MBC welcomes our New Corporate Members “CHIN WELL FASTENERS (VIETNAM) CO., LTD”,” GAMUDA LAND (HCMC) JOINT STOCK COMPANY”,” HAWE INDUSTRIAL CONSTRUCTION JOINT STOCK COMPANY”, ” PANPAGES VIETNAM LTD”,” TUAN LE CONSTRUCTION COMPANY LIMITED” and ” ZICOLAW (VIET NAM) LTD”---MBC welcomes our New Individual Members “ALAN NG AIK HOW from TAN VIET XUAN PRODUCTION JOINT STOCK COMPANY “, “GAN YEE CHUN from SAMTEC VIETNAM COMPANY LIMITED “, “GARY LIT from GL TRAINING & CONSULTANCY”,” GOH SHUI HSIN from HEXACHEM CO., LTD”, “GRATIA GADING GEORGE from KRETOP INTERNATIONAL CONSTRUCTION CHEMICAL”, “HOW YEN LING from GLOBAL TRAINING NETWORK ALLIANCES SDN BHD”, “LENG TZE SING from CT TNHH MOC CAPITAL VIETNAM”,” LIM HOCK SIN from FURNITECH COMPONENTS VIET NAM CO., LTD”, “MARTIN WONG SIEW BING from SOUTHEAST ASIA TELECOMMUNICATIONS HOLDINGS PTE.LTD “,”MICHEL KHAOU from AGILITY CO., LTD “, “PETER LIM WEI HENG from TEXCHEM MATERIALS (VIET NAM) CO., LTD “, “ROGER YAP WENG FOOK from CONG TY TNHH MOLUTION”, “TAN JING KUAN from NORD ANGLIA EDUCATION GROUP”,” TAN LAI SEE from ABS ENGINEERING VIET NAM LIMITED”, “TAY KENG CHONG from NIRO CERAMIC VIETNAM”, “TEO SECK CHUAN from SEAMASTER PAINT VIETNAM CO.,LTD”,” TEOH TEAN TIAR from GTC VIETNAM SERVICE AND TRADE COMPANY LIMITED”.

Malaysia Business Chamber Vietnam


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Vietnam News

HEADLINES

FINANCE

Monetary policy should not be used for too many goals: SSI experts

Three banks being acquired at zero dong: still facing heavy losses

ECONOMY

GDP growth snowballs in 3rd

9M industrial production index up 7.9%

INVESTMENT

Tetra Pak breaks ground on $110-million factory in Binh Duong

HSBC: Thai businesses will continue to invest in Vietnam

REAL ESTATE

Boom foreseen in green construction in Vietnam

In for their share

OIL&GAS&ENERGY&MINING

Tough challenges foreseen for oil, gas sector VNS

Putting an end to long-delayed thermal power and port projects

LEGAL

Tightened control over on-lent ODA and concessional loans for localities

Liquor trading conditions to be stiffened

Source:

Dr. Oliver Massmann

International Attorney at Law
Certified Financial Accountant and Auditor
General Director of Duane Morris LLC
Partner of Duane Morris LLP
Member to the Supervisory Board of PetroVietnam Insurance Holdings Joint Stock Company

FINANCE

Monetary policy should not be used for too many goals: SSI experts

Vietnam Finance

The banking sector or monetary policy can not be used for too many goals, but it is necessary to spread the task of stimulating growth for all agencies with an aim to stimulate demand instead of stimulating supply”, according to Saigon Securities Inc (SSI) experts.

SSI’s September macro report showed, Q3/2017 recorded a remarkable growth of 7.64 percent (it was 5.15 percent in Q1 and 6.28 percent in Q2) thanks to the strong improvement of the processing industry sector with superior products namely electronic products.

Thanks to the launch of Galaxy Note 8 in late August, the industrial index of electronic sector surged 44.5 percent in September in comparison with the same period last year, marking the highest growth in the last 32 months. Therefore, the electronic industrial index in Jan-Sep was boosted to 25.1 percent (while it was 13.4 percent in the same period last year).

In addition to phones, other electronic products contributed $18.4 billion to the export value in Jan-Sep, accounting for 12 percent of total exports and a sharp increase of 41 percent year-on-year(in the same period last year, the rise was 13.1 percent).

Another prominent FDI project namely Formosa, has started working since late Q2 and expects to produce 1.5 million tonnes of steel with expected revenue of 16.8 trillion dong in 2017, making a significant contribution to GDP growth.

According to SSI, growth in Q3/2017 again confirms the importance of FDI and the need for special mechanisms to attract large-scaled FDI projects.

