Ho Chi Minh City Attracted over 4.1 Billion USD FDI Capital

  That is the information released at the meeting on socio-economic situation in the first 6 months of the People's Committee of Ho Chi Minh City, which was held on July 3^rd. Accordingly, HCMC remains an outstanding investment destination for foreign investors to set up company in Vietnam.

Specifically, HCMC has granted investment registration certificates to 483 FDI projects with a total investment capital of 486.53 million USD (equivalent to 128.8% of new projects and 121.8% of investment capital over the same period).

With the newly licensed projects, in terms of sectors, the manufacturing and processing industries attract the most investment capital with 27.2%; followed by real estate business with 25.5%... In terms of the nationality of investors, Korea has the largest proportion of investment capital with 30.3%; followed by Singapore with 22%...

The city also licensed 136 projects to increase capital with total investment capital of 417.21 million USD (equaling 137.4% of adjusted projects and 113.1% of investment capital over the same period).

In addition, the City also approved 1,421 cases where foreign investors implemented procedures to contribute capital, purchase shares, buy back capital contributions from domestic enterprises, with registered capital equivalent to 3.28 billion USD (compared with the same period, equivalent to 134.6% of cases and 153.7% of investment capital).

In this form of investment, in terms of industry/sector, real estate business has the most investment capital with 43%; followed by professional, science and technology activities with 21.5%...

In terms of both capital attracted in the form of granting investment registration certificate and capital attracted through the form of capital contribution, share purchase, capital contribution in the domestic enterprises, HCMC has attracted 4.18 billion USD (equal to 144.1% over the same period).

According to statistics, so far in HCMC, there are 7,910 effective FDI projects with total investment capital including new and capital increase projects of 45.05 billion USD.

In the first half of 2018, the Management Board of the Export Processing and Industrial Zones of HCMC has granted 12 projects; Ho Chi Minh City Hi-tech Park Management Board has granted 3 projects and Ho Chi Minh City Department of Planning and Investment has granted 468 projects.

One noteworthy point is that newly licensed FDI projects in HCMC have increased in terms of number of projects and registered capital compared to the same period last year, but the scale of investment is still small (average only 1 million USD/project).

In particular, the project of Samil Pharmaceutical Co., Ltd. (Korea) in Saigon Hi-Tech Park with registered capital of 40 million USD is one of the largest projects. The project is built on an area of 7,500 m2, with the goal of developing and producing eye drops (single dose and multiple doses); research, development and production of special drugs after eye surgery, stem cell medicine for eye treatment... According to the plan, the project will be built immediately after being licensed and officially started operation from the end of 2021.

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ESMO Corporation (Korea) Kicked off The First Automobile Cable Factory in Vietnam

  ESMO Corporation (precursor is NEXEN TECH Corporation - Korea) has just started construction of the first ESMO VINA automobile cable factory in Vietnam.

ESMO VINA automobile cable factory has a total area of 63,500 m2 and total investment capital of 700 billion VND, located in Gia Phu Industrial Complex (Ninh Binh), expected to create jobs for 2,000 employees.

The ESMO VINA factory was established to improve the production capacity of the ESMO Corporation, in order to meet the demands of new orders, as well as enhancing the competitiveness through the systematic production of components and spare parts for hybrid vehicles and electric cars.

The plant will focus on the production of Wiring Harness - the company's flagship product with a production volume of about 450,000 products a year - used in large and small buses, Battery Module Harness, electric vehicle charger cable... with a view to the explosion of hybrid vehicles and hydrogen vehicles from 2020.

In the context of international commitments on reducing emissions are being promoted to combat climate change and the greenhouse effect, reducing emissions from vehicles is also one of the important tasks for Automobile manufacturing enterprises. Electric vehicles and hybrid vehicles are becoming more and more popular, leading to the development of the corresponding spare parts industry that ESMO is one of the pioneers.

Thanks to the strength of experience in production as well as the high-level engineers from both domestic and foreign countries, ESMO Corporation is expected to contribute to promoting economic growth for Ninh Binh in particular and Vietnam in general, at the same time creating more jobs for local people; it not only helps to train human resources but also strengthens local competitiveness compared to other regions of the world.

Currently, the ESMO Corporation is operating two manufacturing plants in Qingdao (China), which are GoHyeon and RaeSeo factories. In order to realize the goal of expanding the business scope of the group into Southeast Asia, besides building a third factory in Vietnam, ESMO has established Global Land Vina Co., Ltd. ESMO is also planning to increase the volume of its supply to the fast-growing and highly-concentrated automobile manufacturers in South East Asia.

