WB: Vietnam’s economy continues to show resilience
The World Bank (WB) on March 11 released its brief updating Vietnam’s economic development in March, stating that the economy continues to show resilience and is recovering although downside risks have heightened.
Available data suggest continued recovery of domestic economic activities, with industrial production growing by 8.5 percent year on year and a broad-based improvement in manufacturing despite the surge of new COVID-19 cases to over 100,000 infections per day by the end of February.
After falling in January, production of computers, electronics, and optical products bounced back, posting a year-on-year growth of 9.1 percent. Apparel manufacturing maintained strong performance with a 24.7 percent growth against the same period last year, according to the report.
Retail sales grew by an estimated 3.1 percent in February. Sales of consumer services continued to recover, increasing by 5.9 percent, the first expansion since May 2021, as accommodation and catering services sales grew strongly. Sales of goods increased by 2.4 percent.
With imports growing much faster than exports, trade balance deteriorated from a surplus of 1.4 billion USD in January to a deficit of 2 billion USD in February.
Higher export growth rate could be attributed to phones, computers and electronics and machinery, whose exports grew by 6.2 percent in February.
Exports of garment-textile remained strong, growing by 25.8 percent. Strengthening imports partly reflect a jump in imports of phones, computers and electronics components from 14.9 percent in January to 32.3 percent in February.
Imports of petroleum products also increased by 146.8 percent, clearly reflecting rising oil prices. By trading partners, exports to the US remained robust, expanding by 14.6 percent while exports to China rebounded, growing by 19.5 percent after a 15.2 percent drop in January.
The WB brief also indicated that FDI commitment slowed while FDI disbursement continued to recover strongly.
Vietnam attracted 2.9 billion USD of FDI commitment in February, 15.9 percent lower than a year ago. Most of the commitments were made by existing firms intent on expanding their production facilities.
The disbursement of approved FDI projects increased by 7.9 percent in February, a third month of increase.
Budget balance saw a 1.1 billion USD surplus in February as revenue performance remained strong. Expenditures increased thanks to improved disbursement of public investment.
Revenues grew by 5.3 percent in February while expenditures increased by 6.1 percent thanks to improvements in the execution of the public investment programme.
Over the first two months, the Vietnamese Government collected 22.9 percent of total planned annual revenues. The Government also spent 12.8 percent of planned expenditures. Public investment disbursement improved significantly, reaching 8.6 percent of the target set by the Prime Minister, much higher than the rate 5.1 percent recorded in the same period last year.
The State Treasury issued 412 million USD worth of Government bonds denominated in local currency in February, raising total bond issuance to 1.4 billion USD, or 8.1 percent of annual plan in the first two months.
WB experts noted that Vietnamese authorities should encourage exporters to seek new markets and innovate into new products through global value chains and existing free trade agreements to strengthen export resilience. Keeping track of domestic price developments is also warranted.
Fuel prices soar to all-time highs
Domestic fuel prices soared for the seventh straight time, with effect from 3 p.m. today, March 11, amid global oil market volatility.
The ministries of Industry-Trade and Finance issued a joint statement announcing the price of RON95 gasoline had been revised up by VND2,990 to a record high of VND29,820 per liter and that of bio-fuel E5 RON92 by VND2,910 to VND28,980 per liter.
The prices of other petroleum products were also adjusted up by VND2,500-3,900 per liter or kilogram. Kerosene, diesel oil and heavy fuel oil are now priced at VND23,910, VND25,260, VND20,980, respectively.
Compared to December last year, each liter of RON95 rose by VND7,020 per liter, and those of bio-fuel RON92, diesel, kerosene, and heavy fuel oil leapt by VND6,900, VND7,930, VND7,590, VND5,240, respectively.
Vietjet Air resumes numerous routes for summer travel boom
Budget carrier Vietjet Air will reopen and increase frequency of various domestic flights this month to meet travel demand in summer.
In addition to flights linking Ho Chi Minh City and Hanoi with Phu Quoc island offshore Kien Giang province, those from Nha Trang (Khanh Hoa), Da Nang, Da Lat (Lam Dong), Hue, Thanh Hoa and Vinh (Nghe An) to Phu Quoc will be operated with 4-7 round trips per week.
