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Tag: Vietnam

  • Plastic industry hit hard by abrupt scrap import ban

    Plastic industry hit hard by abrupt scrap import ban

    Vietnamese plastic firms are unable to import scrap following a ban by the government, and said costs are becoming unaffordable as a result.

    “We’ll lose $10 million this year if we cannot import plastic scrap for manufacturing,” Tran Vu Le, director of Le Tran Plastic, told a conference organized Tuesday by the Vietnam Plastic Association (VPA).

    Other businesses attending the event said the inadequate plastic recycling in the country means they cannot source scrap locally.

    “HCMC produces 900 tons of plastic waste daily, but only 90 tons are recycled,” Hoang Phi Vu, director of Minh Tam Tin Nghia Plastic Company, said.

    Most of the plastic waste is mixed with regular trash and not sorted, and so does not meet export standard, he said.

    metric tonsVietnam’s 2016-2017 plastic waste import20162017PEPETPVC05101520253035404550Resource Recycling Inc.

    The problem began recently after Vietnamese authorities banned scrap imports just like China, which banned imports of certain wastes last January.

    As of August 13, there were over 6,600 containers of scrap remaining unclaimed at Cat Lai Port in HCMC and Hai Phong Port, according to the two ports.

    They have been there for over 30 days, 90 days in the case of a majority of them.

    Scrap importers have been reluctant to claim the containers because of “unsuitable” regulations related to their import, VPA chairman Ho Duc Lam told the conference.

    One such regulation requires import of plastic scrap with less than 2 percent impurities.

    “It is very difficult to extract the scrap from the containers to measure if it is below 2 percent,” Dinh Xuan Thang, director of the Hoa Lu Environmental Research and Application Center, pointed out.

    Vietnamese regulations allow empty plastic water bottles to be imported, but not bottles that contained sweetened drinks.

    “Who will sort these bottles to sell to Vietnam?” Hoang Duc Vuong, a spokesperson for recycling businesses in the VPA, asked.

    Plastic exporters to Vietnam H1 2018by percentageJapanU.S.KoreaThailandOther countriesVietnam Customs

    The VPA said in a release: “Vietnamese customs on July 7 slapped without prior warning an abrupt ban on scrap imports which did not give businesses time to react.”

    This ban has imposed a “burden” on plastic scrap importers, it said.

    Lam said he has written to Prime Minister Nguyen Xuan Phuc and the Ministry of Natural Resources and Environment about the problem.

    In the first six months of this year Vietnam imported 277,000 tons of plastic scrap mostly from Japan, the U.S. and Korea.

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  • Vietnam set to increase minimum wages in 2019

    Vietnam set to increase minimum wages in 2019

    Vietnam’s National Wage Council has proposed a minimum wage increase of nearly $7-9 per month across all four levels in 2019.

    Overall, the average increase across the four levels will be 5.3 percent.

    All members of the National Wage Council (NWC) on Monday voted on the proposal to be submitted to the government.

    Under the proposal, the minimum monthly wage across four levels will be raised, depending on the area, from $171 to $180 (region 1); $152 to $159 (region 2); $133 to $140 (region 3); and $118 to $125 (region 4).

    At the same meeting, the Vietnam General Confederation of Labor (VGCL), proposed a minimum increase of 6.1 percent, while the Vietnam Chamber of Commerce and Industry, representing the business owners, proposed a 5.1 percent increase.

    All sides came to an agreement of a 5.3 percent increase as the final rate so the meeting could move to the voting round.

    Doan Mau Diep, deputy labor minister and chairman of NWC, said a 5.3 percent increase was reasonable and acceptable.

    “As the inflation rate is not too high, labor productivity is rising and businesses are facing exchange rate risks, we think it is reasonable to increase the minimum wage between 5 and 5.5 percent.”

    VGCL recently published a study on minimum wage and cost of living after surveying over 3,000 laborers in 150 different businesses in the country.

    26.5 percent said they were “barely getting by,” while 12.5 percent said their incomes were not enough to support their families, and have to work overtime or extra jobs to make ends meet.

    The study found that an average worker’s minimum spending is VND6.5 million ($290) each month, while the average base salary is just VND4.6 million.

    Thus laborers need to work on average an extra 28 hours a month just to make ends meet, the study found.

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  • Go-Viet perks up competition in Vietnam’s ride-sharing market

    Go-Viet perks up competition in Vietnam’s ride-sharing market

    Go-Viet’s attractive perks for drivers are motivating many to shift from Grab, and the market leader is responding.

