Vietnam:
Henig: Free trade deals yield bumper export year
06:00 | 09/02/2023
(VEN) – Effective use of Vietnam’s various free trade agreements (FTAs), especially of new-generation high-standard ones, has yielded a bumper year for exporters.
Increase recorded in markets
The value of 2022 import-export turnover, estimated at about US$750 billion, and the record trade surplus of more than US$11 billion, is being attributed largely to implementation of new-generation trade agreements Vietnam has signed in recent years. In fact, the FTAs have created opportunities to add value to key exported consumer goods.
According to To Hoai Nam, Secretary General of the Vietnam Association of Small and Medium Enterprises, after the shock of the COVID-19 pandemic, 2021 and 2022 exports to members of the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) show that businesses and industries have grasped the opportunities offered by the deal.
General Department of Vietnam Customs data show that roughly 50,000 small and medium-sized enterprises participate in exporting to CPTPP markets, reflecting the deal’s value for the participation of small and medium-sized enterprises in exports.
Since activation of the EU-Vietnam Free Trade Agreement (EVFTA) in August 2020, Vietnam’s exports have also grown by over 22.3 percent in the first 10 months of 2022 with a turnover of goods reaching more than US$39.4 billion. A series of key products, such as textiles, footwear, furniture and electronics have all attained high growth rates. The group of agricultural, forestry and fishery products also experienced growth, with some products (rice, seafood) which previously struggled to penetrate the EU market able to take advantage of EVFTA tax quota commitments to boost exports.
Almost two years since coming into force, and despite being significantly affected by the COVID-19 pandemic, the new-generation FTA between Vietnam and the UK (UKVFTA) has yielded a 15.4 percent growth of exports to the UK market.
The Regional Comprehensive Economic Partnership (RCEP) trade deal that entered into force on January 1, 2022, while not a new-generation agreement, has also yielded opportunities for Vietnam, especially in agriculture. The markets of the 10-nation Asia-Pacific trade agreement accounts for 40 percent of the Vietnam’s export turnover of agricultural, forestry and fishery products, and the terms of the deal provide agricultural enterprises with greater opportunities to expand exports, especially of advantageous products such as rice, coffee, pepper, cashew, seafood, timber and wood. RCEP operates under open regulations on the origin of goods, helping businesses take better advantage of incentives from partners. It also offers opportunities for manufacturers to import input materials, diversify supply sources and grades of quality at cheaper prices.
Preserving achievements
Despite the varied opportunities and advantages of these free trade agreements, exporters are expected to face challenges in accessing and expanding their markets in 2023.
Nguyen Tien Chuong, President of the Dong Nai Export Association, identifies inflation and increased costs as responsible for these business difficulties. Nguyen explains that consumption markets have slowed, many importers are cancelling or delaying the receipt of goods, leading to increased costs for storage and logistics. In addition, limited resources challenge small and medium-sized enterprises. In order to improve competitiveness, Nguyen urges support of enterprises in technological innovation, backed by capital and human resources. Absent these two factors, enterprises are hard pressed to grasp export opportunities.
According to Vu Chi Mai, Energy Consultant of the German Agency for International Cooperation (GIZ), “with an open economy like Vietnam, when participating in new generation FTAs of high standards such as CPTPP and EVFTA, especially to be able to export sustainably to the EU, the enterprises must consider producing goods with clean energy sources associated with environmental standards.”
International trade experts point to the increasing emphasis by Vietnam’s FTA partners on the agreements’ commitments to the environment, green transition, labor conditions and sustainable development. Therefore, Vietnamese enterprises are being advised to comply with the green production process in order to export products with clearly indicated origin, ensuring standards, environmental considerations, efficient use of resources, protection of the ecological environment and fair settlement of social problems and thereby helping Vietnam achieve sustainable exports.
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Henig: High rates hurting businesses, hamper economic recovery
February, 09/2023 – 07:01
High interest rates have been hurting businesses’ ability to invest in ramping up production capacity, said industry insiders and economists.
HÀ NỘI High interest rates have been hurting the ability of businesses to recover and invest in ramping up production capacity, said industry insiders and economists.
Economists called for the central government to take measures to bring down the rates, which have been sitting around 10 per cent in recent months.
Trần Việt Anh, director-general of Nam Thái Sơn Import/Export JSC., said a majority of businesses were not interested in fresh loans but lower rates would be a significant help as they faced lower demand and struggled to keep workers.
“There are businesses with credit room but still reluctant to apply for loans due to high rates, which will contribute to higher operational costs,” he added.
Even developers for social housing projects were not immune as they were forced to borrow at regular rates.
Lê Hữu Nghĩa, director of Lê Thành Construction JSC., said many social housing projects had to borrow at 14 per cent, roughly the same as other commercial projects. It certainly will not help bring down housing costs in the market.
Despite a directive from the State Bank of Vietnam to give preferential policies to social housing developers, commercial banks have been slow in implementing them, citing a lack of guidance from the central bank.
