Through domestic reforms, natural resources and structural advantages, Vietnam has become one of the fastest-growing economies in Southeast Asia and is on its way to becoming a global manufacturing hub by attracting more and more high-tech multinational corporations (MNCs).

Opportunities for High-Tech Manufacturing Giants

According to a recent report by the Russian news agency Sputnik, Vietnam is attracting more attention because it has the potential to become one of the world's leading manufacturers.  Vietnam's exports reached a record high as more "Made in Vietnam" products became more widely accessible and held a larger market share globally.

In recent years, the ASEAN market has seen a surge in FDI, owing largely to the region's enormous economic potential. However, it is important to note that not all ASEAN economies benefited equally from this FDI boom. In addition to Singapore, Malaysia and Vietnam appear to be two important markets based on high frequency data. While Malaysia's approved FDI value increased to 12% of GDP in the fourth quarter of 2021, Vietnam has successfully transformed into an emerging global manufacturing hub.

Initially, the majority of investment capital was directed toward low-value-added sectors such as textiles and footwear. However, in the last two decades, Vietnam has moved up the value chain, becoming a major manufacturing hub for electronic products. Electronics exports reached a record high of $100 billion in 2021, accounting for more than 30% of Vietnam's total export value, up from 5% 20 years ago.

Samsung's extensive FDI in Vietnam since the late 2000s has played a significant role in the success of the technology sector. Over the years, Samsung has invested roughly $18 billion, and as of today, it owns eight factories as well as a research and development facility in Vietnam. At the same time, Samsung's success has prompted other tech giants, such as Google and LG, to move their supply chains to Vietnam.

The presence of the big names has made Vietnam a base for the production of electronics and mobile phone components, with the export turnover of phones and components, electronics,  and computers and components exceeding $27.3 billion in the first quarter of this year. Last year, the export of phones and components alone brought in $57.54 billion.

In addition to high-tech giants like Samsung, Nokia, Google, or Intel, other production projects have been announced by large or authorized corporations such as Foxconn, Luxshare, Pegatron, Goertek, and so on, which specialize in manufacturing and assembling components for Apple, Wistron, Amazon, Microsoft, and LEGO.

Apple's OEM model in Vietnam

In Vietnam, Apple recorded 21 suppliers, up from 14 in 2018. This figure is also higher than that of Thailand (15 suppliers) and India (9 suppliers). Apple's recent decision to relocate production lines to Vietnam has created opportunities for the Southeast Asian country to participate more deeply in the global value chain.
For the first time, Apple is shifting some iPad production out of China and into Vietnam, following months of supply chain disruptions caused by strict Covid-19 lockdowns in and around Shanghai. The iPad will become the second major line of Apple products made in the Southeast Asian country, following the AirPods earbud series, which was announced in 2020.

Apple is not the only tech MNC to develop a massive production line in Vietnam. Samsung has recently increased its investment in Vietnam, which produces half of its global smartphone output, by $920 million to manufacture circuit boards, camera modules, and other parts.

However, in reality, Apple's supply chain model is not the same as Samsung's. Apple does not directly manage any manufacturing plants. Instead, Apple works with suppliers around the world to manufacture and assemble Apple products. These suppliers are referred to as original equipment manufacturers (OEMs). Up to now, Apple has moved 11 factories owned by Taiwanese enterprises in its supply chain to Vietnam. The increase in investment activities of Apple's suppliers in Vietnam is mainly due to Apple's request. This also reflects the growing importance of Vietnam in the global value chain of Apple.

Vietnam was mentioned by Apple CEO Tim Cook as one of the three markets with the best business results for the company globally during the meeting to announce the financial results for the second quarter of fiscal year 2022. The CEO also declared that he will seriously take into account the Vietnamese Prime Minister's Pham Minh Chinh suggestion to increase the number of domestic suppliers and the percentage of domestic services and goods used in Apple products in the near future. Apple hopes that the Vietnamese government will continue to have preferential policies to encourage American high-tech enterprises to develop businesses and invest in Vietnam.

This firm also sent notices to a number of supply partners at the end of May 2022, announcing that the company would increase production of its product lines outside of China. As a result, this tech giant has chosen to focus on developing new assembly facilities in Vietnam and India.

Apple’s increasing interest in the supply chain from Vietnam is good news, demonstrating Vietnam’s efforts over the years to be on the world technology map, to become a “base of electronics production” for MNCs. That is an achievement, a spectacular shift by Vietnam in attracting quality FDI inflows, even though Vietnam can in fact do better and make better use of the pervasive value of this capital inflow.

However, it should be noted that Vietnam has been accepting projects at the low value-added stage of the global supply chain, assembly, in order to take advantage of low labor cost. Stages requiring higher added value are still not completed in Vietnam.

Domestic firms are struggling to become suppliers to foreign-invested companies. Because most domestic companies are small and lack competitiveness, foreign investors frequently bring their own satellites to Vietnam.

Conclusion

Vietnam is currently one of the safest destinations and offers the most favorable conditions for the world's high-tech giants to manufacture their products and related parts.

Apple’s story in Vietnam shows that the opportunity for the Southeast Asian country to receive large capital flows from MNCs is getting closer. Vietnam has the potential to become an important link in this global trade movement.

The ongoing trend of high-tech MNCs will also push Vietnam to work more on its domestic competitiveness by improving its level of manpower and infrastructure and creating a more favorable environment to achieve its goal. This also brings positive conditions for FDI enterprises at all levels. For more insights on FDI projects and trends in Vietnam, contact us now.

The Vietnam freight and logistics market is classified according to function (Freight Transport, Freight Forwarding, Warehousing, Value-added Services, and Other Functions) and end user (Manufacturing and Automotive, Oil and Gas, Mining and Quarrying, Agriculture, Fishing, and Forestry, Construction, Distributive Trade (Wholesale and Retail Segments - FMCG Included), and Other End Users (Telecommunications, Pharmaceuticals, etc.).

Market Overview

During the forecast period (2022-2027), the Vietnam freight and logistics market is predicted to grow at a CAGR of more than 5.5 percent. Vietnam is an emerging manufacturing powerhouse. As a result of China's trade war with the United States, Vietnam has welcomed firms looking to relocate manufacturing away from China. It received its largest annual influx of foreign direct investment (FDI) in 2019 and gained prominence as an alternative center when COVID-19 disrupted China's industrial systems and wreaked havoc on supply chains.

Aside from barriers and constraints, Vietnam's logistics industry benefits from free trade agreements and the rapid rise of e-commerce. The Vietnamese freight and logistics industry is being propelled by rapid economic growth, growing domestic production, expanding consumption, and brisk e-commerce. A lack of transportation infrastructure and high logistical costs are two market constraints. Contract logistics is one of the most prominent developments in the Vietnamese freight and logistics industry.

The country's growing e-commerce enables the creation of start-ups with match technologies that necessitate more efficient logistics services, notably in the last-mile delivery and value-added services sectors. Vietnam's logistics economy is becoming more liberalized, allowing new enterprises to capitalize on increased demand. Vietnam has also signed the Regional Comprehensive Economic Partnership Agreement. It expands the scope of its trade agreements to include practically all of the world's major economies. As a result, Vietnam is well positioned to serve as a global industrial and commercial hub.

Market Trends

High Economic Growth and Rising Consumption Lead to an Increase in Trade

Vietnam's economy is one of the fastest growing in the area, and the country has become a hub for investment and trade. Vietnam is a member of the ASEAN Economic Community (AEC) as well as the ASEAN Free Trade Area (AFTA). As part of AFTA, ASEAN countries (Brunei, the Philippines, Indonesia, Laos, Myanmar, Malaysia, Singapore, Thailand, and Cambodia) are committed to making the region a competitive trade area. All of the country's industries are expanding rapidly and attracting international investment. Aside from that, the rise in consumption has resulted in an increase in the flow of goods into the country.

