The trend of sustainable consumption, with environmentally friendly products, has received increasing attention in Vietnam and created an influence on the production and distribution system.
From his practical experience, CEO of Go/BigC System in Hanoi and the northern region Le Manh Phong said that over the recent years, the trend of sustainable consumption in the country has been becoming more and more obvious, as a product with an environmentally friendly production or packaging process often brings more advantages to the business in its competition.
According to a recent report by the Thai-owned BigC – one of the biggest supermarket chains in Vietnam, 31% of the customers are willing to pay more for products that support the environmental protection.
Therefore, many Vietnamese enterprises, especially large ones, have begun to shift their products in the direction of being environmentally friendly.
As a pioneer in implementing the circular economy model, Vijay Kumar Pandey, Chairman of the TH Milk Food JSC (THMF), said that in the production chain of TH Group, by-products and waste of a process are used as input materials for another, so the life cycle of the material is maintained as long as possible before being discharged into the environment, thereby minimising gas emissions.
In addition, the group has also implemented many sustainable consumption solutions such as replacing disposable plastic bags, spoons and straws with eco-friendly bio-plastic ones. In 2022, the TH True Mart system cut the total number of used plastic bags by 15%, equivalent to 19 tonnes.
In addition, it also cut by half of the amount of plastic spoons distributed to the market, and aims to raising the figure to 100% in the near future. The complete elimination of disposable plastic spoons is expected to help reduce from 130 to 260 tonnes of plastic waste into the environment each year.
From the beginning of this year’s second quarter, some retail businesses, and ride-hailing service and food delivery providers in Vietnam began to convert from petrol to electric vehicles (EVs).
According to a study by Baemin – a food delivery service provider from the Republic of Korea, using EVs helps save fuel costs and save 50% of maintenance costs. This will help Baemin reduce its operating costs by up to 30% if it successfully uses EVs in its transportation service.
Assessing sustainable consumption trends in online shopping, Baemin Vietnam CEO Song Jinwoo said that Vietnamese consumers are paying great attention to sustainable products which are made from recycled or reusable materials. In addition, they also tend to choose dishes that are low in fat and sugar, and rich in fiber and nutrition. This is reflected in the growth in the number of stores offering healthy products.
In the first half of this year, the increase rate was 15% compared to the same period last year. But at present, in fact, customers’ demand for environmentally friendly products is still not high as their prices remain the leading factor.
In the coming time, when the economy stabilises again, the trend of sustainable production and consumption will develop strongly, according to insiders.
Digital border gate in Lao Cai put into operation
The management board of Lao Cai Economic Zone launched a digital feature at the Kim Thanh International Border Gate No. 2 in the northern province of Lao Cai on August 21, with an aim to reduce time and costs related to customs clearance for exports-imports through this border gate.
Accordingly, those engaged in export-import activities through the border gate are required to declare on the system https://cuakhauso.laocai.gov.vn in order to facilitate customs procedures.
Lao Cai is the second locality in the country, following Lang Son province, to deploy a digital border gate in order to streamline customs procedures.
The move is expected to lift the province’s export-import turnover to 15 billion USD by 2030.
Additional direct flights from Hanoi to China launched
Vietravel Airlines, a member of Vietravel Corporation, successfully conducted its first direct flight to Hainan of China from Hanoi on the evening of August 20.
Vietravel Airlines’ flight VU1418 carrying more than 130 passengers took off at 22:40 p.m. on August 20 from Noi Bai International Airport in Hanoi and landed at 1:20 a.m. (local time) at the Sanya Phoenix International Airport in Hainan in China.
This marks the start of a series of charter flights jointly implemented by Vietravel Airlines with its partners following the success of the flight connecting Nha Trang to Macau, which was put into operation in May.
A representative of the airline said that the new direct flight will provide a premise for the airline to continue to deploy further regular commercial flights between the nation and the Chinese side moving forward.
Vu Duc Bien, president and CEO of Vietravel Airlines, emphasised that China represents one of the major markets in Asia that the carrier has set a target to fly to on the first day since its establishment.
He added that the airline plans to approach the potential market by conducting charter flights first, before putting regular flights to China into operation in the time ahead.
With the direct air route between Hanoi and Sanya, the airline has co-operated with partners to conduct a series of flights with the ultimate aim of bringing a large number of tourists to and from the two countries.
Earlier on August 12, leaders of Vietravel Airlines and Cambodia Airways signed a new aircraft lease contract. The airline’s fifth aircraft, belonging to the Airbus A320 series, is expected to be put into operation in September, thereby fulfilling its plan to expand the international commercial route network.
Sustainable ports – inevitable trend: experts
Ports serve as crucial gateways for transporting goods and services worldwide, meeting the demands of international trade and facilitating commerce between nations. However, they are also significant contributors to environmental pollution.
Therefore, developing green and sustainable ports has become a top priority, an inevitable trend not only for port operators but also managers and international associations, according to insiders.
Over 80% of global trade is transported by sea, but it has resulted in nearly one billion tonnes of greenhouse gas emissions, accounting for nearly 3% of global emissions caused by human activities. This is primarily from the maritime transport sector, experts said at a seminar entitled “Human Resource for sustainable port development” recently which was held recently by the Vietnam Port Association (VPA) in coordination with the Saigon Newport Corporation (SNP).
The event aimed to prepare human resources for developing sustainable ports, addressing climate change and environmental protection.
