The State Bank of Vietnam (SBV) last week solicited feedback from relevant parties about a draft circular stipulating criteria on limiting foreign loans for risky sector.
While the State Bank of Vietnam’s forthcoming tight restriction on offshore loans which are not guaranteed by the government underscores local authorities’ commitment to maintain safe external debt and minimise risks, it could also leave cash-squeezed businesses high and dry.
The State Bank of Vietnam (SBV) last week solicited feedback from relevant parties about a draft circular stipulating criteria on limiting foreign loans for risky sectors, especially loans which are non-guaranteed by the government. Accordingly, Vietnam’s credit institutions and businesses have been taking advantage of the global low lending rate environment for the past two years, which has led to significant offshore loans.
Besides overall improvement on the general rules such as definitions and required content in borrowing plans in order to access offshore loans, the draft does not exclude state-owned commercial banks (SOCB) including Vietcombank, VietinBank, BIDV, and Agribank, as is the case in the SBV’s Circular No.12/2021/TT-NHNN issued last July specifying the trading of promissory notes, treasury bills, deposit certificates and bonds between credit institutions and foreign bank branches in Vietnam. It implies those four SOCBs must meet statutory financial prudence benchmarks as a condition for obtaining offshore loans for credit institutions.
A lending rate ceiling has been set in the draft, which is either composed of the reference rate plus 8 per cent, or secured overnight finance rate plus 8 per cent for foreign currency-denominated loans, or the 10-year government bond yield plus 8 per cent for VND-denominated loans. It implies the maximum lending rate that borrowers will bear, broadly ranging around 10 per cent at current market rates. The draft also adds a clause requiring borrowers to hedge exchange rate risk via derivative tools, excluding credit institutions and borrowers who can demonstrate adequate forex inflows. Borrowers must hedge risk by covering at least 30 per cent of the credit balance (of over $500,000). Those requirements might burden the funding cost for borrowers, but on the other hand, banks might benefit from additional forex derivative income streams.
Vietnam leads the transition to clean energy in SEA: The Economist
Vietnam is leading the transition to clean energy in Southeast Asia and is a bright spot on an otherwise soot-black map, according to an article published recently on news site The Economist.
The article said Southeast Asia is among the parts of the world most vulnerable to climate change. Yet this smoke-belching region seems uninterested in forsaking fossil fuels.
In the four years to 2021, the share of electricity generated by solar in Vietnam increased from practically nothing to nearly 11%. Not only was this a faster rate of increase than almost anywhere else in the world. It is a bigger share than larger economies such as France or Japan have managed.
By last year, Vietnam had become the world’s tenth-biggest producer of solar power. Underscoring his country’s commitment to the energy transition, Prime Minister Pham Minh Chinh vowed in November to stop building new coal-powered plants and to reduce his country’s emissions to net zero by 2050.
Other Southeast Asian countries that desire improve their game can draw a few lessons from Vietnam.
Accordingly, Vietnam has quadrupled its wind and solar power capacity compared to 2019. The article attributed the “extraordinary achievement” primarily to political will and market forces.
Reforms make it easier for foreign investors to do business in Vietnam. However, the article said, if it hopes to achieve net zero emissions by 2050, the country will have to make greater efforts. According to consulting firm Dezan Shira, energy demand in Vietnam has soared by roughly 10% per year over the past decade.
Food prices up, but farmers continue to suffer
The prices of meat, poultry and eggs are rising on the back of increasing production costs, but farmers are still suffering losses, local reports say.
The price of pork is currently VND55,000 to 57,000 per kg, an increase of VND5,000 compared to the beginning of the year; and that of chicken has gone up by VND4,000 to 5,000 to around VND33,000 per kg.
Egg prices have also increased sharply, retailing at VND3,500 to 3,800 for chicken eggs and VND4,000 for duck eggs.
Farmers, however, are still suffering losses because of the high prices of packaging, fuel and other inputs.
On June 1, domestic gasoline prices jumped to an eight-year high. The price of RON92 gasoline increased to VND30,235 from VND29,639 per litre, and that of RON95 gasoline increased to VND31,578 from VND30,653 per litre.
Food producers say that the rising prices of ingredients and transportation have forced them to hike their prices as well.
