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Vietnam News

HEADLINES

FINANCE

ECONOMY

INVESTMENT

REAL ESTATE

OIL&GAS&ENERGY&MINING

LEGAL


With Compliments

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

Interest rates supporting the economy

Thoi Bao Kinh Doanh

As per the State Bank of Vietnam (SBV), credit growth in the first six months of the year was more than nine percent; credit flow to production, risky and priority areas was controlled; foreign exchange market and exchange rate was stable, leading the market.  

It can be said that in the first months of the year, interbank interest rates showed signs of increasing but since Q2/2017, interest rates declined in spite of rebounding at times but the growth was not significant. *Interbank rates went down  

At present, interbank interest rates are on the downward trend for all three terms: overnight, one week and two weeks, ranging from 0.15 percent to 0.28 percent.  

As per the National Financial Supervisory Commission (NFSC), as of July 21, 2017, interbank interest rates gradually fell to between 0.7 percent and 1.2 percent in terms. The main reason was decreased demand for credit, and SBV lowered operating rates and lending rates in some areas. The current interest rate is equal to the same period of 2016.  

NFSC forecasts that low interest rates will continue to be maintained in Q3. Therefore, SBV net withdrew 37 trillion dong after five consecutive weeks without transaction.  

Specifically, in the week, SBV net withdrew a total of 37 trillion dong through Outright method. This was the first time after five weeks, the State Bank launched new business, and the first time after five years, the State Bank generated Outright method.  

Developments in OMO market coupled with SBV’s reduction of operating rates, sharp reduction of interest rates in interbank market, and commercial banks’ lending rate reduction in some sectors suggested that banks’ liquidity was in surplus.  

As per financial and banking experts, interbank rates fell due to abundant market liquidity. Many banks with abundant capital lent other banks, which will create spill-over effects that support the market.

Do Minh Toangeneral director of Asia Commercial Joint Stock Bank (ACB)said thanks to decreasing interbank rates, ACB focuses on mobilising capital from other banks.

Short-term deposits with interest rates of around 4.9 percent per annum aims at reducing average input cost to ensure reasonable lending rates because ACB forecasts that the capital demand of businesses in the next three months is not high.

Recently, State Treasury mobilised 3.6 trillion dong government bonds in the week, with the winning ratio of 100 percent even in additional auction sessions. The bid winning interest rate continued to decrease continuously for all terms, from 0.42 percent to 0.53 percent per annum, compared to the latest bid.

As of July 21, 2017, interbank rates gradually decreased to 0.7 percent-1.2 percent in all terms. This was mainly due to decreased demand for credit, and SBV lowered operating rates and lending rate ceiling in some areas. The current interest rate is equal to the same period of 2016.

*Banks reduce input costs

Not only decreased interbank rates, lending rates in commercial banks also tended to decrease to support the economy in the last months of the year.

According to experts, from the beginning of the year, the capital mobilisation at banks soared. Meanwhile, due to high interest rates, many businesses cannot access bank capital.

As per SBV, as of the end of June 2017, the cumulative capital mobilisation in HCM City reached over 1,800 trillion dong, while loans only hit more than 1,630 trillion dong, proving that the liquidity of banks in HCM City is extremely plentiful.

In addition, bankers also said that SBV’s recent operating rate reduction began to take effect. With a 0.25 percentage point reduction, the rediscount rate (the interest rate applied when commercial banks mortgage government bonds to obtain loans from SBV) decreased from 4.5 percent to 4.25 percent per annum; Overnight interest rates in inter-bank electronic payments and loans to offset capital shortfall in clearing payments by SBV for commercial banks from 7.5 percent per annum to 7.25 percent per annum have helped many commercial banks reduce operating costs and capital mobilisation pressure from the population and organisations.

Therefore, interest rates started to fall down, in line with the new lending rates of the State Bank. Bank liquidity is plentiful, banks with abundant capital will have conditions to reduce lending rates. At present, some banks have adjusted down lending rates such as Agribank, BIDV, Vietcombank, Sacombank, VPBank.