According to Tran Thi Tu Anh, deputy head of the Science, Technology and Environment Division under the Vietnam Maritime Administration, pollution sources in seaport exploitation activities include the construction of seaports, ports, production and business establishments in the maritime sector and seaport exploitation.
These activities affect air quality, water environment, cause erosion and generate more waste, she added.
Anh held that operators of ports, including the seaport system in the Southeast region, need ensure that their development, construction, and expansion processes are carefully planned and managed to minimise environmental impact.
Bui Van Quy, Deputy Director General of the Saigon Newport Corporation and Chairman of the ASEAN Port Association (APA), said that sustainable port development is one of the top priorities and the seaport system in the Southeast region is no exception.
It is necessary for each component of the maritime and seaport industry to be developed in a greener and smarter orientation, including smart ports, smart ships, smart logistics services, green technology and maritime human resources development.
Nguyen Xuan Ky, General Secretary of APA, Director General of Cai Mep International Seaport, suggested that seaports in the Southeast region should have a reasonable strategy for training and fostering human resources to realise the goal of building green and smart ports.
To solve the problem relating to human resources, the port industry of Ho Chi Minh City has identified two strategic tasks, namely accelerating short-term training for small and medium-sized seaport enterprises to supplement the current workforce shortage and focus on intensive human resource training to have a team of human resources whose quality on par with international standards.
SNP is a pioneer in implementing many measures to build human resources and retain employees, he said.
According to Duong Thanh Khang, Deputy Director General of the Thi Vai Port Complex Joint Stock Company, to build green and smart ports, it is essential to use clean and renewable energy in port exploitation and operation along with the application of information technology to protect the environment. Thus, high-quality human resources are needed to adapt to the digital age, meeting the requirements of sustainable seaport development.
Participants at the seminar underlined the need to implement a single-window maritime mechanism to reduce vessel berthing time at ports. Ports also need to adopt solutions to provide clean and sustainable energy, along with the establishment of sustainable human resources.
Export targets of key forestry and aquatic products lowered
Export targets of some forestry and aquatic products have been lowered due to various difficulties regarding prices and markets.
The Vietnam Cashew Association (Vinacas) has proposed curtailing cashew nut export turnover from 3.8 billion USD to 3.05 billion USD.
The forestry sector has reduced its export target from 18 billion USD to 14 billion USD due to a strong slump in prices of wood materials and wooden products.
The Vietnam Association of Seafood Exporters (VASEP) has also revised down export target and put forth two scenarios.
In the best scenario with a recovery of the market and a stable supply of raw materials, aquatic product exports in the remaining five months of 2023 may reach over 4 billion USD, bringing the total export value in 2023 to 9 billion USD and representing a decline of 15-16% compared to 2022.
In the less optimistic scenario, the sector will only bring home 8.5-8.7 billion USD this year.
In the latest report of the Ministry of Agriculture and Rural Development, the total export revenue of agro-forestry-aquatic products was 29.13 billion USD in the first seven months of 2023, a drop of 9.1% year on year.
The export earnings of aquatic and forestry products experienced the strongest fall of 25.4%, raking in 4.95 billion USD and 7.79 billion USD, respectively.
Bright future for Vietnam’s foreign investment attraction: insiders
Vietnam’s foreign direct investment (FDI) attraction has seen signs of recovery after continuous declines over the past six months, becoming a driving force for the country’s economic growth in the medium and long term, said insiders.
According to the General Statistics Office (GSO), the total registered foreign investment capital in Vietnam from the beginning of this year to July 20 reached 16.24 billion USD, up 4.5% year-on-year. Of the total, 11.58 billion USD had been disbursed, a rise of 0.8% over the same period last year.
Between January and July, there were 1,293 newly-registered FDI projects with a combined capital of 7.94 billion USD, up 75.5% in the number of projects and 38.6% in capital compared to the same period last year.
Vietnam’s attractiveness remained in the eyes of international investors, despite a wave of strategic adjustments as well as a reduction in investment activities on a global scale, according to experts. It reflects the Government’s efforts to promote cooperation, support FDI enterprises and improve the investment environment, experts said, adding that the country’s participation in many free trade agreements also creates advantages for goods produced in Vietnam, especially when the tax rate has become a strength, helping maintain the country’s competitiveness in the race to lure foreign capital.
According to Vice Chairman of LG Innotek Group Cho Ji Tae, the efforts of Vietnam in general and localities in particular in improving the business environment is one of the main reasons to retain investors. Meanwhile, a representative of the European Chamber of Commerce in Vietnam (EuroCham) said that European investors’ confidence has increased again thanks to the good inflation control and the macroeconomic stability of the Southeast Asian nation.
It is noteworthy that a lot of localities are proactively clearing bottlenecks, promoting potential and investment as well as creating the most favourable conditions for investors to attract new projects. For example, the northern province of Thai Nguyen has launched a “campaign” in this regard.
According to Chairman of the provincial People’s Committee Trinh Viet Hung, the province boasts favourable conditions to welcome investors, with appropriate policies, including financial support in vocational training for workers. This is a solution that contributes to accelerating the implementation and improving the feasibility of projects, he said.
At the macro level, the Government continues to focus on speeding up reforms and perfecting institutions and regulations related to FDI; actively promotes investment on the international scale, focusing on large and potential partners in terms of capital and technology such as the Republic of Korea, Japan, Europe and the US.