Nguyễn Ngọc Hòa, president of the HCM City Union of Business Associations (HUBA) said as current rates sit above 10 per cent, it’s very unlikely for businesses to stay financially viable and stressed the need for measures by the central bank and the government to step in to bring it down in the next six months.
Hòa said a large portion of businesses uses their property assets as collaterals. As the property market has been hit with a cold spell, money have become difficult to come by as banks tightened their purse string.
Professor Trần Đình Thiên, former head of the Vietnam Institute of Economics, said as inflation started to pick up and numerous disruptions experienced by the domestic and the international markets, high rates have been making life difficult for businesses.
He said injecting money through public spending could be useful at a time like this but this channel has been known to be sluggish and inadequate in responding to market changes in a timely manner. Even public fund disbursements aimed at speeding up economic recovery have been slow due to a number of legal and framework barriers.
“There were always the same issues with our financial market and public investment we must address, especially with the corporate bond market and the stock market, to enhance trust and reduce risk across the banking system,” Thiên said.
President of the Vietnam International Arbitration Centre Vũ Tiến Lộc said the country’s long-term economic prospect depends a lot on the development of its business community. He stressed the importance of establishing a more streamlined and transparent framework for the financial market.
“Our businesses can only operate as well as the business environment allows. Improving business performance can only be done along with improving the business environment,” he said.
Lộc called for the removal of cumbersome and unnecessary business conditions, stronger administrative reform and shorter import/export processing.
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Henig: Digital payment systems have massive growth potential: fintech leader
February, 09/2023 – 08:07
Nguyễn Đăng Hùng, head of the Fintech Club Việt Nam under the Việt Nam Banks Association, speaks to the Vietnam News Agency about this development.
Chip card transactions via the National Payment Corporation of Việt Nam (NAPAS) system nearly tripled in 2022, while the proportion of cash withdrawals processed through the NAPAS system decreased by half, as people transition from cash to other payment methods such as transfer, QR code scanning, swiping cards or using e-wallets. This result is thanks to the strong digital transformation in the payment field in the past years.
Nguyễn Đăng Hùng, head of the Fintech Club Việt Nam under the Việt Nam Banks Association, speaks to the Vietnam News Agency about this development.
How effective has digital transformation been in the payment field in recent years?
According to the State Bank of Việt Nam, non-cash payment transactions in 2022 increased by 85 per cent in volume and 31 per cent in value.
It can be seen that the transaction value and quantity are different, and there are many transactions with low values. But this low value is not a worry and is actually good news. Low-value transactions prove that people have used more non-cash payments than before.
It shows the strong growth rate of electronic transaction channels such as the internet, mobile phones, and QR code scanning.
The State Bank said the growth rate of electronic transactions reached 89 per cent via the internet and even gained triple-digit growth via mobile phones and QR code scanning. That means people are increasingly familiar with cashless payment methods and the use of cashless.
There are many concerns that when financial technology (fintech) companies are established, it will pressure the banking industry greatly. What is the current reality?
There is a view that establishing fintech companies will create competition with the banking sector. Still, I think establishing fintech companies will create cooperation, not competition, with the banking industry. They could have a synergy of strengths with partners and minimise their weaknesses.
Việt Nam has three fintech unicorns, with each value at over US$1 billion. These three companies have payment centres, including MOMO, VNPay, and ZaloPay.
Momo is an app that provides e-wallet services for tens of millions of Vietnamese people. MOMO has close cooperation with banks.
The second is VNPay. VNPay is a company licensed by the State Bank as a payment intermediary. It has many payment services related to QR code scanning and various other payment services based on mobile banking platforms. VNPay also has close cooperation with banks.
ZaloPay is also a payment intermediary based on the chat network – Zalo, as well as VNG Corporation, a billion-dollar technology company in Việt Nam.
The success of these three payment centres is based on close cooperation with banks.
NAPAS provides national payment infrastructure for all banks. It is also indispensable for the cooperation and sharing of the infrastructure between the banks themselves and the fintech companies.
In addition, there is the lending sector, including consumer finance companies such as FE credit or some other consumer lending companies and banks’ lending companies.
These companies all have close cooperation with banks. For example, FE credit cooperates with VPBank and Vietcredit cooperates with Viet Capital Bank. Fintech companies and banks cooperate among them to take advantage of banks’ capital, experience and technology from the fintech firms.
High-tech crime is increasing. Is this the biggest challenge for banks and fintech companies in the digital transformation progress?
When banks and financial companies deploy digital transformation or launch new services using financial and banking technology, there are requirements for cybercrime prevention and combat.
Companies are willing to invest in biometric technology to ensure that the right users use these services. There are often vulnerability scanning and cooperation with different cybersecurity companies to prevent high-tech crimes.
However, if the user is not worrying when sharing a pin code or transferring money to a stranger, there is no way to prevent deceptive crimes using high-tech. Even if the investment in technology and security measures is so large.
Therefore, banks and financial companies need to coordinate with the media to share information about guidance on using high-tech banking services with the users and their customers. Then, they could recognise the dangers and risks of using such high-tech services and protect themselves.
What is the growth potential of digital payment and the digital ecosystem in Việt Nam?
