
In the view of Fred McMahon from Canada’s Fraser Institute, institutional improvement and the promotion of business freedom are indispensable requirements at this time because this is how Vietnam can maintain a fast and sustainable growth rate.
Over the past eight years, Vietnam’s status in investment and business climate on the global rankings have improved remarkably. While in 2014, Vietnam’s position in the World Bank’s Doing Business was 78, it was 70th among 190 economies in 2019. The country also jumped 23 places in two years in its economic freedom index, placing 84th in 2022.
New balance required in exploitation of fossil fuels
With global challenges on climate change as well as international commitments on emission reduction, Vietnam will require a strategy to effectively use coal power and follow suit with its goals.
Countries at last month’s COP27 climate summit agreed yet again to pursue the 1.5-degree goal, which requires reducing global greenhouse gas emissions by 43 per cent by 2030 compared to 2019. At the same time, it is proposed to phase out all forms of fossil fuels.
However, many countries – including host country Egypt – want to continue to exploit fossil fuels while still wanting funding to respond to climate change.
The rapid development of coal-fired power plants has helped Vietnam solve its electricity supply issues for its rapid development at a high level, which was accompanied by an average increase in electricity demand of 11 per cent per annum before the pandemic. By the end of 2021, the installed capacity of coal-fired power reached about 24.7GW, accounting for 32 per cent of the system’s total power capacity, according to Electricity of Vietnam.
According to analysts, Vietnam’s strong commitments at recent COP summits will have many impacts on the future of the coal power industry. In addition to the declaration towards net-zero emissions by 2050, Vietnam signed a joint statement on the transition from coal to clean energy, which committed to stop coal power production without recovery technology by 2040, as well as stop issuing new permits for coal-fired power projects without CO2 capture and recovery technology.
The draft of the Power Development Plan VIII from November has also reduced and extended the construction progress of new coal-fired power plants, of which about 7.8GW from difficult projects such as Quynh Lap I and II have been cut, among others. However, the total coal power capacity in the draft by 2030 still targets 39.7GW, representing a 15GW increase compared to the total installed capacity of coal power plants in 2021, and 50.9GW by 2045.
According to many analysts, the development of coal-fired power plants in Vietnam also has significant technical challenges, besides the difficulties in capital mobilisation and the consensus of people and local authorities. Due to the low calorific value of anthracite coal in the country, as well as its high ash content and low volatile matter, it is not suitable for the development of coal-fired power plants using supercritical technology or coal gasification technology. Instead, these plants use imported coal.
Vietnam sets out to deal with carbon tax and market barriers
Vietnam’s market for carbon credits is likely to heat up, bringing with it various challenges for both regulators and businesses.
Vietnam is moving towards the challenging goal of becoming a high-income country by 2045 and achieving net-zero emissions by 2050. Meanwhile, the government has only indirectly taxed carbon through the environmental protection tax for enterprises producing and importing fossil fuels.
Enterprises in the northern province of Hai Duong, which is considered a major cement production centre of Vietnam, could feel the impact of a carbon tax the most. In 2019, VICEM Hoang Thach Cement Group accounted for 4 per cent of Vietnam’s output, at about 3.8 million tonnes. The use of limestone to produce commercial concrete has helped Hoang Thach create high-quality but also cheaper product lines.
However, Hoang Thach’s production line is also deemed as one of the bigger contributors to global warming, and cement production and greenhouse gas (GHG) emissions have always increased together.
The national GHG inventory, report released in 2021 conducted by the Ministry of Natural Resources and Environment in 2016, showed that the total emissions of the whole country were 316 million tonnes of CO2 equivalent. This figure is expected to increase to 928 million tonnes of CO2e by 2030 and 1.5 billion tonnes by 2050 under the business-as-usual scenario.
According to the report, since 2000, emissions from energy activities such as transportation, industry, and residential development increased rapidly, accounting for 65 per cent of total emissions in 2016. Compared with neighbouring countries in Southeast Asia, Vietnam’s emission intensity per unit of GDP is quite high, at about 0.35 kg CO2 per USD.
Experts criticise that the tax rate does not reflect the nature of carbon pricing if calculated per unit of GHG, as the tax rate for petrol is higher than for coal. International experience could help Vietnam flexibly apply carbon tax and market measures to optimise emissions reduction. This may allow businesses to be flexible and proactive in choosing measures to comply with emission quotas, thereby bringing about cost-effectiveness in emission reduction.