At the same time, short-term lending rates are commonly 6-9 percent per annum. Of which, interest rates for priority area is 6-6.5 percent per year compared to 6.8-9 percent per annum for normal business sector and 4-5 percent per year for good customers.

Looking at the trend of interest rates in the near future, experts said that it is difficult to predict because in the fourth quarter of the year, the demand for capital of the economy usually increases, the dong/US dollar exchange rate can fluctuate, influencing interest rates in dong.

However, to support the market, recently Governor of State Bank Le Minh Hung directed that the whole system needs to reduce costs, improve operational efficiency to reduce interest rates on loans. The banking system has the basis to reduce lending rates while the government continues to stabilise macro economy. SBV lowered lending rates on both the open market and refinanced funds to support banks to continue lending at lower interest rates.

“Commercial banks must focus on offering credit into the government’s priority sector, controlling credit in risky areas, aiming to achieve the credit growth of about 18 percent”, the governor directed.

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Reference exchange rate up by 4 VND 

VNA

The State Bank of Vietnam set its reference VND/USD exchange rate at 22,434 VND/USD on August 3, up by 4 VND from August 2.

With the current +/- 3 percent VND/USD trading band, the ceiling exchange rate is 23,107 VND per USD and the floor rate is 21,761 VND per USD.

Major commercial banks’ opening hour rates saw slight fluctuations.

Vietcombank offered 22,695 VND (buying) and 22,765 VND (selling), per USD, up by 5 VND from the morning of August 2.

BIDV also posted the same rates as Vietcombank’s, with 22,695 VND (buying) and 22,765 VND (selling), per USD, up 5 VND.

Techcombank raised its buying and selling rates by 5 VND to 22,675 VND and 22,775 VND, per USD.

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ECONOMY

Industrial index up 6.5 per cent in seven months 

VNS

Vietnam’s Index of Industrial Production (IIP) posted a 6.5 per cent year-on-year increase in the first seven months of the year, according to the general Statistical Office (GSO).

But GSO experts said it was lower than the 7.2 per cent rate in the first seven months of 2016. They also warned that the growth of the national IIP in the first seven months was not sustainable because the index of inventory rose by 10.4 per cent year-on-year, higher than the inventory index of 10.2 per cent in the first seven months of 2016.

According to the GSO figures, the IIP of the manufacturing and processing sector rose by 10.6 per cent over the same period last year. However, the mining sector, one of key industrial production sectors, saw a 7.5 per cent IIP drop during the first seven months.

Several production sectors surged on the IIP, including metal production (35.4 per cent), electronics, computer and optical products (15.2 per cent), and paper production (10.4 per cent).

Output of some industrial products reached high growth during this period, such as televisions, up by 36.6 per cent to 5.98 million units; rolled steel products, up 25.2 per cent to 3.6 million tonnes; urea fertiliser products, up 15.2 per cent to 1.42 million tonnes; and electricity, up 8.2 per cent to 108 billion KWh.

Many other products experienced lower growth or reduction in output, including motorbikes, coal, mobile phones, auto, crude oil and gas.

The office said the consumption index of the processing and manufacturing sector achieved a year-on-year increase of 8.4 per cent in the seven months, contributing to the growth of the national IIP.

New firms

Meanwhile, 72,953 new enterprises were established in the first seven months of this year with a total registered capital of VND690.74 trillion (US$30.39 billion), an annual increase of 13.8 per cent in the number of enterprises and 39 per cent in registered capital.

But department experts said the growth rate of new firms and registered capital in the first seven months of 2017 had dropped sharply against the increase of 23.3 per cent and 54.7 per cent, respectively, in the first seven months of 2016.

According to the Ministry of Planning and Investment’s Department for Business Registration Management, during the January-July period, 21,383 enterprises registered to expand their investment capital with a total supplemented capital of VND979.73 trillion.

The average registered capital per enterprise was reported at VND9.5 billion, up 22.2 per cent over the same period last year.

The department said the number of newly-established enterprises has increased in almost every sector compared to the corresponding period last year, including 2,706 new enterprises in the real estate sector, up 68 per cent; 812 new firms in the financial, banking and insurance sector, up 31 per cent; and 385 new ones in the health sector, up 31 per cent.

