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Here is your Mekong Memo Vietnam for January 18, 2024.

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Headlines:

WEF Sees Strategy for Growth Unveiled

FDI a Diverse Growth Story

Banking Sees Record Deposits and Expanding Credit

Labor Market Challenges as FDI Grows

Real Estate Update

HCMC Spearheads “Industry 4.0”

Diplomatic Relations: Canada, US, Indonesia

Energy: Biomass, Hydrogen, Coal, and More

Global Minimum Tax Feared to Scare Off FDI

Shipbuilding Titan Navigates Towards Bankruptcy

AI and Ethical Tech Take Center Stage

Labor Federation Eyes Reduced Work Hours

Vietnam Enters Rare Earth Market with SK Deal

Least Popular Cars of 2023

WEF Sees Strategy for Growth Unveiled

At the 54th World Economic Forum, Prime Minister Pham Minh Chinh outlined a four-pronged strategy to stimulate economic transformation and growth. The strategy emphasizes updating legal frameworks, developing infrastructure, developing high-quality human resources, and building on previous success in industries like renewable energy, digital transformation, and semiconductors. Dialogues with other global leaders in tech, e-commerce, finance, and tourism showcased Vietnam's commitment to creating favorable conditions for foreign investors and the nation’s focus on AI, electric vehicles, and green transportation.

Read more: Tuoi Tre News (Strategy Overview), Vietnam Economic Times (Global Perspective), VietnamPlus (Investment Focus), Vietnam Economic Times (Global Corporate Engagement), Vietnam Economic Times (Sector-Specific Initiatives)

FDI a Diverse Growth Story

Foreign direct investment (FDI) last year showcased diversity and growth. The nation attracted over 39,100 FDI projects, with a good increase in real estate investments totaling more than $68 billion. The growth is attributed to partnerships, political stability, and a favorable investment environment. The country has become an attractive destination for “high-quality” FDI, particularly in new industries, showing that the governments economic diplomacy efforts are beginning to resonate with global investors.

Read more: VietnamPlus (FDI Project Diversity), Vietnam Investment Review (FDI Quality), DTI News (Real Estate), Nhan Dan (35 Years of FDI)

Banking Sees Record Deposits and Expanding Credit

Banking also saw growth in 2023, with total deposits reaching a record VND13.5 quadrillion ($562 billion), a 14% increase from 2022. Credit growth surged, estimated at 13.5%, with outstanding loans hitting a similar number - about 13.6 quadrillion VND. The growth appears to be healthy and is indicative of a recovery of the economy and an increased demand for credit. Despite falling slightly short of the initial 14-15% growth target, a year-end surge in credit was a positive outcome of measures by the industry. Looking ahead to 2024, the State Bank of Vietnam (SBV) has set an ambitious credit growth target of 15%, which represents an injection of about 2 quadrillion VND in loans. This plan includes increasing credit access for both individual people and enterprises, as well as the implementation of a 120 trillion VND loan package for social housing. Commercial banks are aligning with this goal; Agribank and OCB have specifically outlined strategies to boost credit and support customers.

Read more: VNEconomy (Deposits), Nhan Dan (Credit Growth)

Labor Market Challenges as FDI Grows

The growing economy faces a significant challenge in bridging the skills gap in its labor market, despite the influx of Foreign Direct Investment (FDI). Sectors that the government loves to tout (see the first article, above) such as technology, AI, and digital transformation are really under pressure due to a shortage of skilled professionals. The gap is exacerbated by limited English proficiency in the workforce and a declining interest in tourism and hospitality education. To address these issues, efforts between the government, businesses, and educational institutions are going to be needed. Upskilling initiatives and real-world training programs are vital for creating a workforce that meets the evolving demands of the market and attracts further FDI.

Read more: The Investor

Real Estate Update

In Ho Chi Minh City, shophouses are losing their appeal due to high costs and low rental demand, leading to a decline in both rents and buyer interest. Nationwide, townhouse prices have fallen by 10-14%, with significant drops in cities like Da Nang, HCMC, Khanh Hoa, and Hanoi. The government is considering higher taxes for owners of multiple properties to curb land speculation. On the commercial front, vacancy rates for Grade A and B office spaces in HCMC are expected to hit double digits due to an increase in new supply, putting pressure on rents across both grades. Savills says that international investors are keenly awaiting more relaxed legal policies before committing more capital and say that anticipated amendments to the Land Law, along with other legal reforms, are expected to clarify long-standing issues, which should support a real estate market recovery in 2024

Read more: VNExpress (Shophouses), VNExpress (Townhouse), The Investor (Tax Policy), The Investor (Office Vacancy), VnEconomy (Savills)

HCMC Spearheads “Industry 4.0”

Ho Chi Minh City, in collaboration with the World Economic Forum (WEF), is set to launch the Center for the Fourth Industrial Revolution (C4IR) in June. This center, located at Saigon Hi-Tech Park, will center its work on green growth, smart cities, and AI. The initiative should foster policy research, technology transfer, and resource mobilization, improving the city's and the nation's competitive capacity in the digital realm.

Read more: Tuoi Tre News (Collaboration with WEF), Vietnam Investment Review (Focus on Green Growth and AI), VietnamPlus (Operational in June)