    He’s one of the first drivers to sign up with ride-sharing service Go-Viet, but Thanh Hung is still wearing the well-recognized green GrabBike uniform.

    “Too many drivers have just signed up for Go-Viet so there are not enough jackets,” Hung said.

    The 40-year-old motorbike driver said he was able to make VND800,000 ($34) in a day and a half since he began driving for Go-Viet, much higher than the VND500,000 ($21) he would get from GrabBike for the same work duration.

    Hung said he is also attracted by the tax exemption Go-Viet promises for the first six months and the bonus he’ll get if he finishes nine trips a day.

    Go-Viet, a Vietnamese version of Indonesian service Go-Jek, entered the Vietnamese market early this month, seeking its slice of the market pie that Grab has been dominating after the departure of Uber.

    Aiming to tailor its service to Vietnam with a different name and local teams, one of the first goals of Go-Jek in the country is to recruit drivers.

    “The company hopes to bring a stable income to tens of thousands of drivers through technology,” Nguyen Vu Duc, CEO of Go-Viet said in June.

    The company had contacted potential drivers months before the launch, either by meeting face to face or talking to them online, its communication representative Huong Cung said.

    Grab did not comment on the ploys Go-Viet is using to attract drivers, but it’s also deploying its own strategies.

    The company has just launched a campaign to reward drivers with five percent of the total revenue they make in a week, said Nguyen Thu An, communication director of Grab Vietnam.

    In early June, Grab also announced a plan to have over 100 stops for Grab drivers with free wifi, coffee and even vehicle washing service in Ho Chi Minh City and Hanoi.

    “There is a large number of drivers who don’t like Grab and want to work for Go-Viet,” said Vu Hoang Tam, a mobile app expert and one of the founding members of GrabBike in Vietnam.

    This creates a good supply of drivers for Go-Viet, which has learned a lot from the “previous battle,” Tam said, referring to the competition between Grab and Uber earlier this year.

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  • Vietnam most vulnerable in ASEAN to US-China trade war

    Vietnam most vulnerable in ASEAN to US-China trade war

    Vietnam will be the most vulnerable country in Southeast Asia should the U.S.-China trade war persist, according to recent research.

    This is because Vietnam is the most export-dependent of the ASEAN big five, which also includes Indonesia, Malaysia, the Philippines, and Thailand, quoted from Financial Times Confidential Research report.

    Vietnam’s exports were worth $214 billion last year, 21 percent up from 2016, according to Vietnam’s Customs. The U.S. was the largest importer of Vietnamese goods last year, buying goods worth over $41.6 billion.

    “Vietnam’s exports to the U.S. rank first among the ASEAN five, making the country sensitive to softening U.S. consumer demand,” the report said.

    Another reason that Vietnam and other ASEAN member countries would be impacted by the escalating trade tension is the strengthening of the U.S. dollar, it said.

    The dong has been devalued by 1.5 percent this year, and the government could take more aggressive action if exports slow significantly, it said.

    But Vietnam, Thailand and Malaysia might still benefit from the currency weakness “if foreign direct investment shifts away from China as more companies hedge against the risk of trade action,” it added.

    Trade tension between the U.S. and China continues to escalate. A Reuters report cited Beijing as saying last week that it would slap additional tariffs of 25 percent on $16 billion worth of U.S. imports.

    The announcement came after Washington said it would impose 25 percent tariffs on another $16 billion in Chinese goods after imposing tariffs on $34 billion last month.

    So far, China has now either imposed or proposed tariffs on $110 billion of U.S. goods, representing the vast majority of its annual imports of American products.

    Vietnamese experts too have cautioned that the country would suffer collateral damage because of this trade war.

    A report released last week by the Ministry of Planning and Investment’s National Centre for Socio-Economic Information and Forecast said Vietnam’s GDP growth would take a hit from the trade tension.

    The report predicts a drop of 0.03 percent this year, 0.09 percent next year and 0.12 percent in 2020 and 2021.

    In money terms, it translates into VND8 trillion ($344 million) in 2021.

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  • Macau’s Suncity again defers Hoiana casino-resort stake purchase

    Macau’s Suncity again defers Hoiana casino-resort stake purchase

    Hong Kong’s Suncity Group Holdings has twice delayed a deal in the last two months to acquire 34 percent of a casino-resort in Quang Nam Province.

    In a statement to the Hong Kong Stock Exchange, the Macau casino operator and investor said it is waiting for the joint venture between VinaCapital and Hong Kong’s Chow Tai Fook to obtain approval from a Vietnamese bank, which has given a loan to the developers of Hoiana.