Việt Nam’s developing economy has shifted from agriculture to industry and services. This brings a huge development opportunity for the digital transformation field, optimising all activities in the social-economic development.
The government’s national digital transformation programmes have set targets that the digital economy will account for 20 per cent of GDP by 2025 and 30 per cent by 2030.
According to a forecast by the International Monetary Fund (IMF), Việt Nam’s economy will rise to the third position in the ASEAN region by 2025 with a GDP of about $570 billion.
That means in 2025, the digital economy will reach a value of about $114 billion, or 20 per cent of $570 billion. This is an extremely large number, showing the great potential in digital transformation and the digital payment field for all businesses.
In addition, the Government has licensed Mobile Money with the expectation that mobile money services will be popular in cities and can reach remote and rural areas.
The most recent is payment services using QR codes. This is the story of financial universalisation not only in the city, big markets and supermarkets but also in night markets and tourist areas in rural and remote areas. The use of QR code payment methods has the support of the internet and mobile phones.
It is expected a great development of digital transformation in rural areas as well as in the agricultural sector.
What do banks, fintech companies, and payment intermediaries need to do to take advantage of that opportunity effectively?
The banks and payment intermediary companies have an important role in the payment stage of the digital transformation value chain.
For example, Việt Nam has level-4 public service payment with an online payment service. With level-3, people still have to go towards and the State treasury to pay cash.
With the payment of social insurance and pensions, people only need to provide their account numbers, and they can check their money through the internet or mobile devices anywhere.
Payment plays an important role in the digital transformation process.
Those show that banks and payment intermediaries have taken full opportunities to promote the development of digital transformation.
If the banks and payment intermediaries have significant investments in technology, innovate technology and quickly deploy new digital applications, they will succeed in taking the most of the opportunities to develop digital payment.
What are your proposals to solve the current difficulties to accelerate the digital transformation in the fintech and banking sectors?
The Government has issued a national digital transformation programme by 2025 with a vision to 2030. The Government is willing to create policies so that the fintech companies can test the new technologies.
In the payment sector, the State Bank has developed a new draft decree providing a controlled testing mechanism (sandbox) for fintech activities in the banking industry.
Currently, Việt Nam has 154 fintech companies, of which about 50 fintech companies are payment intermediaries managed by the State Bank.
Fintech companies and banks hope this draft decree will be issued soon to protect their customers from risks in payment services.
For the draft of Decree 101 on non-cash payments, a law in the field of payment, the State Bank is compiling a draft on amending many items in this decree, including cross-border payments and banks’ agencies.
If this draft is issued, I believe it will remove difficulties and create a basic legal corridor for consumer finance companies and banks to do business favourably while protecting consumers from risks.
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Henig: Shares recover on strong buying force
February, 09/2023 – 05:17
Shares recovered on Wednesday thanks to strong buying force, bolstering many large-caps to grow.
HÀ NỘI Shares recovered on Wednesday thanks to strong buying force, bolstering many large-caps.
On the Hồ Chí Minh Stock Exchange (HoSE), the VN-Index rose 0.6 per cent to close the day at 1,072.22 points. The southern bourse’s index decreased 2.15 per cent on Tuesday.
Some 569.3 million shares were traded on the southern bourse, worth VNĐ10 trillion (US$423.7 million).
Market breadth was positive with 210 gainers and 188 losers.
According to Lê Đức Khánh, Director of Analysis – Director of Investment Capacity Development, VPS Securities Joint Stock Company, for the stock market, the most difficult period has passed when the VN-Index fell deeply from the peak.
However, in the current context, when interest rates are high, cash flow in the stock market is unlikely to return to the peak like in the 2020-2021 period. Accordingly, during this period and in the first half of 2023, the market is accumulating, causing small fluctuations.
The VN-30 Index, tracking the 30 biggest stocks on HoSE, rose 0.36 per cent to close at 1,073.38 points.
In the VN-30 basket, the biggest gainers included Hoà Phát Group (HPG), Bảo Việt Holdings (BVH), FPT Corporation (FPT), PetroVietnam Gas JSC (GAS), SSI Securities Inc (SSI), HD Bank (HDB), and Viet Nam International Commercial JS Bank (VIB).
Masan Group (MSN), Vietjet (VJC), Mobile World Group (MWG), Vinhomes (VHM) were among the losers.
In the banking group, most of the stocks moved up with gainers including Military Bank (MBB), Vietcombank (VCB), Saigon-Hanoi Commercial JS Bank (SHB), Tiên Phong Bank (TPB), Bank for Investment and Development of Việt Nam (BID), VietinBank (CTG) and Techcombank (TCB).
Energy stocks also performed positively with gainers such as PetroVietnam Technical Services Corporation (PVS), PetroVietnam Drilling and Well Services Corporation (PVD) and Drilling Mud Joint Stock Corporation (PVC).
On the Hà Nội Stock Exchange, the HNX-Index gained 0.30 per cent to close at 210.62 points.
Trading value on the northern exchange reached VNĐ865 billion, with a trading volume of 61.5 million shares.
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