The most significant effort in attracting FDI is that Vietnam always stabilises its macro economy, along with socio-political stability, said Director of the Ministry of Planning and Investment’s Foreign Investment Agency Do Nhat Hoang.
Besides, it is paying attention to improving the investment environment as well as creating conditions for production and business activities, he added.
A survey of Japanese enterprises in Vietnam conducted by the Japan Trade Promotion Organisation (JETRO) in 2022 showed that 60% of the surveyed enterprises said they will expand their business in Vietnam in the next one or two years.
They also said Vietnam has the advantage of high growth potential, and businesses can increase revenue by expanding markets and increasing exports.
EVFTA facilitates Vietnamese goods’ entry into French market: official
The European Union – Vietnam Free Trade Agreement (EVFTA) which took effect in August 2020, has created significant positive impacts on Vietnam’s exports to France, according to Vu Anh Son, head of the Trade Office of Vietnam in France.
He said joining the agreement helps Vietnam improve its prestige in the international arena as it is one of the first developing countries to engage in a new-generation trade agreement with high-standard commitments with the EU.
For the business community, this prestige acts as one of the crucial driving forces to encourage European businesses to either increase or engage for the first time in trade activities with Vietnamese enterprises, Son said.
Tangible benefits from tariff reduction under the EVFTA have significantly contributed to maintaining the momentum of Vietnam’s exports to the EU during and after the COVID-19 pandemic, he noted.
Despite the global economic downturn and the challenging trends for exports in general, Vietnam’s exports to France still sustained stable growth in the first four months of this year at 7.7% year-on-year, hitting over 2.12 billion EUR (over 2.3 billion USD).
Leather and footwear, electronics and telecommunications, and textile and garment continued to be the key exports, constituting about 60% of Vietnam’s total export value to France. In particular, the export of footwear and phones posted strong increases of 30.5% and 21.9%, respectively.
Vietnam’s export turnover to France in 2022 surged by 18.8% to over 7.27 billion EUR from 6.12 billion EUR in 2020, reaching a record-high level.
The credibility and tariff incentives brought by the EVFTA are providing a significant advantage for Vietnam’s exports, particularly in farm produce.
The trade official noted that the EVFTA is a “boost” and a significant source of encouragement that propels Vietnamese businesses to engage more professionally and systematically in the international supply chain with well-defined plans,
In the French market, following a series of promotion activities, image-building, and consumer-orienting efforts carried out by the Vietnam Trade Office, Vietnam’s products have gradually gained footholds and recognition among local consumers, Son said, citing as an example the entry of Vietnamese rice into two major supermarkets chains – Carrefour and E.Leclerc.
The Vietnam Trade Office is continuing to capitalise on opportunities and potential generated by the EVFTA, towards further supporting Vietnamese goods to access the retail segment in France, Son went on.
However, he noted that technical specifications and rules of origin are always significant hurdles for Vietnam’s goods exported to the EU in general and France in particular.
He advised businesses to invest more in technology development to produce products meeting regulations on technical specifications, and quality and environmental standards.
Major electronics retailers face tough times
Leading retailers have seen a sharp decline in their profits in the year to date amid a tough business environment.
In the second quarter (Q2) of this year, MobileWorld JSC (MWG) saw 14 per cent drop on-year in its revenue falling to $1.24 billion, and a 98 per cent plunge in post-tax profit to $734,170.
In the first half (H1) of this year, MWG counted $2.38 billion in revenue and $1.62 million in post-tax profit.
The company has attributed that bleak situation to the weakening purchasing power for handsets and electrical products generally since Q4 of last year, and has yet to be resumed in H1 of this year, except for the demand for air-conditioners and fans due to seasonal weather.
To draw new customers, MWG had come up with a large-scale sale promotion campaign from late March with attractive price discounts to boost sales. Consequently, the company’s total revenue surged 8 per cent in Q2 compared to Q1, yet the accrued profit margin in Q2 reduced.
Similarly, weak demand had also pulled down profit at Digiworld JSC. In Q2, the company posted $193.9 million in revenue and $3.5 million in post-tax profit, a 6 per cent and 39 per cent drop on-year, respectively.
The revenue in the handset segment slid 19 per cent on-year falling to $92.4 million during the period. This is also the segment with the largest contribution to the company’s revenue.
The office equipment segment had a 17 per cent drop in revenue falling to $30.8 million as businesses saved on costs.
In H1, Digiworld counted $361 million in revenue and $6.83 million in post-tax profit, down 28.2 per cent in revenue and 53.4 per cent in post-tax profit.
With such outcomes, the company has only completed 43 per cent of full-year revenue and 41 per cent of full-year post-tax profit projections.
The business picture at FPT Retail (FRT), belonging to tech giant FPT Corporation, is also gloomy. According to the company’s consolidated Q2 financial statement, FRT counted $302.5 million in revenue, up 15.5 per cent on-year, but incurred $9.05 million losses during the period compared to $1.97 million in profit one year ago.
FRT leaders have attributed Q2’s poor profit performance to consumer budget-tightening, particularly for high-value and not essential products.
In addition, competition among retailers is fierce, with many price discount battles.
In the first half of this year, FRT reported 6.6 per cent drop in revenue and incurred $8.9 million losses compared to $9.1 million profit one year ago.
Doan Hong Viet, Digiworld chairman, said that they expected better revenue in Q3 compared to Q2 and to regain growth momentum from Q4.
