Vietnam continues to be attractive investment destination: HSBC
The Vietnamese market will remain an attractive investment destination for foreign investors moving forward, the Hong Kong Shanghai Banking Corporation (HSBC) Vietnam said in its monthly macroeconomic update for September 2021.
The bank cites statistics from the Vietnam Leather, Footwear and Handbag Association (LEFASO), noting more than 30% of garment makers have suspended production, prompting garment exports to drop by 4.5% in August compared to the previous month.
Notably, Vietnam's leather and footwear industry currently makes up 15% of the world's market share, a two-fold increase during the past 10 years. Vietnam is also one of the world's largest textile and garment makers, just behind China and Bangladesh.
However, Vietnamese exports of mobile devices and components recorded a sharp increase in August, achieving an annual growth rate of 11%. Meanwhile, exports of computers and electronic products also decreased by 12% compared to the same period last year.
This increase can largely be attributed to the production capacity of two Samsung's factories in the northern provinces of Thai Nguyen and Bac Ninh which have so far brought the fresh COVID-19 outbreak under control. Remarkably, Thai Nguyen is also among 10 cities and provinces which have recorded no COVID-19 cases over a period of 14 days.
The fresh coronavirus outbreak that started in late April has raised concerns about the viability of the Vietnamese supply chain, especially from digital tech giants like Apple and Google that have delayed moving their production lines to Vietnam.
Despite potential challenges, HSBC says Vietnam remains an attractive destination for foreign investors in the coming time thanks to its strong economic fundamental set to help financiers continue to invest into the market.
According to HSBC, Samsung is poised to expand its mobile device assembly and production line ahead in the second half of this year to increase production of foldable phones by 47% to 25 million units.
Moreover, LG Display has also recently approved an additional investment of US$1.4 billion for a factory in Hai Phong City to increase OLED screen output.
Foreign investment inflows to Vietnam totaled US$19.12 billion in the first eight months of the year, a drop of 2.1% compared to the same period last year, according to statistics released by the Ministry of Planning and Investment.
Despite the complicated nature of the COVID-19 pandemic in localities nationwide, the disbursement of FDI projects during the initial eight months of the year saw an annual rise of 2% to US$11.58 billion.
Imported goods for COVID-19 prevention exempted from import tax, VAT
Goods imported by Vietnamese individuals and organizations to aid the Government in combating COVID-19 shall not be liable to import duty and value-added tax.
This is part of the Government's Resolution No. 106 on import tariff policy applicable to imported goods for COVID-19 fight purposes.
The aforesaid policy shall take effect until the COVID-19 pandemic is declared over by State competent agency.
Under current regulations, humanitarian aid and non-refundable aid are also exempted from import duty and value-added tax.
Earlier in February 2020, the Minister of Finance has issued a decision announcing the list of medical supplies enjoying tax exemption serving for COVID-19 prevention and control.
These medical supplies include medical masks, antiseptic dry hand sanitizer, raw materials for manufacturing medical masks (including non-woven fabrics, antibacterial filters, elastic bands, nasal splint strips), antiseptic water, epidemic prevention suits (including clothing, glasses, helmets, shoes, gloves, medical masks) and other necessary medical supplies.
As of September 10, Viet Nam confirmed 598,417 COVID-19 infection cases, 585,051 of whom were documented since April 27 when the fourth wave of coronavirus resurgence began in Viet Nam.
The number of recoveries and fatalities were 350,921 and 14,745, respectively./.
Czechia-Vietnam trade forum explores opportunities from EVFTA
Vietnamese Ambassador to the Czech Republic Thai Xuan Dung speaks at the Czech Republic-Vietnam trade forum in Brno City, the capital of the South Moravian Region on September 10. (Photo: baoquocte.vn)
A Czech Republic-Vietnam trade forum was held in Brno City, the capital of the South Moravian Region on September 10, aiming to provide local enterprises with information on Vietnam's business environment.
The event also aimed to explore opportunities for enhancing trade, investment and economic ties between the two countries as the EU-Vietnam Free Trade Agreement (EVFTA) has entered into force.
In her opening remarks, Czech Deputy Prime Minister and Finance Minister Alena Schillerova said this is the first trade forum organised by the Czech Ministry of Finance in collaboration with the Czech Confederation of Industry and the Association of Young Vietnamese Entrepreneurs to foster the two countries' long-standing relations in trade and economics.
According to the Deputy PM, Vietnam is Czechia's second largest trade partner in Southeast Asia and the 13th globally. Vietnam exports to the Czech Republic consumer and industrial goods while many Czech companies, including those specialised in medical equipment, have succeeded in Vietnam, she said.
The EVFTA will bring even more opportunities for their trade and economic ties to thrive further in the coming time, she continued, adding that it is expected to lift the two-way trade by at least 50 percent.
Czechia wants to ramp up cooperation with Vietnam in the fields of energy, environment, healthcare, and defence industry, she said.
Vietnamese Ambassador to the Czech Republic Thai Xuan Dung said despite adverse impacts of COVID-19, the bilateral trade grew by over 22 percent to 1.5 billion USD in 2020. It totalled 936 million USD in the first half of this year, up 28 percent year on year.
The Vietnam-Czechia economic and trade relations hold huge potentials to grow to a new height after the trade pact took effect, he said, noting that Vietnam highly appreciates the Czech Republic’s backing of the process of the EVFTA ratification and the Czech parliament’s approval of the EU-Vietnam Investment Protection Agreement (EVIPA) only shortly after the European Parliament (EP) ratified the EVFTA.
Discussion at the forum focused on Vietnam's business climate, opportunities to boost two-way trade, and the Southeast Asian country's orientation in agricultural and food exports./.