On December 29, 2021, the General Statistics Office issued socioeconomic statistics for 2021. As a result, despite the increase in COVID cases, GDP was predicted to improve favorably in 2021. In 2021, the industry's added value increased by 4.82 percent compared to 2020, with the processing and manufacturing industries expanding by 6.37 percent.

According to a survey, Vietnam's e-commerce sector would be the fastest-growing in Southeast Asia by 2026. Despite travel limitations and social isolation during the CVID-19 epidemic, e-commerce increased by roughly 18 percent.

Health Sector Requires Logistics Facilities

Vietnam has a thriving pharmaceutical market, with growing earnings among its rapidly aging population. As life expectancy rises, an increasing proportion of the Vietnamese population is expected to suffer from chronic illnesses associated with old age, which is expected to raise the demand for medicines. Despite the demand, domestic medication manufacturing is still in its infancy.

Greater demand for healthcare services, along with limited public government resources, creates potential for the Vietnamese healthcare business to expand. The European Union-Vietnam Free Trade Agreement (EVFTA) and the revised Investment Law will help international producers and suppliers looking to enter the Vietnamese market, which is still heavily reliant on imported medical equipment and medications.

Businesses Ultilize to 4.0 Technologies in Freight and Logistics

Many uses of science and technology in logistics activities have emerged as a result of the 4.0 revolution's rapid growth. Developed countries are currently gradually implementing E-Logistics, green logistics, E-Documents, etc., and applying cloud computing technology, Blockchain technology, artificial intelligence, or robotics to some implementations services, such as packing or unloading services, loading and unloading goods in warehouses and yards.

Currently, Vietnam's logistics service providers use technology at a minimal level in their company operations, mostly through electronic customs declaration software, vehicle locating technology, email, and rudimentary internet… However, over 80% of experts polled by the Vietnam Report believe that enterprises in Vietnam's transportation and logistics industry would steadily adopt and encourage technology research and application in logistical activities.

Rise of Online Purchasing Creates New Opportunities for Transportation and Logistics Companies

With 70% of Vietnam's population accessing the Internet, the average access time per person is roughly 28 hours per week, fostering a suitable environment for the e-commerce business to develop. The evolution of e-commerce has resulted in many consumers shifting to online purchasing and the creation of new business models for delivery service providers. To suit the demands of their customers, many e-commerce companies spend on developing technological platforms and logistical systems, expanding warehouses, and boosting distribution locations.

Invest heavily in warehouses, logistics hubs, and cold chains

With the dramatic development in the number of e-commerce firms, as well as the necessity to rent space to store, categorize items, and process orders, many businesses have recognized the trend, constructed, and invested to capitalize on it. Invest in a warehouse system, a logistics center with the duty of providing transportation services, fulfilling orders, and professionally distributing in a contemporary, high-quality manner. According to Cushman & Wakefield (C&W), one of the largest real estate service businesses, the cold storage industry in Vietnam has gained a strong attractiveness in the previous two years, driven by import and export orders. pharmaceuticals and vaccinations Food delivery and e-commerce are estimated to exceed $15 billion in revenue by 2025.

Vietnam's freight and logistics market has just experienced the Covid-19 wave, but there are still bright spots. Viettonkin is confident in its ability to be a top-notch expert in the Vietnam freight and logistics market. We are ready to advise you and keep you up to date on changing market trends as well as policies in this field. Contact us right now to increase exponentially!

A synchronously and modernly constructed infrastructure system will boost economic growth, increase productivity and efficiency, and contribute to the resolution of social issues. In many developing nations today, poor infrastructure has produced resource stagnation, difficulties in absorbing and deploying capital, and "infrastructure bottlenecks" that have a direct impact on economic growth.

Overview of the Construction Industry in Vietnam

Current Situation

The industry grew by 5.59% in the first six months of 2022, owing to the experience gained in 2020 and the good adaptation of enterprises, above the 4.54% growth rate in the same time in 2020. However, due to the fourth epidemic's extended impact and significant breakout, many communities were forced to implement social separation.

The majority of projects in remote areas had to halt building. Outside the exclusion zone, projects were also delayed owing to delays in the availability of materials and human resources. The expense of maintaining the apparatus, the cost of epidemic prevention, and the cost of deploying resources after the lockdowns… are the most evident economic losses. Over 20% of the projects/contracts were delayed or disrupted by the COVID-19 epidemic, according to 37.9% of firms polled by the Vietnam Report.

Aside from the intricate evolution of the pandemic, changes in raw material prices have proven a "nightmare" for building builders. Over the same time period, the price index for raw materials, gasoline, and building materials grew by 6.4%. The reason for this is that building material demand has grown but the supply chain has not been disrupted since 2020. Prices for steel and cement have risen by 40% and 8.4%, respectively. A rise in construction material prices has a direct impact on the cost of construction investment. Several industry analysts said that the "price storm" has wiped away any residual potential earnings, forcing many enterprises into losses.

According to the General Statistics Office, the overall industry's growth rate in 2021 will be 0.63%. This is a fairly low level when compared to the 10-year average growth rate of 7.2%. According to a Vietnam Report poll, 53.3% of firms in the industry are still growing in revenue. However, the growth rate is mostly below 25%.

In light of the industry's overall issues, this is a highly positive result. According to the majority of experts contacted by the Vietnam Report, the Government's pandemic adaptation policy is the most essential and decisive contributor to favorable business performance.

Difficulties of Business

Businesses are currently hesitant to work on government infrastructure projects. The pace of investment work in the first six months of 2022 is glacial. The fundamental objective reason for the delay is not the building companies' subjective fault.

Firstly, public investment projects such as highway projects and the operational unit price system are far too old and expose several flaws. The necessary regulations do not persist, while outdated regulations that do not reflect market conditions continue to exist.

Currently, public investment projects must use standard unit pricing (for costs, jobs, etc.). Provinces and cities, on the other hand, update and apply unit pricing of input materials. Budget money is required for public investment projects, but local authorities have curtailed or even kept a portion of their local budgets. As a result, they do not closely update pricing, and they are frequently lower than the actual market price, making it difficult for contractors.

Second, inflation has led raw material, fuel, and material input costs to skyrocket, causing transportation and logistics costs to skyrocket many times again. According to statistics from an Oil reporter, the price of diesel oil was just 12,640 VND/ liter at the beginning of 2021, but it rose to 17,570 VND/ liter by the end of 2021. The current price was 30,010 VND/liter, implying that the price of oil has climbed by around 140% from the start of 2021 and is now lower at 22,908 VND/liter, still a significant increase compared to 2021. Steel, sand, asphalt, cement, and other commodities have all seen significant price increases. As a result, the company won the offer but could not afford it.

Government Plans

Architect Le Viet Hai, a scientist with the Vietnam Construction Association (VCA), stated that collaboration with associations is required to develop an appropriate environment in the construction business. This is a prerequisite for developing a building industry ecosystem in Vietnam that achieves resonance and maximizes collaboration efficiency. Furthermore, the building sector needs the Government's and the State's attention and assistance.

VCA also recommended creating a national plan. In which policymakers identify opportunities, problems, critical tasks, and solutions to increase the overall competitiveness of the construction sector, therefore assisting the construction industry in exporting success.