Flights connecting Nha Trang with Thanh Hoa, Vinh, Da Nang and Can Tho will see 3-4 two-way trips weekly starting March 27.
Similarly, air routes between Da Nang and Da Lat, Buon Me Thuot and Can Tho will reopen with up to seven round trips a week from March 27.
The Can Tho-Hai Phong and Can Tho-Da Lat routes are to be resumed from March 27 and April 28, respectively.
Action plan to assist realisation of green growth targets
The Ministry of Planning and Investment (MPI) is collecting opinions on the Prime Minister’s draft decision on approving the national action plan on green growth for 2021-2030, with a vision to 2050.
This strategy aims to help promote economic restructuring in tandem with growth model reform, and achieve economic prosperity, environmental sustainability, and social equality. It also looks to obtain a green and carbon-neutral economy to help with efforts in curbing global warming.
The green growth strategy focuses on economical and efficient use of energy and natural resources based on science and technology, digital technology application and digital transformation, development of green and sustainable infrastructure, and promotion of green lifestyles.
Approved right ahead of the 26th session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP26) last November, it reflects Vietnam’s determination to carry out the commitments on greenhouse gas emission reduction and climate action through realising green growth targets.
USABC ready to help Vietnam improve health insurance policies: Official
Member businesses of the US-ASEAN Business Council (USABC) always stand ready and want to implement projects and provide resources to help Vietnam improve its health insurance policies and medical system, said Michael Michalak, Senior Vice President and Regional Managing Director of USABC.
Michalak made the affirmation at a working session with representatives of the Vietnam Social Security (VSS) on March 11, during which the two sides discussed the implementation of a memorandum of understanding (MoU) on realising health insurance policies reached on March 9.
The signing of the MoU was a good start for the bilateral cooperation, he said, noting his wish that the two sides will complete targets of projects within the framework of the document.
The MoU will be valid for five years from the date of signing. Under the agreement, the sides will bolster cooperation in health insurance, particularly in the development of sustainable universal health insurance coverage; assessing the quality of medical equipment and services covered by health insurance; and health insurance payment verification.
Legal steps for conducting ODA projects simplified
Legal steps for operating ODA projects are simplified to accelerate the disbursement of the soft foreign loans after amendments to nine laws took effect earlier this month, according to the Ministry of Planning and Investment (MPI).
Provisions for the implementation of ODA projects set out in the revised Laws on Public Investment, Public Private Partnership (PPP), Investment, Housing, Bidding, Electricity, Enterprises, Special Consumption Tax, and Civil Judgment Enforcement were amended in the way that promotes decentralisation, strengthen inspection and monitoring, and simplify legal steps required for the projects to complete, said Minister of Planning and Investment Nguyen Chi Dung.
For example, from now leaders of the governing body of B- and C-class projects using ODA fund or other preferential foreign loans are authorised to grant in-principal approval for the projects to start. Previously, only the Prime Minister had the right to do so.
Similar rules can apply to A-class projects which are large in scale and require big amount of investment if they are proved effective in B- and C-class ones.
Train importation for HCM City’s first metro line to be completed in March
The importation of the 17 trains of Ho Chi Minh City’s first metro line, Ben Thanh – Suoi Tien, is expected to be completed this month.
Two trains, No. 12 and 13, were unloaded at Khanh Hoi Port on March 11 while the last four are scheduled to arrive at the port later this month.
Hoang Mai Trung, Deputy Director of the project management board under the HCM City Management Authority for Urban Railways, said as the investor, the authority will keep coordinating with contractors and relevant parties to import all the 17 trains so that Metro Line No.1 can become operational in late 2023.
The on-schedule importation will help speed up the preparation of technical systems for the line’s trial run, he noted.
In the first phase, the line will use three-carriage trains made in Japan. Each train, 61.5 metres long, is able to carry 930 passengers and run at 110km per hour on elevated sections and 80km per hour on underground ones.
Nearly 89 percent of this metro line project has been completed so far.
Viet Lotus invests in start-up Newee
Viet Lotus announced its investment in start-up Newee, an online seller development platform in Ho Chi Minh City on March 10.
Established at the end of 2020, Newee acts as an intermediary to help businesses expand sales channels on e-commerce platforms as well as bring goods to customers through online sellers easily.
