Slowdown in reform
Since 2014, the government has introduced a resolution each year on the measures to improve the business environment and enhance national competitiveness. The implementation of such resolutions has been commended by the business community for helping the business environment in Vietnam to improve significantly, as seen in the Provincial Competitiveness Index (PCI) released annually by the VCCI with the reform score increasing over the years.
One of the most applauded reform is the administrative procedures to start a business when the number of days required for processing has dropped from 12 to 6 in the past six years. The average time a business spends on receiving tax authorities also fell from 19.5 hours per year to 8 hours in 2020.
The field of export and import has also seen considerable improvements thanks to the application of information technology, risk management, interconnected procedures, and slimmed-down and transparent specialised inspections.
Bold reforms in recent years have helped to increase Vietnam’s position in global rankings. Compared to the 2011-2015 period, Vietnam has leapt 20 positions to rank number 70 among the 190 economies on the World Bank’s business environment rankings. Vietnam also jumped 10 notches to rank at 67 among 141 economies on the International Monetary Fund’s global competitiveness index.
However, a report by the VCCI shows that many hurdles remain in Vietnam’s business climate and the speed of reform is slowing down, especially in starting a business, access to electricity, access to credit and construction permits. It is worth mentioning that these are the areas regarded as having the most rapid and impressive reform for many years. Although a government resolution has called for strengthening discipline in processing administrative procedures in construction, many requirements have yet to be implemented and enterprises have not felt the positive impacts of such measures.
Increasing transparency, equality
A VCCI survey shows that the business community is not satisfied because many business conditions lack consistency while ministries and agencies are slow to propose revisions to the relevant laws. Some business requirements are overlapping, unnecessary, non-transparent and too intrusive in the operations of a business.
Specialised inspections see little improvement and the single-window mechanism is not very effective when enterprises still have to submit hard copies along with electronic versions, while there is a lack of connection between ministries and sectors. Furthermore, the information technology system is frequently overburdened and not very friendly to users.
VCCI Chairman Vu Tien Loc stated that one of the major issues is the lack of transparency when many enterprises say that connections with government officials are needed to secure access to the necessary documents. More and more are complaining that the information released is too general and is not meaningful for them to use. Transparency has been achieved in legal regulations, administrative procedures and business conditions but it is more difficult to publicise the state’s plans, programmes and reports for enterprises to access.
Vietnam has also managed to reduce inequality between private and state businesses, and between domestic private companies and foreign firms. But a worrying problem is that a significant number of enterprises are reporting inequality with “backyard” enterprises.
It seems that all the easy problems have been solved and the remaining tasks are all difficult. It should be pointed out frankly that the challenge of improving the business climate over the next five years will be much greater and requires the joint efforts of the business community, business associations and each and every member of the state apparatus.
According to business and experts, reform in the coming period needs to be upgraded to a new level, not just to remove the hurdles but to create a transparent and equal business environment that strengthens market discipline, promotes innovation, and brings about stability and predictability of policies. It is necessary to continue simplifying administrative procedures, cutting down on business requirements and specialised inspections.
At the same time, the government and localities need to introduce new measures to increase dialogue and deal with difficulties so that programmes aimed at supporting business can produce the intended effect. They need to set out more specific and substantive goals so as to radically resolve issues in reality. Such measures are expected to maintain the stability and friendliness of the business environment, helping enterprises increase their production and create more opportunities for them to penetrate more deeply into the global economy.
According to the company’s press release on May 4, the quarterly revenue and post-tax profit of Vietjet’s parent company totaled 2,845 billion VND (approx. 23.3 million USD) and 110 billion VND (4.77 million USD) respectively. Its consolidated revenue and consolidated post-tax profit for Q1/2021 were 4,048 billion VND (175.7 million USD) and 123 billion VND (5.3 million USD), respectively. Vietjet gained such profit from investments in finance and projects and develop new aviation services to offset the stagnant air transport business.
Vietjet has also transferred all of its owned treasury shares in the first quarter to strengthen its balance sheet and cash flow in support of the air transport sector.