First offline trade meeting between Vietnamese and Ulsan enterprises set for June
A direct trade meeting to seek business partners between enterprises from Ulsan of the Republic of Korea (RoK) and Vietnamese firms will be held on June 9 in Ha Noi by the Korea Trade-Investment Promotion Agency (KOTRA).
This is the first face-to-face B2B meeting held by KOTRA after two years of disruption due to the pandemic.
Korean firms will introduce diverse products ranging from food and cosmetics to industrial supplies and equipment. This is an opportunity for Vietnamese enterprises to look for reputable Korean manufacturers and suppliers. The participation is free of charge and funded by the Korean government.
Ulsan, southeastern South Korea, is the country’s seventh largest city, with a population of more than 1.1 million.
Ulsan Industrial Park is one of the largest industrial production areas in South Korea.
The sectors of shipbuilding, oil refining, automobile manufacturing, agricultural production and cosmetics have developed rapidly in the city.
US-funded project to boost Viet Nam’s renewable energy development
The Vietnam Low Emission Energy Programme II (V-LEEP II), which is worth US$36 million and funded by the US Agency for International Development (USAID), was kicked off in Ha Noi late last week.
The programme was co-launched by US Ambassador to Viet Nam Marc Knapper, Vietnamese Deputy Minister of Industry and Trade Dang Hoang An, and USAID Vietnam Mission Director Ann Marie Yastishock.
Expected to build on the success of V-LEEP I carried out between 2015 and 2020, V-LEEP II will support the financial mobilisation for 2,000MW of renewable energy and 1,000MW of gas-fueled power to reduce 59 million tonnes of CO2.
The new programme plans to provide cooperation, training, and capacity building activities, as well as tools to support the management and implementation of technology planning, connection and transfer for power production and management.
Earlier, V-LEEP I, in conjunction with the private secto, contributed to the mobilisation of 311 million USD to successfully develop wind and solar power projects with a combined capacity of 300 MW.
Industrial production continues to grow in first five months
The index of industrial production (IIP) in the first five months of 2022 increased by 8.3 per cent over the same period last year, according to the General Statistics Office (GSO).
The IIP in May also surged 4 per cent month-on-month, and 10.4 per cent year-on-year, the GSO said, adding that the processing and manufacturing industry saw a yearly IIP rise of 12 per cent.
During the five months, the IIP growth of the processing and manufacturing industry stood at 9.2 per cent, while that of the electricity generation and distribution and mining industry reached 5.5 per cent and 4.1 per cent, respectively.
Several key industries recorded high growth in the period, including clothes (up 22 per cent); electricity equipment (20.4 per cent); leather and leather products (13.5 per cent); electronics, computers and optical devices (11.6 per cent); and metal production (11.5 per cent).
The GSO also named major industrial products with strong IIP increases such as telephone components with 21.6 per cent, urea fertiliser (18 per cent); clean coal (13.4 per cent); processed seafood (11.4 per cent) and automobiles (10.3 per cent).
Industrial production continued its recovery following the successful containment of COVID-19 throughout the country, it said, adding that the IIP rose in 61 out of 63 provinces and cities, with strong growth seen in Bac Giang (46 per cent); Ha Giang (26 per cent); Binh Phuoc (23 per cent); Quang Nam (22 per cent); Bac Ninh (20 per cent) and Thanh Hoa (17.3 per cent).
Modern oil and gas regulations needed: MoIT
It’s high time Viet Nam establishes modern oil and gas laws and regulations to strengthen the State management of these key resources, attract investors and improve the country’s investment environment, Minister of Industry and Trade Nguyen Hong Dien told National Assembly deputies on Friday in Ha Noi.
He said the country’s Oil and Gas Laws, enacted in 1993 and modified in 2000 and 2008, have started showing a number of shortcomings and limitations, as the current development of the industry has outpaced what policymakers envisioned more than two decades ago.
A key proposal to boost the development of Viet Nam’s oil and gas industry is a reduction of the corporate income tax to 25 per cent and a new policy that brings the maximum cost recovery up to 80 per cent for special oil and gas projects. The proposal was the result of comprehensive studies of business models that have been employed by countries similar to Viet Nam.
Another top priority is to ensure the smooth implementation of the new laws and regulations, according to the chairman of the National Assembly Economic Committee Vu Hong Thanh.
