The government has set up an FDI task force to support multinationals and foreign businesses grasping investment opportunities in Vietnam.
Vietnam remains a preferred destination for foreign investors as actual disbursement of foreign direct investment (FDI) rose by 6.7% year-on-year in the first five months of this year to US$7.15 billion.
Electronics production at Rhythm Precision Vietnam in Noi Bai industrial park.
During the period, FDI commitments to the country also slightly rose by 0.8% year-on-year to nearly US$14 billion.
In late May, local authorities in the southern province of Binh Duong issued investment licenses for five foreign projects with a combined investment capital of nearly US$1 billion. Hanoi has also seen a surge in the number of new FDI projects with 16 in the month. The total capital poured into new and existing FDI projects in the capital city hit nearly US$520 million, including US$76.8 million for 139 projects.
Since early 2021, Long An province in the south of Vietnam has emerged as the magnet for large scale projects, including the Long An I and II liquefied natural gas plants worth a total of US$3.1 billion from Singaporean investors, or the O Mon II Thermal Power Plant financed by Japanese investors with registered capital of US$1.31 billion. In Haiphong, Intel (US) and LG (South Korea) have poured additional funds of US$475 million and US$750 million, respectively on their existing plans.
Foxconn, formally known as Hon Hai Precision Industry, is currently exploring an investment option at Thanh Hoa province to set up an industrial park of 150 hectares with a capital of US$1.3 billion. AVG Capital Partners from Russia has also signed a memorandum of understanding with Thanh Hoa’s authorities to develop a US$1.4-billion pork processing complex.
Overall, 70 countries and territories have registered investment projects in Vietnam during the January-May period, a positive sign for the country as the UN Conference on Trade and Development (UNCTAD) predicted 2021 would be another difficult year for investment activities globally as a result of the pandemic.
Vice Minister of Planning and Investment Nguyen Thi Bich Ngoc attributed Vietnam’s advantage in FDI attraction to the country’s participation in a number of free trade agreements, including the Regional Comprehensive Economic Partnership (RCEP), the EU-Vietnam Free Trade Agreement (EVFTA) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the so-called next-generation trade deals.
“FTAs give Vietnam a freeway to access markets of 55 countries, including 15 from the G20,” Ngoc noted.
Kenneth Atkinson, board member of the British Chamber of Commerce Vietnam (Britcham) said the fact that Vietnam has been further integrating into the global community, including its mark as the Chair of ASEAN in 2020 and non-permanent member of the UN Security Council for the 2019-2020 period have elevated the country’s status as an attractive destination for FDI inflows.
Efforts needed to stay competitive
With a volume of capital inflows to Vietnam in the five-month period much higher than the figure recorded in the same period last year, Minister of Planning and Investment Nguyen Chi Dung said at a recent conference that the country has been actively promoting high-quality FDI projects with environmentally friendly and modern technologies as key criteria.
“The government has set up an FDI task force to support multinationals and foreign businesses grasping investment opportunities in Vietnam, along with new laws and greater incentives for projects in priority fields,” Dung said.
To further maintain Vietnam’s status as an investment hub, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc urged the country to have a long-term plan to promote the development of supporting industries.
“This would be the key step for Vietnam to transform its production industry from mainly assembling to creating higher value-added products,” Loc stressed.
Professor Nguyen Thuong Lang from the National Economics University suggested while the government has put up efforts to improve the business environment, each locality should play a more active role in attracting FDI projects.
“Provinces/cities that can quickly address the concern of the businesses and invest substantially in infrastructure systems would have an upper hand in attracting large-scale FDI projects,” he added.
“A transparent and predictable legal environment would help investors settle down for long-term,” Lang said.
Vietnam trade to climb to new peak
Vietnam’s trade could reach a record high of $600 billion in 2021, the Ministry of Industry and Trade has said.
This would be 10 percent higher than last year as against a government target of 4-5 percent, it said.
It had reached $510 billion as of Oct. 15 with a marginal deficit.
Vietnam, which has been recording a trade surplus for years, has been suffering a deficit this year as social distancing and travel restrictions imposed to curb the spread of Covid-19 hurt exports.
So the final value would be dependent on curbing Covid-19 and recovering manufacturing and exports, the ministry said.
If there are no more major outbreaks in the remaining months and southern-based companies regain their growth momentum, the deficit could be wiped out and there could even be a surplus, it added.
Several large FDI plans announced recently seem to substantiate the ministry’s forecast.
South Korean electronics giant LG Display in August announced an additional investment of $1.4 billion in its manufacturing facility in Hai Phong this year.
HDBank affirms position among top 5 prestigious banks in Việt Nam
HCM CITY — HDBank has once again been honoured as one of the most prestigious private institutions in the country by Vietnam Report, affirming its position as among the most dynamic banks in terms of growth.
The award was presented at the Vietnam Top 50 Public Companies (VIX50) in 2021 ceremony organised by Vietnam Report on October 21 in Hà Nội.
Techcombank, ACB, VPBank, and TPBank also won awards.
The awards were based on three criteria: financial capacity as shown in the latest year’s financial statements; communications prestige assessed by media coding method; and surveys of relevant stakeholders done in June 2021.
HDBank did well in all three criteria.
Its positive business results in the first six months of 2021 was a bright spot.
Overcoming the adverse impacts of the COVID-19 outbreak, HDBank achieved 82 per cent of its full-year profit target in the first nine months.
Its total assets as of September 30 were worth over VNĐ346 trillion (US$15.2 billion), up 26.7 per cent from a year earlier.
Return on equity (ROE) was 24 per cent compared to 21.1 per cent in September 2020. The capital adequacy ratio (CAR) and liquidity were maintained at high levels, with CAR (according to Basel II) at 13 per cent, far above the minimum requirement of 8 per cent.
