New FDI challenges for southeast
The southeast continues to take the lead in attracting overseas investment despite the increasing problem of land availability.
Despite gloomy forecasts about global economic prospects, the southeast of the country continues to welcome an influx of foreign direct investment (FDI). Ho Chi Minh City and Binh Duong were the top two regions for attracting foreign investors, enticing $3.94 billion and $3.14 billion from overseas in 2022 respectively.
The volume of FDI for other localities in the region, such as Dong Nai, Ba Ria-Vung Tau, Tay Ninh, and Binh Phuoc also showed a slight increase on-year.
An increasingly apparent challenge to attracting future FDI to the region is ensuring that the amount of quality land reserved for industrial development remains significant. Dao Xuan Duc, from Ho Chi Minh City Industrial and Export Processing Zones Management Authority, noted that the city has only 46 hectares of clear space for investors to lease in 2023 and that this sum is distributed over several districts rather than in a single zone.
Similarly, Dong Nai is facing obstacles in expanding its land fund to attract more overseas finance.
According to Pham Van Cuong, deputy head of Dong Nai Industrial Zones Management Authority, the province’s available land for FDI has reached capacity and five new intended IZs comprising more than 7,100ha are yet to commence development.
Binh Duong, Binh Phuoc, Tay Ninh, and Ba Ria-Vung Tau currently have an advantage in the southeast as they accommodate parks for attracting investment. For instance, Binh Duong has attracted Lego Group to invest in a $1.3 billion factory covering more than 40ha.
Despite the available land, location remains a challenge for these provinces as they are some distance from the major seaports and airports and much of the infrastructure requires upgrading. Construction projects are underway to improve the connectivity of several routes in the region such as the Ring Road 3 in Ho Chi Minh City, Bien Hoa-Vung Tau Expressway, and a number of other planned improvements.
While these projects will do much to alleviate the challenges associated with the lack of connectivity in some parts of the region, they are not expected to be open until 2025.
Majority of supermarkets to remain open during Tet
The majority of supermarket chains nationwide are set to remain open during the traditional Lunar New Year (Tet) festival, the biggest of its kind in Vietnam.
The schedule will see almost all supermarkets shut only on the first day of the Lunar New Year (January 30) before reopening on the second day (January 31). In particular, AEON Vietnam supermarkets will be open throughout Tet.
Along with staying open, AEON Vietnam will offer discounts of between 30% and 40% on many essential items from now until January 20.
The MM Mega Market supermarket system has also announced plans to increase its operating hours from 6 a.m. to 11p.m., except for January 30, to meet customers’ increasing demand for shopping at the end of the year.
The WinMart supermarket will be closed from 12:00 on January 21, and will open again on January 25. During the Tet break, WinMart and WinMart+ will offer discounts of up to 20% on MEATDeli and WinEco products, as well as other essential items at low prices.
Supermarkets GO!, Big C, and Tops Market of Central Retail, will close their doors on January 22, before receiving customers on January 23.
Supermarkets, including Saigon Co.op, also plan to change their opening hours to between 7 a.m. and 10 p.m. during Tet and will reopen on January 23.
Vietnamese people will have seven days off work to celebrate the Tet holiday, starting from January 20.
Ben Tre launches smart agriculture project
The People’s Committee of Ben Tre Province in the Mekong Delta, in collaboration with the International Fund for Agricultural Development (IFAD), kicked off a program on smart agricultural transformation worth US$27 million today, January 11.
The project is funded with a loan of US$17 million from IFAD, and gratis aid of US$4.5 million. The remaining funding will come from the provincial budget and other sources.
Local authorities will prioritize bolstering climate adaptation capacity and boosting collaborative efforts between farmers, enterprises and agencies, according to Nguyen Truc Son, vice chairman of the provincial People’s Committee.
More oil refineries required in Vietnam
Highly volatile petroleum prices in the global market and the fact that the current domestic supply can only meet about 70 per cent of the demand have underlined the need for more refineries in the country.