Thanh said the new changes must keep in line with what was set out by Viet Nam’s 2013 Constitution and the international agreements the country has signed. He said lawmakers must conduct extensive studies and reviews of the proposed changes.
According to Thanh, once completed the new laws will cover most major aspects of the industry, from extraction, transport, storage, distribution and retail, meeting the country’s top priorities in regards to national defence, security, foreign policies and sovereignty.
He asked the Government to continue improving bidding regulations for oil and gas development, especially on selecting qualified and capable contractors for future projects.
US starts anti-dumping and anti-subsidy investigation on wooden cabinets
The US Department of Commerce (DOC) has started an investigation into made-in-Viet Nam wooden cabinets, including kitchen and bathroom cabinets, that used Chinese parts that fell under the US tariff regime, said a source from the Ministry of Industry and Trade.
The DOC decision was made in accordance with the US’s imposed anti-dumping and anti-subsidy duties on products originating from China.
According to preliminary data from the United States International Trade Commission, in 2021, the export value of Viet Nam’s products subject to investigation to the United States will reach about US$2.7 billion.
The case against Viet Nam’s products was brought forth by the American Kitchen Cabinet Alliance, which represents several US wood cabinet manufacturers. The alliance has asked the DOC to extend anti-dumping and anti-subsidy duties to wooden cabinets assembled in Viet Nam and exported to the US.
If the DOC decides not to expand the scope ruling, the plaintiff requests an investigation against trade remedy duty evasion concerning wooden cabinets imported from the Southeast Asian country.
Once a case is initiated, the DOC is expected to draw a conclusion in 120 days, possibly adding 180 days if further investigation is required.
Warburg Pincus lead $250m investment in Novaland
Real estate developer Novaland Investment Group JSC has received investment of US$250 million from a consortium led by Warburg Pincus, which it plans to use to complete some important projects.
The money will also be used toincrease its land fund and develop projects at key locations to make use of southern provinces’ improving infrastructure.
Novaland is working with other companies in the NovaGroup eco-system to invest in a variety of facilities in its large urban projects.
Warburg Pincus LLC is a leading private-equity company focused on global growth investment, with more than US$80 billion in assets under management and an active portfolio of 245 businesses around the world in many fields and at various stages of development.
Since 2013 it has invested in retail platform Vincom Retail, logistics and industrial developer BW Industrial Development, homegrown integrated hospitality platform Lodgis Hospitality, joint-stock commercial bank Techcombank, and fintech platform MoMo.
SSI begins raising charter capital to VND15 trillion
High investment demand in the stock market is heating up the race to raise capital of securities firms.
Last Friday, SSI Securities Corporation (HoSE: SSI) received certificates of registration for a public offering of shares issued by the State Securities Commission (SSC).
The company has been approved to offer 497.4 million shares to existing shareholders. The asking price is VND15,000 a share (US$0.65 a share), half the current market price of VND29,250. The issuance is expected to mobilise nearly VND7.5 trillion.
If the offering is successful, the charter capital of SSI will increase from nearly VND9.95 trillion to more than VND14.9 trillion, keeping its position as the securities company with the largest capital scale in the market.
Besides SSI starting its fund raising process, as of June, VNDirect Securities Corporation (VND), Saigon – Hanoi Securities JSC (SHS), VIX Securities JSC and VPBank Securities (formerly known as ASC Securities) have all officially completed the capital increase.
Vietnam Railways returns to profit
After months of losses, state-owned railway giant Vietnam Railways (VNR) starts to expect a profitable year in 2022.
According to VNR, during the summer holiday from April 30 to May 1, the railway industry witnessed a rebound in the number of passengers and cargo.
In particular, between April 29 and May 3, the railway industry operated 192 trains on routes carrying out over 123,000 passengers, thus enabling it to make a revenue of $1.7 million.
Among railway routes, short routes like the Hanoi-Haiphong one saw rises of 50 per cent in the number of passengers and 76 per cent in revenues.
Seat occupancy on trains is high, reaching about 90 per cent. On some routes, the rate is even higher.
VNR and its units have faced some major losses over the past two years. In 2021, VNR reported a loss of around $30 million.
This year, VNR will focus on cargo transport with the aim of making just over $25 million in pre-tax profits.