The Vietnam Construction Contractors Association suggested that the Prime Minister assign the State Bank to offer recommendations on extra suitable objectives for construction finance in order to alleviate issues for member firms. Key initiatives in terms of supporting production, in particular, require increased attention.

In addition to credit and interest rate suggestions, the Vietnam Construction Contractors Association advocated wiping off all outstanding construction debts from prior years in order to permanently settle for contractors. At the same time, they requested that the Prime Minister appoint the Ministries of Planning and Investment and Construction to investigate sanctions requiring the investor to obtain a payment guarantee from a bank for 20% of the project's final payment to assure project completion.

Vietnam's transport ministry released a transportation infrastructure development plan that will cost between 43 billion USD and 65 billion USD between April 2021 and 2030. Three implementation solutions have been prepared by an industry research institute within the Ministry of Transport (MOT). Implementing the new PPP law in January 2021 is expected to play a critical role in completing major infrastructure projects. As a result, the MOT developed a plan to enhance the North-South railway infrastructure, which included the building of a dual-track broad-gauge line linking Hanoi and Ho Chi Minh City, two express railway sections, and modifications to the current railway.

In September 2021, the Vietnamese government approved the country's road construction plan for 2021-2030. The plan aims to build over 5,000 kilometers of expressways by 2030, up from 3,841 kilometers in 2021. Vietnam is to build 172 national highway networks totaling 29,795 kilometers by 2030, up from 5,474 kilometers in 2021. It also plans to build 3,034 kilometers of coastal roadways connecting 28 cities and provinces.

Prime Minister Pham Minh Chinh signed Decision No. 548/QD-TTg and established six inspection teams to handle concerns linked to public investment capital allocation. In particular, the government will adopt a number of radical measures to promote public investment in the second half of the year and next year. The frequency will be boosted with which material costs in areas are updated and maintaining project diaries to assure contractor payment.

The government is rushing to accelerate public investment distribution, most recently at the fourteenth meeting on August 15. According to the Deputy Prime Minister, the Government has submitted a medium-term public investment plan for the period 2021-2025 to the National Assembly. The Government has submitted to the National Assembly Standing Committee for comments before handing over the medium-term public investment plan (phase 3) of more than VND 100,000 billion.

To Sum Up ...

The construction market in Vietnam remains turbulent as a result of the Covid-19 pandemic. Viettonkin believes in its abilities and position in this field. We are ready to advise you and keep you up-to-date on changing market trends as well as government policies to promote the growth of infrastructure. Contact us right now to increase exponentially.

Vietnam is emerging as a new production center in the global supply chain with the presence of leading names in the technology field such as Samsung, Apple, and Xiaomi…

With its solid fundamentals and position as one of the most attractive investment destinations for international investors, Vietnam gained a lot of trust from the top smartphone companies with a series of large FDI investments.

Vietnam, a rising “star” in the global supply chain

In a recently published article, the British investment magazine Moneyweek said that “Made in Vietnam” products were asserting their position in the world market. According to Moneyweek, many multinational corporations, especially in the electronic field have the same consideration that “made in Vietnam” products are a guarantee of quality.

According to the Ministry of Industry and Trade, in 2021, Vietnam’s electronics industry accounted for 17.8% of the entire industry, mainly producing electronic products, computers, and components…

According to a report by the Ministry of Industry and Trade, for the whole year of 2021, Vietnam produced 233.7 million mobile phones, up 7.6% and the production value of phone components reached VND 580,800 billion, up 29.5 % compared to 2020. Along with that, the export turnover of phones and components in the whole country reached 57.5 billion USD, up 12.4% compared to 2020 and accounting for over 17.1% of the total export turnover of goods in 2021.

Also in 2021, Vietnam’s FDI attraction achieved many positive signals. Foreign investment capital into Vietnam reached 31.15 billion USD, up 9.2% over the same period in 2020. This shows that foreign investors have placed great confidence in Vietnam’s investment environment.

FDI attraction capital data of the Ministry of Planning and Investment in the first 5 years of 2022 also shows that foreign investors have continuously considered Vietnam as an attractive destination when pouring about 7.71 billion USD into Vietnam, up 7.8% over the same period last year.

Considered a rising “star” in the global supply chain, Vietnam has the appearance of almost the world’s leading names in electronics and technology such as Samsung, Intel, LG, Foxconn, Canon, Panasonic, and Electronics, Nokia, Meiko, Apple, Microsoft, Qualcomm… Among these, especially Samsung of Korea, by the end of 2021, the amount of capital that this group invested in Vietnam reached nearly 18 billion USD.

Samsung Vietnam currently operates 6 factories in Bac Ninh, Thai Nguyen, and Ho Chi Minh City, an R&D center in Hanoi, and a sales entity. Currently, more than 50% of global Samsung phone production is produced in Vietnam and exported to 128 countries. In the development plan of the global Samsung Group, Vietnam is surpassing its role as a key global production base and will become a strategic center for R&D.

Besides Samsung, although it has not yet produced iPhones in Vietnam, right from the beginning of 2021, Foxconn Technology Group – Apple’s main manufacturing partner has invested in building a factory in Bac Giang with a total registered investment capital of 270 million USD. This project specializes in the production of tablets and laptops with a capacity of about 8 million products per year.

Previously, all iPad products were assembled in China, but now they have expanded to Vietnam following Apple’s request. Leading Apple products such as iPad, AirPods, MacBook, AirPods, and AirPods Pro are now manufactured in Vietnam and exported around the world.

Most recently, Xiaomi, a Chinese technology company – the world’s manufacturing center, also expanded production to Vietnam. DBG Technology Vietnam, a partner of Xiaomi, has built a phone assembly manufactory in Thai Nguyen, worth $80 million, and put into operation from June 2021. This factory is expected to produce 20 million products per year not only phones but also computers, home electronics, and electronic components.

A promising market

As experts identified, key players in the technology field choose Vietnam because of its potential market.

Vietnam is located in a fast-growing and dynamic industry area. In addition, there is a domestic market of nearly 100 million people and direct access to the ASEAN market of 600 million people, a large international export market thanks to participation in Free Trade Agreements (FTAs).

Besides, Vietnam is also a country with an abundant labor force, young age, and especially low cost compared to the whole labor market in the world. The stability also makes Vietnam an attractive option.

Research and development (R&D) projects are receiving special incentives and have great potential for development when Vietnam can provide high-quality human resources for this field. The success of Samsung Vietnam’s R&D Center is an example of this statement.

Notably, especially for the smartphone-using group, Vietnam also reaches the high rate of smartphone users in the world, with an average of 1 smartphone per person. This is also an important factor for Xiaomi to build production plants because Vietnam is Xiaomi’s big market, second only to China.

GfK’s 2021 statistics showed that, despite the impact of the epidemic, the number of smartphones sold in the Vietnam market grew well from 15.7 million units in 2020 to 16.8 million units.

The proportion of smartphones with basic phones is also growing year by year. In 2020, the corresponding figure was 71% and 29%, and by 2021 it was 80% and 20% respectively. The money spent buying a smartphone has also increased significantly, from about 257 USD (5.8 million VND) in 2017 to 292 USD (6.6 million VND).

“Vietnamese people prefer to upgrade smartphones with higher configurations, support for new technologies such as 5G and large memory, although the average retail price of smartphones tent to increase in 2021.“, a GfK representative said.

Source : Kenh14

Most foreign economic experts are optimistic in their assessment of Vietnam's economic growth prospects this year despite many difficulties in the international environment, including high energy prices.

Optimism about the prospects

The World Bank (WB) has just released an update on Vietnam's economic situation with the title: "Education for growth" with optimistic comments. Accordingly, the World Bank forecasts that Vietnam's economic growth this year will be 7.5% compared to 2.1% last year.

