Vietnam’s 15th National Assembly wrapped up its 8th session on the weekend bringing to the end a month of debate and discussion with a number of new laws and amendments to existing laws approved. Here’s a few key takeaways for firms doing business in Vietnam… Read More »

Aviation news

Vietnam Airlines approved to issue shares to clear some debt

Vietnam’s National Assembly has approved a plan to issue VND 22 trillion or US$867.2 million worth of shares to existing shareholders to help clear the airline’s outstanding debts. It has also agreed to defer tax owed by Pacific Airlines, a subsidiary of Vietnam Airlines, to the end of the year.

This is an interesting development in that 86 percent of the airline is owned by the government. With this in mind, the National Assembly has effectively given the government permission to issue several thousand billion dong worth of shares to itself.

Furthermore, it has been made clear that Pacific Airlines will be required to pay its outstanding tax debt when its extension ends. It’s not clear, however, how the government might go about collecting on said tax debt given that, once again, it is the majority shareholder in the airline.

Of note, VN Express had Vietnam Airlines’ accumulated debt at the end of September at VND 35.2 trillion or US$1.39 billion.

Banking and Finance News

State Bank continues open market operations

The State Bank of Vietnam has continued to intervene in the currency market with US$1.36 billion in treasury bills outstanding as of the close of business Thursday. There were also reverse repurchase agreements outstanding to the tune of US$1.3 billion.

Of note, CafeF reported this week that the SBV has advised some local banks that it intends to resume selling foreign currency. This was also reported by Vietnam Securities Economic Magazine which has noted the intervention price has been set at 25,450–Vietcombank, among Vietnam’s biggest foreign currency traders, was selling US dollars Wednesday for 25,475.

State Bank raises bank credit limits

At the direction of the Prime Minister, the State Bank of Vietnam has raised the credit limits of several banks in order to reach the country’s 15 percent credit growth target for the year.

Nguoi Lao Dong has reported that credit growth was sitting at just 11.12 percent as of November 22. This would mean banks would need to lend an additional VND 525.1 billion or US$20.7 billion (roughly 5 percent of Vietnam’s GDP) by the end of December.

This is an interesting decision with broad uncertainty around what might happen with respect to the US dollar when Trump assumes the presidency in January, though most economists are expecting a stronger dollar. Bad debts among Vietnam’s banks have also been rising and the country’s US dollar reserves have fallen below the IMF-recommended three months’ worth of imports.

Energy news

Pursuit of Ninh Thuan nuclear power plant to resume

Vietnam’s National Assembly has approved a resolution that would see a resumption of a nuclear power plant project in southern Vietnam’s Ninh Thuan province. The project was first approved in 2009, however, it was abandoned in 2016 on the back of lower demand projections.

Coverage from Dau Tu Chung Khoan notes that the cost was estimated to be VND 200,000 billion in 2009 (This is about US$7.9 billion at today’s exchange rate). In addition, the publication points out that several key issues were raised by the NA including radioactive waste management and community safety, though these do not appear to have been addressed.

It also carries comments from Minister of Industry and Trade Nguyen Hong Dien.

“Therefore, nuclear power and new energy sources in the future must definitely exist, but to have them in practice, they must be mentioned in the law right now… Only then will there be a nuclear power project after 10 years,” he is quoted as saying.

This seems to suggest that the Ministry is not anticipating nuclear power to be operational anytime soon.

Also of interest, Nguoi Quan Sat digs into the technical side of nuclear power breaking down the difference between large-scale and small-scale nuclear power. It carries comments from the Director of the Center for Energy and Green Growth Research, Ha Dang Son, in which he points out that whether small scale or large scale the process with respect to time and capital when working with international partners is much the same.

Infrastructure news

Vietnam National Assembly approves Hanoi-HCMC High-Speed Rail

Vietnam’s National Assembly has passed a resolution clearing the way for a proposed high-speed rail project between Hanoi and Ho Chi Minh City to move forward. The next step will be a feasibility study.

There are a few key details that are noteworthy here courtesy of VN Express:

The project will require the resettlement of an estimated 120,836 people. Historically, with big infrastructure projects land acquisitions have been a key obstacle with officials reluctant to exercise eminent domain, instead preferring to negotiate an outcome with landowners which can often be a lengthy process.
Provinces will be allowed to adjust mining licences for key construction materials for the project without following standard procedures. This includes removing environmental impact report assessment requirements.
Any work performed by a foreign entity must include technology transfers to local entities as well as training for local workers. This may be off-putting for some foreign bidders if proprietary technology is involved.
Funding–the project is expected to cost about US$67 billion–is expected to be a combination of government bonds, overseas development assistance, and loans. Of note, there has been a push to try and keep funding in-house, however, given the size of the project and funding required this would be challenging.

The response to this new project has not, however, been without some concern.

BBC Vietnamese, for example, has comments from Tran Quoc Viet, Chairman of the Board of Directors of Region 1 Railway Services Joint Stock Company, who essentially suggests it is all moving too fast and points out there is a dearth of high-speed rail expertise in Vietnam to properly assess the project. On that note, Radio Free Asia notes that the pre-feasibility study for the project was conducted by a consortium of local firms.

