Metro pacific investments corporation

Metro Line 5, phase 2, has a total length of about 14.5km, from Bay Hien intersection to the new Can Giuoc bus station

In a letter sent to the Management Authority for Urban Railways of Ho Chi Minh City (MAUR) and Ho Chi Minh City People’s Committee, Soun-young Chung, general manager of Kexim Bank’s Global Business Cooperation Division said that the bank will soon finance the pre-feasibility study.

The project will transform from official development assistance (ODA) to the public-private partnership (PPP) model.

The study is implemented on three specific aspects: engineering, financing, and legality.

Members of the research team and participating investors have extensive experience in the construction and operation of urban railway lines, including Metro Line 9 of Seoul, Korea, built under the PPP model.

On January 19, the MAUR worked with a group of investors and consulting companies from Korea.

The group consists of Kexim Bank, Hyundai Engineering Co., Ltd., Lotte Corporation, Samil PwC (finance consultant), Dohwa Engineering (engineering consultant), Sejong Corporation, and Shearman & Sterling (legal advisory), among others.

It is anticipated that the pre-feasibility study will be summited by the end of 2020.

The pre-feasibility study of phase 2 of Metro Line 5 was previously funded by the Korea International Cooperation Agency (KOICA). However, due to objective reasons, the ODA form cannot be implemented and is being replaced by the PPP format.

At present, KOICA is funding an urban planning research technical assistance project based on transit-oriented development (TOD) on this section.

Metro Line 5 has a total length of 23.4km separated into two phases. Phase 1, from Bay Hien intersection to Saigon Bridge, has a total length of about 8.89km and a total investment value of about $1.66 billion. Phase 2, from Bay Hien intersection to the new Can Giuoc bus station, has a total length of about 14.5km.

Funding for this project comes from the Spanish government, the Asian Development Bank (ADB), European Investment Bank (EIB), and German Reconstruction Bank (KfW).

Ho Chi Minh City is planning to construct eight metro lines with a total length of about 220km, with the total investment of nearly $25 billion. Currently, Metro Line 1 (Ben Thanh-Suoi Tien) and Line 2 (Ben Thanh-Tham Luong) have been invested in the form of ODA.

In addition to phase 2 of Metro Line 5, which is calling for investment, Ho Chi Minh City is also calling for investment in four other metro lines, including Line 2 (phase 2), 3A, 4, and 5 (phase 1).

Inside a passenger train on HCM City’s first metro line. The opening of the line will be delayed until 2022 (Photo: VNA)

HCM City – The opening of the first metro line in Ho Chi Minh City, which runs between Ben Thanh Market in District 1 and Suoi Tien Theme Park in District 9, will be delayed until 2022, city authorities have said.

The HCM City Management Authority for Urban Railways (MAUR) said the Long Binh – Binh Thai elevated section in District 9 in the newly established Thu Duc city will operate for a trial period in the fourth quarter before a final test of the entire metro line is completed.

Work began last week on the power supply system for the power stations along the line, according to MAUR.

The Metro Line 1 was previously expected to open later this year, but complications due to the COVID-19 pandemic have delayed the start of commercial operations.

MAUR said it would speed up other tasks such as training and technology transfer.

As of the end of last year, about 82 percent of the work had been completed against the targeted 85 percent.

Last year, Japanese and European engineers who oversee installation of the tracks could not enter the country after international flights were suspended because of the COVID-19 outbreak.

Vietnam closed its borders and suspended all international flights in March last year.

In addition, the first train carriages were scheduled to arrive in April last year, but they did not arrive until October. Shipments of other equipment from overseas were also affected, according to MAUR.

The line, the first of the city’s eight proposed routes, comprises four main packages and is funded in part through an official development assistance (ODA) loan from the Japan International Cooperation Agency.

Since construction began in 2012, it has faced many problems, including slow disbursement of funds and a personnel crisis.

The line, with total investment of 2.05 billion USD, has 14 stations (11 elevated stations and three underground stations) through districts 1, 2, 9, Binh Thanh and Thu Duc and neighbouring Binh Duong province.

