Wind and solar power are sustainable energy sources that are prioritized for development.
But as solar power producers have to face oversupply at some points of time, wind power development in Vietnam also has to face many difficulties. Pioneering investors who expect to harvest sweet fruits are facing many risks.
Since Tet (lunar New Year), Mr. Nhan (the real name has been changed), a representative of a wind power investing firm, has been working day and night at his company’s wind power project in Khe Sanh in the central province of Quang Tri. This project is one of the last licensed by Quang Tri authorities. Compared with other wind power projects, it is now reached “red alert” in the construction pace.
“Red alert” means that it is difficult for the project to operate commercially before October 31, 2021 – the deadline to enjoy a preferential price of VND2,000/kWh.
“We have to complete this project on schedule at any cost, or otherwise all effort will be wasted,” Nhan said.
But this will not be easy. His company has recently submitted a 2-page report on the difficulties the project is facing to the authorities of Quang Tri Province, specifically the Department of Industry and Trade.
What Nhan’s company mentioned in the petition is not much different from the situation of dozens of investors in wind power projects in Quang Tri, as well as in other provinces across the country.
Nearly 30 proposals for about 15 wind power investors included in the 16-page report were also sent by the Department of Industry and Trade in Quang Tri province to the appropriate agencies. Generally, investors ask for assistance from relevant agencies to deal with their problems in order to put these projects into operation before October 31, 2021.
The suffering of pioneers
Now, many investors are really “feeling” the suffering of generating electricity. Investment in wind power is difficult, from surveying, measuring wind, and supplementing planning to purchasing equipment, implementing projects, and accepting commercial operation certificates. So far, only 581MW of wind power has been put into commercial operation in the country.
“A plot of 360m2 cultivation land can require compensation of VND4 billion (about $180,000)”: this is the first difficulty for investors. Many investors bitterly admit that anything related to wind power has towering prices. Previously, investors in solar power projects had to pay high compensation for land.
Under the pressure of having to complete their projects before October 2021, investors are in a hurry to purchase equipment. In Vietnam, they mainly buy equipment from four major suppliers such as Vestas, GE and others. Overdemand has resulted in an increase of prices.
The truth is, in the race for developing wind power in Vietnam, domestic investors have winners or losers, but the suppliers of wind power equipment are always the winner. Not only the turbine suppliers, but also the suppliers of specialized equipment such as cranes and specialized transport vehicles have had many Vietnamese customers.
Notably, the implementation of wind power projects shows that the “localization” part is small. Vietnamese contractors mainly undertake work with low added value. Before the money flows into the pockets of Vietnamese investors, foreign equipment suppliers have earned enough.
Gap between planning and implementation
The pressure on wind power investors is expected to last longer because, even if they start their projects before October 31, 2021, there is no guarantee that these projects will generate at full capacity. The problems for solar power projects seem to be the same for wind power generators. These problems include lack of a distribution grid and overloaded and oversupply of power at certain points in time.
The Vietnam Electricity Group (EVN) has asked its subsidiaries to closely follow the progress of wind power projects to develop parallel transmission lines. But there are issues beyond the control of EVN – for example, site clearance to build transmission lines and transformer stations.
Previously, during the golden age of wind power development, while central agencies were busy with expanding wind power development planning, local governments were busy licensing new projects. Consequently, the development of the transmission grid has not kept up with the expansion of wind power supply. The lessons learned from the development of solar power in Vietnam have not been taken seriously.
The risks of solar power and now wind power prove the need to review the task of making plans and the implementation of these plans in Vietnam.
In just a short time of only one to two years, many new wind power projects were licenced. As a result, on April 5, EVN released information that hit wind power investors hard: reducing the generation of renewable energy to ensure safe operation of the power system.
“The fever” of solar power has passed, leaving investors with many lessons and losses, and now the nightmare is likely to be repeated for wind power investors.
Is interbank rate climb worrisome?
Interest rates are the most important focus of attention this year as many believe after a year implementing the loose monetary policy, the authorities concerned are going to tighten them.
