Digital banking: The way forward

Technology solutions are transforming every aspect of life, lining up a plethora of services readily available at the swipe of a finger – and banking and finance is a hotbed of such innovation. Do Danh Thanh, technology consulting director at PwC Consulting Vietnam, told VIR’s Hoang Anh how digital banking is an inevitable trend that puts pressure on banks all over the world to transform their traditional operating models.

What potential do you see in digital banking?

I think there is huge potential for digital banking to become the norm because of the core values that it delivers, such as simplicity, connectivity, and effectiveness. Many of us are already familiar with e-banking systems, which allow customers to make payments, transfer money or check their bank balances online. Digital banking is more advanced in that it enables the provision of all such and other products and services through mobile devices.

The high flexibility of digital banking products and services helps banks serve customers in a timely and highly interactive manner. This not only benefits banks and their customers, but also third-party partners and end users. Moreover, with a similar scale and investment, a digital bank can yield substantially higher economic benefits compared to the traditional operating model. One case in point is India’s Digibank, which amassed over 1.8 million customers and started making profit within only 18 months of its establishment.

According to PwC’s 2018 Global Digital Banking Consumer Survey, 15 per cent of participants use their mobile phones as the primary device to transact with banks (up from 10 per cent in 2017). A survey by the State Bank of Vietnam in 2017 further showed that the number of financial transactions via mobile devices increased by 81 per cent, while Internet banking transactions rose by 67 per cent compared to the previous year. Despite the fact that many customers still stick with traditional banking, digital banking services have been growing rapidly and are expected to replace traditional banking gradually.

What do you think about the current digital banking transformation practices?

Aligned with the government’s objective to create a cashless economy by 2020 and for at least two Vietnamese commercial banks to rank among the 100 largest Asian banks in terms of total assets, competition in the banking industry will boil down to one question: who will come first in the digital banking transformation, thereby winning in the high-potential domestic market and expanding internationally?

As per our assessment, most of Vietnam’s banks have started implementing digital core banking systems to accommodate Internet banking payment services and digital payments. Some banks have authorised payments via QR codes on mobile device applications, payments through social networks, and cash withdrawals from ATM without cards. Currently, some Vietnamese banks are using data analytics to synchronise data and support customer behaviour analysis. These are very positive developments showing that the banking sector is going digital.

How do you think banks should start their digital transformation journey?

We have come up with three main approaches based on our experience in delivering digital transformation projects. The first approach is to set up a digital team who reports to the CEO and fully takes part in the transformation process. With the advantages of direct involvement and deep understanding of the client’s business, this approach puts customers at the centre and brings them new digital experiences. The second approach is to establish an entity separate from the traditional bank. With such segregation, the entity will focus on creative capabilities and piloting to generate new ideas that can be implemented at the original bank at a much larger scale. The third approach is to build an integrated transformation team tasked with solving current customers’ needs with digitalised solutions. With this approach, banks can focus on customers’ needs entirely and form partnerships with fintech startups to implement effective solutions.

Even though each approach has its own pros and cons, these are the three methods that have brought success to many banks around the world in practice. We believe that Vietnamese banks, subject to their own characteristics, should seriously consider one of these three approaches to start their digital transformations.

Objectively speaking, are Vietnam banks ready to undertake the digital journey?

Looking back at the successful digital transformations of some banks in the region, we have identified some common drivers, such as changing demographics, better and cheaper technologies, a need for optimising returns on investment, and open and flexible legal systems. These are the core drivers for banks to transform their operations to meet more complex and diverse customer needs.

Vietnam has all these drivers and is, in fact, a potential market for digital banking transformations. To achieve this, banks should start by building their digital strategies and visions. Then, they can assess their current digital state and select the appropriate approach for digital transformation with clear objectives aligned with financial effectiveness.

There are now over 30 banking institutions in Asia that have successfully transformed to digital banking operating models. Examples include DBS (Singapore), Shinhan Bank (Korea), CBA (Australia), Jibun Bank (Japan). In Vietnam, Timo (sponsored by VP Bank) is currently the only digital bank.


Digital banking: The way forward

Vietnam officially receives Category 1 from US aviation authority

On February 15, United States Ambassador to Vietnam, Daniel J. Kritenbrink met with Minister of Transport Nguyen Van The and director of the Civil Aviation Authority of Vietnam (CAAV) Dinh Viet Thang to congratulate Vietnam on achieving the Category 1 rating (CAT 1).

“A Category 1 rating means Vietnam’s civil aviation authority meets the International Civil Aviation Organization’s (ICAO) standards for personnel licensing, operations, and airworthiness,” stated the FAA.

The status was awarded based on the assessment by a visiting FAA delegation to Vietnam in last August. Achieving the Category 1 rating is an important achievement which is the result of many years of tireless efforts by the CAAV and the MoT.

“With the Category 1 rating, Vietnamese aviation corporations that are able to secure the requisite FAA and authority can establish service to the US and carry the code of US carriers”, according to FlightGlobal.

