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The Hanoitimes – Public investment, trade and domestic consumption remain key for Vietnam’s economic recovery in 2021.

The foremost and key task for Vietnam at the moment is to mobilize all resources to aid the Covid-19 fight, which should lay a solid foundation for economic recovery.

Production of stationery at Hong Ha company(Long Bien district). Photo:Chien Cong.

“In the meantime, the government should continue boosting public investment,” stated the Ministry of Planning and Investment (MPI) in a report, noting such a move would help stimulate domestic consumption and create jobs.

Economist Vo Tri Thanh expected exports to remain as a growth driver for Vietnam this year, especially as the country recorded an all-time high trade surplus of over US$19 billion in 2020.

In the past year, Vietnam recorded 31 groups of export staples with turnover of over US$1 billion, five over US$10 billion and one exceeding US$60 billion.

“Positive performance of trade was mainly thanks to the presence of trade deals that Vietnam is a part of,” Thanh said.

“In the future, both next-generation free trade agreements (EVFTA, UKVFTA, CPTPP) and existing ones would be a decisive factor for Vietnam to overcome negative impacts from the Covid-19 pandemic,” added Thanh.

Thanh expected provincial governments to continue boosting trade promotion, diversifying export markets and addressing bottlenecks restricting the country’s exports.

Along with exports, domestic consumption stays key for Vietnam’s economic recovery, Thanh suggested, saying the government should provide more supportive measures for local retailers to expand distribution networks and revise operational models in a fast-changing business environment.

Pham Xuan Hoe, deputy director general of the Banking Strategy Institute at the State Bank of Vietnam, said Vietnam’s consumer finance market remains huge potential for development.

According to Hoe, in many countries, credit outstanding balance accounts for 40% of total outstanding loan, as such, the market could further expand by VND1,500-2,000 trillion (US$65.2-87 billion).

Former Director of the Market Price Research Institute under the Ministry of Finance Ngo Tri Long said public investment is also a major factor to support growth in 2021.

This year, the government plans to allocate VND477.3 trillion (US$20.7 billion) for public investment, up 1.4% against the previous year.

“It is vital for Vietnam to speed up the implementation progress of public projects, especially priority ones,” Long suggested.

Economist Can Van Luc also noted the necessity to ensure efficient implementation of government’s supporting programs for people and enterprises affected by the Covid-19 pandemic, focusing on fiscal measures of freezing and waiving of fees and taxes.

“Government should suggest solutions to help enterprises better access credit and more direct support for those affected by the pandemic,” he stated.

Sharing Luc’s view, Director of Rohm and Hass Vietnam Nguyen Hoai Son said the company is under pressure to change operation method towards online amid Covid-19 outbreak.

Director of Garment 10 company Than Duc Viet added most companies are struggling with keeping their businesses running at the moment.

“A worse pandemic situation would put the company’s operation at risk,” he added.

The Hanoitimes – Overall crude oil and natural gas production in Vietnam may suffer year-on-year declines of 5% and 1%, respectively, in 2020.

Vietnam’s crude oil and natural gas production face downside risks, in light of a double-whammy of global oil price collapse and sluggish demand due to continued spread of the Covid-19 pandemic, according to Fitch Solutions.

Vietnam – Crude Oil & Natural Gas Production.

As of March 31, benchmark Brent had lost almost 60% of its value since the start of 2020. This has occurred next to an apparent price war between Saudi Arabia and Russia, in the aftermath of failed OPEC+ talks in March, and global demand fears created by the Covid-19 pandemic.

This has triggered widespread reactions from across the globe as oil and gas firms announced significant capex cuts, reduced output targets and other cost cutting measures, in order to ride out the downturn. By comparison, responses from Asia’s national oil companies (NOCs) have been more measured, although many have indicated that they are closely monitoring the situation.

Vietnam’s state-owned oil producer PetroVietnam (PVN) has yet to commit to any spending cuts. However, the state-owned enterprise (SOE) did concede through an official statement, that its 2020 revenues are likely to be halved, due to the drop-off in crude and losses incurred from some ongoing projects as a result. The SOE is also believed to have ordered its subsidiaries to prepare business scenarios for different oil price levels, as it contemplates the likelihood of a protracted downturn in prices. Such a scenario would be highly negative for PVN’s upstream portfolio, which mostly comprises of joint-ventures (JVs) with foreign entities in offshore and mature producing areas.

According to industry sources, PVN’s breakeven cost per barrel is believed to be in the region of US$51/bbl, far above the US$36.3/bbl averaged in March and also above the US$43/bbl that Brent is expected to average in 2020, according to Fitch’s forecast. This risks most of the SOE’s existing output, while Fitch predicted overall crude oil and natural gas production in Vietnam may suffer year-on-year declines of 5% and 1%, respectively, in 2020.