Previously, in March 2018, NEXEN TECH (now ESMO) has partnered with Volex - UK-based Power and Connectivity Solutions to expand its business network with manufacturing projects to produce Wiring harness, electric vehicle charger cable; including the exclusive supply of Tesla Model 3 rechargeable electric cables (used in electric vehicles developed by Tesla Motors and Dyson Group equipments), which is scheduled for release later this year.

NEXEN TECH has been renamed ESMO in early May 2018.

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Attraction from Industrial Parks in Phu Yen

  Phu Yen is gradually moving its economic structure from a purely agricultural province to industry, tourism and services. In order to achieve this goal, thousands of hectares of industrial parks have been prepared, along with infrastructure investment with full facilities to attract projects and foreign investor to invest in Vietnam and in Phu Yen province.

In May 1974, at the An Phu Industrial Zone in Tuy Hoa, Phu Yen province, the electronic component factory was kicked off, marking the presence of the high-tech industry in Phu Yen. This is the first electronic component factory to be built in Phu Yen, with capacity of 500 million pieces per year, with such main products as RF coils and electromagnets. Total investment for the factory is over 5.7 million USD, 100% of products will be exported. The establishment of a factory in Phu Yen province is part of Coilcraft Corporation's production development in Asia.

Vice Chairman of Phu Yen People's Committee welcomed the Coilcraft Corporation for investing in Phu Yen, contributing significantly to the socio-economic development and the industrialization and modernization process of the province. At the same time, it is suggested that the Management Board of Phu Yen Economic Zone and investors continue to have connections and promote the industrial potential of Phu Yen to other investors.

The appearance of electronic component factory invested in An Phu Industrial Park, besides the glass production factories of Hoang Hai Trading Co., Tan Phat Canned Food Joint Stock Company and the project of CCIPY Vietnam limited liability company, as well as bottled water , soft water plants, and seafood processing plants (in Hoa Hiep 1 Industrial Park) of Xin Bang Co., Ltd have made the investment situation in Phu Yen's industrial zones more diverse and exciting.

Besides implementing the policy of economic restructuring towards industrialization, the Party and Phu Yen authorities have made many appropriate policies in order to mobilize internal resources in the province and attract foreign investment. At the same time, completing investment in infrastructure of approved industrial zones and clusters; promote the efficiency of investment and the role of industrial zones and clusters in economic restructuring of the industry, contributing to the economic restructuring of the province.

Currently, Phu Yen province plans to build industrial parks, attracting hundreds of investment projects. In particular, it is concentrated in Hoa Hiep 1 Industrial Park, Hoa Hiep 2, An Phu, North East Song Cau 1 and North East Song Cau 2.

One of the favorable conditions for the management board of Phu Yen economic zone to carry out the plans of promoting and attracting investment in line with the industries and sectors in the industrial parks. That is Phu Yen Provincial Industrial Development Plan up to 2020, with vision to 2030, which has been approved by the provincial People's Committee.

The plan identifies groups of industries with priority given to development till 2020 with a vision to 2030, including: processing of agricultural, forest and aquatic products; medicine; textile; products from new technology; software industry and digital content; chemistry; energy; electronic equipment, telecommunications equipment and information technology; mechanical engineering; supporting industry.

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US Businesses Intend to Move to Vietnam

  Is Vietnam ready for relocation investment?

Answering this question, the flow of foreign investment, particularly the United States to Vietnam will have great changes.

Is Vietnam ready?

This question is again raised, this time from Mrs Marie Diron, Managing Director of the National Credit Risk Group for Asia and the Pacific (Moody's).

Mrs Marie Diron posed this issue at the Seminar on The Indian Ocean - Pacific Strategy and its Economic Impact on Vietnam, seeking solutions to promote sustainable development in Vietnam and other countries in the area (in the framework of the Asian Economic Forum held by the Vietnam Chamber of Commerce and Industry (VCCI) and the American Chamber of Commerce in Vietnam (Amcham) last week in Ho Chi Minh City).

The relationship between the US and China remains complicated, yet it cannot be correctly identified. Foreign manufacturers in China tend to move their investments to Vietnam, but the institutions, human resources, infrastructure, or hardware and software of Vietnam are generally ready to welcome this shift?

Just a few days ago, at the Vietnam Business Forum (VBF) 2018, Mr Michael Kelly, Chairman of the American Chamber of Commerce in Vietnam (AmCham) has mentioned the results of AmCham's recent survey to the US businesses in China, whereby one-third have relocated or are considering relocating some of their manufacturing facilities to overseas. A separate survey of foreign companies from other countries shows that half are considering relocation and Southeast Asia is their top choice.

China will remain an important member of the global supply chain. But with the shift in investment, Vietnam is gaining benefits. The question is how can Vietnam take full advantage of this opportunity to keep up the pace of rapid economic growth?