Crude oil output in September reached 1.06 million tonnes, down 9.9 percent over the same period. Other mineral mining enjoyed a high growth rate of 9.2 percent (7.7 percent in Q2/2017). Therefore, despite a decline of 8.08 percent year-on-year in the mining GDP, this fall was the lowest in the three quarters (the fall was 10 percent and 8.2 percent in Q1 and Q2).

Without the mining sector, the 2017 economic growth would reach 7.5 percent, the highest level in many years. This is an encouraging number and it is premise to believe that 2018 GDP growth will be over 7 percent when the mining sector recovers” SSI experts said.

In the first nine months of 2017, the GDP of the financial, banking and insurance sectors increased by 7.89 percent, the highest level in the past seven years, with the most important factor namely the process of dealing with bad debt and the growth of the stock market.

SSI believes that the economy is moving on the right track and this is the result of great internal efforts such as FDI attraction or the restructuring of the banking system that have taken place many years ago.

“Achieving the growth target of 6.7 percent in 2017 is no longer too important because macro-balances are in good shape and growing above 7 percent by 2018 is reachable,” SSI concluded.

 

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Three banks being acquired at zero dong: still facing heavy losses

Vietnamnet

At the meeting with National Assembly Chair Nguyen Thi Kim Ngan on October 3, State Audit of Vietnam (SAV) said, after being acquired at zero dong by the State Bank of Vietnam, three banks still face big losses and negative Equity is increasing.

Specifically, the SAV’s report on the restructuring results of three commercial banks being acquired at zero dong by the cental bank (including Construction Bank, Ocean Bank and Global Petroleum Commercial Joint Stock Bank (GPBank), shows that after two years of acquisition, the financial status of these three banks has not improved.

“The business performance of these three banks continues to suffer big losses, the negative equity is increasing and if there is not effective measures, the losses will be bigger”, SAV warned.

Also according to SAV, in 2016, the SAV proposed to deal with 38.776 trillion dong, the highest figure during the 22 years of operation of SAV.

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ECONOMY

GDP growth snowballs in 3rd

VIR

Despite a continued downturn in the mining sector, nine-month figures show Vietnam’s economy is on a good growth trajectory.

The general Statistical Office (GSO) reported that the economy grew by 6.41 per cent in this year’s first nine months, higher than the 5.99 per cent of last year’s corresponding period. The economy grew by a record 7.46 per cent in the third quarter, up from 6.28 per cent in the second quarter, and 5.15 per cent in the first quarter.

“These figures reflect that the economy is flourishing, showing a strong rise in the economy’s manufacturing and consumption. The economy has also been buoyed by further increases in foreign direct investment and exports, domestic credit growth, and a further recovery in agriculture from the 2016 drought, as well as accelerating disbursement of capital

expenditure on national infrastructure programmes,” Aaron Batten, country economist from the Asian Development Bank (ADB), told VIR.

According to GSO’s head Nguyen Bich Lam, the economy has been strongly recovering. It shows in the difference in growth rates of 1.18 per cent between the third and second quarters, and 1.13 per cent between the second and first quarters. These differences are the biggest between the quarters of a year since 2010.

In this year’s first nine months, 17 out of the economy’s 21 key economic sectors, excluding the mineral sector, witnessed increases.

For example, the nine-month industrial index for production (IIP) rose by 7.9 per cent year-on-year, higher than the 7.1 per cent increase seen last year. IIP in September was 13.2 per cent higher year-on-year.

The processing and manufacturing sector, which contributes up to 80 per cent of the industrial sector’s growth, expanded by 12.8 per cent, compared to 11.7 per cent in the same period last year. It was “also the highest ascension of this sector over the past many years, responsible for 9 per cent of the economy’s nine-month growth,” according to GSO.

“Despite the drop in mining and oil output, Vietnam’s economy continues to perform well, driven by its twin engines of export-oriented manufacturing and rising domestic consumption,” said Eric Sidgwick, ADB country director for Vietnam.

In this year’s first nine months, the mineral sector shrunk 8.1 per cent year-on-year, compared to 7.1 per cent in last year’s corresponding period, and caused a 0.57 per cent decrease in the economy’s nine-month growth.

According to a GSO survey on manufacturing and processing firms in Vietnam released last week, 41.5 per cent of respondents reported that their business was better in the third quarter than in the previous quarters. 52.6 per cent expected even better business in the last quarter, with 54.2 per cent forecasting an increase in production.

ADB last week set its new forecast for Vietnam’s economic growth in 2017 at 6.3 per cent, followed by growth of 6.5 per cent in 2018. “I think the 6.3 per cent is rather high, compared to many other Southeast Asian nations,” ADB’s Batten said.