Capital spending cuts and FID delays inevitable

Capital spending cuts and foreign indirect investment (FID) delays appear inevitable, as upstream operators come to grips with a lower oil price environment and sluggish demand.

% Stake In Selected Upstream Projects (LHS) & % Share Of Total Oil, Gas Production (RHS).

Many of Vietnam’s largest oil and gas fields boast large foreign ownership. For many of these firms, upstream plays in higher-risk emerging markets such as Vietnam, are outside of their core portfolio, and as such, budgeted spend in Vietnam have potential to be among the first to go, in the event of any capex cuts.

Indeed, a breakdown of ownership across nine select upstream developments (including those in the pre-FID phase) shows that apart from the Dai Hung field – output contribution from which is small – and Block B project, the remaining seven projects boast at least 50% foreign ownership. A large number of foreign firms operating in Vietnam are NOCs, and while this could see activities within the sector prove more resilient in the face of elevated headwinds, anecdotal evidences point to a gradual, cautious turn in sentiment.

For instance, in March 2020, Zarubezhneft participated in discussions with other Russian oil companies and Energy Minister Alexander Novak, which reportedly ruled out output increase in the near-term due to weak demand in light of the Covid-19 pandemic. Thailand’s PTT has not revised its capex plans for 2020 and subsequent years, although has urged the government to release barrels in strategic storage, so as to stave off first quarter losses due to a drop in prices.

Delays of FIDs that were initially slated for 2020 also appear increasingly inevitable, and pose risks to our medium-term output growth projections for Vietnam, as drilling activities and major contract awards are postponed. In March 2020, Jadestone Energy put developments of the Nam Du and U Minh gas fields on hold, in order to maintain its balance sheet.

Other projects at risk of facing delays include Block B and Ca Voi Xanh. The two projects are expected to require combined capital input of about US$15 billion. Output from both could climb to a peak of about 15 billion cubic meters, equivalent to 1.5 times Vietnam’s total gas production in 2019.

Contraction in refined fuels consumption

Additionally, Fitch also revised down its demand growth projections for Vietnam, to reflect reduced demand in light of Covid-19. As a result, refined fuels consumption is expected to contract by 1% in 2020, down from previous forecast for 3% expansion. The severity of reported Covid-19 spread in Vietnam has been moderate relative to larger regional peers, although this has proven insufficient to prevent a precipitation in domestic demand. Indeed, PVN’s domestic refined fuel sales registered a year-on-year decline of some 30% over the first two months of the year, mainly due to the implementation of early containment measures– since December 2019 – and subsequent collapse in travelling demand.

Vietnam – Refined Fuels Consumption & % chg y-o-y.

Given the concentration of containment measures in limiting aviation traffic flows, the most pronounced impact will continue to be felt in jet fuel, particularly as Vietnam is expected to deepen travel restrictions in order to curb the growing number of imported cases. Extension of visa restrictions onto arrivals from Europe and North America, on top of measures already in place for Asia-Pacific countries, for instance, would weigh heavily on jet fuel demand in the second quarter.

Outside of jet fuel, diesel demand is also expected to endure heavy hits over the first half of 2020, mirroring the slowdowns in industries, notably manufacturing, due to the sector’s large exposure to raw materials from China and a drop-off in regional export demand. Indeed, according to official statistics, growth in manufacturing output is shown to have slowed to 7.4% year-on-year over the January-February period, compared with growth of 11.4% year-on-year in the same period in the previous year.

The Hanoitimes – F0 investors put their money in stocks they barely know of but were recommended by others, so they become vulnerable when things go wrong and do not know what to do, said an expert.

The majority of new investors in the stock market, known as investor F0, have not experienced market volatility, so recent slumps of the benchmark Vn-Index was seen as a shock for many of them and led to a large sell-off by inexperienced investors to cut losses.

The rise of the stock market at a time of economic difficulty and low interest rate environment lure new investors. Photo: Viet Linh.

Despite previous warnings from experts that the stock market would soon go through a correction phase following its steady rise in the past two and a half months, F0 investors continues to pump money into the market in the search for easy profit.

The market finally succumbed and suffered a free-fall by 60.94 points on January 19 to settle at 1,131, down 5.11% against the previous trading session.

CEO of Take Profit Consulting and Investment Company Phan Linh told Hanoitimes F0 investors have been a major cause for such slump, as the sign of market going down triggered a wave of sell-off from inexperienced investors who grew nervous and tried to cut losses at any costs.

Since the Vn-Index plunged to its rock-bottom in March 2020 with a 25% slump, the index has been on the steady rise and ended the last trading session of the year at 1,103.87, representing an increase of 14.9% against early 2020 and 67% compared to its lowest point.