On the US investors side, according to Chairman of AmCham, they know what they need. Vietnamese businesses and foreign invested enterprises need an equal and supportive environment for development. That means the relationship between investors and the administration needs to be mutual and transparent.

In particular, Chairman of AmCham said that there should be improvements in important areas that have great significance to Vietnam's competitiveness, they are energy (to strengthen Vietnam's future); facilitate trade and flow of goods; creating a more attractive, transparent and stable business environment; fully exploiting the potential of the digital economy in Vietnam; and modernize education, ensuring reasonable labor costs.

AmCham believes that the business environment can be improved by increasing productivity and reducing costs as well as business risks in Vietnam. More importantly, reducing costs and business risks will benefit Vietnamese businesses - many of which are small and medium enterprises - and will also promote entrepreneurship and start-up spirit, ensuring competitiveness and growth in the future of Vietnam.

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Banking Sector in Vietnam

  1. Overview

Vietnam’s banking sector has shown significant improvement which results from stable inflation and interested rate, favorable environment for foreign direct investment and a shift from deficit to surplus of the country’s current account. This sector plays a crucial role in Vietnam’s economic development in recent years.

2.Banking system

There are two tiers in banking sector in Vietnam. The first one is State Bank of Vietnam (SBV) which is responsible for monetary policy and supervision/regulation of the banking system in Vietnam. The second one consists of commercial banks, financial companies, credit co-operatives, people's credit funds, and insurance companies. The main activity driving banking system is commercial bank which includes 5 state-owned commercial banks, 33 joint stock commercial banks, 5 joint venture commercial banks and 5 wholly-owned foreign owned bank.

State owned commercial banks (SOCB) account for more than 40% of market share. The largest bank in terms of total assets, network and still 100% state owned share is Agribank. And four other SOCB areVietcom bank, Viettin Bank, BIDV and MHB.

Joint stock commercial banks (JSCB) have small capital/deposit base and more diversified shareholding structured compared to state owned commercial banks. There are currently 33 JSCB, which the leading ones are SaiGon Joint Stock Commercial Bank (SCB), Military Joint Stock Commercial Bank (MBB), Vietnam Export Import Commercial Joint Stock Bank (EIB), Asia Commercial Bank (ACB) and SaiGonThuong Tin Commercial Joint Stock Bank (STB)

Also SBV had granted 5 licences to permit HSBC, Standard Charter Bank, ANZ Bank, Shinhan Bank and Hong Leong Bank to establish as wholly-owned foreign banks

3.Potential opportunities for foreign investment

There are solid evidences to prove that Vietnam’s banking sector has such a huge potential for foreign investment

• Government effort of reforming banking system

SBV suggested that merge and acquisition of loss making and incompetent bank would be necessary to improve efficiency within the industry. For example, in 2015, SBV forced merge of loss making Vietnam Construction Bank to Vietcom bank with purchasing share price for 0 VND. By forcing merge and acquisition of incompetent banks, SBV has increased exploitation of economies of scale and the reduced burden on regulators

• Trade agreements facilitate foreign ownership and investment

Have taken part in variety of trade agreement such as Trans Pacific Strategic Economic Partnership (TTP),  Association of Southeast Asian Nations (ASEAN) and Free Trade Agreement with different countries, Vietnam has made restructuring move to standardize banking system which will be compatible and accessible to other countries. Vietnam is required to have bilateral arrangement which eliminate the challenges of foreign establishment of banking services.

The government also encourages foreign investors to hold shares for five year period and partnering with the local bank to enhance management, capacity or new development. With the 30% limit of oversea ownership to domestic banks, the strategic foreign investors are allowed to acquire up to 15% of share in a bank, and up to 20% with Prime Ministerial approval. HSBC has also invested in a leading local bank, possessing a 20% stake in the Vietnam Technological and Commercial Joint Stock Bank—Techcombank. It is also the sole foreign strategic partner of the BaoViet Finance-Insurance Group, Vietnam’s largest insurance company. In a vote of confidence in the insurer, HSBC increased its stake to 18% in October 2009.

• Vietnam- a destination of foreign investment in South East Asian market

There is a huge untapped market in Vietnam. According to SBV, only 20% of more than 90 million citizens in Vietnam hold bank accounts and 3% of the population have credit cards. With 87% of the population under the age of 54, there is a great opportunity for retail banking activity development in Vietnam.

Also it is agreed that SME and rural areas have had challenges to access bank investment and loan. The data of Asian Development Bank shows that “lack the capacity to assess the risk of investment into SMEs and find bankable projects” and lack of knowledge about loan and lending systems for rural citizens are the main reasons leading to currentunder-banked circumstances.

The stable economic with GDP growth of around 6% to 7%; low wage costs; a large population with a high savings rate and lack of innovative approach to the market are advantages for foreign investors to accelerate financial and industrial development in Vietnam market.