Only the shipping and warehouse sector witnessed a 6 per cent decrease in the number of newly-established enterprises.

Meanwhile, 17,549 enterprises nationwide resumed operations in the first seven months of the year, an annual increase of 5 per cent. However, 15,866 enterprises registered for the temporary suspension of business activities, up 16 per cent over the same period last year, while 27,408 others ceased operations or are waiting to be dissolved, up 21 per cent over the same period last year.

A few sectors reported a higher number of workers compared to the same period last year, including the financial, banking and insurance sector, up 48 per cent; the health and social work sector, up 34 per cent; the education and training sector, up 26 per cent.

The total number of registered workers by newly-established enterprises in the January-July period was over 720,700, down 3.2 per cent against the same period last year.

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2017 seafood exports may hit $8bn for first time 

VET

VASEP makes prediction based on exports year-to-date.

Seafood exports this year may reach $8 billion for the first time, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

After a slight increase of nearly 5 per cent in the first quarter of this year, mainly due to growth in tuna, squid and ocean fish exports, seafood exports continued to show positive growth in the second quarter.

Exports in July were estimated to total $714 million, a year-on-year increase of 17 per cent and bringing the figure for the first seven months to $4.32 billion, up 15 per cent.

According to VASEP, shrimp exports began to recover strongly in the second quarter, when they increased by over 30 per cent, with the first-half figure at $1.56 billion, up nearly 15 per cent year-on-year.

Exports of tra fish in the second quarter rose 2.4 per cent, for a first-half figure of $836 million, up nearly 6 per cent.

Tra fish exports in July were $148 million, up 7.7 per cent, bringing the total export value in the first seven months to $985 million, up 6 per cent year-on-year. Exports to the EU fell the most, by 24 per cent, while those to the US fell 5.7 per cent. Exports to China, meanwhile, increased sharply, by 46 per cent, for a positive result in the first half.

Exports of tuna, squid, and other seafood increased sharply in the second quarter, contributing significantly to the total value of seafood exports increasing sharply in the first half.

Tuna exports increased nearly 21 per cent to $271 million, squid exports by 50 per cent to $269 million, and other seafood by 14 per cent to $581 million.

Exports of seafood to Japan, China, and South Korea all saw double-digit growth thanks primarily to shrimp exports. Exports to the US and Australia fell sharply, mainly due to declining exports of shrimp.

Given the current situation, VASEP forecasts that the total value of seafood exports in the second half of the year will continue to increase due to rising market demand. However, difficulties in the US market for shrimp and tra fish will somewhat limit this growth.

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INVESTMENT 

Taiwanese brewer to enter Vietnamese market  

VET 

With the total consumption of about 3.8 billion litres of beer each year, Vietnam is an attractive market luring in numerous foreign investors, and in the upcoming period, a Taiwanese brewer may join and heat up the competition.

As reported by newswire Enternews, Taiwan Tobacco and Liquor Corporation (TTL), the leading and largest tobacco and liquor company in Taiwan, has been scheduled to enter the Vietnamese market. Accordingly, this brewer plans to distribute three beer brands in Vietnam, including Golden Medal Taiwan Beer, Taiwan Beer Sweet Touch, and a special, pineapple flavoured beer.

Previously, Taipei Times reported that TTL had joined the Philippines market in January 2017 and the Singaporean market in 2011.

Chang Lei-min, vice chairman of TTL, said that with the fruit-flavoured beer products, which have never appeared in Vietnamese before, TTL will flourish in the Vietnamese beverage industry.

TTL hopes to sell 38 million litres of beer in Vietnam a year. Also, it expects to hold 1 per cent of the market share within three years.

Besides the plan on distributing beer products in Vietnam, TTL also targets hiring a Vietnamese brewery to manufacture its products, and constructing its own brewery in Vietnam later on.

Before TTL, numerous foreign brewers also saw the potential in the Vietnamese market and crafted strategies to gain some market share.

