Vietnam Industry and Trade News Bulletin for November 24, 2016

A. OUTSTANDING GENERAL ECONOMIC NEWS

1. SME Credit and Financial Challenges

• Low Capital Absorption: Although Small and Medium Enterprises (SMEs) and household businesses provide 52% of social employment, they only absorb 3% of total bank loans. Only about 30% of SMEs can access formal bank capital.

• Barriers to Financing: Banks often require collateral, which many SMEs lack. Additionally, high interest rates compared to the region and a lack of financial transparency (using dual accounting systems) hinder credit access.

• Internal Weaknesses: SME owners often lack formal management training, and their technology is reportedly 30-40 years behind developed countries.

2. Regional Investment and International Cooperation

• Central Region Business Forum: EuroCham hosted its first forum in Da Nang to discuss tax incentives and investment promotion for Da Nang, Quang Nam, and Thua Thien-Hue. A new EuroCham office will open in the Central region in early 2017.

• Italy-Vietnam Partnership: President Tran Dai Quang encouraged Italian firms to invest in mechanics, textiles, footwear, and food processing, aiming to make this partnership a model for ASEAN-EU cooperation.

• FDI Statistics: In the first 11 months of 2016, FDI reached over $18.1 billion across 19 sectors, with manufacturing and processing leading at $13.41 billion.

3. Banking and Consumer Trends

• High Card Fees: Bank card fees in Vietnam are among the highest in the world; specifically, issuance fees are five times the global average.

• Consumer Lending Growth: Consumer lending has grown by 20% annually over the last five years. A new draft circular by the State Bank of Vietnam aims to tighten regulations to ensure market stability and consumer protection.

B. INDUSTRY AND TRADE NEWS

I. OIL AND GAS

• Dung Quat Refinery Efficiency: After seven years of operation, the refinery has implemented 130 initiatives, saving over $130 million. It reached its 2016 production target of 5.8 million tons 52 days ahead of schedule.

• Nghi Son Port Project: Thanh Hoa province approved a $595 billion VND project by PVN to build a technical service port and logistics hub for the Nghi Son Refinery.

II. ELECTRICITY

• Solar Power Obstacles: Investors are waiting for the government to issue official feed-in tariffs (FiTs) for solar energy. Currently, proposed rates range between 11.2 and 13.2 cent/kWh.

• Equitization of Genco 1: The Deputy Prime Minister directed the Ministry of Industry and Trade to accelerate the equitization process and audit the valuation of Power Generation Corporation 1.

III. HEAVY AND SUPPORTING INDUSTRIES

• Samsung Vietnam Operations: The company denied rumors of mass layoffs or hiring freezes following the Galaxy Note 7 incident. Production has shifted to other models like the S7, S7 Edge, and Galaxy A/J series to maintain employment.

• Vinachem Violations: Authorities are investigating legal violations at the DAP No. 2 fertilizer plant project under the Vietnam National Chemical Group.

• Tire Cord Investment: South Korea’s Kolon Group plans to invest $500 million in a tire cord fabric factory in Binh Duong, with a capacity of 6,000 tons per month.

IV. IMPORT AND EXPORT

• Logistics Reform: The Ministry of Industry and Trade is drafting a “breakthrough” plan to improve logistics competitiveness, as Vietnam currently ranks 4th in ASEAN but faces high costs and small-scale domestic providers.

• Trade Milestones: Total import-export turnover reached the $300 billion mark by mid-November 2016, a $100 billion increase since 2011.

• Agricultural Exports:

    ◦ Vietnam and China signed agreements for dragon fruit exports (80% of which currently go to China via border trade).

    ◦ The first batch of Vietnamese mangoes successfully entered the Australian market.

    ◦ Rice exports face stricter regulations as the sector becomes a “conditional business” to ensure food security and brand reputation.

V. DOMESTIC MARKET AND MANAGEMENT

• Beauty Industry: The Vietnamese personal care market (estimated at 27,000 billion VND) is highly attractive to foreign brands, especially from Japan and South Korea.

• Automobile Market: Cheap cars from India (avg. 154 million VND) and Indonesia (avg. 289 million VND) are flooding Vietnam. Domestic assemblers struggle to compete due to weak supporting industries and low localization rates.

VI. TRADE PROMOTION AND INTEGRATION

• Vietnam-Australia Cooperation: A joint working group was established to resolve technical barriers and quarantine procedures for agricultural products like shrimp, cattle, and timber.

• Textile Exhibition: Over 400 enterprises participated in the VTG 2016 exhibition in HCMC, showcasing advanced machinery to improve productivity.

• FTA Risks: Legal experts warn that deep integration (e.g., EU-Vietnam FTA) increases the risk of international trade disputes where investors may sue the government.

VII. SCIENCE, TECHNOLOGY, AND ENVIRONMENT

• Eco-friendly Technology: Only 1/3 of surveyed enterprises invest in environmental protection technology. The main barriers are high initial costs and a heavy reliance on imported Chinese technology (accounting for 40% of renewals).

VIII. CORPORATE UPDATES

• Petrolimex: The corporation celebrated its 60th anniversary and is expanding its communication through social media (Facebook) to connect with employees and the public.

• TKV (Coal): The group is adopting flexible consumption plans to catch up with market trends and has successfully reduced its workforce by over 1,200 through restructuring.

• EVN Safety: During the dry season, EVN is focusing on protecting high-voltage corridors from forest fires and agricultural burning (sugar cane/slash-and-burn) in the Central Highlands.

IX. OTHER ISSUES

• National Brand Selection: The Ministry of Industry and Trade clarified that 88 enterprises achieved “National Brand” status in 2016. Regarding Tan Hiep Phat, officials stated that only two specific products (Dr. Thanh Herbal Tea and Green Tea 0 Degree) were recognized based on strict criteria and after consulting with health and police authorities regarding previous controversies.