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PM orders building socio-economic development plans, budget estimates for 2025

It’s time for Việt Nam to develop more competitive pricing for the renewable energy market, as the feed-in-tariff (FiT) mechanism is no longer appropriate, according to the Ministry of Industry and Trade.

FiT was introduced to support early development of renewable energy sources by providing a guaranteed, above-market price for producers to sell energy back to the grid.

The ministry said that FiT should be applied within a certain period of time in order to encourage investments in renewable energy.

Now, Việt Nam has seen a significant rise in the number of renewable energy projects. It’s time to develop a more competitive pricing mechanism to increase efficiency in the system and ensure competition as well as a stable and sustainable energy supply.

A renewable energy price framework that is flexible and appropriate to developments in each period should be planned, according to the ministry.

In Việt Nam, FiT prices are valid for 20 years. For solar projects that were put into operation before December 21, 2020, the FiT price is 7.09 cents per kWh for ground-mounted solar power projects, 7.69 cents for floating solar power and 8.38 cents for rooftop solar.

For wind power projects that started operations before November 1, 2011, the FiT price is 9.8 cents per kWh for offshore and 8.5 cents for onshore wind energy.

According to Việt Nam Electricity, as of May 23, 81 out of 85 renewable energy projects with a total capacity of 4.597 MW had sent documents for electricity price negotiations.

Negotiations for power purchase agreements are completed for 63 projects with a total capacity of 3.429 MW.

Among them, 29 projects with a total capacity of 1,577 MW completed procedures to begin commercial operations and generate electricity to the grid with a total output of around 2.597 billion kWh as of May 23.

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Coffee exports exceed $3 billion

Việt Nam’s coffee exports hit more than US$3 billion just in the first six months of the year.

According to data from the General Department of Customs (GSO), Việt Nam’s coffee exports reached 862,400 tonnes by the first half of this month, declining by more than 8 per cent in volume but up 38 per cent in value compared to the same period last year.

This is also a record high compared to the same period in previous years.
Regarding price, Việt Nam’s average coffee export price reached $4,275 per tonne in May, up 14 per cent compared to April and up 66 per cent year-on-year.

The country’s average coffee export price reached $3,475 per tonne in the first five months of the year, up 41 per cent year-on-year.

In the early days of June, the price of Robusta coffee in the domestic market increased compared to the end of May.

According to the Ministry of Agriculture and Rural Development, there is currently very little coffee inventory left in the domestic market.

It is forecast that coffee output will continue to decrease by about 20 per cent in the upcoming crop year due to the recent prolonged hot weather leading to severe drought in the Central Highlands.

The Việt Nam Coffee Cocoa Association (Vicofa) said that coffee prices were currently soaring sharply, therefore, coffee output exported to the world may fall but turnover would still grow.

Vicofa expects coffee exports to earn about $4.5-5 billion this year.

Domestic enterprises advised to optimise FTAs

Though free trade agreements (FTA) have so far helped Việt Nam boost exports significantly, domestic enterprises need to further study markets and better focus on the country’s strengths to optimise the deals.

According to statistics from the Ministry of Industry and Trade (MIT), since joining the first FTA with ASEAN more than 30 years ago, Việt Nam has so far signed and implemented 16 FTAs while negotiating another three FTAs.

Việt Nam is also the only country that has signed FTAs with all major economic partners globally such as the US, Japan, China, the EU, the UK, and Russia.

The FTAs have opened up many doors for Vietnamese products to enter potential markets, including many demanding markets with high requirements and standards.

Expert Doãn Hữu Tuệ said FTAs helped Việt Nam significantly increase export output, with a growth rate of more than 20 per cent, much higher than the general export growth rate. In 2022, Việt Nam’s trade surplus with FTA markets was more than US$30 billion.

Dominik Meichle, chairman of the European Chamber of Commerce in Vietnam (Eurocharm), said with the EU-Vietnam Free Trade Agreement (EVFTA) alone, Việt Nam’s export turnover to the EU market increased to more than 48 billion euros in 2023 from about 35 billion euros in 2019.

Hindrance

The signing and implementation of the FTAs have brought many positive export impacts for Việt Nam, but there remain limitations related to origin and non-tariff barriers that have meant many opportunities have not been fully exploited.

According to experts, the certificate of origin (C/O) plays an increasingly important role as a ‘golden key’ to help Vietnamese businesses expand exports and take advantage of tariff incentives under FTAs.

However, the Vietnam Import-Export Report 2023 recently published by MIT shows Việt Nam’s total export turnover which used preferential C/O types under the FTAs in 2023 reached $86.1 billion, accounting for 37.35 per cent of the country’s $230.5 billion total to the FTA markets.

Nguyễn Thường Lạng, PhD, from the National Economics University’s Institute of International Trade and Economics, cited MIT’s data as saying that for the EVFTA alone, after three years of implementation, Vietnamese enterprises could only take advantage of 26 per cent of the agreement’s incentives while the rate for FDI-based Việt Nam enterprises was significantly greater.

