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WB lowers Vietnam’s growth forecast to 2 pct

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WB lowers Vietnam’s growth forecast to 2 pct

A vegetable vendor is seen at Ben Thanh Market in Ho Chi Minh City, Oct. 6, 2021. Photo by VnExpress/Quynh Tran


World Bank revised its growth forecast for Vietnam down to 2–2.5 percent this year, as third quarter figures reveal the impact of the fourth Covid-19 wave on the economy.

This is a drop from the bank’s August forecast of 4.8 percent as GDP in the third quarter contracted 6.17 percent.

Services fell by 9.3 percent year-on-year in the third quarter due to social distancing, while industry dropped 5 percent as factories across southern manufacturing hubs were shuttered to contain the outbreak.

Retail sales in September expanded by 6.5 percent from August, but was still 28.4 percent lower than a year ago as many restrictions were still in place, particularly in Hanoi and Ho Chi Minh City.

Labor market conditions deteriorated with labor force participation dropping 2.6 percentage points in the third quarter from the second.

But some positive figures revealed growth prospects. Foreign direct investment inflow reached $22.1 billion in the first nine months, a 4.4 percent increase year-on-year.

“The merchandise trade balance improved as import growth slowed while FDI commitment grew for a third month, suggesting foreign investors remain confident in the longer-term potential of the economy.”

The government should prioritize helping ease logistics constraints, continued testing and vaccination.

The Ministry of Planning and Investment had recently pegged Vietnam’s growth at 3–3.5 percent this year and 6–6.5 percent next year.

Source: https://e.vnexpress.net/news/business/data-speaks/wb-lowers-vietnam-s-growth-forecast-to-2-pct-4371265.html

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Vietnam has thousands of cooperatives but many are ‘small scale and weak’

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The number of cooperatives in Vietnam is 30 times higher than in Japan and 18 times than in Germany, but most of them are small scale and weak.

Vietnam has thousands of cooperatives but many are ‘small scale and weak’

A report reviewing the 20-year implementation of Resolution 13 on reforming and developing the collective economic sector and the 10-year implementation of the 2012 Law on Cooperatives showed that the number of agriculture cooperatives has increased to 18,000 and unions of agriculture cooperatives to 79.

Vietnam has 800 cooperatives more every year in recent years. In 2017-2021, the number of cooperatives soared by three times compared with previous years. It’s expected that the country will have 3.23 million cooperative members, or 176 members in each cooperative.

In 2020, the average revenue of one cooperative was VND2.44 billion, or 5.64 times higher than in 2001, while the average income of regularly workers was VND40.5 million, or 9.1 times higher than in 2001.

According to Vietnam Farmer’s Union, Vietnam’s cooperatives are many in member but weak in health, so they can be seriously damaged in storms and stress. A high number of cooperatives have been dissolved because of Covid-19.

Nguyen Ngoc Bao, President of Vietnam Cooperative Union, said while 100 percent of farming households in other countries join cooperatives, the number is just 35 percent in Vietnam.

Germany once had 40,000 cooperatives in the 1950s, but the figure has dropped to 1,000, while Japan now has 600. However, the cooperatives have a high number of members and large cultivation areas. They organize production on a large scale with inexpensive input materials and high output value thanks to equal product quality because they can join supply chains.

The situation is different in Vietnam. Because of small production scale, farm produce remains uncompetitive. This is also why 85 percent of farm produce has to be distributed through merchants, while the remaining 15 percent goes directly from farms to supermarkets.

The Ben Tre Red Flesh Pomelo Cooperative, for example, is considered a large cooperative in the province, but the farming area of each member is just 3,000-4,000 square meters and only a few cooperatives have one hectare of cultivation land. The quality of pomelo is not equal.

“Only 50 percent of pomelo meets standards, while the remaining are products of lower quality, sold at low prices,” a representative of the cooperative said, adding that the cooperative doesn’t have cold warehouses.

Bao thinks it’s necessary to apply a supply value chain model for cooperatives to create sustainable value, and support the development of cooperatives’ logistics and warehouse networks.

Hoan said public investment in logistics infrastructure will be sought to improve capability and encourage farmers to connect with and join supply chains. 

Tam An

Source: https://vietnamnet.vn/en/business/vietnam-has-thousands-of-cooperatives-but-many-are-small-scale-and-weak-784840.html

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Insurance stocks get boost thanks to State divestment

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Military Insurance’s application on a mobile phone. Photo

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. —

Source: https://vietnamnews.vn/economy/1063200/insurance-stocks-get-boost-thanks-to-state-divestment.html

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Upcoming incentives create space for tech-led projects

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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.

Upcoming incentives create space for tech-led projects
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.

Taking advantage 

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.

Source: VIR

Source: https://vietnamnet.vn/en/business/upcoming-incentives-create-space-for-tech-led-projects-784871.html

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