    So it is postponing completion of the deal, worth $76.8 million, until August 31 this year, the firm said.

    “It is expected that the bank consent will be obtained on or before August 31, 2018. Save for the condition relating to the bank consent, all other conditions have been fulfilled.”

    In June Suncity had said difficulties in acquiring land for the project caused it to put off the deal until July 31.

    VinaCapital and Chow Tai Fook have since acquired the 163 hectares required for phase 1 of the development.

    Suncity announced plans to acquire the stake in the casino and resort in July last year.

    The $4 billion project was initially planned by VinaCapital and Malaysia’s Genting Group, but in 2012 the latter pulled out, and in 2015 Chow Tai Fook came on board.

    Hoiana is one of eight casinos to be licensed in Vietnam now.

    To be built in seven phases it will have a casino with 140 tables and around 1,000 slot machines, guest rooms and a golf course.

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  • Vietnam’s VinFast in deal with Siemens for technology to make electric buses

    Vietnam’s VinFast in deal with Siemens for technology to make electric buses

    VinFast Trading and Production LLC has signed two contracts with Siemens Vietnam, a unit of Siemens AG.

    The contracts involve the supply of technology and components to manufacture electric buses in the Southeast Asian country.

    VinFast, a unit of Vietnam’s biggest private conglomerate, Vingroup JSC, said on Monday the deals will enable it to launch the first electric bus by the end of 2019.

    “Electric buses are an essential element of sustainable urban public transportation systems,” Siemens Vietnam President and CEO Pham Thai Lai said in the statement.

    VinFast will also produce electric motorcycles, electric cars and gasoline cars from its $1.5-billion factory being built in Haiphong City, it said.

    In June, General Motors Co agreed to transfer its Vietnamese operation to VinFast, which will also exclusively distribute GM’s Chevrolet cars in Vietnam.

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  • Consumer goods, property most attractive sectors for acquisition in Vietnam

    Consumer goods, property most attractive sectors for acquisition in Vietnam

    The most promising sectors for mergers and acquisitions in Vietnam are consumer goods and real estate, says a global advisory firm.

    Food and beverage (F&B) tops the list followed by pharmaceuticals and real estate in joint second position and fast moving consumer goods, KPMG said in its latest outlook report for M&A released at the Vietnam M&A Forum (MAF) 2019 in HCMC last week.

    The firm came up with the report following a survey of more than 300 professionals working for private equity firms, securities companies and M&A advisory firms besides company owners.

    F&B takes the lead thanks to a booming young middle class, stable economic growth of 6.5 percent and increasing exposure to new concepts and cultures especially influenced by globalization.

    As for pharmaceuticals and life sciences, the survey found that while some foreign companies in this industry could see M&A as a faster means of obtaining the necessary licenses in Vietnam, several other arguments were also made in support of this trend: such as the government’s plan to simplify licensing policies and reforming regulatory frameworks, and the increasing demand for healthcare.

    Besides, the country’s rapid urbanization rate means the real estate sector will continue to remain a magnet for investment, especially the residential and hospitality segments.

    A report of the MAF 2019 stated that foreign investors in the consumer goods sector do not just have an eye for local brands but also their distribution networks.

    “Thai and South Korean investors have expressed interest in Vietnam’s consumer goods sector since M&A deals will help them access established channels to distribute Thai and Korean goods in the Vietnamese market,” said the report.

    As for the real estate sector, it noted foreign investors are interested in M&A because it often takes long to complete procedures for new real estate projects in Vietnam, and acquiring local firms would be a shortcut.

    Besides, the availability of land for new projects is limited, with local firms already buying up most of them, making it difficult for foreign investors to strike out on their own.

    MAF 2019 data showed that the total M&A value in Vietnam last year was $10.2 billion, the highest ever and 175 percent up from 2016.

    In the first six months of this year the figure was $3.55 billion, up 55 percent.

    Consumer goods and real estate accounted for the biggest slices of the M&A pie last year, with 57 percent and 27 percent, respectively.

    In H1 this year real estate surged to the top, accounting for 66.75 percent, followed by finance-banking with 19.06 percent.

    Experts at the forum said this year the M&A value could be lower at $6.5-6.9 billion.

    Last year it had been boosted by the biggest ever divestment deal in the country when Thai Beverage paid nearly $5 billion for a 54 percent stake in Vietnam’s top brewer Sabeco.

    KPMG’s survey found that Japan, South Korea and China would continue to be the top sources of M&A deals in the next three years.

    Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia, said the wave of investments from Asia into Vietnam would be huge and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that Vietnam signed in March with 10 other Asia-Pacific countries would make Vietnam’s market even more attractive to investors from Japan and South Korea.

    Deputy Prime Minister Vuong Dinh Hue told the forum the government is amending and finalizing policies related to management of state-owned equity.

    The government will continue to push with its equitization of state-owned firms and tighten up rules to ensure those that have already launched IPOs list on the stock market, he said.

    The government is seeking to make things easier for investors. “The target is to cut 30-50 percent of business procedures within this year. Now 15 percent of such procedures has been axed. We will do the same with specialized inspection procedures to improve the investment environment in Vietnam to make it easier for the establishment of new firms as well as M&A activities,” the deputy PM added.

    Pham Van Thinh, CEO of advisory firm Deloitte Vietnam, said as the government continues to facilitate foreign investment and make the economy more open, Vietnam would remain an attractive market for the next five to 10 years.

    However, as most companies in Vietnam are small or medium-sized, which means many of them do not have strategic policies for long-term development, there is not much scope for strong growth in M&A in future, he said.

    Dominic Scriven, executive chairman of Dragon Capital, one of the top investment funds in Vietnam, said he is optimistic about the M&A prospects in Vietnam.

    But he noticed three factors that should be sorted out to bolster the M&A landscape: the government’s policy to attract foreign investment, a change in attitude of local firms many of whom still want to handle everything themselves and do not look at M&A as a solution to become stronger and how effectively Vietnam can handle possible disputes between partners in M&A deals.

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  • No cheers from World Cup for Vietnam’s top local brewers

    No cheers from World Cup for Vietnam’s top local brewers

    Sabeco and Habeco, Vietnam’s two largest brewers, reported dismal results in H1 despite some highly favorable factors.

    Generally, for fast-moving consumer goods, the first half of the year is usually good because demand skyrockets during Tet, the Lunar Year national holiday.

    This year the beer industry would have hoped to make a killing since the World Cup football tournament began on June 14.

    Yet the two brewers saw profits actually decline.

    Sabeco, as Saigon Beer Alcohol Beverage Corp. is called, saw pre-tax profit fall 4 percent year-on-year to VND3 trillion ($127 million) on sales of over VND17 trillion ($722 million), up over 8 percent. This was the first time its profits had declined since 2013.

    Its gross margin ratio, which compares gross profit to sales, fell to 23.8 percent from 27.4 percent in the same period last year.

    In July Sabeco’s new chairman, Koh Poh Tiong, told shareholders at its annual general meeting that net profits might fall by 19 percent this year due to increased costs, tax hikes and higher branding expenses.

    Habeco, or Hanoi Beer Alcohol and Beverage Joint Stock Corp., reported revenues of VND4.3 trillion ($183 million) and VND413 billion ($17.5 million) in pre-tax profit, almost unchanged from a year earlier and only 40 percent of its full-year target.

    But, unlike Sabeco, its marketing and advertising spending increased by 15.5 percent in the second quarter to VND167 billion ($7.1 million).

    The slowdown for the biggest brewer in the northern market started three years ago. Even as its rivals were growing steadily, Habeco saw annual sales stagnate at around VND10 trillion ($425 million).

    Its market share is showing signs of shrinking amid expansion by foreign rivals in the high-end segment, according to securities analysts.

    The stocks of both brewers are suffering due to their modest showing.

    On Friday 19 morning, Sabeco traded at VND208,000 ($8.8), 40 percent down from its peak late last year. Habeco has fallen by half to below than 83,000 dong ($3.5 each).

    According to a study on the Asia-Pacific beer market by Euromonitor, Vietnamese consumption is forecast to rise in the coming years despite the stagnation and even decline in China and some European countries.

    Last year Vietnam consumed over 4 billion liters, or 45 liters per capita, the local Beer, Alcohol and Beverage Association estimated.

    The country targets production of 4.1 billion liters in 2020 and 5.5 billion liters in 2035.

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  • Vietnam eyes power imports from China, Laos

    Vietnam eyes power imports from China, Laos

    Vietnam might have to import power from China and Laos after 2020, says a senior official.

    “There is a real risk of power shortages in 2021-2023, and the risk will get higher if consumption surpasses forecasts in the coming years,” Hoang Quoc Vuong, Deputy Minister of Industry and Trade, told the Vietnam Energy Forum in Hanoi on Thursday.

    Although the sole power distributor Vietnam Electricity (EVN) is currently able to meet the country’s demand, there is a strong likelihood that the increasing needs of a 95-million population outstrip the capacity.