Receiving this investment, the start-up will be coached and trained directly by experienced mentors who are successful start-ups, founders in the market, owners of reputable businesses and corporations domestically and internationally.
After the training programme is completed, Newee will have access to Viet Lotus’s global network of investment funds to raise capital and continue to be supported by a network of advisors when needed.
Progress seen in settlement of suspected cashew nut scam in Italy
Italian police have kept four containers of cashew nuts delivered to this country’s Port of Genoa, a stride in the settlement of a suspected scam involving 100 cashew nut containers exported from Vietnam.
Vietnam’s trade office in Italy said on March 10 this is an encouraging step that the Vietnamese companies with the product being transported to Italian ports can consider.
To deal with the case, a delegation from the trade office came to Naples on March 10 to meet Vietnam’s Honorary Consul in this city Silvio Vecchione and many agencies in southern Italy, including the Port of Naples, military police, tax authorities, banks, and the delivery firm DHL – the main points of transit of the 36 sets of original documents that Vietnamese firms lost track of.
Signs of a scam became clearer when some banks said they had received only photocopied documents or blank papers sent to the persons without accounts at those banks.
Trade Counsellor in Italy Nguyen Duc Thanh said only 36 sets of documents are being lost, noting that among the 100 sets of original documents, Vietnamese companies have retained over 50 and reclaimed many others returned by DHL.
The most important thing is that the first four containers to arrive at the Port of Genoa have been kept by Italy’s financial police thanks to timely actions by relevant parties, he said, adding that lawyers will continue working with relevant agencies of Italy to return the goods to Vietnam, or let the companies sell the cashew nuts to other buyers in Italy or other countries.
Authorised by Vietnam’s Trade Office, Honorary Consul Silvio Vecchione filed a denunciation of the cashew nut scam to Naples police.
Businesses need to proactively cope with impact of Russia-Ukraine conflict
Local firms have been advised to swiftly grasp information on US embargos and negotiate with their American partners in order to avoid violating sanctions against Russia and other related markets, according to insiders.
The recommendation was made by experts at a talk held on March 13 to discuss the impact of the Russia-Ukraine war, with the event being organised by the Leading Business Club (LBC) and the Business Association of High-Quality Vietnamese Products.
Economists pointed out that the country is likely to encounter difficulties in the event that the US and European nations impose sanctions on Russian oil and gas enterprises.
Tran Quoc Hung, CEO of the Institute of International Finance (IIF) in Washington DC, analysed that current tensions, coupled with Western sanctions, have caused shortages and pushed up the prices of many commodities such as oil and gas, grains and some strategic minerals, thereby making the business environment more difficult for global businesses.
Think tanks outlined that Vietnam can increase its participation in the EU market in a number of different areas, such as agricultural products and food to replace goods from Russia and Ukraine. In fact, the nation exports over 6.5 million tonnes of rice per year, ranking second in the world behind only India.
Vietnamese businesses have therefore been advised to increase their market share in the EU market by using up the rice export quota of 80,000 tonnes with a tariff rate of 0% under the terms of the EU-Vietnam Free Trade Agreement (EVFTA).
Simultaneously, the country should strive to develop high-quality specialty rice that is favoured by European consumers.
A number of experts have pointed out that the escalating global price of oil is anticipated to rise fuel prices in the nation, thereby leading to production and consumption costs to skyrocket.
Forum seeks effective ways to safely reopen tourism
The Vietnamese tourism sector has been advised to improve its overall product quality, upgrade tourism infrastructure, and improve the skills of its workforce to thoroughly prepare for the reopening of international tourism in the future, according to industry insiders.
This information was released by experts during a forum held on March 11 to discuss measures aimed at reopening inbound and outbound tourism in a flexible, safe, and effective manner.
Delegates emphasized that with the COVID-19 pandemic now being brought under control in the country, there will be huge opportunities moving forward for the local tourism industry to recover as it enters a new normal period.
According to data compiled by Google Destination Insights, the number of foreigners searching for information about flights to the nation since the beginning of this year has increased by 425% against the same period from last year.
Most notably, people seeking tourism information about Vietnam mostly came from the United States, Australia, Russia, France, Germany, Japan, India, the UK, and Canada.