Vietnam is home to the Dung Quat Oil Refinery, the Nghi Son Refinery and Petrochemical Complex, and condensate processing plants with a total capacity of 14 million tonnes of petroleum per year.
According to the Ministry of Industry and Trade (MoIT), this volume only meets around 70 per cent of current domestic demand, with the rest being imported through key petroleum traders.
State-owned Vietnam Oil and Gas Group (PetroVietnam) has proposed adjusting the investment policy of the Dung Quat Oil Refinery to allow for 7.5 million tonnes per year, while the Nghi Son Refinery and Petrochemical Complex has not yet established an investment plan for capacity expansion.
According to the MoIT, it is estimated that by 2045, Vietnam will lack about 12 million tonnes of petroleum and 3.5 million tonnes of petrochemical products per year.
This shortage is even larger according to PetroVietnam’s calculations, reaching nearly 12 million tonnes of petroleum in 2025 and increasing to nearly 20 million tonnes by 2030.
PetroVietnam has therefore proposed crafting a project to build a refinery and petrochemical complex in the southern province of Ba Ria-Vung Tau.
Accordingly, in phase I the complex is set to turn out 12-13 million tonnes of crude oil and 660,000 tonnes of condensate, LPG, and Ethane per year. The plant’s output will be 7-9 million tonnes of petroleum and 2-3 million tonnes of petrochemicals per year.
The MoIT has also requested the government to direct PetroVietnam to continue studying the project, complemented by inputs from relevant ministries and sectors.
Following supplemental investment in phase II, the project aims to raise the output by an additional 3-5 million tonnes of petroleum and 5.5-7.5 million tonnes of petrochemical products per year.
According to PetroVietnam, the project’s investment scale in phase I will be $12.5-13.5 billion and a further $4.5-4.8 billion in phase II.
Property slowdown unlikely to become systemic crisis
The current property crisis in Vietnam is not likely to be systemic because of the real estate sector’s moderate size and limited links to the banking sector, according to a recent report.
Maybank Vietnam has released a report to assess the impact of a real estate slowdown in Vietnam through an assessment of the size of the real estate sector and its linkages with the broader economy and financial system.
Accordingly, real estate activities accounted for 3.7 per cent of real GDP in 2021. Real estate and its closely related industries, construction and finance, make up 15.6 per cent of real GDP. The aggregated share is nonetheless considerably smaller than China, where real-estate related activities account for as much as 30 per cent of GDP.
The report indicates that a property market downturn could dampen household consumption through negative wealth effects. Real estate is a popular asset class. A 2022 survey indicated that nearly 80 per cent of respondents owned at least one property, mainly comprising married people aged 40 or above with income from VND20 million ($851.97) per month. Most respondents with monthly salaries of more than $2,960 owned two to three properties.
It is said that a slowdown in property development and sales activity may dampen state revenue. Land and property-related revenue comprised 14.6 per cent of total fiscal revenue in 2021, from the assignment of land use rights (11.8 per cent of total revenue), rental of land (2.6 per cent), land and housing tax (0.1 per cent) and sales of state-owned houses (0.1 per cent). However, the government is expected to raise taxes on land and housing in 2023 to discourage speculation, which could offset the revenue impact from the slowdown.
The financial system’s exposure to the property sector is moderate. Property accounted for 20.4 per cent of total outstanding bank loans as of April 2022, compared to 26 per cent of the banking system’s total loans in China. The lion’s share of property loans is mortgage loans extended to homebuyers.
Loans to real estate businesses represented only 7.3 per cent of total outstanding credit as of April 2022. As of the first quarter of 2022, banks’ total balance of investment in corporate bonds represented only 3 per cent of total outstanding loans.
Nonetheless, some developers may be major shareholders or decision-makers in commercial banks, raising concerns about distorted lending practices that bypass regulatory limits.
Fuel traders in HCMC to be inspected in June
The market surveillance authority in HCMC will inspect 91 gas stations operated by more than 50 fuel trading firms citywide in June this year, according to the Market Surveillance Department of HCMC.