Cabinet meeting discusses five-month socio-economic development
The Government convened its monthly meeting on June 4, discussing the socio-economic situation in May and the first five months of 2022 and reviewed the implementation of the government’s socio-economic recovery and development programme and the allocation and disbursement of the State budget this year.
Prime Minister Pham Minh Chinh pointed out limitations and challenges facing the Government, ministries and local administrations in the coming time and potential solutions for them.
He urged ministries, sectors and local administrations to keep a close watch on the COVID-19 situation, global strategic competition, prices of fuel and inputs, inflation risks and the development of the global and regional economies to come up with effective responses.
The PM ordered the Ministry of Education and Training to address concerns over new textbooks, saying the ministry must consider factors like feasibility, convenience and cost-efficiency to bring benefits to people and the society.
Reports showed that despite the global uncertainties caused by the Russia – Ukraine conflict, rising costs and potential risks of security and food crisis, Vietnam saw progress in socio-economic development in May and the first five months of this year.
The five-month CPI rose by 2.25 percent year on year. State budget revenue expanded 18.7 percent compared to the same period last year and made up 57.1 percent of the estimate.
The country’s import-export turnover surged 15.6 percent year-on-year. Industrial Production Index (IIP) edged up 8.3 percent, with manufacturing picking up 9.2 percent.
Nippon Koei seeks business opportunities with Vietnam Railways
A business group led by Hirofumi Mori, chief representative of Nippon Koei in Vietnam, on May 30 worked with state-owned railway giant Vietnam Railways (VNR) on the possibility of joining in railway projects.
At the meeting, the representative of Nippon Koei introduced railway projects that the company has joined in countries in the world.
Nippon Koei proposed some new projects in Vietnam such as upgrading and electrifying existing railway routes while building new lines between Van Dien and Yen Vien, developing container depots in suburban areas of Hanoi, and upgrading the signal information system along existing railway routes.
Nippon Koei joined many projects in Vietnam, including the Ben Thanh-Suoi Tien Metro Line 1, among others.
Boeing seeks new cooperation opportunities in Vietnam
A business mission led by Malcom An, senior managing director at Boeing, on June 1 worked with the Vietnam Air Traffic Management Corporation (VATM), seeking new business cooperation opportunities.
At the meeting, An introduced the group’s development and cooperation strategy in Asia and Vietnam.
According to An, the local aviation market will recover in 2022, while the global one will recover and grow in the years to come.
The Boeing representative said that the company will strengthen comprehensive cooperation with Vietnam in the aviation industry. Accordingly, while intensifying cooperation with government agencies and airlines, Boeing will strengthen cooperation with Vietnam in air traffic management with VATM being a representative.
Pham Viet Dung, chairman of VATM, expects that Boeing’s support and cooperation will help improve air traffic management and service quality to meet growing demands in Vietnam. VATM also expects to get Boeing’s support in technical and training programmes.
An said that in the upcoming time, Boeing will send a group of experts to work on details directly with the Civil Aviation Authority of Vietnam and VATM.
Vietnam witnessing speedy growth in digital payments
Digital payment giant Visa published its latest Visa Consumer Payment Attitudes study last month, which showed an emphatic shift in payment habits. Sixty-five per cent of Vietnamese are carrying less cash in their wallets and 32 per cent said they would stop using cash after the pandemic. This was paralleled by significant gains in cashless payments. Almost 76 per cent of consumers now use mobile wallets and even more (82 per cent) use cards.
Online shopping and cash alternatives are all likely to stay after the pandemic. Two-thirds of Vietnamese tried shopping online during the pandemic and half of them made their first purchase through social media. Nine out of 10 consumers are now using home delivery, and almost all of them use it more often than before the pandemic.
Spending on all forms of travel decreased as people cancelled or postponed trips, along with eating out and out of home entertainment. Now, consumers are most eager to spend on travel, especially domestically (25 per cent). The surge of desire in Vietnamese consumers to travel is driven by reconnection, over necessity or wanderlust exploration, as consumers yearn to reunite with family and friends after a long time apart.
The overwhelming majority (more than 80 per cent) now use their cards, QR payments, and mobile wallets at least once a week. Meanwhile, a solid half of all Vietnamese have begun using cards more often, while 64 per cent and 63 per cent have increased their usage of mobile contactless and mobile wallet payments. Convenience seems to be the highest-rated factor in consumer preference across digital payment methods, followed by safety from infection and transaction security.