Recently, Carlton and United Breweries (CBU), one of the most iconic beer companies in Australia, also expressed interest in expanding its business in Vietnam.

In particular, at a meeting with Deputy Prime Minister Vuong Dinh Hue on July 24, 2017, Jan Craps, general director of CBU, said that they are eyeing the stakes in Hanoi Beer, Alcohol and Beverages Corporation (Habeco) and Saigon Beer, Alcohol and Beverages Corporation (Sabeco). Accordingly, CUB plans to expand its operations in the southern province of Binh Duong and is expecting to become a strategic investor of both Habeco and Sabeco.

In February 2017, Heineken Vietnam Brewery Vung Tau JSC (Heineken Vietnam) received the investment certificate for the 12-fold expansion of its factory in My Xuan A Industrial Zone after it bought Carlsberg’s Vung Tau brewery last year.

In January 2016, Carlsberg invested in a fourth canning line in its Hue beer factory in the central province of Thua Thien-Hue. This facility has the largest capacity of all Carlsberg factories in Vietnam. The investment raised Carlsberg’s capacity in central Vietnam to 370 million litres a year.

At the end of 2015, Thai companies Singha and Masan Consumer Holdings officially started production at their joint VND1.6-trillion ($70 million), 100-million-litre-a-year factory in the Mekong Delta province of Hau Giang. The company said the facility could be expanded to produce 150 million litres a year.

In May 2015, Anheuser-Busch InBev (AB InBev) took the first step into Vietnam with the opening of its VND660-billion ($30 million), 100-million-litre-a-year factory in the southern province of Binh Duong.

These were the most significant movements of big brewers from overseas entering Vietnam.

Some possible market changes

According to statistics, in 2016, beer consumption in Vietnam was 3.8 billion litres, ranking first in Southeast Asia, and third rank in the world, after Japan and China.

Currently, the beer market in Vietnam is divided into different segments. The high-end beer segment accounts for 7 per cent of the market share, with the domination of foreign brands, such as Heineken and Tiger. The middle-income segment accounts for 60 per cent of total market share, mostly taken up by domestic brewers, such as Habeco and Sabeco. The remaining market share is held by new brewers.

In recent years, the appearance of numerous international beer brands in Vietnam is making the competition intense. Currently, there are more than 30 international brewers present in Vietnam.

According to a report of the Vietnam Beer Alcohol Beverage Association (VBA), the beer market may see some new waves, especially after the state divestment from Sabeco and Habeco is finished.

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Investment flow into Phu Quoc Island remains strong  

SGT 

The investment flow into Phu Quoc Island off Kien Giang Province has stayed strong, with nine projects worth around VND2.6 trillion approved in the first half of this year, said the Management Board of the Phu Quoc Economic Zone.

Apart from these nine projects, which cover 64.38 hectares in the island district, the board proposed the provincial government of Kien Giang to give approval in principle to 16 other projects which need 476 hectares of land.

The board also suggested the provincial government scrap two projects occupying 28.7 hectares of land, and adjust 21 investment registration certificates.

With the updated figures, Kien Giang had approved 197 projects capitalized at VND218 trillion (US$9.6 billion) on Phu Quoc Island as of June this year, according to a report on first-half socio-economic performance of a working group in charge of studying mechanisms and policies for development of the island.

There are 265 valid projects covering more than 10,500 hectares as of now, of which foreign investors have 26 projects worth US$290 million while domestic investors have 197 projects worth VND218 trillion that have either obtained investment certificates or approved in principle.

Thirty-one projects which have been up and running cover over 2,000 hectares and have combined capital of around VND49.5 trillion. Besides, 24 other projects which need more than 1,700 hectares and roughly VND46 trillion are under progress now.

The report says nearly 988,000 tourists visited the island in the six-month period, up a staggering 44.1% compared to the same period last year, and this met 54.2% of the full-year target. Notably, 198,820 international visitors came to the island, up 77.7%.

In regard to agriculture, local farmers harvested 1,245 tons of pepper, up 2.05% year-on-year. In addition, the total output of seafood in the period totaled more than 99,500 tons (up 27.4% year-on-year), 49.6% of the full-year target. As a result, local farmers earned an estimated VND1.77 trillion.

