Worker shortage deters textile-garment firms from taking new orders
Although apparel orders have been pouring into Vietnam, certain textile and garment enterprises are hesitating to accept new ones due to a severe shortage of laborers and materials.
With many local apparel firms having secured enough orders for production and export, experts forecast, the country’s apparel exports would hit US$45 billion, well above the target of US$42-43 billion.
Nguyen Thi Tuyet Mai, deputy general secretary of the Vietnam Textile and Apparel Association, said local apparel firms are seeing a surge in orders. They have secured enough orders for production until the end of the third quarter of 2022. However, they have had difficulty with hiring to scale up their production.
Pham Xuan Hong, chairman of the HCMC Association of Garments, Textiles, Embroidery and Knitting, said the firms active in the apparel sector are finding it hard to hire workers to fulfill their orders.
In reality, the textile and garment industry had faced a shortage of workers due to fierce competition with other sectors backed by foreign investment before the Covid pandemic, let alone the post-pandemic recovery period. Particularly, HCMC and several southern provinces have seen large numbers of workers walking away from the apparel sector.
The Covid pandemic has also led workers in the textile and garment sector to return to their hometowns. They have either refused to return to HCMC or landed a new job in their home provinces, intensifying the labor shortage in HCMC, according to Hong.
In addition, due to China’s zero-Covid policy, many local apparel firms are voicing concerns over a dearth of materials for garment and textile production, so they did not dare accept new orders.
As such, the shortage of workers and materials and rising prices of materials have deterred apparel firms from ramping up capacity and getting more orders.
In the first four months of the year, Vietnam exported nearly US$11 billion worth of textile and garment products, surging 21% year-on-year, said Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association.
During the four-month period, the country’s exports of these products to the United States, Europe and Japan reported strong gains.
Solutions proposed to improve int’l railway transport service
The Ministry of Transport has been tasked with coordinating with relevant ministries, sectors and localities in considering and handling recommendations of the Vietnam Railways Corporation (VNR) on how to better the capacity of international railway transport serving import and export activities.
Previously, the VNR had submitted a written proposal to the Prime Minister suggesting solutions to improve the railway system’s capacity and output of international transport service.
According to the VNR, investment for infrastructure development and solutions in terms of mechanisms and policies are the key and decisive factors to improve international railway transport capacity to support import-export activities of the country.
The VNR has surveyed and selected cargo terminals and storage facilities in strategic locations to serve international transportation activities. The company underlined the need to develop storage facilities qualified to handle containers as well as warehouses meeting standards to store import and export goods.
An investment plan using both State budget capital and private capital has also been suggested by the VNR.
Vietnam’s rubber exports rise sharply
Vietnam exported around 110,000 tonnes of rubber worth 181 million USD in May, up 40.4 percent in volume and 27.9 percent in value against the previous month.
The figures also represented year-on-year increases of 33.1 percent in volume and 26.4 percent in value, the Agency of Foreign Trade at the Ministry of Industry and Trade cited statistics by the General Department of Vietnam Customs as showing.
Rubber export price averaged 1,645 USD per tonne in May, down 8.9 percent against April and 5 percent as compared with the same period last year.
In the first five months of this year, the country shipped abroad 595,000 tonnes of rubber valued at 1.04 billion USD, up 8.1 percent and 12 percent year-on-year, respectively.
China was the biggest buyer of Vietnamese natural and synthetic rubber, with hikes seen in both volume and value in the first months.
Agricultural sector to develop production in line with international standards
Minister of Agriculture and Rural Development Le Minh Hoan has said that his Ministry will adjust policies aimed at encouraging firms to invest in agriculture, as well as to develop production in line with international standards and practices to better serve agricultural exports.
Minister Hoan underlined the necessity of strictly complying with regulations related to labeling, traceability, cultivation area indication, quarantine, packaging, quality and types of agricultural products, and business code.
