FINANCE. finance & business news. Reference exchange rate down by 2 dong

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1 finance & business news 2 November Reference exchange rate down by 2 dong 1 Moody's: Outlook for VN banking system positive 2 Vietnam Dong, among most stable in Asia this year: experts 2 More than 330 million USD of G-bond mobilised in October 3 Why Vietnamese banks rush to join forex trading business? 3 Health insurance a new playground for life insurers 4 Vietinbank's 9-month pre-tax profit reaches 37.4b dong 5 85 million shares of MBB to be traded from November 10th 6 SHB attains record-high profit from service operation 6 VPBank recruits over 5,000 personnel in just 9 months 6 FE Credit allowed to open 8 more representative offices 7 Vietnam's PMI in October decreases to 51.6 points, lowest in 5 months 8 VN's manufacturing PMI dips to 51.6 in October 8 NA discusses economic development problems 9 NA discusses growth goals, budget estimates 10 Lawmakers urge strong boost to fruit & vegie export, logistics sector 11 Vietnam's business environment rating improves 12 Lawmakers call for shake-up of FDI incentives 13 Ways sought to boost honey exports to EU 14 Coffee exports down 23pct in quantity 14 Can Tho's export value hits 1.43 billion USD in ten months 15 Ha Tinh: Export revenue on strong surge 15 Export businesses need to meet stringent US standards 15 Vietnam sugar industry begs to delay import tariff cuts 16 Maritime authority proposes dumping dredged sediments into sea 17 Sugar sales struggling: association 17 Domestic cement consumption declines 18 Customs clearance payments to go online 18 Quang Ninh puts forth solutions to deal with tax arrears 19 Vietnam back on M&A radar 20 Vietnam nutrition market to be worth $6b by VN retail forecast to grow steadily 21 Electricity sector gets BOT boost 22 Foreign-backed local pharma surges 23 Investors in VN's mining industry look for long-term returns 24 Foreign investors still ignore SOE equitisation 25 Few local SMEs join global trade 27 SMEs seek global trade assistance 27 Spurring more funds into startups 28 Reference exchange rate down by 2 dong Dong Thap Muoi develops flood-adapted agriculture 29 BIZ NEWS Business Briefs 02 November, VN stocks rebound driven by banks, energy firms 30 HSX up, HNX down 31 ROS sends HCM City bourse down 31 MSCI upgrade not coming until SCIC announces initial price of Vinamilk's share auction 33 Vincom Retail to debut on HOSE in early November 33 HCM City looks to expand solar power network 34 Ha Giang seeks solutions to sustainable beekeeping development 34 Excavation of first tunnel of Metro Line No.1 complete 35 NA deputy proposes building cable car system in Phong Nha- Ke Bang 36 Vietnamese allowed in casinos from early next month 36 Japan boosts promotion of food products in Vietnam 37 Apec 'a golden chance' for Da Nang firms 37 SCIC under divestment pressure in Q4 38 Tien Sa Port gets $7.9m loan to expand 39 Saigon Times and RMIT co-organise roundtable on interpretation job 40 A domino effect in Hanoi's condotel scene 41 Korean firm wants to build road under BOT in Can Tho 41 EVNNPC produces over 5 billion kwh of electricity in October 42 Uber and Grab asked for logo 42 Vietnamese firm to export pork to Korea 43 Software chain gets nod to admit associate members 43 Vietnam Airlines promotion for SE Asian flights 44 Vietnam Railways to pilot automated ticketing 44 Lifestyle hotel brand Wink launched 45 Lotte gets blessing for smart complex in Thu Thiem 45 Viettel's N-Office software exported to Haiti 46 Toro vending machine launched in VN 46 Khaisilk restaurant chains and real estate projects falling like dominoes 47 Wholesaler caught in Da Lat produce fraud 47 British trade envoy talks up Vietnam links 48 Vietnam Property Awards back for 4th year 49 Brandlaureate Awards to be held in VN for first time 50 Tech Fest to link start-ups, investors 50 Over 200 enterprises to participate in international jewellery fair 51 02/NOV/2017 INTELLASIA TIN TUC The State Bank of Vietnam (SBV) set its reference dong/us dollar exchange rate at 22,466 dong/us dollar on the morning of November 2, down two dong from yesterday. With the current +/- 3 percent dong/us dollar trading band, the ceiling exchange rate is 23,132 dong per US dollar and the floor rate is 21,794 dong per US dollar. Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Tel: Fax: Office@intellasia.com Websites:

