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Here is your Mekong Memo Vietnam for the week of October 26, 2023:
Energy was a big topic this week, so we’ve formatted the highlights a little differently:
Renewable Energy Investments and Developments
Vietnam's Commitment to Clean Energy Transition: The country is making strides in its clean energy journey, with a focus on enhancing its legal framework and encouraging foreign investments. (VietnamPlus)
Jinko Solar's Major Investment in Northern Vietnam: A significant $710 million investment to establish a solar panel manufacturing facility, aiming to boost the local economy and provide job opportunities. (The Investor)
Dutch Firm's Waste-to-Power Plant Initiative: A $122 million project in Southern Vietnam, focusing on converting waste to power, aligning with the country's renewable energy goals. (The Investor)
Energy Trade and Export
Vietnam's Low-Carbon Electricity Export to Singapore: A groundbreaking move to export 1.2 GW of low-carbon electricity to Singapore, marking a significant step in regional energy cooperation. (VIR, Tuoi Tre News, The Investor)
Government Initiatives and Regulations
Vietnam Government's Push for Early Completion of Power Purchase Mechanism: A call for swift action to establish a direct power purchase mechanism, aiming to facilitate the growth of renewable energy in the country. (The Investor)
Challenges in Implementing Offshore Wind Power Projects: Highlighting the current legal and regulatory hurdles that are hindering the progress of offshore wind power projects in Vietnam. (The Investor)
An Urgent Quest for Energy Stability
Vietnam faces a pressing challenge to stabilize its power supplies following a series of blackouts during the summer, raising concerns for the business outlook as the economy is expected to continue growing. The government is actively seeking solutions, including diversifying energy sources and expediting infrastructure projects. However, experts warn that the risk of power shortages could persist into the mid-term, highlighting the need for swift and strategic action to ensure energy stability and support economic growth.
Read more: Nikkei Asia
Economic Resilience and Challenges for Growth
Vietnam is on the path of economic recovery, aiming for a GDP growth of over 5% this year. The government is actively implementing salary reforms and striving to maintain stability. While some experts express concerns about the attainability of these targets, others remain optimistic, forecasting a rebound to 6.5% over the next few years. International financial institutions like the IMF and Standard Chartered have also projected a positive outlook, emphasizing the country’s potential for a strong economic comeback.
Agricultural Exports Flourishing
Vietnam's agricultural sector is experiencing a significant upswing, with fruit and vegetable exports expected to surpass $5.5 billion, and aquatic products aiming for a $9.3 billion revenue in 2023. The surge in durian exports, reaching $1.63 billion in the first nine months, has notably positioned it as the top earner in the fruit and vegetable segment. At the same time, the aquatic sector is thriving, with shrimp and catfish being substantial contributors. This remarkable performance is attributed to Vietnam's strategic market expansion and quality improvement initiatives, ensuring a robust presence in global markets.
The Laos-Vietnam Railway Project
The Laos-Vietnam railway project, a joint venture between Vietnam’s Deo Ca Group JSC and Laos’ Petroleum Trading Lao Public Company, has officially been approved, marking a significant step towards easing the business of regional trade and tourism. The project is part of the Vientiane-Vung Ang railway development plan, which is to establish a direct link between the two countries, enhancing economic and infrastructure development. The first section, spanning 103 kilometers, is estimated to cost around $1.12 billion, with the entire project expected to be operational by early 2027. This railway is set to connect Laos to regional maritime trade, strengthen economic ties with Vietnam, and target markets in China, South Korea, and Japan, playing a crucial role in the region’s growth and development.
The Fiscal Backbone: Top Corporate Taxpayers
In 2022, the top 1,000 corporate taxpayers in Vietnam significantly impacted the nation's revenue, contributing 58% of the total tax income. Leading the pack were prominent entities such as Honda, Vietcombank, and Samsung Electronics Thai Nguyen Company. The list saw a shift from the previous year, with 331 companies no longer featured, a change attributed to a variety of factors including tax prepayments, unique transactions, downsizing, and reduced profitability. This data highlights the crucial role these major corporations play in supporting Vietnam's economy, while also pointing to the necessity of expanding the tax base to ensure long-term fiscal stability.