The Ministry will maintain negotiations aimed at removing barriers and increase the export of additional agricultural products to major and potential markets. This includes durians, birds’ nests, passion fruit, avocadoes, grapefruit, and coconut to China; as well as longan, grapefruit, and passion fruit to Japan; in addition to shrimp, grapefruit, litchi, rambutan, processed poultry, and cattle meat to the Republic of Korea.
The Ministry will therefore maintain the effective implementation of free trade agreements (FTAs) signed with other countries and regions globally, as well as co-ordination with Vietnamese embassies, and trade and agriculture offices. This will be done to collect and provide information about foreign markets and tastes for local businesses, thereby helping them to boost trade promotion, stated Minister Hoan.
Vietnam attends Seoul Food 2022
More than 20 Vietnamese enterprises are participating in the Seoul Food 2022, which kicked off on June 7 at the Korea International Exhibition Center (KINTEX).
The event provides an ideal venue for Vietnamese food and beverage businesses to strengthen trade promotion activities, and effectively gain entry into the Republic of Korea (RoK)’s market, as well as other countries around the world.
Within the framework of Seoul Food 2022, the ASEAN – Korea Center has co-ordinated efforts with relevant agencies to organise the ASEAN Trade Show 2022 in support of micro, small, and medium-sized enterprises (SMEs) to gain entry into markets and improve their overall competitiveness.
The ASEAN Trade Show 2022 will also focus on promoting the food service industry, which has been hardest hit by the COVID-19 pandemic, supporting the growth of SMEs in ASEAN, whilst simultaneously promoting economic co-operation between the bloc and the RoK.
The Seoul Food Expo 2022 is due to last until June 10 and is expected to attract 30,000 visitors.
Vietnam-Australia business forum to seek co-operation opportunities
A Vietnam-Australia business forum is set to take place next week in support of firms from the two countries to allow them to seek greater co-operation opportunities and technology transfer in clean energy, hi-tech agriculture, and digital transformation applications.
The “Vietnam-Australia Business Cooperation Forum” Technology Transfer and Business Opportunities between Innovation Ecosystems in Australia and Vietnam” will be organized by the Australian Department of Foreign Affairs and Trade (DFAT). The event will be held on June 16 in collaboration with the Ministry of Science and Technology (MOST), the University of Technology Sydney (UTS), Saigon Innovation Hub (SIHUB), and Ho Chi Minh City University of Technology.
It is set to be supported by the Australia-Vietnam Enhanced Economic Engagement Grant (AVEG) under which the Australian Government is committed to providing roughly US$2 million to assist small Vietnamese businesses.
The forum will be held both in person in Ho Chi Minh City and on virtual platforms, expects to see the presence of leaders of the two countries, as well as experts and business representatives from both sides.
Higher coverage helps SMEs recover faster
The Law on Support for Small- and Medium-sized Enterprises (SME) took effect on January 1, 2018, but its programmes have not provided adequate coverage to make any big difference.
According to the Vietnam Chamber of Commerce and Industry (VCCI), ten programmes have been implemented under the law, but fewer than eight percent of enterprises enjoyed the benefits from the programmes.
Notably, only 7.34 percent got access to the SME Credit Guarantee Fund, 6.55 percent got the consultancies from state agencies, and 4.75 got the subsidies for rentals in industrial parks, high-tech parks and industrial complexes.
Regarding other subsidies, just 6.17 percent were granted legal aid services subsidies, 5.40 percent market information consultancy subsides, 6.83 percent training courses subsidies and 5.39 percent vocational training subsidies.
Although 80 percent of enterprises which managed to access the programmes said procedures were easy to follow, the figure does not capture those who never applied. In fact, 51.3 percent were unaware of the programmes.
PetroVietnam surpasses oil exploitation plan by 22 percent in January-May
The Vietnam Oil and Gas Group (PetroVietnam) pumped 4.55 million tonnes of crude oil in the first five months of 2022, surpassing the plan by 22 percent, contributing to ensuring national energy security and national development.