Ho Chi Minh City plans to reopen economy after September 15
Ho Chi Minh City plans to return to a “new normal” with a roadmap of reopening and recovering in three phases from September 16 to January 15, 2022.
Currently, the city’s goal is to basically control the pandemic by September 15 and restore the economy, bringing the city to a state of “new normal”. The easing of social distancing in Ho Chi Minh City is based on the principle of safety and flexibility according to the results of pandemic prevention. City residents will be handed green or yellow COVID-19 cards based on vaccination status (green for both shots, yellow for one).
The COVID-19 cards will play an important role in controlling people during economic reopening and recovery after September 15. These cards will be issued to individuals meeting all medical and epidemiological requirements.
Ho Chi Minh City plans to reopen the economy in three phases.
Phase 1 is expected to begin on September 16 and last until October 31. During this phase, individuals and employees holding green COVID-19 cards will be uninhibited in their movements except for karaoke bars, discotheques, bars, massage parlours, on-site catering services operating in amusement parks, sports, cinemas, and commercial centres.
Individuals and employees with a yellow card and a negative COVID-19 test will also be allowed to participate in a number of fields as of yet undisclosed.
Phase 2 will last from October 31 to January 15, 2022. In particular, the city will expand the activities allowed for COVID-19 green card holders to include shopping centres, sports training centres, outdoor recreational activities, as well as catering services that are small in scale and ensure the prescribed distancing and host fewer than 20 people at any one time.
Phase 3 is expected to begin on January 15, 2022. The city plans to reopen all activities. However, visitors to karaoke bars, discotheques, bars, massage parlours, will need to have a green card.
Agriculture digital transformation forum to open on September 16
The Vietnam Agriculture Digital Transformation International Forum 2021 will be held next week to update participants on market trends and help agriculture become a pillar of support for the economy amid the COVID-19 pandemic and after.
Oganised by the Ministry of Foreign Affairs, VIDA, and newswire VnExpress, the international forum will discuss the key issues and strategies for Vietnam’s agriculture sector in the regional and global context, to create opportunities to approach modern technology, digital experiences,and to learn how Vietnamese agricultural products can enter international markets more effectively.
Through two symposium sessions themed “Improving the Ecosystem for Vietnam’s Agriculture Digital Transformation” and “Developing Human Resources to Meet the Needs of Vietnam’s Agricultural Digitalisation”, the delegates will discuss the challenges and opportunities of digital transformation in Vietnam and breakthrough opportunities for Vietnamese agriculture.
"This is the first time that a large-scale agricultural forum in Vietnam applies virtual technology. Participants will experience a virtual conference space with features such as check-in, take commemorative photos at the virtual photo booth area, receive guidance and documents at the reception area, participate directly in the programme and put questions to guest speakers or discuss with fellow delegates," Hung said.
"Thanks to these modern features, participants can get the real conference experience without physically visiting directly to the event venue," he said.
In addition, within the framework of the forum, a number of other interesting activities were also organised such as a series of talk shows on agricultural economics to find solutions to modernise and digitalise the agricultural sector and optimise traditional markets.
Besides, the Vietnamese Agriculture Virtual International Exhibition is another highlight event of the forum, with VR technology supporting full immersion.
Amid the Fourth Industrial Revolution and the pivot in development goals, the agriculture sector is demonstrating its role as “the backbone of the economy”. In particular, amid increasingly severe climate change and global pandemics, the agricultural sector remains key in ensuring food security and maintaining economic growth.
In the National Digital Transformation Programme to 2025 with a vision to 2035 approved by the prime minister in June 2020, agriculture is one of the fields to be prioritised for digital transformation by developing high-tech agriculture in the direction of smart agriculture and precision agriculture.
Denmark’s Ørsted ties up with T&T to increase its offshore wind footprint in Vietnam
Denmark-headquartered Ørsted and Vietnamese cross-industry company T&T Group have announced the signing of an MoU to begin a strategic collaboration on offshore wind in Vietnam.
Vietnam has some of the best conditions for producing offshore wind in Asia, with more than 3,200km of coastline and high constant wind speeds. Vietnam’s offshore wind potential is estimated at 500GW by the World Bank Group.
In addition to this world-class potential, Vietnam’s fast-expanding power consumption means that additional large-scale, reliable power sources will be required in the next decades. The Vietnamese government has produced a draft national Power Development Plan (PDP) VIII that includes a target of 3-5GW offshore wind in 2030 and 9-11GW in 2035.
There are a few large-scale offshore wind farms under construction in Vietnam, notably Enterprize Energy’s 3.4GW Thang Long offshore wind farm and Copenhagen Infrastructure Partners (CIP), Asia Petroleum Energy, and Novasia Energy’s 3.5GW La Gan offshore wind farm.
These favourable indicators, together with Vietnam’s strong supply chain potential, have persuaded Ørsted and T&T Group that offshore wind will play a key part in the country’s future energy mix. Do Quang Hien, president and general director of T&T Group, said, “10 years ago, we began researching and preparing for the development of renewable energy in order to be ready when the time was right. This has resulted in T&T completing several large solar PV projects and being on track to complete five big onshore wind projects by the end of this year. Energy is a strategic focus for the T&T Group, and with this collaboration with Ørsted, the global leader in offshore wind, we look forward to accelerating our plans and bringing valuable experience and international investment capital to the offshore wind sector in Vietnam.”
Matthias Bausenwein, president of Ørsted Asia-Pacific, said: “This MoU is a major step for Ørsted in establishing a strong foothold in Vietnam and in showcasing our aspiration to be a reliable long-term partner in this country. Together with T&T, we are excited to use our multi-GW pipeline to build a vibrant local offshore wind industry and to make Vietnam one of the leading offshore wind markets in Asia-Pacific.”
