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Here is your Mekong Memo Vietnam for November 30, 2023*.
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Banking and Anti-Corruption Efforts Intensify
In perhaps a case of closing the barn door after the horse has already left, the government is claiming an intensification of its banking supervision and anti-corruption measures. The State Bank of Vietnam wants to minimize manipulation and cross-ownership in banks, focusing on transparency and risk control. This includes monitoring shareholders with significant ownership and reducing credit ceilings. The Communist Party of Vietnam is accelerating its anti-corruption campaign.
Nobody has been covering the story better than Michael Tatarski at Vietnam Weekly, so check it out there. (On another note, if you’d like to subscribe to the Vietnam Weekly with an annual subscription, reply to this email - we’ve got an offer for you).
Luxury Retail Blooms
Vietnam is emerging as a player in Southeast Asia's luxury retail sector, with leading brands like Loewe, Van Cleef & Arpels, and Breitling entering Ho Chi Minh City. This influx, encouraged by a growing wealthy consumer class and high-quality retail spaces, contrasts with challenges faced by mid-range brands, which are seeing a 20-30% sales drop. Vietnam's overall retail segment is contributing significantly to economic growth, however, with a 8.6% year-on-year increase in retail sales in the first nine months of 2023.
Read more: The Investor
Wealthy Population to Surge by 2027
Vietnam is on track for a sharp rise in its ultra-rich population, with a projected increase to 1,300 people by 2027, a 22% growth from 2022. This increase aligns with a 70% increase in dollar millionaires over the past five years. To cater to this affluent group, financial markets are evolving - one example being BIDV's partnership with Edmond de Rothschild Group to offer private banking services for high-asset clients.
Read more: DTiNews
GMT: Balancing Between Revenue and FDI Appeal
Vietnam's National Assembly has overwhelmingly approved the implementation of a global minimum tax (GMT) of 15% on large multinational enterprises (MNEs), effective January 1, 2024. This move is in line with the OECD's initiative to curb tax avoidance and harmonize tax practices globally. While the policy is expected to impact just over 100 MNEs in Vietnam and potentially increase tax revenues, there is a growing call for supportive measures to maintain the country's attractiveness to foreign investors. Lawmakers emphasize the need for new incentives and a comprehensive assessment of the investment environment to balance the benefits of increased tax revenue with the potential reduction in foreign direct investment (FDI) attractiveness.
Read more: Yahoo News (Implementation), Vietnam News (Approval), The Investor (Policy), The Investor (Policy), Vietnam News (Incentives for FDI), Financial Times (Impact on Samsung, Intel), Tuoi Tre (Impact on FDI)
Diplomatic Roundup: Turkiye, Palestine, Japan, Bangladesh
Highlights on the diplomatic circuit this week include developments with Turkiye, Palestine, Japan, and Bangladesh. With Turkiye, Vietnam aims to reach a $4 billion trade target and simplify visa processes to boost tourism. Vietnam is commemorating 35 years of diplomatic ties with Palestine, emphasizing solidarity and support. In Japan, President Vo Van Thuong's policy speech at the National Diet was hailed as a landmark in deepening the partnership, focusing on peace and prosperity in Asia. Vietnam and Bangladesh are exploring new avenues for bilateral cooperation, particularly in port city development and trade.
Energy Roundup: Solar, Wind, LNG
A $25 million solar panel plant is set to be built in Yen Bai, while Japan's Vsun Solar has inaugurated the first phase of a $200 million solar cell factory, in another boost. Coro Energy PLC is restructuring its Vietnamese ventures, including a 50MW rooftop solar project, increasing its equity interest in the market.
The wind power sector is also gaining momentum. Singapore has approved the sale of 1.2GW from a 2.3GW offshore wind farm in Vietnam, contingent on Vietnam finalizing a development framework within the next year.
Interest in developing a robust liquefied natural gas (LNG) market faces a host of challenges, including the need for improved infrastructure, planning, and market mechanisms. Some of the challenges listed in the article:
The country lacks a fully functional legal framework for LNG power projects
Fluctuating LNG prices pose a risk to its price-sensitive market
The complexity of negotiating Power Purchase Agreements (PPA)
Absence of government guarantees for LNG projects
Lack of centralized LNG storage facilities and high import costs (which constitute a major portion of total costs)