Vietnam Industry and Trade News Bulletin for January 8, 2016

A. GENERAL ECONOMIC HIGHLIGHTS

1. WB Forecast: Vietnam’s Growth Lower than Myanmar, Laos, and Cambodia In its Global Economic Prospects 2016 report released on January 7, the World Bank forecasts Vietnam’s GDP growth at 6.6% for 2016, slowing to 6.3% in 2017 and 6% in 2018 . While this rate is higher than Thailand (2%), Indonesia (5.3%), and the Philippines (6.4%), it lags behind Myanmar (7.8%), Laos (7%), and Cambodia (6.9%) . FDI inflows are expected to remain high, primarily targeting the labor force .

2. HSBC: Vietnam Certain to Hit 6.7% Growth Target Contrary to regional trends, HSBC asserts that Vietnam will certainly achieve its government-set growth target of 6.7% in 2016 . Drivers include recovering double-digit export growth (boosted by FDI in electronics, footwear, and textiles) and strong domestic demand fueled by low interest rates . HSBC expects inflation to rise in the second half of 2016, potentially prompting the State Bank to shift to a tighter monetary policy .

3. Confusion Over Discrepant GDP Figures Experts are expressing concern over a significant discrepancy in 2015 GDP data released by two government bodies. The Ministry of Finance estimated GDP at current prices at over 4.484 quadrillion VND, while the General Statistics Office (GSO) reported nearly 4.193 quadrillion VND—a gap of nearly 300 trillion VND . Economist Vu Dinh Anh noted this discrepancy causes deviations in budget revenue (2% of GDP) and deficit calculations (0.4% of GDP) . Experts call for transparency and unification of data to maintain credibility .

4. Debate on SME Support With nearly half a million new Small and Medium Enterprises (SMEs) expected by 2020, officials debate the effectiveness of support policies . 99% of SMEs do not aim to become large corporations but need stable policies to survive . While 90% of local reports now address SMEs, actual support remains fragmented. Experts at the Ministry of Planning and Investment proposed a 3,000 billion VND program to support SMEs .

5. Social Insurance Changes: Income Splitting to Avoid Costs As of 2016, Social Insurance (BHXH) contributions are based on a broader salary definition. While the rate (26%) is unchanged, many businesses are reportedly “splitting” income into other allowances to minimize the base salary for BHXH, fearing cost increases . Workers worry this will lower their future benefits, while others fear lower take-home pay due to increased deductions .

6. Temporary BHXH Collection for State Firms The Ministry of Labor, Invalids and Social Affairs (MOLISA) directed that state-owned single-member limited liability companies that have not yet finalized their salary scales will temporarily pay BHXH based on the current monthly salary . Adjustments will be made once the salary scales are approved .

7. Hope for Capital Flight from China to Vietnam Following the second stock market halt in China in early 2016 due to sell-offs, experts believe Vietnam is a “prime target” for foreign capital fleeing China . As the Yuan devalues and China’s growth slows, investors may redirect funds to stable growth economies like Vietnam .

8. ATMs Must Not Run Out of Money During Tet The State Bank of Vietnam issued Document No. 85 requiring banks to ensure sufficient cash supply for the economy and guarantee that ATM systems operate smoothly without running out of cash during the Lunar New Year .

9. HCMC Tet Bonuses Reach 2 Billion VND In Ho Chi Minh City, the highest reported Tet bonus is over 2 billion VND at an FDI enterprise . In contrast, the lowest bonus in the FDI sector is only 134,000 VND . Domestic private firms top out at 600 million VND .

B. INDUSTRY AND TRADE NEWS

I. ELECTRICITY

Grid Risks from Cambodia: EVN sold over 7 billion kWh to Cambodia in the last 5 years . However, the National Load Dispatch Center warns that the Vietnamese grid faced danger 26 times in 2015 due to sudden load fluctuations from Cambodia and a lack of data sharing from the Cambodian side . This poses a risk of grid failure .
PV Power Goals: PV Power targets an output of over 21 billion kWh and revenue of 29,445 billion VND in 2016 .
EVN Finances: EVN signed $4.8 billion in ODA loans for 2011-2015, stabilizing its financial balance . However, raising over 600,000 billion VND for 2016-2020 remains a challenge .

II. HEAVY INDUSTRY & SUPPORTING INDUSTRIES

Steel Lawsuit: Domestic steel firms have successfully filed a request for an anti-dumping investigation against imported steel (mainly from China) . In 2015, steel imports reached 13.85 million tons (up 33%), with prices hitting an 8-year low ($490/ton), causing domestic factories to run at only 50% capacity .
Airbus Partner: AESC, a 100% Vietnamese-owned company, has been selected by the Civil Aviation Authority of Vietnam to be introduced to Airbus as a partner for manufacturing wire harnesses for A320/A321 aircraft .

III. EXPORT – IMPORT

Risks of Small-Scale Exports: Experts warn that exporting agricultural products to China via small-scale cross-border channels (tieuch ngach) carries high payment risks due to the lack of L/C guarantees .
Desire for Formal Channels: Businesses are urging for formal export channels to China to ensure stability, estimating that exports could double or triple to $10-15 billion if formalized .

IV. DOMESTIC MARKET

Metro Sale Completed: The transfer of Metro Cash & Carry Vietnam to Thailand’s TCC Group has been completed for 655 million Euros . TCC’s subsidiary BJC will take over operations .
Petrol Fraud: Police have prosecuted 4 more individuals in the Hanoi petrol chip fraud case, where staff rigged pumps to cheat customers out of 5 billion VND .
Sugar Smuggling: Approximately 500,000 tons of Thai sugar are smuggled into Vietnam annually . Domestic sugar costs 13,000-14,000 VND/kg, while smuggled Thai sugar is only 9,000 VND/kg due to lower production costs in Thailand .

V. CONSUMER PROTECTION

Ineffective Protection: Consumer protection is deemed ineffective due to a lack of funds and personnel. Hanoi spends only 1,000 VND per person/year on this task . The HCMC Department of Industry and Trade has only one official dedicated to this massive sector .

VI. TRADE PROMOTION

Walmart Sourcing: Walmart will meet with nearly 100 Vietnamese enterprises in HCMC on January 15 to discuss bringing Vietnamese goods into its global supermarket system .
Thai Goods Fair: The 2016 Thai Goods Fair opened in Hanoi with 150 booths, marking the start of activities celebrating 40 years of diplomatic relations .

VII. INTERNATIONAL INTEGRATION

TPP Benefits: A World Bank report highlights that Vietnam’s textile and garment sector will benefit the most from TPP due to massive tariff reductions . TPP is expected to boost Vietnam’s GDP by 8-10% by 2030 .