Under ADB’s Development Outlook Update 2017 released last week, the growth rate of many nations in the region is expected to be lower than that of Vietnam this year and in 2018. Examples include Indonesia (5.1 and 5.3 per cent, respectively), Malaysia (5.4 and 5.4 per cent), Singapore (2.7 and 2.7 per cent), and Thailand (3.5 and 3.6 per cent).

“Vietnam has firmly established itself as a premier destination for foreign investment. It has a very large domestic market, a middle class that is growing quickly, a good labour force and an improved regulatory system. Enterprises are showing optimism about Vietnam’s prospects,” Batten said. “If the mineral sector had grown like in previous years, Vietnam’s economy could have grown by 7 per cent this year.”

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9M industrial production index up 7.9% 

VET

Index up 7.1% year-on-year and 7.2% compared to first eight months, GSO reports.

The nine-month industrial production index (IPI) increased 7.9 per cent, up 7.1 per cent year-on-year and 7.2 per cent compared to the first eight months of the year, according to the latest figures from the General Statistics Office (GSO).

The IPI in the third quarter was estimated to have increased 9.7 per cent; much higher than the figure in the first quarter, of 3.9 per cent, and the second quarter, of 8.1 per cent.

Manufacturing and processing grew 12.8 per cent; its highest increase for several years and contributing 9 percentage points to the overall increase. Mr. Nguyen Bich Lam, General Director of the GSO, said that this was the highlight of the industrial sector, which contributes significantly to GDP growth in general.

Power generation and distribution rose 8.9 per cent, contributing 0.6 percentage points to the overall increase, water supply and waste water treatment rose 7.8 per cent, contributing 0.1 percentage point, and mining fell 8.1 per cent, adding 1.8 percentage points less.

In the first nine months of the year, some sectors saw higher production indexes than in the same period last year, such as the production of electronic products, computers and optical products, which increased 25.1 per cent and 45.5 per cent in the third quarter.

The main reason was Samsung expanding its production of high-value electronic products, with expected revenue in electronics in 2017 at more than VND1.18 trillion ($51.9 million), up 17.7 per cent compared to last year.

Steel production increased 21.4 per cent, including the contribution from the Formosa Group, with a 2017 target of producing 1.5 million tons of raw steel and earning revenue of VND16.85 trillion ($741.4 million). Production of rubber and plastic products increased 11.6 per cent.

Sectors with low or declining growth included food processing, up 6.6 per cent, tobacco, down 2 per cent, and the exploitation of crude oil and natural gas, down 10.7 per cent.

The nine-month IPI in certain localities with large industry increased, such as Bac Ninh, up 25.1 per cent year-on-year, Hai Phong 20.1 per cent, and Thai Nguyen 18.1 per cent.

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INVESTMENT

Tetra Pak breaks ground on $110-million factory in Binh Duong

VIR

Tetra Pak, the world's leading food processing and packaging solutions company, today broke ground on its new, state-of-the-art regional packaging material factory at Vietnam-Singapore Industrial Park II-A in the southern province of Binh Duong.

Built with an investment of $110 million, the 100,000-square-metre facility will have an expandable capacity of 20 billion packs per annum and is expected to begin commercial operations by early 2019. The factory will produce a variety of packaging formats, including the popular Tetra Brik Aseptic and Tetra Fino Aseptic packages.

“This, our fourth packaging materials factory in the region, is a strategic addition to our existing production footprint, enabling us to meet the rapidly growing demand for dairy and beverage packaging in Vietnam as well as the Asia-Pacific region”, said Chris Kenneally, president of Tetra Pak South Asia, East Asia & Oceania.

"We have always believed in the potential of the region, and this investment is an important step towards shaping the future of its packaging industry. The new factory will give us much better coverage and scale, helping us provide our customers with shorter lead times, consistent supplies, and improved efficiency and flexibility," he said.

Packed liquid dairy and fruit-based beverages sales across the ASEAN, South Asia, Japan, Korea, Australia, and New Zealand are expected to grow at a rate of 5.6 per cent annually up to 2019.

In Vietnam, the market is expected to grow faster at a cumulative growth rate of 6.5 per cent during the same period. The dairy category, which remains the country’s biggest, is projected to see per capita consumption doubled to 28 litres per annum by 2020, while the fresh juice and purees market is expected to grow at an annual rate of 17.5 per cent over the next five years.

The new factory will leverage best-in-class innovations and experiences from all over the world, deploying the latest technology and equipment.

With sustainability as a longstanding strategic pillar of the company, the new factory is envisioned to be one of the greenest in the Tetra Pak system, and will be one of the first factories in the country to apply the latest, most-demanding environmental standards set by the globally-recognised LEED Certification.