Market surveillance teams will look into these businesses’ compliance with laws and regulations on business registration, business conditions, pricing, trading and distribution, among others.
According to the list of firms subject to the inspections, a number of them are major businesses in the field, such as Petrolimex Saigon, Comeco, PV Oil Saigon, Saigon Petro, SFC, Cagico and Timexco.
Aside from conducting the inspections as scheduled, local market surveillance forces will examine some fuel trading facilities without prior notice.
In late December last year, the inspectors from the Ministry of Industry and Trade announced multiple irregularities at 11 fuel wholesalers in southern provinces and cities, including those at some State agencies.
Policies taking shape for real estate market overhaul
The Vietnamese government’s new policies on land, market transparency, taxes, and bond issues are expected to help the real estate market in 2023 to pass through the current gloomy winter and help the market become more stable.
In the past year new resolutions and decrees have been issued related to policies for the real estate market, which are hoped to officially start impacting the market in 2023.
Resolution No.18-NQ/TW, on continuing to improve the effectiveness of land management and use, and create a driving force to develop Vietnam to become a high-income developed country, has defined the specific goal to complete the amendment of the 2013 Law on Land and a number of related laws, ensuring uniformity and consistency.
In December, the government also issued Resolution No.156/NQ-CP on solutions to promote the real estate market safely and sustainably; and Decision No.1435/QD-TTg the previous month set up a working group on reviewing and removing difficulties in implementing real estate projects for both localities and businesses.
Also last month, the prime minister signed Official Letter No.1164/CD-TTg on removing difficulties for the real estate market and housing development. The prime minister requested a review and proposals to amend legal regulations which were overlapping and inadequate, causing obstacles in the implementation of real estate projects.
The prime minister also requested the State Bank of Vietnam to direct, coordinate, and guide localities and commercial banks to lend and disburse quickly, with the correct focus and subjects for loans and disbursements.
Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said that these timely directions will create fundamental changes to restore and develop the market.
Associate professor Tran Dinh Thien, former dean of the Vietnam Economics Institute, said that 2023 will still be tough, but opportunities are also out there, basing this on the fact that the Vietnamese economy has been developed in a stable manner and leads the ASEAN community in many aspects. “However, the real estate market must reduce speculation and restructure investment flow which should be towards affordable properties to serve the majority of the population first, rather than luxury segments,” he said.
Phan Duc Hieu, a standing member of the National Assembly Economic Committee, forecast that the market will have many positive signals based on Vietnam’s economic prospects in 2023.
Vietnam emerges as an attractive alternative location for supply chain diversification
According to a new global survey released by Germany’s Container xChange this week, businesses around the world deem Vietnam and India as attractive alternative locations for the diversification of their supply chains away from China this year.
More than 2,600 industry professionals from over 20 countries were surveyed about shipping and supply chain trends for 2023. The findings show that 67 per cent of respondents thought that Vietnam and India would emerge as functioning container shipping hubs this year and change the existing layout of the global transport industry.
The survey comes amid emerging indications that the two Asian nations are gaining popularity among businesses looking to reduce their reliance on China and diversify their supply chains.
Apple is looking into alternatives to China, such as India, to produce its iPhones. In the meantime, Foxconn and other Apple suppliers are expanding their production facilities in Vietnam. However, it will take time for capacity to be moved out of China. According to the report, the US still depends on China for hundreds of essential products including textiles, chemicals, and electronics.
The majority of the experts surveyed believe that this year’s disruptions will be most heavily influenced by inflation and the recession.
Real estate and construction firms to buy back over $710 million in bonds
According to data from the Vietnam Bond Market Association (VBMA), the total value of corporate bonds reaching maturity from now until the end of this month approximates $760.8 million, mainly concentrated in the real estate and construction sectors.
Specifically, this month, real estate enterprises must pay $456.5 million of bonds due, equal to 60 per cent of the total bond value reaching maturity. Construction firms need to pay $256.5 million, accounting for 34 per cent of the total bond due volume.
