Many cities and provinces are reopening hesitantly due to fear of the pandemic as their leaders are very cautious in making decisions because of the pressure of responsibility.
“Many localities, from provinces to districts and communes, have released decisions which go beyond their authority and don’t follow instructions by central agencies. Local authorities don’t actively solve the problems of enterprises in their localities. As a result, enterprises have to send petitions to the Prime Minister and Government.”
This is one of the problems during the process of restoring production and business activities mentioned in a document from the sub-committee for production and goods circulation under the National Steering Committee for Covid-19 Prevention and Control to the Prime Minister and committee’s head on September 24, 2021.
Meanwhile, the consumption markets, especially export markets, have narrowed. The input materials for domestic production are lacking because suppliers have halted operation, causing disruption of supply chains, while material prices are escalating in the world market.
The enterprises running production under the ‘three on-the-site’ principle want to rotate workers to maintain production, but localities still have not shown effective measures to ensure safety.
Meanwhile, the capability of local healthcare units remains limited, unable to satisfy the requirements on rapid and PCR testing, vaccination, localization, and tracing and isolating positive Covid-19 cases in enterprises.
“A lot of enterprises are exhausted. The General Statistics Office (GSO) reported that 85,000 businesses were set up in the first nine months of the year, but up to 90,000 businesses left the market,” said Vu Tien Loc, former chair of the Vietnam Chamber of Commerce and Industry (VCCI) at a seminar held recently.
“This is the first time the number of businesses leaving the market is higher than the number of newly set up businesses,” Loc said.
Even the enterprises maintaining production activities are running at just 10-15 percent of capacity. They cannot run at higher capacity because production costs are too high.
Loc said that businesses have to bear pressure from pandemic prevention and control measures; business performance; and psychological consequences.
Medical and business consequences are worrying and it will take a lot of effort and time to settle them. However, psychological consequences prove to be the heaviest.
“I think after the crisis, many businesses will have to give up because they feel worried and insecure, unable to continue,” Loc said.
“This would cause very serious damage to businesses in particular and the economy in general,” he warned.
Loc cited a survey as saying that more than 20 percent of orders and contracts cannot be implemented because partners have shifted to work with others. These include orders for the Christmas and New Year sale seasons.
Vietnam is ‘missing a beat’ in comparison with other countries, including strategic partners and rivals. Loc believes that Vietnam’s enterprises have missed 20 percent of opportunities.
Loc stressed that ‘reopening’ is actually a bailout, a support package that helps businesses ‘breathe’.
|Many cities and provinces are reopening hesitantly due to fear of the pandemic as their leaders are very cautious in making decisions because of the pressure of responsibility.|
The market reopening measures taken when HCM City and other cities/provinces controlled Covid-19 are good news for reactivating and recovering the economy and marking the comeback of enterprises. Of course, enterprises will face a lot of challenges on the path to return to the market.
“We have missed a lot of opportunities for year-end orders. But we can put hope on the orders for 2022 spring-summer season, as Vietnam’s economy will surely bounce back in Q1 2022 thanks to the great efforts by the Government and the business circle,” Loc said.
An official of the Ministry of Industry and Trade (MOIT) said businesses are expecting the promulgation of temporary guidance on safety and controlling Covid-19 effectively now being drafted by the Ministry of Health (MOH). MOIT offered suggestions about the draft three weeks ago.
The regulation is expected to be applied throughout the country.
A tentative regulation in the Draft says that localization on the smallest possible scale will be applied when positive Covid-19 cases are found. The assessment of the pandemic level will be implemented at the commune, residential quarter, hamlet and village levels, not at district and province levels.
If lockdown is applied at commune level, commune’s chairs will have to report to districts’ chairs. If lockdown is applied at district level, districts’ chairs will have to report to provinces’ chairs. Meanwhile, provinces’ chairs will report to the Prime Minister about the lockdown in their provinces before the application.