Furthermore, high vaccination coverage along with the government reopening plan to international tourism as of March 15 will create favourable conditions for foreign tourists to the country in the time ahead.
Improving coffee quality essential to expand EU exports
Improving coffee quality and building brands are essential for Viet Nam to expand export to the EU, according to the Ministry of Industry and Trade.
The EU, the world’s largest coffee market accounting for nearly 48 per cent of the world’s total coffee imports, is a huge potential market for coffee exporters.
The EU is also the biggest importer of Vietnamese coffee, accounting for more than 16 per cent of Viet Nam’s total coffee export.
The Viet Nam – EU Free Trade Agreement (EVFTA) which removed 93 per cent of tariffs, including processed coffee, opened significant opportunities for Vietnamese coffee, according to the ministry, adding that coffee was also one among 39 geographical indications of Viet Nam that the EU committed to protection under the EVFTA.
Railway firms report shrinking losses
Railway firms have announced that they continued to run at a loss in 2021 but to a lesser extent in comparison with 2020.
Hanoi Railway Transport JSC reported a loss of VND121 billion ($5.3 million) in 2021, about VND74 billion lower than the loss in 2020.
The firm put down the shrinkage of loss to its extensive expense-cutting measures, which helped cut expenses by over 21 per cent.
Reductions can be observed in various accounting items, including depreciation expenses, interest expenses and operating costs.
Notably, total expenses decreased by around VND454.7 billion in 2021, more than enough to offset the fall in revenues, resulting in less deficit.
Sai Gon Railway Transport JSC followed suit with a fall of VND78.2 billion in losses.
Effective delivery of preferential loans needed for firms
A clear mechanism is essential to ensuring a preferential credit package will benefit pandemic-hit firms and contribute to economic recovery.
Under the State Bank of Viet Nam’s draft, which was recently made public, loans of pandemic-hit firms will enjoy an interest rate cut of 2 per cent.
The package will total VND40 trillion sourced from the State budget, aiming to ease financial difficulties for enterprises, cooperatives and business households and recover business operations.
In 2009, the Vietnamese Government used a credit package worth VND17 trillion (equivalent to US$1 billion at that moment) sourced from the foreign exchange reserve to provide an interest rate cut of 4 per cent for businesses.
Novaland to mobilise trillions of dong through bonds
Novaland Group (NVL) has just approved a resolution related to increasing capital in subsidiaries and mobilising money through bond channels.
The real estate developer plans to pour another VND500 billion (US$21.8 million) into The Prince Residence JSC. The capital will be taken from the bond mobilisation approved by the Board of Directors in Resolution 26. The deal will be executed in the first half of 2022. After that, the total ownership of Novaland in the company is 99.928 per cent of the capital.
It also agreed to issue more bonds to mobilise a maximum of VND1.5 trillion (US$65.6 million) with the collateral being NVL shares.
Money from the issuance is expected to be spent on The Prince Residence. Correspondingly, Novaland’s total ownership in the company will increase to 99.964 per cent of capital.
Half of schools, hospitals to accept cashless payment this year
About half of all schools and hospitals in centrally managed provinces and cities will accept non-cash payments by the end of the year.
This was the target set by the Ministry of Information and Communications in an effort to promote digital transformation and cashless payments.
The ministry recently sent a document to People’s Committees in the area to develop plans for accelerating digital transformation at local education and healthcare institutions.
Many projects on verge of lagging behind schedule as steel prices surge
Since early March, domestic steel prices have increased three times by an average of VND600,000-1.4 million per ton, worrying many contractors and slowing down the execution of many projects.
The steel cost makes up a large proportion of the value of projects. Without solutions, many projects may face a suspension, Hiep noted.
According to VACC, the steel cost accounts for some 18%-20% of the value of high-rise apartment building projects. The proportion is higher in road and bridge projects.
Obviously, the steel prices affect the value of construction projects. The construction sector currently contributes some 8%-9% to the country’s gross domestic product (GDP).
Most contractors have been in a dilemma. If they continue executing projects, they will face losses. Otherwise, they will be fined if they fail to ensure the progress of the projects and may not receive payments for the completed workload.
VACC has proposed the Ministry of Construction review and publicize the prices of building materials in regions.