The airline still maintained its efficient cost control through innovative and creative programmes and measures to cut back on expenditures while optimising fleet operations with a 52 percent of cost reduction and a year-on-year decrease of 39 percent of costs for ancillary sale and administration.
Vietjet has transported nearly 3.6 million of passengers on more than 21,000 flights over the first three months of the year. Its On-time Performance (OTP) rate has stayed at the global high of over 90 percent.
Vietjet was one of the first airlines to have fully resumed the domestic flight network and even opened more new routes to meet the increasing travelling demand post-Tet holiday and in the summer. Such routes have helped localities to kick-start their economic recovery.
The airline has also introduced several promotions including the zero Vietnam dong tickets, voucher offerings worth of 100,000 VND and 50,000 VND or a free 20kg check-in luggage.
Apart from passenger transport, Vietjet has come up with different measures to increase the ancillary revenue which now accounts for nearly 50 percent of the airline’s total revenue.
Its cargo services have also turned more diverse in terms of product range which was developed closely based on the sentiment of the logistics market in order to meet the mounting cargo delivery demand. In Q1/2021, Swift247 Joint Stock Company, which has 67 percent of shares owned by Vietjet, has launched a new online air cargo services named SWIFT Mega to deliver heavy freight on Vietjet’s extensive flight network. In total, Vietjet has transported 18,000 tonnes of freight in the first quarter of 2021.
The airline has won the “Belly carrier of the year” and the “Low-cost carrier of the year” awards by cargo magazine Payload Asia in late January this year.
Paying an extra attention to the safety and health of the passengers and the flight crew, Vietjet has been strictly following the COVID-19 prevention measures of the World Health Organization (WHO), the International Air Transport Association (IATA), aviation authorities and health agencies to help passengers and flight crew stay safe. Vietjet was hailed as one of top 10 safest and best low-cost airlines in the world in 2020 by AirlineRatings. It also received the highest safety ranking of 7 stars regarding COVID-19 prevention measures implemented by airlines.
In the coming months, Vietjet is focusing on digital transformation to maximize its capabilities and operating effectiveness. It is also pushing ahead negotiations with services suppliers for appropriate discounts while proactively looking for alternative sources of revenue like air cargo and extended aviation services. The airline plans to carry out financial investments and projects to ensure its business strategy is done in an effective and sustainable manner.
Vietjet has installed the second flight simulator (SIM) at Vietjet Aviation Academy (VJAA) which is expected to start operating in May, 2021. It will fundamentally increase the VJAA’s training capabilities, making it one of the most modern and advanced training facilities in the region for aviation manpower in Vietnam and the world.
Vietjet is expected to kick off a series of technical and physical infrastructure projects plus an investment in a technology park. The airline is stepping up preparations to welcome top aviation experts and activities, aiming to make Vietjet one of the top airlines in the world./.
According to the owner of apartment A18, from the end of 2018 till the middle of 2019, the district administration has called for investors to participate in the construction project and planned for resettlement; however, the coronavirus pandemic 19 stopped the plan.
By Luong Thien – Translated by Anh Quan
|To foster a successful timber export industry, experts advise a strong cooperation between FIEs and domestic businesses. Photo: Le Toan|
Kuka Home, a fully Chinese-invested company has started construction of a wood-furniture processing factory after only six months of signing a lease contract for more than 12 hectares of land in Dong Xoai Industrial Park III in the southern province of Binh Phuoc. According to Li Binh, in charge of the factory’s construction, the company has invested in a system of factories in industrial zones in many provinces of Vietnam, including in the southern province of Dong Nai, to produce wood for export.
Exports of foreign-invested enterprises (FIEs) last year continued to show their superiority over domestic ones. By the end of 2020, Vietnam had more than 3,600 enterprises directly involved in exporting timber products, with an export value of $12.31 billion in 2020.
Among these, 653 FIEs account for 18 per cent of the total number of export enterprises. The export value of these companies reached $6.07 billion, accounting for 51 per cent of the total export value from timber products.