2 Moody's: Outlook for VN banking system positive The exchange rate at major commercial banks stayed stable. Vietcombank set at 22,675 dong (buying) and 22,745 dong (selling), per US dollar, unchanged from the previous day. Vietinbank offered the same rate as Vietcombank at 22,675 dong (buying) and 22,745 dong (selling) per US dollar, unchanged from November 2. Meanwhile, BIDV listed the greenback at 22,680-22,750 dong/us dollar, down five dong from the day earlier. 02/NOV/2017 INTELLASIA VNS Moody's Investors Service on Tuesday upgraded its outlook for Vietnam's banking system to positive for the next months from stable, reflecting the country's strong economic prospects and the positive outlook for most rated banks. "The change in outlookwhich expresses our expectation of how bank creditworthiness will evolve in this system over the next monthsreflects Vietnam's robust economic growth, supported by domestic demand, healthy exports and public sector investment," Eugene Tarzimanov, Moody's vice president and senior credit officer, said. "We forecast Vietnam's real GDP will grow 6.1 per cent in 2017 and six per cent in 2018, faster than the 5.9 per cent average for the previous five years." "Strong economic growth translates into positive conditions for banks' asset quality, but rapid credit growth, aided by accommodative monetary policy, can raise asset risks again," Tarzimanov said. According to Moody's the banks' operating environment will benefit from robust economic growth, based on ongoing improvements to infrastructure, favourable demographics and the government's continued focus on reform to support foreign direct investment. The banks' asset quality will remain largely stable during the outlook with problem loan ratio at 7.1 per cent at end-2016, slightly lower than 7.5 per cent in Moody's further expects this ratio to decline to 5.8 per cent in 2018, driven by loan growth outpacing the formation of problem loans and because of modest recovery in the property sector. However, rapid credit growth will continue to erode capital buffers and capitalisation will deteriorate as banks struggle to replenish capital against rapid loan growth. High provisioning expenses will undermine banks' abilities to generate internal capital, while options to raise external capital are limited. In addition, the growth in local-currency customer deposits, the main funding source for Vietnamese banks, will continue to be healthy, but it will lag behind credit growth, resulting in slightly tighter system liquidity. Profitability will remain stable with banks' pre-provision income growing steadily over the next months on the back of strong loan growth. However, the improvement will be offset by high credit costs. Net interest margins will also likely decline further due to competition and government pressure to lower bank lending rates. At the same time, government support notching could increase for some bank ratings. Any upgrade of the government of Vietnam ratingwhich has positive outlookwill likely result in upgrades of a number of banks' ratings, which in some cases could receive greater uplifts from their baseline credit assessments. Moody's rates 15 banks in Vietnam, which together account for 58 per cent of banking system assets as of June 30, Three of the 15 banks Bank for Investment & Development of Vietnam (B1 positive, caa1), Bank for Foreign Trade of Vietnam (B1 positive, b1) and Bank for Industry and Trade (B1 positive, b2) are owned by the government, while the other 12 are privately owned joint-stock commercial banking institutions. Vietnam Dong, among most stable in Asia this year: experts 02/NOV/2017 INTELLASIA VNA The Vietnam Dong (VND) is among the most stable currencies in Asia this year, said the US-based Bloomberg News, echoed by similar views from Vietnamese economists who were confident that the stability would remain until the year end thanks to the economy's positive signs. The currency has been kept stable, weakening about 1 percent against the US Dollar since the start of this year. An increase in remittances was behind this, said Can Van Luc, a member of the National Financial and Monetary Advisory Council. Intellasia 2 November / 52