In the period, the group faced numerous difficulties as the Russia-Ukraine conflict has prolonged for more than 100 days, causing disruption to supply chains, pushing up prices of power and materials, as well as transport and production costs.
Besides, existing oil and gas mines have seen big reductions in output while the exploitation of new ones is hindered by regulations.
In such difficult circumstances, PetroVietnam has undertaken a range of measures to maintain output and stable operation, including technical solutions to increase output.
Demand for healthy foods on the rise post-COVID
Consumers are increasingly looking for natural and environment-friendly products and those with health benefits after the COVID-19 pandemic, according to the High Quality Vietnamese Product Business Association.
Vu Kim Hanh, its chairwoman, who led a Vietnamese business delegation to THAIFEX-Anuga Asia, the region’s largest food and beverage trade fair, in Bangkok last month, said consumers were obsessed with the pandemic and looked for foods that boost their health and immunity but are convenient.
Surveying 1,000 booths at THAIFEX, her delegation found that the current demand was for plant-based products, but other emerging trends included products derived from insects and biological products developed from lab and fungi, she said.
Nguyen Truong Thinh, deputy sales director of Luong Quoi Coconut Co., Ltd, said: “After the pandemic, natural and organic products have received greater attention from consumers. When we did market research, we found that though incomes have decreased, people are willing to cut other expenses to buy products that are good for their health.
According to Nguyen Le Quoc Tuan, CEO of Song Huong Foods, which makes products from eggplant and other traditional items, the company’s products are naturally fermented by using an improved traditional process to ensure health benefits and natural flavours.
Ly Huy Sang, general director of Minh Long I, said kitchen utensils helped increase the taste of food, but cooking would also affect the quality of food, directly affecting health.
That was why his company constantly researches and develops premium porcelain cooking product lines (macrobiotic cookware) that help retain flavour and nutrition in foods after cooking.
Orphan contracts cause issues in bancassurance
Many bank clients have bought insurance through their banks (bancassurance), but they have received no support from the institutions when problems arose.
Hanh Lien, a bancassurance client in Ha Noi, said that she had not been consulted by any insurance agent so far, and only received periodic messages asking for premium payments.
Lien’s case is not uncommon and is called an “orphan insurance contract,” indicating that insurance clients are left without any support from their agents.
The situation is worse when banks end their partnership with insurance firms, adding uncertainty to bancassurance contracts.
Can Van Luc, chief economist at BIDV, underscored bank clerks’ inexperience in insurance as the main cause for low-quality bancassurance, leading to client dissatisfaction.
The economist believes that a sound legal framework for bancassurance is needed to promote its growth and safeguard clients.
Nguyen Thanh Ha, chairman of the SB Law Firm, shares this view. He said some regulations on bancassurance had been developed but were still in their infancy.
Notably, it is insurance agents, which are actually bank clerks, but not banks themselves that are involved in the lawsuit as a related party once disputes arise.
Thai Quynh Mai Dung, a member of the National Assembly, called for stringent regulations to end “orphan insurance contracts.”
Specifically, she suggested insurance laws be modified in a way that prohibits acts of deliberately refusing to pay insurance benefits or delaying such payments without valid reasons.
She also called on insurance firms to closely supervise their agents’ operation, ensuring that clients have their rights fully observed.
Deposit interest rate forecast to rise by 0.3-0.5 pp in H2 2022
Deposit interest rate in the second half of this year might be adjusted up some 0.3 to 0.5 percentage points, experts forecast.
Banking expert Nguyen Tri Hieu said that savings interest rates in the remaining months of the year will unlikely remain at historic low levels as last year due to a higher capital demand and inflationary pressure as well as a fiercer competition from other investment channels such as real estate and securities to attract idle capital flows.
Sharing the same view, Tran Duc Anh, director of the KBSV Securities Company’s Macroeconomics and Market Strategy Division, said interest rates for long term deposits of large-sized banks would increase by about 0.5 percentage points.