The sub-committee for production and goods circulation has also proposed early guidance on safe adaptation and effective control of Covid-19, so that local authorities can have a legal basis to implement reopening measures.
“The document needs to be promulgated as soon as possible,” the official from MOIT said.
He said that that once the reopening strictly follows the instructions by the central agencies, localities’ worries about responsibility will be lifted. If so, workers will have jobs and they won’t have to leave large cities for hometowns as they have been doing.
Insurance stocks get boost thanks to State divestment
HÀ NỘI — Revenue of the whole non-life insurance market recorded modest growth this year, but most insurance stocks on the stock market rose sharply.
In the past two months, most insurance stocks have rebounded, with some stocks like Military Insurance Company (MIG), Bảo Minh Insurance Corporation (BMI) and Post – Telecommunication Joint Stock Insurance Corporation (PTI) up about 60 per cent compared to the beginning of the year. Vietnam National Reinsurance Corporation (VNR) even jumped 145 per cent.
This stands in contrast to the sideways trend that occurred a few years ago.
On the stock exchange, there are currently seven insurance stocks, including VNR, PTI, MIG, BMI, Petrolimex Insurance Corporation (PGI), PVIRe (PRE) and BIDV Insurance Corporation (BIC).
These companies are operating in the field of non-life insurance. In Việt Nam, there is no life insurance company listed or registered for trading on the stock exchange.
Two other stocks, including Bảo Việt Holdings (BVH) and PVI Holdings (PVI), have long been considered by many investors as insurance stocks, but are actually financial investment stocks in the financial – insurance sector. BVH is holding 100 per cent of capital in Bảo Việt Insurance Corporation, while PVI holds 100 per cent of capital in PVI Insurance Corporation and 73 per cent of capital in PRE.
PVI shares, which were trading at VNĐ48,100 per share on Thursday morning, rose about 50 per cent this year. Meanwhile, BVH shares fell slightly, despite its profit climbing 41.2 per cent year-on-year in the first half of 2021.
The negative and complicated developments of the COVID-19 pandemic are creating short-term risks for insurance companies due to a decrease in customer income, the risk of inflation and an increase in premiums, but insurance stocks are expected to inch higher.
The bullish trend of insurance stocks is believed to be driven by the divestment of state capital and extraordinary business results of some enterprises.
According to the plan to divest state capital of the Department of Corporate Finance, the Ministry of Finance, BMI and VNR are two insurance companies managed by the State Capital and Investment Corporation (SCIC) expecting to divest in the first quarter of 2022. The value of State capital at par value at BMI is VNĐ463.1 billion (US$20.3 million), while at VNR is VNĐ529 billion.
However, VNR has not received any documents from the authorities on the divestment of State capital, Nguyễn Thị Minh Châu, who is in charge of information disclosure of VNR, told tinnhanhchungkhoan.vn.
Finance-insurance expert Trần Nguyên Đán said that it is understandable that investors’ cash flow is poured into insurance stocks, especially those on the list of State divestment. But investors need to assess the business performance and growth potential.
Accordingly, if an enterprise subject to divestment has an almost exclusive segment, it is an investment opportunity, while if that field has been opened and liberalised, it is not attractive.
“For example, previously, a month after the successful State divestment, Sabeco (SAB) share price declined from VNĐ340,000 per share to VNĐ230,000/share. The shares’ fluctuation, then, created a lot of emotions in the market, but SAB shares currently are just traded over VNĐ160,000 per share,” Đán added.
Preliminary data from the Insurance Association of Việt Nam showed that in the first eight months of 2021, the revenue of the non-life insurance market is estimated at nearly VNĐ37.3 trillion, up 3.61 per cent over last year, the lowest growth rate in the last decade.
The slowdown was due to declines in both major retail businesses, with negative growth in vehicle insurance, while health insurance’s growth was lower.