The site will leverage best practices from Tetra Pak’s more than five decades of building experience to minimise its environmental footprint, which includes implementing an innovative “Energy Monitoring System” that monitors and acts on all energy and CO2 losses.

“The investment reflects Tetra Pak’s commitment to contribute to Vietnam’s socioeconomic growth,” shared Robert Graves, managing director of Tetra Pak Vietnam, who noted that with the country being one of the region’s manufacturing powerhouses, the new factory will help strengthen its capability to become part of the global supply chain, besides positively impacting related industries.

The facility’s 200+ employees will also receive hands-on training on the use of highly automated technology utilised at the factory.

“The combination of highly skilled employees and cutting-edge technology will surely help set a new standard for food packaging in Vietnam and enable innovation sharing and transfer that will benefit the industry,” said Graves.

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HSBC: Thai businesses will continue to invest in Vietnam

VET

CEO of HSBC Thailand predicts investment levels will be maintained via FDI and M&A.

Many Thai businesses are very interested in the Vietnamese market and it is predicted that many will continue to invest in Vietnam to take advantage of the opportunities opening up in many areas, Mr. Kelvin Tan, CEO of HSBC Thailand, told the media on October 3 during his visit to Vietnam.

According to Mr. Tan, Thai businesses will increase their investment in the Vietnamese market through both foreign direct investment (FDI) and mergers and acquisitions (M&A).

Vietnam’s retail market continues to attract the attention of Thai investors. Food and beverages (F&B) and consumer goods are also expected to attract many Thai investors in the near future. Thai businesses also plan to increase their investment in fields where they have strengths, such as building materials, power plants, and cattle feed.

An advantage for Thai businesses in Vietnam, Mr. Tan said, is that they are geographically close and similar in cultural characteristics. The growing Thai investment in Vietnam is due to the latter’s stable political and macroeconomic conditions, low labor costs compared to many countries, and government incentives. Vietnam is also geographically close to China.

In recent years, Thai investment in Vietnam has increased sharply, creating a wave of M&A. HSBC Vietnam has been involved in many major deals, such as BJC buying Metro Cash & Carry and the Central Group’s PowerBuy purchasing electric appliance supermarket chain Nguyen Kim.

According to the Foreign Investment Agency, Thailand had invested $8.13 billion in 458 projects in Vietnam as at last March, and was the tenth-largest investor of the 115 countries and territories with investments in the country and the third-largest in ASEAN, after Singapore and Malaysia.

In the first six months of 2017, Thailand ranked 8th, with 20 projects valued at $146.4 million.

 

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REAL ESTATE

Boom foreseen in green construction in Vietnam

VNA

There will be a boom in green buildings in Viet Nam if the community’s awareness of environmental protection improves, an expert told a symposium in HCM City Thursday.

Green buildings are defined as those with high efficiency in the use of energy and materials and not having much adverse effect on human health and the environment.

Tran Khanh Trung, president of the HCM City Green Architecture Club, said: “Viet Nam now ranks 17th in Asia and 37th in the world in the number of green buildings, but the fact is the construction of such buildings has been steadily increasing, going up from 28 in 2016 to 48 this year.”

He listed the hurdles to green building construction in Viet Nam.

“Low awareness of the community about how green buildings can protect the environment is the biggest challenge.

“Misconceptions about green buildings are the next hurdle. People mistakenly think a green building must have a lot of trees and energy saving equipment, it is only about unique architectural solutions.

“People also think it is very difficult to get green certification and green buildings are very expensive. They are wrong.”

He said they cost 5 – 30 per cent more than normal buildings, but a very good consultant could bring it down to just 0.5 – 2 per cent.

He himself constructed a green building for his company at 8 per cent extra cost, he said.

“I spent 4 per cent more for energy efficiency and fully recovered my money in three years.”

He invested another 3 per cent to ensure no harmful materials or equipment were used indoors, considering that an investment for his and his staff’s health, he said.

In Viet Nam, the concept of green buildings is still relatively new to the public and is not fully understood even by those working in construction and architecture, he said.

He was confident that “If the community’s awareness of environmental protection improves, there will be a boom in green buildings.”

Vu Linh Quang, vice president of the club, said: “Green buildings also contribute significantly to the process of urban development by creating a sustainable living environment, attracting foreign investment and increasing tourism.”

Joseph Azzarello, senior staff engineer – sustainability, at Kohler Company and LEED certification coach at the US Green Building Council (USGBC) said: “Buildings have a great impact on the environment and we must change them to green for environmental protection.”