If the number of bonds redeemed before maturity was included, the payment pressure on enterprises would be much greater. As of December 30, the total value of bonds bought back before maturity was $9.15 billion, up 46 per cent on-year.
Meanwhile, the amount of new corporate bond issuance has decreased sharply. Throughout 2022, the value of bonds issued to the public amounted to just $460.8 million, down 65 per cent and equal to about 4 per cent of the total issued value. Private bond issuance retail value reached $10.6 billion, down 66 per cent and accounting for about 96 per cent of the total issuance value.
The 2023-2024 period is considered to be the peak of bond maturity with an estimated due value touching $30.4 billion.
According to KB Securities Vietnam, based on the number of months with bonds reaching maturity in 2023, the middle of the year will be a stressful period for the market when the bond maturity pressure is greatest.
The 2023-2024 period is considered to be the peak of bond maturity with an estimated due value touching $30.4 billion.
At the same time, investor confidence has decreased recently, causing new issuance to drop sharply and it is unlikely to recover in 2023. Moreover, domestic and international interest rates have spiked, causing investment cash flows to shift to savings channels.
Data from the VBMA shows that, from the beginning of 2022 to December 23, the value of new bond issuance (both public and private) approximated $11.1 billion, down nearly 62 per cent on-year.
Bond issuance to the public shed 61 per cent, accounting for 4 per cent of the total issued value, while corporate bonds issued privately decreased by 63 per cent, equaling 96 per cent of the total issued value.
General secretary of the VBMA Do Ngoc Quynh said that the corporate bond market in 2022 also witnessed an abnormality as the amount of early redemption increased dramatically.
According to the VBMA’s data, from the beginning of the year to December 23, the total value of bonds bought back by businesses totalled nearly $8.7 billion, up 42 per cent over the same period in 2021.
The abnormal increase in premature repurchases was primarily caused by a wave of bond sales, although also due in part to an unfavourable market.
If deducting the number of bonds repurchased before maturity, in 2022 businesses would have raised only $2.4 billion through the bond channel, equal to one-tenth of the net issuance volume in 2021.
In 2021, businesses successfully issued new bonds worth $28.6 billion, while they only bought back just over $5 billion ahead of time.
Vietnam’s wood exporters to EU seen facing challenges
Vietnam’s wood exporting firms will encounter challenges in shipping their products to the European Union (EU) market when the EU’s new regulations banning the import of agro-products linked to deforestation are approved in the coming time.
The new regulations will require exporters of agro-products such as coffee, rubber, soybean, wood and palm to ensure that their products have not been planted in areas cleared by deforestation.
Once the EU applies the new regulations, Vietnam’s wood and wood product exports to 27 EU members will face more challenges if the wood industry fails to comply with the regulations.
Wood contributes significantly to the country’s agricultural export revenue, at US$14.7 billion in 2021.
The U.S., China, Japan, Korea and the EU are Vietnam’s five major wood buyers, with a total export value of roughly US$15.5 billion, accounting for 91% of the forestry product exports.
Vietnam now has hundreds of enterprises exporting wood and wood products to the EU, according to statistics of the Ministry of Industry and Trade.
Proposed price for ground-mounted solar power at VND1,188/kWh
Electric Power Trading Company (EPTC) – member of Vietnam Electricity (EVN) – has issued a written proposal for the purchase prices of electricity harnessed from solar, wind power plants.
Proposed price for ground-mounted solar power at VND1,188/kWh ảnh 1
Accordingly, EPTC’s proposed prices for products from ground-mounted solar plants, floating solar power plants, onshore and offshore wind power plants are the lowest among the calculated values in various options.
In particular, the price for ground-mounted solar power is VND1,188/kWh (US$0.05), VND1,570/kWh ($0.064) for floating solar power, VND1,591/kWh ($0.068) for onshore wind power, and VND1,945/kWh ($0.08) for offshore wind power. These are the prices submitted by EVN to the Ministry of Industry and Trade on November 20, 2022.
EPTC does not accept products whose prices are higher than the Feed-In Tariffs (FIT price).