The World Bank (WB) has just released an update on Vietnam's economic situation with the title: "Education for Growth" with optimistic comments. Accordingly, the World Bank forecasts that Vietnam's economic growth this year will be 7.5% compared to 2.1% last year.

WB experts said that despite recent shocks and increased uncertainty, Vietnam's economy has still been on the path to recovery. Over the past six months, the recovery of Vietnam's economy has accelerated thanks to a solid manufacturing and processing sector and a strong recovery in service sectors.

"After strict social distancing and a sharp decline in GDP in the third quarter of 2021, the economy has started to recover from the fall of 2021 thanks to high vaccination rates that facilitate the reopening of the country. By the end of December 2021, about 80% of the population had been fully vaccinated, and travel restrictions were gradually lifted. Thanks to that, the economy recovered quickly, growing at 5.2% in the fourth quarter of 2021, 5.1% in the first quarter of 2022, and 7.7% in the second quarter”, WB experts said.

Forecasting Vietnam's economic prospects this year, WB experts believe that Vietnam's GDP growth will increase sharply from 2.6% in 2021 to 7.5% this year when consumers satisfy the previously pent-up demand and the number of international tourists increases.

Earlier, Singapore's The Business Times also quoted economic experts as saying that Vietnam's economy is on a strong recovery momentum this year.

Mr. John Paul Lech, Investment Director at Matthew Asia Investment Fund, said: "Vietnam is the star of the frontier market."

In his view, although often overshadowed by continental heavyweights like China and India or older emerging markets like Indonesia and Malaysia, Vietnam is one of the best growth markets in developing countries.

Although emerging markets are generally smaller, less liquid, and less likely to access foreign investment, Vietnam is bucking the trend. The evidence is that in the first 6 months of this year, foreign direct investment (FDI) into Vietnam increased by nearly 9% to 10.1 billion USD.

Economist Chua Han Teng of DBS, Singapore's largest bank, also has an optimistic perspective that Vietnam's GDP growth this year will reach 7%, meeting the set target. In particular, the service sector will continue to grow strongly. Retail activity will recover across all sectors. The number of newly established enterprise registrations is increasing.

There is also an optimistic assessment of Vietnam's economy in 2022, HSBC Bank said that Vietnam is one of the fastest growing countries in the region this year.

In a recent report, HSBC analysts suggested that Vietnam is a rare country that has maintained growth for two consecutive years since the pandemic and is currently considered a bright spot in the region, due to its solid economic development potential and the ability to recover quickly after the Covid-19 pandemic.

Total retail sales of consumer goods and services in the first 6 months increased by 11.7% over the same period last year. Industrial production continued its steady growth momentum with a rate of 8.48% of the whole industry over the same period in 2021, of which mobile phone components increased by 22.2%. The manufacturing PMI rose from 51.7 points in April to 54.7 points in May, the highest level in the past 12 months, before retreating slightly to 54 points in June.

Thanks to stable FDI capital for many years pouring into the technology manufacturing industry, Vietnam has grown to become a manufacturing factory of the world. Export growth in the first 6 months increased by 17.3% over the same period last year.

This optimism was underpinned by Vietnam's GDP growth in the second quarter was higher than expected, with an increase of 7.7% year-on-year—the highest in 11 years and well above the earlier estimate of 5.9% by economists. This strong recovery was fueled by manufacturing activity, which accelerated for the fourth consecutive quarter, and a recovery in services output that has continued to regain ground since the last decline in the third quarter of 2021

In this regard, Mr. Chua Han Teng also said that Vietnam is emerging as a strong exporter of information and communication technology and that its market share is likely to grow further.

In the first 6 months of the year, the whole country had 76,200 newly registered enterprises, up 13.6% over the same period last year and nearly 40,700 enterprises returned to operation, up 55.6%. On average, there are 19,500 newly established enterprises returning to operation a month. This shows that business activities are starting to prosper and become vibrant again.

In particular, the full reopening from mid-March played a very important role in the recovery of the service industry. In the first half of the year, Vietnam welcomed 602,000 international visitors, 6.8 times higher than at the same period last year.

These signs all show that Vietnam is on a steady and steady recovery. Therefore, HSBC has raised its growth forecast for the whole year to 6.9% (from 6.2% and 6.6% previously). Vietnam's growth rate is likely to lead the region’s.

Similarly, Singapore's UOB also raised its growth forecast from 6.5% previously to 7% assuming no further strict disruptions caused by the pandemic.

Standard Chartered Bank recently also forecast that Vietnam's GDP growth in the third quarter will reach 10.8% and that for the whole year will reach 6.7%.

Mr. Tim Leelahaphan, the economist in charge of Thailand and Vietnam at Standard Chartered, said that the economic recovery will take place strongly in the second half of the year, especially when the tourism sector has been reopened after 2 years of closure. According to him, at the moment, the inflation situation is still under control.

In its latest report released at the end of July, the Asian Development Bank (ADB) also maintained its forecast for Vietnam's economic growth at 6.5% this year and 6.7% in 2023, while lowering its Asia growth forecast to 4.6%.

Noticeable risk

Although the growth outlook is very positive, WB experts also note the growing risks that threaten the recovery prospects of the economy. Those risks include slowing growth or stagnant inflation in key export markets, continued world commodity price shocks, disruptions to global supply chains, or the emergence of new strains of COVID-19.

In addition, the WB said that there are domestic challenges, including labor shortages, rising inflation risks, and higher risks in the financial sector.

Speaking to The Business Times, economist Yun Liu said that despite the positive growth momentum, the energy crisis has begun to affect Vietnam's growth. Therefore, Vietnam needs to be aware of the increased risks to growth, especially from rising energy prices.

Sharing the same view, Mr. Ngo Dang Khoa, Country Director of Foreign Exchange, Capital Markets and Securities Services Division, HSBC Vietnam, also said that Vietnam is facing a series of challenges in the context of rising world fuel prices. high. That will cause fuel costs to increase, adversely affecting Vietnam's trade balance.

“We evaluated this trend to continue, putting downward pressure on inflation. Despite high energy costs, moderate food inflation, and relatively stable domestic production, they help to contain total inflation," said HSBC experts.

Besides, HSBC experts said that Vietnam needs to pay close attention to the "counterwinds" that hinder trade growth, which is getting stronger. On the one hand, world consumption is shifting from goods to services. On the other hand, supply chain disruption in China makes it increasingly difficult for Vietnamese manufacturing enterprises to secure input materials for export activities in the future. These are the factors that make it difficult for Vietnam's export growth to maintain the current strong growth momentum.

However, the World Bank believes that the recovery process of Vietnam's economy has just begun while the outlook for global demand is weakening and inflation risks are increasing. Therefore, the WB recommends that the competent authorities take the initiative to respond.

Recommendations

Regarding fiscal policy, the WB recommends that the focus should be on the implementation of the policy package to support economic recovery and development and, at the same time, expand the targeted social safety net to help poor and vulnerable people withstand the impact of fuel price shocks as well as rising inflation.

In the financial sector, the World Bank's report recommends that it is necessary to closely monitor and strengthen reporting and provision for bad debts and at the same time issue a mechanism to deal with insolvency.

Vietnam’s Director of the World Bank, Carolyn Turk, also said that to maintain economic growth at the desired rate, Vietnam needs to increase productivity by 2-3% per year.

"International experience shows that increasing labor productivity can only be achieved by investing in the education system." "A competitive workforce that will bring productivity is what Vietnam needs in the long term," the Director of WB Vietnam emphasized.