Will the recent surge in interest rates on the interbank money market (Market 2) exert adverse effects on the market between banks and their corporate and individual clients (Market 1)?
|When it comes to capital inflows, banks have considerably built up their charter capital in recent years and set out plans for drastic capital hike this year. – SGT Photo: Tran Ngoc Linh|
Interest rates on the Interbank market, the channel allowing banks to lend and borrow money among them, suddenly surged in late April. More precisely, the overnight rate climbed to 1.2% per annum, the highest during this past year. Such a level is also nearly three times higher than in the preceding week, 4.5 times higher than in the beginning of the month and 100 basis points higher than in early this year.
Similarly, the interest rates for the one-week, two-week and one-month terms picked up 100-120 basis points against the beginning of the year, and 2.5-3.5 times greater than in early April. The hike worries quite a few people as they fear the liquidity pressure in the banking system is returning and the interest rate rise may send its ripple effect to Market 1, which means that banks may start to revise up their deposit rates again.
According to analysts, interest rates are the most important focus of attention this year, as many believe after a year implementing the loose monetary policy, the authorities concerned are going to tighten it. Recent reports by several institutions also forecast interest rates may start to rise again in the second half of this year, as a number of countries are showing signs of beginning their tightening monetary policy.
As per statistics of the General Statistics Office, credit growth in the banking industry as of March 19 was 1.47%, 2.7 times higher than the rate of only 0.54% in capital mobilization. The most up-to-date credit growth figure was 3.34% in mid-April, which might mean the demand for loans has further risen and the growth in deposits until now has probably failed to keep pace with the credit growth rate.
If this trend continues, it is inevitable that the system’s liquidity will further decline. If this is the case, one cannot rule out the possibility of banks competing for deposits once again. However, there are still factors that help stabilize interest rates, while the recent rise of interbank interest rates is probably just temporary.
Prior to any long holiday, interest rates on Market 1 often grow rapidly as banks are in need of capital to meet their liquidity safety and short-term solvency ratios. They will later slide back.
For example, in the latest surge, although the lending rates in Market 2 increased sharply for the shorter terms, there was hardly any change in the rates for the three-month, six-month and nine-month terms compared to the beginning of the month. Moreover, they even significantly went down against the beginning of the year. Therefore, if this demand for liquidity is only temporary, it will probably not exert any pressure onto the bank-to-customer market.
Interest rates supporters
Meanwhile, at present and in the immediate future, there are factors that help interest rates remain stable as mentioned above. The first is inflation is still at a low level, evidenced by the fact that the consumer price index (CPI) in April recorded the second consecutive month of reduction compared to the preceding month, with a slight decrease of 0.04%. So far, the CPI has only picked up 1.27% against the beginning of the year and 2.7% year-on-year, far from the target of 4% for the whole year.
Notably, from the third quarter onward, a handsome sum of the dong will possibly be pumped out from the six-month foreign currency sales contracts that commercial banks signed with the State Bank of Vietnam (SBV) early this year. That amount of money may help stabilize the liquidity of the dong in the system. In recent years, the volume of the dong pumped out via the foreign currency buying activities carried out by the SBV has played a key role in supporting the liquidity of the system.
Faced with accusations of currency manipulation by the U.S. Department of the Treasury in late 2020, the SBV has switched to buying foreign currencies in a six-month term early this year, but basically this policy may be supportive to the liquidity of the system. In addition, the United States has lately removed Vietnam from her list of currency manipulators. This indicates the intervention in the market for foreign exchange spot transactions may no longer have to bear great pressure. In other words, the central bank may resume the policy on buying foreign currencies via both spot and forward contracts.
Another supporting factor is considering the fact that prices in the real estate market are on the constant rise in an unhealthy way in some localities, which means probably a certain volume of bank loans has been spent on swing trading in this investment channel, the agencies in charge will tighten their grip to cool down the steep housing prices. The SBV, meanwhile, will probably formulate other policies in a bid to limit the volume of credit poured into risky industries, such as real estate or securities, thereby curbing credit growth in the process.
When it comes to capital inflows, banks have considerably built up their charter capital in recent years and set out plans for drastic capital hike this year. Also, they have successfully issued long-term bonds and valuable papers, which helps reduce the dependence on deposits from individual customers, who often come only when offered high interest rates.