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US and North Korea Leaders Will Meet in Hanoi, Vietnam

  President Donald Trump announced that Hanoi, Vietnam will be chosen as the place to hold the second US-North Korea summit on February 27 and 28, 2019.  There are signs of intention of both parties to transform the relationship and create a solid foundation for the de-nuclearization of North Korea and end the Korean War. This is the opportunities for Vietnam to promote the country as a place for foreign investors to trust and invest through setting up factory and companies, and further grow the country through foreign direct investment.

Vietnam has been selected as the place for this important international political event due to a number of reasons, including good relations with the US, South Korea and North Korea, closer to North Korea in distance, and that Vietnam is a country with experience in organizing in high security event i.e. APEC 2017 with leaders from US, Russia, China, Japan, Korea.   Further, the administration of President Trump thinks that Vietnam is a political and economic model that North Korea should pursue in terms of opening the country and attracting foreign investment, allowing foreigners to set up factory, companies in various areas.  From difficult relationship with embargo, the US and Vietnam has now become partners with two-way trade which turnover increased from 451 million USD in 1995 to 52 billion USD in 2016, and that Vietnam has become one of the rising export markets of US.   From North Korea’s perspective, Kim Jong-un will be interested in witnessing the story of Vietnam, which can be an inspiration and a model for the road ahead for North Korea to follow.

This event will be an opportunity for Vietnam to promote the country of peace, opportunity, prosperity and land of foreign investment, growing its role in the international markets in both business and politics, which further attract foreign direct investment, the driver for growth of the country over the decades.

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Sustainable development in Vietnam

  Achievement of sustainable development in Vietnam

The sustainable development objectives including economic, social development and environment protection have been integrated into national priority development together with economic growth objective.

With a stable GDP and economic growth, improvement of education, Vietnamese citizens have gained more knowledge about gender quality, environmental and other social issues, thus, creating campaigns to support collective action. For example, the campaign collecting garbage along beaches in Vietnam attracted more than 1000 students to participate in which indicated collective action to mitigate effect of disaster and climate change.

Vietnamese government has significantly improved the rate of hunger eradication, poverty reduction, population, job creation, education and healthcare. Particularly, in 2014, total state budget for hunger eradication and poverty reduction were more than 34 billion VND. Thus, the poverty rate took a nosedive from 14.2% in 2010 to 1.8-2% in 2014, proving average reduction of 2% per year national wide.

The state fund for environmental protection has been increased, thus the policies for environmental protection has put into regular operation. By executing tax exemption for environmental friendly enterprises, businesses in Vietnam have been more aware of coordinating environmental protection policies into long term vision and mission.

Vietnam takes part in international agreement to show commitment to sustainable development such as: WTO, United Nation Framework Convention on Climate Change, United Nation Convention to combat desertification, the convention on International Trade in Endangered Species of Wild Fauna and Flora…

Challenges of sustainable development in Vietnam

There have been some challenges in Vietnam when implementing sustainable development policies. An increase in natural disaster, degenerated natural resource (water and biodiversity resources), wasteful and ineffective production and consumption are causing huge destruction to various local communities.

Even though there have been some supporting policies for enterprises in Vietnam to implement sustainable development policies, they have not obtained full awareness of the link between good environmental, social, and governance performance and the ability of companies to be profitable and survive in turbulent times. Therefore, most of the firms succeeded in promoting sustainable development practices are international businesses.

Sustainable development in business

Since Vietnam takes part in international trade agreements, there will be more international and institutional investors need the information of material environmental, social and governance information about company performance to decide whether to make investment decision.

Sustainable development of the business should be proven by social factors (employee compensation, benefits, staff turnover, safety practices, diversity and local community) and environmental factors (energy efficiency, GHS emissions, biodiversity conservation, water usage, natural resource use, waste to energy and recycling practices). These factors are crucial for investors as they indicates how the company takes into account risks, opportunities, management approach, stakeholder value and long term development.

Sustainability report has been strongly recommended by Vietnamese government. Vietnam Brewery Ltd is one of a few leading companies taking this report seriously. Their report in 2014 stated that the company switched from diesel to biomass as boiler fuel, reducing direct CO₂ emissions as a result. In addition to reducing our carbon footprint and mitigating the effects of global warming, the local community has also benefited from the programme with an additional income from the sale of rice husks. The company also highlighted the code of conduct which allowed the employees to voice their opinions. There have been also other big cooperation taking part in the trend for example Bao Viet Corporation, Vinamilk, Hau Giang Pharmacy…

In conclusion, in order for enterprises in Vietnam to actively engage in sustainable development and voluntarily adopt sustainability as common practice, Vietnamese government should take more urgent actions.

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