Vietnam struggles to disburse foreign loans on site clearance, approval delays

Vietnam had disbursed just 30.3 percent of the public investment funds from foreign loans at the end of November. This was an improvement over the same time last year when that number was sitting at just 24.89 percent, though still well below the target of 95 percent.

On the issue, Bao Chinh Phu has comments from several provincial leaders that have all detailed the same sorts of problems in that plans are often changed after being approved which has seen delays as approvals for the revised plans have been sought. This often connects with site clearance delays in that often the changes are in the size of compensation payments.

Similarly, VietnamNet is carrying comments from Nguyen Thai Son, from Vietnam’s Department of Construction Management, Ministry of Agriculture and Rural Development in which he says the delayed pricing frameworks after the new Land Law came into effect has seen site clearance procedures ‘almost stopped’ with respect to agricultural projects.

Of note, Reuters reported back in May that the United Nations, World Bank, and a handful of other donors had sent a letter to the Prime Minister of Vietnam pointing out the country has lost US$2.5 billion in aid funding over the last three years due to approval delays. It also noted that a further US$1 billion was awaiting project approval. Reuters went on to assess that this was due to the ongoing ‘blazing furnace’ corruption crackdown.

Retail news

China’s Temu semi-halts operations in Vietnam on registration challenges

Chinese e-commerce giant Temu has removed the Vietnamese language version of its website in order to comply with Vietnam’s cross-border e-commerce requirements. Specifically, cross-border e-commerce providers must register with the Vietnam Ministry of Industry and Trade if they: use a .vn domain name, display content in Vietnamese, or process more than 100,000 transactions per year from Vietnam.

Of note, Temu was not using a .vn domain name and it seems unlikely it would have reached 100,000 transactions in the few months it has been operating in the country. Ergo, by removing the Vietnamese language website the firm is now compliant–VN Express confirmed this with a representative from the Ministry of Industry.

It’s also been reported that customs is refusing to clear e-commerce packages from firms that should be registered but are not. However, if by removing the Vietnamese language site Temu is now compliant, this should not be an issue moving forward.

PM pushes for greater domestic consumption

With retail sales growth sluggish for most of this year, Vietnam’s Prime Minister has issued a Directive designed to increase domestic consumption in the lead-up to the Lunar New Year break at the end of January. Though lacking specific details the directive requests policy ideas from the Ministry of Industry and Trade to boost consumption and the simplification of procedures for consumer loans.

Overall, local media coverage suggests a broad consensus that there is a domestic consumption problem, relative to past experiences, in the lead-up to the Lunar New Year.

For example, on the issue, Tuoi Tre has spoken with a number of businesses, most of whom have suggested they are anticipating a slower-than-usual Lunar New Year shopping season. They note that input costs have increased, however, anticipated lower purchasing power is seeing many businesses hold their prices or limit price increases and instead absorb the costs.

Alternatively, Dau Tu Online has contextualised this with comments made at the National Assembly in which concerns were raised that Vietnam was overly dependent on its export activities and that increased domestic consumption would be crucial to sustainable growth. It also makes note of the extension to the 2 percent Value-added Tax cut, though already in place for a number of years, this is unlikely to stimulate growth per se but rather see more of the same.

That said, there does not seem to be much in the way of analysis of the specific aspects of the Prime Minister’s Directive–like where the bloat might be in consumer loan procedures–or how it might manifest in a practical sense.

Stock market news

Foreign traders return to market, net-sell US$7.3 million

Over the last five trading sessions to the close of business on December 5, foreign investors net-sold US$7.3 million worth of HCMC Stock Exchange stocks. This was in line with months of mass withdrawals from the exchange by foreign investors (although there was a net-buy last week). Specifically, foreign traders this year have net-sold just shy of US$3.49 billion or nearly US$3.8 billion since the same time last year.

Foreign trader activity, last five trading days

	Buy		Sell		Change
Date	VNDbns	US$	VNDbns	US$	VNDbns	US$
29/11	1,812	$71,366,707	1,482	$58,369,459	330	$12,997,248
2/12	1,530	$60,259,968	1,835	$72,272,576	-305	-$12,012,608
3/12	1,261	$49,665,242	1,487	$58,566,387	-226	-$8,901,146
4/12	1,037	$40,842,867	1,689	$66,522,278	-652	-$25,679,411
5/12	2,003	$78,889,357	1,336	$52,619,162	667	$26,270,195
Total	7,643	$301,024,141	7,829	$308,349,862	-186	-$7,325,722

Source: Vietnam Stock Market Tracker

Trade news

Philippines to investigate Vietnam cement dumping claims

The Philippines has announced it will launch an anti-dumping investigation into cement products from several countries including Vietnam. In its announcement, the Department of Trade and Industry of the Philippines noted that Vietnam has accounted for more than 90 percent of the country’s cement imports since 2020.

On the flip side, the Philippines accounted for 27 percent of Vietnam’s cement exports to the end of October this year. With this in mind, Vietnam’s cement oversupply problem may be about to get worse.

The week ahead

There are a handful of events coming up this week. For more information see the: Doing Business in Vietnam: Events Directory 2024

Also, Vietnam is a dynamic market that is changing rapidly. To keep updated to date with the business environment and how it is evolving make sure to subscribe to the-shiv.

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