Deputy PM’s conclusions on interest rate support package
The Government Office has issued an announcement on Deputy Prime Minister Le Minh Khai’s conclusions at a meeting on interest rate support package in accordance with the Government’s Decree No.31/2022/ND-CP dated May 20.
The announcement said after nearly three months, the disbursement of the package remains limited.
The Deputy PM assigned the State Bank of Vietnam (SBV) to work closely with ministries and agencies concerned to review the Decree, the SBV’s Circular and guidelines, ensuring they are in line with the National Assembly’s Resolution No.43/2022/QH15 and the Government’s Report on fiscal and monetary policies in support of the socio-economic recovery and development programme.
Harsher penalties sought as pharma violations continue
On August 3, the Drug Administration of Vietnam (DAV) under the Ministry of Health (MoH) imposed a fine of VND50 million ($2,175) on Incepta Pharmaceuticals Ltd., a group from Bangladesh and established in 1999, for violating level 3 quality regulations. Nam Phuong Cosmetics and Pharmacy Trading Company Limited is the representative of the Bangladeshi firm to execute the fine.
The week previously, the DAV also fined Italian group Industria Farmaceutica Nova Argentia S.p.A for quality violation. It makes Navacarzol, with various lots of the drug violating level 2 quality regulations. The fine was set at VND150 million ($6,500) and a recall has taken place.
Also last month, a similar fine was imposed on PT. Merck Tbk from Indonesia, which produced two lots of Neurobion 200mg, Thiamin mononitrate 100mg; and Cyanocobanlamin 200mcg.
More seriously, the DAV in July revoked marketing authorisation for Zinnat Suspension for violating level 2 quality regulations. Zinnat Suspension is a broad-spectrum antibiotic registered by GlaxoSmithKline (GSK) in Singapore. The producer is Glaxo Operations UK, while Zuellig Pharma Vietnam is the importer. The DAV asked the registering company to work with the importer and distributors to recall the violators and then report the result to the agency.
According to GSK, in April 2022, GSK communicated with local regulatory agencies in five markets after identifying an issue during routine stability testing which resulted in a Cefuroxime axetil sachet Oral Suspension 125mg/5ml failing to meet the specification for appearance, moisture and impurities.
A GKS representative told VIR that in Vietnam, GSK proposed to local regulatory authorities to implement voluntary recall of Cefuroxime axetil sachet Oral Suspension 125mg/5ml as a precautionary measure and to ensure the interests of patients are fully protected. GSK worked with the importer to implement this voluntary recall in accordance with local regulations and it was completed accordingly.
Domestic enterprises were also hammered with fines. They included Nghe An Pharmaceutical Medical Material and Equipment JSC, BRV Healthcare, and Mebiphar JSC among others. For BRV Healthcare, this is not the first time. On two separate occasions last year it was fined for Desloratadine 5mg failing to meet quality standards. The MoH earlier announced stricter rules to deter any new violators. They include toughest-ever rules including suspension of violation-related business activities for 1-3 months if mobile drug retailing establishments fail to satisfy the conditions as ruled, and suspension of violation-related business activities for 6-12 months for forging papers in dossiers announcing business establishment.
In addition, some guilty parties may even have their certificates of eligibility for pharmacy temporarily revoked for up to two years.
According to Business Monitor International, the scale of the Vietnamese pharmaceutical industry is likely to reach $16.1 billion by 2026.
Exporters advised to minimise headwinds of currency volatility
As the world’s commodity and foreign exchange markets have many fluctuations, domestic exporters should pay attention to the exchange rate between the Vietnamese đồng and other currencies to enable them to choose the most profitable ex-import markets and payment currencies.
Phan Minh Hòa, an economics lecturer at RMIT University, recommended the measures as local firms have started to suffer from headwinds of the significant fluctuations in the US dollar, the euro and Japanese yen on their production and business performance.
The dollar has this year strengthened sharply against the euro and the Japanese yen as US Federal Reserve has raised interest rates to curb the 40-year high inflation.
While the euro plunged below parity with the dollar last month – a 20-year low, the yen also hit its lowest level against the dollar in 24 years in June 2022.
The Vietnamese đồng has so far depreciated by some 2 per cent against the dollar and is forecast to depreciate below 3 per cent in 2022, according to VNDirect Securities Company.
Besides, as most currencies, including the yen and the euro, have weakened significantly against the dollar, demand for import goods from the Japanese and European markets has declined, negatively affecting Vietnamese exports, according to Lực.
