Vietnam Industry and Trade News Bulletin for JANUARY 04, 2016

A. POSITIVE NEWS

1. Record FDI Attraction: Four “Billion-Dollar” Projects in 2015 According to the Foreign Investment Agency, total registered foreign direct investment (FDI) in 2015 reached nearly 23 billion USD, an increase of 12.5% compared to 2014. This marks the first time in seven years since the 2008 record that Vietnam has attracted such a large volume of FDI.

Major Projects: 2015 saw the licensing of four “billion-dollar” projects. Notable examples include the Samsung Display Bac Ninh capital increase (3 billion USD) and the Duyen Hai 2 Power Plant by Malaysian investors (2.4 billion USD).
Top Locations: Bac Ninh led investment attraction with 3.5 billion USD (16% of total), followed by Ho Chi Minh City with 3.3 billion USD (14.6%).

2. Trade Surplus with the US Reaches $25.5 Billion While Vietnam faced significant trade deficits with China and South Korea in 2014, the US market remains a crucial counterbalance. In 2015, exports to the US reached 33.5 billion USD, up 17% against 2014, making it Vietnam’s largest export market.

Surplus: With imports from the US estimated at 8 billion USD, Vietnam recorded a trade surplus of 25.5 billion USD with this market.
Key Exports: Key growth drivers included phones and components (up 87.4%), textiles, and footwear. The Ministry of Industry and Trade expects the TPP to further boost exports in sectors where tariffs will drop to 0%, reinforcing the trade surplus.

B. GENERAL ECONOMIC HIGHLIGHTS

1. 2016 GDP Growth Forecast at 6.7% – 6.8% The National Financial Supervisory Commission forecasts economic growth will continue to improve in 2016, reaching approximately 6.7% – 6.8%.

Drivers: Growth is expected to be driven by higher foreign and private investment, banking sector restructuring improving credit supply, and increased exports due to new trade agreements.
Inflation Control: Inflation in 2016 is forecast to remain low, around 2% – 3%, providing room for adjustments in basic goods/service prices and exchange rates.

2. Government Push for Institutional Breakthroughs Prime Minister Nguyen Tan Dung has emphasized that perfecting institutions is an urgent requirement to achieve 2016 targets. The government has identified institutional breakthroughs as the most critical among three strategic breakthroughs to be pushed.

Action Required: The Prime Minister demands that every Minister must be a pioneer in institutional breakthroughs, ready to make decisions and take responsibility for the common good.
Goal: The core message is to remove difficulties for business and production, innovating institutions to keep pace with economic development and foster integration.

C. AGRICULTURE & TECHNOLOGY

1. Agriculture Faces “Survival” Challenge amidst Integration In the next 5 years, as Free Trade Agreements (FTAs) take full effect, Vietnamese agriculture will face a period of “survival” for many sectors.

Challenges: Besides price competition, the sector faces technical barriers and high standards from markets like Japan and the EU. Experts note Vietnamese farmers lag behind many countries in mindset, production skills, and technology.
Adaptation Strategy: Minister of Agriculture and Rural Development Cao Duc Phat affirmed the need to focus on competitive advantages (rice, coffee, aquaculture) and reorganize production into value chains by applying science and technology.

2. Transitioning to Chip Cards by 2020 The State Bank of Vietnam has issued a plan to convert magnetic stripe cards to chip cards (cards with electronic microchips).

Rationale: Most current Vietnamese bank cards use magnetic technology, which has low security and is easily counterfeited.
Trend: The global trend is rapidly moving toward chip technology for higher security and expanded customer utilities.

D. DOMESTIC MARKET & INDUSTRY NEWS

1. Oil & Gas: PVN Needs Oil at $45/Barrel to Profit The Vietnam Oil and Gas Group (PVN) states that it will only make a profit if the selling price of oil in 2016 is over 45 USD/barrel.

Impact of Price Drop: PVN calculates that a 1 USD/barrel drop in oil prices reduces the group’s revenue by 5,400 billion VND and state budget contributions by 1,500 billion VND.
Cost Management: PVN is reviewing costs for every individual field; if prices fall below 45 USD/barrel, some fields will face difficulties.

2. Record Trade Deficit with China; Anxiety over Tet Bonuses

China Deficit: The trade deficit with China in 2015 climbed to a record high of 32.3 billion USD, an increase of 12.5%. Vietnam imports everything from manufacturing inputs to agricultural products that can be produced domestically, like vegetables and fruits (up 21.2% in 11 months).
Tet Bonuses: Workers remain anxious about Tet bonuses. While the Ministry of Labor, Invalids and Social Affairs suggests average bonuses might exceed the 2015 level of 5 million VND due to economic improvements, many businesses have yet to announce specific results.