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FTAs – momentum for Vietnam’s economy in 2022

FTAs - momentum for Vietnam’s economy in 2022 hinh anh 1

Bilateral and multilateral free trade agreements (FTAs), including the Regional Comprehensive Economic Partnership (RCEP) which took effect from January 1, are expected to become a new momentum promoting Vietnam’s economic growth in 2022.

Experts, however, said that enterprises need to proactively improve their competitiveness and self-innovate in order to meet the process of international economic integration and fully tap opportunities in the new context, thus enabling them to go faster and further in the future.

Looking back at 2021, Vietnamese brands continued to gain a foothold on the world commodity map, enjoying a trade surplus of 4 billion USD, despite difficulties caused by the COVID-19 pandemic.

One of the catalysts for this spectacular achievement was FTAs, especially new generation ones.

Accordingly, the FTAs that Vietnam has signed with its partners have been opening the door for the Southeast Asian nation to integrate further into the global value chain and production network.

The new-generation FTAs, such as the CPTPP, the EU-Vietnam FTA (EVFTA) and the UK-Vietnam FTA (UKVFTA), are being implemented comprehensively and effectively.

The Ministry of Industry and Trade (MoIT) said the EVFTA, which came into effect on August 1, 2020, has created a huge boost for Vietnam’s exports, helping the country’s export turnover to the EU hit about 40.07 billion USD, up 14 percent.

As many as 201,846 EUR.1 certificates of origin (C/O) were issued in 2021 for Vietnamese exports worth 7.8 billion USD to 27 EU member countries, the ministry added.

Besides, the UKVFTA, which was implemented from the beginning of 2021, also helped the two-way trade between Vietnam and the UK reach nearly 6.6 billion USD. The import and export values both increased by double digits to 24.1 percent and 15.4 percent, respectively.

Regarding the CPTPP, Vietnam’s exports to Canada and Mexico where Vietnam has just had FTAs with, respectively expanded by 19.5 percent and 46.1 percent.

National credit rating improvement to help lure more foreign capital inflows

The Ministry of Finance has coordinated with relevant agencies to complete a report on the development the National Credit Rating Improvement Project for the 2021-2030 period to submit to the Prime Minister for approval.

International credit institutions remain optimistic about Vietnam’s prospects for 2022. They said that by improving the credit rating, Vietnam may attract more and more international capital inflows.

The roadmap to improve Vietnam’s credit ratings to reach investment grade in the next 10 years will include a combination of quantitative and qualitative objectives, along with maintaining credit health in the process of realising growth potential and strengthening external financial position as recognised by credit rating agencies.

National credit rating improvement to help lure more foreign capital inflows hinh anh 2

Karby Leggett, Global Head, Public Sector and Development Organizations at Standard Chartered Bank (Photo: Standard Chartered)

Karby Leggett, Global Head, Public Sector and Development Organizations at Standard Chartered Bank, said he believes that transforming the current positive credit outlook into credit rating events would be Vietnam’s next step in its progress towards an investment rating.

Ngo Dang Khoa, country director of Foreign Exchange at Capital Markets and Securities Services at HSBC Vietnam, said since Vietnam joined the group of lower-middle-income countries, official development assistance (ODA) sources and concessional loans have gradually decreased and are expected to end in the near future.

Vietnam represent largest Canadian trading partner in ASEAN

Canadian Ambassador to Vietnam Deborah Paul said that Vietnam remains the most significant trading partner of Canada in ASEAN, noting their two-way trade hit approximately CAD9.5 billion (US$7.46 billion) over the January – November period last year.

Both countries maintained regular exchanges, including a meeting between Canadian Prime Minister Justin Trudeau and his Vietnamese counterpart Pham Minh Chinh at COP26 last November in the UK.

Late July saw Vietnamese Deputy Defence Minister Sen. Lieut. Gen Hoang Xuan Chien and his Canadian counterpart Jody Thomas co-chair the first Vietnam – Canada online dialogue on defence policy, during which both sides reached an agreement on a three-year plan on defence co-operation

Ambassador Paul said she is proud of the strong ties between the two countries which are highlighted through bilateral educational co-operation and exchanges.

Since December 2020, almost 19,000 Vietnamese citizens have been granted permits to study in the North American country.