As per deposit rates, in April, whereas several banks lifted their deposit rates (up 0.6 percentage point for terms of six months or longer at GPBank, up 0.2 percentage point also for terms of six-month or more at VPBank, and up 0.2 percentage point for terms of 1-3 months at PGBank), some others further lowered such rates: down 0.1 percentage point for terms of six months or longer at Kienlongbank, down 0.2-0.3 percentage point for terms of 6-11 months at VIB, down 0.2 percentage point for 3-5 month terms and 0.1 percentage point for terms of 12 months or more at Techcombank, down 0.2-0.4 percentage point for all terms at MBBank, etc.
Enterprises and the healthcare front
|A medical worker prepares AstraZeneca’s Covid-19 vaccine for injection – PHOTO: VNA|
For enterprises, protecting the people’s health does not look like their mandate, but hundreds of local businesses have rolled up their sleeves for the common cause in the midst of the raging Covid-19 pandemic. Aware of their corporate social responsibility, enterprises across the country have opened their coffers, pouring out hundreds of billions of Vietnamese dong to finance the national vaccination drive.
Just three weeks ago, the Vietnam Fatherland Front Committee of HCMC organized a function to receive donations from enterprises for the city’s program to buy vaccines for fighting the Covid-19 pandemic, and the enthusiasm from enterprises amazed many attendees.
“As of April 23 this year, the city had received more than VND200 billion from 31 organizations and individuals,” said To Thi Bich Chau, head of the Vietnam Fatherland Front Committee of HCMC, at the function. That is not to mention donations in kind worth nearly VND70 billion contributed to the city’s vaccination drive.
At the event, Hung Thinh Corporation donated a huge sum of VND50 billion to buy vaccines. Nguyen Nam Hien, deputy general director of Hung Thinh Corporation, noted that the corporation has responded to the call from the Vietnam Fatherland Front Committee of HCMC, contributing VND50 billion for HCMC and other localities to buy vaccines. “Apart from this donation, we will continue to support other activities of HCMC and the country to fight the Covid-19 pandemic,” he promised.
In fact, this huge donation is just a part of the corporation’s CSR program to support the community in tough times. When the pandemic surfaced last year, Hung Thinh already donated nearly VND50 billion in cash and in kind, including Covid-19 diagnosis machines, portable X-ray machines, protective gears for medical personnel, and other essential items for frontline workers.
Numerous other enterprises in the country have since early this year also given big bugs for the vaccination program.
On February 25, An Phat Holdings handed over VND20 billion to help the northern province of Hai Duong acquire vaccines for the local people who were then struggling with the third wave of Covid-19 outbreaks. Pham Van Tuan, a senior executive of An Phat Holdings, remarked that the company wished to join forces with the provincial government and other entities to quickly contain outbreaks. Earlier that same month, An Phat Holdings had already donated VND10 billion plus medical supplies worth VND3.5 billion to the provincial government to help with the fight against Covid-19.
In similar gestures, Thaiholdings and LienVietPostBank on February 5 donated a combined VND21 billion to the Ministry of Health to acquire Covid-19 vaccines. Minister of Health Nguyen Thanh Long, speaking at the donation ceremony, highly regarded the generosity of the two companies, stressing “access to Covid-19 vaccines is a top priority of the healthcare sector.”
The minister also reckoned the development of domestic vaccine candidates, saying initial but encouraging results have been achieved. Nanogen has surpassed the first-stage clinical trial and is ready for the second-stage trial, said the minister, referring to the local vaccine candidate. Meanwhile, two other locally-developed candidates by IVAX and VABIOTEC have yielded highly-prospective pre-clinical results.
The development of local Covid-19 vaccines has also earned strong support from local enterprises. Besides giving financial support to buy vaccines, the multi-sector business corporation Vingroup on February 27 handed VND20 billion to the Ministry of Health to support the clinical trial of Covivac vaccine by IVAX. This support, said Minister Long at the donation ceremony, would help speed up the clinical trial of the local vaccine candidate, helping the country launch a Made-in-Vietnam Covid-19 vaccine in the coming time.
According to the health ministry’s website, Vingroup is a strong pioneer in backing the fight against Covid-19. Last year, the group provided over VND1,270 billion, or more than US$50 million, to fund activities against the pandemic, including manufacturing ventilators, acquiring medical machines, and financing projects to respond to Covid-19 outbreaks.