In addition, according to Mr. Khoa, Vietnam should approach the international capital market for green development, taking advantage of the interest of the capital market and the investor's taste in a favorable direction.

Source : Dantri

The dynamic start-up environment in Vietnam 

HSBC and KPMG have just released the Report "Emerging Giants in Asia - Pacific 2022", which assesses businesses operating in the region's new economic sectors with strong potential for impact on the global business landscape over the next decade.

In 2021, there were aroundt 3,800 startups in Vietnam - a double of that in 2019 when the Covid pandemic spread, four of which were unicorns and 11 were valued at over 100 million USD. Additionally, Vietnamese startups received more than 1.3 billion USD in investment the same year. Fintech was leading the race with a total deal value of 200 million USD. E-commerce came second with the most notable deal being 258 million USD Tiki in Series E.

Vietnam has emerged as a start-up hub, close to catching up with Indonesia and Singapore. With a young, dynamic and educated population, high internet coverage and smartphone usage, and proactive government support, Vietnam will continue to maintain its position as an attractive destination for both investors and technology companies, making this country a development cradle of potential unicorns in the near future

Mr. Tim Evans, General Director of HSBC Vietnam.

Mr Pham Tan Cong, President of Vietnam Chamber of Commerce and Industry (VCCI) also stated that “The Vietnamese government has made great attempts to improve the business environment in favor of start-ups”.  Ivo Sieber, the Swiss ambassador in Vietnam, agreed on the viewpoint, and added, “Entrepreneurial spirit and startup spirit should be nurtured in the educational system”. 

A successful start-up case in Vietnam 

One of the most prominent cases of home-grown start-up business is Coolmate, a men’s fashion brand that directly provides customers with products via e-commerce channels (D2C E-commerce). Founded in early 2019, Coolmate follows the D2C e-commerce model to cut distribution costs in traditional retail, bringing consumers 100% high quality made-in-Vietnam garment products at a reasonable price..

During the pandemic, Coolmate raised USD 2 million in a Series A financing round led by Access Ventures with the participation of Do Ventures, CyberAgent Capital, and DSG Consumer Partners. Coolmate is on track to reach the $19 million revenue mark in 2022, with revenue increasing more than three times per year.

After three years of operation, from a company with just over 2,000 purchase orders per month, Coolmate is now processing over 10,000 purchase orders per day. More than 50% of the daily purchase orders come from former customers.

According to the evaluation of KPMG and HSBC, the success of Coolmate is built on two factors:

Successful adaptation of their business model based on correct identification of market gap

The emergence of the Covid-19 pandemic has aided in the acceleration of the digital transformation process and has had a significant impact on online shopping behavior. According to the reports of Google, Temasek, Bain & Company, Vietnam's e-commerce market growth was 53%, growing from USD 8 billion in 2020 to USD 13 billion in 2021, and it is forecast to gain USD 39 billion in 2025. Coolmate, which was founded in the midst of the online shopping habit boom, established a domestic fashion brand with distinct strengths in the context of strong and competitive e-commerce growth.

Aimed at the young users, Coolmate minimizes its product design with a focus on high-quality materials to maximize user comfort. Plus, advanced fashion technologies such as Excool, Anti-Smell, CleanDye, and HeiQ Viroblock are used to create environmentally friendly products.

Mastery of logistics channel and operation

Coolmate also developed an independent e-commerce website and a highly interactive website platform that enables the development of exclusive features such as smart size selection, size fit analysis, and a variety of payment methods. It covers both the customer experience factor and cost efficiency aspect. 

The brand also use the new capital for researching and product line extension with new materials, thereby enhancing the comfort for customers. Along with that, Coolmate is set to upgrade its operating system. The newer version can help the brand meet the packaging and delivery stages on a large scale. Besides, the investment is allocated to improve the workforce capacity, thus meeting Coolmate 's rapid growth rate.

"Coolmate is in the leading position in the field of fashion technology in Vietnam with the diversity and uniqueness in their business strategy”

Charles Rim, Managing Director at Access Ventures

Charles Rim, Managing Director at Access Ventures highly evaluated the brand "Coolmate is in the leading position in the field of fashion technology in Vietnam with the diversity and uniqueness in their business strategy”. The Managing Director also predicted that Coolmate will accelerate and grow significantly in the coming time with a new milestone in fund-calling. Thus, the made-in-Vietnam start-up will achieve its business goals and strengthen its position in the Vietnamese fashion industry. 

"Coolmate leadership team has a vision of the business model, optimal operating ability, and they always act decisively”

Le Hoang Uyen Vy, Managing Director at Do Ventures

"Coolmate leadership team has a vision of the business model, optimal operating ability, and they always act decisively”, said Le Hoang Uyen Vy, Managing Director at Do Ventures. Coolmate is set to continue to write inspirational stories of Vietnam's fashion technology with the help of investors and a talented executive team.

Vietnam's young generation is full of ambitions and innovative ideas. However, it takes time, effort, money, and even failures to turn those ideas into a physical business. With the help of VCs, these ideas can take flight and be potential. Being a part of the Vietnam start-up ecosystem, Viettonkin are proud to be the bridge for VCs and new innovative start-ups. Therefore, if you are looking for an investment in innovative business, we will assist you with the whole process. Contact us for more information! 

Starting from April 2020, Decree No. 10 (on conditions for transport business by car) officially took effect. This marks the end of a years-long dispute over the delimitation of technology taxi models and opens up development opportunities for the taxi industry in Vietnam.

The rival between traditional taxis and ride-hailing apps

The Vietnam Taxi Market was worth USD 0.41 billion in 2021, and it is predicted to reach USD 0.79 billion in 2027, with a compound annual growth rate (CAGR) of roughly 10.25 percent between 2022 and 2027.

COVID-19 caused substantial damage to the taxi business in 2020, with lockdowns and restricted periods affecting taxi demand. Also, the border closure has made it difficult for many cab firms that rely on tourists to function. However, the demand for transportation services, primarily technology applications, increased after the country's activities began to reopen.

The primary services of a traditional taxi company remain vehicle booking over the phone and calling a car on the street. However, cheap taxi fares and quick vehicle booking via smartphone are allowing digital taxi services to take over the Vietnamese taxi sector progressively. 

When ride-hailing apps entered the market, many taxi firms failed to react, causing a severe drop in revenue. However, to keep up with customers' needs, several traditional taxi companies have begun to apply technology to their activities. Major players in this market include Mai Linh, Vinasun, VinaTaxi, GrabTaxi, Gojek, and Be.

Mai Linh, a Vietnamese taxi company, has teamed with local e-payment service provider VNPAY in June 2020 to deploy SmartPOS devices throughout its entire fleet, making it the first in the country to provide smart payment options to its customers. Some other traditional taxi companies have also started to launch their ride-hailing applications, typically the merger of 7 taxi firms to create the G7 brand.

Two new models for technology vehicles

At the direction of the Prime Minister, in early 2016, the Ministry of Transport issued a pilot plan to apply connection support technology for contract cars with less than nine seats in Decision No. 24.

After that, on January 17 (2020) the Government issued Decree No. 10 regulating business and conditions for transport business by car, effective from April 1 (2020) including the official management section for the application of connection support technology for contract cars.

Specifically, Article 35 of Decree No. 10 stipulates the responsibilities of ride-hailing application software providers in two cases:

In the first case, the unit only provides application software to support transport connection (does not directly operate the vehicle or driver; does not decide on freight rates) and must comply with the law on electronic transactions and other relevant laws.