Globally, buildings account for 17 per cent of water use, 33 per cent of CO2 emissions and 40 per cent of the energy consumed, he said.

The symposium attracted property developers, architects and interior design specialists, giving industry professionals an opportunity to share and discuss problems, hear from leading experts about world trends, and promote green buildings in the country.

Following the symposium, Kohler organised an LEED Green Associate training programme, and awarded attendees a certificate that is a pre-requisite for the official LEED GA certification exam.

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In for their share

VET

Increasing numbers of new international hotel operators are expanding their presence in Vietnam given the level of development in the country’s tourism sector.

 Fifty-five years since it opened its first hotel in Tokyo, the Hotel Okura Co. signed an agreement with the Saigon Trading Group (SATRA) to develop and manage The Okura Prestige Saigon in Ho Chi Minh City in 2020. The Okura Prestige Saigon will be the Okura Prestige brand’s first property in Vietnam, featuring 250 spacious guest rooms, Japanese restaurants, all-day dining, a rooftop bar, multi-purpose banquet/meeting rooms, a gymnasium, and an outdoor pool. It will combine meticulous Japanese hospitality with state-of-the-art facilities to deliver the signature Okura Prestige quality and ambience. 

“We are focusing on hotel development in Vietnam because of its stable and highly promising GDP growth rate, which is averaging 6.5 per cent annually, and its affluent and youthful population up to age 30, which accounts for half of the total population,” said Hotel Okura’s President Toshihiro Ogita. “Vietnam suits our business strategy of expanding the scope of our loyal customers’ travel destinations, growing our brand awareness, and further strengthening our customer base and thus competitive advantage in promising markets.” 

The Okura Prestige Saigon is among a wide range of international upscale and luxury hotel brands already planned for opening in Ho Chi Minh City within the next three years. These include Hilton and Ritz-Carlton and well-known brands already with a presence, such as IHG, Accor, Marriott and Hyatt. Over the next three years, approximately 3,500 rooms in 13 individual hotels are set to open in the city, according to real estate consultants JLL. Hotel investors are clearly quite keen to invest in Vietnam. 

Market upbeat

In early June, Hilton CEO and President Mr. Christopher J Nassetta was joined by a key strategic business partner in Vietnam, Ms. Nguyen Thi Nga, Chairwoman of the BRG Group, at a special meeting with Prime Minister Nguyen Xuan Phuc during his visit to the US. Hilton and BRG told the Prime Minister of their view that Vietnam’s tourism sector will be a key pillar of future economic and employment growth, as it already contributes 7.3 per cent to employment and 9.1 per cent to GDP. “Vietnam is an incredible destination with the potential to be a significant beneficiary, and, at Hilton, we are committed to bringing our unique brand of hospitality everywhere our customers want us to be,” said Mr. Nassetta. 

During the meeting, Hilton and BRG outlined the details of their partnership, which includes two hotels in Hanoi, the Hilton Hanoi Opera and the Hilton Garden Inn Hanoi, plus the recently announced dual brand project to develop Hilton Hanoi Westlake and Double Tree by Hilton Hanoi Westlake. Hilton has also previously announced management agreements for Hilton Hai Phong, which is under construction, and the Double Tree by Hilton Doson, also in Hai Phong.

In terms of Vietnam’s accommodation demand, there were over 10 million international arrivals in the country in 2016, a 26 per cent increase against 2015. This is the first time Vietnam has welcomed over 10 million foreign visitors, reflecting the country’s growing status as a business destination and tourism hotspot, and the number is set to double by 2020. In the first half of this year, it welcomed 6,206,336 international arrivals, representing an increase of 30.2 per cent year-on-year, according to the General Statistics Office. The country appears on track to meet its target of 11.5 million foreign visitors this year.

To accommodate the increasing number of arrivals, new hotels have been popping up around the country. As with Ho Chi Minh City, international operators like IHG, Pan Pacific, Accor, Hilton, and Marriott already have hotels in Hanoi. “As observed elsewhere in Southeast Asia, we expect growth beyond international hotel brands,” said Mr. Adam Bury, Senior Vice President, Investment Sales, Asia Pacific, Hotels & Hospitality Group, at JLL. “Homegrown hotel brands are likely to come to the forefront, particularly catering to domestic travelers. We’re seeing domestic hotel brands being established in Ho Chi Minh City and Hanoi in the budget and mid-scale segments, and expect these chains to grow nationwide at a rapid pace.” 

There are also a number of notable projects currently under different stages of planning and construction along the coastline, while several projects remain in various pre-feasibility stages as the market continues to receive solid interest from developers in Da Nang and Hoi An. The soon-to-open Sheraton Hoi Tam Ky Resort and the master-planned Hoiana integrated casino development, which will include Vietnam’s first Rosewood hotel, both to the south of Hoi An, will further expand the length of the coastline accessible to visitors.