The dong interest rates traded between banks on the interbank market by the end of April declined by 0.5-0.7 percentage points per year, but increased again in early May 2022. Specifically, the interbank interest rates in early May 2022 were 0.1-0.4 percentage points per year higher than the rates at the end of April on short terms of less than one month.
Not only small-sized banks, but large-sized banks, which previously always kept deposit interest rates at very low levels, have recently also adjusted up their rates as a move to increase the competition in attracting depositors.
Analysts from the Saigon Securities Incorporation (SSI)’s research department also said deposit interest rates were under increasing pressure in the wake of rising inflation and stronger-than-expected credit growth.
Data of the State Bank of Vietnam (SBV) showed total credit supply as of May 20 reached more than VND11 quadrillion, up 7.66 per cent compared to that at the end of 2021 and doubling the figure recorded over the same period last year.
SBV’s deputy governor Dao Minh Tu said from the beginning of this year, SBV had guided credit flow towards the production and business sectors as well as prioritised areas, while tightly controlling credit in risky areas.
Particularly, a growth of over 8 per cent was seen in credit for sectors facing difficulties such as tourism and hotels, while a 7.6 per cent increase was recorded in industrial sectors and supporting industries.
The SBV Deputy Governor said as of the end of April, more than VND695 trillion in loans had been given to more than 1.1 million customers.
Thanks to the strong credit growth, many banks have almost reached the credit quota they were granted at the beginning of the year.
Property market faces serious liquidity issues: conference
With the real estate market facing liquidity problems, analysts have called for the Government and banking industry to create a mechanism that enables property developers to borrow and issue bonds.
Speaking at a seminar on capital sources for the real estate market yesterday, Le Hoang Chau, chairman of the HCM City Real Estate Association Minh, said, “The market is facing serious liquidity problems.”
Businesses’ own funds account for only 15-20 per cent while the remaining 80-85 per cent come from bank loans, bond issuance, home buyers, and foreign investment, he said.
Dr Dinh Trong Thinh of the Academy of Finance said the tightening of corporate bond issuance should be done with a road map, slowly and step by step.
Le Thanh, chairman of the Green Economy Institute, said the property market contributed 14 per cent to the country’s GDP in 2019-21 and had a spillover effect on some 40 other sectors such as construction, processing, tourism, accommodation and catering, and finance and banking.
In April the central bank started tightening credit for the real estate sector, he said.
According to the Ministry of Construction, as of the first quarter of this year there were only 24 completed real estate projects, or half the number in the previous quarter and a year earlier.
The number of projects eligible for sale was only 56, down by two thirds from the previous quarter, and the low supply pushed prices up dramatically, he said.
Dao Minh Tu, deputy governor of the State Bank of Viet Nam, said the focus was on controlling credit risk to ensure market transparency and preventing a bubble.
But lenders would only tighten credit to high-risk segments to prevent speculation, but not to segments like housing for workers and the poor, he assured.
Le Xuan Sang, deputy director of the Viet Nam Institute of Economics, said it was vital to improve existing channels while promoting new channels such as real estate investment trusts (REIT).
Ngo Tri Long, former director of the Ministry of Finance’s Price and Market Research Institute, said the central bank and credit institutions must ensure stable overall credit growth and the quality of lending to the real estate sector.
Lending to the property sector accounts for nearly 20 per cent of total outstanding credit, according to the central bank.
At the end of April total outstanding loans to the sector was VND2.3 quadrillion, up 10.19 per cent from the end of 2021, accounting for 20.44 per cent of total outstanding loans.
Bright prospects ahead for sugar producers
A raft of listed sugar producers has successfully weathered turbulent times with upbeat performance, leveraging the continued surge in global sugar price due to dwindled supply and export restrictions from leading sugar exporters.
The revenues from July 1, 2020 to June 30, 2021 of listed sugar firms rose on average 15.8 per cent, while profit figures shot up 80.8 per cent on-year.
