Market based emissions regulation and industry dynamics

The Hanoitimes – The government should refrain from excessive intervention into the market and only hold core business fields with potential impacts on national security.

Contribution of private enterprises to Vietnam’s GDP is less than 10%, which indicates the slow progress towards a full market-based economy in the country, according to economist Pham Chi Lan.

Overview of the conference. Photo: Nguyen Tung.

Lan’s assessment is similar to a previous statement by Chairman of Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc that of the 40% of GDP contribution by the private sector, five million business households make up 30% and the remaining by 700,000 private firms.

“There have been resolutions and legal documents from the government to form a market-based economy in Vietnam, but the focus has only been to address difficulties in the business environment for the business community,” Lan said at a conference on July 29.

Meanwhile, many countries in the world have now shifted to the process of creating favorable business conditions, Lan added.

According to Lan, there remain major issues hindering the country from moving towards a full market-based economy. Lan went on to say that, of the three major economic components, namely state-owned enterprise, foreign-invested enterprise and private enterprise, the third one is the least favored in government incentive policies.

“It is challenging for private firms to access state resources for development,” Lan asserted.

Economist Le Dang Doanh added while over 90 countries and territories have recognized Vietnam’s market-based economy, the US and EU, Vietnam’s two major economic partners, have not done so.

“Institutional barriers must be removed, while the state should refrain from excessive intervention into the market,” Doanh suggested, adding it should only hold core business fields with potential impacts on national security to ensure true market-based economy in Vietnam.

“Benefits would be huge if Vietnam is recognized as a market-based economy by major global economies,” Doanh stressed. For example, Vietnam’s export products would be less susceptible to trade protection measures, or the country is set to attract more investment capital, Doanh said.

Sharing the same view, former Director of the Central Institute for Economic Management (CIEM) Nguyen Dinh Cung said the law of supply and demand, not the state, should decide the production of goods and services.

As part of the reform process, Cung urged more attention is needed to work out laws and regulations specialized in protecting the ownership rights for assets of businesses and the people.

“Once the ownership rights are ensured, the influence of the state in the economy would gradually diminish and the market is set to operate fully on its own,” Cung added.

The Hanoitimes – Under the revised regulation, local oil and petrol traders are now allowed to transfer their stakes to foreign investors but foreign ownership should not exceed 35%.

Vietnam’s Ministry of Industry and Trade (MoIT) has proposed the government to allow foreign investors to join the local petroleum retail market, local media reported.

Vietnam trade ministry proposes opening the petroleum market for foreign enterprises.

The move is part of the revised version of the government’s Decree No.83 on petrol and oil trading, which has been submitted to the government for approval.

Under the revised regulation, local oil and petrol traders are now allowed to transfer their stakes to foreign investors but foreign ownership should not exceed 35%.

According to the MoIT, the timing of opening the market for foreign investors has been considered thoroughly, particularly as petroleum products are strategic that directly affect national energy security.

The MoIT said since Vietnam’s entry to the World Trade Organization (WTO) in 2007, the country did not commit to open the domestic petroleum retail market in order to support the development of local firms. After 13 years, Vietnam has now opened its doors to foreign investors in the majority of fields, including electricity, aviation and oil.

The MoIT referred to foreign participation in a number of major state firms with government approval, including PetroVietnam Oil Corporation (PVOil) at 35%, Binh Son Refinery and Petrochemical (BSR) at 49%, and Petrolimex at 20%. Foreign holdings have helped significantly improve their respective corporate governance.

A senior official from the MoIT told Thanh Nien the foreign ownership limit set at 35% would restrict the influence of foreign investors to domestic firms, especially regarding veto rights. Meanwhile, this limit would help local firms to attract capital, technologies and acquire high level of corporate governance.

A shareholder with a share of 36% or more has veto power in a Vietnamese company.

SCG headquarters in Bang Sue District, Bangkok, Thailand. — Photo courtesy of SCG

After buying Duy Tan Plastic Corporation, Thailand’s Siam Cement Group (SCG) is cementing its domination of Viet Nam’s plastic production industry.

Under the contract signed on February 9 via a virtual conference, Duy Tan will sell 70 per cent of its shares in five of total twenty-two subsidiary companies, including Duy Tan Plastic Manufacturing Corporation and Duy Tan Long An Corporation, to SCG’s SCG Packaging, Duy Tan said.

Duy Tan Plastic is a leading company in the plastic goods market in Viet Nam with revenue of VND4.7 trillion in 2020. It has nearly 1,000 commodities units and 16,000 distribution agents across the country. The company’s annual capacity reaches 116,000 tonnes of hard plastic packaging and plastic goods.