The second case is that the application software provider has performed at least one of the transportation activities to make a profit (like directly operating a vehicle or deciding on freight rates), they must comply with regulations on business and conditions for automobile transport business in accordance with the provisions of Decree No. 10, the law on electronic transactions, and other relevant laws.

Therefore, the companies providing application software to support transport connections actively choose the proper business model to ensure compliance with Article 35 of Decree No. 10. From there, businesses can choose to be a provider of application software to support transport connections or a transport unit.

New competitive opportunities for traditional taxis and technology taxis

Before Decree No. 10 took effect, the most controversial issue was the identification of rail-hailing brands based on the law to have an appropriate management plan. For many years, Grab has been operating in our country with a business model detrimental to traditional taxi firms.

On the one hand, this enterprise has always identified itself as just a supplier of application software to support transport connections. But on the other hand, Grab operates no different from a transportation business when it directly determines freight rates and intervenes in many other fields, which are not reserved for units that only provide ride-hailing software.

That makes many traditional taxi companies constantly protest because they cannot compete with competitors that operate on technology platforms like Grab. While many regulations bind traditional taxis, Grab and ride-hailing apps are not under much pressure. A representative of the Vinasun taxi company said that when Grab first developed in Vietnam, its business activities decreased seriously. In the first three months of 2017, 4,239 employees quit their jobs, and 300 vehicles had to stop working.

Decree No. 10 has redefined the types of auto transport, allowing both traditional and technological taxi businesses to choose the appropriate model for themselves.

With technology taxis, businesses will now have to be responsible for their obligations to their employees, like traditional taxi businesses. In return, technology taxis will no longer be controlled in 5 pilot localities (Hanoi, Ho Chi Minh City, Da Nang, Quang Ninh, Khanh Hoa) but can operate across the country. Technology taxis are also limited in the number of vehicles like traditional taxis.

Now with apparent regulations, businesses have the right to choose, and the competition will be fiercer, but in a healthy environment. Because the transport order will be re-established, the state can manage the transport activities, and the businesses must comply with the regulations.

Investment Opportunities

The online car-hailing sector in Vietnam is considered an attractive field for domestic and foreign investors, with revenue of almost 2.4 billion USD in 2021 and an average growth rate of roughly 30-35 percent per year from 2015 to now.

Direct investment in the taxi market

Many media taxi companies are gradually converting to a technology taxi model. These businesses' strengths are a large team of experienced drivers, reliability and safety, and being available in many large domestic markets such as tourism. Even some traditional taxi companies' fares are cheaper than technology taxis.

To successfully transform, traditional taxi companies need to mobilise financial resources for operation in the new context. Taxi transportation is a large market-oriented business that requires an expensive initial investment. After a certain period, firms must capture a relative market share regarding orders and number of passengers. Businesses that want to succeed often must meet important factors such as ensuring usability, wide coverage and efficiency.

In addition to the "big players" in the current technology taxi market such as Grab, Gojek and Be, many new technology carriers who desire to develop from niche markets are being developed. One of the potential markets today is car rental with a driver for a period of time.

Although the taxi market is facing some difficulties due to high gasoline prices and the rise of private vehicles, the demand for taxi services will continue to be developed due to the increasing demand for transportation and the return of domestic and foreign tourists.

Integration with other service ecosystems

Most taxi businesses, both traditional and technological, are currently attempting to create an ecosystem around transportation services to suit clients' increasingly diverse needs. 

Grab has evolved from a ride-hailing app to a "super app" with all the conveniences of payment, restaurant ordering, delivery, travel, and more. These services were created to address transportation-related demands and enhance income for Grab's drivers, either directly or indirectly. GrabFood, the food delivery service of Grab, has consistently topped the market in terms of utilisation, accounting for around 79 percent of the total.

The "mega app" development trend is continuously booming around the world. Baidu, Alibaba, and WeChat are all instances of super applications in China that integrate all services from transportation to delivery, electronic payment, entertainment, and communication.

Traditional taxi firms, such as Mai Linh, focus on developing a conventional ecosystem, including tourism, telecommunications, insurance, cargo transportation, and car repair shops. The Mai Linh Group established its first Mai Linh Food shop at the end of 2021. When all proceeds from sales operations are transferred to the driver, Mai Linh drivers will have the possibility to raise their income.

Conclusion

Many traditional taxi firms could not adjust to ride-hailing apps' emergence in the early stages. Furthermore, management policies have failed to respond to market changes, resulting in disagreements and debates between the two sides. With the implementation of Ministry of Transport Decree No. 10, Vietnam's taxi sector now has the opportunity to compete and develop, creating significant investment opportunities.

If you are looking to invest in the Vietnamese taxi market, contact Viettonkin for the most up-to-date and reliable information. Viettonkin and our team of specialists have over 12 years of expertise in the sectors of investment and business consulting. Contact us now.

In Vietnam, the state budget currently only meets 64 percent of the healthcare infrastructure investment needs. The financial shortage has prompted the Vietnamese government to focus on mobilizing private resources to achieve public health goals. 

Overview of current public-private partnerships (PPP) projects in healthcare 

Vietnam is undergoing an economic and demographic transformation that offers enormous potential for its healthcare industry. According to Fitch, in 2019, Vietnam’s spending on healthcare reached roughly $17 billion, equalling 6.6 percent of the country’s GDP. Authorities expect that healthcare spending in Vietnam will reach $23 billion by 2022 at a compound annual growth rate of 10.7 percent. 

Besides that, the hospital network in Vietnam is quite extensive with 1,531 hospitals, among which 86 percent are public and 14 percent are private. The 1,318 public hospitals are managed following a hierarchy including central, provincial, and district or commune levels. 

On the other hand, private providers are simultaneously growing rapidly with an average of 1,300 private clinics and 9.6 new private hospitals opening each year. Currently, 50 out of 63 provinces and cities have at least one private hospital with an average rate of 1.7 private beds per 10,000 people. 

In major cities, private medical facilities provide 32.2 percent of outpatient services and 6.3 percent of inpatient services. However, private healthcare in Vietnam only accounts for 5.4 percent of the sector, while the figures for Latin American and Asian countries stand at 20-30 percent. 

Consequently, local authorities have been developing health systems by calling for domestic and foreign private financiers to invest. For example, within 5 years, Hanoi plans to develop 15 new hospitals with a total of 5,000 beds and worth 8.6 trillion VND.

Opportunities

Demographic factors

The healthcare sector in Vietnam is evaluated as having a lot of potential due to the recent demographic and socioeconomic changes. Vietnam's rapid economic development has spurred the demand for more specialized and high-quality healthcare services, especially with the growing middle class.

Additionally, the COVID-19 outbreak has again demonstrated the great importance of health, consolidating its priority for the Vietnamese people. What’s more, due to the growing concern about food safety, pollution, as well as unsafe working and living conditions, Vietnamese people are also willing to spend more money on medicine and health care. 

According to the United Nations Population Fund (UNFPA), the country has entered the aging phase since 2011. By 2038, it is expected that 20 percent of Vietnamese people will be over 60 years old. Plus, as more women enter the labor force, the falling birth rate will accelerate the aging of the population, hence straining the social welfare system. 

Healthcare system expansion

With the increasing income levels and living conditions, today, Vietnamese people are gradually more interested in the healthcare sector. To prevent overload and ensure that both urban and country patients can access health services, the government continues to fund the construction of new hospitals. 

Since public hospitals are dependent on government funding, Vietnam will need to mobilize various sources of investment to improve its medical facilities. To help the government reduce the burden of the rising healthcare costs, Vietnam is extensively looking for investment from the private sector and international companies through PPP and joint venture projects. These changes mean that there will be more business opportunities in the Vietnamese healthcare sector in the coming years.

