VIET NAM TRADE

VFF officials listen to opinions of Vietnamese expats in Australia

Vietnamese expatriates in Australia raised opinions and expressed their aspirations while meeting with officials of the Viet Nam Fatherland Front (VFF) Central Committee in Sydney on December 7.

Tran Ba Phuc, Chairman of the Viet Nam Business Association of Australia (VBAA), said the Vietnamese community here number more than 320,000, along with nearly 30,000 students.

Since this year marks the 45th anniversary of the countries’ diplomatic ties and witnesses the upgrade of bilateral ties to a strategic partnership, a number of high-level mutual visits have been organised, including a trip to Australia by Prime Minister Nguyen Xuan Phuc last March. The VBAA has also worked with Viet Nam’ representative agencies to organise many practical events popularising the country’s images in Australia and promoting bilateral trade and investment, he noted.

At the meeting, the expatriates pointed out obstacles to applying to keep Vietnamese nationality. They also asked for books teaching Vietnamese to be posted on the Internet so that their children can have easier access since similar books in Australia have become outdated.

They raised questions about procedures for investing in Viet Nam, noting that they want to contribute to the homeland’s development.

Some representatives of the community also called for policies to be reformed so that they can help apply Australia’s advanced technologies and experience in Viet Nam, especially in the fields of Australia’s strength like education and hi-tech agriculture.

Welcoming the opinions, Hau A Lenh, member of the Party Central Committee and Vice President and Secretary General of the VFF Central Committee, noted this visit is a chance to listen to opinions of the overseas community, including entrepreneurs.

He said he is proud that regardless of what their jobs are or what positions they hold, the expatriates still have confidence in Viet Nam’s development and want to contribute to the homeland.

The official underlined the issue of how to capitalise on the human resources of nearly 30,000 Vietnamese students in Australia amid extensive international integration.

That the Vietnamese community is highly regarded and the Vietnamese language was recognised is a good chance to promote the language among young expatriates. However, more support in terms of textbooks from the country is still needed, Lenh admitted.

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Australia’s Trade with Viet Nam in October 2018

Two-way goods trading between Australia and Viet Nam in ten months of 2018 reached AUD 8,99 billion in which, Viet Nam exported to Australia AUD 5,01 billion and imported from Australia AUD 3,98 million.

Details of Australia’s Trade with Viet Nam in October of 2018.

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Viet Nam becomes Asia’s hottest investment destination: Forbes

An article published by US magazine Forbes has recently considered Viet Nam as the hottest investment destination in Asia.

According to the article, Viet Nam attracted 17 billion USD in FDI commitments last year, arguably the largest for an emerging market relative to its 250-billion-USD GDP, the magazine said.

In the first quarter of 2018, it became the fourth largest Initial Public Offering market in the region, surpassing the Republic of Korea (RoK), Singapore and Australia. The realty market in Ho Chi Minh City is booming and GDP is growing at about 7 percent per annum.

It said the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) and EU-Viet Nam Free Trade Agreement (EVFTA) are expected to be ratified in the coming months, helping Viet Nam further integrate in the global economy. Meanwhile, in 2020, the capital Hanoi will host the Formula 1 Grand Prix.

Explaining the reason behind such progresses, the article pointed to the fact that the country’s leadership has agreed on an economic development vision that focuses on offering highly productive, cost effective labour for labour-intensive export manufacturing. This has driven record FDI inflows, largely from more mature Asian economies such as Japan, the RoK, and Taiwan (China), of which over 90 percent are going into manufacturing. It said Viet Nam has become integral to the global supply of many goods, from smartphones and electronics to catfish and cashews. The country is also poised to be a major beneficiary of the ongoing US-China trade tension, as foreign companies seek to restructure their supply chains.

The article noted the government’s plan to equitise hundreds of state-owned enterprises (SOEs) has been critical to Viet Nam’s growth story. It said the equitisation is attracting a flood of portfolio investment across several sectors, most notably consumer and healthcare. According to the writer, such investment interest is likely to accelerate, following recent legislation drafted by the local Ministry of Finance, which stipulates that foreign ownership caps on listed companies - currently at 49 percent - will be lifted in 2019.

In addition, it mentioned the country’s young, educated entrepreneurial population of 95 million, which is rapidly urbanising and experiencing real spending power for the first time.

The article said it is easy to understand why international brands like Apple, Starbucks and McDonalds are betting big on Viet Nam, adding that the country’s tech scene is also thriving.