Kim Thu, a representative of the Vietnam Association of Seafood Exporters and Producers, said the strong depreciation of the Japanese yen against the US dollar had caused Japanese importers to suggest renegotiating import prices to compensate for their losses when the yen weakened.
In addition, some Japanese importers, who have already signed import contracts, have requested to negotiate to receive the goods slower from three to five months to wait for consumers to get used to the new prices.
Due to heavy losses when the local currency depreciates, Japanese importers were adjusting their import plans and demands, Thu said.
According to Thu, although Vietnamese exporters were not affected too much due to the depreciation of the yen and the euro because most of their import and export transactions were in US dollars, they have been affected by decreasing import demands as profits of the importers reduced. Besides, when the yen and the euro weaken, imported goods become more expensive. At that time, Japanese and European consumers chose essential items at affordable prices, which reduced consumption demands.
Võ Văn Phúc, General Director of Vietnam Clean Seafood Joint Stock Company, said the purchasing power of consumers had decreased significantly, and seafood exports had faced difficulties since August 2022. Besides choosing ex-import markets and payment currencies, Hòa said, to hedge against exchange rate risks, local firms should choose banks with good trade finance ability and use derivative financial instruments such as foreign currency futures and swaps.
Cargo throughput via seaports sees slight rise in July
Cargo throughput via seaports across the country hit 62.9 million tonnes in July this year, up 2% year-on-year, according to the Vietnam Maritime Administration.
Container throughput increased 1% to 2.2 million TEUs during the period.
Notably, the volume of imports and exports tends to increase, but domestic container goods has decreased slightly.
Economists said that the growth of goods throughput at seaports is still low and has not regained the recovery momentum to the level before the COVID-19 pandemic.
They attributed the situation to the lingering consequences of the pandemic, and the Russia – Ukraine conflict, which put pressure on the global economy.
Rising inflation amid the bleak growth prospect can have a significant impact on the global consumer demand, and goods transport, they said, noting that Vietnam, with an open economy, can hardly avoid these effects.
Firms suggested to stay well-informed to avoid trade remedy risks
Australia is a potential export market but also poses risks of trade remedy investigations, so enterprises should stay well-informed to avoid risks, head a recent seminar held in Ho Chi Minh City.
Trade between the two countries has been growing continually, by an annual average of 11.5% during 2011 – 2021. Australia was the 10th largest trading partner of Vietnam last year, when bilateral trade turnover rose 49% year on year to 12.4 billion USD. It ranked 7th among the trading partners of Vietnam in the first seven months of 2022, said Nguyen Thi Phuong Nga, an official of the Asia – Africa Market Department at the Ministry of Industry and Trade.
Chu Thang Trung, Deputy Director of the ministry’s Trade Remedies Authority of Vietnam (TRAV), pointed out that aside from market opportunities, there remain challenges, including risks of trade remedy investigations. If trade remedies are imposed, businesses could face higher export tariffs compared to the pre-FTA levels and lose part of or the entire market they export to.
The World Trade Organisation (WTO) and FTAs allow member states to use trade remedies when necessary, so countries tend to use this tool to protect domestic production and labourers in the face of growing imports. Popular trade remedy instruments include anti-dumping, anti-subsidy, safeguard, and anti-circumvention duties, said Phung Gia Duc from TRAV.
Vietnamese exports had been subject to 222 trade remedy investigations as of June 2022. Eighteen were conducted by Australia, and all of them anti-dumping and anti-subsidy probes, with 61% against steel products and 16.7% against other metals. The number of such cases is still on the rise.
Duc held that close coordination among Government agencies, business associations, and enterprises is necessary to secure good results for exporters in trade remedy cases.
JICA strengthens Vietnam-Japan agricultural connectivity
The Japan International Cooperation Agency (JICA) has teamed up with the Nghe An Department of Agriculture and Rural Development to organize a workshop to introduce an agricultural market forum and an agribusiness Japan desk, with an effort to boost the Vietnam-Japan agricultural connectivity.
The event, held in Vinh City in the north-central province of Nghe An last Thursday, was aimed at encouraging Japanese firms to invest in the province’s agriculture sector and strengthening the connectivity and partnership between Vietnamese and Japanese enterprises active in agriculture.
The workshop, which attracted 180 participants who are officials, and Japanese and Vietnamese entrepreneurs and investors, also featured a networking and exchange program allowing Japanese firms to sound out cooperation opportunities with local companies.