In the near future, Vietnam’s objectives are to continue to support banking and payment technologies, connect isolated and rural parts of the country with banking systems, provide small-amount transactions electronically nationwide, provide 24/7 automatic financial services, and update electronic payment security features.
Banks anticipate real estate credit rally
As the Vietnamese authorities continue to tighten controls on potentially hazardous industries, financial institutions are beginning to place more restrictions on real estate-backed loans.
According to the State Bank of Vietnam (SBV), at the end of Q1 2022, outstanding credit for the real estate industry represented 7 per cent of the overall outstanding credit balance. If including individual loans to purchase homes to live in, real estate accounted for 20 per cent of the total outstanding amount.
The SBV’s plan to tighten the credit demand for real estate has been discussed for years (see Page 24). However, banks are already giving preference to qualified customers who have genuine requests, as well as prominent property developers after conducting a comprehensive due diligence investigation.
Real estate lending is flying high on banks’ agenda. For instance, regarding the loan structure of lender MB, home loans still accounted for the highest proportion of about 33.2 per cent of the total outstanding loans, followed by car and motorcycle loans (22.7 per cent) and manufacturing loans (15.4 per cent).
The bank actively controlled the proportion of loans to real estate and construction at around 10 per cent of the total outstanding loans by the end of the first quarter, with the bad debt ratio of this segment being about 0.14 per cent.
Besides this, MB mainly holds real estate and clean renewable energy bonds, of which total credit loans of the real estate sector were VND5.1 trillion ($221.7 million). The management said that the bonds held by MB are attached to projects with high profitability.
In the same vein, Techcombank is now among the banks with the highest proportion of outstanding loans for the real estate sector in the industry. Nguyen Duc Huy, an analyst at KB Securities, believed that as a result, tight control of real estate credit will affect the bank’s financial lending activities.
In particular, Techcombank’s real estate lending will be under pressure as outstanding loans grew by only 2.35 per cent year-to-date in Q1 2022, compared to 4.98 per cent in the same period last year. Home loans are less affected, reaching 6.2 per cent year-to-date in the first quarter.
Besides MB and Techcombank, other lenders such as Viet Capital Bank, VPBank, MSB, and Eximbank also recorded a proportion of real estate loans greater than 10 per cent of total outstanding loans by the end of 2021.
The Vietnam Real Estate Brokers Association advises authorities to impose regulations to safeguard transparent real estate businesses in addition to safeguarding individual investors in high-risk financial markets. Moreover, capital must be made available for all sectors of the economy.
Ben Tre prepares for first shipment of green grapefruit to the US
The People’s Committee of the Mekong Delta province of Ben Tre had a meeting with Chanh Thu Fruit Import & Export Co., Ltd. on the preparations for the first shipment of green grapefruit to the US market.
At the meeting, the representative of Chanh Thu Company reported on the contents related to the green-skin pomelo material areas and the standards to be met when exporting fresh fruit. Accordingly, the company has coordinated with 5 cooperatives to produce green-skin pomelo in the province.
Ben Tre Province currently has an area of about 9,440 hectares for growing green pomelo, with an annual output of nearly 90,000 tonnes.
In addition to the implementation of solutions to develop the domestic market, Ben Tre Province has always focused on the promotion of export activities, especially exports to major markets such as the US.
Vietnam Airlines, Thien Minh promote tourism in Japan
Vietnam Airlines and Thien Minh Group, in collaboration with the Vietnamese Embassy in Japan, held a seminar on June 3 on promotion of Vietnam’s aviation and tourism services in Japan.
The seminar was aimed to give updates on Vietnam’s aviation and tourism incentives to representatives of more than 50 companies and media organizations related to aviation and tourism in Japan.
The seminar in Tokyo was part of Vietnam Airlines’ series of events in Japan to welcome back tourists to Vietnam this year.
After this seminar, Vietnam Airlines is attending the annual Vietnam Festival in Japan from June 4 to 5. On June 6, the national flag carrier and Thien Minh will organize another aviation and travel promotion event in Osaka, Japan.