3 Remittances from Vietnamese living abroad were worth 13.4 billion USD in 2016, up 3 percent from the previous year, according to latest statistics by the World Bank. The remittances are forecast to grow 5-7 percent to exceed 14 billion USD this year, taking Vietnam to the top 15 countries with the biggest remittances, he noted. The rising remittances have helped the country ensure enough dollar supply to meet the domestic demand and allowed the State Bank of Vietnam (SBV) to boost forex reserves. "Such a high level of foreign reserves will allow us to step in to stabilise the money market when needed", said SBV deputy governor Nguyen Thi Hong on the sidelines of a meeting last month. The central bank has adopted a more market-based management mechanism with reference exchange rates set on a daily basis since January 2016 in its effort to maintain the Vietnam Dong's value. Luc added that surge in foreign direct investment (FDI) has also helped stablise the currency. The Ministry of Planning and Investment's Foreign Investment Agency reported that Vietnam drew in billion USD in FDI in the first 10 months of this year, 12 percent higher than the country's yearly target of 25 billion USD. The FDI disbursement was estimated at 14.2 billion USD during the period, up 11.8 percent year-onyear. In addition, Vietnam has also witnessed a growth in foreign indirect investment over the past several years. Foreign investors have poured 4.2 billion USD into the local stock market in the first three quarters of the year, a 3-fold increase from 2016, according to director of the Business Development Institute Le Xuan Nghia. HCM City led the way in both FDI attractions and remittances. The southern economic hub lured around 5.03 billion USD in the first 10 months, doubling the year-on-year figure. In 2016, overseas remittances to the city reached 5 billion USD, accounting for percent of the national total, a year-on-year rise of 11 percent. It aims a 10 percent growth to 5.5 billion USD this year. More pressure will be likely on the Vietnam Dong at the end of the year due to the US Federal Reserve's forecast benchmark interest rate rise and higher demand for foreign exchange from importers ahead the Lunar New Year holiday. More than 330 million USD of G-bond mobilised in October Why Vietnamese banks rush to join forex trading business? 02/NOV/2017 INTELLASIA VNA The Hanoi Stock Exchange successfully held 15 auctions in October, mobilising over 7.51 trillion VND (330.6 million USD) of bonds issued by the State Treasury, up 45.5 percent over September. The ratio of winning bids reached 60.5 percent of the offerings. The coupon annual rates were percent for five-year bonds, 4.83 percent for seven-year, percent for ten-year and 6.20 percent for 15-year ones. Compared to September, the coupon rates of five-year and seven-year State Treasury bonds decreased, while those for 10-year term increased. Meanwhile, outright transaction on more than 952 million bonds worth over trillion VND was made in the secondary market in October, down 10.9 percent over the previous month. Repo (repurchase agreement) transaction was also made on over billion government bonds, valued at more than trillion VND, up 17.7 percent over September. Foreign investors spent over 4.5 trillion VND on outright purchases and sold over 1.8 trillion VND, while making repo sale of over 345 billion VND and no repo purchase million-usd-of-gbond-mobilised-in-oct/ vnp 02/NOV/2017 INTELLASIA DIEN DAN DOANH NGHIEP Within the last 10 days of October 2017, the State Bank of Vietnam (SBV) has granted permission to supplement the trading and provision of foreign exchange (forex) services for eight domestic commercial banks. Intellasia 2 November / 52

4 Most recently, on October 25th 2017, SBV issued a decision on amending and supplementing the license of Tien Phong Commercial Joint Stock Bank (TPBank) and Kien Long Commercial Joint Stock Bank (Kienlongbank). With this decision, SBV's Governor agreed to add the "trading and provision of forex services on domestic and international markets within the limits set by SBV" to the content of these banks' activities. On the same day, SBV issued Decision 2238/QD-NHNN amending the operation contents of the decision on the establishment of Agriculture and Rural Development Commercial Joint Stock Bank (Agribank). Accordingly, the Article 3, Decision 280/QD-NH5 dated October 15th 1996 of SBV's Governor will be supplemented with "trading and provision of forex services on domestic and international markets within the limits set by SBV". Previously, on October 24th, Petrolimex Group Commercial Joint Stock Bank (PG- Bank) also received decision to supplement forex trading business. Not long ago, SBV also approved to add this content to the operations of many domestic banks such as Orient Commercial Joint Stock Bank (OCB), Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank), Bac A Commercial Joint Stock Bank (BacABank), Maritime