VAMA proposes lower tax on hybrid cars
The Vietnam Automobile Manufacturers’ Association (VAMA) has written to the Government proposing lowering the excise tax and registration fee on hybrid electric and plug-in hybrid electric vehicles.
The proposal is aimed at encouraging residents to use hybrid vehicles rather than fossil fuel-powered cars to protect the environment.
Vietnam’s traffic infrastructure is assessed as practical for the development of hybrid vehicles which are able to run in a long haul and emit a low volume of carbon dioxide while charging stations do not require much investment, according to VAMA.
In early 2022, the National Assembly decided to cut the excise tax on electric vehicles with fewer than nine seats to 3% from 15%. The tax reduction took effect in March 2022, for five years. After March 2027, these vehicles will be subject to the 11% excise tax.
Meanwhile, hybrid vehicles are yet to be entitled to the reduction, but are subject to the excise tax of 15% and the registration fees of 10%-12%.
After the hybrid vehicles are entitled to the lower excise tax and registration fee, their prices will be revised down, attracting customers and stimulating firms to invest in hybrid cars and charging stations, said VAMA.
The incentives and tax reduction on electric vehicles and hybrid cars might be phased out and will be stopped after 2050, when these vehicles account for a large proportion in the local market.
In addition, the association proposed the Government approve an auto industry development strategy in the new normal as soon as possible and build a legal corridor to encourage automakers to apply new technology to their production to fulfill the target of net zero emissions by 2050.
Finance ministry sets targets for banking system
The Ministry of Finance (MoF) has issued targets for restructuring banks in a bid to bolster the strength of Viet Nam's financial industry.
The MoF will coordinate with other ministries to set regulations on capital increases for State-owned credit institutions, especially the Bank for Agriculture and Rural Development of Vietnam (Agribank).
The MoF will also coordinate with the State Bank of Vietnam to apply International Financial Reporting Standards (IFRS) in accordance with financial reporting standards in Viet Nam.
In addition, it will study and develop standards for debt valuation, including bad debts, with an aim to create a legal basis for debt valuation activities to ensure objectivity in debt valuation.
Ministries and agencies will have to report their results to the MoF’s Department of Banking and Financial Institutions before November 15 every year so the department can compile the results to send them to the SBV before November 30 every year.
VCCI calls for land law draft revision
As the Ministry of Justice is gathering comments on a draft amending the Law on Land, the Vietnam Chamber of Commerce and Industry (VCCI) comments that the draft needs revisions to be legally consistent with the Law on Real Estate Business and Law on Housing.
Under the draft, land users do not comprise foreign individuals. That means the latter are not eligible for land allocation, land lease, land use rights and land use right transfers. Their eligibility for land sublease in industrial parks is also ruled out.
VCCI said such a regulation would be at odds with the Law on Real Estate Business because the law allows foreign individuals to purchase houses in Viet Nam and the sale of a house normally comes with a piece of land.
In the same way, the regulation is legally inconsistent with the Law on Housing since the law grants homeownership to foreign individuals who have received as a gift, purchased or inherited the commercial houses.
VCCI also said the regulation, if passed, would lead to an inconvenient situation in which Vietnamese homebuyers would not be able to receive land use right transfers associated with houses once they purchase the houses from foreign individuals.
VCCI also said the conditions applicable to land use right transfers in residential and infrastructural construction projects would need revision.
The draft defines conditions on which the land use right transfers go with the transfer of whole infrastructural construction projects. Meanwhile, the Law on Real Estate Business does not regulate such transfers. It only covers conditions on which the transfer of realty projects are possible.
VCCI said the inconsistency would likely cause difficulties for firms to observe the legal documents concurrently. The chamber, thus, called for a draft revision to make the legal documents compatible.
SHS shares banned from margin trading starting August 23
The Saigon – Hanoi Securities JSC (SHS)'s shares are not allowed to perform margin trading due to negative profit after tax in the first six months of 2022 after being reviewed by AASC Auditing Firm, according to the Ha Noi Stock Exchange (HNX). The decision will take effect on August 23.
Previously, AASC announced that SHS's semi-annual audited financial statement has some changes compared to the self-made report of the second quarter, with the profit after tax changing from positive to negative.
Specifically, in the reviewed financial statements, the company's first half profit after tax was negative VND68.2 billion (US$2.9 million), while the original financial statements posted a profit of nearly VND334 billion. Therefore, during the period, its profit after tax declined by VND649 billion compared to the same period of VND580.8 billion.