Both Digiworld and MWG pin their hopes on rebound prospects of the retail market in the rest of this year, leveraging the fact that Apple will be launching its flagship iPhone this October and better revenue from laptop sales ahead of srudents going back to school.
Viet assumes that a boom in growth will come in the second half of 2024, driven by a new product cycle and economic rebound, leading to burgeoning consumer demand.
Nguyen Bach Diep, chairwoman of FPT Retail is less optimistic, saying that difficult times will drag to the end of the year.
Diep said that in the long run FRT’s growth might see upbeat prospects, with the Long Chau drugstore chain set as an investment priority at present.
Mixed fortunes persist in F&B arena
The food and beverage sector has witnessed fluctuations as local businesses grapple with unprecedented challenges, despite the arrival of some foreign chains.
Japanese burger establishment, Shogun Burger, marked its global footprint with the inauguration of its premier outlet in Vietnam last month.
Strategically positioned within Ho Chi Minh City’s vibrant Binh Thanh district, the establishment seeks to captivate the local Japanese community and the burgeoning tourist demographic.
Beyond the introduction of its hallmark burger offerings, Nikkei Asia reported that Shogun Burger will venture into curating an assortment of bespoke creations meticulously tailored to Vietnamese palates.
This culinary endeavour will encompass an innovative melding of premium Japanese and Vietnamese beef, alongside an exclusive limited-edition banh mi burger.
Having been established in 2016, Shogun Burger currently commands a network of 11 establishments across Japan, constituting a blend of both company-owned and franchised locales. The culinary venture operates under the stewardship of Ganesha, a Toyama-based entity.
Meanwhile, Japanese restaurant operator Hachi-Ban is preparing to make a pronounced mark on Southeast Asia’s dining landscape, with a particular emphasis on the vibrant market of Vietnam.
Originating in Kanazawa, the company’s expansion aspirations are anchored in Thailand and Vietnam. After inaugurating its inaugural Vietnamese restaurant in Ho Chi Minh City in 2019, the company temporarily slowed expansion due to the pandemic.
However, Hachi-Ban recently resurfaced with a renewed drive, launching its second restaurant in the southern Vietnamese city in April.
As reported by Nikkei Asia in late July, Hachi-Ban’s further openings are planned before year-end, aligning with a near-term goal of reaching 50 outlets in Vietnam.
While definitive statistical insights on the entire food and beverages (F&B) performance for the first half of 2023 remain elusive, a survey conducted by iPOS.vn of 137 outlets reveals a subdued industry outlook. Only 30 per cent of F&B businesses registered revenue growth over the six months. Concurrently, 40 per cent reported declining revenues, whilst another 30 per cent noted stagnant turnover.
In terms of operational activity, 63.5 per cent of businesses maintained their outlet count; 26.3 per cent inaugurated new branches; 5.8 per cent had to shutter at least one branch, with another 4.4 per cent opting to replace unprofitable branches with new ones.
Highlighting the market’s sentiment, renowned F&B conglomerate Golden Gate – owner of chains such as Kichi Kichi, Gogi House, Manwah, and iSushi – declared record profits of over $27.1 million in 2022.
Yet, in a move reflecting the prevailing cautionary approach, the company set a 2023 revenue target of only $7.05 million.
In the aftermath of Masan Group’s acquisition, Phuc Long beverage chain is confronting its inaugural revenue decline during the second quarter, with a lingering conundrum surrounding its kiosk model.
Specifically, Phuc Long Heritage JSC, the subsidiary that owns the Phuc Long beverage chain, recorded a contraction of over 14 per cent in second-quarter revenue on-year, translating to a sum exceeding VND370 billion ($15.6 million).
For the first time since coming under the purview of Masan, Phuc Long is grappling with a regression in its performance. Masan’s leadership has also attributed the sluggish pace of new store openings to the challenges confronting F&B retail.
Meanwhile, Auntie Anne’s, the American coffee and pretzel franchise, in June announced it has permanently shut all of its Vietnam-based establishments after four years.
Nguyen Ha Linh, CEO of the Thai Koh Yam restaurant chain, said, “Major businesses’ recent struggles clearly indicate the lingering aftermath of the pandemic. Last year witnessed a spending spree, a rebound from prolonged social distancing measures. However, now as things normalise, economic downturns become evident, directly impacting consumer spending, especially from the end of 2022 onwards.”
Vu Thanh Hung, CEO of iPOS.vn, anticipates that the end of 2023 will mark the nadir for F&B in Vietnam. He foresees a year-end holiday season characterised by maximal frugality from consumers.
To navigate these challenging times, Hung suggested three strategies for F&B businesses.
“Firstly, companies must discern and meet the evolving market demands by introducing innovative products and restructuring menus at more competitive prices. Secondly, they should focus on minimising operational costs, maintaining just enough revenue to cover ongoing expenses, even if this means accepting slimmer profit margins or operating at a loss. Lastly, businesses should capitalise on festive occasions and special events, recognising that consumers are often more inclined to spend on dining during these times,” he noted.
Cement producers continue to count losses
Cement producers have experienced a tough first half amidst the gloomy market prospects both at home and abroad, surging production costs, and sluggish consumption.
At the end of June, 12 cement producers released their second quarter financial statements, with only two units posting profit growth.