The 19.7-km metro route will have 17 Japanese-made trains with three carriages each that will run at a maximum speed of 110km per hour above ground and 80km per hour below ground.

Second metro line

For Metro Line 2, which will connect Ben Thanh Market in District 1 to Tham Luong in District 12, site clearance and relocation of technical infrastructure and bidding procedures will be completed by the end of 2021 and selection of contractors in 2022, according to MAUR.

The first phase of Metro Line 5 will include a pre-feasibility study report that will be submitted to the National Assembly for approval in the fourth quarter of 2021. Metro Line 3A will have a pre-feasibility study report completed in 2022.

Eight metro lines running a total 220 km are slated to be built.

With a population of about 13 million, HCM City has been struggling with traffic congestion for years. The number of personal vehicles has surged, with 825,000 cars and 8.12 million motorbikes, while public transport remains underdeveloped.

Gold is expected to rise back to over $2,000/ounce levels in 2021.- VNS Photo Ho Hoang

Gold is still a safe heaven

The price of gold in international markets has been on a downward trend since the second half of last year as many investors have turned to the US dollar as a new safe haven and COVID-19 vaccines are developed and manufactured.

However, the gold price is expected to bounce back to US$2,000/ounce in 2021, so the precious metal is still a good investment for idle money.

The successful trials of COVID-19 vaccines have taken away some of gold’s appeal, but the rapid spread of new variants of coronavirus, which have been found in Viet Nam recently, and prospects of more stimulus packages from central banks and governments to kick-start economies after the health crisis will support the precious metal.

“The prospect of more stimulus packages after US President Joe Biden took over the White House will boost gold in the near future,” said Phan Dung Khanh, Head of Investment Advisory at Maybank Kim Eng.

“So investors can take advantage when the gold price is in low territory to invest. However, gold is just suitable for long-term investors and they need to invest when the difference between local and international gold price is low.”

Right after the inauguration, US President Biden proposed a US$1.9 trillion stimulus package. Gold is usually considered a hedge against rising inflation and currency debasement that can result from massive stimulus.

Last year, the gold price fluctuated a lot in both local and international markets.

In international markets, gold hit over $2,000/ounce for the first time in history in August as the US dollar receded, then plunged after that.

Meanwhile, in the local market, the gold price surged in the second half of 2020 and even peaked at a historic level of over VND62 million/tael from around VND42 million/tael at the beginning of 2020.

Stocks an attractive investment

The expert from Maybank Kim Eng expects the market’s positive level to fall in 2021 despite impressive economic growth last year.

“Even when the economy recovers well, if new investors and individual investors still dominate the market while lacking other large cash inflows from foreign investors and organisations, the the market will struggle to cross new peaks,” Khanh said.

However, he believed that “stocks remain an attractive investment in the near future but couldn’t beat that of 2020,” and investors have to choose sectors that attract capital.

The market strongly fluctuated since the beginning of the new year. It continued last year’s rally in the first half of January with many analysts expecting the market could hit its historic peak of over 1,200 points.

But it witnessed corrections in the next sessions due to selling pressure for profit booking. Especially, the VN-Index posted its biggest daily loss in history at the end of last month after new COVID-19 community cases were reported. And it recovered again.

However, analysts are still optimistic about the market and expect it will recover in the short-term.

Stocks have become more popular as an investment channel during the pandemic as transactions can easily be done via phone calls or mobile applications.

The market’s benchmark VN-Index rose nearly 15 per cent last year despite a deep fall at the end of March.

Real estate still has room for development

With economic recovery, real estate is also a promising investment in 2021.

Prof. Dr. Dang Hung Vo, Former Deputy Minister of Natural Resources – Environment, said that Viet Nam’s real estate including agricultural, industrial, resort and housing segments, has huge potential. In the housing market, our urbanisation rate just reached 38 per cent which means to become an industrial country the level of urbanisation must be around 70 – 80 per cent.

“Therefore the potential growth for housing and urban development is really high,” said Vo.

The shift in foreign investments from China will lead a huge amount of cash flow to Viet Nam’s market and support the industrial segment.

However, the downside of Viet Nam’s real estate industry is that the law on land and real estate is not strong enough and too complicated for businesses and foreign investors.