“The rise of the stock market at a time of economic difficulty and low interest rate environment lure new investors,” stated Mr. Linh, but adding the majority of them come in unprepared as they look for quick profit.

“F0 investors put their money in stocks they barely know of, based on others’ recommendations, so they become vulnerable when things go wrong and do not know what to do,” he added.

Data from the Vietnam Securities Depository (VSD) revealed in December 2020, the stock market witnessed 64,243 new accounts, the all-time high number in a month. This resulted in a total of 393,659 new stock accounts in 2020, up 109% year-on-year from 205,013 in the previous year.

Le Quang Minh, analysis director of Mirae Asset Vietnam (MAS), said the participation of F0 investors was key in keeping the Vn-Index going up at a time when foreign investors remained net seller.

“As the Tet holiday is fast approaching and the sentiment of taking profit after having seen the market going up for a while, selling pressure from individual investors would continue to last for the next few trading sessions,” Mr. Minh told Hanoitimes .

Mr. Phan Linh from Take Profit urged investors not to think short-term when investing in the stock market.

“A correction phase is necessary for the market to stabilize before trying to surpass the 1,200-resistant zone, as well as to shrug off a large amount of margin lending for more sustainable growth,” he stated.

“Any decision in the stock market should be based on technical assessment, and not following the herd behavior,” Mr. Linh concluded.

The Hanoitimes – Dutch ambassador to Vietnam Elsbeth Akkerman expressed her impression of Hanoi’s efforts to ensure sustainability and inclusivity in plans to get people’s life on track when Covid-19 is basically under control.

Dutch Ambassador to Vietnam Elsbeth Akkerman.

This year, Hanoi targets economic growth of 4.5 – 5% amid the Covid-19 pandemic. What is your view about Hanoi’s efforts to pursue the dual target of both containing the pandemic and boosting economic growth?

I am impressed by how Vietnam in general and Hanoi in particular have been balancing between the two targets: containing the Covid-19 pandemic and supporting public health on the one hand, and boosting economic growths on the other.

However, striking that balance is not easy, especially since Covid-19 has brought about new challenges in Vietnam and in the rest of the world. These challenges are also evidenced in the area of trade and investment that relates to the economic growth. That Hanoi is having a two-fold target is sensible, smart and the most sustainable.

While aiming for a robust, sustainable and resilient recovery from the pandemic, it is equally important for Vietnam and Hanoi to assist the most vulnerable people to overcome the impact of the pandemic. I am happy to see sustainability and inclusivity prominent on Hanoi’s agenda.

What is your assessment of Hanoi’s business environment in recent years? From your point of view, what are the challenges that Hanoi has to address to further attract foreign investors, especially high-quality FDI projects from Europe?

It is clear that Hanoi is working hard to attract more FDI. The ongoing initiatives aimed at improving infrastructure and mobility, reducing red tape and investing in skilled labor are very important and need to continue in the next years.

There are also challenges related to the environmental and societal impact of economic growth and rapid urbanization like a growing amount of waste and air pollution, more serious traffic congestion, more scarcity of natural resources, and increasing income gaps. Tackling these issues will not only attract more business and investment to Hanoi, but will also provide a better quality of lives for Hanoians, build strong communities and support a sustainable society.

As such, more incentives to attract sustainable and qualitative investments will benefit all: the investors, the city, the citizen and also the planet. Examples are investments in sectors like renewables, waste to energy, green logistics, urban farming, etc. Apart from being economically and financially sound, high-quality investment requires a responsible mindset from the partners involved towards the society and the environment.

The Netherlands is fully committed to sustainable trade and investment. At the Embassy, we encourages Dutch investors and businesses to integrate Responsible Business Conduct (RBC) in all their operations and management when doing business in Vietnam. We would like to team up with Hanoi in making RBC reality.

What do you think of the economic cooperation potential between Vietnam and the EU, and particularly between Hanoi and the EU after the EVFTA took effect in August?

The EU – Vietnam Free Trade Agreement (EVFTA) is a modern and ambitious agreement that, if implemented correctly, is expected to boost sustainable trade between Vietnam and the EU, and will serve as a powerful vehicle for improving environmental and labor standards. The Netherlands therefore looks forward to increasing its partnership with Vietnam in areas like agriculture, water, climate, logistics, smart cities, circular economy and renewable energy.

There are still things to do for Vietnam to get the most out of this trade deal. As an example, while the EVFTA opens new opportunities for Vietnamese agro – products, the EU’s regulations on traceability and food safety are now a challenge for Vietnamese enterprises. In this context, it would be important for Vietnam to invest in sustainable value chain development to ensure safe and high-quality food. The Netherlands is willing to exchange ideas and partner with Vietnam in this respect.