Japan is one of the key markets for Vietnam’s aviation and tourism. According to data of Vietnam Airlines, before the Covid-19 pandemic, Japan was among the top three international markets for Vietnam’s tourism.
Currently, Vietnam Airlines has eight routes between Vietnam and Japan, connecting Hanoi and HCMC to Tokyo, Osaka, Nagoya and Fukuoka.
Quang Binh calls for investment to expand airport
The central province of Quang Binh plans to call for the private sector to build passenger terminal T2 at the Dong Hoi Airport.
The Airport Corporation of Vietnam (ACV) is responsible for the investment and operation of airports nationwide, but it cannot allocate capital for Quang Binh to build the terminal.
In 2018, the airport was added to the master plan by the Ministry of Transport, so a passenger terminal with an annual capacity of three million passengers and synchronous infrastructure would be developed in the 2019-2021 period.
In 2021, ACV proposed investment for the terminal that got support from the relevant authorities.
After that, ACV wrote to the Prime Minister pledging to allocate investment capital for the terminal. If it is not able to kick off the project in 2022, the Ministry of Transport would be assigned to cooperate with the province to invest in the project.
On April 25, ACV informed Quang Binh Province that the corporation could not proceed with the capital allocation, so the terminal T2 project could only be implemented after 2025. Thus, it proposed the Ministry of Transport consider an alternative investment format for the project.
Meanwhile, according to Quang Binh, it is necessary to invest in expanding the airport soon. Thus, the province asked the Prime Minister to allow it to invest in the project by mobilizing private capital. The Ministry of Transport would be in charge of the project.
HCMC develops plan for preservation, development of traditional craft villages
The People’s Committee of HCMC has launched a plan on preserving and developing traditional craft villages in the 2022-2025 period.
The project aims to create jobs, increase people’s income and preserve traditional cultural values of the city’s rural areas associated with tourism development.
Under the plan, the city will pay attention to the maintenance and development of traditional crafts, including making rice paper in Phu Hoa Dong Commune, kitting in Thai My Commune, making bamboo blinds in Tan Thong Hoi Commune in Cu Chi District; making incense sticks in Le Minh Xuan Commune in Binh Chanh District; salt production and dried fish making in Can Gio District; cultivation of yellow apricot trees in Binh Chanh District’s Binh Loi Commune.
The Department of Agriculture and Rural Development of HCMC will cooperate with relevant agencies to help individuals and cooperatives that meet loan conditions access to the money in accordance with the city’s encouraging policy of agricultural structure transfer, and raise public awareness of the preservation and protection of traditional craft villages.
Coal-fired power cost price four times higher than hydroelectricity
The Deputy General Director of Vietnam Electricity (EVN) said that while the cost price of coal-fired power was reaching VND4,000 per kWh due to the sharp increase in imported coal prices, that of hydroelectricity was only VND1,000 per kWh.
The National Steering Committee for Natural Disaster Prevention and Control held a meeting to review the preparation for the operation of the inter-reservoir in the Red River basin in 2022 on June 3, in Hanoi.
At this meeting, Mr. Ngo Son Hai, Deputy General Director of EVN, said that at present, the water source in the river systems in the North is very good, so the capacity of most water reservoirs is running at the maximum, especially hydroelectric plants on the Da River, with a capacity of 24 hours per day.
According to Mr. Ngo Son Hai, this year, the price of input fuels for thermal power production, such as coal, has climbed extremely high, leading to higher electricity production costs.
Meanwhile, the Ministry of Industry and Trade has recently reported the situation of electricity production in May and forecast for June.
In May, domestically produced and imported electricity by the whole system was estimated at 23.36 billion kWh, including the output of rooftop solar power, down 2.4 percent compared to the same period in 2021, 1.149 billion kWh lower than the approved power supply and power system operation plan in 2022.
In the first five months of this year, the accumulated domestically produced and imported electricity was estimated at 108,758 billion kWh, an increase of 4 percent compared to the same period last year, 109 million kWh lower than the plan.
According to updated calculations of EVN, the domestically produced and imported electricity of the entire power system in the remaining seven months of 2022 is estimated at 166.641 billion kWh.
The State Bank of Vietnam (SBV) last week solicited feedback from relevant parties about a draft circular stipulating criteria on limiting foreign loans for risky sector.