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Viet Nam Moves Up on the Sustainable Trade Index

According to the 2018 Hinrich Foundation Sustainable Trade Index, which measures the capacity of countries to participate in the international trade system in a way that supports sustainable development, Viet Nam ranked ninth in 2018, up two places from 2016.

The study was released by a non-profit foundation Hinrich foundation and the research firm The Economist Intelligence Unit and includes 19 Asian economies and the US.

Sustainable trade index

The index has 24 indicators and ranks the economies across three broad categories, economic growth, social capital, and environmental protection. It covers 19 Asian countries and the US.

Trade is a major component in any country’s economic growth, however, for a sustainable growth, social development and environmental protection are equally important, hence both categories are included in the study.

Viet Nam’s rankings

Viet Nam ranked ninth in 2018, an increase of two points compared to 2016 and six points in index performance relative to the GDP.

Social

The social pillar covers factors such as labor standards, educational attainment, and inequality. In this section, Viet Nam ranked eighth, up one place compared to 2016, higher than middle-income nations such as China, Thailand, and Malaysia.

Economic

The economic pillar covers economic growth through trade, financial sector, investments, innovation, infrastructure, and growth in the labor force.

Driven by the growth in foreign investments and a reduction in non-trade barriers, Viet Nam’s rank jumped from 10th in 2016 to ninth in 2018.

Environment

This section covers air/water pollution, deforestation, environmental standards in trade, the share of natural resources in trade, and transfer emissions.

Viet Nam’s rank dropped from 11th in 2016 to 16th in 2018, mostly due to deforestation.

Regional Comparison

Overall, Hong Kong led amongst all the countries in the study. Among ASEAN nations, Singapore ranked third followed by Viet Nam at the 9th position. The Philippines, Malaysia, Thailand, and Indonesia ranked 10th, 12th, 13th, and 14th respectively.

Social

Taiwan led the rankings in the social pillar. Singapore ranked fifth, while Viet Nam, Brunei, Indonesia, and the Philippines ranked eighth, ninth, 10th, and 11th respectively.

Economic

Overall, Singapore led the rankings in the economic pillar. Malaysia ranked seventh, while Viet Nam, Thailand, and Indonesia ranked ninth, 11th, and 14th respectively.

Environment

Hong Kong had the highest scores in the environmental category and led the rankings. Singapore ranked fourth, while the Philippines, Thailand, and Laos ranked sixth, 11th, and 12th respectively.

Need to do more

Going forward, Viet Nam needs to focus on issues such as the decline in labor force due to an aging population, infrastructure development to minimize trade and logistics costs, minimizing trade payment risks, reducing the rate of deforestation, and water pollution for a sustainable development.

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Australian Finder chooses Da Nang among global destinations of 2019

Viet Nam’s central city of Da Nang has been chosen by Australian travel website Finder as one of the best travel destinations in 2019.

Da Nang has been ranked 6th among the top destinations and trends in the world for 2019.

"Say ‘goodbye’ to Ho Chi Minh City and hello to Da Nang. Located in Viet Nam’s north (sic), low-cost carriers like Air Asia and Jetstar can get you there on the cheap, and from this city, it's an hour's drive to Hoi An, a beautiful town well worth your time," Finder wrote.

The site gives tips on how to make the most out of a trip to Da Nang.

"Da Nang has a beautiful beach, but it's also only an hour's drive from Hoi An. Split your time between both (because you can) and take the fast route by taxi between each. These are quite inexpensive, so it won't blow too much of that budget."

Lisbon (Portugal) tops the Finder’s list, followed by Malta, Turkey, Jordan, Japan, Da Nang (Viet Nam), Perth (Australia), the Netherlands, Uzbekistan, Georgia, Durban (South Africa) and Bacalar (Mexico).

Earlier this year, the central city was voted by travel magazine Live and Invest Overseas as one of the most livable cities in the world.

Da Nang has become a destination for both domestic and foreign tourists thanks to its location near world cultural heritages, diverse tourism products and a port system which can serve international cruise ships.

The city is seeking to develop cruise-based tourism as an increasing number of tourists from Australia, China, Germany, Spain, and the UK have come to Da Nang city and the Central Highlands region on famous cruise ships like Star Cruises, Costa Cruises, AIDA Cruises, Dream Cruises and Holland America Cruises.

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Viet Nam: Wood Products Exports to Reach Record High in 2018

Viet Nam’s wood and wood products exports reached a record high in the first 11 months of 2018 to US$7.22 billion, up 15.63 percent compared to the same period last year. In the last decade, the country’s wood processing industry has grown 2.7 times, making Viet Nam the world’s fifth largest wood exporter with a market share of six percent, second largest in Asia, and first in Southeast Asia.

