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Vietnamese strategy: overcoming the pandemic, maintaining high economic growth

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Vietnam’s economy is witnessing an impressive rebound and is expected to be among the best recovering economies in the world despite Covid-19 resurgence in neighboring countries.

Vietnamese strategy: overcoming the pandemic, maintaining high economic growth

The newly released 2021 ADO (Asian Development Outlook) Report says Vietnam’s economic growth will see strong recovery this year with a predicted GDP growth rate of 6.7 percent, while the growth rate will be 7 percent next year.

ADB (Asian Development Bank) experts attribute the strong economic recovery to success in controlling the spread of the coronavirus. They also believe that growth will be empowered by the export-oriented manufacturing and processing industry, investment increases, and trade expansion.

Economic growth is forecast to continue thanks to reform of the business environment and Vietnam’s FTA (free trade agreement) memberships with most developed economies.

VEPR (Vietnam Institute for Economic and Policy Research) has raised its forecasted GDP growth rate to 6-6.3 percent in 2021.

Meanwhile, Vietnam has received a four-grade promotion on Bloomberg’s list of the best-recovering economies, thanks to effective measures to fight the pandemic.

According to Bloomberg newswire, vaccinations will be not enough to deal with Covid-19. The most important factor is taking preventive measures and strictly applying other measures. A 7.3 percent GDP growth rate was predicted for Vietnam this year.

Prior to that, Fitch Ratings predicted that the GDP growth rate would be 7.5 percent this year despite the third Covid resurgence. If this occurs, the growth rate would be much higher than the 2.91 percent in 2020.

Experts from Oxford Economics also commented that Vietnam’s success in fighting against Covid-19 will help the recovery of domestic demand to continue uninterrupted.

Vietnam has controlled Covid-19 outbreaks with the results among the highest in the world thanks to fast and large-scale traceability campaigns, as well as the mobilization of society’s resources in the fight against the pandemic.

They said that trade and production activities are the driving force pushing up economic recovery in ASEAN-6. The consultancy firm said it was optimistic about the growth prospects of Vietnam and believes that Vietnam will see more benefits from global trade during the recovery.

Risks

Earlier, the Strifeblog in the UK published an article saying that Vietnam is walking the path of a rising middle power, especially in the realm of global supply and 5G technology development.

It said it was impressed with the openness of Vietnam’s economy with a series of bilateral and multilateral agreements, including the more recent CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and RCEP (The Regional Comprehensive Economic Partnership).

In late March, Moody’s raised Vietnam’s credit outlook by two grades to ‘positive’, unprecedented since the Covid-19 outbreak.

Vietnam has controlled Covid-19 outbreaks with the results among the highest in the world thanks to fast and large-scale traceability campaigns, as well as the mobilization of society’s resources in the fight against the pandemic.

Nevertheless, there are still high risks for a Covid-19 resurgence, especially because of the strong reoccurrence in India and spread in Vietnam’s neighboring countries of Laos and Cambodia.

ADB believes that risks remain high this year and next year, because of the return of new coronavirus variants and the delays in the Vietnamese Government’s vaccination program.

In a recent report, Forbes commented that the incredible growth of the Vietnam’s real estate market shows the possibility of recovery during the pandemic. The brightest spot of the local real estate market is Industrial Zone development, which has benefited from the production boom.

According to Forbes, in recent years, many large corporations including Nike, Adidas and Samsung have relocated their production facilities out of China and made investments in Vietnam because of increasingly high production costs in China and the trade war with the US.

More recently, vendors for US large manufacturers have set up manufacturing facilities in Vietnam for projects worth billions of dollars.

However, economists have warned that the rapid private investment recovery, rapid increase in domestic consumption, and the global oil price surge may push inflation up. They also warned of an asset bubble if credit is not driven to production sectors.

The inflation rate is predicted to rise to 3.8 percent this year and 4 percent in 2022.

According to VEPR, Vietnam is facing great challenges in an uncertain global economic environment. The resurgence of Covid in many countries may prolong supply chain disruptions, which will weaken businesses’ resilience.

According to Fitch, Vietnam needs to stabilize the macro-economy and diversify import/export markets.

ADB believes that Vietnam can sustain inclusive growth by mitigating the impact of the pandemic on poverty and income. It said the government should adopt a sustainable, long-term strategy to help the livelihoods of the poor and vulnerable through measures such as vocational training and improved access to microfinance for new businesses.

Vietnam has also been warned of a large fiscal imbalance, slow investment in development projects (especially in infrastructure), and low management efficiency.

Experts have mentioned risks for the banking system, which has been consolidated but remains vulnerable. Other risks include the reliance on the foreign-invested sector, and a lack of autonomy in technology and materials for production. 

Duy Anh

Source: https://vietnamnet.vn/en/feature/vietnamese-strategy-overcoming-the-pandemic-maintaining-high-economic-growth-732750.html

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Vietnam Airlines gets clearance for Canada flights

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Vietnam Airlines gets clearance for Canada flights

A Vietnam Airlines aircraft at the Tan Son Nhat International Airport, HCMC. Photo by Shutterstock/EQRoy.