SHS Securities explained that the operating revenue increased by 2.1 per cent from VND621.4 billion to VND634.2 billion, but operating expenses jumped 31.9 per cent from VND433.8 billion to VND572.2 billion.
SHS Securities also said that the stock market in the first six months of this year was unexpectedly negative, leading to difficulties in the proprietary trading segment and causing a loss in profit after tax.
Hanoi partners up with French business in aviation industry
The Department of Industry and Trade of Hanoi on August 23 inked an MoU with French company Advanced Business Events (ABE) on cooperation in developing a high-grade network of sustainable production, supply and consumption in the aviation industry.
Hanoi-The Department of Industry and Trade of Hanoi on August 23 inked an MoU with French company Advanced Business Events (ABE) on cooperation in developing a high-grade network of sustainable production, supply and consumption in the aviation industry.
Acting director of the department Tran Thi Phuong Lan noted the fast increasing demand for supply chains of products and services in the aviation industry in Southeast Asia, including in Vietnam and Hanoi in particular.
She said the signing of the MoU will assist Hanoi in developing a high-grade network of sustainable production, supply and consumption in the aviation industry.
The cooperation will also help create a favourable environment for connecting Hanoi businesses with international supply chains of aviation products and services, helping them become suppliers.
The Hanoi official asked the ABE to help arrange for a Hanoi delegation to attend the Aeromart Toulouse event in France.
ABE is also expected to work with Hanoi to organize a series of business and investment matchmaking events between suppliers of aviation products and services in Hanoi with the global high-grade network of production and supply in the aviation industry, including the Aero Expo Hanoi & Vietnam Aviation Forum 2023.
Vingroup to build a Vietnamese Sillicon Valley in Khanh Hoa
Nguyen Viet Quang, general director of Vingroup, revealed that the conglomerate intends to construct a Vietnamese Silicon Valley in Khanh Hoa within the next three years.
He stated, “Within the next three years, Vingroup will build the Global Intellectual Connection Centre in Cam Lam (Khanh Hoa) to bring together the world's greatest minds, professionals who own patents, and in-depth research. We will help them refine and implement their plans so that Vietnam may host a “Silicon Valley” for the world's most distinguished talents.”
Accordingly, Vingroup's expansion pace has increased the requirement for more qualified human resources.
“Furthermore, in order to contribute to our sustainable growth, we need 100,000 employees, of whom 20 per cent must be highly qualified professionals with advanced degrees. Around 10 per cent of these will be sent specifically to Vinfast's manufacturing and commercial facilities in the US and Europe,” he added.
“We firmly believe that Vingroup’s go-global plan will also carry the aspiration of Vietnam to conquer the international market. To fulfil this dream, human resources are the key.”
Investment opportunities for automotive component manufacturers
The leading 25 automotive component manufacturers from India arrive in Vietnam from August 21 to 26 to look for investment opportunities.
These 25 businesses are members of the Automotive Component Manufacturers Association (ACMA), which has over 800 members and accounts for 85 per cent of the component production revenue in India.
ACMA wants to cooperate with domestic automotive manufacturing vendors to exploit the potential. We accept all investment methods, including direct investment in the country.
International contractors given opportunity to join $3.9 billion railway
Deputy Prime Minister Le Van Thanh has asked the Ministry of Transport (MoT) to work with Dong Nai, Binh Duong, Ba Ria-Vung Tau, and Ho Chi Minh City on the construction plan of two railway routes namely Thu Thiem-Long Thanh International Airport and Bien Hoa-Vung Tau.
According to the government, these two railway routes are two important projects that will contribute to creating synchronisation for the transport infrastructure for Long Thanh International Airport.
The government has assigned that these two railway routes huge investment capital equaling $3.91 billion.
The MoT has asked the railway project management board to build pre-feasibility study reports for these two railway lines and prepare the procedures to select consultant firms. The results are expected to be released in the third quarter of this year.
These two projects are among a portfolio of national initiatives that are in need of foreign investment in the 2021-2025 period.
The 38km Thu Thiem-Long Thanh International Airport light railway route, which starts from Thu Thiem Station in Thu Duc city and goes to Long Thanh International Airport, has been included in the plans. The project has a total investment capital of $1.76 billion.
Meanwhile, the Bien Hoa-Vung Tau railway line has a length of 84km long with a total investment capital of over $2.15 billion. It starts at Trang Bom Railway Station in Dong Nai province and ends at Cai Mep-Thi Vai International Port in Ba Ria-Vung Tau province. Once completed, the two railways are expected to reduce pressure on road traffic and support economic development in the area.