“We believe that offshore wind is one of the best ways for Vietnam to meet its rapidly-growing power demand as this is a utility-scale, reliable, and domestic power source which, if deployed at large scale and with the right framework, can be competitive with coal and gas-fired power stations,” he added.
In anticipation of a developing offshore wind sector in Vietnam, Ørsted set up an office in Hanoi in April. The offshore wind developer stated that it intends to establish a local team and collaborate closely with government officials and local partners.
Pandemic's socio-economic impact threatens to derail global development goals
The COVID-19 pandemic pushed as many as 80 million people in developing Asia into extreme poverty last year, according to the Asian Development Bank (ADB) in a recent important report on the region.
The socio-economic impact caused by the pandemic has hampered efforts to achieve the UN’s global development goals and is threatening to derail them, according to the report.
Out of the Asia-Pacific economies reported on by the ADB, including 46 developing and three developed ones, only around 25% recorded economic growth in 2020.
According to ADB estimates, the population living in extreme poverty (less than US$1.9 per day) in Asia declined from 5.2% in 2017 to 2.6% before the outbreak of COVID-19 in 2020.
However, the pandemic caused an estimated increase of 2% in the poverty rate last year. The region lost about 8 per cent of its work hours, affecting poorer households and workers in the informal economy.
ADB Chief Economist Yasuyuki Sawada said that Asia-Pacific region has made impressive strides, but COVID-19 has revealed social and economic fault lines that may weaken the region’s sustainable and inclusive development.
The world economy has also been witnessing uneven growth. According to a report by the International Monetary Fund (IMF), the global economy is projected to grow 6% in 2021; however, developed countries are recording stronger growth than developing ones.
The IMF has announced a US$650 billion allocation of Special Drawing Rights (SDR) approved by its board of governors in early August. About US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion.
This SDR allocation will provide additional liquidity to the global economic system, supplementing countries' foreign exchange reserves and stepping up their fight against the crisis, noted IMF Managing Director Kristalina Georgieva.
The UN recently said that the goal of hunger eradication and malnutrition in the world by 2030 is unlikely to be achieved due to COVID-19 pandemic and the spread of new virus variants has exacerbated the current situation.
The UN’s International Fund for Agricultural Development (IFAD) will work with the development banks of poor countries to invest in the transition to a sustainable food system to benefit the most vulnerable people.
EU businesses seek to solve COVID-19 challenges
The European Chamber of Commerce (EuroCham) on September 9 attended a high-level meeting with the prime minister of Vietnam, government ministers, and the European diplomatic corps to discuss the ongoing challenges of COVID-19.
EuroCham chairman Alain Cany and other European business leaders emphasised the need to accelerate Vietnam's vaccine roll out; ensure the free-flow of goods; ease the movement of workers; speed up the process for vaccinated business leaders, investors, and experts to return to Vietnam; ensure that factories and companies can resume their operations as soon as possible; and the need to live with the virus in order to maintain economic growth and protect livelihoods.
"There is no disguising the fact that this fourth wave is having a dire impact on business. The EuroCham Business Climate Index is now recording the lowest sentiment in more than a decade. If lockdowns, social distancing, and travel restrictions continue for much longer, new investment projects could be put at risk and companies could consider relocating elsewhere in the region," said Cany.
"What our members need now is a clear roadmap out of these current measures, one which resolves the roadblocks to their commercial operations and gives them a predictable path on which to plan the reopening of their businesses," he added.
According to the chairman, one of the most pressing issues is the need for electronic vaccination passports to ease the free movement of vaccinated people both within and into Vietnam. “In particular, we urge the government to create a fast-track process for foreign business leaders, experts, and their families returning to Vietnam. The current procedure is both time-consuming and burdensome. It also represents a significant barrier to the trade and investment activities which will be essential to achieving economic growth post-pandemic,” he added.
He went on to elaborate that the current “three-in-one” policies need to be refined. While the principle is sound, it places a huge burden on both companies and their workers in practice. It is also important to highlight the need for a vaccination roll-out which prioritises those most at risk to allow a gradual opening up of cities and provinces so that commercial operations can resume; consistent, centralised regulations to reduce confusion for companies and to ensure the smooth circulation of goods; alongside a streamlining and simplification of customs requirements.
During the event, some problems were solved, including pharmaceutical and work permits while the others will take some time to be dealt with.
The EuroCham has launched the “Breathe Again” fundraising initiative. The campaign aims to secure significant donations in order to purchase much-needed medical equipment to support Vietnam's front-line healthcare workers and hard-pressed hospitals in their fight against the pandemic. The campaign has now raised over €1 million for ventilators, monitors, and other essential equipment for hospitals in some of Vietnam's hardest-hit provinces.
$4 billion LNG Bac Lieu gets environmental impact assessment report approved
The Ministry of Natural Resources and Environment has approved the environmental impact assessment report of the $4 billion LNG Bac Lieu project invested by Delta Offshore Energy Pte., Ltd.
According to the report, Delta Offshore Energy (DOE) is responsible for implementing the compensation, land clearance, and support for people affected by the project. The investor also has to complete procedures to change the land use purpose of the area, according to regulations.
DPE has to collect and treat all waste and scrap generated during construction as well as install and operate a cooling water intake and discharge system to ensure environmental safety and minimise the impact on livelihoods, biodiversity, aquatic ecosystems, and seawater quality in the project and surrounding areas.
DOE was asked to comply with current regulations on licensing for exploitation and use of water resources, corridors for protection of water sources, and discharge of wastewater during project implementation.
Previously in late July, DOE and Bechtel signed a contract to provide front-end engineering design (FEED) services for this 3,200MW combined cycle gas turbine (CCGT) power plant.