Of which, vehicle insurance’s revenue reached nearly VNĐ10.3 trillion, down 7.7 per cent, while revenue of health insurance rose 3.39 per cent year-on-year to more than VNĐ11 trillion. —
Upcoming incentives create space for tech-led projects
New regulations on special investment incentives have been unveiled to facilitate more high-tech funding in Vietnam, giving the country a new tool to lure quality foreign investment and retain investors for the long term.
|Vietnamese high-tech groups are welcoming added investment from Asia and beyond. VIR Photo: Le Toan|
On October 6, the prime minister issued Decision No.29/2021/QD-TTg, in which new and expanded investment projects will be entitled to special incentives. The decision provides the levels, duration, and conditions for application of incentives on areas such as corporate income tax and land rent.
According to Seck Yee Chung, vice president of the Singapore Business Group (SBG), with the aim to boost the growth of startups, tech companies, and other innovative sectors, the Law on Investment 2020 supplemented the sectors that will be entitled to such funding incentives. The sectors include, among others, high-tech and sci-tech enterprises, innovative small- and medium-sized enterprises (SMEs), research and development centres, and investment in technical facilities for SMEs.
“Decision 29 has provided further guidance on the requirements and specific incentives applicable to these projects and, in general, I believe this new regulation will help promote investment in Vietnam,” he added.
Sophie Mermaz, head of the French Chamber of Commerce and Industry in Vietnam (CCIFV) in Hanoi, said, “Considering that French companies are at the cutting edge of technological progress and innovation in sectors such as digital, energy, and pharmaceuticals, a push for technology and know-how transfer to access a market as vibrant as Vietnam is more than welcome.”
The CCIFV, as one of the largest foreign business associations in Vietnam, is promoting and supporting investors wishing to do business in Vietnam and it greatly welcomes the positive announcement, Mermaz said. “We strongly believe that Vietnam is rapidly emerging as one of the world’s new manufacturing hubs. Through our business centres and associated consultancy services in Ho Chi Minh City and Hanoi, we strive to entice tech and innovative companies to set up in the new ASEAN hub that is Vietnam,” she added.
The new regulations on special investment incentives may also facilitate Vietnam to fulfil its commitments under a wide range of free trade agreements (FTA) it has signed. In particular, the EU-Vietnam FTA is expected to strengthen Vietnam’s competencies by fostering further European high-tech and innovation investments, which are important to accelerate the development of the local industrial and digital economy in line with the country’s development strategy.
Benefiting from maturity
According to Guru Mallikarjuna, managing director of Bosch Vietnam, Vietnam has a favourable economic outlook for German investors, especially with ample advantages for further industrial and high-tech development, such as availability of a competitive labour force, preferable age brackets, and increasing focus on capacity training and development trajectory. In addition, direct effects from FTAs promote Vietnam’s standing even stronger with fewer trade barriers with countries in the EU and Asia, representing a huge purchasing power of billions of potential customers.
“The pandemic has also accelerated digitalisation, leading to higher productivity and promoting leaner production footprints that are closer to end markets,” Mallikarjuna said. “In response to this shift Vietnam, with the right pandemic management strategy, can present itself as a prime candidate for global and German investors.”
He did add, however, that it remains a valid argument that Vietnam’s supply chain could benefit from further maturity and expert availability – but the country is well on its way to addressing this matter to sharpen its competitive edge.
Specifically, for German investors and manufacturers, this is thought to be an opportunity rather than a challenge, providing that they act boldly and imaginatively to leverage the forefront capabilities that German industries are known for, in Industry 4.0 technologies and system quality. Through embracing next-generation digital technologies such as automation, advanced robotics, and more, not only will it enable German firms to significantly improve speed and productivity, but will also promote a much leaner and more flexible supply chain that is located in close proximity with end users of ASEAN’s growing markets, according to Mallikarjuna.
The new regulations on special investment incentives are being offered in the hope of aligning Vietnam’s efforts to attract high-quality investment in the Industry 4.0 era. However, there are still some concerns as to whether certain conditions under the decision would be workable. Chung from the SBG pointed out that in order to enjoy the incentive corporate income tax rate of 9 per cent for 30 years, the project must be in business lines eligible for exceptional incentives, and with a total investment capital of at least VND30 trillion ($1.3 billion), with at least VND10 trillion ($434 million) being disbursed within three years.