Commercial Joint Stock Bank (Maritime Bank), and Nam A Commercial Joint Stock Bank (NamABank), etc. Exchanging foreign currency is an indispensable requirement of those who plan to study, travel, work, or transfer money to relatives or settle abroad, etc. Previously, since forex business was less focused by commercial banks, customers having needs to conduct forex transactions often came to free market to directly buy and sell foreign currency, thus distorting the market and affecting the operation of the banking system. In the previous years, the forex business was mainly for big banks. However, along with the development of the economy, the demand for foreign currency of people is increasing rapidly. The foreign currency needs for the purpose of studying abroad alone is already three billion USD per annum, not to mention the foreign currency needs in tourism, work, medical examination, and settlement areas, etc. Seizing the actual demand, some medium-sized banks have recently started to offer this service. The fact shows that lending, forex trading and services are the three main sectors that generate revenue for foreign banks, in which forex trading brings the most achievement. Not only HSBC and ANZ, for most foreign banks operating in Vietnam, forex trading and services contribute very high proportion of revenue as well as profit. While the segment of services and forex business of many foreign banks accounts for over 50 percent of the profit, while for domestic banks, revenue from credit still accounts for 70-80%, and even 90 percent at some banks. The dependence on lending not only causes domestic banks to make less profit and suffer high bad debts, but also bear the risk of losing customers. Some people said that many Vietnamese banks are becoming old, as they operate in traditional ways and lack of diversified services to meet the needs of customers, especially young customers who require high-technology. Therefore, retaining domestic customers is very difficult for these banks and they will surely lose on international playground. Experts also warned that to compete with foreign banks, domestic banks should not pursue credit growth which contains many risks like in the past time but should boost the strategy of raising revenue from services. This is not only the pressure of competing with foreign banks but also the pressure from the 4.0 technology revolution, when the needs of consumers and customers are changing. These perhaps are the explanations for the expansion of forex business of many Vietnam banks (including stateowned banks and private banks) in the recent time, with the aim to capture this potential market. Health insurance a new playground for life insurers 02/NOV/2017 INTELLASIA DTCK As the economy develops and income level is gradually rising, people are paying more attention to health care. Thus, health insurance is the target that both non-life and life insurance companies pursue. The diversity of health-care products offered by both Intellasia 2 November / 52

5 non-life and life insurers is creating more heat for the health insurance segment. Signing a three-year exclusive partnership with Tiki to offer free personal accident insurance products to 100,000 customers of Tiki is the first step of FWD to introduce new online life insurance products to the market. This is an independent personal accident insurance which is in the group of health and accident products. FWD is also one of the first insurers on the market to be licensed to deploy this product line to individual customers. Accident and health insurance has been launched for fairly long time by both non-life and life insurers. However, for life insurers, this product line in the past was mainly sold as an additional product which is attached with a main contract of individual customers. One-year accident and health insurance products were often sold to employees of businesses. This group of services is also the strength of non-life insurers in both wholesale and retail segments. The segment of accident and health insurance may be the new competitive playground of the life insurance sector. Along with FWD, Chubb insurance company from the US has recently announced to receive the license for launching health insurance products and the firm is planning to provide this product to individual customers. Talking to Dau tu Chung khoan, some life insurers also said to have plans to develop this type of product. However, some other life insurance companies said they have no intention to develop