    This can happen as early as 2020 if the generators don’t operate well or there is not enough coal and liquefied natural gas (LNG) to produce power, EVN Deputy Director Ngo Son Hai said at the forum.

    While more coal power projects are being built in the south, shortages can happen if these constructions run behind schedule, he noted.

    Power shortage will increase by 7.2-7.5 billion kilowatts hours a year in the southern region for each delayed project, Hai said, adding that there were seven underway at present.

    Southern provinces need more coal power projects be built to provide over 18,000 megawatts needed in the next five years, but none of them have opened yet, he said.

    Power production plans in southern Vietnam in megawattsby 2022Projects under constructionProjects yet to be builtEVN

    Deputy Minister Vuong proposed that Vietnam starts importing electricity from Laos and China, to meet rising demand in the country.

    Vietnam should also create favorable conditions for renewable power projects, like solar and wind power, be developed near high consumption areas, he said.

    Vuong noted encouraging the installation of rooftop solar power systems could be one solution to address the looming power shortage.

    To meet the high demand for power, Vietnam needs to produce 278 billion kilowatt hours in 2020, and this number needs to double by 2030, according to EVN.

    The country’s installed power capacity is estimated to reach 47,800 megawatts by the end of 2018, 5.4 times that of 2003, making the country second in ASEAN and 25th in the world, EVN said.

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  • East Saigon running out of apartments for sale to foreigners

    East Saigon running out of apartments for sale to foreigners

    An ownership cap is preventing foreigners from buying high-end apartments in Saigon, especially its eastern part.

    Thien’s apartment was in a prime area with a view of the Saigon River in Ho Chi Minh City’s Thao Dien Ward, District 2.

    He could have sold it for VND5.5 billion ($236,000) to a foreign buyer, but had to sell to a local investor for VND5 billion ($215,000) because the 30 percent cap of foreign ownership had already been reached.

    Like Thien, Luong bought a high-end apartment on Ha Noi Highway, District 2, in 2017, and sold it to a foreigner early 2018. It was after the contract was signed that he learnt that the foreign ownership cap had been reached. It took him another month to find a Vietnamese buyer for lower profits.

    The amended Housing Law 2014 expanded foreigners’ rights to buy housing in Vietnam but stipulates a foreign ownership cap of 30 percent in each project.

    Savills Vietnam director Matthew Powell said that many apartment projects in HCMC have reached the 30 percent foreign ownership limit since last year, especially in expat dense areas.

    Song Hai, an experienced real estate broker, said many foreigners find property in the east of the city, like District 2, especially in Thao Dien ward, more attractive as it has been an expatriate haunt for some time.

    Earlier, in the third quarter of 2017, a property project located in a prime location in District 1, accessible via the Thu Thiem Tunnel, was so attractive to a group of individual Korean investors that they were willing to take 50-year leases if they could not buy apartments outright as a result of the foreign ownership limit.

    Nguyen Xuan Quang, Chairman of Nam Long Investment Joint Stock Company, said the participation of such individual foreign investors was a positive sign for the market at a time when apartment sales were slowing.

    “Foreign investors might see good market prospects here as returns from property in the city could be better compared to other countries,” he said.

    Nguyen Loc Hanh, deputy general director of sales and marketing at Danh Khoi Real Estate Joint Stock Company (DKR), said quite a few apartment projects in the eastern part of the city have reached the 30 percent foreign ownership limit, especially high-end projects with fewer than 500 apartments typically preferred by foreigners.

    Luxury apartments in the city are still much cheaper than in Hong Kong or Singapore, Hanh noted.

    Alan Kan, committee member of the Hong Kong Business Association Vietnam (HKBAV), said that Hong Kong property prices have risen to unaffordable levels, and so many people there are looking to investing in cheaper places like Vietnam and Thailand.

    According to data from Hong Kong-based Golden Emperor, gross rental yields are between 4.5 percent and 5 percent in Bangkok and much lower in Singapore, Kuala Lumpur and Hong Kong, and cannot compare with the yields of 6-8 percent in Vietnam.

    Powell of Savills Vietnam added that conditions and legal procedures related to foreign ownership have been eased but should be improved further to attract more investors.

    He agreed it was important to have ownership limits to ensure proper oversight and avoid negative impacts on the economy, but Vietnam could consider relaxing the regulations in certain areas to meet demand, especially in the luxury segment, he added.

    According to property consulting firm Jones Lang LaSalle (JLL), Malaysia has a relaxed realty policy that encourages foreigners to buy various kinds of properties.