SCG, Thailand’s largest cement producer, will buy the stakes over three years, starting from 2021. The deal takes a long time as it is based on business results, Duy Tan Plastic said.

Through the deal, SCG and Duy Tan Plastic want to create a solid foundation for a completed supply chain.

Duy Tan Plastic aims at developing hard plastic packaging products, plastic goods and expanding export markets, while the investments help SCG Packaging broaden its hard plastic packaging businesses in ASEAN, especially strengthen capacity to serve FMCG producers and consumers in Viet Nam.

The deal is a part of SCG’s investment plan worth 10 billion baht (US$334 million) to extend its businesses in Viet Nam that has big and growing demands in plastic packaging products.

Wichan Jitpukdee, CEO of SCG Packaging, said that the company will keep investing in Viet Nam, resulting in revenue growth of over 10 per cent each year.

Dominating Viet Nam’s plastic production industry

The plastic production industry in Viet Nam has around 3,300 enterprises with total value of approximately US$18 billion.

The upstream sector of this industry includes petrochemical refineries and chemical enterprises whose main activities are to convert fossil materials into raw plastic beads.

Meanwhile the downstream sector is turning raw plastic beads into plastic products. The downstream can be divided into four main segments, including plastic packaging products, plastic building materials, plastic goods and engineering plastics.

With the deal for Duy Tan Plastic’s shares, SCG is dominating Viet Nam’s plastic industry, especially in plastic packaging products and plastic building materials. These two segments account around 61 per cent of the total market value.

In 2019, SCG Packaging founded Vina Kraft Paper in Binh Duong Province to produce paper packaging products with total capacity of 500,000 tonnes/year.

The company continued to invest in Tin Thanh Packing JSC (BATICO) in 2015. And recently SGC bought 94 per cent of Bien Hoa Packaging JSC’s stakes, with the deal worth of VND2.07 billion (US$89 million).

SCG also owns stakes in many plastic companies including Binh Minh Plastics JSC, Vietnam Construction Materials JSC, Prime Group, Viet Thai Plastchem Joint Venture Company Ltd, TPC Vina Plastic and Chemical Corporation Ltd, Viet Nam Chemtech Company Ltd and Minh Thai Plastic Material Company Ltd.

In 2018 June, SCG signed a contract to buy 29 per cent of Viet Nam Oil and Gas Group (PetroVietnam)’s shares in Long Son Petrochemical Complex Project, raising its equity from 71 per cent to 100 per cent with total investment value of 8.5 billion baht per year. — VNS

The Hanoitimes – Being one of the world’s most powerful bodies responsible for the Islamic affairs, Malaysia’s expertise in this field could be significant for Vietnam’s businesses.

Malaysia can offer its expertise in Halal industry to assist Vietnamese businesses in venturing into the US$2.3 trillion Halal market, according to Dato’ Shariffah Norhana Syed Mustaffa, Ambassador of Malaysia to Vietnam.

Dato’ Shariffah Norhana Syed Mustaffa, Ambassador of Malaysia to Vietnam. Source: Embassy of Malaysia to Hanoi

The move becomes valuable in the context that Vietnam is making efforts to boost its export to the potential global market that is largely formed on highly hygienic perspective.

Hanoitimes has the honor to introduce the ambassador’s notes that could give some insights into the concept of Halal.

The Global Islamic Economy Report 2019 said that the Muslim populations worldwide spent a total of US$1.4 trillion for Halal food and beverages in 2018 and the global Halal food and beverage market is forecast to post a CAGR of 6.3% by 2024 thanks to Islamic faith-inspired ethical consumption needs.

You please share about the Muslim community in Malaysia, the consumption of Halal food in your country, and an overview of Malaysian Halal industry (supply and export) as well?

The Malaysian ambassador (2nd left) at an international meeting on Halal food held in Hanoi in November 2020. Source: Vietnam MOFA

Dato’ Shariffah Norhana Syed Mustaffa: First and foremost, I would like to talk about the meaning of the term “Halal”. Halal is an Arabic word that translates to “permissible or lawful”. In the Quran (Islamic Scripture), the word halal is contrasted with haram (forbidden). The term halal is usually associated but not limited with Islamic dietary laws and especially meat processed and prepared in accordance with those requirements.

It is common in the halal market for people to use the terms halal and halalan-toyyiban interchangeably due to a perception that whatever is halal, is also halalan-toyyiban. But actually, the two terms carry two different meanings. The former implies compliance with fundamental Syariah (Islamic teachings) parameters, while the latter goes beyond those fundamentals to invoke enhanced features that make something good, pure and wholesome.

