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Headlines:
HCMC's Competitive Edge Slips
FTAs Drive Ongoing Reforms
UN Warns on Environmental Toll of Digitalization
Overall Growth Steady Just Above 6%
Export Sector Growth Posting Gains
Economy Rebounds on Government Action
Renewable Energy Success Offers Lessons
Surge in Hanoi and HCMC Real Estate
Infrastructure Projects Gain Momentum
Deposit Rates Rise as Cheap Money Era Ends
Ministers Strengthen Vietnam-Canada Ties
Businesses Target Overseas Expansion
FDI Surge Thanks to Reforms and Stability
Korean Investors Face Administrative Hurdles
Circular Economy Takes Root in Agriculture
Murder-Suicide Shocks Bangkok
HCMC's Competitive Edge Slips
Once-dominant HCMC businesses now lag behind national and regional rivals in growth rates. The city leads in economic value but has only one enterprise among top tax-paying companies and none in the largest firms list. Experts are calling for the adoption of competitive strategies targeting domestic and international markets, strengthening brands, and implementing professional management practices to regain lost ground. Addressing challenges is seen to be crucial for bring the city's business competitiveness back to life.
Read more: The Investor
FTAs Drive Ongoing Reforms
Trade agreements continue catalyzing economic changes in intellectual property, labor laws and market access, building on earlier reforms spurred by memberships in ASEAN and the WTO. The CPTPP and EVFTA have driven some big policy shifts, though state-owned enterprise reform remains an under appreciated challenge. These agreements show how the use of trade pacts to sustain and deepen market-based reforms can work in an ever-changing world.
Read more: FULCRUM
UN Warns on Environmental Toll of Digitalization
The UN is warning that the shift towards a digital economy is causing environmental damage, due to the big energy and water consumption needs of data centers. Reports show tech giants like Google and Microsoft have increased their greenhouse gas emissions of late, and the UN is calling for the urgent need for sustainable digitalization strategies and standardized data production by tech companies to minimize environmental impacts. There was no mention in the report of the economic or environmental cost of producing and moving vast amounts of paper around the country world, however.
Read more: Tuoi Tre News
Overall Growth Steady Just Above 6%
Some big institutional names are forecasting steady expansion driven by trade recovery, manufacturing, and foreign investment. The first half saw a nearly 6 and a half percent GDP rise backed by healthy exports across sectors, with agricultural exports in particular notching almost 20% growth. Government focus remains on sustainable growth through trade agreements and market diversification, hoping to maintain momentum.
Read more: VnEconomy (ADB forecast), Vietnam News (growth outlook), DTiNews (UOB forecast), Cong Thuong(first-half GDP), Nhan Dan (agriculture growth), VNEconomy (Economic Footing)
Export Sector Growth Posting Gains
Timber, footwear, textiles, cashews and seafood all reported solid growth in the first half of 2024. Timber and wood products rose 22.2%, leather and footwear exports are predicted to hit $27 billion annually, while textile exports reached $16 billion. Cashew exports surged 26%, and seafood hit $4.4 billion, with shrimp and lobster showing particularly strong growth.
Read more: Cong Thuong (Timber), Vietnam News (Leather Footwear), VNEconomy (Canada), Cong Thuong (Textiles), Mundus Agri (Cashews), Nhan Dan (Seafood)
Economy Rebounds on Government Action
H1 growth hit 6.4% as exports boomed and policy measures like interest rate reductions and public investment boosts took effect. IMF forecasts continued recovery exceeding 6% annually (see previous article) but increasingly is sounding the alarm on inflation risks, as the rate sits at 4.3%. A balanced approach to recovery and inflation management is urged, along with continued reforms to improve productivity and mitigate the effects of demographic and climate challenges.
Read more: Vietnam Economic News
Renewable Energy Success Offers Lessons
Attractive feed-in tariffs, supportive policies, and energy security concerns are driving progress in renewable energy adoption. A new decree allows direct renewable sales, which has been good for investor confidence in the sector. Grid infrastructure and policy certainty remain issues, but recent energy expos have demonstrated ongoing innovation and collaboration. Sustained efforts and international cooperation are seen as crucial if there is any hope of achieving green energy goals.
Read more: East Asia Forum (Renewables Boom), Vietnam Investment Review (Methods), VnEconomy (Investment Certainty), VnEconomy (Energy Expos)
Surge in Hanoi and HCMC Real Estate
Hanoi apartment sales in the first half of 2024 matched the total for 2023, pushed by high demand despite rising prices. HCMC is seeing renewed demand and increased launches, while villa and townhouse prices in Hanoi have risen due to new infrastructure developments. Affordable housing has largely disappeared from the market, with new supply focused on high-end properties. The outlook remains positive with upcoming large-scale projects and regulatory changes expected to further support the sector.
