Vietnam News in Brief: Weekly Roundup August 11
Vietnam Briefing keeps track of what’s happening in Vietnam’s business and economic news so that you don’t have to. Here’s what happened this week.
Biden may be headed to Vietnam
The President of the United States, Joseph Biden, has said that he will be visiting Vietnam ‘shortly’. Though no specifics were provided, it will come on the back of a string of visits from high-profile US politicians, including Vice President, Kamala Harris and Secretary of State Antony Blinken.
The US has actively been pursuing a closer relationship with Vietnam as it seeks to counter China’s influence in Asia. Specifically, the United States is looking to upgrade its relationship with Vietnam to a ‘strategic partnership’ though doubts have been raised as to whether or not this will actually happen.
Banking and finance news
A reduction in foreign ownership limits in banking on the cards
A reduction of foreign ownership limits in banks has appeared in a draft of a revised Law on Credit Institutions. The banking sector is not in favor and it’s not clear how this came about. Most banks in Vietnam are foreign-invested up to the limit—which is currently 20 percent. Many are also over the limit with special approval often granted by the country’s central bank, SBV, to struggling domestic banks.
In draft form, it could be months or even years before a new law is approved. But with a lot of foreign activity in the banking sector, this is worth keeping an eye on for foreign firms operating in Vietnam’s financial services sector.
World Bank ‘Taking Stock’ report for August has been released
The World Bank has released its Taking Stock report for August with a focus on public spending for growth. There are several key takeaways from the report:
- Public debt is expected to reach 36 percent this year. The report notes that it has been on a steady decline for the last few years and is well within a sustainable range. It points out that this gives Vietnam room to initiate further economic stimulus in line with the focus of the report which is public spending for growth.
- GDP growth is expected to hit 4.7 percent this year. This is considerably lower than the 6.3 percent the World Bank forecast in March.
- Power outages in northern Vietnam are estimated to have cost the economy US$1.4 billion. The World Bank cites a lack of rain for hydro plants and coal for thermal power plants, as well as infrastructure deficiencies when it comes to moving excess power from the south to the north.
Vietnam still aiming high for GDP growth
Vietnam’s Prime Minister Pham Minh Chinh has said Vietnam will target 9 percent growth for the last half of the year. This is after the Southeast Asian nation recorded just 3.72 percent GDP growth in the first half of the year—9 percent would mean Vietnam would hit the 6 to 6.5 percent annual growth target outlined at the beginning of the year.
Also of note, the PM suggested more interest rate cuts and more cuts to fees and charges could be on the horizon.
Human resources news
Ball starts rolling on minimum wage hikes
Vietnam’s National Wage Council has met to discuss what a minimum wage hike might look like in 2024. The last wage hike was in 2022 with no wage hike this year as the economy struggled.
The Labor Confederation has suggested a pay hike of around 5 to 6 percent. The current minimum wage is currently around 4 to 5 million a month depending on the region. This is mostly likely to impact retail and low-value service businesses, with average wages in core FDI sectors like manufacturing, in most instances, at about VND 7 million, according to GSO data.
See also: Salary and Wages in Vietnam
South Korean firms invest in local pharmaceuticals producers
South Korea’s Dongwha Pharm has announced it has taken a 51 percent stake in Vietnam’s Trung Son Pharma. The deal is reportedly worth KRW 391.1 billion (US$295 million). Vietnam’s pharmaceutical sector has experienced rapid growth in recent years in line with rising incomes and a subsequent surge in demand for healthcare services.
Garment and textiles news
Hong Kong apparel to acquire Vietnam-based textiles firm
Hong Kong’s Texwinca Holdings is reportedly set to acquire China’s Texhong’s fabric unit in Vietnam for US$78 million. In general, garment and apparel businesses and ancillary operations, like fabric producers and dyers, have struggled over the last year as demand has fallen in Vietnam’s key export markets. This has seen increased activity in mergers and acquisitions as some firms seek to mitigate their risks by downsizing their operations, while others look for bargains amid the economic challenges.
Australian cotton week is underway in Vietnam
A delegation of cotton industry professionals from Australia is currently in Vietnam to showcase Australian cotton at a series of events in Ho Chi Minh City, Hue, and Hanoi. Vietnam became the biggest market for Australian cotton last year when it imported over US$1.17 billion worth. The cotton industry delegation will be looking to build on that success with this round of events.
Long An to receive US$52 million cold storage facility
Yokorei, a Japanese refrigeration firm is currently building a US$52 million facility in southern Vietnam’s Long An province, a stone’s throw from the country’s financial center Ho Chi Minh City. This project will go at least part of the way to satisfying a surging demand for cold storage facilities created by rising consumer incomes and a growing taste for perishable goods, dairy for example.
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