DOE is a Singapore-registered company focusing on project origination and development in clean energy, with offices in Singapore, Hanoi, and Houston. DOE is the owner of the 3.2GW Bac Lieu LNG-to-power project, which was included in Vietnam's revised National Power Development Plan VII.
$6.7 billion in wind power investment in Vietnam at risk without COVID-19 relief
The Global Wind Energy Council (GWEC) and the global wind industry is calling on the Vietnamese government to postpone the feed-in tariff (FiT) deadline for wind projects by at least six months as a COVID-19 relief measure for the wind sector in Vietnam.
Over the last few years, Vietnam has emerged as a top market for wind and renewable energy investment in Asia, and particularly Southeast Asia. The ambitious targets proposed in the draft Power Development Plan 8 (PDP8) master energy plan have reflected the government's commitment to the long-term decarbonisation of the energy system and strengthening Vietnam's regional competitiveness. It is vital that policymakers act to prevent pandemic-related difficulties from reversing this progress.
The COVID-19 situation in Vietnam has created many hardships for the industry. This extends to supply chain bottlenecks for wind project components, workers prevented from reaching project sites for crucial inspections and activities, travel restrictions for foreign personnel, and other issues. As of August 2021, an industry survey conducted by GWEC estimates that 4,000MW of mainly onshore wind projects in Vietnam are severely challenged by these extenuating circumstances and are now at risk of missing the November deadline for the wind FiT.
Using standard industry calculations based on global and Vietnam averages, 4,000MW of wind projects translate to around $6.7 billion in investment that would significantly benefit local authorities and communities. This includes $6.51 billion in capital expenditures and an additional $151 million in operating expenditures per year across an average 25-year lifetime of projects.
Approximately 21,000 jobs could be created from these wind projects, sustaining coastal populations and supporting a blue economy in Vietnam. Much of this investment and workforce expansion would be locally focused at the province level, including in transport, installation, and operations and maintenance activities.
GWEC is calling on the government of Vietnam to implement a 6-month postponement of the FiT deadline to April 2022, to allow wind projects that have demonstrated clear progress and milestones but are facing uncontrollable COVID-19 related delays to complete construction safely and within the current procurement scheme. GWEC supports establishing clear criteria for eligibility for this deadline postponement, not a blanket extension.
This is in line with international relief measures around the world which have been implemented to support the wind sector from the impacts of the pandemic. For instance, in May 2020 the US provided one year of "safe harbour" for wind projects to complete and continue accessing a clean energy tax credit, while in June 2021, India issued a 2.5-month commissioning extension for renewable energy projects, in recognition of the lockdown measures which lasted from April to mid-June.
Vietnam has identified wind as a key sector for energy security and system decarbonisation in Resolution 55, the draft PDP and other documents. The wind FiT was introduced by Decision No.39/2018 and set at 8.5 US cents per kWh for all projects achieving commercial operations (COD) before November 1, 2021. This policy provided a clear route to market for onshore wind projects and resulted in an enormous investment pipeline of more than 140 wind projects signing Power Purchase Agreements with the state-owned grid operator, Electivity Vietnam, as of August 2021.
However, due to the massive challenges posed by the ongoing COVID-19 outbreak, most of these projects face uncontrollable delays in construction. GWEC's survey found that more than 70 per cent of wind projects which had submitted grid connection requests by August 3, 2021 will not achieve COD by the deadline. Missing this deadline would leave these projects outside the FiT scheme, deteriorating their economics and raising the risk of becoming stranded assets.
Ben Backwell, CEO GWEC said, "Pandemic-related disruptions to travel, worker mobility and supply chains have reverberated across different countries over the last 1.5 years. In recognition of these disruptions, many countries like the US, UK, Germany, India, and Greece have implemented COVID-19 relief packages or deadline extensions for projects to reach their commissioning date. This support is crucial to ensuring investment and development in wind power can continue amid the harsh realities of the pandemic, which are beyond the control of individual project developers. In Vietnam, similar relief measures will be needed to support the nascent onshore wind industry which has been heavily impacted by COVID-19."
Wind energy will make a strong contribution to Vietnam's energy future, and action to support the renewables sector is needed to safeguard the country's attractiveness as a foreign investment destination. Mark Hutchinson, chair of GWEC's Southeast Asia Taskforce, said, "Vietnam is one of the most promising wind markets in Southeast Asia. But this is the make-or-break moment for onshore wind, which reached more than 500MW by the end of 2020. The government must introduce a FiT time postponement that will allow these 4,000MW of otherwise viable and economic wind projects to complete on a reasonable deadline. This is not just a marginal issue: Losing this volume of wind projects would strike a blow to the renewable energy investment environment, initiating a ‘bust’ cycle in Vietnam's wind market which may take years to recover."
A FiT deadline postponement will not only ensure the health of the onshore wind pipeline but also support future investment in the offshore wind sector. The first generation of offshore wind projects are undergoing different stage to close project finance right now. A similar group of international investors is anxiously watching the destination of the current onshore projects at risks. Thus, the project at risk now is not just 4,000MW projects and the investments behind it but a burgeoning offshore wind industry, which is positioned to become a sustainable, affordable, reliable, and indigenous energy solution for Vietnam.
Banks readjusting focus with subsidiary divestments
Vietnamese banks are withdrawing capital from their subsidiaries to refocus on major banking services, with the move opening the door for foreign investors to make inroads in the financial market.
Particularly, the bank targets to divest 15 per cent in VietinBank Securities, reducing its ownership from 75.6 to just over 50 per cent.
Vietinbank Securities has witnessed exceptional growth in its performance in the first half of 2021 thanks to the huge appetite of new retail traders. 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. The company is among the seven most experienced brokerages in Vietnam.
