Samson: US is Vietnam’s biggest export market in Jan-May
1st June 2020
The US was Việt Nam’s leading export market in the first five months of the year, despite a slight decrease in total export turnover.
Việt Nam’s total export and import turnover in the first five months was US$196.84 billion, a 2.8 per cent drop year-on-year, according to the General Department of Statistics.
Total export turnover was $99.36 billion, a yearly drop of 1.7 per cent, while imports reached $97.48 billion, down 4 per cent year-on-year.
COVID-19 has affected Việt Nam’s main trading partners, hampering exports and imports, according to the department.
However, the US was Việt Nam’s largest export market in the period with export turnover of $24.6 billion, an 8.2 per cent increase compared to last year.
Last year, the US had one of the highest export growth rates compared to Việt Nam’s other export markets, with a 29.1 per cent increase in export growth compared to 2018, accounting for 23.2 per cent of Việt Nam’s total exports.
Meanwhile, import turnover of fruits and vegetable from the US in the first four months was over $102.1 million, a 44 per cent increase from 2019, even though overall produce imports dropped by 42 per cent.
Vietnamese exports reached $16.3 billion in China, $8.1 billion in Japan, and $7.7 billion in South Korea.
In the five-month period, 17 product groups reached over $1 billion worth of export valuer each, including phones and components, electronics, garment and textiles, machinery, footwear, and vehicles.
Those with declining turnover were telephones and components (9 per cent), textiles (15 per cent), footwear (5 per cent), fruit and vegetables (10 per cent), rubber (30 per cent), and pepper (18 per cent). LINK
Samson: More Vietnamese consumers set to use cashless payments: Visa country chief
2nd June 2020
Cashless payments in Việt Nam is now strongly development. Đặng Tuyết Dung, Visa Country Manager for Việt Nam and Laos,speaks about the trend and the benefits cashless payments bring to merchants and consumers.
What is the status of non-cashpayments in Việt Nam now?
Digital payments in Việt Nam, while relatively new, is gaining strong attraction in the market as a number of different statistics show.
Firstly, according to our advanced global processing network, VisaNet, the value of transactions done using Visa cards in Việt Nam increased by 39 per cent in 2019, while the number of transactions grew by 54 per cent. Overall, people are using their Visa cards more often, and they’re using them to spend more, all of which are fundamentally positive trends.
Recently, we commissioned the Visa Consumer Payment Attitudes study, which surveyed a broad demographic mix of consumers across the country on their perspectives and expectations of a variety of different payment methods.
One of the standout statistics from the study was that 74 per cent of consumers expect to increase their use of non-cash payment methods in the next 12 months. We also did this survey in several other Southeast Asian markets, and Việt Nam actually had the highest affirmative response to this question. Again, this demonstrates a very real sense of positivity and interest around digital payments in this market.
Contactless is one of the next ‘big things’ in digital payments. How are consumers taking to this new technology?
Contactless payments is a new technology that allows you to simply tap your Visa card, or your smartphone or smart device, on a terminal to pay, rather than swipe or insert a card. It is based on secure chip technology; contactless cards have a tiny antenna which can be read by POS terminals when they are within 4cm. During this process, the card never needs to leave your hand, and it is extremely fast: POS terminals can typically read a contactless card or device in less than half a second. Consumers in Việt Nam are starting to embrace contactless payments as a fast, secure and more convenient way to pay.
The study found that 37 per cent of respondents were using contactless payment cards while, interestingly, even more are using mobile contactless payments: 42 per cent. The vast majority of those already using contactless payment methods have found that they are becoming a regular payment method in their lives, with 85 per cent using them at least once a week.
What benefits are there for merchants to accept digital payments?
I think, first and foremost, by accepting digital payments merchants are opening up their businesses to potential customers from all around the world. Put it this way: I think we can all relate to being in a situation where you just happen to walk past a store and something catches your eye that you really like but don’t have any cash in your wallet. If the shop has the ability to accept digital payments, then that’s one sale they may not have otherwise made.
This is particularly important for businesses who get a lot of traffic from tourists. These customers often don’t want to be carrying large sums of foreign currency around, and yet they are also often the ones who want to make ‘impulse’ purchases.