    Thailand now allows foreigners to buy only 49 percent of a housing project, down from 100 percent earlier.

    Indonesia only allows foreign individuals to hold a right of use title for 30 years extendable for another 20.

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  • Toyota Vietnam recalls 11,300 plus cars with airbag faults

    Toyota Vietnam recalls 11,300 plus cars with airbag faults

    Toyota Vietnam has announced the recall of more than 11,300 cars of three models with faulty airbags.

    The inflator canister of over 5,600 Corolla Altis cars manufactured in 2013 can be penetrated by humidity, the Japanese company said in a statement.

    Thus, it can happen that in some crashes, the activation of the airbag can break the inflator into pieces. These pieces can be pushed through the inflated airbag, causing serious damage to users.

    The same fault is likely in 5,100 Vios cars and 550 Yaris cars manufactured at the same year, which are also being recalled.

    Another 372 Corolla Altis cars manufactured between December 16, 2015 to February 15, 2016 are being recalled for airbag crash sensor faults.

    The electrical insulator of the airbag electronic controller unit can fall off after a period of car operation, turning on the warning airbag symbol on the driver’s control board.

    In the event of a crash, the airbag may not be activated because of this fault.

    Toyota said it has not been aware of any accidents involving these faults so far.

    Customers can bring their vehicles for a free replacement of the faulty parts at Toyota garages, which should take three hours.

    This is not the first time Toyota Vietnam is recalling cars with airbag faults. The most recent one was in March this year and August last year, with over 20,000 vehicles in each occasion.

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  • US-China trade war could drag Vietnam GDP down

    US-China trade war could drag Vietnam GDP down

    Vietnam’s GDP could drop slightly as a result of the ongoing US-China trade war, a new report says.

    The report, released Wednesday by the National Center for Socio-Economic Information and Forecast (NCIF), predicts a drop of 0.03 percent this year, 0.09 percent next year and 0.12 percent in 2020 and 2021.

    This equals to a GDP drop of VND1.65 trillion ($71 million) this year and VND5.3 trillion ($228 million) next year. The decline will climax at VND8 trillion ($344 million) in 2021, says the NCIF, which functions under the Ministry of Planning and Investment.

    This drop is “relatively low,” even at the climax in 2021, said Tran Toan Thang, head of NCIF’s Department of World Economic Issues.

    While Vietnam’s exports will also decrease because of the negative impacts of the trade war, there will be negligible impact on foreign direct investment, Thang said.

    He also expressed concern over the new U.S. tax law that lowers its business tax rate from 35 percent to 21 percent, he added.

    The new law might make U.S. businesses reconsider their investment strategies to focus more on their home country instead of expanding in Vietnam, Thang said.

    The tax deduction might also result in some countries creating more incentives to retain U.S. investments. China has recently said it would temporarily give U.S. firms tax exemptions to stop them from withdrawing from the country, Thang noted.

    “This move will lower competitiveness of the investment environment in Vietnam,” he added.

    Tension escalates

    Trade tension between the U.S. and China continues to escalate. A Reuters report cited Beijing saying on Wednesday that it would slap additional tariffs of 25 percenton $16 billion worth of U.S. imports.

    The announcement came after Washington said it would impose 25 percent tariffs on another $16 billion in Chinese goods after imposing tariffs on $34 billion last month.

    So far, China has now either imposed or proposed tariffs on $110 billion of U.S. goods, representing the vast majority of its annual imports of American products.

    Experts have previously cautioned that Vietnam will suffer collateral damage from this trade war.

    When large corporations no longer see the attractiveness of developing countries, their capital will flow back to the big countries, said Pham Sy Thanh, a department head at the Vietnam Institute for Economic and Policy Research (VEPR).

    For this reason, the abundance of labor will no longer be a perk for developing countries like Vietnam, Thanh told VnExpress.

    Local economists are also concerned that the weakened Chinese yuan will result in a rush of low quality Chinese goods to Vietnam, including textiles, garments and wood products.

    This is not just a trade war, but “a war on power, technology and currency policy between the world’s two largest economies,” Tran Tuan Anh, Minister of Industry and Trade said at a government meeting last month.

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  • Vietnam Steel Association hopes to circumvent ban on scrap imports

    Vietnam Steel Association hopes to circumvent ban on scrap imports

    The Vietnam Steel Association wants the ban on metal scrap waived so that its members can continue importing it as feedstock.