Simultaneously, VietinBank is also lowering its capital in VietinBank Capital to VND300 billion ($13 million). It is waiting for approval from the State Bank of Vietnam (SBV) to divest 50 per cent of its capital in VietinBank Leasing by December.
Last year, Japan's Mitsubishi UFJ Lease & Finance Co., Ltd. acquired a 49 per cent equity interest in VietinBank Leasing. The deal size, however, was not disclosed publicly and the transaction could not be completed as competent authorities require more time to grant approval.
"VietinBank and VietinBank Leasing will continue to coordinate with the transferees to accelerate the approval of the competent authority for the legal transformation of VietinBank Leasing," VietinBank said in a public statement.
KB Securities noted, "In our assessment, proceeds from expected deals would not have a significant impact on VietinBank's operation. However, after successful divestment, VietinBank could boost the efficiency of its core business in banking services and diversify its techable portfolios."
Last month, SHB confirmed that it would temporarily lock its foreign ownership limit ratio at 10 per cent from its previous 20 per cent, and is now negotiating with several foreign investors.
The bank also entered a strategic agreement to sell its consumer finance arm, SHB Finance, to Ayudhya Bank (Krungsri) of Thailand – a member of Mitsubishi UFJ Financial Group from Japan in a $156 million deal. Accordingly, SHB would transfer 50 per cent of SHB Finance's charter capital to Krungsri and the remaining ownership would be transferred to the Thai bank after three years.
MUFG, the largest shareholder of Krungsri (holding nearly 77 per cent stake), is also the largest strategic foreign investor of VietinBank with approximately 20 per cent ownership in the bank.
Elsewhere, MSB last week announced its public auction of its contributed capital shares at its asset management and exploitation arm MSB AMC. According to the bank's semi-annual financial report, MSB is contributing VND100 billion ($4.34 million) of capital to AMC. This divestment would help MSB to restructure its portfolio and refocus its priority on the bank's strengths.
In early 2020, MSB successfully negotiated the transfer of 50 per cent of its FCCOM to Hyundai Card – the credit card company of South Korean automaker Hyundai. However, due to the impact of the pandemic and a change in partner strategy, the $42 million deal has turned sour.
"Currently, there are a few potential partners working with MSB on the FCCOM divestment, and the deal is expected to be completed in 2022," said Nguyen Hoang Linh, CEO of MSB. "Moreover, we are mulling over a few options regarding foreign partnership, such as reserving a part of the bank's capital for foreign investors. In the short run, international strategic partners will transfer international know-how and help MSB to diversify funding sources."
Vo The Vinh, head of Research and Investment Strategy at Guotai Junan Securities Vietnam, said, "We expect MSB to complete the process of selecting a new partner soon and close this deal by the end of 2021 or early 2022. With the average price-to-book ratio of recent deals, we expect MSB to make at least VND500 billion ($21.7 million) in profit from the sale of FCCOM, thereby adding resources to the bank's business."
In late July, Sacombank also confirmed its intention to offload entire capital from brokerage arm Sacombank Securities JSC. The move is in line with the bank's comprehensive restructuring strategy, including divestment from ineffective businesses. The bank could bag VND150-170 billion ($6.5-7.4 million) if the deal is successfully executed.
HCMC’s street food stores not ready for reopening
Few convenience stores have reopened while most of food and drink stores in HCMC are still close after the city's allowance for the resumption of a small number of food and essentials goods delivery services starting on September 8.
Ms. Lan, an owner of a Pho (Vietnamese noodle soup) family-style restaurant on No Trang Long Street in Binh Thanh District said that she has got the information on lifting restrictions on food and beverage services from social media platforms. However, the local administrative agencies have yet officially launched detailed guidance and instructions to residents.
She has also yet prepared essential ingredients that are used for cooking Pho. In addition, it is hard to buy these items during the current social distancing period.
Most of food businesses still cannot resume their operation due to the stricter social distancing measures banning people from going out from 6:00 pm to 6:00 am.
In addition, household stores of food and drink have never applied for a business registration certificate that is now the required condition for reopening.
On the other hand, requirements on implementing the model of “three on the spot”, ensuring employees to have at least one shot of a coronavirus vaccination and get tested for coronavirus once every two days will make an increase in the costs and cause the price to rise.
Another unfavorable condition is that these businesses are permitted to operate from 6am to 6pm in the model of “three on the spot” and limited to drive-through, delivery and take-out as well as use the App-based delivery services with delivery workers for transporting goods under guidelines on Covid-19 prevention and control.
In the morning of September 9, some mini supermarkets and convenient stores, such as Co.op Food, Bach Hoa Xanh, Con Cung and Circle K were opened and saw scattered visitors.
All to play for in bancassurance growth
Bancassurance is prefigured to gain new momentum thanks to its win-win doctrine which generates a generous amount of upfront fees for banks, while insurers could leverage banks' wide-ranging network despite the rigorous social restrictions.
In addition to accelerating digital engagement across the customer journey, insurers have also been reinforcing cross-selling initiatives through bancassurance. Non-interest income growth will become the main driver and take unprecedented priority in banks' income, and bancassurance is among the crucial elements, according to Viet Dragon Securities.
Bancassurance is seen to continue to grow much faster than the agency channel. At some insurance companies such as Prudential, Dai-ichi Life, Sun Life, MB Ageas, and FWD, new premium revenues from bancassurance in the past six months has increased equal to, or even higher than, revenues from agency channels.
So far in 2021, new premium incomes from Prudential's bancassurance channel has surpassed the traditional agency channel, while that of MB Ageas nearly doubled the new premium fee from the agency channel. Sun Life Vietnam also reported its new premium income accounting for nearly 90 per cent of total new fee revenue.
