Vietnam start-ups need more investment

Source: VNA

Despite strong growth, investment into innovative start-ups in Vietnam remains relatively modest compared to the region and the world. Dien Dan Doanh Nghiep (Business Forum) newspaper organised the 2018 Start-up Forum in Hanoi on April 24. According to a Topica Founder Institute report, up to 291 million USD was poured into Vietnamese start-ups last year, a year-on-year increase of 42 percent. According to Tech in Asia, the Southeast Asian region has attracted 7.86 billion USD in start-ups last year. Therefore, the amount of investment into Vietnamese start-ups accounted for a very small proportion, less than 5 percent, reported Tu Minh Hieu, a representative from the Department of Market and Sci-Tech Enterprise Development, Ministry of Science and Technology. The number of investment transactions in Vietnam is also increasing, however the number of transactions under 1 million USD is in the majority, Hieu said. The amount of investment with capital of over 10 million USD is small, he said. “The number of merger and acquisition (M&A) deals is very small. No startup has made an initial public offering (IPO)”. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said that capital for start-ups is very important. There are currently more than 50 investment funds in diverse investment forms but scattered and in small scales, Loc said. Therefore, the VCCI Chairman said that it is necessary to research more deeply on the investment funds to create supportive mechanisms to help enterprises focus on innovative start-up ideas. “Capital for start-ups must always be ready, because this is the ’baby bottle’ for successful start-ups, therefore we need more ways for this ’baby bottle’ to grow,” he emphasised. The Government has promulgated many regulations and programmes to support start-ups, especially innovative start-ups, including Decree 38/2018/ND-CP on innovative start-up investment. Trinh Thi Huong from the Enterprise Development Agency, Ministry of Planning and Investment, said Decree 38 identified and recognised innovative start-up investment activities as a business; identified the legal status of innovative start-up companies and funds.  The decree is expected to provide a legal basis for private investors when jointly contributing capital to establish a creative start-up fund; streamline capital flows for creative start-up activities. In addition, Vu Tien Loc also spoke highly on the role of large enterprises as the senior companies will provide funds for start-up investors to carry out social responsibility. “This is considered one of the goals of developing a start-up community in Vietnam, therefore, large enterprises need to boost action plans and spend for start-up capital,” he said. In addition, the VCCI leader said that the country’s entrepreneurial spirit is not inferior compared to the global landscape. According to a VCCI study of over 60 economies, Vietnam is among the 20 economies that have leading entrepreneurial spirit. However, in terms of the possibility of realising the ideas of starting a business and introducing a business model, Vietnam is among 20 economies in the second half,” he said

Power project to begin operations ahead of schedule

Source: VietnamNews

The US$1.75-billion Vinh Tan 1 thermal power project will begin operations ahead of its schedule owing to concerns about the risk of power shortage in the southern provinces in future. This is the largest project in the country made with Chinese investment and involvement.  According to latest reports, the first unit of the project will begin commercial operations in July 2018, five months earlier than its schedule.  Phan Ngoc Cam Thanh, deputy director of Vinh Tan 1, told the National Steering Committee for Power Development that after 1,025 consecutive construction days, the project was 93 percent complete. “We target to push forward the date for commercial operations,” he said.  On April 18, the first unit of Vinh Tan 1 successfully connected to the national grid for the first time and met all standards during a test.  Dinh The Phuc, member of the National Steering Committee for Power Development and deputy director of the Electricity Regulatory Authority of Vietnam under the Ministry of Industry and Trade, said Vinh Tan 1 thermal power plant had a huge generation capacity and was expected to help increase energy supply in the country.  The 1,240MW project is the first thermal power plant in Vietnam to apply the pulverised coal combustion technology. It will play an important role in supplying power to the country’s southern part as there have been delays in the operationalisation of the Song Hau 1 and Long Phu 1 thermal power plants. These projects, in the Mekong River Delta provinces of Soc Trang and Hau Giang, respectively, are designed to produce an annual 1,200MW of power each, but they are many years behind schedule. Vietnam’s State-run oil and gas group PetroVietnam invested in both the projects. Vinh Tan 1 is expected to generate more than 7.2 billion kilowatt-hours of electricity per year, increasing the southern region’s electricity supply capacity and helping reduce its dependence on hydropower, especially in the dry season or during droughts.  The power demand in Vietnam is expected to see a remarkable increase of more than 10 percent per annum in the coming years due to rising population and economic growth. Southern Vietnam in particular, the country’s largest economic bloc, which includes HCM City, faces a critical situation in relation to the current imbalance between the existing supply and the increasing demand for electricity. This calls for urgent development of power generation infrastructure in the region. In his recent tour to the southern provinces, Deputy Prime Minister Trinh Dinh Dung underlined that accelerating the pace of constructing power plants, especially in the south, as well as upgrading transmission projects would remain a prime task for years to come.

Foreign automakers switch to trading as Vietnamese scale up production

Source: VietnamNet

While foreign-invested manufacturers have shifted to importing cars for domestic sale, Vietnamese enterprises have increased investments and expanded production, vowing to develop a domestic automobile industry.