Free-trade agreement

The Vietnamese government has implemented strategies that promote the development of the healthcare industry. Besides, the growing demand for qualified healthcare services and the application of the EU-Vietnam Free Trade Agreement (EVFTA) are driving forces for private investment in the sector. 

With the EVFTA, it is expected that Vietnamese healthcare will attract more EU businesses by solving specific problems that firms have had inquiries about for many years, such as property rights and intellectual property. 

For example, the enforcement of the EVFTA will eliminate tariffs on pharmaceutical products from the EU, while allowing foreign companies to import and sell pharmaceutical products to Vietnamese distributors and wholesalers. 

Limitations in legal policy framework and investor's perspective

While the government and authorities have made great efforts in bringing about positive transformations for the healthcare system, there still lie some limitations in the legal policy framework that investors should be mindful of, especially with concern to PPP healthcare projects. 

The definition of PPP focuses on infrastructure development, disregarding the role of PPP service. The term also makes no mention of long-term contracts, transfers of risk, management responsibilities from the public to private sectors, or result-based payments. 

In addition, the current PPP framework lacks important regulations and guidelines for screening PPP projects, allocating risks, providing government support, and discretionary proposal management. Along with that, the legal documents applied to PPP projects have not ensured completeness and consistency. 

Evidently, Vietnam has the potential to develop the Public-Private Partnerships in Healthcare model. Yet, currently, an application of PPP in the service sector is still in great need. Improving this shortcoming can open doors for the private sector to contribute toward a comprehensive, advanced, and sustainable healthcare system. 

A more forward-looking PPP regulatory framework integrated into the national health financing strategy is highly anticipated by investors. Moreover, in the field of medical equipment, enterprises hope that the decrees regulating the model of placing machines at public medical facilities will soon be approved this year. Thus, in the immediate future, investors interested in healthcare PPPs should consult with experienced and dedicated experts to navigate this dynamic sector. 

Do not hesitate to contact Viettonkin Consulting now via our website to make great use of our extensive connection in the field and our world-class service.

Vietnamese State-owned enterprises (SOEs) are enterprises directly or indirectly owned or influenced by the Vietnam's Government. In the recent decade, the Government has given top priority to enhancing SOE’s efficiency. However, the performance hasn’t been commensurate with its potential that the Government is putting great effort to incentivize investors to enter the sector. In this article, we will answer some fundamental questions about SOEs to give you a brief summary of this sector.

Vietnamese State-owned Enterprises - An overview

State-owned  Enterprises (SOEs) were originally formed during Vietnam’s subsidy period by the Government. It was once the leading economic sector in the Vietnam market. After Doi Moi (1986), switching to the market-based economic model, these enterprises began to be equitized to mobilize more social resources with a view to being a significant contributor to the economic development of the country.

According to the General Statistic Office of Vietnam (GSO), Vietnamese State-owned Enterprises are involved in almost all economic activities of the economy. They have a tendency to favor certain economic sectors, such as manufacturing, construction and trade with the considerable number of the establishments. Furthermore, it has been shown that SOEs have traditionally dominated sectors including energy, steel, non-ferrous metals, electric and electronic manufacturing, chemicals, fertilizers, rubber, food processing, and printing.

However, against the aim to contribute to the Vietnam economy, the number of SOEs has decreased significantly since Doi Moi started. The total number of SOEs was halved from 12,000 in 1991 to roughly 6,000 in 1994. The decline has kept going on recently. As of January 1, 2017, the number of operating SOEs was over 2,700, down 18.3% compared to 2012.

As recorded at the beginning of 2021, Vietnam had about 500 SOEs which held 100% of charter capital and about 200 SOEs which held controlling shares. Excluding defense, security and agro-forestry enterprises, there were only 94 large-scale SOEs. Specifically, there were 9 economic groups, 67 state-owned corporations, and 18 companies operating under the parent company and subsidiaries model.

What is the role of SOE in Vietnam's socio-economy?

The SOE sector is one of the pillars in Vietnam's economy. In 2018, according to GSO, the sector accounted for 28% of GDP, contributed nearly 30% of the state budget. At the same time, it also comprised 17% bank credit, and accounted for 60% of  non-performing loans in the economy.

In 2021, with about 500 operating enterprises, SOE accounted for only a small proportion - 0.08% of the total number of enterprises in the whole economy. However, SOEs contributed 28% of total taxes and other payables to the state budget. In comparison to privately owned businesses and foreign-invested businesses, SOEs' average tax and payable amount was VND 576 billion (approximately USD 24.8 million), 43 times higher.

With more than 29 percent of the nation's GDP coming from SOE, this sector held a significant market share in a variety of industries, including banking, telecommunications, and energy. In other words, SOE plays an important role in these industries. For example, currently, up to 96% mobile phone users use networks of Viettel, VNPT and Mobifone, 3 leading state-owned telecom providers. Besides, state-owned commercial banks such as BIDV, Vietcombank and Vietinbank accounted for more than a half of the total loan amount in the whole banking industry.

In addition, SOE plays a significant role in creating and expanding the infrastructure system required for socio-economic growth. It accounted for 24.6% of the State's overall investment capital and 12% of all societal investment capital during 2016-2020. Many SOEs have also joined the State in ensuring national defense and security. 

In short, SOEs have a great influence on the development of other Vietnamese industries. Investments made by SOEs in significant economic sectors have helped to ease the load on the state budget when implementing major projects. This has partially helped to restructure the economy and update the growth model.

How is the efficiency of SOEs?

The efficiency of SOEs has not been commensurate with its resources. Despite holding significant economic resources, SOEs do not have enough investment and development initiatives to spur innovation and enhance their competitiveness. SOEs did not implement many large-scale projects between 2016 and 2020. Instead, they only continued working on unfinished and inefficient projects from the previous periods. If there is no additional capacity, SOE’s contribution to the economy will be even more limited over the next five years.

Economists said that the SOE sector only needed to grow by 10% to help the whole economy expand more rapidly. However, the sector has been unable to do so for many years. The development of SOEs is still under expectation and requirement.

During a Government meeting, Minister of Planning and Investment Nguyen Chi Dung stressed that: “State-owned firms’ successes are only limited to a few sectors with considerable advantages, including mining, finance-banking, and telecommunications.” These enterprises still haven’t realized they could be the key driver to economic growth, he added.

Moreover, the restructuring of SOEs has had a lot to desire and concern  because it iss primarily focused on divesting state capital, rather than seeking for innovative solutions in terms of technology or business strategy.

The world is changing rapidly everyday, which offers Vietnam many opportunities. However, SOEs cannot seize them despite having the greatest potential. This is due to the lack of vision for development, especially in further integrating into the global value chains, which the Government is putting tremendous effort to improve.

What is the Government’s action to develop SOEs?

Generally, the Government’s view is for SOEs to play the leading role in the whole economy and set up  value chains to create spillover effects for the growth of the economy. Therefore, the Government has taken measures to promote the development of SOEs as well as incentivize foreign investment in SOEs.

To improve the scale and efficiency of SOEs

First, SOE reform or Vietnam’s equitization and divestment has been taking place since the 1980s. The process of SOE reform in Vietnam is divided into three main stages: the period of 1980−1986; the period of 1986−2001; and from 2001 to present. During the 3 stages, enterprise valuation is one of the most complicated, costly and lengthy steps. It is considered as a bottleneck that prevents a large number of SOEs from successful equitization and retard the reform process.