independent health insurance product, but still offer it as a supplement that comes with main insurance policy of individual customers. The fierce competition in this segment is not a matter of concern for life insurance sector, but making profit for self-interests and the compensation rate are the biggest concerns for each insurance company when deciding to engage into this product segment. However, according to experts in the industry, each insurance company will have different way to measure the risks of the products. The way to measure as well the issuance of policy to each type of customer in this segment will also be calculated based on actual data, as well as the analysis on the product development of other companies. "When life insurance companies launch health and accident insurance to individual customers, the market will surely become more vibrant. Certainly, since entering the market late, each life insurer will have different implementation", said a representative of a life insurance company. He added that this type of product will be a good supplement for the policy to expand national health insurance coverage. "I personally think that the opportunity between non-life and life insurers in implementing health and accident insurance products is the equal, as the market is open and customers will the make their choice", said an expert in insurance sector. Vietinbank's 9-month pre-tax profit reaches 37.4b dong 02/NOV/2017 INTELLASIA NDH Viet Capital Commercial Joint Stock Bank has recently released Q3/2017's financial statement with the profit margin to improve over the same period last year but still remain very modest. The net interest income reached 184 billion dong in Q3 alone, up 9.89 percent year-onyear and the accumulated net interest income touched 456 billion dong, up 3.2 percent year-on-year. This is also the main "rice cooker" of this bank. The net interest from investment securities brought about more than 10 billion dong in Q3, down 45%. Meanwhile, though operating cost slightly improved, it eroded the majority of income with more than 158 billion dong. After deducting tax expense and credit risk provision, the bank's after-tax profit reached 22.8 billion dong. Meanwhile, in the same period last year, the bank suffered from the net loss of 11.7 billion dong. Thanks to Q3, the accumulated profit in the first nine months hit 35.8 billion dong, improving compared to the previous loss. With 300 million existing shares, the bank's 9- month EPS touched 119 dong per share. The bank plans to earn 25 billion dong profit in Therefore, its 9-month profit exceeded 48 percent of the year plan. The profit was improved in the context that deposits of Vietcapital Bank's customers slightly decreased 0.67 percent from the beginning of the year, to trillion dong. Intellasia 2 November / 52

6 85 million shares of MBB to be traded from November 10th Thanks to the loans in the interbank market, the bank's total debt asset reached trillion dong. Meanwhile, Vietinbank reduced the lending in the interbank market. The outstanding credit as of September 30 increased 7.4 percent from the beginning of the year to trillion dong. 02/NOV/2017 INTELLASIA NDH The Hochiminh city Stock exchange (HOSE) has made announcement on the listing and trading of shares of which the listing is adjusted for Military Commercial Joint Stock Bank (MBBank, code: MBB). Accordingly, all 102,764,454 shares will be additionally listed from October 30th This amount of shares is used to pay dividend and issue shares under the programme selected for MBB's employees. In which, for the 85,637,045 shares issued to existing shareholders to pay the second dividend in 2016, this amount of shares will be traded on November 10th The remaining 17,127,409 shares to be sold to MBB's employees will be traded on October 21st The total value of listed shares, thus, has increased to over trillion dong. MBBank has recently released the third quarter financial statement. In the first three quarters, the bank achieved trillion dong of net profit. The income from services of the bank was also 2.25 times higher than the same period of 2016, bringing over one trillion dong. The bank's consolidated pre-tax profit after the first nine months of the year reached trillion dong, completing 88 percent of the plan. The Earning per share (EPS) in the first nine months was 1,864 dong per share. SHB attains recordhigh profit from service operation VPBank recruits over 5,000 personnel in just 9 months 02/NOV/2017 INTELLASIA NDH Saigon Hanoi