Besides fulfilling the Syariah law, which is compulsory for Muslims, the food safety factor plays a significant contributor in determining the toyyiban i.e. wholesome (safe, clean, nutritious, quality) aspects of the food. To ensure that these aspects are not taken lightly, Malaysia has defined halal food through its MS1500:2009: Halal Food – Production, Preparation, Handling and Storage -General Guidelines (Second Revision) as food permitted under the Shari’ah law.

In keeping with Malaysia’s vision to be a global Halal Hub, Malaysia has recognized a total of 84 halal certification bodies consisting 46 international countries and developed a set of 28 halal standards covering areas such as halal food, halal pharmaceuticals, Islamic goods and halal logistics. In 2019, Malaysia’s total halal export value was RM40.2 billion (US$9.85 billion), a slight increase from RM40 billion in 2018. There were 1,876 halal exporters in 2019 compared to 1,827 reported in 2018, representing a 2.7% increment in growth. For 2020, Malaysian halal industry is forecasted to contribute 8% to national gross domestic.

As a catalyst for economic growth, the halal industry is expected to create new opportunities for business communities in producing more high value products. Malaysian halal industry has traditionally been applied to food and beverages, with standards and regulations enforced by the national agencies. However, apart from food and beverages, there are emerging sectors that have been identified such as pharmaceutical, cosmetics and personal care, ingredients and tourism.

Muslim community in Malaysia accounted for 61.3% or 19.5 million people out of the total population of 32.6 million people, being the main contributor towards the Halal prospect/sector of the country. The Government of Malaysia is committed by providing a comprehensive halal ecosystem, encompassing the followings:

i. Policy & Legislation;

ii. Human Capital;

Logo of the Department of Islamic Development Malaysia (JAKIM)

It seems that there are not common regulations on Halal certification but depending on each market. As far as I know, Department of Islamic Development Malaysia (JAKIM) is the competent authority being responsible for Halal certification in Malaysia.

How are its mission and role in the global certification, please?

Dato’ Shariffah Norhana Syed Mustaffa: Department of Islamic Development Malaysia (JAKIM) is the agency responsible for the Islamic affairs including halal certification in Malaysia. Therefore, JAKIM plays very important role to protect Muslim consumers in Malaysia and it is always been JAKIM’s responsibility to assure them to seek for halal products as urged by the Shariah (Islamic teachings).

For the purpose of halal certification, JAKIM has to ascertain the halal status of the product at every stage and at every process involved by carrying out an official site inspection on the plants purposely to examine on how the halal status of the raw material is maintained and monitored at all times.

Based on these reason, JAKIM requires a reputable and credible foreign halal certification bodies as JAKIM representatives to monitor/verify the halal status of these raw materials and products with responsibility and integrity. The recognition is based on the capability of the foreign halal certification bodies that comply with the Malaysian procedures & guidelines.

In addition, JAKIM and the Islamic Religious Council in the respective States shall be the competent authorities to certify that any food, goods or services is halal in accordance with the Trade Descriptions (Definition of Halal) Order. The validity of the appointment of Foreign Halal Certification Bodies (FHCB) & Authorities is for two (2) years. The appointed FHCB is listed on JAKIM’s website as the Recognized Foreign Halal Certification Bodies.

As of December 1, 2020, there are around 84 Recognized FHCB & Authorities. For Vietnam, JAKIM has appointed Halal Certification Agency Vietnam (HCA). The FHCB & Authorities shall submit annual report to JAKIM and JAKIM shall carry out the review audit after the expiration of the appointment period.

In recognizing Malaysia’s effort in the Halal market, the Global Islamic Economy Indicator (GIEI) acknowledges Malaysia as the leading country in showing the extent to which its ecosystem is developed, relative to other countries. The GIEI is a composite weighted index comprised of six sector-level indicators across 73 core countries. The ranking is weighted towards Islamic Finance and Halal Food given that their economic impact is comparatively larger than other sectors.

On October 10, 2020, JAKIM via its Halal Management Division has been accredited by Department of Standards Malaysia (DSM) in compliance with ISO 17065:2012 on its conformity assessment for bodies that certify products, processes and services on its roles as the government agency responsible to certify and issue Halal Certificate in Malaysia.

