Merit alternative investments

The ministry said 24 out of 25 comments from Government members approved the draft decree with the 35 percent cap, while one disagreed.

The MoIT said foreign investment into the local petrol and oil market has caused controversy over the years and the Ministries of Public Security, Planning and Investment, and Finance have long had concerns about energy security, legality and the intrinsic benefits of investment from foreign firms.

The MoIT said despite these concerns, several firms already have sizeable foreign ownership, including Petrolimex (20 percent owned by foreign investors), PVOil (35 percent) and BSR (49 percent) through equitisation, capital mobilisation and receiving approval from the Prime Minister. All the above firms have operated stably.

Foreign investors have contributed to a significant improvement in governance and transparency in financial statements, improving efficiency and competitiveness, while helping businesses increase their value, the MoIT said.

According to the ministry, foreign investors have abided by Vietnamese laws and regulations in the sector, but a lack of specific regulations on the shareholding ratios of foreign investors has caused confusion among domestic firms and regulators when discussing investment and capital increases.

The issue has even caused a lack of consistency in the shareholding rate when listing on the stock exchange.

In addition to the State-owned enterprises that have been permitted to sell stakes to foreign investors by the PM upon equitisation, there are thousands of listed petroleum companies that wish to attract foreign investors. Foreign businesses are also interested in their stocks but face difficulties due to the lack of clear and specific regulations.

These issues prompted the draft revision of the decree and the ministry is in favour of the 35 percent cap.

“The proposal to open the petroleum market stems from the needs of domestic petroleum businesses, not from foreign enterprises,” said the MoIT, adding that many countries have opened their petroleum markets such as China, Singapore, Thailand and Japan.

The ministry said petroleum enterprises, regardless of economic sector, when doing business in Vietnam, must comply with the conditions and provisions of this decree and other documents.

Any stake transfer is an indirect investment activity that does not allow enterprises to directly exercise the right to distribute petroleum in Vietnam. The exercise of the right to distribute petroleum in the country is only possible when a foreign enterprise establishes a branch in Vietnam./.

Thoughts return to stronger rail options. Source: freepik.com

Although the Ever Given container ship was rescued one week after being stranded in the Suez Canal in Egypt, the trading world remains rocked as hundreds of billions of US dollars has evaporated in the wake of the global trade system significantly relying on this narrow canal.

The incident has also posed questions on developing other transportation channels, in which trans-continental rail routes may be top of the list.

“One of the most effective channels is to develop a rail route running through Asia and Europe. This would be very good for exporters in Vietnam,” said Tran Thanh Hai, deputy director of the Ministry of Industry and Trade’s Agency of Foreign Trade.

It is now recommended that exporters should consider and take advantage of the current rail route connecting Vietnam through China to Kazakhstan, Russia, Belarus, Poland, and Germany. From Germany, the goods can be transported to other European markets.

Currently if goods are transported via this rail route, it would take a month from Vietnam to Germany, with a cost of $8,000-9,000 per container, which is higher than the $6,000-8,000 for sea transportation which can take up to 50 days.

However, the existing difficulty is the difference in railway widths and also standards of the trains themselves. The width of Vietnam’s railways is one metre, while that of other nations is around 1.4m. Moreover, trains in Vietnam cannot accommodate a huge volume of goods at the same time – each train can carry a maximum of 90 tonnes of goods for 15 compartments. If exporters want their goods transported by trains from Vietnam to overseas markets, they will have to change trains many times, meaning higher costs.

These factors currently make it difficult for Vietnam to boost the transportation of goods by train to other international markets.

Kazakhstani Ambassador to Vietnam Yerlan Baizhanov previously told VIR that Kazakhstan, China, and Vietnam had established a council to discuss a project to develop a rail route for goods transportation from Vietnam through China to Kazakhstan and other member countries of the Vietnam-Eurasian Economic Union (EAEU), including Russia, Belarus, Armenia and Kyrgyzstan, and vice versa.

“The council has organised a number of meetings. One of the key issues now is to fix the cost for transporting goods,” Baizhanov said. “I believe that there will be a shared solution. If this rail route is not developed, it will be difficult to raise the bilateral trade between Kazakhstan and Vietnam, which currently sits at only $500 million per year.”

The railway will help reduce the time for transporting goods from Kazakhstan to Vietnam to only 14 days from about one or two months now, he added. “The Kazakhstani side will continue working with Vietnam’s authorised agencies about this project,” said Baizhanov.

Currently, goods are transported between both nations by sea, which often takes a few months for a ship.

Under the railway project, whose total length and investment capital remain unrevealed, container goods will be transported from Vietnam’s northern Dong Dang and Lao Cai railway stations to China’s Lianyungang port – whose 49 per cent of stake is now held by Kazakhstan Temir Zholy (KTZ), the national railway company of Kazakhstan. After that, the goods will be transported by railway to Kazakhstan, which borders China, and to other EAEU countries.

Leaders of the railway industry of Vietnam, Kazakhstan, and China have decided on the project’s logistics manager, namely KTZExpress of Kazakhstan and Vietnam’s Transportation and Trade JSC, a member unit of state-owned Vietnam Railways Corporation. They have also considered the demand for organising container-based trains for the new routes. KTZ and Vietnam Railways Corporation also inked an MoU on cooperation in railway development several years ago.