“The FAA had not previously assessed Vietnam’s civil aviation authority for compliance with ICAO standards,” the FAA told newswire FlightGlobal. “The Category 1 status announced today is based on an August 2018 FAA assessment of the safety oversight provided by the CAAV.”

In order to maintain the CAT 1 rating, a country must comply with safety standards of ICAO, the UN technical agency in charge of establishing international standards and recommended practices for operation and maintenance of aircraft.

After obtaining CAT 1 certification, Vietnamese airlines also need to apply for a commercial flight licence by the FAA to fly directly to the US.

Vietnam Airlines shared that the firm has yet to set a specific flight time to the US.

Two other carriers, Vietjet and Bamboo Airways, are also planning to open direct flights to the US, but currently have no wide-body aircraft to serve this route.

CAT 1 is not only a key technical element to establish a direct Vietnam-US flight but also contributes to elevating Vietnam in the international aviation market. In addition, the acquisition of CAT 1 gives the country the opportunity to codeshare with the world’s major airlines.

Vietnam Airlines has considered both the Boeing 777X and Airbus A350-1000 for the more than 16-hour straight flight between Ho Chi Minh City and Los Angeles. Low-cost rival Vietjet has discussed obtaining widebody aircraft for many times, and newcomer Bamboo Airways has committed to purchase 20 787-9 planes.


Vietnam officially receives Category 1 from US aviation authority

Foreign capital flows into southern provinces as Lunar New Year starts

Ba Ria-Vung Tau on February 14 granted nine investment certificates worth nearly VND10 trillion ($430 million) and nearly $163 million to investors.

The newly-licensed projects include the instant coffee production plant of Japan’s Marubeni Group; the liquefied natural gas (LNG) plant of PVGAZPROM Natural Gas for Vehicles, a joint Russian-Vietnamese company; and the cement additive production plant by CHC Vietnam. Other projects include the Da Bac 4 solar power plant of Dong A Chau Duc JSC, and the speedboat project linking Vung Tau city with Con Dao Island of PQ Express JSC.

Statistics show that the province’s economy grew by 7.2 per cent in 2018, a record pace over the past eight years. In 2018, the local industrial production value, excluding crude oil and gas, increased by 8.72 per cent year-on-year. Export turnover reached $4.4 billion, up 13.32 per cent.

In 2018, Ba Ria-Vung Tau attracted 44 foreign-invested projects valued at about $1.9 billion and 59 domestically-funded ones worth VND18.76 trillion ($815.7 million). As of present, the province accommodates 351 valid FDI and 521 domestic projects, valued at $27.3 billion and VND276 trillion ($12 billion), respectively.

At the same day, the Binh Duong People’s Committee also handed out investment certificates to three foreign-invested companies with a total investment capital of $180 million. BW Industrial Development JSC received investment certificates for two projects, one to lease offices and factories and another to provide logistics warehousing services, worth $105.8 million in total.

Kyungbang Vietnam Co., Ltd., was licensed to expand its facility to produce cotton yarn and blended yarns valued at $40 million, while Top Glove Sdn., Bhd. will inject $30 million in a plant to produce gloves and other products from plastics. ​​​​


Foreign capital flows into southern provinces as Lunar New Year starts

Vietnam ‘hits its stride’ as more shippers and logistics players enter the market

The US-China trade war is set to accelerate the shift of manufacturing to Vietnam this year.

According to Amanda Rasmussen, chief operating officer at Indo Trans Logistics (ITL) and recently elected chair of AmCham Vietnam, the increased manufacturing activity will lift the country’s booming air freight market to even greater heights.

“There’s been a tremendous amount of growth in the air freight market,” she told The Loadstar.

“Vietnam is really hitting its stride and, barring any unforeseen global events, I think we’re going to see a very positive economic period coming up.

“We see the growth both from a trade perspective as well as with domestic consumption.”

While official statistics are yet to be released, Ms Rasmussen estimates the air freight market grew 20% in 2018.

Capital city Hanoi, where electronics exports dominate, enjoyed a 52% share of the traffic; whereas in the south, Ho Chi Minh City caters for mostly garments and footwear with a 47% share. The main tradelanes are with North Asia (30% market share), the EU (25%) and the US (28%).

The double-digit growth was not due to the trade war, however, Ms Rasmussen noted: “I can’t say it had a huge impact in 2018. Last year’s growth can be attributed very heavily to the existing big players here.

“But there’s a general shift of manufacturing from China that’s been going on for some time, and I definitely believe this year we will see a much faster pace of that shift. That in turn will continue in a bigger way into the air freight market.”

For example, Ms Rasmussen said, from the third quarter last year ITL worked with many companies opening their first factory in Vietnam, helping them set up their logistics operations.

“Of course, everything takes time to set up, so I don’t think we’ve really seen the true effects yet,” she added.

Based in Ho Chi Minh City and with offices across the region, ITL is one of the largest air cargo players in South-east Asia. It acts as a general sales agent (GSA) for 22 airlines, operates 200 flights a week and uplifts over 80,000 tonnes of air freight per year. In Vietnam, ITL is the number one GSA and controls around 17% of the country’s total air freight export market, according to Ms Rasmussen.