Vicem Ha Tien Cement JSC – a large member of the state-owned cement conglomerate Vietnam Cement Industry Corporation (Vicem) – witnessed a 16 per cent drop in its consolidated revenue on-year, falling to $84.3 million, and around $2.5 million in consolidated post-tax profit, down nearly 57 per cent on-year.
Although such outcomes marked an improvement compared to the record losses seen in Q1 of this year, the company still shed $1.13 million in H1. This sharply contrasts with the more than $7 million profit that was counted one year ago.
Similarly, Bim Son Cement JSC saw $210,970 in losses in Q2 of this year – its fourth consecutive loss-making quarter.
Its second quarter consolidated financial statement also records a 21 per cent drop in the company’s revenue, which stood at $37.67 million.
Q4 is often a key season for cement consumption, yet with the current situation, many firms expect the falling demand to continue for the rest of this year.
In H1, Bim Son Cement posted $73.4 million in revenue, down 25 per cent, and counted nearly $2.2 million losses. 12 months earlier, it generated nearly $5.5 million in profit.
Vicem But Son, another major unit under Vicem, experienced similar woes. In H1 of this year, the company raked in $56.65 million in net revenue, showing a 12 per cent drop, and incurred $1.35 million in losses. This comes off the back of the nearly $2 million it made a year ago.
The company has attributed its bleak business results to the fact that the first half of this year was a very tough time for the sector, with gloomy market prospects and rising production costs.
While not having to endure the losses of the aforementioned firms, Vicem Hoang Mai JSC saw its revenue in Q2 of this year tumble by nearly a half. It posted $98,500 in post-tax profit, compared to $464,100 in the same period last year.
In H1, the company posted $26,200 in profit, far lower than last year’s figure of $489,450.
Ngo Duc Luu, Vicem Hoang Mai’s deputy general director, believes that the cement market is facing a serious oversupply, with the designed capacity of approximately 130 million tonnes far outstripping the mere 65 million tonnes of domestic demand.
The remainder is set for export, with 65 per cent of the volume earmarked for the Chinese market.
However, since 2022, China has reduced its imports from Vietnam, forcing firms to seek other markets such as countries in South America and Bangladesh. However, this export volume is comparatively insignificant, leading to rising inventories at cement plants.
This has caused a remarkable decline in prices, with the rising input costs further compounding the issue.
Q4 is often a key season for cement consumption, yet with the current situation, many firms expect the falling demand to continue for the rest of this year, causing further difficulties.
Most cement producers are pessimistic about their 2023 business results, seeing little hope of achieving their set targets.
Textile apparel sector increasingly going green
More producers in the textile apparel sector are adopting measures for green and sustainable production to meet increasingly stringent requirements from trading partners, as well as create extra income sources.
To reach sustainable development targets, many countries and regions are enacting stringent requirements for importing products, forcing producers to obey environmental and sustainable development requirements, including the textile and apparel sector.
Pham Van Viet, chairman of Viet Thang Jean Co., Ltd., said that to break into demanding markets such as the United States and EU, it is currently a must for export producers to shift into green production.
At Viet Thang Jean, the company has entirely shifted into using high-tech applications to boost production as well as save the environment.
In the past, for denim products, the company had to use chemicals and pigments in the printing process.
Now, the firm has acquired laser printing technology to avoid doing harm to the environment.
One of its major investments $12.5 million in a process for producing 10,000 complete items, eight-time more in value compared to a conventional production line.
Similarly, Nguyen Huu Phuc, director of Fadatech JSC, said that the company uses bamboo fabric, or linen, which are deemed as environmentally friendly production materials that can be biodegradable after several years.
“As for technology, instead of using traditional methods with waste printing ink being discharged into the environment, we currently employ digital technology in printing, not using water, free from chemicals, dust and waste. After being printed, the fabric is dried and softened by heat-based and mechanical methods,” said Phuc.
Not only apparel firms, textile and material producers are also part of the trend. Many firms strive to adopt green and environmentally friendly production models that create many benefits when they join the global value chain.
Le Van Linh, head of Equipment Infrastructure division at Tran Hiep Thanh Textile Corporation, said that in 2019, the company discharged a total 57,783 tonnes of CO2 from production.
The company is committed to pulling down this volume by 29.4 per cent by 2026, despite its continual efforts for scope expansion.
Experts assume that many businesses have been aware of the benefits of going green in production, yet amid the current tough business climate with a sharp fall in order intake, investing into boosting production efficiency attached to environmental protection is causing difficulties for businesses.
Current solutions for many firms, therefore, are to make gradual investments with long-haul plans to smoothen the transformation process.
Rooftop solar plans may stifle industry
The Ministry of Industry and Trade is proposing to encourage rooftop solar power in offices and homes – but not in service and production businesses or industrial zones, which has caused concern for foreign and local producers in implementation of carbon reduction commitments.
Under a draft to encourage the development of rooftop solar power installation in Vietnam in June, the Ministry of Industry and Trade (MoIT) set up structures to encourage rooftop solar energy to be installed in homes, offices, and business headquarters in Vietnam. The power generated will be for self-consumption, not sale.
In addition, organisations and individuals investing in developing rooftop solar systems are exempted from electricity licences and certificates of electricity enterprise registration. Rooftop solar systems installed at offices are prioritised to allocate the budget for implementation.
But Dao Xuan Duc, chairman of the HEPZA Businesses Association, said that the draft did not refer to roofs of factories in industrial zones (IZs), at a workshop earlier this month.