Canada strives to promote cultural diplomacy in Vietnam through the screening of Canadian films, along with organising exchange events with Canadian artists.

The Ambassador highly appreciated Vietnam’s COVID-19 control efforts, saying, saying the government swiftly took decisive steps to limit both the health and economic fallout. She also singled out Vietnam for contributing funds to COVAX to roll out vaccines globally.

Industrial production index up 2.4% in January

Vietnam’s industrial production index (IPI) in January rose by 2.4% year-on-year, the General Statistics Office (GSO) reported.

The processing and manufacturing industry, which accounted for over 70 % of total industrial output, witnessed a yearly IPI increase of 2.8 %, contributing 2.6 %age points to the industrial sector’s overall growth.

Many industries also enjoyed a surge in IPI, such as metal ore mining (21.9 %); production of prefabricated metal products (16.8 %); leather and related products (12.3 %); electrical equipment (11.5 %); clothing production (11.4 %); textiles (8.8 %); and rubber and plastic products (8.1 %).

Meanwhile, industrial products with drops in the index included beverage production (2.7 %); production of drugs, pharmaceutical chemicals and medicinal herbs (3.6 %); electronics, computers and optical products (5 %); wood processing and products from wood and bamboo (5.1 %); and crude oil and natural gas (9.7 %).

Hai Phong container terminal welcomes first ship of 2022

The Tan Cang Hai Phong International Container Terminal Co., Ltd (TC-HICT) welcomed its first container vessel of the year – WAN HAI 315 – the AA9 service line of the Wan Hai lines from Taiwan (China).

This is a service route which is operated by the shipping line which features eight 2,500 TEU to 2,800 TEU ships and serves to directly connect Hai Phong with the United States’ east coast.

The route passes through numerous destinations including TC-HICT, Shekou, Kaohsiung, Qingdao, Balboa, Charleston, New York, Singapore, and back to TC-HICT.

The opening of an additional AA9 service route linking Hai Phong to the US’ East Coast is anticipated to help increase the frequency of ships docking at TC-HICT each week. This will therefore serve to provide options for importers and exporters in northern Vietnam to connect goods to the US, which is currently the country’s largest export market.

MoIT promotes use of IT in trade activities

Viet Nam will continue to promote the application of information technology (IT) in trade activities this year.

Minister of Industry and Trade Nguyen Hong Dien said that during the pandemic, the ministry had implemented trade promotion in the digital environment to help businesses save costs and increase revenue.

That has promoted trade activities, shortened distance and time, and increased chances of approaching potential customers.

Viet Nam’s export goods have reached strict markets, especially agricultural and aquatic products that have been affected by the pandemic.

The application of IT in trade promotion continues to be an advantage that Vietnamese businesses need to use this year, he said.

Fertiliser prices forecast to continue growth this year

Fertiliser prices are expected to increase this year so the Ministry of Agriculture and Rural Development must have solutions to stabilise the domestic fertiliser market.

In the latest report, Ban Viet Securities Joint Stock Company (VCSC) has forecast that the average global urea price would reach US$625 per tonne in 2022, up 25 per cent compared to 2021.

The VCSC reported that some urea plants in the world had closed due to high gas prices and labour costs, creating a global fertiliser shortage.

In addition, the urea supply has been disrupted due to COVID-19, seeing prices rise further.

At the end of 2021, China and Russia, two of the three largest fertiliser export countries in the world, decided to suspend fertiliser exports to stabilise domestic supply and control inflation. This decision could last until the end of the second quarter of 2022.

Viet Nam’s robust exports to underpin rapid growth rebound in 2022

Viet Nam’s recovery is set to gather momentum this year, as domestic demand rebounds and export performance remains strong, according to Fitch Ratings.

In a report released this week, the rating agency said improving levels of vaccination in Viet Nam should reduce the risk that the country’s recovery is set back by further COVID-19 outbreaks. However, the evolution of the pandemic remains subject to uncertainties, in particular as daily cases have trended higher in recent months.

Viet Nam’s economic growth in 2021, at 2.6 per cent, was much weaker than the 7 per cent that Fitch had expected in April 2021 as the authorities moved to control a surge in COVID-19 cases.

However, Fitch forecasts further pandemic-related shocks, while possible, are unlikely to be so severe, because the Vietnamese Government has shifted from a “zero COVID” approach to the flexible adaptation strategy as vaccination rates have increased.