“The legacy of our business is air freight but we’re now a full-service operator,” she explained, adding that as an asset-based logistics provider the company had grown into the fourth-largest logistics company in Vietnam.

The country’s strong trade growth has attracted an influx of foreign freight forwarders in recent years, Ms Rasmussen said. The big multinationals had been operating in for some time and the influx was from smaller, niche and mid-sized forwarders, she added.

“They’ve been coming in a big way in the past five or six years. It changes the market, because it’s reduced the number of local operators through M&A activity.

“But I don’t see it as a negative; it’s a positive, as it raises the game of the market and the competition, and it’s better for customers. In a way, it’s a natural progression for the country, which you also see reflected in the infrastructure development, the openness of the economy  and the attractiveness for foreign direct investment.”


Vietnam ‘hits its stride’ as more shippers and logistics players enter the market

Labour disruption in Industry 4.0

As Industry 4.0 and cutting-edge technology gain ground, it is an essential task for Vietnamese authorities to revamp the country’s growth model. Meanwhile, businesses need to adapt to a new competitive environment, apply automation, and optimise production as the time for cheap labour is over.

Investing into cutting-edge technology production lines

Thanks to applying technology into production and processing over the last years, Minh Phu Seafood Corporation has become one of the leading shrimp exporters around the world. While other seafood companies are considering strategies for their key products or have yet to invest into expensive technology, Minh Phu has been concentrating on innovation for the last 10 years, applying advanced technology solutions to improve productivity and product quality.

In order to catch up with global trends as well as anticipate the market, Minh Phu has just decided to use an Artificial Intelligence (AI)-based system to reduce labour and improve quality control. While it once took two people to manage water, shrimp growth, and feed for each pond, after the implementation of this system it will take only one person to manage about 50 ponds. The company wants to bring most of its ponds under AI control by 2019 and cut the workload of feed management by 70 per cent by 2025. In the first days of 2019, Minh Phu signed an agreement with AI Academy to provide technical advice and automate several processing stages. Employees made redundant by the new technology will be transferred to processing plants or other operations.

Meanwhile, Vietnam Dairy Products (Vinamilk) is planning to build a 22,000-cow dairy farm in the Mekong Delta city of Can Tho. It has earmarked about VND4 trillion ($173.9 million) for the state-of-the-art 6,000-hectare facility, which will be the company’s largest to date. Sensors and microchips will control barn and feed hygiene and monitor cow growth, while robots will be used to automate feeding and milking. Previously, in its mega milk factory, Vinamilk poured VND2.4 trillion ($104.35 million) into automating most production stages from filling and sterilising to packaging and pallet loading.

The textile and garment industry has also been gathering speed to keep up with Industry 4.0. Managing director of Vietnam National Textile and Garment Group (Vinatex) Cao Huu Hieu said that upgrading technology and machinery is necessary to survive in Industry 4.0. In 2017, as many as 140 workers, equivalent to 10 per cent of the textile factory in the northern province of Nam Dinh, went into retirement, while the company recruited only 20 employees. He said that investing into a smart factory is the solution the group has set forth to overcome the lack of workforce and strengthen productivity.

In another case, as the owner of one of the leading footwear and bag manufacturing factories in Vietnam, with the annual revenue of over VND10 trillion ($434.8 million), TBS Group has upgraded its production lines rather early, already in the middle of 2017.

“TBS has built a synchronous and integrated system where we can track all production processes on a smartphone. In the footwear industry, this is a significant development to boost productivity,” said chairman and CEO of TBS Group Nguyen Duc Thuan.

Moreover, TBS has developed a production module which is similar to a map of the factory, contributing to corporate governance and shortening production period.

With the backdrop of the US-China trade war, Foxconn, one of the global largest electronics manufacturers, plans to relocate production lines and factories into Vietnam, presenting a good chance for Vietnamese employees to work in the production chain of Apple, the highest value brand in the globe. However, the chance will likely be for skilled workforce, based on Foxconn’s previous employment strategy in China. Two years ago, Foxconn reduced employee volume at one of its factories from 110,000 to 50,000 thanks to the introduction of robots, reporting greatly reduced labour costs afterwards. Although Foxconn confirmed that it was working to automate much of its manufacturing operations. The company said it is simply using the machines to “replace repetitive tasks previously done by employees,” while allowing those employees to focus on more valuable parts of the manufacturing process like research and development (R&D) and quality control.

Workers have to adapt

Industry 4.0 will open a plethora of new job opportunities, however, only those with good skills will be allowed access to them, while the less skilled majority may find it harder to cope. According to the research of Manpower Group, up to 45 per cent of jobs can be automated. The industries forecast to be most affected by technology and automation are IT (26 per cent), and customer service (15 per cent). The retail and financial sectors are heavily impacted as 47 per cent of activities conducted by salespeople can be automated, and the rate will reach 86 per cent in accounting and bookkeeping, as well as other data processing tasks.