    Making steel from steel and iron scrap is an environment-friendly process, which produces only a fifth of the emissions as using iron ore, the VSA said in a letter to the Ministry of Natural Resources and Environment.

    China has been restructuring its steel industry in recent years to prioritize using metal scrap, and a similar trend can be seen in the U.S. and EU, it said.

    Since the supply of metal scrap in Vietnam can only meet 40 percent of their needs, steelmakers have to depend on imports for the rest, it said.

    The VSA petition follows a recent government order to stop import of scrap, which warned that Vietnam is on the verge of becoming the world’s dumping ground after China stopped scrap imports on January 1.

    The letter also proposed severe penalties for steelmakers violating import regulations and causing harm to the environment.

    Seventy two Vietnamese steelmakers imported over 2.6 million tons of metal scrap in the first half this year, mostly from Japan, the U.S. and Hong Kong.

    The figure is estimated to reach 19 million tons in the period from 2018 to 2020, according to the VSA.

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  • Mitsubishi Motors bolsters crossovers sales

    Mitsubishi Motors bolsters crossovers sales

    Mitsubishi Motors Vietnam managed to boost its sales via crossovers while eyeing the expansion of manufacturing and assembly in the country.

    The firm (MMV) yesterday debuted the all-new Xpander, a next-generation crossover MPV, in Vietnam.

    Manual and automatic models of the seven-seat car will be imported from Indonesia, with orders starting in September, and cost VND550 million ($23,650) to VND650 million ($27,950).

    They will take on the Kia Rondo, Suzuki Ertiga and Toyota Rush.

    The auto maker has to yet reveal the import scheme for Xpander, which won Indonesia’s Car of the Year award this year from leading tabloid Otomotif.

    Early this year, even as many other automakers were struggling to import cars following the introduction of stringent technical regulations by the government’s Decree No. 116, Mitsubishi launched the domestic-assembled crossover Outlander and gained positive cues.

    More than 1,000 Outlander units were sold in the first half of this year, or one third of the total sales.

    Meanwhile, the extensive operations of MMV is under consideration.

    The company has reportedly discussed locations for its second plant in the country with the central province of Nghe An and the southern province of Long An. The first is in Binh Duong province near Ho Chi Minh City.

    The proposed plant, would cost around $250 million and have an annual capacity of 30,000 – 50,000 units, vice chairman of Mitsubishi Motors Corporation, Kozo Shiraji, told Deputy Prime Minister Vuong Dinh Hue during a meeting in January.

    The factory is likely to begin production in 2020.

  • Vietnam’s renewable energy sector in a state of flux

    Vietnam’s renewable energy sector in a state of flux

    Vietnam’s renewable energy sector is experiencing an unprecedented surge in project activities and policy changes, making end results unpredictable.

    The surge in activity includes project approvals as well as project transfers to technically experienced and financially capable developers, which is a positive trend, but whether it can fulfill the nation’s renewable energy potential remains to be seen.

    Among the significant policy developments that have taken place of late is the temporary suspension of approval for additional solar power projects (SPPs).

    The Office of the Government has issued Notice No. 174 requesting the Ministry of Industry and Trade (MOIT) to suspend approval of additional SPPs pending, in turn, the approval of a national master plan for the development of solar power (Solar PDP).

    The MOIT has been tasked with formulating and presenting a new Solar PDP to the Prime Minister.

    Notice 174 states that over 70 solar power projects with a total registered capacity of 3GW approx have been approved within relevant master plans (noting a planned capacity of 850MW for up to 2020 under the Power development plan 7).

    Pending passage of the new master plan for solar power development, only projects that have been appraised by the MOIT (50MW or less) and those that have already been presented to the PM (above 50MW) will be considered for approval.

    Other solar projects, including those being appraised by the MOIT, regardless of their registered capacity, shall be deferred and considered for inclusion in the national solar master plan.

    The impact of this suspension has been seen in the market, where the selling side has tended to mandate higher prices for their project development efforts. It has also reminded market players to be prepared to accommodate potential policy uncertainties, twists and turns in their dealings.

    FIT developments

    Another area of primary interest in the sector has been in the Feed in Tariff (FIT) deadline for SPPs.

    To further promote socio-economic development, Deputy PM Vuong Dinh Hue has instructed the Ministry of Planning and Investment (MPI) to draft a Government resolution proposing a special regime and policy, including a potential extension of application of Decision No.11/2017 (Decision 11) on FIT for SPPs in Ninh Thuan Province.

    The draft document (No. 4545 dated July 4, 2018) submitted by the MPI to the Government Office has been reviewed.