The strong growth of the bancassurance channel with revenue similar to that of the agency channel also helped Dai-ichi Life rise to second among foreign-invested insurers in Vietnam regarding new premium fees in the first half of 2021.
By the end of the period, Manulife's market share of premium income reached 19.1 per cent. The significant driving force for Manulife's continuous growth is that the company had cross-selling insurance contracts with privately-held banks that have large customer data such as ACB, TPBank, Techcombank, and SCB, along with reputable foreign banks such as Shinhan Bank and ANZ, which helped speed up exploitation activities.
"There has also been significant investment in technology at the insurance companies in Vietnam, which explains why Vietnam's life insurance market has experienced double-digit growth over the past few years," said Naren Baliga, COO at Manulife Vietnam.
Tanh Tran, deputy head of Yuanta Securities, said that fee income is likely to be a core topline focus among the banks in H2. The current operating conditions emphasise that the Vietnamese banks must diversify their earnings sources to be less dependent on interest income.
"We expect upfront fee recognition from bancassurance exclusivity deals and bancassurance sales to continue providing support for banks' fee income and earnings in the second half. In addition, we also expect a wave of renegotiated bancassurance exclusivity deals in 2021- 2022," Tran said.
Southern-based lender HDBank is meanwhile allegedly in the process of renegotiating its tie-up with Japan's Dai-ichi Life. Yuanta Securities also anticipated that Techcombank and VPBank would renegotiate their partnerships to get higher upfront fees that will probably be within the range of those of their peers.
VPBank is said to be dealing with AIA for a forthcoming exclusive bancassurance deal. If successful, the bank could bag a generous amount of upfront fees. MB Securities predicted this transaction to take place in 2022 at the latest.
VietinBank, on the other hand, is slated to receive upfront fees from monopoly bancassurance partnership with Manulife by the end of 2021 or in the first quarter of 2022 after Manulife completes the acquisition of Aviva.
Vietnam has traditionally been one of the top countries with the highest growth rate of insurance premiums in the world, with an average annual growth rate of over 9.3 per cent. Although continuously recording high growth, Vietnam has a relatively low market penetration rate of only 2.7 per cent by 2019 (non-life insurance is 0.8 per cent and life insurance is 1.9 per cent), much lower than other countries in the region (averagely at 3.3 per cent).
"We believe that the non-life insurance industry will quickly return to the average growth rate of 15 per cent as in the previous period, while life insurance will maintain a high growth rate of 25-30 per cent per annual," said Khanh Do, analyst at Bao Viet Securities Company.
Despite the high growth rate, the market penetration rate of the bancassurance channel is modest, at only 19 per cent, much lower than the average rate of about 60 per cent in developing countries.
"The low rate lies in several reasons, such as limited products, customers having little understanding of products distributed through banks, and legal issues," Do told VIR.
However, in the past few years, these problems have been gradually solved by insurance companies as well as banks, gradually increasing the efficiency of bancassurance. For example, the renewal rate through bancassurance was only 70 per cent by 2020, but has been increased to 80 per cent by 2020, and even 9 per cent for some companies, according to Do.
Covid-19 likely to leave wind power investment in Vietnam at risk
Without a FiT deadline postponement, these projects will be unable to progress, according to GWEC.
The pandemic restrictions that have put brakes on the supply chain, worker mobility, and other issues have caused significant delays for wind project construction in the fact that they are rushing to complete ahead of the expiry of the Feed-in Tariff ("FiT") on November 1, 2021.
Without a Covid-19 relief measure to extend the FiT for wind projects by at least six months, these projects will become collateral damage of the pandemic and almost 21,000 potential jobs at risk, GWEC said in a request released on September 9.
GWEC and the global wind industry are calling on the Vietnamese Government to postpone the FiT deadline for wind projects by at least six months.
Most onshore wind projects currently in the pipeline will not complete construction in time to meet the deadline for tariff access, GWEC argued, adding that without a deadline postponement, these projects will be unable to progress, adversely impacting local economic growth and the wider renewable energy investment environment in Vietnam.
This will translate into lost investment and tax revenue for local governments, delayed progress towards Vietnam's renewable energy aims in Resolution 55 and a "bust" cycle in Vietnam's wind market which may take years to recover, the organization noted.
Ben Backwell, CEO of GWEC said pandemic-related disruptions to travel, worker mobility and supply chains have reverberated across different countries over the last 1.5 years. In recognition of these disruptions, many countries like the US, UK, Germany, India, and Greece have implemented Covid relief packages or deadline extensions for projects to reach their commissioning date.
"This support is crucial to ensuring investment and development in wind power can continue amid the harsh realities of the pandemic, which are beyond the control of individual project developers. In Vietnam, similar relief measures will be needed to support the nascent onshore wind industry which has been heavily impacted by Covid-19," he said.
Wind energy will make a strong contribution to Vietnam's energy future, and action to support the renewables sector is needed to safeguard the country's attractiveness as an FDI destination, he added.
The Covid-19 situation in Vietnam has created many hardships for the industry. This extends to supply chain bottlenecks for wind project components, workers prevented from reaching project sites for crucial inspections and activities, travel restrictions for foreign personnel, and other issues.
As of August 2021, an industry survey conducted by GWEC estimates that 4,000MW of mainly onshore wind projects in Vietnam are severely challenged by these extenuating circumstances and are now at risk of missing the November deadline for the wind FiT.
Using standard industry calculations based on global and Vietnam averages, 4,000MW of wind projects translates to around $6.7 billion in investment that would significantly benefit local authorities and communities. This includes $6.51 billion in capital expenditures and an additional $151 million in operating expenditures per year across an average 25-year lifetime of projects.
Approximately 21,000 jobs could be created from these wind projects, sustaining coastal populations and supporting a blue economy in Vietnam. Much of this investment and workforce expansion would be locally focused at the province level, including in transport, installation, and operations and maintenance activities.