“Our potential is really huge but our law on land and real estate is not consistent. And the law on land, which is its foundation, has not yet been fixed, leading to a reduction in housing demand,” said Vo.

In 2019 and 2020, the number of projects receiving approval fell ten times, which meant that in the next 3 – 5 years, housing supply will decline significantly, he added.

“Viet Nam has more real estate investment opportunities than other more mature Asia-Pacific markets, although certain difficulties remain,” Matthew Powell, Director of Savills Ha Noi, said in a statement.

“The standout prospects are in industrial, logistics, and Grade A offices in Ha Noi and HCM City. For individual investors, real estate remains a favourite investment channel for its mid-term capital growth potential.”

Some domestic developers might focus mainly on residential real estate, while other more specialist investors like industrial and logistics sector from apartment or resort development.

Dr. Craig Emerson, director of the Australian APEC Study Centre

Vietnam’s success in containing COVID-19 with minimal economic fallout compared to other nations has improved its already-strong reputation for competent governance. The government has been liberalising Vietnam’s economy for decades and is now reaping the benefits of rapid growth.

Vietnam has stood to gain from the recent US-China trade conflict with many companies relocating at least some of their production facilities there. Vietnam is also rapidly adopting digital technologies to deploy automation, smart manufacturing, and big data analytics. Competent economic management, consistent reforms, swift digital uptake, and effective COVID-19 containment make Vietnam a very attractive destination for trade and investment in 2021 and beyond.

Economically, Vietnam is becoming a manufacturing powerhouse, particularly for electronics and apparel. It is also becoming a focal point for regional value chains with preferential access through free trade agreements (FTAs).

It has taken up trade deal commitments and accepted assistance to develop the institutional and regulatory environment, infrastructure, and facilitation to attract investment. The country is also actively working on non-tariff barriers to trade including intellectual property protection, food safety regulations, restrictions on the internet and digital economy, and other governance issues to accelerate the absorption of investment.

Vietnam needs to be considered in terms of its unique qualities and context. It is following its own development path in a new time, with different conditions, drivers, and realities. Comparisons can be made to Japan with its appreciation of tradition; to Singapore with its open trade policies and architecture; China’s southern Guangdong province in population scale and economic activity; and Indonesia in terms of benefits from a demographic dividend.

Vietnam has a web of FTAs that make it a strategic location for foreign investment as it offers preferential access to several markets. Vietnam continues to attract high levels of such funding from Japan, South Korea, Singapore, China, the United States, and other countries.

Vietnam maintains an ASEAN-first policy but is drawing attention from global investors, particularly due to its economic growth despite COVID-19 and attracted projects from more than 100 countries into its industrial zones during 2020.

Enterprises from Australia are being encouraged to look into new business prospects in Asia. Photo: Le Tien

Approaching the market

The drivers of growth in Vietnam create attractive conditions and opportunities for Australian business in the post-pandemic environment. There is scope for manufacturing, agriculture, resources, and services businesses to expand engagement with Vietnam, now and into the medium term. The country’s rapid evolution will continue creating further chances as the economy and consumption mature.

There can be an increase in trade in goods where Australia has proven export capacity and readiness to meet demand in Vietnam. There are also possible increases in the value-added contribution of Australian content in Vietnam’s exports of manufactured products.

In addition, there are prospects to increase services trade in existing and new areas, particularly around education, healthcare, insurance, and environmental services. Both governments have prioritised these sectors under the expanding bilateral economic framework. Investment opportunities exist across the manufacturing, agriculture, services, and resources sectors and there are also those in relation to Vietnam’s digital transformation.

Globally, Vietnam is a major exporter of electronic equipment, apparel, and footwear. In terms of the Vietnam-Australia bilateral relationship, there are prospects for expanding Australian exports of beef, wheat and barley, cotton, horticultural products and processed food. There is also scope to expand exports of services in the education, ICT, mining technology, insurance, and environmental and healthcare sectors.

Australian businesses should also be aware of new prospects emerging in relation to Vietnam’s digital transformation and efforts to modernise economic activity through automation, AI, the Internet of Things, and big data.