Commercial Joint Stock Bank (SHB) has released consolidated financial statement in Q3/2017. Accordingly, the bank's net interest income in Q3 reached 716 billion dong, not changing significantly compared to the same period last year. Other business activities had unexpected growth. Specifically, the securities trading and forex trading have had strong growth compared to the same period last year. Noticeably, the net profit from service operation was 844 billion dong, 15 times higher than the same period and exceeded the net interest income. This is the record figure in the entire banking system. In the past quarter, SHB's operating costs did not change remarkably compared to the same period, accounting for 630 billion dong. Meanwhile, the risk provisioning cost also improved strongly with 2.5 times higher than the same period to 620 billion dong. At the end of Q3, SHB recorded 528 billion dong profit, doubling the same period. Cumulatively, in January-September, the bank's pre-tax profit reached trillion dong, up 68%. The after-tax profit remained at trillion dong. As of September 30, 2017, SHB's total assets touched 264 trillion dong, up 13.3 percent from the beginning of the year. Loans to customers hit 191 trillion dong, up 18%. Customers' deposit stood at 193 trillion dong, up 16.2%. SHB's total bad debt was trillion dong, reckoning for 1.92 percent of the total outstanding loans, up slightly from the beginning of the year (1.87%). 02/NOV/2017 INTELLASIA TRI THUC TRE While in the first nine months of the year, the number of employees in Vietinbank decreased 627 people, compared to 256 people in BIDV, a series of other private joint stock banks strengthened the recruitment of hundreds or even thousands of personnel. Compared to the beginning of the year, VPBank recruited as many as nearly 5,200 new staff. This figure is nearly five times larger than the scale of some small banks. This bank has also strongly recruited personnel in 2-3 recent years. Currently, VPBank is the second largest bank in the system in personnel scale with 22,500 people. However, only half of them are working for the bank while the rest are working for two subsidiary companies, mainly for FE Credit. Intellasia 2 November / 52

7 Besides, such banks as MB, Sacombank, LienVietPostBank newly recruited more than 1,000 personnel while TPBank, Techcombank, Vietcombank, VIB, etc. newly recruited hundreds of personnel. In the opposite trend, two giants including Vietinbank and BIDV showed the decline in the number of employees. Specifically, in the first nine months, 627 Vietinbank's employees left the bank compared to 256 employees quitting job at BIDV. Human resource of the banking sector is forecasted to continue being strengthened in the near future because in the last months of the year, a series of banks have posted recruitment information in large numbers. BIDV recruited more than 700 people to work at branches and transaction offices. Vietcombank and Vietinbank also announced to recruit hundreds of people working at branches and headquarters in October and November. Meanwhile, other banks such as MBBank, LienVietPostBank, etc. are also recruiting additional personnel. The common point is that most of the banks have strengthened the recruitment of personnel to work at transaction offices and branches, focusing mainly in credit and customer relation segments. This is also understandable because banks now have directed to strongly develop the retail segment. Though many bank employees shared that working at banks goes along with a lot of pressures, stress, much time is devoted to work, etc. and they want to quit their jobs, the finance and banking sector is still considered to bring about higher income than almost all other ones. Director of human resource management division of a joint stock bank said human beings are always the most precious asset. Therefore, the bank where she works is adopting a new organisational model and building management processes including the KPI/Balance Score Card, payroll system associated with personal working efficiency, internal equity and competitiveness, laying solid foundation to meet business targets and strategic goals. She added that human resource surveys show that remuneration is just a very shortterm tool to attract but a friendly working environment, where employees are respected and encouraged to make decisions in their scope of work, are trained and have opportunities to challenge and experience to succeed, etc. is the decisive factor in increasing