According to Fitch, the strong export performance that the rating agency expects in 2022-23 will catalyse domestic investment and consumption, through positive spill-overs, for example from job creation.

Fitch noted although Viet Nam’s economy continued to grow in 2021, the gap between its GDP per capita and the median of the ‘BB’ peer group widened.

Under the report, Fitch forecasts Viet Nam’s public debt/GDP ratio broadly stable over 2022-23, at around 41 per cent of GDP.

Viet Nam plans modern and sustainable fisheries industry

Viet Nam is searching for solutions for the sustainable development of the fisheries industry.

The Ministry of Agriculture and Rural Development is drafting a Prime Minister’s decision on a master plan for protecting and exploiting aquatic resources until 2030.

This plan is necessary to protect, conserve, restore and develop aquatic resources, as well as to meet the requirements of importing countries, according to the ministry.

The plan will make the fishing efficient and sustainable, in line with the requirements of international integration associated with the protection of national sovereignty, defence and security on the seas and islands of Viet Nam.

With a vision to 2050, Viet Nam will become a country with a sustainable and modern fishery industry while its marine biodiversity is preserved and developed.

About 28 coastal provinces have also had plans to sustainably develop the fishery industry to remove Europe’s “yellow card.”

Of which, Ba Ria-Vung Tau Province has synchronously implemented solutions to combat illegal, unreported, and unregulated fishing (IUU).

Viet Nam’s pepper exports forecast for growth this year

The pepper export price is forecast to continue at a high level this year.

The Viet Nam Pepper Association (VPA) reported that pepper was sold at VND90,000 (US$3.98) per kg last year on the domestic market, almost doubling the previous year’s VND48,000, after a constant reduction over the last few years.

The average export price of Viet Nam’s pepper in December 2021 reached $4,703 per tonne, a sharp increase of almost 70 per cent on the year 2020.

The average export price for the whole year reached $3,593 per tonne, up 55.2 per cent compared to 2020.

Therefore, Viet Nam’s pepper export turnover in 2021 rose by 42 per cent compared to 2020 to $938 million, although the export decreased by 8.5 per cent in volume to 261,000 tonnes.

The association forecasts that Viet Nam’s pepper exports will rebound from the first quarter of 2022 with an estimated world purchasing demand of 130,000-160,000 tonnes, while Viet Nam’s total annual output is only about 150,000 tonnes.

Moreover, the quality of local pepper is improving and the VPA is supporting local enterprises to promote the processing of pepper and branding.

Future looks bright for organic personal care products

Vietnamese, especially those from the north, believe that a bath using coriander leaves can remove misfortune, so many are boiling it to get rid of bad luck before the Tet holiday.

However, Nguyen Thuy Giang, 25, in Ha Noi, eschews the traditional coriander bath used by her mother and instead will order a coriander soap with a package printed with a Year of Tiger design to remove her bad luck.

Giang and lots of digitally-savvy women her age seek care products online.

“I like the smell of coriander when it is boiled but I don’t want to clean the scattered boiled leaves after the bath,” she said.

Giang has ordered many different organic soaps online, so much that she even gets free shipping to her home.

As online shopping grows in Viet Nam, personal care and cosmetics have been among the most common products purchased, particularly among urban consumers.

Online purchases of personal care products in urban areas of Viet Nam doubled from 2018 to 2020, according to a recent report by Statista.

As more people shop online, brands have been tailoring their customer journey to meet the new demand for online services, with the pandemic causing an even greater surge in e-commerce.

The new shopping habit is predicted to stay even after the pandemic, reinforcing the importance of having an online presence for cosmetics brands in the country.

Sinh Duoc, a co-operative in Ninh Binh Province, which produces coriander soap, operates on most popular online channels, such as Facebook, Instagram and TikTok or the e-commerce stores of Shopee, Lazada and Tiki.

The revenue of the beauty and personal care market in the country stood at around US$2.1 billion in 2020, according to Statista, with beauty and personal care revenues projected to grow at a 5 per cent compound annual growth rate until 2025.

While foreign brands make up 90 per cent of the cosmetics market in Viet Nam, with Korean brands the most popular, local Vietnamese brands are focusing on affordable, low-end products, and have recognised the long-term trend for organic products.