Specifically, FDI disbursement in Việt Nam hit a record high of more than $23 billion in 2023, most of which headed into the export sector to take advantage of FTA opportunities. More than 70 per cent of Việt Nam’s export turnover was a result of FDI enterprises.

As for FTAs, Vietnamese exporters had mainly focused on traditional products with low labour cost advantages, such as textiles-garments and assembled industrial goods and natural resource advantages such as agricultural products and wooden products. Furthermore, these products had not yet been fully exploited through the increase of added value by using supply chain and professional marketing development.

Meanwhile, the fields which associate with the development of international investment relations in the new stage, have remained moderate, not commensurate with the great potential of the economy and mainly implemented by transnational companies, according to the International Investment Research Institute (ISC).

Việt Nam, Lạng said, was optimistically forecast to be the base for manufacturing electronic products worldwide after a series of FTAs take effect. However, this role was unlikely to be played by Vietnamese enterprises in the short term. FTAs had not been used to create enough momentum to form a wave of innovation in domestic businesses.

According to a recent report submitted to the Prime Minister on the results of implementing the CPTPP, EVFTA and UKVFTA, though exports to large FTA markets, such as the EU, CPTPP and the UK, are growing positively, their proportion is still relatively modest and the preferential utilisation rate has not met expectations.

The preferential utilisation rate in the new CPTPP, EVFTA and UKVFTA is about 5 per cent, 26 per cent and nearly 24 per cent, respectively. Meanwhile, FDI enterprises still account for the majority of Việt Nam’s key product export turnover, the report notes.

Vietnamese businesses, Tuệ said, had only participated in some stages of the supply chain. The ability to meet and comply with quality, food hygiene, safety and technical requirements of Vietnamese goods was still limited, especially in the context that many import markets had increasingly improved technical standards and non-tariff barriers. Vietnamese enterprises still mainly made processed products according to orders so the added value was not high.

Solutions

To optimise the FTAs, Vietnamese businesses needed to take advantage of market opportunities, participate in the global value chain and access modern technology, according to Lạng.

The first and biggest impact of FTAs is to maximise market expansion in both width and depth. Therefore, to effectively exploit this, domestic businesses need to proactively invest in surveying and understanding the market to firmly grasp the needs of partners. They should actively take part in trade fairs, exhibitions, forums, conferences, trade connections to find suitable partners.

Participation in FTAs means the connection and deep penetration in the global value chain. To gain a genuine connection, domestic businesses need to meet origin standards as committed in each FTA. They absolutely do not cheat on origin or avoid trade defence measures to avoid a loss of credibility with relevant entities.

Most Vietnamese businesses are small and medium sized, so it is difficult for them to cover the entire large market, create scale advantages and invest in high technology, besides being easily dominated by competitors. Therefore, the businesses need to proactively connect and cooperate with each other to increase support and complement each other to enhance the capacity to meet large-scale orders.

Domestic businesses need to invest in research, development and innovation, which create differentiating factors, know-how and core competitive advantages for them.

Southeast key economic region exports grow strongly

Exports by provinces and cities in the southeastern key economic region have grown strongly so far this year.

The region includes HCM City and the five provinces of Đồng Nai, Bình Dương, Bà Rịa – Vũng Tàu, Bình Phước, and Tây Ninh, making it the country’s largest economic hub and a major contributor to economic growth, exports, Government revenue collections, and jobs.

According to the Bình Dương Department of Industry and Trade, in the first five months of the year the province’s exports valued nearly US$13.8 billion, up 13.9 per cent year-on-year.

Deputy chairman of the province’s Wood Processing Association, Lưu Phước Lộc, said the wood products sector has always been one of Bình Dương’s bright spots in terms of exports.

With its effective business support policies, Việt Nam’s wood and wood products exports have achieved great success in the international market, he said.

Businesses are trying to secure more orders by organising fairs and exhibitions at home and abroad and making inroads into new markets in the Middle East, he added.

According to the Đồng Nai Province’s Statistics Department, in the first five months of the year, the trade surplus topped $2.8 billion, with local businesses exporting nearly $9.3 billion worth of goods.

Of Đồng Nai’s exports, more than 60 per cent are from industries such as electronics, textiles, footwear, and machinery components and equipment.
The province exports to more than 170 countries and territories, but the US, Japan, China, South Korea, and Europe remain the main markets.

According to businesses, the export market shows signs of improvement with more orders coming in.

Đồng Nai expects a trade surplus of $6.8 billion this year.

Nguyễn Ngọc Hòa, chairman of the HCM City Business Association (HUBA), said since the beginning of the year city businesses have had large orders that would take until the end of the third quarter to complete.

Though businesses are still under pressure to reduce prices and face high technical barriers, they are striving not to lose orders, accepting reduced profits and finding ways to reduce costs.