The Swiss hotel company Mövenpick Hotels & Resorts has recently signed up for a new property in Vietnam. Located in Da Nang, the property will have 150 rooms as well as 354 residences, a rooftop bar and restaurant, several other bars, a swimming pool, a fitness center, a spa, and a kids club, as well as a reception hall and meeting rooms. To open at the end of 2019, the new property is part of the Swiss hotelier’s widespread ambitions. 

“The property is being specifically designed to serve Vietnam’s rapidly developing tourism and business and MICE sector, while also meeting emerging demand for extended and long-term stays,” explained Mr. Andrew Langdon, CDO and Senior VP, Asia, at Mövenpick. “The growth within the country’s economy and a general increase in disposable incomes are driving domestic tourism and the property market simultaneously.” After the opening of the Mövenpick Hotel Hanoi, it has four hotels currently under development in Vietnam: Mövenpick Resort Cam Ranh Bay (2018), Mövenpick Hotel Quang Binh (2019), Mövenpick Resort Phu Quoc (2019), and Mövenpick Hotel Quy Nhon (2020). 

Development and investment in Nha Trang and Cam Ranh have historically been driven by domestic groups, but the growing profile of the two destinations is now starting to attract the attention of international investors, such as Westin Resort & Spa Cam Ranh, Mövenpick Cam Ranh Resort, and Champarama Resort & Spa, to name just a few. 

“Tourism in Vietnam has really been booming, particularly in the last two years, and the country is now on the fast-track to becoming an extremely popular destination,” Mr. Patrick Basset, Chief Operating Officer for AccorHotels Upper Southeast and Northeast Asia, told VET. 

Accordingly, AccorHotels will be opening another 15 hotels in the country by 2020, bringing its total portfolio to 39. The group is growing its presence in locations such as Phu Quoc Island, Hai Phong, Sapa, Nha Trang, and Hanoi. 

Solid prospects

The Vietnam National Administration of Tourism (VNAT) is forecasting a further 15 per cent increase in international tourist arrivals this year, to 11.5 million, and for the tourism sector to generate $20 billion in revenue. To facilitate these increases, the government has introduced an online visa system for short-term and business travelers from leading source markets and is also extending the waiver of visa requirements to more countries. The new e-visa granting procedures for foreign citizens implemented this year and new low-cost airlines are encouraging people to travel to Vietnam, boosting the need for quality accommodation and facilitating the growth of international hotels.

In the meantime, the dramatic rise in arrivals has gone hand-in-hand with significant infrastructure investment, as Vietnam is spending a greater amount of its GDP on infrastructure than any other Southeast Asian nation, according to JLL. The investment will lead to 2,000 km of new highways, urban railway networks in Hanoi and Ho Chi Minh City, and a slew of airport expansions and new builds. This is complimented by investments from both State and private airlines to expand and improve their fleets. 

According to Vietnam’s Tourism Master Plan to 2020, the country is looking to host 20 million international visitors by that time. The tourism sector is envisaged to create 3.5 million jobs and generate total revenue of $30 billion, which would represent approximately 10 per cent of GDP. These figures are growing into a much larger blip on the radar that’s drawing hotel investors and developers from around the world. 

“Vietnam’s growing tourism sector and thriving economy have promoted the hotel and resort market among foreign developers and investors,” Mr. Frank Sorgiovanni, Head of Research, Asia Pacific, at JLL Hotels and Hospitality Group, told VET. “As a result, a number of new hotel developments remain in the pipeline. Given the recent rapid growth in international visitor arrivals, continued marketing efforts, improvements to infrastructure, and the further development of human resources and services in Vietnam, the outlook for the tourism and accommodation sector is bright. New hotel supply will continue to be announced.”

With the emerging tourism market expected to continue growing strongly over the next few years, the strong brand loyalty that exists will see more tourists continue to visit Vietnam. International brands have the power to heavily market their properties and in turn attract guests to Vietnam.”

 

Mr. Frank Sorgiovanni, Head of Research, Asia Pacific, JLL Hotels and Hospitality Group

“Vietnam is famous for its amazing natural scenery, friendly people, and cuisine. We look forward to seeing more destination-driven marketing campaigns by the Vietnam Tourism Board as well as TV series and write-ups on international media channels to promote Vietnam not only as a tourist destination but also an attractive MICE destination.”