The number of enterprises has grown from 2,500 in 2008 to 4,500 in 2017, including 3,900 domestic and 600 foreign-funded enterprises. Earlier, foreign firms accounted for over 70 percent of the country’s total wood exports, but now, the share of domestic firms in total exports has reached 53 percent.

The wood industry is one of the largest export industries in Viet Nam. To ensure a sustainable growth and conservation, the government issued Decision No: 1288/QD-TTg in October 2018, approving a project on sustainable forest management and forest certification by establishing the national forest certification system

Wood production and processing

Wood production in 2017 was estimated to be 11.5 million m3, up 12.4 percent. In the first 11 months of 2018, it was 11.6 million m3, growing by 10 percent compared to the same period last year.

Major provinces of wood production in 2017 were Tuyen Quang, Quang Nam, Quang Ngai, and Binh Dinh.

In the wood processing sector, Binh Duong attracts a large number of enterprises due to its labor force and its linkages to key timber areas in the Southeast and Central Highlands of Viet Nam. In 2017, Binh Duong’s wood processing exports reached US$4 billion, accounting for 54.8 percent of Viet Nam’s total wood exports. In the first six months of 2018, their exports have already reached US$1.5 billion.

Trade

Exports

In the first 11 months of 2018, forestry products exports were estimated at US$8.49 billion, up 16.6 percent, accounting for almost a quarter of the total agriculture-forestry-fishery exports.

Within forestry products, wood and wood products exports reached US$7.22 billion during the same period, up 15.63 percent compared to the same period last year.

Exports are estimated to reach US$9.3 billion in 2018, with trade surplus estimated at US$6.4 billion.

Major export markets include the US, Japan, the European Union (EU), China, and Korea, accounting for 87.33 percent of the total exports.

Imports

In the first 11 months of 2018, imports of wood and wooden furniture reached US$2.1 billion, up 6.17 percent, compared to the same period last year.

Major import markets include China, the US, Cambodia, and Thailand.

Going forward

In October 2018, Viet Nam and the EU signed a Voluntary Partnership Agreement (VPA) on Forest Law Enforcement, Governance, and Trade (FLEGT). This agreement will help improve regulations on forest management, reduce illegal logging, and increase exports of timber products to the EU.

In addition, the upcoming Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will lead to a further increase in export orders.

To achieve the government’s exports target of US$12-13 billion by 2020 and retain their competitiveness, companies in the wood processing sector need to continue to focus on improving efficiency and increasing investments in advanced technologies and equipment.

Viet Nam’s Solar Power Market

Viet Nam’s energy demand is predicted to increase by over 10 percent by 2020, while energy consumption is projected to increase four-fold by 2030 compared to 2014. To meet the growing demand which cannot be fulfilled by sources like coal and hydro, the government is promoting other renewable sources such as biomass, solar and wind to reduce the gap between demand and supply.

Solar power industry

The potential for solar energy in Viet Nam is between 60 and 100 GWh per year for concentrated solar power, while for photovoltaic (PV) systems, it is around 0.8 to 1.2 GWH per year. With around 1,600 to 2,700 hours of sunlight per year and an average direct normal irradiance (DNI) of 4-5 kWh/m2, the country has huge potential for solar power. DNI is the amount of solar radiation received per unit area by a surface perpendicular (normal) to the rays.

Region

Ninh Thuan province in south-central Viet Nam has the highest potential for solar power generation. The region has already attracted over 140 projects. Other potential areas include Binh Thuan, Daklak, and Khanh Hoa which have attracted 100, 13, and 12 projects respectively.

Government targets

Solar power accounts for only 0.01 percent of the total output, and the government aims to increase this to 3.3 percent and 20 percent by 2030 and 2050 respectively.

The government’s target by 2020 and 2025 is to install 850 MW and 4 GW respectively. By 2030, it aims to increase it to 12 GW.

Projects

The government has approved more than 70 new projects, with a total capacity of over 3,000 MW that needs to begin operations before June 2019. As of July 2018, projects with a total capacity of 12,622 MW were in the pre-investment phase, while 1,432 MW were in the development and feasibility phase. Around 1000 MW are under construction, while only 8 MW is in the operating stage.

As of July 2018, 748 solar roof-top projects are in operation with a total capacity of 11.55 MW peak. Major companies that installed roof-top systems include Intel, Avery Dennison, and Deutsche Bekleidungswerke. In addition, government buildings of the MoIT, National Assembly, and UN have also installed roof-top solar systems. According to government estimates, rooftop solar projects can reduce monthly power bills by over 50 percent.