Some investors in power plants commented that the above prices are 30 percent lower than those accepted by EVN.
Before this, in response to a series by SGGP Newspaper in November 2022 on challenges in selling solar and wind power of power plants, the Office of the Prime Minister released Dispatch No.7633/VPCP-CN, asking the Ministry of Industry and Trade to handle the case.
Livestock industry still depends on imported animal feed
Vietnam is enjoying a high total export turnover of agricultural, forestry and fishery products; yet it still has to import a large amount of raw agricultural materials and animal feed.
Statistics from the General Department of Vietnam Customs reveal that the import turnover of animal feed and the input for animal feed production processes reached US$5.16 billion at the end of November 2022, a rise of 14.6 percent compared to that time in 2021.
It is calculated that the total import turnover of this merchandise could come to $5.6 billion in the whole 2022. If counting those for poultry and aquatic feed (corn and soybean), this figure could become nearly $10 billion.
Standing Vice President Nguyen Xuan Duong of Vietnam Animal Feed Association attributed this continuous rise to the development of the livestock sector in the country, leading to a higher demand on this merchandise, while the domestic production can no longer satisfy this need and the corn growing area is unchanged. It is estimated that Vietnam requires 33 million tonnes of animal feed each year, only 30-35 percent of which is manufactured domestically.
In addition, certain animal feed types cannot be produced in Vietnam like soya bean meal, palm kernel expeller, fish meal, meat and bone meal, as well as vitamin supplement.
Deputy Director of the Department of Livestock Production Tong Xuan Chinh stated that out of the 269 registered animal feed producers, only 90 are FDI businesses with modern production lines and large capacity. Others are of small scale with outdated technologies and unstable product quality.
More remarkably, these FDI enterprises are occupying 60-70 percent of the market shares, yet they merely focus on the manufacturing and trading stages but not the development of material growing surface area. This means a dependence on imported materials.
To obtain a more sustainable and less risky agriculture that is not too affected by continuously increasing costs and supply chain disturbance, Director of the Department of Livestock Production Duong Tat Thang proposed a rise in the area to grow animal feed materials (corn and cassava) in low-yield rice fields.
Implementation of 2-percent interest rate support package remains sluggish
The implementation progress of the 2-percent interest rate support package is extremely slow, the Ministry of Finance informed at a press conference for the fourth quarter of 2022 on January 9 in Hanoi.
Adding more information about the difficulties and obstacles of this support package, Mr. Nguyen Hoang Duong, Deputy Director of the Department of Banking and Financial Institutions, said that businesses were not interested and concerned that if they received support money, they would be inspected and audited later. The condition for enterprises to be supported is recoverability, but banks said they faced difficulties in recoverability assessment.
According to the review of commercial banks, by September 30, 2022, the outstanding loans of the group of customers eligible to receive interest rate support signed loan agreements and disbursed after January 1, 2022, about VND850,000 billion, equivalent to more than 750,000 customers. Commercial banks have actively sent information to customers.
However, up to 650,000 customers, or 87 percent, did not meet the conditions. Only more than 100,000 customers, or 13 percent, met the loan conditions. Of these, only 7 percent of customers have received interest rate support and are completing the interest rate support dossier; 26 percent of customers have not responded, and up to 67 percent of customers have responded that they do not need interest rate support.
HCMC eyes 40 million domestic and int’l visitors in 2023
The HCMC Department of Tourism has met with tourism companies seeking to attract 40 million local and foreign tourists to the city this year, and obtain total revenue of VND160,000 billion from tourism.
The above target was announced at a tourism conference held by the HCMC Department of Tourism on January 10.
According to the marketing manager of a local tourism company, HCMC should focus more on promoting the city’s tourism products through seminars and exhibitions.
The representative also highlighted the importance of improving the road traffic systems and opening more direct international flights to make traveling easier.
According to Nguyen Trung Khanh, head of the Vietnam National Administration of Tourism, to meet the target of five million international and 35 million local visitors this year, the city should focus on improving the quality of tourism products.