Currently, Thanh Thanh Cong-Bien Hoa JSC (SBT) is Vietnam’s number-one producer of sugar and sugar products, holding about 46 per cent of the market share.
SBT is upscaling the value chain of its sugar products by providing the market with 73 product lines, including seven organic sugar products, 11 by-products and post-sugar product lines, and six drinks.
Phu Hung Securities JSC, with more than 66,000ha, accounts for 25 per cent of the country’s total material area. The self-reliance on material sources amid a higher price tag helps the company to bolster its profit margin.
As for Son La Sugar JSC (SLS), the company’s major market is Hanoi, holding 75 per cent of its output. Its core business line – sugar processing and trading – accounts for 90.9 per cent of its total revenue in 2021.
Agribank Securities estimates that SLS’s material area in the 2021-2022 fiscal year hovers around 9,300ha, and SLS is the only listed sugar firm enjoying corporate income tax exemption.
Around 70 per cent of Lam Son Sugar JSC’s (LSS) material areas are sparsely distributed in hilly land, making it hard to apply synchronous mechanisation. The company is set to bring the material areas to low-land regions. At the time of being equitised in 2008, LSS owned a stable material growing region from 15,000-20,000ha.
Meanwhile, Kon Tum Sugar JSC’s material area is at a medium size. The company eyed a 103 per cent jump in post-tax profit to reach $205,200 in the first nine months of the 2021-2022 fiscal year.
Numerous BOT projects report poor revenues
A total of 19 build-operate-transfer (BOT) projects reported revenues lower than 70 per cent, and three of these reported revenues lower than 30 per cent compared to their financial plans, according to the Ministry of Transport (MoT).
Reporting to the National Assembly on June 5, the leader of the MoT said that the country currently has 54 BOT projects with toll collection, and 41 of them have gained less than the financial plan in the contract.
Of which, the revenues of 19 projects were less than 70 per cent of the financial plan, and three reported income of less than 30 per cent, namely the Thai Ha bridge, connecting the two provinces of Thai Binh and Ha Nam, the expansion of the Ho Chi Minh national road (in Dak Lak province), and building Binh Loi railway bridge (in Ho Chi Minh City).
The Ministry of Transport raised many reasons for the decrease in revenue. Businesses were directed to reduce fares for vehicles near toll stations for trucks of 10 tonnes or more, according to Resolution No.35/NQ-CP (dated 2016) on supporting and developing businesses. Over the past seven years, they have not increased the fares, despite the contract stipulating to raise fares every three years.
Vietnam witnessing speedy growth in digital payments
Vietnamese consumers are rapidly adopting a range of digital payment methods, accelerated due to the global restrictions of the past couple of years.
Digital payment giant Visa published its latest Visa Consumer Payment Attitudes study last month, which showed an emphatic shift in payment habits. Sixty-five per cent of Vietnamese are carrying less cash in their wallets and 32 per cent said they would stop using cash after the pandemic. This was paralleled by significant gains in cashless payments. Almost 76 per cent of consumers now use mobile wallets and even more (82 per cent) use cards.
Online shopping and cash alternatives are all likely to stay after the pandemic. Two-thirds of Vietnamese tried shopping online during the pandemic and half of them made their first purchase through social media. Nine out of 10 consumers are now using home delivery, and almost all of them use it more often than before the pandemic.
Spending on all forms of travel decreased as people cancelled or postponed trips, along with eating out and out of home entertainment. Now, consumers are most eager to spend on travel, especially domestically (25 per cent). The surge of desire in Vietnamese consumers to travel is driven by reconnection, over necessity or wanderlust exploration, as consumers yearn to reunite with family and friends after a long time apart.
The overwhelming majority (more than 80 per cent) now use their cards, QR payments, and mobile wallets at least once a week. Meanwhile, a solid half of all Vietnamese have begun using cards more often, while 64 per cent and 63 per cent have increased their usage of mobile contactless and mobile wallet payments. Convenience seems to be the highest-rated factor in consumer preference across digital payment methods, followed by safety from infection and transaction security.