No competitive position
FIEs continue to play an important role in Vietnam’s timber and wood product exports as more of them invest in the industry, thus becoming an important component of Vietnam’s exports from this sector. Last year, the export turnover of the entire wood industry increased by 16.2 per cent compared to 2019.
The export value of these FIEs is especially high in southern localities like Binh Duong, Dong Nai, and Ho Chi Minh City. Binh Duong is the leading province in terms of last year’s export value in the wood industry, reaching $5.68 billion and accounting for 47 per cent of the total export value of the country.
In which, FIEs reached $3.85 billion, accounting for 68 per cent. Meanwhile, domestic businesses only raked in $1.8 billion, holding 32 per cent. Dong Nai ranked second and hit $1.62 billion, or 13 per cent of the total.
The increase of FIEs participation in the wood industry is a direct result of preferential policies and investment attraction measures by the government and partly the result of new-generation free trade agreements, as well as the favourable geographical position of the Asia-Pacific economic region. The tensions within US-China trade also created opportunities for Vietnam to receive capital flows from China in this industry.
The export growth of Chinese wood processors also shows that the financial scale and production capacity of FIEs are far ahead of domestic players.
“Capital and production capacity are both important factors that drive growth for FIEs in the wood processing industry,” said Nguyen Liem, general director of wood product exporter Lam Viet JSC.
For instance, investments of $5 million are huge for Vietnamese companies, but $10 million, or even $15 million, are still small for an FIE.
“A contract for 100 containers will be produced in 15 days,” explained Liem when talking about the production capacity of Chinese players.
“They carry out all operations very quickly, install equipment, and import raw materials before they produce around the clock,” he added.
According to Liem, Chinese enterprises investing in Vietnam’s wood processing sector are mostly manufacturers with decades of experience, who produce goods of medium quality but in large quantities for export.
Compared to FIEs, Vietnamese businesses are “not in a competitive position,” said Liem, who has worked more than 10 years at an FIE within the industry.
Before Chinese wood manufacturers were investing in Vietnam, US buyers already knew them. As the US-China trade war broke out, many Chinese wood processors invested in Vietnam to open factories. They dragged American buyers to their new location and signed large quantity contracts. Even the leaders of some large corporations in the US noted that their representative offices in Vietnam are now often bought by from Chinese-owned companies.
One unified system
The wood industry is witnessing a common phenomenon: the more developed, the higher the risks. Currently, Vietnam ranks second in Asia in the export of wood and timber products, with a rapid growth rate of about 17 per cent per year.
Businesses exporting wood products to the US market are under pressure from an investigation by the United States Trade Representative (USTR) regarding allegations of using illegally harvested or traded timber.
The Vietnamese government is trying to create an open policy mechanism to attract investment. But on the other hand, the government is also trying to control under- and shadow investments.
Tran Le Huy, vice chairman of the Forest Products Association of the central province of Binh Dinh, noticed that the wood industry is “lacking an appropriate mechanism to spread the strengths of FIEs. Meanwhile, the spillover effect only occurs when there is a suitable mechanism allowing domestic businesses and FIEs to exchange information and experiences.
Huy believed that allowing FIEs to be official members of wood associations will create a unified system between both sides. “This will contribute to better positioning and mitigating risks in foreign investment activities, while at the same time, building a sustainable Vietnamese wood industry in the future and helping to bring domestic players closer to the market,” Huy explained.
However, in the middle of the pandemic, the business environment of Vietnam remains highly appreciated by foreign investors. Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry, said that Vietnam has become the first choice for FIEs in the region, with 136 economies investing in the country with the total investment capital of over $400 billion.
According to Loc, with over 70 per cent of Vietnam’s export value coming from FIEs, these enterprises are also the main driver of export growth, bringing Vietnamese-made goods into global supply chains.