New factories:  Truong Hai Automobile (Thaco) on March 25 opened Thaco Mazda, which is considered Mazda’s biggest and most modern factory in South East Asia, with total area of 30.3 hectares and capacity of 100,000 products a year. On the same day, Thaco opened the Japan – Chu Lai international maritime route and received APL’s first ship from Hiroshima docking at the Chu Lai Port.  The cargo carried by APL included Mazda car parts and machines that serve the manufacturing and assembling of cars at Thaco Mazda and the Chu Lai – Truong Hai Automobile Mechanical Engineering Industrial Zone. Prior to that, in 2017, Thaco put Bus Thaco, the biggest bus manufacturing factory in ASEAN with the capacity of 20,000 products a year, into operation. The enterprise also spent money to upgrade car parts and accessory manufacturing factories which provide components to assemblers. The newly opened factories, analysts say, show that Thaco is strictly implementing the commitments on making investments for Thaco’s new development period in Chu Lai Open Economic Zone. The automobile manufacturer made the commitment to Quang Nam provincial leaders. Thaco’s president Tran Ba Duong said that Thaco is raising the localization ratio step by step, expected to reach at least 40 percent for cars. In its plan to export cars to regional markets, Hyundai Thanh Cong is considering opening a second factory in Vietnam. The existing factory, in Ninh Binh province, now has capacity of 60,000 products a year. It makes Hyundai SantaFe, Elantra, Grand I, Tucson and New Porter 150 models.

4.0 technologies: Anticipating the new tendencies in the 4.0 era, Thaco many years ago decided that it needs to develop the Chu Lai – Truong Hai Automobile IZ into a modern multi-purpose mechanical engineering and automobile production center. The newly inaugurated Thaco Mazda is equipped with the most advanced automatic production lines. These include a robotic welding line with laser technology and an 80 percent automatic assembling line. According to Thaco, the group now has 20 car part manufacturing and assembling factories using 4.0 technologies. VinFast, another Vietnamese automobile brand, also is thinking big with its plan to become the leading automobile manufacturer in South East Asia with the capacity of 500,000 products by 2025. To reach that goal, Vinfast has signed a contract with Siemens on building a modern digital factory similar to the factories of world famous manufacturers like Mercedes, BMW, Maserati and Volkswagen. Vinfast plans to launch two models this year, one sedan and one SUV.


Cryptocurrency under supervision

Source: Vietnam News

Vietnam has intensified inspections on cryptocurrency transactions as trading and investments using this payment system are on the rise in the country. Transactions in cryptocurrency can threaten the stability of the financial market and social order due to the high risks involved. Following the Prime Minister’s instruction issued recently, the State Bank of Vietnam (SBV) this week ordered financial institutions and other organisations providing payment brokerage services not to conduct cross-border transactions in cryptocurrency for fear of money laundering, terror sponsoring, tax evasion and fraud. Under the SBV’s directive, financial institutions and intermediary payment service organisations must intensify inspections, promptly report suspicious transactions with close connections to digital currencies and address violations. They were ordered to set up plans to prevent illegal transactions and report to the SBV’s Payment Department before June 30. Meanwhile, the SBV’s units must work with ministries and branches to carry out legal framework and solutions to handle the illegal use of cryptocurrency as a means of payment. Local branches of the SBV across the nation are required to raise public awareness about the risks involved in cryptocurrency investment and trading, as well as the legal regulations on cryptocurrency. Earlier, Prime Minister Nguyen Xuan Phuc asked SBV, financial institutions and other organisations providing payment brokerage services to intensify inspections and promptly report suspicious cryptocurency transactions. The Prime Minister signed Directive No.10/CT-TTg on the matter, following repeated warnings from relevant agencies on the risks associated with Bitcoin and other cryptocurrencies, along with the threat that cryptocurrencies could be used to finance crimes such as money laundering, terrorism, tax evasion and fraud. Cryptocurrency is considered an illegal non-cash payment method in Vietnam. The use of virtual money as a means of payment is prohibited and will be dealt with as per the country’s laws. The police in HCM City are coordinating with relevant agencies to investigate an alleged cryptocurrency fraud involving more than 32,000 people and a sum of VNĐ15 trillion (US$666 million).


Vietnam’s securities market may get ‘emerging status’

Source: VNS

Vietnam’s securities market may be upgraded to the emerging market status from its current frontier market by 2020, according to the latest SSI Retail Research. The local securities market has grown rapidly and reached US$191 billion in total value by the end of March 2018, equivalent to 95 percent of the GDP (gross domestic product) in 2016 and up 24.7 percent against 2017.  It’s as large as the securities markets in the United Arab Emirates and the Philippines and even surpasses some emerging markets such as Qatar ($131 billion), Pakistan ($82 billion) and Egypt ($58 billion).  Liquidity also increased sharply to an average of VND8.8 trillion ($386 million) per session in the first quarter, a growth of 80 percent over the average of 2017.  According to SSI Research, five Vietnamese stocks have satisfied the Morgan Stanley Capital International Inc (MSCI) requirements in terms of market capitalisation, free-float rate and liquidity and can be added to the Emerging Market Indexes in case the local market is upgraded. SSI estimates that nine other stocks will meet these requirements in future. These shares have a market value of over $2 billion and good liquidity but are yet to reach the level of required free-float rate. In its 2017 market classification review that was carried out in late June, MSCI did not include Vietnam in the review list for a potential reclassification to the emerging market status. Thus, Vietnam remained in the MSCI Frontier Markets Index. Essentially, Vietnam’s securities market has satisfied MSCI’s quantitative requirements in terms of the market size and liquidity. However, qualitative conditions will be decisive factors for an upgrade, not only by MSCI but also by other classification firms, such as FTSE and S&P. The Government, meanwhile, is doing well in managing macro-economic stability and reinforcing foreign investors’ confidence in the local market. However, the research suggests relaxing the limit of foreign ownership and accelerating the divesting of State capital in State-owned enterprises to further broaden the investment scale for foreign investors.  On the other hand, the foreign exchange market needs to be more flexible to facilitate the flow of foreign capital into the country. According to SSI Research, Vietnam can be upgraded to the emerging market status in 2020 by MSCI, but it requires at least one year for MSCI to seek advice from the international investment community and another year for investment firms to prepare for the changes and portfolio restructuring.  MSCI will publish its annual market rating and prepare a list of markets that need to be consulted for the next period in June.


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