Vietnam’s top merchandise imports from Australia are coal, iron ore, cotton, live animals, scrap iron, wheat, aluminium, copper, zinc, fruit, and nuts. The proportion of raw materials in the trade flows has steadily increased this century and now represents around half of all Australian merchandise exports.

Trade opportunities for Australia are supported by policy settings in Vietnam that are generally encouraging of foreign investment to advance the country’s position as a major regional trader. Australia’s exports show that businesses are already participating in value chains to which Vietnam belongs.

When semi-processed metals and fibre are shipped from Australia, it is likely they are being sourced by Vietnamese factories as inputs for final products, many of which are exported again for sale.

Vietnam is a promising market for company investment as a densely populated, developing, and urbanising country which is transitioning to an industrial and market-based economy through trade and investment and making great strides to position itself for Industry 4.0. Australia is currently a relatively small investor, but stock has doubled since 2015 and is growing faster than Australian investment into other ASEAN economies.

Most of Australia’s investment in Vietnam is in manufacturing (47 per cent) with lower levels in hospitality (8 per cent), construction/real estate (7 per cent), agribusiness (6 per cent), and healthcare (6 per cent).

Vietnam has historically had some state-owned enterprises (SOEs) with monopolies in particular sectors, some of which continue to operate. Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam has committed to providing member countries with a level playing field for their companies competing with SOEs and ensuring any state-designated monopolies do not abuse their market power. Vietnam has also introduced legislation to equitise and divest SOEs and monopolies and ensure that they are offered only limited state preferences.

The CPTPP provides preferential access for Australian businesses to invest in Vietnam. It has the most liberal conditions for any foreign investors in Vietnam and these conditions are also available to other CPTPP members, including two of Vietnam’s largest investors, Japan and Singapore.

Australian movement

Australian businesses are being urged to expand engagement with Asia to capitalise on economic complementarities, diversify supply chains, and benefit from regional growth and integration. As an advanced and globally connected economy in the region, Australia is well placed to benefit from engagement with neighbouring Asian economies to build trade, investment, and innovation networks.

Even before the pandemic, heightened geopolitical tensions in the region driven by a more competitive relationship between the United States and China had highlighted the need for Australia to have a broad and diverse network of trading partners. Many companies in the US and Australia began to adopt a China+1 strategy, with Vietnam emerging as a preferred option.

As the pandemic struck and brought many supply chains to a standstill, first in China and then around the world, businesses and governments soon became painfully aware of their exposure to policy changes overseas. In some cases, this led to calls in Australia to re-shore supply chains, especially for essential medical supplies. More generally, although trade with Vietnam and other economies will not replace trade with China, it may help build resilience.

Australia is generally well-regarded in Vietnam. It is a considered a high-income, advanced economy with much to offer in terms of technology, managerial know-how, and skills. Brand Australia has a strong reputation for being high-quality, safe, and reliable. Exports of goods such as baby products, food, vitamins, and supplements are testament to this reputation.

As the business culture in Vietnam is strongly governed by relationships, Australian businesses should draw on the thriving Australia-Vietnam ecosystem already in place. Onshore and offshore resources are available from national and state governments, industry bodies, academia, students, alumni, diaspora, and locals. The insights and connections of Vietnamese diaspora in Australia, Australian expatriates in Vietnam, and Australian-educated Vietnamese students and graduates will prove invaluable to prospective businesses.

There are a lot of economic complementarities underpinning trade and investment between Australia and Vietnam, as well as traded sectors with the most potential for growth. Besides these, numerous opportunities are arising from the rapid digital transformation of both economies with the adoption of smart manufacturing, digital technologies, and data analytics.

Both governments are equally open about their support for a rules-based security and economic order in Asia, continued trade liberalisation and the centrality of ASEAN in maintaining regional stability.

There has been no better time for Australian businesses to engage in Vietnam. Despite pandemic-related challenges, its economy grew by nearly 3 per cent in 2020 while many of its regional peers, including Australia, fell into recession. Opportunities will continue to unfold for Australian businesses which are willing to engage and adapt to local market conditions, cultural realities, and leverage Australia’s unique assets in the burgeoning eco-system.