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Here is your Mekong Memo Vietnam for November 2, 2023:
Export Boom Fueled by Five Years in CPTPP
Vietnam has seen remarkable export growth since joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) nearly five years ago. Despite global challenges like pandemics and war, the country's export turnover to CPTPP nations reached $53.6 billion last year, a 17.3% YoY increase. Particularly noteworthy is the trade surplus of $11 billion with new FTA partners like Canada, Mexico, and Peru. The agreement has also enhanced Vietnam's economic reputation and led to increased interest from businesses and governments in other CPTPP countries.
Read more: Vietnam News
Diplomatic Roundup: Mongolia, Denmark, the Netherlands, Colombia
Vietnam continues to strengthen its international relations through high-profile visits and partnerships. The Mongolian President's visit is intended to elevate the seven-decade cooperative relations between the two countries, focusing on politics, defense, and economy. Vietnam and Denmark have established a green strategic partnership, emphasizing sustainable development and climate action. The Dutch Prime Minister's visit focuses on high technology and digital transformation, building on the countries' comprehensive partnership established in 2019.
Stock Market Hits 14-Month Nadir
Vietnam's VN-Index experienced its steepest monthly decline since September 2022, losing nearly 126 points or 10.9% to close October at 1,028.19 points. The average daily trading value across the country's three main exchanges plummeted by 36.7% compared to the previous month. Blue-chip stocks were the primary drag on the index. Foreign investors continued to be net sellers for the seventh consecutive month, particularly offloading stocks in key sectors like real estate, banking, and retail.
Read more: The Investor
Manufacturing Sector Struggles Despite Uptick in Orders
Vietnam's manufacturing PMI remained in contraction, dipping slightly to 49.6 in October from 49.7 in September. While new orders increased for the third consecutive month, the rate of growth was the weakest in the current upturn. Employment levels stabilized, ending a seven-month decline. Input and output cost inflation accelerated to an eight-month high, influenced by currency weakness and rising oil prices. Manufacturers used existing inventories to meet new orders rather than ramping up production.
Foreign Direct Investment Robust
Vietnam is experiencing a surge in foreign investment, attracting double the monthly average financial pledges this year. U.S. firm Coherent is planning high-tech investments in Northern Vietnam, while Samsung further cements its status as a premier foreign investor in the country. The manufacturing and processing industry is the primary recipient, accounting for almost 73.1% of the total FDI. Notably, newly registered FDI has surged by 54% in the first 10 months of 2023, with HCM City leading in attracting new projects.
Challenges and opportunities for UK in Vietnam
Two years into the UK-Vietnam Free Trade Agreement (UKVFTA), both countries are keen on long-term collaboration across various sectors, including renewable energy, finance, and food and drink. While British businesses see Vietnam as a promising production hub, challenges like understanding the local business landscape and establishing a clear taxation framework remain. Initiatives like the Just Energy Transition Partnership (JETP) and efforts to make Vietnam a regional financial center indicate a commitment to not just trade but also knowledge transfer and capacity building.
Read more: Vietnam News
Tourism Boom: Annual Projections Shattered
Vietnam welcomed 8.9 million foreign tourists in the first nine months of 2023, already exceeding its full annual target of 8 million. This nearly five-fold increase from last year is attributed to accessible e-visa policies, affordable holiday packages, and a diverse range of transportation options. Asia was the primary source of these arrivals, followed by Europe, the Americas, and Oceania. The country now is aiming to attract 10-12 million foreign tourists in 2023, buoyed by extended e-visa validity and a rising trend in solo travel. On the back of Vietnam’s continuing tourism success, Marriott International announced that they will be opening an additional 20 new hotels and resorts over the 16 that they currently operate in the country.
Exporters: Go Green or Go Home
Vietnamese exporters are advised to transition to low-carbon, environmentally friendly production to meet the demands of major markets like the EU and the U.S. The shift is considered crucial for long-term competitiveness and aligns with global efforts to achieve net-zero emissions by 2050. The trend is not just a response to international pressure but is increasingly demanded by both foreign and domestic clients. Companies like Walmart, Aeon, and IKEA are already seeking Vietnamese suppliers that meet these green production standards.
Read more: QDND
Canada and Vietnam in Trade and Sustainability
Canada and Vietnam are strengthening their trade relations, particularly in agriculture and food quality. Canada is keen to support Vietnam in enhancing food safety and quality for global exports. Both nations are benefiting from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has eliminated trade barriers. Vietnam is viewed as an essential part of Canada's Indo-Pacific strategy, and the two countries are working towards a free trade agreement. The focus is also on sustainable practices and low-emission agricultural production.
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