In Vietnam, carbon pricing tools have been gradually developing, including the environmental protection tax, an indirect tool that has been used for a long time, and the carbon market, a direct tool that will be applied in the future. Many domestic analysts believe that Vietnam is still struggling in determining the criteria in carbon pricing instead of considering factors for this tool to be effective, including a support mechanism for those who suffer from carbon emissions.
In theory, carbon pricing is an economic policy tool aimed at achieving emission reduction targets at the lowest cost by balancing emissions reduction costs across sectors and sources of GHG emissions.
Vietnam up to the challenge in hitting net-zero targets
At COP27 last month, Vietnam took further action to fulfil its net-zero goals by 2050 through a strong energy transition, which has been putting pressure on long-term energy policy revisions to ensure international commitments.
Nicole Glahnemann, deputy director general of the Department of Energy and Climate Cooperation in Asia at the German Ministry of Economic Affairs and Climate Action, last week travelled to Hanoi to attend a policy dialogue on renewable energy and activities to promote cooperation on green energy. Energy has been one of the development priorities of the German government in Vietnam since 2013 as it contributes to the nation’s reduction of greenhouse gases (GHG).
Germany’s strategy has five main strategic pillars to realise this goal: promoting renewable energy, phasing out coal, increasing energy efficiency, developing clean hydrogen, and the electrification of transport, heat, and industry. Continual policy developments have contributed to accelerating the deployment of renewable energy in Germany, with renewables accounting for nearly half of the nation’s current electricity production.
Vietnam and Germany are aiming for net-zero emissions by 2045 and 2050, respectively, and the German government hopes to have “more bilateral cooperation activities” with Vietnam, said Glahnemann.
About 135 countries have committed to achieving net-zero emissions by mid-century. In Vietnam, the trend of energy transition is associated with the rapid growth of the economy, urbanisation, and industrialisation. Relying on coal and oil energy has created a large amount of energy, but GHG emissions are one of the main causes of climate change. According to estimates by the World Bank, Vietnam lost $10 billion in 2020, equivalent to 3.2 per cent of its GDP, due to the effects of climate change.
In 2021, Vietnam ranked 61st out of 115 countries in terms of readiness for energy transition in the World Economic Forum’s Energy Transition Index. Vietnam was one of the first countries to submit an update of its Nationally Determined Contribution to the UN Framework Convention on Climate Change in 2020, committing to reduce GHG emissions. Such sectors as electricity and transportation have tended to change the most in response to Vietnam’s commitment to reducing these emissions.
Currently, Vietnam’s electricity production mainly depends on hydropower, natural gas, and coal. However, there is currently little room for hydropower development. Gas power developed strongly between 1999 and 2014, with a peak in 2010. However, starting with the Power Development Plan VI from 2007, coal power has become the mainstay. Since 2015, coal production has surpassed gas production, and has increased by an average of 13 per cent a year.
Real estate hoping to build on positive sentiment
The credit growth cap and setting up a working group to solve problems for businesses and localities in the implementation of real estate projects are optimistic signals for the real estate market, which still expects a tough winter ahead.
The State Bank of Vietnam at the end of November officially adjusted the credit growth limit from 1.5 to 2 per cent for credit institutions. This percentage expects to add another $6.5-8.7 billion of the credit source for the economy and is being deemed an opportunity for businesses to access more capital for production and operation.
Nguyen Anh Que, member of the Executive Committee of the Vietnam Real Estate Association, said that the credit extension is a positive signal for the entire economy as well as the real estate sector.
In addition, according to Que, the credit extension will positively impact consumption because the period around Lunar New Year is the favourite time for Vietnamese people to take on consumer loans or buy property.
Immediately after the credit extension, some projects reacted to the market. Hung Thinh Corporation, the investor of Lavita Charm in Ho Chi Minh City, announced the end of a sale with 40 per cent discount for apartment buyers if 98 per cent of the payment is fully paid up front.
At the end of November, the Prime Minister decided to set up a working group with the task of removing issues in the implementation of projects in Hanoi, Ho Chi Minh City, and other locations.
According to Nguyen Manh Ha, vice chairman of the Vietnam Real Estate Association, the establishment of a working group is a timely action in the context of real estate difficulties.
VNDirect estimates about $2 billion of real estate corporate bonds will have to be paid in the first half of 2023 and $2.78 billion in the second half of 2023, putting pressure on liquidity to repay loans.
In fact, the residential real estate industry is facing many challenges, the report continued. “Tight monetary policy leads to short-term liquidity pressure. Currently, bank loans and bond issuance are important capital mobilisation channels for real estate developers in Vietnam,” it said.