According to the 2018 Global Talent Competitiveness Index, which assesses countries’ ability to attract, develop, and retain talent, Vietnam ranks 87th amongst 119 countries and territories. Major challenges include the lack of technology infrastructure, R&D spending, as well as vocational and technical skills.

To lessen the negative impacts of Industry 4.0 or even turn labour force into an advantage, Vietnam needs to improve the quality of its education and training, building out a creative labour market with high intellectual standards.

Ha Thu Thanh, chairwoman and one of the founders of Deloitte Vietnam, said, “The skills of employees and modern technology play an important role in improving labour productivity, because if employees are not trained methodically and professionally, they will work by instinct without creativity. As a result, they cannot improve labour productivity. Besides, 70 per cent of equipment, machinery, and infrastructure in Vietnamese workshops are backward, which hinders productivity.”

Accordingly, labourers need to master the skills required by new and ever-changing jobs. Each person needs to choose a career that suits his or her strengths. Workers need to prepare for changing employment situations and need to master new skills. They must change both their understanding and opinion on occupation and occupational stability. At the same time, dynamism, creativity, and flexibility will be enhanced.

Every labourer should live by the creed of “Lifelong Learning,” and be aware of the need for capacity building and skill change to adapt to new technology and meet work requirements. Besides, labourers need more training and learning foreign languages, especially English, with strengthened application of information technology in learning and management.

Valentina Barcucci Labour economist, International Labour Organization Country Office for Vietnam
labour disruption in industry 40Skills development is a building block of both the quantity and quality of economic growth. Evidence at the macro- and microeconomic levels shows that skills development is at the core not only of some of the most impressive economic development performance in history, but also of greater access of women and men to better jobs.Vietnam has achieved robust and continued growth for two decades. However, the quality of growth has increasingly become a policy priority, with skills development being one of the most pressing issues for several reasons. Economic development and trade integration have brought job creation, but Vietnam still occupies relatively low skill levels in the global value chains.Technological change is shifting skills demand, calling for a skills upgrade and millions of workers are still in informal employment, particularly unskilled workers without formal qualifications. Vietnam should promote skills upgrading in the informal sector, co-ordinate its industrial and skills development policies, and encourage the private sector to make use of available skills. In addition, they should facilitate the stronger involvement of employers’ and workers’ organisations in skills development.
Caitlin Wiesen Resident representative, United Nations Development Programme
labour disruption in industry 40In the context of rapid technological progress and uncertainties, new challenges and opportunities, it is necessary to generate new sources of growth and more decent jobs for all by creating inclusive platforms that simulate innovations, nurture and incentivise experimentation of Vietnamese companies in generating new applications of Industry 4.0 technologies for building local value chains, and enhancing their competitiveness and capabilities to innovatively apply frontier technologies for generating new business opportunities and jobs with greater social and environmental impacts such as restoring the natural environment, promoting circular economy and the use of green energy. Additionally, the country needs to build Industry 4.0 technology/IT infrastructure, data security, and e-government which will help increase the efficiency of the government and the private sector, with faster adaptation of Industry 4.0 among Vietnamese companies. It will also enable Vietnam to better utilise domestic data resources for growth. Last but not least, the country needs to catalyse a culture of anticipatory governance, regulations, and services that embraces the pace of technological change and helps make Industry 4.0 more inclusive. This includes creating well-defined zones for experimentation such as “regulatory sandboxes” to test, and innovate future anticipatory guidance, services, and regulations for Industry 4.0 technology-based transformations of existing businesses and to facilitate the growth of new businesses in “sunrise” industries, agriculture, and services.
Nguyen Phuong Mai CEO, Navigos Search
labour disruption in industry 40The Vietnamese labour market has benefited a great deal from Industry 4.0, which is creating many co-operation opportunities, increase employment, and draw in the world’s leading factories and brands to the country. Despite being highlighted for their quick learning, hard work, and adaptability, local employees have been facing difficulties in matching international standards and exhibiting discipline and poor foreign language skills among senior managers, especially in the processing and manufacturing industry.Our research on the impacts of the ASEAN Economic Community on mid-level employees in Vietnam shows that they still need to adopt a global mindset and improve their foreign language skills. It is difficult to recruit employees even for big companies as benefits and welfare are not completely guaranteed, while these are some of the top concerns of employees.


Labour disruption in Industry 4.0

Push for more private investment in transport

Last year saw great interest among international companies in Vietnam’s transport sector. However, regulatory barriers continue to hinder their next steps. Minister of Transport Nguyen Van The discussed with VIR’s Bich Thuy strategies to garner private funding in the sector and the opportunities for foreign investors in 2019.

What is your overview of ­the transport sector’s operations in 2018 and what were the highlights in both private and foreign ­investment attraction?

Last year was a difficult one for the sector. Social demands required us to develop key transport projects so as to create a driving force for the future development period. In terms of investment, we focused on making preparations for the country’s key transport projects, namely the Eastern Cluster of the North-South Expressway and Long Thanh International Airport.