While the Netherlands is a key EU trade and investment partner to Vietnam, Vietnam continuously proves to be an interesting market for Dutch companies, as reflected by the large trade delegation of our Prime Minister Rutte to Vietnam last April. This year, such a physical visit is not possible due to the pandemic, therefore, together with other Netherlands Embassies in Southeast Asia, we are organizing a virtual trade mission to Vietnam, Indonesia, Malaysia, Singapore and Thailand from October to December. In this mission, we also focus on city-to-city business opportunities, and look forward to working with Hanoi in this respect!

Thank you for your time, Your Excellency!

The long process of project approval from competent government agencies and the serious impact of COVID-19 have helped mergers and acquisitions in real estate sector become more active.

The Hanoitimes – EVFTA takes effect at the right time as Vietnam is recovering from the Covid-19 pandemic and the deal is expected to boost the Vietnam-EU relations.

Vietnam has now a once-in-a-generation chance to capitalize on the EU-Vietnam Free Trade Agreement (EVFTA) and attract more foreign direct investment (FDI) from European enterprises looking for an open, competitive, and business-friendly market, EuroCham President Nicolas Audier said at a dialogue on June 30.

Vietnam reforms to unlock potentials of EVFTA, according to the EuroCham’s dialogue on June 30. Photo: Viet Tuan

The dialogue, themed “Administrative Reform: A Key Role in EVFTA Implementation”, was held by the European Chamber of Commerce in Vietnam (EuroCham) and the Prime Minister’s Advisory Council for Administrative Procedure Reform (ACAPR) on June 30.

Speaking at the dialogue, Minister-Chairman of the Government Office Mai Tien Dung said that this is the third conference the ACAPR has held with the EU business community in Vietnam.

Speaking at the opening of the dialogue, Audier emphasized that the successful implementation of the EVFTA in 2020 is significant. For it to be signed in June 2019, there had been 14 rounds of consultations with many local agencies and localities, meetings and discussions with EU Parliament members to promote the signing. The next step is to roll out the deal.

In order for EVFTA to come into force, it is necessary to the establishment of the EVFTA’s Business Council to address challenges in the process of the implementation and cooperation, Audier added.

The president of EuroCham commented that Vietnam has become a role model in combating epidemics. “This is the right time to successfully deploy the EVFTA because Vietnam is recovering from the Covid-19 pandemic and the EVFTA will help boost the Vietnam-EU relations,” he noted.

With the EVFTA set to take effect in August, it is essential that businesses and governments work together to ensure its smooth and successful implementation, Audier suggested. One of the most critical factors will be to accelerate Vietnam’s positive progress in administrative reform – streamlining business conditions, strengthening the business environment, and modernizing the legal framework.

Solutions for businesses

Minister-Chairman of the Government Office Mai Tien Dung. Photo: Viet Tuan

Speaking at the dialogue, Minister-Chairman of the Government Office Mai Tien Dung stressed that with a 30-year establishment of diplomatic relations, the implementation of the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) will create stable and long-term frameworks to maximize the potential of cooperation and boost the development of economic – trade – investment relations and make them commensurate with the potential of Vietnam – EU comprehensive cooperation partnership.

Minister Dung also said that the Covid-19 pandemic has been affecting many socio-economic aspects but Vietnam has put the disease under control, and, at the same time, established a new normalcy. This shows the government’s determination to achieve the dual goal of combating the pandemic and rebooting the economy.

From the beginning of 2020 until now, the government has reduced 239 business conditions, bringing the total number of business conditions already cut to 3,893 out of a total 6,191. In addition, 6,776 out of 9,926 listed goods subject to specialized inspection and 30 out of 120 administrative procedures related to specialized inspection have been trimmed off.

The total social cost savings from reduction and simplification of administrative procedures is estimated at over 18 million working days per year, equivalent to over VND6.3 trillion (US$270.9 million).

With the EVFTA set to take effect in August, it is essential that business and government work together to ensure its smooth and successful implementation. Photo: Viet Tuan.

The improvement of administrative procedures and public services through the one-stop-shop mechanism has received positive feedback from businesses and the citizens. In particular, the National Public Service Portal, which has been in operation for the past six months, has integrated and provided 725 online public services, 4.5 times more than in the past three months.

The total cost of social savings through online public services was about VND6.5 trillion (US$279.5 million) per year, of which, the cost saved thanks to conducting public services online through the National Public Service Portal was VND3 trillion (US$129 million) per year.

Minister Dung asked enterprises to frankly share their difficulties in doing business and point out specific difficulties and obstacles to the development of industries so that the government and the prime minister could remove those barriers.

At the dialogue, Vietnamese ministers and business leaders discussed a wide range of issues including the EVFTA; access to generic drugs, how to achieve a predictable and consistent legal environment for investment; medical device procurement; goods labeling requirements; food safety inspection registration certificates; and tariffs applied to functional foods, among others.