Currently, under its strategy, Kazakhstan is boosting transport infrastructure modernisation and attaching great importance to developing transport-logistics routes connecting Kazakhstan with Southeast Asian nations including Vietnam. The railway will also enable Kazakhstan to boost imports of electronics, and garments and textiles products from Vietnam, which it needs the most.

In the same vein, in 2018, members of the Organization for Cooperation of Railways (OSJD) discussed a plan to develop a railway transport system running from Vietnam to Russia through other Asian and European countries. The plan is part of an agreement signed that year at the OSJD’s conference of general directors in the central city of Danang. Directors pledged to promote logistics development through rail, expand research cooperation, and supply locomotives and machinery. However, no further information of the plan has been published so far.

An Vui – smart transportation management software solution

The Ministry of Information and Communications (MIC) on April 9 introducedAn Vui, a smart transportation management software solution, making it the first digital platform of the Vietnam Digital Technology Forum.

The forum is the continuation of the activities to introduce “Make in Vietnam” digital products and platforms launched in 2020 to implement the prime minister’s recently-approved National Digital Transformation Programme by 2025 with a vision to 2030.

Vietnam’s long-distance passenger transport market remains fragmented and fiercely competitive, and reluctant to change. The market is dominated by 2,000 large-scale businesses, accounting for 90 per cent of the market, while the rest are small-scale household operators.

ietnam Digital Technology Forum

Phan Ba Manh, director of An Vui Technology JSC, said the software solution aims to digitise the long-distance transportation industry, helping operators manage their businesses more efficiently. The An Vui software solution includes backend management tools for ticket sales, parcel shipments, and fuel usage management.

Addressing the event, Deputy Minister of Information and Communications Nguyen Huy Dung said that the An Vui software solution facilitates workers and students working and studying away from home in buying tickets. It is also a solution to meet the transport demand of firms and passengers.

Interbuslines, one of the famous passenger car operators on Hanoi-Sapa-Hanoi, is one of the first customers of An Vui. Only six months after operating on the An Vui platform, the profit of Interbuslines rose by 300 per cent.

Thus far, more than 1,000 bus operators use An Vui’s services and products. In 2019, Vietnam-based venture capital (VC) firm VinaCapital Ventures made an investment into An Vui for an undisclosed sum.

Green growth strategy receives helping hand

Clean energy is one of the focal points that the international community is encouraging Vietnam to implement in its National Green Growth Strategy for the 2021-2030 period, with a vision to 2050, and representatives of embassies and international organisations at the consultative conference organised by the Ministry of Planning and Investment (MPI) last week discussed opinions for this strategy.

Emphasing the importance of clean energy in the green growth process, British Ambassador to Vietnam Gareth Ward said, “This consultation is useful because Vietnam will be recovering faster from the pandemic than most countries and there’s a lot of supply chain relocation into Vietnam happening, which also means a lot of opportunities to do things differently. So, we very much welcome the national green growth strategy.”

Energy is a sector requiring great attention as it is also the major source of greenhouse gas (GHG) emissions.

“Vietnam has a very large potential in wind and solar, and the country could be much quicker in establishing a stable supply in time. I think there should be a particular focus in the strategy on attracting public investment into the grid’s resilience for renewable energy,” Ward said.

“Some international investors have expressed their interest to invest in the green energy sector,” he added. “So, green finance is a sector that Vietnam can develop with green bonds and investment funds, while simultaneously setting standards that will change the calculations of the banking system,” he added.

Ambassador of Spain to Vietnam María del Pilar Méndez Jiménez said, “I would encourage Vietnam very much to develop green energy because we are aware of how important energy, solar wind and water are. There are also Spanish companies that are willing to cooperate with Vietnam in this regard.”

The Politburo’s Resolution No.55-NQ/TW dated October 2, 2020 on the orientation of Vietnam’s National Energy Development Strategy until 2030 and outlook to 2045 already points towards cleaner and greener energy. The resolution states that renewable energy sources in the primary energy mix should sit somewhere between 15-20 per cent by 2030 and 25-30 per cent by 2045. The government also targets to reduce GHG emissions from energy activities by 15 and 20 per cent by 2030 and 2045, respectively.

A McKinsey study shows Vietnam has tremendous natural endowments, yet the country’s market for renewables remains in its infancy, with a grid scale of only about 200MW from solar and wind online.

“A successful renewables-led pathway includes building out the country’s wind and solar generation capabilities to 39GW and 61GW by 2030, respectively,” the study stated. “This would be five times more than Vietnam’s current energy plan and would need to be supplemented by natural gas and battery storage.”

International organisations have been working to help Vietnam promote energy. The GIZ Energy Support Programme is supporting the Vietnamese government in developing renewables by addressing barriers. GIZ works on several levels with the Ministry of Industry and Trade’s Electricity Regulatory Authority of Vietnam and other institutions to implement aspects of Vietnamese policies.

Along with the importance of energy development in realising the national green growth strategy, onlookers have pointed out there that shortcomings remain. British Ambassador Ward said, “All countries that are setting their targets not only need to look at growing renewables, they also need to look at the way to phase out coal and other brown energy sources.”

Though highly valuing the green growth strategy, Dong-bae Kim, Economic Minister-Counsellor of the South Korean Embassy in Hanoi also raised concerns over how it relates to the National Power Development Plan 8, especially in the power generation.