Outside of being able to encourage more business, digital payments reduce the amount of labour required from employees, both in terms of the amount of time spent handling cash during a transaction and banking. These activities can be labor intensive, and ultimately draw employees away from undertaking more productive activities on the job.
The fact of the matter is that cashless transactions benefit both businesses and customers, and that these benefits go both ways. So when customers have a better experience, the merchant benefits from increased transactions and shopper loyalty, and when merchants are operating more efficiently and effectively, they can better serve customers. It is really a win-win proposition.
What do you think needs to be done to encourage more Vietnamese consumers to go cashless?
Firstly I’d like to say that we at Visa support the Vietnamese Government’s goal of transitioning to a more cashless economy and we are working closely with a number of stakeholders in order to make this objective a reality. But what we are also seeing is strong public support for the measure: in our Visa Consumer Payment Attitudes study, 79 percent of Vietnamese respondents indicated that they support the government’s desire to ‘go cashless’, the highest rate in the region.
Firstly, I think educating consumers and merchants on the benefits of digital payments is key to greater adoption. Secondly, we need to provide consumers with more opportunities to use digital payments, and this also dovetails with my first point because we need to work closely with merchants in particular to help them understand the enormous benefits digital payments bring to their businesses.
When we surveyed Vietnamese consumers, we found that of those that were carrying less cash, the most commonly stated reason for doing so was that they found more places offering digital payment options. If we can continue this trend of merchants accepting digital payments, then more shoppers are likely to make the switch from cash to cardor smartphone payments. We are also working at the moment to encourage not just non-cash payments but also contactless payments. We will run promotions to encourage consumers to try new ways of paying, which ultimately will help to change payment behaviours.
How do you see the payments eco-system in Việt Nam evolving in the short to medium term?
We are seeing incredible opportunities with more consumers engaging in e-commerce and using mobile payments. I believe one of the big changes we are going to see is that there will soon be a generation of consumers in Việt Nam for whom using digital payments is second nature. They will also be accustomed to paying with their smartphone and smartwatch. Vietnamese consumers are fast adopters of new technologies, and with the digital economy increasingly becoming a part of people’s day-to-day lives, digital payments too will be a part of everyday life. LINK
Samson: Can Việt Nam take advantage of new foreign investment strategies?
2nd June, 2020
Over the past few decades, many companies worldwide have come to China, seeking a place to set up production bases and do business as they were lured by the country’s low labour costs and enormous domestic consumer market, allowing the country to become a global manufacturing hub.
However, since around 2010, there has been a noticeable shift in foreign direct investment flow, which is called the ‘China plus one’ strategy.
The phrase ‘China plus one’ refers to a strategy in which companies try to diversify risks of concentrating their manufacturing operations in China by opening factories in at least one country.
The strategy has been around for many years as China has entered a phase of restructuring its economic growth model towards focusing more strongly on domestic demand, rather than boosting growth by exports and trade, and the country has gradually lost its comparative advantages from other Asian countries due to rising production costs, especially labour costs.
At the end of 2018, the strategy was reactivated as investors sought to reduce risks caused by political tensions between China and the US, which originated from the tit-for-tat trade dispute. The risk of disruption of global supply chains has become more apparent. Technological advances, particularly digital technology, have also forced investors to change value chain strategies. Việt Nam has been recognised as one of the potential candidates for new production facilities.
Since the coronavirus pandemic hit and has claimed nearly 400,000 lives and disrupted global production and distribution systems, investors can see more clearly than ever the consequences of a value chain strategy depending too much on one market. Under these circumstances, COVID-19 has been deemed a catalyst for investors to take not only the ‘China plus one’ but also ‘investment withdrawing in China’ strategy into more significant consideration and the trend of shifting manufacturing bases to Việt Nam has recently picked up pace.
Why Việt Nam?
Việt Nam has long been an attractive destination of investment for foreign investors. Not only located in a dynamic region, but the country also has good conditions in terms of logistics for trade, especially its proximity to China.
In the ‘China plus One Strategy in Vietnam’ report released by Dezan Shira & Associates in 2018, experts said: “By situating manufacturing cost centres close to traditional hubs in mainland China, investors can reduce costs with limited interruption or delays to currently existing supply chains.” Besides, Việt Nam is said to have a state of manufacturing similar to that found in China 10 or 15 years ago when low production costs and labour-intensive manufacturing acted as a magnet for foreign investment.