The National Assembly (NA) has approved the investment plan of all 11 sections of the Eastern Cluster of the North-South Expressway and is in the process of making the next steps.

For the Long Thanh project, we are working with cities and provinces that the project affects in order to complete site clearance. As we have planned, compensation will be carried out and the final report of the project’s feasibility study will soon be finished.

We also carried out other transport initiatives planned for 2018, at a time when the transport sector received VND26 trillion ($1.13 billion) for projects. We estimated to disburse over 90 per cent of the total sum by the end of 2018, while the remainder was disbursed in January.

Last year, we also focused on drafting and completing regulatory frameworks. We created and issued 100 per cent of decrees, circulars, and others as earlier set. This is important work, enabling us to attract more investment in the sector.

Foreign investment attraction, especially in road transport, remains a difficult task. To date, we have not had any road projects that offer international bidding. The Eastern Cluster of the North-South Expressway is the first road project that the Ministry of Transport (MoT) has gotten the green light for, from both the NA and the government, to conduct international bidding, but it is expected that more opportunities will be available for foreign investors. However, the difficulty is that they often want the government to guarantee revenue. We have reported this to the government, but have yet to receive approval so far.

What is the MoT’s orientation in the attraction of foreign investors in 2019 and beyond, and what potential projects are available for them?

We aim to attract private investment in specialised segments such as aviation, seaports, and railways. We are planning to develop new railways in the coming months in which the government will fund the development of rail and signalling systems, while the investment in stations and locomotives will be sourced from the private sector in a model that is applied in many countries.

This will be a decisive year to develop key national transport projects, and we are considering some to attract private investment. They include the Long Thanh project, the Eastern Cluster of the North-South Expressway, and also Tan Son Nhat International Airport.

For the expressway plan, at present, the MoT is conducting bidding for building designs and budget estimation. As planned, we will finish the bidding in February this year. Then in April, we will focus on the design of site clearance for each project section.

We plan to disburse 50 per cent of the total site clearance funding of VND15 trillion ($652.2 million) for the project in 2019. We will also kick off three totally state-funded sections this year. For the eight sections to be developed under the public-private partnership (PPP) format, we will complete the shortlist of potential investors in September. If everything goes smoothly, we will have investors for certain sections by the end of 2019.

We hope that the Eastern Cluster will be a model for other future projects where they are developed in line with market orientations and without state intervention.

For the investment plan for the Long Thanh project, we will conduct international bidding.

At present, only road projects face difficulties related to the government’s revenue guarantee due to risks from new ventures to be developed in the future, while investors in other specialised transport segments such as aviation, railway, and seaports do not, so private investors can develop projects without the revenue guarantee because of low risks.

A potential scheme for private investors is Tran De Port, which has a special and important role to the Mekong Delta region. We are planning to report to the prime minister about this. At present, some domestic investors have expressed interest in this project.

We also want to develop a specialised railway route to transport a high volume of goods and commodities from industrial parks in the southern provinces of Dong Nai, Binh Duong, and Ho Chi Minh City to the Cai Mep-Thi Vai port complex located in the nearby Ba Ria-Vung Tau province. If foreign investors are interested in this project, we are willing to welcome them.

Van Don International Airport has just been inaugurated in the northern province of Quang Ninh by private player Sun Group. What did the MoT learn from this initiative for private investment attraction in the future?

This airport is obvious evidence of how efficient a privately-invested project is. We learned two main lessons from the venture, which was developed by Sun Group, one of the biggest property developers in Vietnam.

The first is about administration procedures. We should look into the reasons why a private investor can develop the project so much more quickly than state-owned enterprises. If a state-run company did this project, it could have taken a longer time, while it took Sun Group only three years. We are reporting to the government and the NA about this so as to review the Law on Public Investment, the Law on Public Procurement, and the regulations on construction to increase their efficiency.

The second is to pay due attention to attracting more private investment in the sector’s projects in the future to tap into their strong financial capacity and good development strategies. Privately-run groups such as Sun Group, Vingroup, FLC Group, and others are outstanding names.

Traffic accidents remained rampant in the transport ­sector in 2018. What are the solutions that the MoT has been taking to solve it? And how can the MoT work with airlines and aircraft ­manufacturers to ensure ­aviation traffic safety?

Traffic accidents remained a concern in 2018. Although the number of traffic accidents, injuries, and deaths decreased, we saw many serious and complicated cases. There are some key reasons for traffic accidents, including low awareness and performance of traffic rules, with the transport network still having some constraints.

Regarding railway safety, we also ordered the Vietnam Railway Authority to build a master plan on ensuring railway traffic safety, with solutions to focus on the development of overpasses, bypasses, and others, as well as application of IT in supervisions at intersections, and installation of lighting, warning, and automation systems. The master plan is estimated to cost over VND7 trillion ($304.35 million). We will report this to the prime minister. We are also working on a plan on new railways and will report it to the NA in 2019.

In aviation, we will intensify work with technicians on the technical quality of aircraft to ensure their operational safety. We will also intensify the inspection and management of professionalism of pilots, and will strictly punish any violations. For airlines which have many technical problems and breakdowns, we will seek special supervision over them, and even ban them from flying altogether.

