Vietnam 20241212: Proportionate, Integral, Interminable
Mekong Memo Vietnam Weekly: Business, politics, finance, trade & legal news.
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Headlines:
Growth Forecast Lifted as Economy Surges
Tech Giants Drive AI Development Push
High-Speed Rail Project Gets Green Light
Banking Sector Undergoes Major Restructuring
Real Estate Recovery on Horizon
Landmark Economic Zone Takes Shape
Green Finance Takes Root
Record Rice Exports Achieved
Startup Ecosystem Draws Investment
Metro Planning Gets Priority
Energy Market Reform Looms
Digital Economy Drives Growth
Growth Forecast Lifted as Economy Surges
The Asian Development Bank has raised Vietnam's growth forecast to 6.4% for 2024 and 6.6% for 2025, citing strong trade performance and accelerated public investment. The economy expanded 6.8% in Q1-Q3 2024, driven by export-led manufacturing and fiscal stimulus measures. Trade surplus hit $24.3 billion in the first 11 months, with exports up 14.4% to $369.9 billion. Foreign direct investment reached $31.4 billion, up 1.9% year-on-year, with Singapore leading at $9.14 billion. The manufacturing sector has drawn the most investment of the 18 sectors monitored.
Read more: VN Economy (Growth Forecast), VIR (Investment Data)
Tech Giants Drive AI Development Push
NVIDIA is setting up its first Vietnam research and development center, focusing on AI development and software engineering. The facility will support researchers and startups across the healthcare, education, transportation, and finance sectors. Meta's Chief AI Scientist has spoken glowingly of Vietnam's potential in the global AI ecosystem, specifically mentioning the country's semiconductor roadmap and supply chain position. The developments come as Southeast Asia attracted over $30 billion in AI infrastructure investments in H1 2024, with tech giants Microsoft, Google, and Amazon pledging $50 billion to the region's AI sector.
Read more: StockTitan (NVIDIA Center), VNEconomy (Meta Plans), TheInvestor (Regional Investment)
High-Speed Rail Project Gets Green Light
The National Assembly has approved a $67.6 billion high-speed railway project connecting Hanoi to Ho Chi Minh City. The 930-mile system will pass through 20 provinces and cities, featuring 23 passenger stations and 5 freight stations. Construction is expected to begin in 2027, with operations (optimistically?) planned for 2035. Trains will run at 350 km/h, reducing the current 30-hour journey to 5 hours.
Read more: Vietnam Briefing (Project Details), The Cool Down (Environmental Impact)
Banking Sector Undergoes Major Restructuring
Major state-controlled banks are boosting capital through hefty share issuances. HDBank plans to issue 582.5 million shares, BIDV will issue 1.2 billion shares, and Vietcombank received approval for 2.77 billion shares. The sector is seeing mandatory transfers of weak banks, with Vietnam Construction Bank moving to Vietcombank and Ocean Bank to Military Bank. Two more transfers are expected by year-end. Financial experts are demanding thorough investigations to prevent cross-ownership and manipulation.
Read more: TheInvestor (Capital Raising), VIR (Bank Transfers)
Real Estate Recovery on Horizon
The property market is expected to enter a new development cycle in 2025, supported by three new laws that became effective in August 2024. Hanoi is foreseeing 25,000-30,000 new units while Ho Chi Minh City expects 7,000-8,000 units. The sector saw 4,241 new company establishments in January-November, down 2.6% over last year’s tally. Experts are saying that the biggest challenges are land valuation, fee calculations, land clearance costs, and access to capital. Multiple solutions proposed include implementing multiple property ownership tax and streamlining administrative procedures.
Read more: VIR (Market Outlook), VN Economy (Price Solutions)
Landmark Economic Zone Takes Shape
A new 20,000-hectare Southern Coastal Economic Zone will be established in Hai Phong as a third-generation, multi-industry ecological economic hub. The development includes 2,909 hectares of reclaimed land and will focus on high-tech industries, modern seaport logistics, and smart urban development. Operating under green growth and circular economy models, it includes a free trade area with policies modeled after successful global examples. The zone is expected to contribute $22 billion to the national budget and create 301,000 jobs.
Read more: Vietnam News (Zone Details), VN Economy (Development Plans)
Green Finance Takes Root
Techcombank became the first private bank to launch a green bond framework aligned with International Capital Market Association principles. S&P Global rated the framework 'Medium Green', the second-highest designation. The initiative is expected to finance environmentally beneficial projects while improving investor confidence in the green finance market. Despite growth potential, green credit development faces challenges including the absence of a unified taxonomy and complicated lending processes. Green credit currently represents only 4.5% of total outstanding debt.
Read more: Vietnam News (Green Bonds), VIR (Development Challenges)
Record Rice Exports Achieved
Rice exports hit $5.3 billion in the first 11 months of 2023, marking a 22.4% year-on-year increase and beating 2023's total by 10.8%. Success is coming from farmers shifting to high-quality fragrant rice varieties for export, which are able to command premium prices in international markets. The Philippines leads export destinations with 46.1% of shipments, followed by Indonesia at 13.5% and Malaysia at 8.2%. The industry wants to continue to focus on value enhancement while reducing environmental impact.
Read more: TheInvestor
Startup Ecosystem Draws Investment
The youth startup ecosystem has pulled in more than half a billion dollars in venture capital during 2024. Most entrepreneurs are aged 16-35, with the largest group being 30-34 years old (6.6 million people). A recent study shows 36% of startups were unregistered, while 52% received incubator support and 26.7% reported effective operations. Female entrepreneurs reportedly face challenges their male compatriots do not, with 31.8% reporting poor performance and limited access to mentors. Main barriers include complex administrative overhead, limited stakeholder collaboration, skill gaps, and a low risk tolerance.
Read more: Vietnam News
Metro Planning Gets Priority
Prime Minister Pham Minh Chinh has once again spoken of the need for long-term vision and preparations in urban railway projects for Hanoi and Ho Chi Minh City. The focus is on developing both underground and above-ground networks to address traffic congestion and environmental pollution. Cities must submit overall planning, including urban railway development plans, by Christmas this year. Major focus priorities include technology transfer, green technology, and transparent selection of consultants and contractors.
Read more: VEN
Energy Market Reform Looms
Experts are asking for reforms in the energy sector, specifically citing challenges including net-zero transition, potential shortages, and complex pricing policies. Recommendations include modernizing the energy market, implementing two-component pricing mechanisms, and following Taiwan's example in renewable energy development through competitive bidding systems. The government wants to develop a competitive energy market by 2030 with a vision to 2045, focusing on energy security, economic growth, and international integration.
Read more: VEN
Digital Economy Drives Growth
The digital economy continues to show strong growth, accounting for 16.5% of GDP in 2023 with projections of 18.6% by the end of 2024. According to a report from Google, Temasek, and Bain & Company, the sector is expected to reach $36 billion in 2024, a 16% increase from 2023. The transformation extends beyond economic growth, improving access to services and creating new opportunities for livelihoods that did not exist previously. E-commerce tax revenue have reached $4.25 billion in the first 11 months of 2024, with 116 foreign service providers registered for tax payments.
Read more: TFGI (Digital Growth), Vietnam News (Tax Revenue)
That’s it for this week!
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The first link for the "growth forecast" news is actually from VNEconomy, not ADB.