Binh Duong Province speeds up regional connectivity works

Binh Duong Province plans to complete a number of key transport infrastructure projects this year and start others to maintain its leading position in attracting foreign investment and act as a springboard for recovery after the COVID-19 pandemic ends.

Nguyen Anh Minh, the director of the province Department of Transport, said the development of transport infrastructure, especially linking other provinces and cities and seaports and airports, needed to be synchronised to promote economic development.

Binh Duong prioritised resources for key traffic projects, he said.

It was speeding up work to put the Bac Tan Uyen – Phu Giao – Dong Phu Road into use this year. The 12.15km project costs over VND965 billion (US$42 million) and connects Phu Giao and Bac Tan Uyen districts in Binh Duong with Dong Phu District in Binh Phuoc Province.

Binh Duong and Dong Nai provinces started to build the Bach Dang 2 Bridge between them late last year at a cost of VND980 billion ($42.6 million).

The 540m-long bridge across the Dong Nai River will connect Tan Uyen Town in Binh Duong with Vinh Cuu District in Dong Nai Province, and play an important role in the distribution of goods.

HCM City to focus on industry, exports this year

HCM City will promote manufacturing and exports this year, its Department of Industry and Trade has said.

It targets 5 per cent industrial growth, 10 per cent growth in retail sales of goods and services and 9 per cent increase in foreign trade (excluding crude oil).

It told a meeting held early this week to review industrial production and trade in 2021 and set tasks for this year that the index of industrial production declined by an estimated 14.3 per cent last year due to the impacts of COVID-19, with the city’s four key industrial clusters (food processing, pharmaceutical chemicals-rubber-plastic, mechanical engineering, and electronics) shrinking by 10.6 per cent.

To quickly revive the city’s economy, this year the department will focus on developing the industrial sector, high-tech sectors, supporting industries, and the four key clusters comprehensively.

It will pay greater attention to promoting key industrial products and those with potential in 2021-25 to foster development of others.

It will continue to transform the export structure with a focus on support services and products and services like software, digital content and others in which the city has advantages.

Techcombank reaches US$1 billion pre-tax profit in 2021

Techcombank record a US$1 billion pre-tax profit in 2021 despite COVID-19, reinforcing the resilience and potential of its business models.

Its total operating income (TOI) grew 35.4 per cent, while the sector-leading current account savings account (CASA) ratio reached 50.5 per cent.

The bank’s focus on transformation and technology investments, to meet the needs of its fast-growing customer base, drove an impressive 81 per cent rise in the value of e-banking transactions.

“Prudent risk management, cost optimisation, and investments in Digital, Data and Talent, position us well to capitalise on economic recovery. Importantly, we will continue standing by our customers, especially in tough times like the past two unprecedented years,” said Jens Lottner, Techcombank CEO.

Its strong net interest income (NII) and net fee and commission income (NFI) growth drove a 35.4 per cent year-on-year uptick in TOI to VND37.1 trillion.

Investors should be cautious in corporate bond market: experts

The risk of corporate bond defaults will keep increasing unless legal loopholes in the market are plugged, according to experts.

Nguyen Hoang Duong, deputy director of Department of Banking and Financial Institutions, noted that total corporate bond issuance in Viet Nam had been rising steadily since Q2/2021.

Around VND658 trillion (US$29.1 billion) worth of bonds were issued in 2021, up 42 per cent year-on-year. Private placement took up the lion’s share of over 95 per cent of bond issuance, whereas the rest went to public offering. The rapid growth of the corporate bond market has attracted much interest from individuals. However, individuals are not eligible for private placement according to securities law. It is only available to strategic investors and professional investors.

Nguyen Quang Thuan, chairman of FiinGroup JSC, said that a large number of bond issuers were financially weak with a low ability to repay, notably unlisted ones.

According to Thuan, 94 out of 383 issuers in 2021 had been accumulating losses, 81 were running at a loss in 2020 and 121 offered bonds with no collateral.

Do Ngoc Quynh, general secretary of Vietnam Bond Market Association, believes both professional and non-professional investors will be at risk if the exodus of individuals to the bond market is left unchecked.

To reduce the risk of a bond default, he called for a crackdown on issuers that have manoeuvred to raise money from investors.


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