“It would be a huge waste to ignore solar rooftops in IZs,” Duc said. “In Ho Chi Minh City alone, there are 18 IZs with a planned area of about 7,000 hectares, which will be increased by another 4,000ha going forward. The demand for electricity is absolutely huge.”
Textiles, garments, and footwear are among Vietnam’s billion-dollar export industries, and fields that have begun to turn green, but businesses are struggling with investing in rooftop solar power systems at factories because there is no clear support mechanism. Pham Xuan Hong, chairman of the board at Saigon 3 Garment JSC, said that the policies for solar power were still unclear because there was no mechanism to support installation costs such as capital, tax, and fee reductions.
One renewables investor said last week, “It is incomprehensible why the MoIT doesn’t mention IZs when talking about the rooftop solar power development strategy. The benefits from rooftop solar power in such facilities are great – for the state, for Electricity of Vietnam (EVN), for electricity buyers, and for electricity generators, especially when the north is suffering from electricity shortages.”
To encourage rooftop solar power development, various ministries seek to expand the scope of rooftop solar power systems to schools, hospitals, farms, production workshops, airports, railways stations, seaports, and others.
But the MoIT said it is following the instruction of Deputy Prime Minister Tran Hong Ha that the players at this time are homes and office buildings, while others will be looked at in future decisions.
Analysts pointed out that the draft document compiled by the MoIT mentions “encouragement”, but there is nothing which encourages rooftop solar power to develop in reality. The mechanisms in the document are deemed vague.
Le Chi Hieu from the Ho Chi Minh City University of Technology said he agrees with the self-production and self-consumption principle when developing rooftop solar power stated in the Power Development Plan VIII (PDP8), but stressed that if there is no detailed regulation, the strategy will fail.
“If we only think of developing rooftop solar on people’s homes and office buildings, nothing will be solved. If we want to develop the national electricity system, we have to think about developing rooftop solar power systems in IZs,” Hieu said.
Businesses that invest in solar power on the roofs of IZ factories to resell also are concerned about developing solar power in the near future.
“The mechanism proposed by the MoIT indeed only applies to the roof voltage system in office buildings, and is not yet applied to factories, so capacity is very limited and cannot meet the demand for clean electricity for large-scale factories,” said Nguyen Hoai Nam, deputy general secretary of the Vietnam Association of Seafood Exporters and Producers.
In a response, the MoIT explained that development in these areas had not been prioritised immediately, as they needed to be considered and calculated based on development of other sources in the entire power structure. This is to exploit the distributed renewable energy source without having to invest in upgrading the distribution grid, and especially to ensure the safe operation of the whole system.
In recent times, foreign-invested enterprises have expressed desire to participate in using renewable energy sources for production. Samsung, for example, proposed a trial programme to purchase power directly from renewable power plants instead of from EVN.
Some companies with major brands in the country have been working towards carbon neutrality with roof-based strategies.
Honda Vietnam set the goal of reducing CO2 by 46 per cent compared to 2019 by 2030, and it wants to be carbon-neutral by 2050. Earlier this year, the company put into operation a roof voltage system at factories in the northern provinces of Vinh Phuc and Ha Nam, contributing to reducing the use of national electricity by more than 7.5 million kWh per year and equivalent to a cut of about 4,700 tonnes of CO2 per year.
The company has said that the aforementioned solar power output accounts for about 6 per cent of Honda Vietnam’s demand, and it is considering the efficiency of buying solar directly from production units through a direct power purchase agreement between renewable energy generators and customers.
According to the PDP8, by 2030, half of all commercial buildings and half of all residential buildings will employ self-sufficient and self-consuming rooftop solar power. But the MoIT also acknowledged that since 2021, the installation of rooftop solar power in the country took place spontaneously and was not controlled.
“The most important thing now is to review the status of rooftop solar power installations after 2020 to get an overall picture before continuing to propose a new mechanism,” said Nguyen Binh, an industry expert.
Localities take on irksome admin process
A number of localities are slashing procedures for project approvals in order to lure in foreign investment at a faster pace.
Quang Ninh province is boosting its administrative reform to attract more investment, photo Le Toan
Nghe An People’s Committee is lauding a record time to approve and license a foreign-invested project.
On August 1, the province granted approval for a $165 million electronics project from Innovation Precision Vietnam Co., Ltd., under China’s Shandong Innovation Group.
The 11.8-hectare project will manufacture aluminium alloys and related items for electronic goods; forged, stamped, pressed, and rolled metal, and more besides. The factory is expected to enter operation in October 2024.
Chairman of Nghe An People’s Committee Nguyen Duc Trung said, “It took only two weeks from field surveys to issuing the final decision. In addition, it took only one week to approve the project’s admin procedures instead of 15 working days as normal, the shortest time so far in the province.”
The central province is implementing synchronous solutions to enhance the effectiveness in foreign-invested capital attraction, which focus on supporting and accelerating the process to approve projects, Trung added.
Along with Nghe An, the northeastern province of Quang Ninh is also a well-known locality for quick licensing of projects. In late June, Foxconn Singapore received investment certificates for two projects worth $250 million just 12 hours after the investor submitted an online application. This process typically takes 15 working days.
The projects include the $200-million FECV Quang Ninh factory, which focuses on manufacturing and assembling electronic components, electric chargers, and electric vehicle charge controllers. It is expected that the factory will be put into production in January 2025. The other complex is the $46 million Quang Ninh FMMV Factory, which manufactures and processes different components for tech devices.