The list of donors for the fight against Covid-19 has been extending over the past year since the pandemic hit the country. These include Nestle Vietnam and Lavie – the latter being a member of Nestle Group – donating nearly VND40 billion, and Vietcombank giving VND4.2 billion to Hai Duong Province to buy a Covid-19 diagnosis machine, among others.
Vaccines for own workers
Before giving their helping hand to the community, many enterprises have earlier pledged to protect their own workers by seeking approval from health authorities to vaccinate their employees against Covid-19.
Kim Oanh Group, for example, in early March unveiled its plan to acquire over 5,000 vaccine doses for its employees and their relatives who will be given the shot all free of charge upon approval from the health ministry, according to Tuoi Tre. Hung Thinh Corporation has also announced its plan to buy over 14,000 doses of Covid-19 vaccines for all its staff and their familities. This similar move has also been announced by other enterprises, including Dat Xanh, An Gia, Hi-Kool Vietnam, and Gotec Land among others.
Nguyen Dinh Trung, chairman of Hung Thinh, said the corporation as well as many other enterprises are willing to finance inoculation against Covid-19 for all their employees and their relatives. “Such a move is not only a necessary response to protect the workforce as the most valuable asset of enterprises, but also a corporate responsibility to share the burden with the State, the community and the entire society,” Trung was quoted in Giadinh.net. He furthered that with vaccines as a shield, the war against Covid-19 will certainly come to success.
In a recent meeting, Minister of Health Nguyen Thanh Long rallied the participation of the business community in the vaccination drive, saying their support would help the country realize the program to safeguard all the people from the pandemic. According to the ministry, Vietnam needs to import some 150 million doses of Covid-19 vaccines this year, which will require huge financial resources and exert great pressure on the State budget.
Although protecting the people’s health is not a mandate of the business community, their active participation, either via direct donations to the relevant State agencies or through vaccination plans for their own workers, is also a great contribution to the common cause of the nation to ward off the pandemic for the good of the economy and the community. Such contribution is all the more urgent now that the fourth wave of Covid-19 has attacked the country, with hundreds of infections confirmed each day, which requires not only efforts by State agencies, healthcare authorities and other frontline workers, but also the participation of enterprises. To some extent, enterprises joining the drive can also be considered as frontline forces.
Toyota offers support to Vietnamese auto part producers
|Representatives of the Vietnam Industry Agency and Toyota Motor Vietnam Co., Ltd sign a memorandum of understanding – PHOTO: VIETNAM INDUSTRY AGENCY|
HCMC – Toyota Motor Vietnam Co., Ltd signed a memorandum of understanding with the Ministry of Industry and Trade’s Vietnam Industry Agency on May 17 to support local producers of auto accessories to improve their capability to participate in global supply chains.
Accordingly, the two sides will cooperate to support domestic producers of auto parts to strengthen their linkages with auto assemblers. The cooperation project will be executed this year and the next, the local media reported.
They will work to find potential suppliers, connect them with auto manufacturers and assemblers, hold meetings and visits to domestic suppliers and provide training courses.
Toyota will provide basic criteria for the Ministry of Industry and Trade to choose appropriate enterprises. The company will also preliminarily assess local suppliers, while the Ministry of Industry and Trade will provide legal support, consultants and potential suppliers and support in training.
Pham Tuan Anh, deputy head of the Vietnam Industry Agency, said the lack of connections between Vietnamese and foreign-invested firms had affected the production and economic development.
The development of supporting industries, enhancement of the connections between domestic and foreign-invested enterprises and establishment of local supply chains are core factors to ensure the sustainable development of Vietnam’s industry, Anh added.
Meanwhile, Toyota Vietnam President Hiroyuki Ueda said the advantage of Vietnam’s supporting industries was the high quality but low cost of local human resources.
However, the supply capacity of local firms remains limited, while their production scale is small. Further, they are dependent on high-quality material imports.
Their experiences and governance capacity are also limited, so their production costs double and triple those of other countries in the region, Hiroyuki noted.
Therefore, Toyota is backing Vietnamese firms in supporting industries to increase the localization rate of their products.
Last year, the Ministry of Industry conducted a survey and selected 200 potential suppliers.
Toyota later chose six among the 200 firms to involve them in its supply chains.
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