Meanwhile, the value of industrial production was estimated at around VND2.58 trillion, increasing 12.2% year-on-year and fulfilling 61.1% of the full-year target.

The working group of Phu Quoc has been working with the provincial government to finalize a proposal for the special administrative and economic zone on Phu Quoc Island.

The group has been working with the Ministry of Planning and Investment, related agencies, and Kien Giang Province to draft the Law on Special Administrative and Economic Units which will be submitted to the Prime Minister for consideration and the National Assembly for approval in the upcoming meeting.

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REAL ESTATE 

 

SunCity Group to acquire casino project  

VET

Subsidiary to pick up holding in Hoi An South Integrated Resort, Quang Nam province, for $76.8 million.

Goal Summit Ltd., a subsidiary of casino junket operator the SunCity Group, is set to acquire a 34 per cent stake in a casino project in central Quang Nam province.

In a filing sent to the Hong Kong Stock Exchange last week, the company said that Goal Summit would buy the entire equity interest in Star Admiral Ltd. from Suncity International Holdings Ltd. for a total consideration of HK$600 million ($76.8 million).

Under the acquisition agreement, the purchaser intends to acquire 50,000 shares in Star Admiral Ltd, which is developing the Hoi An South Integrated Resort in a joint venture between SunCity, the Vietnam-based asset management company VinaCapital, and Gold Yield Enterprises Ltd., a subsidiary of the Hong Kong-based Chow Tai Fook Enterprises Ltd.

Goal Summit is chaired by Macau junket investor Alvin Chau Cheok Wa, who is also the owner of Suncity International Holdings, according to the filing.

“Through the acquisition, the group could acquire interests in the project and thereby tap into the promising tourism sector as well as the potentially expanding gaming market, in Vietnam, in line with the group’s objective of developing tourism-related business in the country,” SunCity said in the filing.

The Hoi An South development has received an estimated $89 million in investment to build the first phase of the integrated resort. The project will comprise of seven phases, with the first having a casino featuring 140 gaming tables and about 1,000 slot machines, as well as a golf course, hotel rooms and suites, and a condo-hotel.

The first phase is expected “to be completed on or before mid-2019,” the casino junket investor said.

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Mid-end apartment supply plentiful

VNA

The real estate market will see an abundant supply of mid-end apartments toward the end of the year, according to the Vietnam National Real Estate Association.

A number of renowned investors, such as Vingroup and Eurowindow, will launch a large number of mid-end apartments, which are of high demand.

Over 20,000 apartments will be completed by the end of this year, of which 50% are of the mid-end segment, mostly in the west and southwest of Hanoi.

Other downtown districts, including Tay Ho, Dong Da and Ba Dinh are expected to have more high-quality projects.

In the second quarter this year, the supply of serviced apartments exceeded 4,130 units, with 60% of them in Ba Dinh and Tay Ho districts. 

The renting prices of these apartments have fallen slightly by 2.4% on a quarterly basis and 2.7% year on year.

An additional 1,180 apartments of this type will be made available in the third quarter, creating more competition pressure in this sector.

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OIL & GAS & ENERGY & MINING

SCG: Long Son Petrochemicals complex to begin operations in 2022  

VET 

Constructon of Ba Ria Vung Tau complex to take four and a half years, according to SCG President & CEO.

Construction of the Long Son Petrochemicals (LSP) complex in southern Ba Ria Vung Tau province is scheduled to take four and half years and commercial operations will begin in the first half of 2022, Mr. Roongrote Rangsiyopash, President and CEO of SCG, told a meeting releasing the company’s unaudited operating results for the second quarter and first half of 2017, in Bangkok on July 26.

“SCG has recently approved investment in the first petrochemicals complex in Vietnam, Long Son Petrochemicals, with a 71 per cent stake and investment of $5.4 billion, with the Vietnam Oil and Gas Group (PetroVietnam),” he said.  

The project consists of state-of-the-art technology to support Vietnam in reducing imports and meeting demand. “Production accommodates a flexible feedstock with an Olefin production capacity of 1.6 million tons per year,” he said.