“The exploit of licensing within 12 working hours is the result of the extreme careful preparation of the investors and the detailed guidance of the provincial authorities,” said Cao Tuong Huy, Acting Chairman of Quang Ninh People’s Committee.
“Foxconn is a prestigious investor in Vietnam, and so the province saves time in appraising the financial potential and feasibility of the project. Normally, if a major new investor expressed the intentions in the province, we would take a long time to study them in order to avoid pie-in-the-sky ventures,” Huy said.
Shortening the licensing time still ensures the compliance of regulations and the compromise of departments and relevant authorities, Huy stressed. “The province commits to accompany the investor during the construction progress and resolve difficulties, including on days off,” he said.
Chau Nghia Van, deputy general director of Foxconn Group in Vietnam, said, “Quang Ninh is where the group chose to deploy important production projects. These decisions are based on the natural socioeconomic conditions as well as management and direction capacity of the locality.”
Reforming procedures is a priority of central government. In early August, the government’s Steering Committee for Administrative Reform requested ministries, sectors, and localities to proactively and promptly supervise the system of legal normative documents, identify any issues and obstacles, and assign relevant agencies to resolve them within specific deadlines.
At the same time, the prime minister issued a reform plan for the second half of 2023, aiming to simplify 13 major groups of admin procedures. This work at localities will be given strength from a working group on admin procedure reform led by Deputy Prime Minister Tran Luu Quang. The working group is responsible for assisting the PM in directing tasks and solutions to reform such procedures and strengthen policy response capacity. The group is also responsible for putting forward solutions to handle legal bottlenecks raised by individuals and businesses.
Export turnover of crude oil to Thailand soars
The export turnover of crude oil to Thailand reported an increase of 200 per cent in July only, contributing to generating a revenue of $455 million for the first seven months.
Statistics published by the General Department of Vietnam Customs showed that the total export value of crude oil of Vietnam was 222,847 tonnes worth $115 million, up 9.4 per cent in quantity and a decrease 13.6 per cent in value compared to the figure of June.
In the first seven months, the export turnover of this product was $1.07 billion with 1.6 million tonnes, up 10.8 per cent in quantity but down of 17.4 per cent in value on-year.
The highlight was export activity to Thailand. In July only, this country imported 113,486 tonnes of crude oil worth $46.6 million from Vietnam, signifying an increase of 190 per cent in quantity and 84 per cent in value compared to June.
The figure for the first seven months was $454.4 million and 700,581 tonnes, increasing 63 per cent in quantity and 18 per cent in value on-year. These figures account for 42 per cent in value and 43.7 per cent in quantity compared to the export turnover of crude oil of the whole country.
Vietnam currently exports crude oil to Thailand, Australia, Singapore, China, Korea, and Japan.
Although Vietnam exports a large volume of crude oil, it still has to import this product for refinery because the country’s kind of crude oil is not suitable for the current oil refineries. Nghi Son Oil Refinery uses entire crude oil imported from the Gulf, which was exploited from deserts and schist rock. Meanwhile, Dung Quat Oil Refinery specialises in using the material exploited from Bach Ho oil field, but the reserve of this mine is exhausted.
This is why Vietnam exported 2.7 million tonnes of crude oil but imported 10.2 million tonnes worth over $7.8 billion in 2022. The imported oil mainly served these two refineries.
In the first seven months, Vietnam exported 1.76 million tonnes of crude oil and imported 7.36 million tonnes.
Food businesses seeking brand new growth engines
A number of food enterprises are restructuring and looking for more growth drivers.
After nearly 50 years in the business, Vinamilk, the 6th valuable brand in the world, has decided to change its brand identity. According to CEO Mai Kieu Lien, the rebranding campaign is a part of the company’s next five-year strategy, which includes digital transformation in all sectors that aim to reach and engage with consumers faster and more efficiently. Since its establishment, Vinamilk has changed many times its brand identity and this time is no exception.
“A brand that wants to last 100 or 200 years must change in accordance with actual conditions. During our years of development, Vinamilk has undergone numerous changes, and this time is no exception” Lien shared.
Vinamilk, the 36th largest dairy company in the world in revenue terms, currently owns about 40 percent of the dairy market share in Vietnam, with about 15 dairy cow farms, 17 processing factories out of a total of nearly 50 domestic and overseas subsidiaries.
After tough recent years due to the pandemic, the company recorded consecutive profit growth in the first two quarters of this year. It has successfully signed several large export contracts with a total value of USD 100 million and is eyeing positive growth in the second half. By the end of June, Vinamilk had achieved revenue of nearly $1.2 billion and profit after tax of more than $173 million, of which revenue in the second quarter increased by 16.5 percent compared to the first quarter.
Viet Capital Securities forecasts Vinamilk’s revenue will achieve a compound annual growth rate of 6 percent over the next four years.
“Vinamilk will focus on meeting the needs of consumers across quality, price, and service to increase sales and market share,” Lien said
According to the Ministry of Industry and Trade (MoIT), about 5,000 Vietnamese enterprises are currently operating in the food and beverage industry, an increase of 83.8 percent compared to before the pandemic.
Over the last five years, the volume of food and beverage consumption in the country has risen by 9.68 percent and 6.66 percent, according to the MoIT.