Real Estate Update
Vietnam's real estate market is experiencing a complex period with both challenges and growth across various sectors. The residential market in Hanoi has seen a surge in prices, with a notable increase of nearly 7% in Q3 2023 compared to the previous quarter, and a 14% rise year on year. This is attributed to the high-end new supply dominating the market, along with several projects increasing their primary selling prices. The average selling price in the secondary market also continues to rise, reflecting the overall upward trend in property prices in the city. However, the market faces challenges with a significant number of new entrants, adding to the already intense competition. In the industrial sector, there is a soaring demand for land leases, particularly from foreign investors in manufacturing, leading to a substantial increase in rents in both northern and southern regions. This influx of foreign investment is contributing positively to the market, yet it also underscores the urgent need for additional supply to meet the growing demand.
Read more: The Investor (Acceleration), The Investor (Survival Focus), The Saigon Times (New Entrants), VIR (Hanoi), Vietnam News (Hanoi), VnExpress (Apartments), Vietnam News (Apartments), VnExpress (Industrial Land)
FDI Prospects Remain Positive
Vietnam is poised for a substantial increase in Foreign Direct Investment (FDI) in 2023, surpassing the figures from the previous year. This optimistic outlook is driven by growing investor confidence and a robust economic environment. The government's proactive measures and the country's stability play a crucial role in attracting foreign investments, promising a thriving year ahead for Vietnam's economy.
Foxlink’s $135 Million Investment
Taiwan-based Foxlink International Investment Ltd. is set to ignite Da Nang's high-tech sector with a $135 million investment, establishing an electronics manufacturing plant at the Da Nang Hi-Tech Park. This move is anticipated to generate nearly 2,000 jobs, contributing significantly to the local economy. The plant will specialize in producing high-tech electronic equipment, including touch pens, wireless earphones, batteries, charging stations, and printed circuit boards. This development is a part of Da Nang's broader initiative to attract major hi-tech projects, emphasizing industrial electronics and microchips to drive future growth.
Saudi Aramco Explores VN Petrochemical Opportunities
Saudi Aramco, the world's largest oil company, is exploring investment opportunities in Vietnam's burgeoning petrochemical and oil refinery sector. During a meeting with Vietnamese Prime Minister Pham Minh Chinh, Aramco's Vice President, Yasser M. Mufti, expressed interest in establishing an oil refinery in Vietnam, marking a potential shift from being a crude oil supplier to engaging in direct investment. The Vietnamese government has called for investments, highlighting the country's desire to diversify its market, especially in the petrochemical domain. Aramco's move aligns with its production capacity expansion plans and ongoing efforts to reduce carbon emissions.
Rural Areas Continue Going Cashless
Vietnam is witnessing a significant shift towards cashless transactions, even in the most remote areas. The government's efforts to promote digital payments, paired with the increasing use of smartphones, have played a crucial role in this transition. Financial institutions are also contributing by expanding their network of POS terminals and encouraging local businesses to adopt digital payment methods.
Read more: Vietnam News (Video)
Huawei and ZTE in 5G Talks
In a move to advance Vietnam's digital transformation, President Vo Van Thuong engaged with executives from ZTE and Huawei, emphasizing the nation's eagerness to welcome investments from tech giants and enhance its digital infrastructure. The discussions highlighted ZTE's existing partnerships with Vietnamese telecom firms and Huawei's global heft in ICT, digital energy, and cloud computing. Both companies expressed their commitment to supporting and improving Vietnam's digital competitiveness.
Escaping the FATF Grey List
Vietnam is actively implementing measures to be removed from the Financial Action Task Force (FATF) grey list, recognizing the adverse impacts on its banking system, economy, and global standing. Deputy Prime Minister Le Minh Khai has underscored the urgency of complying with FATF’s recommendations, urging the State Bank of Vietnam to finalize and submit the action plans for government approval. Failure to show effective cooperation could risk Vietnam being placed on the FATF’s Black List, leading to increased business costs and operational disruptions.
Read more: The Saigon Times
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