National flag carrier Vietnam Airlines has received a permit from Transport Canada to carry passengers and cargo to every airport in the country starting June 11.

Vietnam Airlines is the first Vietnamese carrier to get this permission is granted after a stringent process. The examination process for Vietnam Airlines took four months.

The airline plans to launch repatriation flights to bring the Vietnamese in Canada back home, as also carry the Canadians and students who want to study abroad to Canada. It will operate flights mainly to Toronto and Vancouver.

The airline will use its biggest wide-body aircraft – the Boeing 787 or the Airbus A350 for these flights. It will implement strict Covid-19 prevention measures on the flights.

The first flight is set to take off on June 30 to Toronto to bring home Vietnamese citizens stuck in the country.

The carrier has also received permission from U.S. authorities to conduct 12 repatriation flights this year, the first of which is scheduled for this month.

Vietnam Airlines had been allowed to operate flights to Canada last year, but only for four months from July to November.

Source: https://e.vnexpress.net/news/business/economy/vietnam-airlines-gets-clearance-for-canada-flights-4296412.html

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Vietnam to protect production at industrial parks

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The fourth wave of COVID-19 has changed the routines of many people working in industrial parks (IPs) in northern Vietnam.

Vietnam to protect production at industrial parks
A worker of Samsung Company in Yen Phong IP, Bac Ninh Province, is vaccinated against COVID-19. — Photo laodong.vn 

As IPs play an important part in the country’s exports and local economic development, the re-emergence of the COVID-19 pandemic could cause disruptions to production and business activities, causing tens of thousands of workers to work alternate shifts or take temporary leave, said experts.

To deal with the situation, Bac Ninh Province, which is home to 1,120 companies including big names such as Samsung, Canon, Foxconn and Microsoft, as well as about 450,000 workers in 10 industrial parks and 26 industrial clusters, started the first ever production-residence-combined model in the country to deal with the ongoing outbreaks in the IPs.

Vu Ninh, who worked as a manager at Samsung’s vendor at the Yen Phong IP told Việt Nam News: “I was vaccinated against COVID-19 on June 2 and feel thankful and safe for that.”

Ninh said: “Now, everything is served at the factory. Instead of going back and forth between Hanoi and Bac Ninh every day like usual, we are working, eating and staying at the factory all the time.”

Other IPs in Bac Ninh Province are following similar models.

Nguyen Thi Khai, a worker at Bujeon Vietnam Electronics Company in Que Vo IP, said: “I feel peace of mind while I keep my job and income and am protected.”

Nguyen Thi Thu, a worker at Yen Phong IP, said: “We get VND100,000 per day and extra each month to call home.” 

Co-operate to protect the IPs

While Bac Ninh Province People’s Committee set up teams to inspect, supervise and guide enterprises to implement the work-stay model, local enterprises were also working hard to make sure their staff stay safe.

Bujeon Vietnam Electronics rearranged an equipment line, temporarily suspending an expansion project to take advantage of the space for accommodation. 

Song Yu Hoon, director of the company’s Administration and Human Resources Department, said: “We always ensure the best conditions for workers’ accommodation as they need to be safe to maintain stable production.”

Choi Joo Ho, general director of Samsung Vietnam, said: “In a short time, equipment has been installed for workers to stay at the factories and at 51 schools in Yen Phong district.”

To ensure peace of mind for tens of thousands of employees, the company provides free accommodation, as well as three meals and a snack a day.

Bui Hoang Mai, Head of the Provincial IP Management Board, told local media: “The policy of the province has received the consent of enterprises as it is the most practical solution to fulfil the “dual goal” of both economic development and fighting the COVID-19 pandemic.” 

Other IPs to be protected

There are 3.8 million people working in 369 industrial zones and border areas nationwide, while some 600,000 people work at industrial clusters. 

Hanoi, HCM City and Bac Giang Province also suffered from the fourth wave of COVID-19. In the top ten exporting localities, valued at US$213 billion, the top four accounted for 51.2 per cent of the volume. HCM City and Hanoi accounted for 40 per cent of the country’s GDP.

In the fourth wave of the virus since April 29 to June 16 afternoon, Bac Giang reported 4,590 cases, Bac Ninh followed with 1,432, while HCM City and Hanoi reported 1,015 and 464 cases, respectively.

With more positive cases reported, HCM City’s factories implemented measures to deal with the pandemic and ensure production.

Head of Viet Thang Jean Co. with thousands of workers and vice president of the HCM City Textile, Embroidery and Knitting Association, Pham Van Viet, said: “The textile and garment industry is labour-intensive and works on a chain, so if a worker is isolated for 14-21 days, the enterprise’s production plan and the production chain are interrupted.”