“We consider that there is a lot of growth potential for AB Mauri in the country. Our current business in Vietnam is strong, but there is still much room for growth to be in line with the market potential,” said Tran Huu Dat, the new CEO of AB Mauri Vietnam, a subsidiary of Associated British Foods Group.
Dat said the Vietnamese confectionary industry had been experiencing double-digit annual growth due to the contribution from both local and foreign businesses, competing through innovation, quality, pricing, and local understanding.
To realise this growth, one of the company’s strategic priorities is to expand its bakery ingredients business. This strategy began with the appointment of a new CEO at AB Mauri Vietnam, while participating deeper in the domestic market as well as aiming to supply bakery ingredients to other countries in the region.
“We are exploring different possibilities to realise this growth, including long-term investment in raw materials,” he said.
The food industry has a stable growth rate of about 7 per cent per year and more than half of businesses operating in this sector are participating in foreign direct investment, according to the MoIT.
Foreign involvement in food production takes big strides
Vietnam is continuing to be an attractive destination for foreign enterprises in processing and supplying food ingredients, with more cooperation prospects emerging.
About 700 businesses from 20 countries and territories will come to Vietnam in mid-August to seek the supply sources from Vietnamese agricultural and food producers, according to the Food and Foodstuff Association (FFA) of Ho Chi Minh City.
According to FFA vice president Nguyen Dang Hien, the interest of foreign businesses will mainly focus on beverages, ingredients and food additives, and seafood, besides other fields such as nutritional food, drugs, and functional foods.
“Vietnam’s processed products and food ingredients are highly appreciated by the world market for both quantity and quality, in which there are very fastidious markets with technical barriers in terms of quality, food safety and hygiene such as the United States, Europe, Japan, and South Korea. The halal food market also highly appreciates the potential of Vietnamese products,” Hien said.
Possessing an abundant source of agricultural raw materials, Vietnam has many advantages to developing the food processing industry. According to statistics from the Ministry of Industry and Trade, Vietnam’s food production and processing sector accounts for almost one-fifth of the value of its processing and manufacturing industries.
Fruit and vegetable exports reached about $3.3 billion, of which processed items are likely to be worth more than $1 billion, accounting for about 30 per cent in 2022. Vietnam is home to around 850 aquatic processing factories of which nearly 700 were granted EU export codes, up to quadruple compared to Thailand, India, and Indonesia.
Gunther Beger, managing director of the United Nations’ Industrial Development Organisation, said Vietnam has made a remarkable development in food and foodstuff production, especially in processing. “I think Vietnam is on the right track,” commented Beger. “We have all seen a spectacular change from an importing country to becoming the world’s leading producer and exporter of food and foodstuffs, with a wide range of export-leading agricultural products such as rice and coffee.”
The food industry is also one of the key industries prioritised for development by the Vietnamese government towards 2025, with the goal of bringing the export turnover of agriculture, forestry, and fishery value to $65-70 billion by 2030.
In particular, free trade agreements have increased market access for Vietnam’s processed food and beverage products to international markets and vice versa. This is also a driving force for foreign businesses to seek business cooperation opportunities in the Vietnamese market in the food industry.
There have been many merger and acquisition (M&A) deals in the food industry and this trend is expected to continue in the coming years.
The PAN Group registered a part of shares in member company Sao Ta Foods JSC to C.P Vietnam in 2021. Before that, South Korea conglomerate CJ Corp acquired 65 per cent in Minh Dat Food Co., Ltd. in 2017 and 47.3 per cent in Cau Tre Export Processing JSC the previous year. South Korea’s food-making conglomerate Daesang Corporation bought nearly a full stake in Duc Viet Food JSC in 2017, while Earth Chemical from Japan completed the acquisition of A My Gia JSC at the same time.
According to the European Business Association, the number and value of M&A transactions in Vietnam’s food production and processing industry has been on a steady growth track in recent years. M&A transactions are considered by many investors to be the most effective way to penetrate the market and expand their business here.
“The proportion of foreign direct investment in the food processing industry has a high difference between industries and fields, mainly focusing on projects with quick capital recovery such as the processing of agricultural and aquatic products, and beverages,” said Vu Ba Phu, director of the Trade Promotion Agency under the Ministry of Industry and Trade.
The entry of foreign investors and businesses into the food processing sector also helps domestic enterprises to have abundant capital, modern technology, and management experience to improve their production capacity.
Le Nguyen Doan Duy, director of Business Development at Asia Ingredients Group (AIG), said that the business’s expansion has been fuelled by an investment of approximately $2 million from Mekong Capital since 2014 and later PEMN Partners.
“Even when we have grown up and have a high degree of autonomy, we continue to receive investment offers from many large funds,” Duy shared. “Several funds want to invest in AIG because of its good performance, and there are not many companies involved in the food processing industry in Vietnam,” he added.
AIG owns six member companies with more than 20 years of experience in providing high-quality ingredients for the food production and processing industry.
AIG member Asia Chemical Corporation (ACC), accompanied the US Dairy Export Council in the conference “Elevating Beverage Innovation with U.S. Dairy Ingredients” took place in Ho Chi Minh City on August 3 to introduce new products made from U.S. whey and milk ingredients to consumers.
An ACC representative said that the company aims to introduce to the market quality products of international standards, ensuring convenience, as a way to improve the customer experience and promote the production capacity of the Vietnamese food processing industry.