We will work with international organisations such as the International Civil Aviation Organization and aircraft manufacturers such as Boeing and Airbus on any incidents.

What are the MoT’s priority tasks in 2019 to increase ­operational efficiency and to unlock private investment in the sector?

The top priority is to ensure the development schedule of the three national key transport projects, namely the Eastern Cluster of the North-South Expressway, the North-South high-speed railway project, and the Long Thanh International Airport project, while improving construction efficiency by increasing the disbursement rate to 100 per cent.

The second is to focus on traffic safety. We will work with relevant agencies on possible solutions and rules for this. We will also focus on upgrading and maintaining roads.

We will also give due attention to legislation to further reduce administrative procedures and especially to have sufficient decrees and circulars to create more favourable conditions for businesses, thus enabling the sector to attract more private investment in the future.



Push for more private investment in transport

Breaking barriers for future growth

In 2018, the Vietnamese economy grew by an impressive rate of 7.08 per cent, fuelled by the strong direction of the government, with a rise in foreign investment. Minister of Planning and Investment Nguyen Chi Dung talked with VIR’s Tung Huong about the year’s economic achievements, and the country’s new investment attraction strategy.

What was the Vietnamese economic picture like for 2018, moving into this year?

We have greatly succeeded in maintaining the macroeconomic situation, with the economy keeping its comprehensive growth speed. The economy has been supported by many impetuses, with inflation controlled and its macro-balances ensured. This success has been made by all sectors in the economy, especially the concerted actions by the ministries of Planning and Investment, Finance, and Industry and Trade, and the State Bank of Vietnam. Accordingly, all solutions for implementing monetary and fiscal policies, and other macro-policies have been effectively carried out.

Thanks to macroeconomic stability, the economic picture in 2018 was bright. Specifically, the economy grew by 7.08 per cent, which is quite high. Notably, comprehensive growth could be seen in all sectors with the agricultural, and manufacturing and processing sectors remaining the key drivers, which have created visible changes in the economy’s structure and growth model.

In addition to the consumer price index controlled at an on-year rise of 3.54 per cent, many macro-indexes such as public debt (down to 61.4 per cent), foreign exchange, the lending rate, banking liquidity and safety, credit growth, and foreign reserves have also been ensured at very positive levels.

The local investment and business climate has continued to significantly improve, with over 130,000 newly-established enterprises, and disbursement of foreign direct investment (FDI) for 2018 hitting $19.1 billion, up 9.1 per cent on-year.

Total development capital accounted for 33.5 per cent of the GDP, with the ratio of private investment on the rise.

Besides, the domestic and overseas markets have also developed strongly, with export turnover rising by 13.8 per cent on-year, and a record trade surplus of $7.2 billion. Total retail and consumption service revenue climbed by 11.7 per cent on-year.

For 2019, many international organisations forecast that the global economy’s growth will slow down due to trade tensions, which will have negative impacts on the Vietnamese economy. However, we can still see big prospects for the country, especially in the sectors of trade and investment. We need to grab all opportunities from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) right away.

Global FDI flows are expected to continue changing in 2019, with the Southeast Asian region and Vietnam remaining attractive investment destinations. The issue is that we need to make good preparations to take advantage of all opportunities, while selecting high-quality projects which are environmentally friendly and can be linked with Vietnamese enterprises.

The National Assembly has set a growth target of 6.6-6.8 per cent for 2019. What will be the key drivers to reach this goal?

Prime Minister Nguyen Xuan Phuc stated that 2019 is considered by the government to be a year of speeding up, and making big breakthroughs in all sectors of the economy. All efforts must be made to reach the highest results.

In 2019, Vietnam has to double down on its efforts so that all socioeconomic development goals set until 2020 can be hit successfully.

Party General Secretary, State President Nguyen Phu Trong has ordered that in 2019, growth must be higher than in 2018.

Much remains to be done not only in 2019, but also in the following years. Specifically, we must keep boosting administrative reforms, making it more convenient for businesses to enter the market effectively, while reducing costs for businesses to develop further. We have already been doing this job well over the past years, but this effort must be multiplied in the coming years.

Focus must be laid on developing private enterprises. They have been strongly developing in number and quality. Many big projects in Vietnam have seen the participation of the private sector.

However, they are now facing difficulties, and need a level playing field in the economy, with openness and transparency.

The resolution of the fifth meeting of the 12th Party Central Committee has stressed the development of the private sector into one of the important propellants of the socialist-oriented market-based economy. Thus, in 2019 focus must be placed on removing difficulties for private companies, so that they can strongly develop and make bigger contributions to the economy and become a stronger impetus for the country.

It is also necessary to boost scientific and technological renovation via sturdier policies and mechanisms.

Also, we need good preparations for international integration. After the CPTPP takes effect, the economy and the business community will need stronger capacity to take advantage of all opportunities. If we do well, the our economic growth can exceed the target of 6.8 per cent set by the National Assembly, laying good groundwork for the development of following years.