Viet said: “We are very worried because if we cancel orders, we have to compensate customers, while thousands of workers have to quit or lose their jobs.”

As in Bac Ninh, the city’s businesses have prepared plans for on-site production and accommodation. On June 11, the management board of the city’s Hi-Tech Park organised an online scenario when workers stay and work in the factories.

Economist Ngo Tri Long said that the fourth wave poses other problems. The first priority was to fight the pandemic, but at the same time keep production chains intact. 

“In the planning and development strategy of IPs, it is necessary to prepare and respond to the pandemic and limit the spread of the disease. The construction of concentrated accommodation and catering for workers in a closed chain in industrial parks and factories will be a long-term solution. Thus, it is easy for us to stamp out the pandemic, not to spread it in the community.”

Long said it was necessary to urgently trace, localise and stamp out new infection clusters, especially outbreaks that have spread to industrial parks and export processing zones, adding that foreign experts working in the IPs need to undergo mandatory isolation.

Economist Nguyen Tri Hieu told Việt Nam News: “The local economy has spent the first five months relatively optimistic. Exports grew over the same period last year, foreign trade maintained growth, jobs were restored, and GDP continued to grow. However, from now until the end of the year the situation will be very unpredictable.”

He added: “We still have strength in exports. Many markets around the world are being strongly affected by the pandemic, but there is a lot of demand for goods, especially agricultural products. However, the pandemic must be controlled and the production must be maintained.”

Source: Vietnam News

Source: https://vietnamnet.vn/en/business/vietnam-to-protect-production-at-industrial-parks-747013.html

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Japanese investors secure foothold in leading Vietnamese brands through M&A

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Japanese investors have poured billions of dollars to purchase stakes at Vietnamese businesses over the past decade.

Japanese investors secure foothold in leading Vietnamese brands through M&A
After a decade of M&A, Japanese investors now own several leading brands in Vietnam.

As of May 2021, Japan was the second-largest foreign investor in Vietnam with the total registered capital of $63 billion. Japanese investors have also been actively contributing capital and share purchases to Vietnamese firms in various fields such as retail, food and beverage, pharmaceutical, real estate, and finance.

Many well-known Vietnamese brands are now owned by Japanese investors. In 2011, Unicharm acquired local company Diana. In 2015, Unicharm expanded its factory in Bac Ninh Province, targeting a bigger slice of the market.

Also in the same year, brewery group Kirin Holdings acquired major Vietnamese soft drink producer Interfood Shareholding Co. as part of its plans to capitalise on the Vietnamese market. Kirin purchased 57.25 per cent of the total outstanding shares in Interfood for an undisclosed sum and also bought out Wonderfarm Biscuits & Confectionery Sdn. Bhd., a Malaysia-based firm that manages the intellectual property rights of Interfood.

Eath Chemical also took over A My Gia, which is known for the Gift brand household detergent and Ami brand air fresheners. Sojitz Corporation spent around $91 million on acquiring a 95 per cent stake in Saigon Paper Corporation, which is the largest tissue paper and industrial paper producer nationwide. Japanese drugmaker Taisho Pharmaceutical Co., Ltd. also takes control of Hau Giang Pharmaceutical JSC. Other M&A deals involving Japanese investors include NTTData’s acquisition of Payoo, AEON Group’s acquisition of Citimart, and Line’s acquisition of Webtretho.

In 2021, Maruha Nichiro decided to acquire Saigon Food in order to secure a new marine product processing base and to acquire a platform for the development, processing, and sales of processed foods. Meanwhile, Japanese mega financial institution Sumitomo Mitsui Financial Group (SMFG) has just acquired 49 per cent stake in Vietnam’s largest consumer finance company FE Credit. The Japanese bank will invest more than $1.4 billion in FE Credit as early as October.

Speaking at the Vietnam M&A Forum 2020, Masataka “Sam” Yoshida, head of the Cross-border Division of RECOF Corporation and CEO of RECOF Vietnam Co., Ltd. said that M&A investments in Vietnam will be a trend for Japanese companies which will last for the years to come.

The first trigger is the destiny for Japanese companies to find new markets to expand outside Japan. The fact is that most of the sectors in Japan are already mature. For instance, almost one-third of the Japanese population is over 65 years old. This makes the average age of Japanese people 48.4 years, almost 20 years older than the figure for Vietnam. Also, around 276,000 people (more than a quarter of a million) are disappearing every year.

“The second trigger is ‘M&A as a growth strategy’ which is backed up by the abundant accumulated cash during the last 20 years which is reaching $2.34 trillion as bank deposits with almost zero interest rate. Pushed by shareholders’ requirements to make use of the money, these funds have started to flow into the M&A market which made its highest record in 2019 by 4,088 deals. This means there were more than 4,000 active and successful Japanese investors,” he said.

Source: VIR 

Source: https://vietnamnet.vn/en/business/japanese-investors-secure-foothold-in-leading-vietnamese-brands-through-m-a-747031.html

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