Inflation risks pose questions for exchange rate policy
In response to the recent Fed’s interest rate hike, the State Bank of Vietnam is predicted to tighten its monetary policy in an attempt to curb inflation, with a focus on controlling the exchange rate.
In the past two weeks, interbank interest rates have started to cool down. At the same time, the State Bank of Vietnam (SBV) reduced the frequency of money injection into the market.
At the end of July, the SBV made the sudden move to raise the interest rate on the open market, causing the interest rate on the interbank market to skyrocket, reaching over 5 per cent per year. However, over the past week, the overnight interest rate on the interbank market fell significantly.
Although the operating interest rate remains unchanged, the SBV’s move to raise interest rate on the open market recently shows that this agency is giving the green light for the interest rate in the market to increase.
Experts credit the recent increase in the exchange rate to the Fed’s interest rate hike and believe that the SBV’s maintenance of high interbank lending rates is aimed at reining in the exchange rate. Raising interest rates will make the VND more attractive compared to the USD, thereby reducing the need to hold the USD and indirectly cooling down the exchange rate.
Work on Can Tho-Ca Mau expy starts early next year
The My Thuan Project Management Board has been urged to complete paperwork to break ground on an expressway linking Can Tho and Ca Mau provinces in the Mekong Delta prior to March 31, 2023, said the Ministry of Transport. The ministry added that the Government had issued Resolution No.18 on the construction of the expressway.
Till now, the ministry had approved two components of the expressway. The first component is a 37.6-kilometer section between Can Tho and Hau Giang Province and the other is a 73.2-kilometer section between Hau Giang and Ca Mau.
Recently, the provincial government of Hau Giang has proposed the Transport Ministry allocate over VND2.1 trillion to the province to build four resettlement areas and pay compensation for local households affected by the project. Of the mount, VND246 billion will go to the construction of the four resettlement areas. Around VND1.86 trillion is slated for covering compensation costs and supporting affected households in resettlement.
The 110-kilometer Can Tho-Ca Mau Expressway, which is part the country’s North-South Expressway, in the first phase will have four lanes and cost over VND27.5 trillion in investment. The Ministry of Transport assigned the My Thuan Project Management Board to serve as the project’s investor.
Domestic businesses still not able to take advantage of FTA
Economic experts have revealed that the advantages of Free Trade Agreements (FTAs) in Vietnam are mostly taken by Foreign Direct Investment (FDI) businesses. In some situations, this causes even fiercer competitions for domestic enterprises not only in national but also in international markets.
Chairman Pham Xuan Hong of the Ho Chi Minh City Association of Garments, Textiles, Embroidery and Knitting stated that an FTA allows only a certain proportion of merchandise to enjoy preferential tax rates. This means when FDI companies, which normally have a large capital and production scale, export their goods to this limit, other businesses of smaller scales can no longer receive this advantage.
This has been proved in the statistics of the total export turnover of Vietnam in the first 7 months this year. Of the total US$216.35 billion (a rise of 16.1 percent compared to this time last year), FDI enterprises account for 73.7 percent. In a long term, that might pose a risk of national export turnover depending on foreign companies.
Vice Chairman of HCMC Business Association Nguyen Phuoc Hung explained that the expansion of FDI enterprises in the country recently via more investments and the bankruptcy of various domestic companies are attributed to the unreasonable application of support policies for businesses. While foreign ones can enjoy land rental reduction and exemption, corporate income tax reduction, and import tax exemption, their domestic counterparts still have to pay these fees in full.
HCMC Business Association have repeatedly proposed improvements for the investment environment and business development, with a clear focus on loan support, land sources for investment, tax policies.
Even though the Government has introduced several policies to help needy companies to approach capital sources, it seems that commercial banks have not actively provided this support. Such financial policies as debt freezing, debt repayment extension, debt structuring (including the principal debt and interest due), loan interest rate support of 2 percent should be implemented more widely.
In addition, the list of eligible goods to apply the value added tax reduction to eight percent must be issued so that enterprises find it easier to declare their tax and functional agencies can enforce it with ease.
Another barrier that worries many businesses is their after-sale legal responsibility. For them to operate with peace of mind, it is necessary to introduce a regulation to release enterprises from long-term or jointly responsibilities for unintentional mistakes that are caused by uncontrollable, objective reasons.
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