Vietnam needs to fine-tune its foreign investment attraction policy
With foreign direct investment’s (FDI) significant contributions to economic growth as well as its shortcomings being highlighted clearly amid global investment changes, Vietnam needs to take immediate measures to tap into the resources of this sector to boost its economy.
After 35 years of opening and attracting FDI, Vietnam has received investments from 140 countries and territories around the world, with big global names such as Intel, Microsoft, Foxconn, Samsung, Sanyo, Sony, Fujitsu, Toshiba and Panasonic.
A 2021 report by the Vietnam Association of Foreign-Invested Enterprises (VAFIE) shows that the FDI sector currently accounts for 25% of total social investment, 55% of total industrial production value and 70% of total exports. Such figures demonstrate that Vietnam’s investment and business environment is increasingly improving, making foreign investors more confident in their business success with Vietnam by increasing their investments to expand their operations and earn greater profits.
Notably, foreign investors have been actively engaged in share purchase activity over the past ten years, accounting for a major part of total FDI pledges and disbursements. In 2021, the total value of mergers and acquisitions reached 12 billion USD, up 150% from a year earlier, despite the severe impacts of COVID-19.
In addition, the non-equity mode (NEM) is becoming a new investment method in Vietnam, as seen in Vingroup’s deals related to Vinfast and Vinsmart. According to VAFIE Chairman Nguyen Mai, this mode allows multinational companies to coordinate supply chains, creating a chance for domestic manufacturers and suppliers to take part in the global supply chain. Foreign investors’ resources usually include brands, intellectual property rights and business know-how. This is an investment trend that aims to increase marginal profit in potential markets without contributing capital.
Work on HCMC’s second metro line might be delayed until late 2025
HCMC has informed the Ministry of Planning and Investment that work on its second metro line, which links Ben Thanh Market in District 1 and Tham Luong Depot in District 12, might be delayed until the end of 2025 due to problems with a consulting contract.
The consulting contract for the second metro line project was signed in 2012 by the Management Authority for Urban Railways (MAUR) of HCMC and Implementation Consultant (IC), comprising two phases. The first phase involves design, bidding, documentation and evaluation, while supervision operations are in the second phase.
Due to prolonged project adjustment, the contract expired in 2018. As such, the consulting firm stopped supplying services for the first phase of the project, the local media reported.
In 2018, MAUR decided to end the second phase of the consulting contract because of changes in the scale of the project and the groundbreaking date.
In 2019, the authority and IC held negotiations on Appendix 13 of the consulting contract to complete the rest of the first phase. The negotiation lasted for two years, but no consensus was reached.
In May 2021, the city decided to end negotiations on Appendix No. 13 and the contract with IC. However, IC later proposed resuming negotiations to complete some main bidding packages.
The municipal government assigned MAUR to get back to the negotiation table with IC. However, in March, IC announced ending the consulting contract.
Beltway No. 3 project to get priority funding: NA chairman
The Beltway No. 3 project, which will connect HCMC, Binh Duong, Dong Nai and Long An, will get priority access to funding so that it can be completed by 2025 and opened to traffic in 2026, said National Assembly (NA) Chairman Vuong Dinh Hue.
At a discussion on the Beltway No. 4 project in the Hanoi City region, Beltway No. 3 in southern Vietnam and the expressways of Bien Hoa-Vung Tau, Khanh Hoa-Buon Ma Thuot and Chau Doc-Can Tho-Soc Trang, NA Chairman Hue said Beltway No. 3 needs urgent development. It will help improve traffic connectivity between HCMC and its three neighboring provinces.
According to HCMC Chairman Phan Van Mai, the project was originally planned to be constructed through a public-private partnership but State investment was later proposed for the project, the local media reported.
The project, once in place, will help facilitate traffic in HCMC, Binh Duong, Dong Nai and Long An, and the southern key economic zone as a whole.