Dragon Capital becomes major shareholder of STB
Dragon Capital has raised its ownership in Saigon Thuong Tin Commercial Joint Stock Bank, or Sacombank (STB), to over 5%, according to the Hochiminh Stock Exchange (HoSE).
Vietnam Enterprise Investment Limited, a member of Dragon Capital, on March 8 bought 1.25 million STB shares, taking Dragon Capital’s ownership in the bank to 95.2 million shares, or a 5.05% stake, making it one of the local bank’s major shareholders.
Among the members of Dragon Capital, Norges Bank is holding the most STB shares, at some 18 million, followed by Amersham Industries Limited with 15.9 million shares and Vietnam Enterprise Investments Limited with 15.7 million shares.
Wood, forestry product exports expected to reach US$20 billion by 2025
Vietnam expects to export wood and forestry products worth US$20 billion in 2025, including over US$18.5 billion worth of wood and wooden products.
The figures are expected to reach US$25 billion and US$20.4 billion, respectively, by 2030, according to a plan on the sustainable and effective development of the wood processing sector in the 2021-2030 period signed by Deputy Prime Minister Le Van Thanh on March 10.
Specifically, the sector is expected to become an important economic sector by 2030. The country looks to establish prestigious Vietnamese wood brands in local and international markets and become a leading producer, processor and exporter of wood and wooden products.
The sector also set a target to earn US$5 billion from the sales of wooden products in the domestic market by 2025 and over US$6 billion by 2030.
In addition, more than 80% of wood processors were expected to employ advanced technology, and all wood and wooden products consumed locally and exported to other markets will use legal materials.
Compulsory civil liability insurance for the construction industry
Construction contractors in Vietnam will have to buy compulsory civil liability insurance for third parties from July.
On March 10, the government issued Decree No.20/2022/ND-CP, amending and supplementing some regulations of Decree No.119/2015/ND-CP from 2015. They govern compulsory insurance in the construction sector.
The latest decree adds the regulation on compulsory civil liability insurance for third parties in the field. Construction contractors will be required to buy compulsory insurance for workers on construction sites and civil liability insurance for third parties.
The cost of the cover will be met by the contractor, and it must be valid for the full duration of any construction contract. The decree will take effect from July 1.
Nghe An gives two solar energy projects go ahead
The central province of Nghe An has approved two VND7.8 trillion (USD336.21 million) solar energy projects.
One project is located on Khe Go Reservoir in Tan Son Commune, Quynh Luu Province. Khe Go MK Solar Energy JS Company’s 303.48-hectare project is valued at VND4.1 trillion and capable of outputting 250 MWp.
The other project invested by Vuc Mau Solar Energy JS Company is valued at VND3.7 trillion. It is situated on a site of 216.23 hectares on Vuc Mau Reservoir stretching the three communes of Tan Thang, Quynh Thang and Quynh Trang in Quynh Luu District.
The investment procedures are expected to be finished by December this year. Work is scheduled to be started in January and completed in December next year.
Vietnam car sales rise 34% in two-month period
An improved Covid-19 situation in Vietnam and ongoing Government support policies for the car market would lead to stronger growth in car sale figures in the coming months.
The sales figure in February, however, was on the decline for two consecutive months with a contraction of 22% against the previous month to 13,585 units.
The number of cars sold in Vietnam in the first two months rose by 34% year-on-year to more than 53,500 units, a positive sign from the current economic recovery process, according to data released monthly by the Vietnam Automobile Manufacturers’ Association (VAMA).
The volume included nearly 43,000 passenger cars, up 41% year-on-year, while the remaining were commercial cars with 9,960 units and special-purpose vehicles with 765 units.
As many as 32,310 locally assembled cars were sold in the period, up 41% against the previous month, and the figure for imported cars rose by 25% to 21,234 units.
CPTPP preferential export tariffs applicable to goods exported to Peru
The Government has issued a new decree on preferential export tariffs and special preferential import tariffs for implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) during 2019-2022.
The Government has promulgated Decree No. 21/2022/ND-CP amending and supplementing a number of articles of Decree No. 57/2019/ND-CP dated June 26, 2019 of the Government on the Preferential Export Tariffs and Special Preferential Import Tariffs for implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) during 2019-2022.