Mr. Patrick Basset, Chief Operating Officer, AccorHotels Upper Southeast and Northeast Asia

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OIL&GAS&ENERGY&MINING

Tough challenges foreseen for oil, gas sector VNS
VNS

The oil and gas industry is one of the country’s key economic sectors, making important contributions to the national economy, but it is facing exceptionally tough challenges, especially in the context of deeper international integration, participants at a seminar in Hà Nội were told on Tuesday.

The Communist Review, a magazine of the Communist Party of Việt Nam, and the Việt Nam Union of Science and Technology Associations held the seminar to discuss the achievements, opportunities and challenges facing the oil and gas industry and to propose solutions to maintain its dominance in the process of international integration.

Vũ Văn Hà, deputy editor-in-chief of the Communist Review, told seminar participants that the oil and gas industry, represented by the Việt Nam National Oil and Gas Group (PVN), annually contributed 25-30 per cent of the State’s budget revenues.

While state-owned enterprises (excluding the oil and gas industry) contributed about 42 per cent of GDP, PVN separately accounted for 16–18 per cent of GDP, the highest level of one company in the 2008-2015 period, Hà said.

In addition, the development of the oil and gas industry contributed to national energy security, playing an important role in Việt Nam’s sea strategy and contributing to the protection of national sovereignty, he added.

Its achievements raised Việt Nam position in the community of oil producing countries and contributed to enhancing Việt Nam’s international reputation, while boosting international cooperation and investment activities in key areas including exploration and exploitation, oil refineries, gas services and power services.

Overall, the industry helped enhance the value of oil and gas resources, promoting national industrialisation and modernisation and improving the competitive position of Việt Nam’s oil and gas industry in the world, Hà said.

However, he added, the national oil and gas industry was facing tough goals.

Under the development strategy of the oil and gas industry towards 2025, the industry aims to annually increase oil and gas reserves to 35-40 million tonnes of oil equivalent, oil and gas exploitation will increase by 10-36 per cent for each five-year period, of which the exploitation from overseas oil field must be 3 to 5 times higher than the current levels, the sector’s annual revenue is expected to grow by 10 to 15 per cent.

"The future for the country’s oil and gas industry will be tougher as the major oil fields near the shores are close to exhausting production. The calling for foreign investment in oil and gas exploration will also be more difficult," Hà said.

Tough goals ahead

Many large PVN projects lacked capital and access to credit while borrowing from international organisations is getting increasingly harder, Hà said. In addition, the company’s skilled human resources supply was becoming limited. Implementation of key projects abroad also faced obstacles, greatly affecting the the achievement of short-term and long-term goals of the whole sector, Hà added.

Trương Đình Tuyển, former minister of trade, said that under the free trade agreements and commitments that Việt Nam had signed, import taxes on diesel and mazut would be zeroed out, also affecting the domestic oil and gas industry.

Thus, local suppliers would face stiff competition from not only foreign investors but also domestic importers due to the tariff elimination, Tuyển said.

With the establishment of the ASEAN Economic Community (AEC), in addition to the tariff reduction issue, there would be a shift in the labour force within the industry, leading to “brain drain” for the sector, Tuyển forecast. For example, some of PVN’s highly-skilled workers might move to other oil and gas groups from ASEAN countries if offered better working conditions.

At the seminar, participants agreed that the oil and gas industry should urgently build a human resource management system in accordance with international standards.

The whole industry would need to adjust its production and business strategy so that it could compete with foreign rivals locally and internationally. It would also need to put emphasis on the gas industry and consider it the driving force for the development of the whole industry.

At the same time, PVN research units should focus on research and application of technology to reduce the cost of exploration, exploitation and to diversify processed oil products.

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Putting an end to long-delayed thermal power and port projects

VIR

Tan Tao Investment and Industry Corporation (ITACO)’s $2-billion Kien Luong 1 thermal power plant and $800-million Nam Du deep water seaport projects located in Kien Giang province, will have their investment certificates revoked due to the long delay in construction.

Deputy Prime Minister Trinh Dinh Dung has assigned the Ministry of Industry and Trade (MoIT) to collaborate with relevant ministries and the Kien Giang People’s Committee to complete the procedures to revoke the two projects, according to newswire Dantri.

Licensed in January 2008, ITACO planned to develop Kien Luong power and port complex under the build-own-operate (BOO) format on an area of 555.9 hectares. The project includes an industrial park, an urban area, a deep water seaport, and a power plant with a total generation capacity of 4,400 megawatts.

According to plan, the construction of ITACO’s Kien Luong complex was expected to start in 2009 and be completed in 2018. However, ITACO could not keep the plan on track for the deadline to launch commercial operations in 2018 due to the group’s troubles in mobilising funds for the project.