The ISO/IEC 17065:2012 is also an international standard recognition given to JAKIM as the authority to issue Malaysia Halal Certification. As such, the current procedures and process which implemented by JAKIM with regards to the HALAL Certification Process is in compliance with international standards and specifications set by International Organization for Standardization (ISO). The scope of ISO/IEC 17065:2012 includes food products and beverages, premises (hotel & restaurants) and other services (slaughtering). The scope will be extended to other Halal Certification Schemes in the future. This is also in line with pro-active action taken by the Government for Malaysia to be recognized as Global Halal Hub.

Among other things, through this international recognition, it will open up greater opportunities for products displayed with Malaysia Halal Certification (HALAL) to be recognized and accepted at the global market as well as attracting domestic and foreign businesses to apply for Malaysia Halal Certificate.

Halal-certified food. Source: Straturka

Vietnam, a decade-long food exporter, is making efforts to seek export opportunities for Halal products (mainly food and beverages), its latest attempt was hosting an international workshop that you were an honorable guest. You please speak of Vietnam’s advantages and disadvantages.

Lack of market standards and cultural understanding is believed to be the biggest barriers for Vietnamese exporters. How do you think about it and your recommendation, please?

Dato’ Shariffah Norhana Syed Mustaffa: The global halal food market has great potential and Vietnam could have sustainable development in this market if it uses its advantages, such as being a strong exporter of agricultural and aquaculture products.

Vietnam being one of the most dynamic countries in ASEAN has demonstrated its GDP growth averages between 6 to 7% per annum, indicating a strong domestic economy for future growth. The country possesses abundant of raw materials including coffee, rice, agriculture and aquaculture products which have high potential to be turned into Halal end products. Vietnam also has been recognized as one of the top tourists’ destinations in 2016 where over 12 million tourists’ arrival were recorded, indicating future potentials for hospitality services business including Halal restaurants and caterings.

There are nearly 2 billion Muslims worldwide and expenditure on Halal food is estimated at US$1.4 trillion this year and forecast to jump to US$15 trillion by 2050.

Despite the huge potential that exists, Vietnam businesses could do more to participate in the Halal food market. According to the Halal Vietnam Center, domestic enterprises are participating in the export of some Halal products, however, they are only able to meet one thirds of the demand from countries in the Organization of Islamic Cooperation (OIC).

At present, Vietnamese businesses could have facing some challenges relating to the issuance of Halal certificates, whilst generally lack of information about the market, business culture and consumption patterns. All of which hinder them from becoming deeply involved in the Halal market. Furthermore, many business owners in Vietnam still do not understand the Halal economy unlike Japan, Korea, Russia and Taiwan. Continuous engagements, training, dialogues with enlarged stakeholders must be initiated in order to gains further Halal tractions.

There are nearly 2 billion Muslims worldwide. Source: Fooddiversity

Could you please talk about the Vietnam-Malaysia trade exchange and potential of Vietnam’s Halal products export to Malaysia as well as other ASEAN member states like Indonesia and Brunei?

Dato’ Shariffah Norhana Syed Mustaffa: Malaysia-Vietnam bilateral trade in 2019 stood at US$13.1 billion with Malaysia’s export accounted for US$8.4 billion while imports from Vietnam to Malaysia is amounted US$4.7 billion. Rice and aquaculture products are among top export products from Vietnam to Malaysia.

Recent demand for Halal products has seen a dramatic increase, not only because of the rapid growth of the Muslim population in Islamic countries, but due to the shifts in the non-Muslim population in major economies who increasingly prefer these products due to their standards on food hygiene, safety and the environment.

Halal industry in general should not be looked from religious perspective but more on hygienic angle following the halalan-toyibban which invokes enhanced features that make certain produce good, pure and wholesome and therefore hygienic, safe and highly good to be consumed.

That being said, products that complied with halal certification can be exported to Malaysia, Indonesia and Brunei and beyond such as to the Middle East and Europe. Malaysia can offer its expertise in this field to assist Vietnamese businesses in venturing into the US$2.3 trillion Halal market.

Thank you very much!

Vietnam’s rising income per capita would soon move cars from a luxury product with a passenger vehicle density of 34 per 1,000 to a more ordinary one with a density level comparable to countries in the region.

New regulations to change Vietnam automobile industry in 2021

Cars in Vietnam since 2021 are subject to new regulations such as registration fee, import tariff, and higher emission standards.

There are many ways to make money in the 4.0 industrial era with the support of high technologies.

National programme to boost development of high technology

Prime Minister Nguyen Xuan Phuc has signed a decision on the national programme on high technology development to 2030, which aims to develop and master 20 prioritised technologies in different fields.

Digital transformation gives boost to development

Vietnam’s digital economic outlook has been seeded on a fertile and potential land with a high rate of Internet usage and a developing technological infrastructure.