Under the renewed decree, goods exported to or imported from Peru from March 10 shall be subject to preferential export tariffs and special preferential import tariffs in accordance with the CPTPP.
Peru is the eighth country to ratify the trade deal which took effect with Peru from September 19, 2021.
Vietnam’s garment-textile industry seeks to promote “green” production
Vietnam’s textile and garment industry is making efforts to realise its green production target and reduce emissions in a bid to help implement the Government’s commitment to net-zero emissions by 2050 at the 26th United Nations Climate Change Conference of the Parties (COP26).
Due to CO2 emissions in the production process, the global fashion industry is one of the causes behind climate change. This is why many well-known fashion brands and textile manufacturers worldwide have set goals related to climate and the environment.
To support Vietnamese textile and garment enterprises to reduce emissions through the efficient use of natural resources and energy, and chemical management, the German Development Cooperation Organisation (GIZ) and French sporting goods retailer Decathlon signed a memorandum of understanding on cooperation in improving the environmental performance of Vietnamese garment and textile suppliers.
Accordingly, GIZ partners with Decathlon Vietnam through its projects, “Climate protection through sustainable bioenergy markets in Vietnam’ (BEM) and ‘Fostering and advancing sustainable business and responsible industrial practices in the clothing industry in Asia’ (FABRIC), to help Decathlon’s Vietnamese suppliers improve their ability in climate change adaptation, efficiently use of water and energy, and manage chemicals at factories in 2022.
Specifically, the GIZ FABRIC project will offer free e-learning courses namely “Climate Action Training” and “Chemical Management Training (e-REMC), via the platform www.atingi.org.
Samsung workers in Vietnam bear brunt of slowdown in global demand for electronics
Samsung Electronics Co Ltd has scaled back production at its massive smartphone plant in Vietnam, employees say, as retailers and warehouses grapple with rising inventory amid a global fall in consumer spending.
America’s largest warehouse market is full and major U.S. retailers such as Best Buy and Target Corp warn of slowing sales as shoppers tighten their belts after early COVID-era spending binges.
The effect is acutely felt in Vietnam’s northern province of Thai Nguyen, one of Samsung’s two mobile manufacturing bases in the country where the world’s largest smartphone vendor churns out half of its phone output, according to the Vietnam government.
Samsung, which shipped around 270 million smartphones in 2021, says the campus has the capacity to make around 100 million devices a year, according to its website.
“We are going to work just three days per week, some lines are adjusting to a four-day workweek instead of six before, and of course no overtime is needed,” Pham Thi Thuong, a 28-year-old worker at the plant told Reuters.
“Business activities were even more robust during this time last year when the COVID-19 outbreak was at its peak. It’s so tepid now.”
Reuters could not immediately establish whether Samsung is shifting production to other manufacturing bases to make up for reduced output from the Vietnamese factory. The company also makes phones in South Korea and India.
Samsung told Reuters it has not discussed reducing its annual production target in Vietnam.
The South Korean tech giant is relatively optimistic about smartphone demand in the second half, saying on its earnings call last week that supply disruptions had mostly been resolved and that demand would either stay flat or even see single-digit growth.
It is aiming for foldable phone sales to surpass that of its past flagship smartphone, the Galaxy Note, in the second half. It is expected to unveil its latest foldables on Aug. 10.
But a dozen workers interviewed by Reuters outside the factory almost all said business is not good.
Thuong and her friends who have been working for Samsung for around five years said they had never seen deeper production cuts.
“Of course there is a low season every year, often around June-July, but low means no OT (overtime), not workday cuts like this,” Thuong said.
She said managers had told workers inventories were high and there were not many new orders.
Research firm Gartner expects global smartphone shipments to decline by 6% this year due to consumer spending cuts and a sharp sales drop in China.
Samsung is Vietnam’s biggest foreign investor and exporter, with six factories across the country, from northern industrial hubs Thai Nguyen and Bac Ninh where most phones and parts are manufactured, to Ho Chi Minh City’s plant making fridges and washing machines.
The South Korean company has poured $18 billion into Vietnam, powering the country’s economic growth. Samsung alone contributes one fifth of Vietnam’s total exports.