In 2022, HCMC’s tourism revenue amounted to VND131,000 billion, 46.7% above the target. During the first three days of 2023, the city took the lead among cities and provinces nationwide in achieving VND6,000 billion from tourism services.
Ha Noi sees strong recovery in serviced apartment market in Q4/2022
Ha Noi real estate market in the fourth quarter of 2022 saw a better performance in the serviced apartment segment than in apartments sales, according to the Savills’ report on the Ha Noi property market released on January 10.
On the serviced apartment market, occupancy of 81 per cent rose by four percentage points quarter on quarter and 12 percentage points year on year. That has nearly reached the pre-COVID (or the quarter of 2019) figure at 82 per cent.
Rent of VND575,000 per sq.m per month increased by 1 per cent quarter on quarter and 6 per cent year on year. Grade A charged the most at VND735,000 per sq.m per month.
According to the report, Ha Noi had no new supply of serviced apartments in the fourth quarter of 2022, while the stock of 5,935 units from 63 projects was stable quarter on quarter but increased by 4 per cent year on year.
In 2022, Ha Noi was sixth nationally in registered foreign direct investment (FDI), reaching US$1.7 billion, a year-on-year increase of 12 per cent. Newly registered FDI mostly came from Singapore, Japan, and South Korea.
The Ha Noi Department of Labour, War Invalids and Social Affairs granted over 10,000 new work permits to foreign workers and reissued 868.
Nineteen future projects will provide 3,778 units from 2023 onwards. The secondary area will provide 3,097 units or 82 per cent. Branded operators will have 93 per cent or 3,596 units; brands include Ascott, Lotte, The Shilla, Pan Pacific, Wink, Hyatt and Hilton.
In 2023, 19 new launches and the next phases of two projects will add 15,800 units to the Ha Noi apartment market. Grade B will have 79 per cent. Hoang Mai, Nam Tu Liem and Gia Lam will deliver 57 per cent.
Developers also want residential land in satellite provinces, which increasingly meet Ha Noi’s housing demands. Hung Yen and Bac Ninh will provide approximately 103,900 units from 2023 to 2025 onward.
Improving infrastructure, more affordable products and diverse facilities are key success factors, according to Savills.
Tough screening procedures hinder soft-loan rollout
Tough inspection and screening procedures have hindered the rollout of a financial aid package with an interest rate discount of two percentage points, the Ministry of Finance said.
According to commercial banks, the package amounted to VND850,000 billion in 2022, targeting 750,000 borrowers. However, only 100,000 of them were eligible for the package; 7% of them took out loans, 26% remained hesitant and the rest showed no interest.
Loans taken out under the package totaled VND30,000 billion, while outstanding loans with an interest reduction were just a fraction of VND850,000 billion, at VND23,000 billion.
Disbursement has been far slower than expected, with just over VND78 billion in late 2022.
Ho Chi Minh City Food & Beverage Association established
Ho Chi Minh City Food & Beverage Association (FBA) has been set up with the aim of exploring and developing Vietnamese cuisine and showcasing it throughout Vietnam and the world.
At a meeting held on January 11, delegates agreed to approve the charter and operational orientation of the association and elected an executive board of 43 members. Nguyen Tan Viet, Chairman of the Vietnam Food & Beverage Association was elected Chairman of FBA.
The F&B Vietnam Festival 2022 and Vietnamese Cuisine 2023 Forum were also organised on the same day.
The F&B Vietnam Festival 2022 featured 100 dishes and specialties of Vietnam as well as those of Thailand, the Republic of Korea and Japan. This was part of activities aimed at promoting consumption demand and reviving tourism in HCM City and Vietnam as a whole.
Entitled “Night-life Economy & Cuisine Development”, the Vietnamese Cuisine 2023 Forum was expected to offer opportunities for enterprises to popularise Vietnamese brands to regional and international markets.
This year, the city’s tourism sector will focus on building a set of criteria to evaluate its food service establishments, she said, adding that attention will be paid to developing tourism products in combination with the expansion of the city’s night economy.
New FDI challenges for southeast