Vietnam has identified wind as a key sector for energy security and system decarbonization in Resolution 55, the draft Power Development Plan and other documents.
The wind FiT was introduced by Decision 39/2018 and set at 8.5 US cents/kWh for all projects achieving commercial operations ("COD") before 1 November 2021. This policy provided a clear route to market for onshore wind projects and resulted in an enormous investment pipeline of more than 140 wind projects signing Power Purchase Agreements with the state-owned grid operator, Electivity Vietnam, as of August 2021.
GWEC's survey found that more than 70% of wind projects, which had submitted grid connection requests by August 3, 2021, will not achieve COD by the deadline. Missing this deadline would leave these projects outside the FiT scheme, deteriorating their economics and raising the risk of becoming stranded assets.
Mark Hutchinson, Chair of GWEC's South East Asia Taskforce, said Vietnam is one of the most promising wind markets in South East Asia. But this is the make-or-break moment for onshore wind, which reached more than 500MW by end of 2020.
"The Government must introduce a FiT time postponement that will allow these 4,000MW of otherwise viable and economic wind projects to complete on a reasonable deadline. This is not just a marginal issue: Losing this volume of wind projects would strike a blow to the renewable energy investment environment, initiating a "bust" cycle in Vietnam's wind market which may take years to recover," he said.
Hutchinson added that a FiT deadline postponement will not only ensure the health of the onshore wind pipeline but also support future investment in the offshore wind sector. The first generation of offshore wind projects is undergoing different stages to close project finance right now. A similar group of international investors is anxiously watching the destination of the current onshore projects at risk.
Thus, the project at risk now is not just 4,000MW projects and the investments behind it, but a burgeoning offshore wind industry, which is positioned to become a sustainable, affordable, reliable, and indigenous energy solution for Vietnam.
Over the last few years, Vietnam has emerged as a top market for wind and renewable energy investment in Asia, and particularly South East Asia. The ambitious targets proposed in the draft National Power Development Plan VIII (PDP8) have reflected the government's commitment to long-term decarbonization of the energy system and strengthening Vietnam's regional competitiveness. It is vital that policymakers act to prevent pandemic-related difficulties from reversing this progress.
Pandemic driving digital-first mindset around financial services in Vietnam
The global health crisis is driving a digital-first mindset in Vietnam when it comes to opening banking accounts.
“The pandemic is driving a digital-first mindset in Vietnam with 63 per cent of consumers more likely to open an account digitally than a year ago,” said Aashish Sharma, senior director of decision management solutions for FICO in the Asia-Pacific. “The number of consumers who prefer to open bank accounts digitally has grown to 44 per cent and continues to rise, which is significant in a country with a strong branch culture.”
The survey revealed that consumer patience with account applications varied according to product. Vietnamese people had the highest expectations for completing applications in 10 questions or less for savings accounts (53 per cent), transaction accounts (51 per cent), and Buy Now Pay Later products (47 per cent).
Interestingly this expectation was significantly higher than other countries in the survey. For instance, just 41 per cent of UK consumers and 51 per cent of Australian consumers expected to answer 10 questions or less when opening a transaction account.
Overall Vietnamese consumers want digital experiences that reduce friction and inconvenience. They expect their main bank to know them, 70 per cent want to prove their identity online, and 25 per cent of Vietnamese say that financial institutions ask too many questions.
The survey showed that increased friction and security is deemed appropriate by consumers when it comes to applying and onboarding for specific high-value financial products.
Despite relatively high levels of ease and confidence in applying for day-to-day online financial products such as current accounts, savings, loans, and credit cards, more than half (61 per cent) of customers polled expect greater rigour when it comes to mortgage applications.
Research showed that just 31 per cent of Vietnamese would apply for a mortgage digitally, compared to the survey average of around one in three (34 per cent). In all countries bar the US and the UK, in-branch openings are preferred to online methods. South Africa was a modest outlier with 43 per cent of customers favouring online mortgage applications.
Over one in two Vietnamese polled (56 per cent) said they were willing to answer 11 to 20 or more questions when it came to applying online for a mortgage.
Vietnamese who open an account digitally prefer to carry out the process entirely in their chosen channel, whether it be smartphone or website. If customers are asked to move out of channel to prove their identities, many of them will abandon the application, either giving up on opening an account completely or by going to a competitor. Of those who do not immediately abandon, up to an additional 20 per cent will delay the process.
The survey found that any disruption matters. Asking people to scan and email documents or use a separate identity portal causes almost as much application abandonment as asking them to visit branches or mail in documents.
More bank support given to businesses affected by COVID-19
Credit institutions and businesses can now relax after the State Bank of Vietnam enacted Circular No.14/2021/TT-NHNN to extend the time and scope of debt rescheduling for enterprises suffering from COVID-19.
The commercial lenders have deemed the second revision as quick and timely, helping retail and corporate customers and the banks themselves to unclog impediments.
Compared to former regulations, Circular 04 carries two highlights. The scope of the loans which are entitled to delay in repayment with reduction or exemption of interest and fee now cover those arisen from June 10, 2020 until August 1, 2021, instead of just covering the loans prior to June 10, 2020 as regulated in Circular 03 in the first revision.
Despite high assessments for timely enactment of Circular 14, many bank executives said that further efforts towards policy improvement are needed to further uphold firms and banks alike.
Nguyen Dinh Tung, general director of Ho Chi Minh City-based OCB said that the new Circular is supportive to both lenders and firms, and that "OCB will accelerate rescheduling debts for the customers based on amended regulations".
As Circular 03 had only allowed banks to reschedule the loans arose before June 30, 2020, most customers taking loans, including those hardly hit by the fourth wave of COVID-19 from late April until present would not have their debts rescheduled.