Its arrival nearly a decade ago in Thai Nguyen, about 65 km (40 miles) from the capital Hanoi, transformed the area from a sleepy farming district into a sprawling industrial hub that now also manufactures phones for Chinese brands including Xiaomi Corp.
Generous benefits including subsidised or free meals and accommodation have lured tens of thousands of young workers to the region, but reduced workhours have now left many feeling the pinch.
“My salary was cut by half last month because I just worked four days and spent the remaining week doing nothing,” said worker Nguyen Thi Tuoi.
Job cuts are on some workers’ minds but so far none have been announced.
“I don’t think there will be job cuts, just some working hour cuts to suit the current global situation,” said one worker, declining to be named because she did not want to risk her team leader role.
“I do hope that the current cut will not last long and we will soon be back to normal pace.”
Government debt drops by VND57 trillion when exchange rate fluctuates
According to the Ministry of Finance, based on the selling rate of the State Bank, from the beginning of the year until August 1, 2022, one USD equals VND23,400 an increase of 1.1% compared to the beginning of 2022 estimated to increase the Government debt balance in USD in VND by about VND 5 trillion (compared to the end of 2021).
One EUR equals 24,385 VND, down 9.5% compared to the beginning of 2022. It is estimated to reduce the outstanding government debt in EUR in VND by about VND17 trillion ($727 million) compared to the end of 2021.
JPY is equal to 180 VND, down 13% compared to the beginning of 2022. It is estimated that the government debt balance in JPY in VND is about VND45 trillion ($1.9 billion) compared to the end of 2021.
According to the Ministry of Finance, only taking into account the exchange rate fluctuations of 3 main currencies USD, JPY, and EUR, the government debt balance by the end of 2022 is estimated to decrease by about VND57 trillion ($2.4 billion) down 2% compared to the last outstanding balance 2021.
Currently, the volume of domestic loans from the Government accounts for 90% and foreign debts only account for about 10% of the total annual value.
As reported by the Ministry of Finance, from the beginning of the year to July 31, 2022, repayment of government debt is about VND192,122 billion ($8.2 billion) (57.2% of the plan), of which domestic debt repayment is VND148,717 billion ($6.3 billion), foreign debt payment VND43,406 billion ($1.8 billion); direct government debt repayment is about VND 175,835 billion ($7.5 billion) (58.6% of the plan), on-lending is about VND16,287 billion ($696 million) (45.3% of the plan). The Government’s direct loan repayment obligation compared with state budget revenue in the first 7 months is about 16.1%.
Vietnam’s THACO and philosophy of no surrender
Truong Hai Auto Corporation (THACO), a typical successful firm in Vietnam’s automobile sector, has been investing heavily in mechanics and the manufacturing of accessories.
THACO leaders shared the firm’s journey to resolve the issue: increasing the localization rate or surrendering to auto imports flooding the local market.
They also shared the one-stop model to help other Vietnamese enterprises cooperate to develop, thereby improving the internal power of Vietnam’s industry.
THACO chairman Tran Ba Duong said at a meeting with mechanical enterprises that “you have technology and machinery. We will build factories and lease them at low prices.”
“If we fail to demonstrate our commitment, you can take your machinery away.
“We will not go back on our words. Only actual acts and thoughts will create values.”
Refreshing itself by enhancing investment
Returning to Chu Lai Industrial Park in central Quang Nam Province nearly three years after Tuoi Tre (Youth) newspaper held the forum ‘Last chance for Vietnam’s automobile industry,’ a series of factories mushroomed, and container trucks have been nose to tail.
The industrial park is home to not only THACO automobile assembly factories measuring thousands of hectares in area but also newly-built factories manufacturing accessories and mechanical products.
Enthusiastically sharing a project to develop THACO Chu Lai into a hub manufacturing mechanical products, accessories, and devices for industries in the central region, Do Minh Tam, general director of Truong Hai Supporting Industries and Mechanics Limited Liability Company (THACO Industries), an arm of THACO, expected the project to boost the development of Vietnam’s industry.
“At first, everyone seemed dubious. They only thought of automobiles whenever mentioning THACO. However, we separated mechanics from the automobile segment in November 2021,” Tam said.