In terms of labour costs, Vietnamese workers’ wages are only half that of Thailand and Malaysia, meanwhile, the quality of human resources has been improved with more tech-savvy workers. In terms of land rent, although industrial park land rent in Việt Nam rose sharply in 2019, the average price was just US$103.5 per square metre, the second-lowest in the region, only higher than that of Myanmar, according to a report of VNDirect Securities Corporation.
VNDirect also pointed out that Việt Nam reduced corporate income tax from 22 per cent to 20 per cent in 2016 for all domestic and foreign companies to increase production attraction. Common tax incentives for firms in industrial zones include tax exemptions for two to four years, tax breaks for three to 15 years, and import tax exemptions.
Though the results brought by the economic reform process have not been as great as hoped, Việt Nam has still seen a lot of improvements in its business and investment environment. Moreover, while maintaining political stability, Việt Nam has integrated more deeply and widely into the global economy by joining a series of free trade agreements, including the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
The European-Việt Nam Free Trade Agreement (EVFTA) is also expected to be approved by the 14th National Assembly in its ongoing ninth meeting. Under the agreement, tax imposed on exports from Việt Nam to EU will be eliminated as soon as EVFTA takes effect or shortly thereafter (maximum seven years). Thanks to the EVFTA, Việt Nam’s revenue from exports to the EU is forecast to surge by 44 per cent by 2030.
Last but not least, that Việt Nam has been hailed as one of the countries most successful in controlling the COVID-19 outbreak at low cost, as well as its assistance and provision of medical equipment and face masks to other countries in their fight against the pandemic have helped raise investors’ confidence. This is a good opportunity for Việt Nam to attract investment and recover the economy, creating momentum for long-term and sustainable development.
Challenges ahead and solutions
To prepare for a new investment wave, in September last year, the Politbureau adopted its first-ever resolution on orientations to perfect institutions and policies for and improve the quality and efficiency of foreign investment until 2030.
Under the resolution, the country will aim to attract foreign investment in a selective manner, focusing on quality, efficiency, technology and environmental protection. Priority will be given to foreign direct investment (FDI) projects that use advanced technology and modern management with high added value, bringing spillover effects to Vietnamese enterprises, especially small and medium-sized enterprises; and the projects must be able to connect to the global production and supply chain.
Despite the advantages mentioned above, Việt Nam is not without its share of challenges.
Firstly, many localities in Việt Nam are under pressure of reaching high growth rates, so they have a large demand for capital. Therefore, local authorities are likely to rush licensing projects without carrying out a full assessment of their investment quality and social, economical and environmental impacts.
Secondly, Việt Nam needs to create a healthy, fair competitive environment and have policies suitable with international commitments to spur the growth of Vietnamese enterprises and supporting industries in particular.
Thirdly, Việt Nam should not compete with other countries to court more foreign capital by only offering investment incentives, as this can distort resource allocation and will not have a meaningful impact in the long run. The country will be more attractive to foreign investors if it can correct its weaknesses and shortcomings, such as improving the capacity of capital absorbency, perfecting logistics infrastructure, upgrading workers’ skills and ability, and reforming institutions.
While some changes can’t happen overnight, institutional improvement and reforms must be carried out drastically and quickly.
While presiding over a meeting on FDI late May, Prime Minister Nguyễn Xuân Phúc agreed to establish a special task force, led by Planning and Investment Minister Nguyễn Chí Dũng, that will help the country prepare for a new wave of FDI inflows in the post-COVID-19 period. The main objective of the task force is to fix investment bottlenecks, approach potential investors looking for new destinations and support those that are having difficulties in Việt Nam.
According to the PM, given that FDI is a critical part of the economy, it is essential for Việt Nam to take advantage of a shift in global investment capital flow. By combining the strength of both the local and foreign investment sectors, Việt Nam will be able to create a development leapfrog. LINK
Samson: Talking shop: UK businesses see ‘new investment opportunities in Việt Nam despite pandemic’: envoy
4th June 2020
The COVID-19 pandemic has had a strong impact on the global economy, including Việt Nam. The country has however been a safe destination for foreign investors thanks to its successful efforts to control the outbreak. Việt Nam News’ Thu Ngân speaks to the British consul general in HCM City, Ian Gibbons, about UK enterprises in this country and how he sees investment trends in the near future.