Achievements also come with ­difficulties. Can you highlight some of the obstacles our economy is facing in 2019?

The economy will experience ups and downs. It is expected that the global economy’s growth and the demand for goods and trade will slow down, especially from the US and China. This will have a negative impact on Vietnam.

Meanwhile, domestically, we are facing numerous issues, such as the economy’s small scale, low competitiveness, as well as climate change, natural calamities, and epidemics which have badly affected people’s lives. State resources remain limited, while it is still difficult to mobilise resources from the private sector.

In 2018, the country’s ­disbursed FDI reached $19.1 billion, up 9.1 per cent. What is the ­significance of this?

The FDI disbursement last year was positive. In the coming time, this capital will make bigger contributions to the economy. It can be said that obstacles to FDI have been removed, thus the disbursed FDI figure was quite high in 2018. It also reflects foreign investors’ growing confidence in the Vietnamese business and investment climate. I would stress that the disbursed sum is very significant.

After 30 years of attracting FDI, the Ministry of Planning and ­Investment has been compiling a new strategy for the coming years. What kinds of projects and partners will the focus be on?

Over the past three decades, FDI has become an important part of the economy, creating 27 per cent of the GDP, 70 per cent of export turnover, 17 per cent of state budget, and generating employment for about nine million local workers.

FDI has also helped Vietnam boost economic reforms and perfect the socialist-oriented market-based economy, while supporting the development of localities and domestic enterprises.

In the time to come, we will ­concentrate on luring FDI into the sectors of high-technology, new technology, IT, ICT, electronics, automobiles, agricultural machinery, industrial and electrical equipment, supporting industries, and research and development. The Internet of Things, Artificial Intelligence, virtual reality, cloud computing, digital economy, and automatisation are also very important.

Priorities will also be given to attracting FDI in the sectors of manufacturing and processing, high-tech agriculture, healthcare, education and training, high-quality tourism, finance, logistics, and clean, smart energy.

However, we will also continue to seek for FDI into the sectors that are of Vietnam’s advantage, such as garments and textiles, and footwear, with a focus on high-added value linked with automation and smart production.

In terms of markets and partners, we will continue diversifying the attraction of FDI from various markets and partners. We will effectively take full use of our ties with strategic partners, developed nations, and G7 nations in order to attract more investment from these countries into hi-tech projects which can have a spillover effect all over the economy.

We will continue to follow and assess FDI inflows into Vietnam to select projects that suit our country’s orientations. We will say no to projects using backward technologies which can harm the environment and people’s health.

We will also attract FDI from small- and medium-sized enterprises that have modern technology and can help domestic counterparts join global value chains, develop supporting industries, improve production capacity, and ­create more new employment.

Now is a good time for us to revise our policies and strategy on FDI ­attraction, as Vietnam is becoming a more attractive investment destination.


Breaking barriers for future growth

Foreign investors double-crossed by labour shortage in Vietnam?

This concern was expressed in Navigos Group’s latest report on middle- and high-level personnel demand in 2018’s fourth quarter. Accordingly, the Vietnamese labour market has seen significant impacts from free trade agreements (FTAs) and foreign investment capital in late 2018.

The report also revealed that along with the wave of investment movement from China, the expansion of business-scale of foreign-invested enterprises (FIEs) in northern Haiphong city and Bac Ninh provinces are increasing demand on local midde- and high-level personnel for positions like factory managers, office managers, and assistants.

In fact, the shortage of high-end personnel is not a new thing in Vietnam. According to the General Statistic Office of Vietnam’s (GSO) latest survey of Vietnamese workers, the number of non-skilled labourers still accounted for 77 per cent of the total labour force, while university graduates only accounted for less than 10 per cent.

Discussing the issue with VIR, Nguyen Phuong Mai, managing director of Navigos Search, a company specialised in middle- and high-skilled recruitment under Navigos Group, said that although the majority of Vietnamese labourers are in the golden age, they have yet to meet the demands of recruiters. Their findings stated that many recruiters in Vietnam are facing difficulties to hire high-skilled labourers.

In fact, many firms have begun planning relocating from China since late last year. In October, GoerJek – a Chinese firm assembling Apple’s wireless earphones (AirPods) – has just notified its suppliers about its plan to transfer production and business operations to Vietnam.

Similarly, Nikkei stated that despite already running an iPhone earphone manufacturing facility in northern Vietnam, the firm still intends to run away from China due to the risk of suffering damage from the US-China trade war.

In addition to GoerJek, other Apple assembly manufacturers also have similar intentions. Specifically, Cheng Uei, a Taiwanese firm specialised in manufacturing connecting wires and charger equipment for iPhones, and Petragon, the second largest iPhone assembly firm only behind Foxconn, has just revealed plans to transfer manufacturing lines to Taiwan or Southeast Asian countries like Vietnam, Thailand, and the Philippines.

Previously, Taiwan-based Delta Electronics, which specialises in supplying components for iPhones and Macbooks, stated that the firm will focus on its subsidiary’s business in Thailand, then expand to India and Slovakia.