From 17 factories producing automobile parts, THACO Industries has developed a complex of 19 factories whose strategy is to concurrently increase the localization rate and supply accessories and mechanical products to the domestic and foreign markets.
It is a must to develop the factories on a large scale and in a methodical manner as in 2019, THACO and many other automobile manufacturing and assembly enterprises faced a selection: increasing the localization rate or letting car imports flood the local market due to their competitive advantage given import tariff cuts.
Fruitful results and development ambitions
Nevertheless, it is not easy to develop an empire.
In 2021, a meeting on the restructuring of the firm was held by key leaders to choose a new business model, restructure a board responsible for the company’s products because of its more diversified product portfolio, develop a research and development (R&D) center, and boost digitalization, Tam remembered.
However, the results surprised many people. With revenue from mechanics amounting to VND5.7 trillion (US$244.2 million) in 2021, THACO Industries set a target to generate revenue of $1 billion by 2025 and invest in 15 more factories, operating in the mechanics, automobile, agricultural mechanics, construction, household appliance, and product design sectors.
“Mechanical accessories, electric wires, car seats, specialty chemicals, and bodywork will be localized first,” Tam said.
“Once our staff are experienced and we can research and develop as well as design products, we will expand to industrial equipment.”
According to Tam, together with changes in supply chains, purchasers have had a higher demand for the one-stop model, which is like a food market with multiple dishes.
With THACO Industries’ advantages in a closed manufacturing chain with lower logistics costs, THACO has repeatedly secured orders of foreign direct investment enterprises, including those ordering a combo of molds, plastic injection equipment, paint and packaging services, instead of sourcing them from four to five separate suppliers.
THACO has a plan to develop industrial parks in the north and the south of the country, thus establishing new-generation specialized industrial parks to suspend the transport of huge volumes of products from Chu Lai to other provinces.
“The close connection and support in the three regions will contribute to optimizing the effectiveness of our value chain, reducing logistics costs, improving the competitiveness, and opening up new business opportunities,” Tam noted.
He added that THACO had also sought to develop a mechanical engineering outsourcing center in association with R&D to support small and medium enterprises in southern Binh Duong Province. The center will be developed under the one-stop model.
This will not be a normal mechanic engineering outsourcing center. R&D services and core technology will be invested in heavily.
|Employees monitor a spring production system at THACO Chu Lai Industrial Park in Quang Nam Province, Vietnam. Photo: Huu Hanh / Tuoi Tre|
The center is expected to attract enterprises with the same sense of purpose of getting involved in global production chains and forming a sustainable mechanical engineering ecosystem.
No rivals, only partners
In the past, THACO manufactured and assembled automobile models for KIA and Mazda and it could be considered a rival of Hyundai and Ford.
However, with the policy of making friends with partners, THACO is currently manufacturing plastic bumpers for Hyundai Vietnam and Toyota at a lower price than those offered by Thai manufacturers.
It is also a supplier of springs for Isuzu Vietnam, and will be a partner of Ford Ranger in the near future.
THACO has launched four cooperation models: partners manufacturing and outsourcing products for THACO; THACO manufacturing and outsourcing the entire or part of products for R&D enterprises; THACO offering R&D services and manufacturing, outsourcing and providing products for enterprises having their own markets; and THACO and partners joining hands to manufacture products.
These models are expected to enhance the cooperation and competitiveness of enterprises, creating a strong industrial ecosystem and manufacturing society to pave the way for the breakthrough of the mechanical engineering sector and supporting industries.
Methodical support needed
Tam said state agencies’ support should be more methodical and specific.
Amid the shift of foreign investment to Vietnam, if institutes and state agencies conduct macro-scale and specialized research, or assess the advantages and competitiveness of Vietnam’s mechanical engineering sector, enterprises will have more information to grasp opportunities.
It will be too late to make investments after securing orders.
In addition, the mechanical engineering sector requires large capital while the rate of return is low. Therefore, to secure orders, the state should issue appropriate preferential interest policies for each sector.
Moreover, it is advised to focus on labor training on the basis of support packages for schools and students in engineering majors to help them approach advanced technology and techniques.
Incentives in taxes, land, and site clearance are also needed for companies to scale up their investment.
Notably, the development of industrial parks should involve plans to connect them with value chains, associated with expanding markets and seeking new customers.
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