Several of Vietnam’s key export sectors have become magnets for merger and acquisition (M&As) activities, posing a risk of leading enterprises in those sectors being purchased by foreign investors.
The leather-footwear industry is among the key export sectors attracting M&As in recent years (Photo: VNA)
An advantage of Vietnam’s textile-garment industry is low labour costs, and it was also identified as one of six sectors on a list of supporting industry products prioritised for development.
The country has become the “footwear factory” of the world, while the domestic market boasts a population of more than 96 million.
Vietnam is also establishing itself as the world’s electronic manufacturing hub, with FDI continuing to flow into the sector over recent years.
Tran Phuong Lan, an official from the Vietnam Competition and Consumer Authority at the Ministry of Industry and Trade (MoIT), said that apart from existing development potential, opportunities created by bilateral and multilateral free trade agreements (FTAs) have also fuelled those industries’ development.
For example, she noted, under the EU-Vietnam FTA that took effect on August 1, 2020, 42.5 percent of import tariffs on textile-garment products were immediately eliminated, while those on leather-footwear items will be gradually cut to zero percent. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force on December 30, 2018, abolished tariffs on Vietnam’s textile-garment products exported to other member countries.
A recent study of COVID-19’s impact on certain main industries in Vietnam noted that there have been signs of M&As surging in the textile-garment, footwear, and electronics sectors over the last three years.
In 2018, Japan’s Itochu Corporation spent 47 million USD on purchasing nearly 10 percent of shares in the Vietnam National Textile and Garment Group (Vinatex), raising its stake to almost 15 percent and becoming the second-largest shareholder, after MoIT.
Notable M&A deals last year included the one between the Taekwang MTC Vietnam Co. Ltd and the Jin Heoung Vina JSC in the leather-footwear industry, and the one between the Zenith Electronics LLC and Luxoft USA Inc. in the electronics industry.
Investors from the Republic of Korea, who have continually conducted large-scale M&A deals in Vietnam, also tend to select sectors with potential, like textile-garment, leather-footwear, and electronics.
Economic experts cited the experience of other countries as showing that to ensure effective M&A activities and protect the interests of all sides involved it is necessary to perfect related legal regulations, especially those on information transparency, and set up a regular consultative mechanism between the MoIT and the Ministry of Planning and Investment to develop an M&A database for key industries like textile-garment, leather-footwear, and electronics.
Vietnamese enterprises should proactively diversify technical solutions to keep information transparent, identify their targets in M&A deals, and analyse partners to avoid risks during negotiations.
In particular, experts noted, in M&As involving foreign firms, businesses should have a good grasp of market information and carefully assess foreign investors regardless of the deal’s value.
Nguyen Thi Tong, former Vice Chairwoman and former Secretary-General of the Vietnam Leather, Footwear and Handbag Association, recommended that as the leather-footwear and handbag sector is one of Vietnam’s five key export industries, businesses should make proactive moves to boost their capacity and cooperation via M&As within their sector, to secure sustainable development./. VNA
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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