How have British businesses been doing in Việt Nam in recent times? How are they coping with the impacts of the COVID-19 pandemic?
Many British companies are attracted to Việt Nam due to the country’s steady economic growth and ongoing efforts to integrate fully into the global free trade system.
British firms operate across a range of sectors here, including education, financial services, energy, infrastructure, and healthcare, and there are new opportunities in the country’s evolving tech sector.
But of course COVID-19 has been hugely disruptive for firms’ operations, here and across the globe. Travel restrictions were imposed early by the Vietnamese Government, impacting mobility and recruitment. International schools are struggling to recruit teachers from overseas ahead of the new academic year. Companies in the aviation sector have faced significant disruption with revenues dropping by 70-80 per cent.
Many expect that they can only resume normal operations in the third quarter at the earliest. Across the board, companies are experiencing delays in payment and administrative procedures, and challenges in securing licensing for new projects.
However, Việt Nam has been successful in limiting infections through proactively testing, tracing and treating those infected, and life is now returning to normality here, ahead of other countries in the region. Social distancing has been a central part of Việt Nam’s strategy, and British companies will need to adapt to new ways of working, including more remote working for staff and shifting to virtual meetings with external stakeholders. Companies can benefit from the Vietnamese Government’s guidance on precautions for businesses, including advice on how to ensure the health and safety of employees, as operations resume.
Many foresee a new wave of foreign investment in Việt Nam after the pandemic since it is a safe and attractive destination. How do you see it?
We continue to see interest from the British business community in new investment opportunities in Việt Nam, despite the ongoing global pandemic. Education is a key area of opportunity, and a number of British educational institutions are seeking potential partners for new strategic co-operation in Việt Nam.
Healthcare is another promising area for UK investment. The current global pandemic has necessitated collaboration and innovation across the healthcare sector. In Việt Nam, we’ve seen Prudential launch a mobile app enabling people to monitor their own health and the British Medical Journal establish online COVID-19 resources for medical training of doctors around the world.
Việt Nam has worked with UK partners on disease control for many years. For instance, the Oxford University Clinical Research Unit conducts world leading research on epidemiology in HCM City and Hà Nội. UK pharmaceutical companies are an important part of the Vietnamese healthcare system.
Tech is an area of opportunity too. Within the startup realm, Việt Nam’s fintech groups are gaining traction, and the sector received considerable foreign investment last year, ranking second in Southeast Asia. At times like this, the world needs innovative companies more than ever, with the tech sector in particular having a key role to play in the global recovery from COVID-19. The UK government recently announced a £1.25 billion (US$1.46 billion) support package to enable British tech start-ups to access the capital they need to continue developing and innovating through the crisis, creating the services and products of the future.
What should Việt Nam do to enable companies to recover as soon as possible and what should it do to attract investors?
In the past year Việt Nam has revised regulatory frameworks in order to attract more foreign direct investment. There is still more that can be done on regulatory and administrative reform to make Việt Nam a more attractive destination for UK investment. The UK Government is supporting the development of a Government Resolution on simplification and streamlining of administrative procedures relating to business activities in 2021 – 2025. If successfully implemented, this could be a significant reduction of administrative burden on businesses, boosting the country’s economic growth and productivity.
Despite facing complicated decisions on how to balance public health benefits and economic costs, Việt Nam’s Government has been successful in managing the impacts of COVID-19, and in supporting the economy’s resilience.
Looking at the regional perspective, at the Special ASEAN Summit on COVID-19, ASEAN reaffirmed its commitment to a collective COVID-19 response and to strengthening the resilience of supply chains in the region. This pandemic has shown that no country is self-sufficient and that international collaboration is vital to tackle the economic impacts of the crisis.
The UK will continue to deepen its commitment to global trade and we believe that maintaining openness, flow of investment and functioning supply chains are crucial to economic recovery. The removal of trade barriers will be key in attracting the investment needed to stimulate economies.
There is optimism about Việt Nam’s economic recovery with an expected GDP growth rate of 7 per cent in 2021 and we have confidence in Việt Nam’s capability to realise this expectation. LINK
Suzie: I would think the Dong would be ready to revalue also, maybe same time as the Dinar and weren’t all currencies supposed to be on the “same Page” value wise around the first part of April? Just hopin’ n’ supposin’ IN MY OPINION!