He committed that SCG will continue to expand its business in ASEAN. In Vietnam, SCG’s second quarter revenue from sales totaled $289 million, including sales from both operations in the country and imports from the Thai operations. This represents an increase of 17 per cent year-on-year, mainly from the packaging business.

In the first half, SCG’s operations in Vietnam recorded revenue from sales of $532 million, a 17 per cent increase year-on-year. Revenue from the sales of high value added products and services was $2.486 billion, up 5 per cent from the previous year, and accounting for 38 per cent of total revenue from sales.

It recently unveiled its “Open Innovation Center”, which enhances science and technology collaboration from research institutions and corporates around the world, in an attempt to combine ideas and introduce innovative products and services to the market as well as to unlock the ability to tackle consumer needs with speed and precision.

SCG is also seeking to invest in startups, with the recent launch of AddVentures, a corporate venture capital fund. AddVentures highlights investments in digital technology and innovation to support digital transformation. Investments are considered both as direct investments and venture capital. Moreover, an internal startup program has been established for SCG employees to learn from startup business models. SCG also plans to invest in innovation development, at around $144 million in 2017.

 

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Nghi Son 2 thermal power plant to be kicked off by year-end

VIR

The construction of the $2.8-billion Nghi Son 2 thermal power plant, located in the central province of Thanh Hoa, will start by the end of this year.

It was announced by the investor, namely the consortium of Japanese company Marubeni Corporation and Korea Electric Power Corporation (KEPCO), at the working session between the investors and representatives of Japan Bank for International Cooperation (JBIC), Export-Import Bank of Korea (K-Eximbank), and leaders of the Thanh Hoa People’s Committee.

Earlier in June, the Ministry of Planning and Investment granted the investment certificate for the investor. Accordingly, Nghi Son 2 is the first international tender for a large-scale coal-fired power plant in Vietnam. The project is going to be carried out under the build-operate-transfer (BOT) format.

The $2-billion plant will be located in the province’s Nghi Son Economic Zone. It will have a capacity of 1,200 megawatts, produced by two units of 600MW each. 

Once completed, the consortium will operate the thermal power plant for 25 years before handing ownership over to the Vietnamese state.

By July 28, 2011, three tenders including EDF, Marubeni-Kepco, and Suez Tractebel-Mitsui, had submitted bid offers for this project. In 2013, former Prime Minister Nguyen Tan Dung issued a decision allowing the Ministry of Industry and Trade to offer Marubeni-Kepco Consortium the BOT contract.

The consortium of Marubeni-Kepco held a ground-breaking ceremony of the Nghi Son 2 power plant in September 2015, with its first turbine expected to come online in September 2019. The plant is projected to be fully operational the following year.

This project is Marubeni’s first international partnership programme (IPP) business in Vietnam. In addition to supplying power plant facilities, which account for approximately 20 per cent of Vietnam’s total generation capacity, Marubeni intends to expand its IPP business in Vietnam and take part in the development of power generation facilities to support economic growth, the firm stated on its website.

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LEGAL

Foreign home ownership may rise to 99 years  

VET

Draft Law on Special Administrative-Economic Units contains provision for extending leaseholds for foreigners to 99 years, up from 50.

The leasehold for home ownership for foreigners in Vietnam will be extended from 50 years to 99 years if the draft Law on Special Administrative-Economic Units is approved.

Prime Minister Nguyen Xuan Phuc chaired a meeting on August 2 to discuss the draft. 

He agreed to create an outstanding institutional framework that transcends existing laws and minimizes the application of business investment conditions in special zones, to attract investment into such zones.

Regarding land policy, the law will be adjusted to extend the leasehold to 99 years for foreigners and allow them to mortgage assets in association with land use rights at foreign credit institutions.

PM Phuc confirmed the determination to establish a law guaranteeing long-term and sustainable development. He highlighted the spirit of ensuring international and regional competitiveness and seeking advantages to attract investment.

He asked the Ministry of Planning and Investment to update information on special zones and issues identified by strategic investors.

 


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