In 2013, to address the investor’s problem and get the project back up and running again, the Vietnamese government allowed ITACO to modify its investment model from BOO to build-operate-transfer (BOT), so that it could receive government guarantees to realise the project.

In 2014, ITACO sought partners to establish a consortium to implement the project. Leading French energy company EDF and Korean Samsung and Hyundai groups have expressed to join. Previously, the Kien Luong 1 thermal power project was also considered by UK investor Graham Bell & Associates Limited. However, ITACO declined to disclose the official partner.

It was not until December 2015 that the silence was finally broken, when ITACO and MoIT signed a memorandum of understanding on developing the BOT project, paving the way for its resurgence, following six years of financing trouble.

Under the latest MoU, Kien Luong 1 was scheduled to start generating power by February 2025. The plant would have two generators with the combined capacity of 1,200MW, representing a total investment capital of more than $2.4 billion. However, the project has yet to take a single step forward.

The Kien Giang People’s Committee has proposed the PM to withdraw the license of the project for numerous reasons. Notably, the investor had delayed starting the construction, thus it was withdrawn from the government’s adjusted master plan on electricity development in the 2011-2020 period with orientations to 2030. 

Besides, the province is concerned about the environmental pollution caused by using coal for its operations, hampering the development of tourism in the province.

In addition, local residents heavily protested handing over agricultural fields to the investor due to the long delays. They were hoping that they would be provided with jobs once the plant comes into operation. However, the project has yet to be implemented, leaving locals hanging.

Regarding Nam Du deep water seaport, in July 2010, ITACO and Royal Haskoning Vietnam Co., Ltd. signed an engineering consultancy agreement for the project. Accordingly, the construction of the project with the total investment capital of $800 million would be divided into two phases.

The first phase was expected to be implemented in 2010-2013, allowing the port to accommodate vessels of up to 80,000DWT. In the second phase between 2014-2022, the port could deal with 150,000-200,000DWT vessels.

However, to date, the port project is still immobile.

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 LEGAL

 Tightened control over on-lent ODA and concessional loans for localities

VLLF

The Prime Minister has recently requested local authorities to use foreign loans for development investment projects only, not for payment of local regular expenses.

Under Directive 37/CT-TTg, intensifying the management and supervision of loans for on-lending to local authorities, provinces and centrally run cities nationwide are requested to keep their borrowing and debt payment levels within their approved loan borrowing limits prescribed in the 2015 Law on the State Budget.

The Directive says that the country had to borrow and on-lend both ODA and concessional loans with higher and higher interest conditions in the context that public debts and government debts are piling up and ODA loans are more and more scarce.

Therefore, it requests localities to prioritize the use of highly preferential ODA capital for their important and urgent programs and projects, and the disbursement of on-lent ODA and foreign concessional loans as committed with foreign donors when implementing foreign loan borrowing and repayment plans.

In case the use of on-lent loans makes the outstanding loan balance exceed their permitted loan limits or annual borrowing estimates approved by competent authorities, localities will have to cut down other loans as planned or promptly repay outstanding loans in order to keep them within the prescribed limits.

When adjusting their foreign loan borrowing and repayment plans, localities are required to report adjustments to the Ministry of Finance for appraisal and submission to the Government for subsequent submission to the National Assembly for decision.

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Liquor trading conditions to be stiffened

VLLF

Liquor products for sale at home and imported liquors will be required to have stamps and labels on their packages, except for manually produced liquor products sold to enterprises with industrial liquor production licenses for further processing.

Under Government Decree 105/2017/ND-CP, which will take effect on November 1, since liquors belong to the group of goods subject to conditional trading, those that conduct mass and small-scale production of liquors for trading, liquor distributors, liquor wholesalers and liquor retailers are required to possess licenses prescribed in this Decree.

Meanwhile, small-scale producers who sell manually made liquors to enterprises with industrial liquor production licenses will have to register their business with commune-level People’s Committees.

Liquor products subject to no technical regulations must be announced to be compliant with the food safety regulations and have food safety regulation conformity documents registered with competent authorities for market sale pending the issuance and entry into force of relevant technical regulations.

The Decree also specifies prohibited acts in liquor production and trading, including producing or trading in liquors without licenses or at variance with licenses; using food alcohols of poor quality, industrial alcohols or other banned materials for liquor production and processing; leasing or lending liquor trading licenses; exhibiting, buying, selling, circulating and consuming liquors having no package labels or stamps as prescribed by law, and liquor products not up to the food safety and quality standards or of unclear origins; selling liquor products to under-18 persons; selling liquors with alcohol content of 15 percent or more on the Internet; retailing liquors by vendor machines; conducting liquor advertising or sales promotion in contravention of regulations.

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