    The Government Office has since issued a notification (No. 7108 dated 26/07/2018) saying Decision 11, which provides for a FIT of US cents 9.35/kWh, will not be extended.

    However, a PM Decision on extension of commercial operation date (COD) till 2020 for Ninh Thuan province up to a capacity of 2000 MW (AC) is expected.

    In order to support the next policy consideration, the MOIT has issued a document (Official Letter 5735) requesting relevant Government bodies and their units to assign a cadre to participate in the working group to draft a decision amending Decision 11 and another draft decision to develop bidding mechanisms for the solar power sector. These are to be submitted to the PM for his consideration.

    It is to be noted that post June 2019 solar power projects may expect a lower FIT rate of approx 7.6 US cents/kWh. The authorities are further considering formulating a special provincial plan to support investments in the two key provinces of Ninh Thuan and Binh Thuan, which are attracting huge investor interest for solar power projects.

    This guideline on the application of Decision 11’s FIT, together with the potential for system overload if the transmission system is not updated in time, will present a significant technical challenge for Vietnam Electricity (EVN) and MOIT in accommodating the policy.

    This will also be true of piloting direct Power Purchase Agreements (PPAs) and upcoming policy changes.

    Rooftop projects

    In relation to rooftop solar power projects, national utility EVN, the sole power distributor in the country, issued a document (EVN Official Letter 1337) on March 21, 2018 guiding the temporary implementation scheme for rooftop SPPs with capacities equal to or less than 1MW, pending the issuance of an official guidance document by the MOIT and the Ministry of Finance (MOF) on payment and invoicing structure.

    The prevailing regulations provide for a net-metering scheme for rooftop SPPs. Under this, credit for surplus electricity (over direct consumption) generated can be transferred to subsequent payment cycles, and the excess electricity generated can be sold to EVN at the rate mentioned in the PPA signed by the seller and EVN either at the end of the relevant year or upon termination of the agreement.

    The MOIT Circular 16, issued last year, requires a solar power generator, as the seller, to enter into an appendix to the Model PPA in place with EVN or its authorized subsidiary. The model appendix is provided under Annexure 3.2 of Circular 16.

    However, according to EVN OL 1337, the appendix will not be applied until the MOIT and the MOF issue further guidance on the finalization, payment scheme and invoicing mechanism for such net-metering purposes.

    Offtake limitations

    Under current regulations, EVN is required to offtake the entire power output of solar and wind power projects.

    However, EVN already anticipates significant challenges to honoring this requirement, especially in areas with high concentration of solar and wind power projects with limited transmission capacity, even with the proposed system update expected by the end of 2019.

    EVN has reported such challenges to the MOIT, and the latter has issued a document (OL 3943 dated May 21, 2018) that requires the following:

    – EVN to instruct its affiliates to formulate grid connection agreements (GCA) for projects that may be able to dispatch power to the national transmission system without causing system overload;

    – EVN to review and consider (i) dispatch capacity of the system, and (ii) potential conditional GCA for projects that may cause system overload. Developers and operators may be required to reduce power output and suspend operation of their plants as requested by EVN’s operators to avoid system overload and comply with technical requirements under MOIT’s Circular 30/2015 and Circular 25/2016.

    – EVN to prepare and present to MOIT in the third quarter of 2018 a plan for investment in a transmission system able to take dispatch of renewable power projects after 2020.

    These MOIT instructions may result in potential deviations from the model power purchase agreements. EVN’s offtake obligation and such deviation would certainly add another significant item to the list of bankability issues for projects without executed PPAs and GCAs.

    It is expected that such issues would be further considered in the process of amending Decision 11 and related regulations.

    Stakeholders in projects with executed PPAs and GCA would be well advised to ensure closer monitoring and coordination with EVN to minimize impacts and disruptions.

    Increasing wind power FIT

    The MOIT has proposed to the PM an amendment (Draft decision) to Decision 37/2011 to increase FIT for wind power projects from the current 7.8 US cents/kWh (onshore).

    The amended draft decision will increase the FIT equivalent to 8.77 US cents/kWh (onshore) and 9.97 US cents/kWh (offshore), based on the SBV’s exchange rate of $1 equivalent to VND21,896 (announced on January 4, 2016) and subject to fluctuation.

    This potential increase is an effort to fix one of the most notable issues with wind power development regulations in Vietnam. The FIT under the draft decision shall apply to projects achieving COD before January 1, 2021.

    To sum up, although Vietnam has an advantage in terms of abundant resources, whether or not it will be able to tap its full potential remains to be seen.