Therefore, Pham Nhu Anh, member of military-run lender MB's Board of Directors assumed that extending the time for debt scheduling as in the newly-released Circular 14 is quite necessary, helping firms to resume production as well as quicken capital circulation for higher investment efficiency.
Analysts at PSI Securitiesassumed that Circular 14 would help firms to reduce interest burdens and banks to improve asset quality with their profit not being largely affected by the pandemic impacts.
Despite high assessments for the timely enactment of Circular 14, many bank executives said that further efforts towards policy improvement are needed to further uphold firms and banks alike.
For example, banks should be allowed to extend the time for debt rescheduling by three more months after the date the prime minister announces the pandemic is over. This is to avoid further revisions of the circular.
In addition, many lenders assumed that the SBV has not extended the time to make provisioning for rescheduled loans would exacerbate banks' provisioning dilemma.
Banking experts, however, said that SBV's prudence in the enactment of Circular 14 is understandable, as a lengthy time for debt rescheduling or extending too much provisioning time would mean more bad debts.
Coronavirus slashes farm produce export, businesses look forward to solutions
Vietnam's export turnover in August reduced six percent against the previous month. According to businesses, even if Southern localities ease social distancing measures, only 40 percent of enterprises can recover from the pandemic if the Government do not launch any emergency aid for companies hit hard by Covid-19.
According to the General Statistics Office of Vietnam (GSO), the agriculture sector earned US$1.89 billion from export in June, US$2.07 billion in July but it reduced to US$1.75 billion in August. The export turnover of aquatic products in Vietnam also dropped sharply in August.
General Secretary of Vietnam Association of Seafood Exporters and Producers (VASEP) Truong Dinh Hoe said that only 30-40 percent of aquatic product companies in Southern localities have implemented the model of “three on the spot”. The production capacity of these businesses has also declined by 50-60 percent because many workers left their jobs to avoid getting Covid-19, leading to the region's fall in production capacity by 60-70 percent.
Shrimp export which is one of the strong points of the Mekong Delta region also saw a sharp drop due to the temporary suspension of shrimp processing factories.
The country's shrimp price has dropped while the global shrimp price is on the rise. Shrimp and catfish processing and exporting enterprises are facing a variety of challenges of Covid-19 prevention rules for trans-provincial travel causing the break in the supply chain and transport of goods to supermarkets, shopping malls and seafood processing plants for exporting, General Director of Minh Phu Seafood Joint Stock Company (Minh Phu Seafood Corp) Le Van Quang said at the recent conference on the consumption and production of agricultural and aquatic products in the last months of 2021.
Besides, many rice milling plants in the Mekong Delta region have also sent words of late shipment apology to their partners due to the break in the supply chain during the ongoing social distancing measures and the lack of empty containers from Asia to deliver goods to customers.
According to the Ministry of Agriculture and Rural Development, the Vietnam’s five-percent broken rice price has dropped to US$385-390 per ton, the lowest decrease in the last six months. It is expected to increase by US$403-409 per ton in the beginning week of September.
The US remains Vietnam's biggest export market, followed by China, the EU, ASEAN, South Korea and Japan. However, these markets have many changes in technical barriers to trade (TBTs) that require Vietnamese enterprises have to actively improve their technologies and production processes to meet the major export markets' technical regulations and standards, said Deputy Director of the Vietnam Sanitary and Phytosanitary Notification Authority and Enquiry Point (SPS Vietnam Office), Ngo Xuan Nam.
At the reviewing conference on the activities of the Special Mission Team 970 that was set up to deal with issues related to the consumption of agricultural products amid the Covid-19 pandemic by the Ministry of Agriculture and Rural Development, enterprises suggested the Ministry to solve difficulties in harvesting, supplying raw materials and and consumption.
Some 38,500 tons of catfish have been yet harvested while 90 percent of processing plants have to temporarily suspend because that have failed to implement the model of “three on the spot”. Many localities give vaccine priority to workers working in processing plants but fish farmers. These breeders have not been granted travel document, said Deputy Director of the Department of Agriculture and Rural Development of Can Tho City, Nguyen Tan Nhon.
Deputy Minister of Agriculture and Rural Development, Head of the Special Mission Team 970 Tran Thanh Nam noted that the team will release a document on establishing catfish harvesting teams in six provinces in the region, and ask the local departments of Health, Industry and Trade to issue mechanisms to allow the teams to harvest agricultural products under strict safety guidelines.
As planned, a virtual conference on promoting consumption of agricultural products amid the Covid-19 pandemic chaired by Deputy Prime Minister Le Van Thanh will be held on September 11.
The Ministry of Agriculture and Rural Development will propose the Government to issue a directive on resumption of agricultural production nationwide.
On the other hand, businesses and the local functional departments of localities have made every effort to solve problems in promotion and consumption of agricultural products.
The Department of Agriculture and Rural Development of Dong Nai Province has established two industrial zones specialized in Agro-product processing, including Phu Tuc and Long Giao, and launched solutions to expand export markets, such as the EU, the US, Japan and the Middle East.
Meanwhile Ca Mau Province has used the internet and forms of digital communication to strengthen trade promotion activities, said Deputy Director of provincial Department of Industry and Trade, Duong Vu Nam.
Regarding to the pepper manufacturing sector, Counselor at the Vietnam Trade Affairs Office in India, Bui Trung Thuong said that Vietnam's pepper export turnover to India reaches about US$30 million a year. He noted that Vietnamese exporters should coordinate with famers and cooperatives to meet food safety regulations and enhance the quality of Vietnamese pepper.
Source: VNA/VNS/VOV/VIR/SGT/SGGP/Nhan Dan/Hanoitimes
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