Thanks to this, the city’s exports continue to recover after being affected by fluctuations in the world market, with shipments increasing across the board by product and market.

Its Department of Industry and Trade said exports in the first four months of the year were quite high at $12.5 billion, a 69 per cent increase year-on-year.

Textile and garment exports topped $1.2 billion, an increase of 40 per cent, wood and wood product exports rose by more than 80 per cent to $175.6 million, and machinery, equipment, tools, and parts exports reached $912.8 million, an increase of 41 per cent.

The city has created mechanisms and policies to support businesses in converting production models towards increasing the application of modern, environmentally friendly technology and improving the competitiveness of Vietnamese exports.

It has also encouraged businesses to find partners in and expand markets outside of China and the US.

Diversifying export markets will help reduce cyclicality and volatility in exports.

Accelerated green economy transition efforts needed for 2024 GDP target

Accelerated green economy transition efforts needed for 2024 GDP target

Việt Nam’s 2024 economic growth target of 6.5 per cent is challenging, with weak consumption demand and exchange rate risks, so signals a pressing need for hastening energy transition towards a green economy, a conference to launch the Việt Nam Annual Economic Report 2024 heard.

The conference was hosted by the VNU University of Economics and Business (UEB) on Thursday in Hà Nội.

Researchers project a baseline GDP growth of 5.85 per cent this year and inflation at 4.5 per cent, with the possibility of a devaluation of the Vietnamese đồng of around 5-6 per cent, if public spending meets all its targets and foreign direct investment does not see any unusual developments in the second half of the year.

If economic polices are adjusted, such as reducing interest rates and exports remain robust and there is increased public investment spending, the GDP growth is expected to hit 6.01 per cent.

“The Vietnamese economy is operating at a level below its potential in both scenarios,” Nguyễn Quốc Việt, Deputy Director of the UEB’s Việt Nam Institute for Economics and Policy Research (VEPR) said.

He added that over the short term, the focus should continue to be on fiscal policy to stimulus demand, especially speeding up the disbursement of public investment in the remaining months.

The policy of the two per cent reduction of value added tax should be extended to the end of the year and possibly even to June 2025, together with bigger reduction to promote consumption.

In addition, it is necessary to develop more credit packages to encourage investments in sustainable production and business, accelerate digital transformation, promote science and technology application, he added.

Nguyễn Anh Thu, VNU-UEB’s Vice Rector said that in the long term, Việt Nam must improve its national digital transformation strategy and accelerate factors which create real added value for the digital economy such as in the software industries and in e-commerce and innovation.

The social housing development model should also be improved, Thu said, adding that establishing State-owned enterprises in charge of developing social housing projects should be put into consideration.

It is necessary to develop feasible policies to encourage investment, especially private investment to promote growth and support enterprises overcome difficulties.

Thu added Việt Nam also needs to raise policies to improve labour productivity and competitiveness of industries and the national economy.

Towards a green economy

Việt Nam’s net zero ambition and the pressure from stringent standards of developed markets is requiring a faster energy transition towards a green economy in Việt Nam, posing not only challenges but also opportunities for it to strengthen economic restructuring, enhance competitiveness and promote investment and trade cooperation, researchers said.

Researchers pointed out that Việt Nam is exploiting, almost to the limits, domestic fossil resources and has to import more coal and gas, making the country a net-energy importer.

The electricity infrastructure development and integration of renewable energy into the national grid remain major challenges.

Investing in renewable energy to reduce the dependence of fossil fuels becomes vital, researchers said, quoting the Việt Nam Energy Association warning about energy uncertainty over coming years, when demand is forecast to increase by around 8.5 per cent annually.

Incentive policies and appropriate financial mechanisms should be raised to attract investments from both private and international sectors into renewable energy development in Việt Nam. Smart grid development is an important factor to ensure the efficiency of renewable energy management and stability of energy supply.

Việt Nam also needs to invest in energy storage technology and improving transmission capacity as well as developing new energies such as hydro and e-fuels, while energy savings need to be promoted nationwide.

Researchers cited findings of the World Economic Forum that Việt Nam is not yet completely ready for energy transition due to barriers such as the absence of technical standards, limitations in capital raising, uncertainty in tax incentives and electricity pricing mechanisms.

Thus, the Vietnamese Government needs to increase communication to improve the community’s awareness about efficient use of energy.

Support policies in terms of credit and taxes should be raised to encourage investments in renewable energy together with the development of a consistent and clear legal framework for the generation, distribution and use of renewable energy sources.

Enterprises should cooperate to share renewable energy infrastructures, such as developing common solar power stations in industrial zones to lower costs.

Researchers also urged the development of a competitive electricity retail market to be sped up with an appropriate roadmap.

It is necessary to reform electricity pricing mechanisms towards a market-based to ensure transparency.

A proper roadmap must be developed to gradually enable different groups of customers to participate in the competitive electricity retail markets.