Foreign investors double-crossed by labour shortage in Vietnam?

Binh Duong open for investment

Provincial authorities will urge site clearance and facilitate construction work to improve the investment climate and help the private sector to develop.

The province will open industrial parks and zones to welcome new investment trends, said Mai Hung Dung, deputy chairman of Binh Duong People’s Committee.

In addition to efforts to improve the quality of urban management, Binh Duong will conduct research and invest in multi-mode transportation, and move polluting facilities in residential areas to industrial zones and parks.

Dung said the province will also improve the province’s public investment and accelerate construction of major work, and focus on training of human resources for the Industry 4.0 era.

The province has set 12 targets for sustainable economic growth, with major growth focused on the service sector.

It will also continue to invest in infrastructure, with the aim of turning Binh Duong into a first-grade city, thus contributing to efforts to improve the living standards of Binh Duong residents and to build Binh Duong into a smart city.

Binh Duong has targeted a GRDP (Gross Regional Domestic Product) of 8.4 – 8.6 per cent this year and per capita income of VND140 million (more than US$6,030).

The province’s socio-economic development attained significant growth last year. The province fulfilled 27 of 29 targets set by the provincial authority for 2018.

The Binh Duong Province’s Department of Planning and Investment also reported significant improvement in the investment environment, with total foreign investment (FDI) of more than $1.6 billion in the first 10 months of 2018, bringing total FDI registration in the province to $31.75 billion.


Binh Duong open for investment

Asian markets rise as investors track trade talks, US shutdown

Asian markets rose on Thursday (Jan 24) as investors try to ascertain the state of play in the China-US trade row, while the pound edged higher on optimism Britain will not crash out of the European Union.

However, the US government shutdown continued to rankle, with Democrats and Donald Trump digging their heels in over the president’s border wall budget demand, while a White House official warned it could hammer the world’s top economy.

For a second day, equities swung to and fro, with few solid catalysts to drive trade, though Wall Street provided a positive lead as all three main indexes ended higher following upbeat earnings from the likes of market titans Procter & Gamble and IBM.

Hong Kong, Shanghai and Sydney all ended up 0.4 per cent, while Seoul jumped 0.8 per cent and Singapore added 0.5 per cent.

There were also advances in Wellington, Taipei, Manila and Jakarta though Tokyo closed 0.1 per cent lower.

In early trade London rose 0.2 per cent, Paris was flat and Frankfurt fell 0.2 per cent.

Trump on Wednesday gave an upbeat assessment of the state of affairs in the trade stand-off, saying “we’re doing very well in the negotiations” and that China “wants to make a deal”.

However, his remarks come in a week that has seen the White House deny Financial Times and CNBC reports that officials had rejected Beijing’s offer of preparatory discussions ahead of high-level talks in Washington.

Earlier, Bloomberg said the two sides were struggling to see eye to eye on the delicate issue of intellectual property.


The talks come as China struggles to reinvigorate its economy, which is growing at its weakest pace in almost three decades, while Trump is facing an increasingly bitter government shutdown just as the presidential campaign season gets into gear.

The impact of the shutdown – with Democrats refusing to provide Trump billions for his Mexico border wall – was laid out by the head of the White House Council of Economic Advisers, who warned the economy could grow “very close to zero” if it continued through March.

But Kevin Hassett said there would likely be a massive rebound as soon as the stand-off ended.

There seems no end in sight, with Trump hitting out at House Speaker Nancy Pelosi after she disinvited him from the chamber for his upcoming State of the Union speech, citing security worries while parts of the government are not working.

Trump backed down late Wednesday, agreeing to delay the address until the shutdown, which is in its fifth week, has ended.

The pound is holding at two-month highs against the dollar, supported by a belief that Britain will not exit the EU without a deal, despite Prime Minister Theresa May’s controversial agreement being soundly defeated by MPs last week.

Traders are increasingly “convinced that the ‘worst’ that might happen on Brexit is that May’s previously doomed Withdrawal Agreement might actually get over the line if the ‘hard Brexiteers’ in her government become convinced that the alternative is a (delay in leaving), a second referendum and potentially no Brexit”, said National Australia Bank’s Ray Attrill.

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: DOWN 0.1 per cent at 20,574.63 (close)

Hong Kong – Hang Seng: UP 0.4 per cent at 27,120.98 (close)

Shanghai – Composite: UP 0.4 per cent at 2,591.69 (close)

London – FTSE 100: UP 0.1 per cent at 6,848.47

Pound/dollar: DOWN at US$1.3065 from US$1.3068

Euro/dollar: DOWN at US$1.1374 from US$1.1383 at 2200 GMT

Dollar/yen: UP at ¥109.70 from ¥109.60

Oil – West Texas Intermediate: DOWN 27 cents at US$52.35 per barrel

Oil – Brent Crude: DOWN 34 cents at US$60.80 per barrel

New York – DOW: UP 0.7 per cent at 24,575.62 (close)


Asian markets rise as investors track trade talks, US shutdown