Given the significant size of investment capital to be disbursed within a short period of time, the number of projects that can meet the conditions for entitlement to this particular incentive is likely limited. It remains to be seen, in practice, as to how meaningfully this regulation will be interpreted and applied.
Chung also noted that the regulation on investment incentives is a significant effort from the government to facilitate foreign investment, especially in tech sectors, into the country. However, in addition to regulations on investment incentives, tech transfer and investment into a particular market, including Vietnam, depend on the various policies and circumstances.
“These can include support from the government, whether on a business-friendly environment, legal framework on protection of intellectual property rights, cybersecurity, and also taxation. In addition, the country’s ability to manage future crises can be a factor that the investor will consider before making a decision,” Chung stated.
As Vietnam is reopening its economy, the new investment incentives also give confidence for foreign financiers to retain investment in Vietnam after the implementation of tough coronavirus prevention measures.
Mermaz from the CCIFV said that Vietnam does have advantages in the fast-evolving international supply chain. The country remains in a good position as it has been open for foreign direct investment (FDI), and related regulations have been favourable. The economy is likely to bounce back strongly in 2022, attracting strong demand for relocation.
Despite the complexities of the pandemic, FDI keeps growing in terms of capital investment. Vietnam’s favourable conditions for doing business has cemented its position as a safe and stable destination for investment. “We aim at helping companies make informed decisions when beginning their operations in Vietnam and will continue to do so when the 2022 economic rebound takes place,” Mermaz added.
In the same vein, Chung said that the safety measures introduced to manage the pandemic outbreaks have seriously affected the business of many companies and investments in Vietnam. However, he believed that Vietnam is still an attractive destination for foreign investment. In 2020, Vietnam was one of the few Asian countries to continue to grow and attract new foreign investment despite the impact on the global economy.
“The country’s position in the global supply chain remains important, as investors look at other Asian countries outside of China for production activities. That being said, in order to compete with other countries to attract foreign investment, the government should continue to support companies in Vietnam, whether by way of incentives or ensuring a fair and transparent environment to do business in,” he said.
IT giant FPT reports high profits over first nine months of 2021
HÀ NỘI – Information technology giant FPT has recorded VNĐ24.95 trillion (over US$1 billion) in sales and VNĐ4.57 trillion ($198 million) in pre-tax profits over the first nine months of 2021, up by 17.9 per cent and 20 per cent respectively.
Both revenue and profit enjoyed positive growth, with the technology and telecommunications sectors providing the primary impetus.
FPT’s technology sector accounted for 22.1 per cent of its revenue and 30.4 per cent of its pre-tax profit.
Overseas, sales increased in all of the major markets, especially in the US and Europe, due to high COVID-19 vaccination rates and steady economic recovery. FPT has consistently received substantial orders.
Revenue from digital transformation reached VNĐ3.94 trillion over the nine months, up by 59.6 per cent, thanks to growth in key technologies such as cloud computing (Cloud), Artificial Intelligence (AI), and low-code.
FPT secured 16 projects totalling more than $5 million by the end of the third quarter this year.
After three quarters of 2021, the group has achieved 72 per cent of its revenue target and 74 per cent of its profit target for this year, indicating that it is on track to meet its full-year targets.
FPT’s telecommunications sector has generated revenue of VNĐ9.23 trillion, an increase of 11 per cent with a pre-tax profit of VNĐ1.78 trillion, a 21.9 per cent increase over the same period last year.
Due to increased profits from PayTV, combined with the postponement of infrastructure investment due to the pandemic, the pre-tax profit margin of telecommunications services, including broadband and other services, continued to improve in the first nine months of 2021, reaching 20.8 per cent and 14 per cent, respectively. —
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