Major companies

Major investors in the solar power industry in Viet Nam include German ASEAN Power, B.Grimm Power Public Co Ltd, Trina Solar, Siemens, Schletter Group, JA Solar, Sunseap International, Nippon Sheet Glass, Ecoprogetti, Tata Power, Shapoorji Pallonji Infrastructure Capital, Gulf Energy Development, InfraCo Asia Development, and ACWA Power.

Although there is no foreign ownership restriction in the industry, PPP projects in the form of BOT contracts are usually preferred due to government guarantees and incentives.

Incentives

Investors are entitled to exemption from the land use fee for a period of 11 years and 15 years in case of rural areas. In addition, during the construction of the plant or building, investors are entitled to exemption from land and water surface rents.

Corporations can also avail a reduction in corporate income taxes (CIT). A CIT of 10 percent is applicable for renewable energy producers for the first 15 years. Under certain conditions, CIT exemptions are also provided for investors.

Import duties are also exempted in case imported goods are raw materials or are used in the manufacturing of components.

Regulations

In 2017, the government issued Decree No.11/2017/QD-TTg on mechanisms for encouraging the development of solar power in the country. Guidelines on PPA for solar projects were set out in Circular 16/2017/TT-BCT. Together, these include guidelines on the approval process, power development plans, technical requirements, and tariff structures and covers both commercial as well as rooftop projects. In Viet Nam, the Electricity of Viet Nam (EVN) is the sole buyer of energy generated from solar power projects.

Feed-in-tariffs (FIT) for commercial and rooftop projects have a commercial operation date (COD) of June 2019. Investors have recommended the government to increase the COD beyond 2019 as it is a tight deadline that can deter long-term investments. Based on the feedback, the government extended the COD to 2020 through Resolution No. 115/NQ-CP, but only for the Ninh Thuan province. The government is planning to do the same for other provinces as well.

The government is also planning to introduce a direct power purchase agreement (DDPA) for renewable energy in 2019. DDPA is an agreement between a power generator and a corporate consumer, which will allow power generation companies to sell their electricity directly to corporations.

Feed-in-tariffs

The FIT for utility solar power plants is VND2,086 (9.35 US cents/kWh) for a period of 20 years. For rooftop projects, the net-metering is 9.35 US cents/kWh. This rate will also apply for excess power generated from rooftop solar projects that begin their operations before the 2019 deadline and sell it to the EVN

The FIT will be applicable for projects beginning operations before 30 June 2019, except for ones in Ninh Thuan province, which have a 2020 deadline. Once the COD deadline expires, new FIT rates will be finalized, which may be lower than current rates.

Challenges

The major challenges facing investors are government policies on solar prices and COD deadlines. Government policies need to be more consistent and COD deadlines need to be extended beyond 2019, as permitting processes and land acquisitions in Viet Nam take time which can lead to project delays. Other challenges include lack of financing, technical expertise of the local developers, and grid infrastructure quality.

The government needs to increase transparency, provide financial support, reform administrative processes related to permits and land acquisitions, create consistent pricing policies, and develop the grid infrastructure to meet the growing energy demand.

New Regulations on the Inspection and Verification of Origin of Exports

Viet Nam’s Ministry of Industry and Trade has just released Circular No.39/2018/TT-BCT (“Circular 39”) providing guidance on the procedures for inspection and verification of origin of exported goods before and after the issuance of certificates of origin (C/O).

Circular 39 will come into effect on December 14 and includes two forms of examination, examination of dossiers, and on-site verification at production establishments.

Circular 39

Examination of dossiers

Examination of the origin dossiers can be carried out if the competent authorities in the importing country have proposed such inspections. In addition, the domestic C/O issuing authorities can also inspect in case there are signs of origin frauds.

Other local domestic functional agencies can also request for coordination if there are signs of violation.

Inspection and verification at production establishments

If the examination of dossiers and other documents are not sufficient to determine the origin or if they suspect of fraud, the competent authorities of importing countries can request for the examination of C/O documents and inspection and verification of goods at production establishments.

In addition, the local C/O issuing authority can also initiate the verification of the origin of goods to meet their requirements of risk management and frauds. Other domestic agencies can also suggest for inspections.

The new regulations will increase the coordination amongst the domestic authorities, customs offices, and traders in importing countries.

Going forward, the frequency of such inspections and verifications are expected to increase, and will lead to reduced violations and origin frauds.

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