On March 17, 2022, the Vietnamese Government approved the project "Restructuring SOEs, focusing on economic groups and corporations in the period of 2021-2025". On the basis of modern technology, innovation, and management according to the world standards, the project aims to increase the operational effectiveness and competitiveness of Vietnamese SOEs. Economists estimate that this is the right step of  the Government to deal with the weaknesses as well as enhance the strengths in order to protect and expand capital in the state section.

Moreover, the project also points out the need to clearly identify key industries and fields that need the presence of SOEs in line with the country's sustainable development orientation, such as renewable energy, high-tech industry, and important national infrastructure.

To encourage SOE’s role of leading other economic sectors, recently the Ministry of Planning and Investment drafted the project: "Developing large-scale SOEs, especially multi-owned state economic groups”. There will be seven SOEs of this sort, according to the project. These large-sized SOEs must be well-governed by following international standards (OECD). They must also have total assets of over VND 20,000 billion, a market share of at least 30%, a return on capital ratio of at least 6%, and the ability to master high technology.

The minister also stressed the necessity to change how we perceive equitization and the divestment of state investments in enterprises. Equitization and divestment must aim to increase the quality, effectiveness, and value of public investments, not to withdraw state money from SOEs and reduce their scope and scale.

To create favorable conditions for foreign investors

Because the equitization and divestment process has been slowed down by several factors, the Government has kept issuing new decisions in order to incentivise foreign direct investment in the SOEs and accelerate the process.

In 2019, the Ministry of Finance introduced Circular No.21/2019/TT-BTC which outlines the process of book building. This is a process in which an underwriter attempts to determine the price at which an initial public offering will be offered.

This Circular can help businesses determine market interest and purchase power before a transaction. It also improves the efficiency of the firm’s first public sales, which is especially important when it comes to a major auction involving foreign investors.

In addition, the Government also issued Circular No.03/2019/TT-NHNN in May 2019. The Circular allows foreign investors to make deposits in foreign currency when they register for an SOE auction. It is effective for both first-time sales of an SOE or state divestments. The transaction can be carried out at all approved banks.

Though the SOE sector seems to be a promising investment opportunity, there are quite a lot of challenges facing investors when entering this market. Viettonkin is confident to be an expert in the SOE sector. We can provide you with guidance and keep you updated about the changes of the market trend and regulations related to SOE. Let contact us right now to maximize your chance of success!

Currently, Vietnam has set long-term objectives for developing sustainability and green growth, based on the effective use of natural resources to stimulate economic growth. Hence, the Vietnamese government prioritises fostering sustainable development, which has attracted much attention from both foreign and domestic investors.

National green growth strategy and innovative investment trends in Vietnam

National Green Growth Strategy

The Prime Minister adopted the National Green Growth Strategy 2021-2030, vision 2050, on the eve of the 2021 United Nations Climate Change Conference.

The Vietnam Green Growth Strategy (VGGS) aims to quicken the economic restructuring process to use natural resources effectively, and reduce greenhouse gas emissions by applying technologies. Green growth will take the lead in sustainable economic development to achieve a low-carbon economy and enhance natural capital. 

Because of the rising interest in sustainable development, enterprises have the direction to incorporate sustainability into their business models, policies, and plans. Additionally, enterprises can also take advantage of the trend since governments focus on creating opportunities and incentives for sustainable enterprises.

Vietnam sustainable growth trends

Globally, a number of organizations, nations and investors have taken steps to expand the sustainable investment trend, with ESG investing being the most well-liked. Environmental, social, and corporate governance (ESG) elements serve as a framework for investors looking to invest in businesses that are concerned with sustainability and the issues facing the world today. 

According to Mrs. Lim Bey An, Head of the Green Finance and Asset Management Division at the Monetary Authority of Singapore (MAS), "Asia's economy is still developing, and fossil fuels will continue to play a critical part in that expansion. We cannot make this decision lightly, notwithstanding the fact that Asia still has a long way to go in terms of sustainability. It is critical to consider the economic and social repercussions before the implementation stage. However, considering the unique characteristics of the area, action must be performed with caution.

Southeast Asia's largest solar market, Vietnam, is now experiencing the highest level of investment in the field of renewable energy. In an effort to encourage sustainable and environmentally friendly growth, Vietnamese banks and organizations have made a variety of investment commitments for overseas investors.

Pioneering Corporation in Green Investments and Development

New green investment projects coming into Vietnam are strongly following the trend of green production. The first $1 billion projects of 2022 in Vietnam is a toy factory project that grants Lego Manufacturing Vietnam Co (Denmark) the authority to import, export, wholesale, and retail items in Binh Duong. Over 1.3 billion USD had been invested in the project overall, representing a 15-year investment difference. 

Notably, this will be Lego's first carbon-neutral facility, as it pledges to use solar rooftop power and alternative energy sources, which are necessary for new consumption trends. Consumers are particularly interested in whether the product was made using environmentally friendly practices in addition to quality and pricing concerns. These elements will soon contribute to the competitiveness of the economy and goods in Vietnam.

One of the four focuses in Suntory PepsiCo Vietnam's sustainable growth strategy for the years 2021–2025 is converting to more ecologically friendly materials and reducing packaging waste. According to Mr. Jahanzeb Khan, General Director of Suntory PepsiCo, Pepsi's recycled plastic soft drink bottles are first introduced to the Asian market in recent years. 

To keep up with the trend of green development, FDI capital also gives the production, professional, scientific, and technological domains greater consideration. Some significant FDI projects (like Samsung's) have represented typical cases of improving connectivity and fostering the capacity development of domestic component suppliers.

Endeavour to Attract Private Green Investments

To encourage the green investments in Vietnam market, The National Assembly passed Resolutions No. 43 on fiscal and monetary policies to support the socio-economic recovery and development program, and No. 31 on the economic restructuring plan to mobilize resources for socio-economic recovery and development in the context of Covid-19 epidemic effective control.

Not only the government, but Standard Chartered Bank Vietnam and the British Business Association Vietnam (Britcham) also signed a cooperation agreement at the beginning of September 2021 in order to promote sustainable development in Vietnam and implement ESG standards in the firm.

Without the agreement and operational execution of the business community, the shift from a brown economy to a green economy can rarely be effective. According to calculations by the Ministry of Planning and Investment and the World Bank, to implement Vietnam's green growth strategy by 2030 is expected to need about 30 billion USD. The state budget can meet up to 30% of resources, opens up a lot of investment opportunities in potential fields such as agriculture, energy, finance, consumption, etc that investors can consider to set up business. 

Fortunately, there was a noticeable shift in FDI initiatives. A number of sustainable energy projects have recently received licenses, such as the project for the Bac Lieu LNG Thermal Power Center's liquefied natural gas (LNG) power plant (Singapore). 

Foreign investors' interest in the green economy and green production creates positive effects on Vietnam's economy. The eco-industrial park model has received more attention, accompanied by the improvement of related policies as well as an increase in investment of industrial real estate developers (for example, industrial parks).

Conclusion

There are rules and requirements that must be satisfied in order to achieve the aims of green growth. Sustainability and green growth are long-term goals that would be game-changing factors to boost national economics, bringing benefits to both domestic & foreign enterprises. Green products and projects will also assist to form higher pricing segments, which will help offset the additional expenses as they switch to green operations. Therefore, the wide application of Vietnam sustainable growth would bring numerous potential benefits to private investors.

If you are looking to have a green investment or endorse national green growth, contact Viettonkin for the most up-to-date and reliable information. Viettonkin and our team of specialists have over 12 years of expertise in the sectors of investment and business consulting. Contact us now.