Read more: VnExpress (Hanoi apartment sales), The Investor (affordable apartments), VnExpress (HCMC demand), VnExpress (villa prices))
Infrastructure Projects Gain Momentum
Plans are in motion for 1,541km of high-speed railway by 2035, improving connectivity throughout the country. Construction on southern motorways will start in December, while Indian giant Adani Ports has received approval for a new port in Da Nang. AIIB is saying that it will continue to support green infrastructure projects, aligning with national sustainability goals and helping along the government's commitment to comprehensive infrastructure development.
Read more: Cong Thuong (HSR), Vietnam Investment Review (Southern Motorways), Safety4Sea (Port), Bernama (Mobile Broadband), Vietnam News (AIIB)
Deposit Rates Rise as Cheap Money Era Ends
Banks are hiking rates as inflation and exchange pressures come into increased ply, with 24 domestic banks raising deposit rates in June alone. Experts are seeing further increases of as much as 1% by year-end, impacting lending rates and signaling tighter monetary conditions. Rising credit demand and economic growth are expected to drive the trend as banks compete to pull in deposits.
Read more: Vietnam Economic News
Ministers Strengthen Vietnam-Canada Ties
Vietnam’s Minister of Industry and Trade Nguyen Hong Dien and Canada’s Minister of Export Promotion Mary Ng met in Italy to talk about boosting bilateral economic and trade cooperation. Vietnam, Canada's largest ASEAN trading partner, has done well of late, thanks to the collaboration, with the results seen in trade and investment growth. Both ministers emphasized their commitment to furthering ties, taking advantage of existing and upcoming cooperation mechanisms, as well as supporting multilateral frameworks like the CPTPP. The meeting showed the importance of Vietnam in Canada’s Indo-Pacific Strategy - a story to keep an eye on.
Read more: Vietnam Economic News
Businesses Target Overseas Expansion
Nearly 90% of Vietnamese businesses say that they plan foreign ventures within the next three years, with ASEAN as the top destination. Challenges include customer acquisition, regulatory barriers, and finding suitable partners. Firms are looking for financial incentives and connections with large corporations to navigate market complexities, saying that they are placing high levels of importance on digitalization and strategic planning in their expansion efforts.
Read more: Vietnam News (UOB report), The Realtor (investment motivations)
FDI Surge Thanks to Reforms and Stability
Foreign direct investment is projected to reach as much as $40 billion this year, thanks to expected macroeconomic stability and ongoing reforms. High-quality investments, particularly in electric and electronic sectors, are flowing into provinces like Bac Ninh and Ba Ria-Vung Tau as the government's efforts to improve the business environment, streamline investment procedures (caveat: next article), and address infrastructure needs continue to bear fruit.
Read more: CSIS (US Investment), Vietnam Investment Review (FDI Growth)
Korean Investors Face Administrative Hurdles
Korean investors are raising their voices to alert the government of challenges related to slow administrative procedures affecting visas, temporary residence cards, and work permits. An unreliable power supply, and skilled labor shortages, the Global Minimum Tax, and VAT refund delays add to concerns are the icing on the cake. The Korean Business Association says that Vietnam remains attractive for Korean businesses, especially in high-tech sectors, but more work needs to be done to get governmental support and streamline procedures.
Read more: The Investor
Circular Economy Takes Root in Agriculture
The agro-forestry-fishery sector is taking on a circular economy model, focusing on recycling and sustainability to support work towards net-zero emissions targets. The Ministry of Agriculture and Rural Development is spearheading the initiative, and the project is expected to improve technology application, policy frameworks, and market development.
Read more: Vietnam Investment Review
And now for something completely different.
While the focus of The Memo is on news for business, we often wrap with a less business-focused article.
A few interesting tidbits this week, including a Facebook user jailed for seven years after ‘insulting Ho Chi Minh,’ a university saying it won’t accept short people because they ‘lack confidence,’ the launch of internationally famous Tatler Magazine into Vietnam, some complaining about the habits of Vietnamese workers, a report that three Vietnamese bars have been counted amongst the best in Asia, three more charges on top of the death sentence for embattled Truong My Lan, and the purposeful destruction of a Lamborghini . The story we’ve chosen to particularly highlight this week, however, comes out of Bangkok as the story has left the city stunned:
Murder-Suicide Shocks Bangkok
Thai police are investigating the deaths of six Vietnamese people at a Bangkok hotel, currently linking the incident to debt issues. Initial findings suggest one person killed the others before committing killing herself, as seemingly by poisoning as no signs of external violence were found. A seventh person remains as yet unaccounted for. The Vietnamese Ministry of Foreign Affairs is coordinating with Thai authorities to help victims' families and further the investigation.
Read more: Nation Thailand (Investigation Details), The Investor (Debt Issues)
That’s it for this week!
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