Vietnam Industry and Trade News Bulletin for JANUARY 05, 2016

A. POSITIVE NEWS

1. China Lifts Ban on Live Shrimp Imports from Vietnam After 11 months of suspension, the General Administration of Quality Supervision, Inspection and Quarantine of China (AQSIQ) has officially announced the lifting of the ban on live shrimp imports from Vietnam. This decision opens up a significant opportunity for the seafood industry to recover and boost exports to this neighboring market at the start of 2016.

2. Vietnam Oil and Gas Group (PVN) Exceeds Production Plan by 2.1 Million Tons In 2015, PVN achieved an oil production output of 18.74 million tons, exceeding the government’s plan by 11.5% (equivalent to 2.1 million tons). Gas production also reached 10.67 billion m3, exceeding the annual plan by 9%, contributing to national energy security and budget revenue despite the sharp decline in global oil prices.

3. Opportunities to Bring Vietnamese Goods into Walmart’s Global Retail System Expected on January 15, 2016, approximately 200 Vietnamese enterprises will have a direct meeting with Walmart representatives to explore opportunities to become suppliers for this system. This is a crucial preparation step for domestic businesses to approach strict standards and leverage advantages from the TPP Agreement.

B. GENERAL ECONOMIC HIGHLIGHTS

1. 2016 Inflation Forecast to Remain Low at 2-3% The 2016 Economic Outlook Report by the National Financial Supervisory Commission (NFSC) suggests that core inflation in 2016 will be around 3%, while headline inflation will fluctuate between 2-3%.

• Impacting Factors: Declining global commodity prices help reduce domestic production costs; however, aggregate demand and the salary increase roadmap may create certain pressures.
• Policy Room: With the National Assembly’s inflation target of below 5%, the Government has significant room to proactively adjust public service prices and exchange rates.

2. Implementation of New Central Exchange Rate Mechanism The State Bank of Vietnam (SBV) has begun applying a new exchange rate management method, announcing the central exchange rate daily based on domestic foreign exchange supply-demand and international fluctuations.

• Flexible Management: This mechanism allows the exchange rate to fluctuate more flexibly while remaining under state control to ensure macroeconomic stability.
• Liquidity Support: The SBV allows banks to purchase 3-month forward foreign currency to balance their foreign exchange positions, instead of only offering spot sales as before.

C. INDUSTRY AND EXPORTS

1. Warning on Excessive Dependence on Imports from China The trade deficit with China in 2015 exceeded $32.3 billion, an increase of 12.5% compared to the previous year. Experts warn that importing too much cheap machinery, equipment, and raw materials from this market could lead to domestic technological obsolescence and supply security risks.

2. Future of Thermal Power Plants in Power Development Plan VII The adjustment of Power Development Plan VII (revised) poses a major challenge regarding energy proportions. Experts expressed concern over the reliance on coal-fired thermal power (expected to account for 62% by 2030), calling for increased development of renewable energy such as wind and solar power to protect the environment and take advantage of decreasing technology costs.

D. DOMESTIC MARKET & MANAGEMENT

1. Debate Over BOT Road Toll Increases Despite the Ministry of Transport’s proposal to delay the deadline, BOT toll stations proceeded with price increases at the start of 2016 according to the Ministry of Finance’s roadmap. The Deputy Minister of Transport explained that the increase is necessary to avoid breaking the financial plans of investors and banks, although he admitted it creates pressure on citizens and transport businesses.

2. 30 Trillion VND Support Package Stalled Due to Mortgage Regulations The implementation of the SBV’s Circular 26 regarding the registration of secured transactions for assets formed in the future is causing the disbursement of the 30 trillion VND package to stagnate in many areas. Social housing buyers are facing difficulties as local transaction centers lack specific instructions to certify collateral.

3. Tightening Management of Multi-Level Marketing Activities Decree 124/2015, effective from January 05, 2016, stipulates fines of up to 100 million VND for illegal multi-level marketing (MLM) activities or violations of regulations on commissions and bonuses. This is a decisive move to clean up the market and protect consumers from fraudulent MLM variations.