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World Bank lowers Vietnam’s 2021 economic growth to 2 – 2.5%

With the negative growth in the third quarter, Vietnam’s GDP growth rate for 2021 could reduce, World Bank said in a recent report.

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The Southeast Asian economy’s GDP contracted by 6.2 percent in third quarter, the sharpest drop since quarterly data were compiled in the country.

Depending on the strength of the economic rebound in fourth quarter, economic growth for 2021 is now estimated to be in the 2 percent to 2.5 percent range, far below the institution’s August forecast of 4.8 percent.

Due to high sensitivity to social distancing measures, services were hit hardest, falling by 9.3 percent, and contributing 60 percent to the GDP contraction. Industry was also affected severely, down 5.0 percent as factories in the southern manufacturing hubs were shuttered to contain the outbreak.

By contrast, agriculture remained relatively resilient, growing by 1.0 percent. Given the sharp contraction of the GDP in Q3-2021 and depending on the strength of the economic rebound in the last quarter of the year as both Hanoi and HCMC are lifting sanctions.

Labor market conditions worsened substantially, reflecting the adverse economic impacts of the lengthy lockdown in major economic centers.

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.

Inflation remained subdued amid weak domestic demand while the Vietnamese dong experienced further nominal appreciation in the domestic official market.

Credit growth decelerated due to weakening credit demand associated with slower economic activities but was comparable to pre-pandemic rates as banks continued to provide preferential loans and forbearance to support businesses affected by the pandemic.

The year-to-date budget balance remained in surplus despite posting another monthly deficit in September, mainly driven by a sharp fall in revenues.

The resumption of economic activities after a lengthy lockdown is facing market frictions as seen around the world. Reactivating manufacturing factories and businesses in the services sector will face potential product and labor shortages. Therefore, helping ease logistics constraints, continued testing and vaccination and encouraging labor mobility should be priorities.

The authorities should also adopt a more expansionary fiscal policy and use the various fiscal tools available to support the economic rebound, including easing procedural rigidities in the budget to spend the planned current budget, accelerating implementation of planned public investment, and expanding social protection to households and to formal and informal workers.

FDI commitment increased by 26.1 percent in September, a strong recovery amid the crisis, indicating foreign investors’ continued confidence in Vietnam’s economy in the longer term. Higher FDI commitments were driven by increasing capital flow into manufacturing, including a $1.4 billion investment in electronics by a Korea-based company.

Overall, committed FDI inflow reached $22.1 billion in the first nine months of 2021, a 4.4 percent increase. As mobility restrictions were eased, FDI disbursement also rebounded, growing by 57.4 percent although it remained 29.5 percent lower than a year ago. Over the first nine months of 2021, FDI disbursement decreased by 3.5 percent year-on-year.

Source: https://e.nhipcaudautu.vn/economy/world-bank-lowers-vietnams-2021-economic-growth-to-2-25-3342409/

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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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IT giant FPT reports high profits over first nine months of 2021

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FPT’s new headquarters on Phạm Văn Bạch Street in Hà Nội. — FPT.com.vn

HÀ NỘI – Information technology giant FPT has recorded VNĐ24.95 trillion (over US$1 billion) in sales and VNĐ4.57 trillion ($198 million) in pre-tax profits over the first nine months of 2021, up by 17.9 per cent and 20 per cent respectively.

Both revenue and profit enjoyed positive growth, with the technology and telecommunications sectors providing the primary impetus.

FPT’s technology sector accounted for 22.1 per cent of its revenue and 30.4 per cent of its pre-tax profit.

Overseas, sales increased in all of the major markets, especially in the US and Europe, due to high COVID-19 vaccination rates and steady economic recovery. FPT has consistently received substantial orders.

Revenue from digital transformation reached VNĐ3.94 trillion over the nine months, up by 59.6 per cent, thanks to growth in key technologies such as cloud computing (Cloud), Artificial Intelligence (AI), and low-code.

FPT secured 16 projects totalling more than $5 million by the end of the third quarter this year.

After three quarters of 2021, the group has achieved 72 per cent of its revenue target and 74 per cent of its profit target for this year, indicating that it is on track to meet its full-year targets.

FPT’s telecommunications sector has generated revenue of VNĐ9.23 trillion, an increase of 11 per cent with a pre-tax profit of VNĐ1.78 trillion, a 21.9 per cent increase over the same period last year.

Due to increased profits from PayTV, combined with the postponement of infrastructure investment due to the pandemic, the pre-tax profit margin of telecommunications services, including broadband and other services, continued to improve in the first nine months of 2021, reaching 20.8 per cent and 14 per cent, respectively. —

Source: https://vietnamnews.vn/economy/1063618/it-giant-fpt-reports-high-profits-over-first-nine-months-of-2021.html

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Vietnam to build $305mn airport in northern resort town

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Prime Minister Pham Minh Chinh issued a decision on Thursday to approve the construction of an airport in Sa Pa, a famous resort town in the northern Vietnamese province of Lao Cai, at an estimated cost of almost VND7 trillion (US$305 million).

The project, developed under the public-private partnership (PPP) format, is located on a 371-hectare plot in Cam Con Commune, Bao Yen District.

The first phase of the construction will start this year and will build the airport to a capacity of 1.5 million passengers a year before doubling it to three million passengers following the second stage in 2028.

The government will be charged with site clearance while private companies will undertake construction of the project. 

The government will contribute VND2.73 trillion ($119.8 million), or 39 percent of the funds, and private investors will cover the rest. 

Construction is expected to last four years and the investors are forecast to break even after 46 years. 

Sa Pa Airport is one of six new airports approved for construction by 2030.

Vietnam has 22 airports at present.

In the first six months of 2021, Lao Cai welcomed 1.1 million tourists, up 21 percent year on year, according to the Ministry of Culture, Sports, and Tourism.

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Source: https://tuoitrenews.vn/news/business/20211022/vietnam-to-build-305mn-airport-in-northern-resort-town/63719.html

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