“If local and overseas companies are not symbiotically linked, it will be difficult to bring pervasive value,” Loc said, adding that the government should create a symbiotic environment between foreign and Vietnamese enterprises, and must encourage domestic ones to participate in the supply chain besides FIEs.
At this point, there are basic conditions to connect FIEs with their domestic counterparts effectively. The country’s Strategy for Socioeconomic Development 2021-2030 stated that foreign direct investment will continue playing an important role in national development.
The total registered capital within the 2011-2020 period reached over $278 billion, an average increase of nearly 6.9 per cent per year, accounting for 22.8 per cent of the total social investment capital.
Therefore, “the economy backed by foreign investment capital develops rapidly,” according to the strategy’s report. Meanwhile, the 10-year socioeconomic development strategy and the 5-year plan emphasise the strengthening of the links between FIEs – especially multinational corporations – with local suppliers.
Ha Cong Tuan – Deputy Minister of Agriculture and Rural Development
Regulations on product quality and timber traceability of the importing countries have become a common trend but are also an excuse for resolving trade relations.
During the investigation under the US Trade Act about the alleged use of illegally harvested and traded timber, a representative of the USTR consulted the Vietnamese government and opened hearings to gather opinions of both parties. Most said that the US accusations were not satisfactory. Therefore, the US has not yet made any official conclusions.
The issue, however, could become a big story of the trade relationship between the two countries, which could force Vietnam to find a suitable solution to ensure more balanced trade.
The state’s role is especially important in providing solutions to problems with the US market. Meanwhile, those who are exporting to the US need to comply with the laws in this market.
Trade relations in a market economy must be two-way. Therefore, there are things that must sacrifice certain interests to receive certain goods of the partner country as a trade-off for a suitable and balanced trade relationship.
By Hai Van
With revenue of $2.6 billion in 2020,Vinamilk is the only representative in Southeast Asia to be listed among the Top 50 leading dairy companies in the world. The top 10 includes firms from the U.S., New Zealand, Europe and China.
Vinamilk has recently imported more than 2,100 high-yielding dairy cows from the U.S. Photo by Vinamilk.
In 2017, Vinamilk made the list for the first time. After four years, the company’s revenue has continuously improved in the chart rankings. In 2020, despite Covid-19 impacts, Vinamilk still posted a 5.9 percent increase in revenue over the same period in 2019 and 17 percent compared to 2017, rising six ranks on the world dairy industry map.
Graphic by Hung Thai.
Vinamilk has recently introduced new products to consumers, including Vinamilk Green Farm fresh milk, fresh milk with bird’s nest, premium juice Fruit Love, and Hero fruit milk. With a wide variety of new and quality products that meet diverse nutritional needs, the Vinamilk brand has been the most chosen by Vietnamese consumers for eight consecutive years, according to Kantar Worldpanel’s Asia Brand Footprint 2020.
A report from Nielsen also shows Vinamilk is leading the domestic dairy market in key segments, including liquid milk, powdered milk, and condensed milk.
Green Farm is introduced to Vietnamese consumers in March. Photo by Vinamilk.
Vinamilk currently owns 13 factories, 13 farms, with a herd of about 150,000 cows, producing more than 250 types of products.
The company has exported its products to 56 countries and territories, with a total turnover of more than $2.4 billion. Since 2017, Vinamilk’s export revenue has grown continuously along with the expansion of new export markets.
In the first quarter of 2021, Vinamilk’s export revenue increased by 7.9 percent over the same period last year.
Vinamilk products on display at a supermarket in Singapore.
To rank higher on the world dairy industry map, Vinamilk has promoted corporate governance and sustainable development as its focal points in future direction.
Sustainable development strategy aims at ensuring sustainable values for the economy, society and environment.
Mai Kieu Lien, general director of Vinamilk, said the company would maintain stability in production and business, and further promote cohesion and value sharing with stakeholders.
“At Vinamilk, sustainable development will be oriented towards advanced models of the world dairy industry. Specific action plans and initiatives would be implemented along all parts of the value chain, from research and development, farm systems, factories to supply,” Lien maintained.