The bank’s total operating income in the first three quarters topped VNĐ12.1 trillion ($532.3 million), 23.6 per cent up from the same period last year. Operating costs continued to be optimised with the cost to income ratio reduced to 39 per cent from 43.8 per cent a year earlier.
Its standalone and consolidated non-performing loan ratios were below 1 per cent and 1.4 per cent, both lower than in a year earlier.
Services continued to be its bright spot in the first nine months, as net income rose 88.6 per cent year-on-year.
Notably, net income from services for the parent bank more than tripled from the same period last year thanks to growth in the bancassurance and payments services segments.
This helped HDBank develop in a more comprehensive way, no longer depending on credit while minimising risks and improving the revenue structure in a sustainable manner.
In the first nine months of the year, HDBank actively undertook digital transformation to promptly meet the transaction needs of customers in the context of the pandemic.
To help prop up the economy, since the pandemic outbreak HDBank has earmarked over VNĐ42 trillion to support individual and corporate customers.
Besides preferential interest rates, the bank has also offered support in terms of waiver and reduction of various fees.
In August, it won the Best Bank and Best Digital Transformation Bank in Vietnam in 2021 awards at the Global Brand Award. —
Covid-19 pandemic and the goal of 1.3-1.5 million enterprises by 2025
The target of having 1.3-1.5 million enterprises by 2025 may be difficult to achieve as many obstacles and the Covid-19 pandemic have affected business seriously. A strong recovery and reform program is needed to encourage Vietnamese businesses.
In early 2021, the Government assigned the Ministry of Planning and Investment to develop a resolution on enterprise development for the period of 2021-2025, with a vision to 2030, which targets 1.3-1.5 million enterprises by 2025.
According to the Vietnam General Statistics Office, by the end of 2020, the country had about active 810,000 enterprises. To achieve the target, Vietnam must have 100,000-150,000 new businesses coming into operation annually.
This year, due to the heavy influence of the Covid pandemic, a large number of enterprises has withdrawn from the market. It is estimated that by the end of 2021, the number of active businesses will be lower than that of 2020. The question is the target will be fulfilled?
Unified anti-pandemic policy needed
Entrepreneurs complain that with the policy “each locality is a fortress to prevent the epidemic”, many provinces have prioritized the fight against the epidemic with the desire to achieve “zero Covid-19” and this has affected business and production operations.
In many localities, hundreds of pandemic checkpoints have been set up at entrances and highways, which have hindered circulation of goods. The Vietnam Association of Logistics Service Providers lamented that as provinces apply different epidemic prevention measures, goods transport has been seriously affected, doubling the burden on businesses that have had to struggle to survive in the pandemic.
The characteristic of production and business activities is chain connections, regardless of administrative boundaries. Therefore, when local governments apply different policies and regulations on social distancing and goods transport and some provinces even close their doors to ensure “zero Covid”, input materials cannot reach factories and goods are kept in stock. This is seen as the fastest way to push enterprises to the risk of bankruptcy.
Recent statistics from the General Statistics Office show that in January-September 2021, up to 90,300 enterprises withdrew from the market, up 15.3% over the same period of last year.
On average, 10,000 enterprises were leaving the market each month. In fact, the number may be higher because when provinces implemented strict social distancing, many businesses could not complete closure procedures.
This situation has never happened in the past 10 years. Experts estimate that from now until the end of 2021, the number of businesses that will stop operating or be dissolve will be around 120,000.
Prolonged lockdowns have hit the economy hard. However, when switching to “living with Covid-19”, there are still many obstacles. In some provinces, the risk of “sub-license” rises again, making it difficult for businesses to resume operations.
Ly Kim Chi, Chairwoman of the HCM City Food and Foodstuff Association, said that businesses are already exhausted. If local governments issue more sub-licenses and regulations that cause difficulties for business operations, enterprises will “collapse” completely.
Another challenge for business and production recovery is labor shortages, as tens of thousands of migrant workers have left cities to return to their hometowns to avoid the pandemic.
Nguyen Dinh Cung, former director of the Central Institute for Economic Management, said that in 2017 the Institute had proposed that the Government remove three quarters of the existing 4,000 business conditions. However, in official documents issued later, the Government only asked to reduce and simplify 50% of these. In 2018, ministries and branches began reducing and simplifying business conditions under the Government’s direction.
“But I don’t think that it really works because we recommended removing and abolishing, not simplifying business conditions,” Mr. Cung said. Therefore, there has been no substantive impact on the business environment, and no positive effect on enterprises. Half-hearted reform has led to the risk that business conditions are recovering.
The Vietnam Chamber of Commerce and Industry (VCCI) commented that the recent reform and reduction of business conditions and support for enterprises to enter the market has not been substantial. Ministries and state agencies claimed to have cut business conditions by up to 60%, but it is on paper only. In reality it’s only about 30-40%. The market entry procedures are still complicated and overlapping.
In 2016, the Government issued Resolution 35/NQ-CP on supporting and developing enterprises, which set a target of having 1 million enterprises operating by the end of 2020, but it failed. According to experts, the main reason is that the business environment still has many barriers for enterprises to enter the market.
Therefore, in the period of 2021-2025, if there are no drastic reforms in the business environment and to changes in behavior detrimental to production and business activities, the dream of having 1.3-1.5 million enterprises by 2025 will be unreachable.
Facing difficulties caused by the Covid-19 pandemic, businesses need a strategy to restore safe production and business activities in the new anti-epidemic state. It is important for Vietnam to take action now, to maintain its competitiveness on regionally and globally, and not to fall behind in the economic recovery process.
Economic experts said that it is necessary to take action immediately and have a comprehensive economic promotion program. Otherwise, recovery will be slow and painful.
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