employees' engagement with the organisation. FE Credit allowed to open 8 more representative offices 02/NOV/2017 INTELLASIA NDH On October 26, 2017 the State Bank Governor issued the document No.8727/NHNN- TTGSNH approving the establishment of representative offices in such cities as Hanoi, Hai Phong, Da Nang, Khanh Hoa, Dong Nai, Tien Giang, Vinh Long, Ca Mau of VP- Bank Finance Company (VPB FC FeCredit). Within six months since the signing date of this document, VPB FC must open representative offices in the approved provinces and cities. In case of failure, the State Bank's approval will become invalid. Specifically, VPB FC's representative office in Hanoi is located in 10th floor, Mipec Tower, 229 Tay Son, Nga Tu So wad, Dong Da district. In Hai Phong city, FeCredit will open the office at 6th floor, Akashi building, No.10, Lotte 2A, Nga Nam new urban area, Cat Bi airport, Dong Khe ward, Ngo Quyen district. The representative approved to be established in Da Nang is located at K294/35 Dien Bien Phu road, Group 50, Chinh Gian ward, Thanh Khe district. The representative office in Khanh Hoa is located at Suburb. IV, V 5th floor in VCN building, A1 road, Vinh Diem Trung urban area, Nha Trang City, Khanh Hoa province. In the southern area, the representative offices are approved to be established in four provinces including Dong Nai (K19, Vo Thi Sau road, Thong Nhat ward, Bien Hoa city); Tien Giang (09 Le Van Pham, ward 6, My Tho City); Vinh Long (71/46/6 Lotte A11, Bach Dan housing area, Hamlet 2, Ward 3, Vinh Long city); Ca Mau (No. 10 Trung Nhi, Ward No. 2, Ca Mau city). Intellasia 2 November / 52

8 Vietnam's PMI in October decreases to 51.6 points, lowest in 5 months VPB FC is responsible for implementing legal procedures and complying with regulations in the Law on credit organisations, the State Bank Governor's decision No.01/ 2008/QD-NHNN dated January 9, 2008 on the opening and termination of branches and representative offices of non-bank credit organisations. 02/NOV/2017 INTELLASIA BIZLIVE The Manufacturing Purchasing managers' Index (PMI) for the whole manufacturing sector in Vietnama composite index measuring the performance of the manufacturing sectorfell to 51.6 points in October from 53.3 points in September. This shows a slight improvement in business conditions and is the worst improvement in five months. However, Vietnam's manufacturing sector has continuously improved since December 2015, the Nikkei report said. Nikkei has not released the PMI for Asean in October. With 53.3 points, Vietnam led Asean countries in September. According to this report, the main factor causing operating conditions to improve more slowly in October was the slower increase in output. Output increased at the lowest level in the of production increase period that lasts for 12 recent months. The report shows that the number of new orders continued to rise sharply in October, although the growth was weaker than September. Meanwhile, the number of new export orders increased faster and was the strongest growth in six months. As the number of new orders soared, manufacturers increased their purchasing power at a faster pace, although the increase was lower than the previous month. Companies are still optimistic that output will improve in the next 12 months, thanks to forecasts about market demand improvement and achievement of the company's plan. The level of optimism is higher than September. "Vietnam's manufacturing sector has slowed down in October as output only increased slightly in the month. The number of new orders have also slowed down, but are still strong as the number of new export orders increase faster", said Andrew Harker, deputy director at IHS Markit, the company that collects survey results. Harker argues that the situation of material shortage affects the manufacturing sector, leading to increased input costs and longer delivery time. "The production sector is still a strongly developed sector of the Vietnamese economy so far this year. Therefore, from October to the end of 2017, growth should increase again to reach the whole year GDP growth target of 6.7%. IHS Markit is currently forecasting the growth at 6.5%," Harker added. VN's manufacturing PMI dips to 51.6 in October 02/NOV/2017 INTELLASIA VNS Vietnam Manufacturing Purchasing managers' Index (PMI) dipped to 51.6 in October, from 53.3 in September, with weaker increases in output, new orders and employment, according to Nikkei's IHS Markit report. According to the report, released on Wednesday, this signaled a modest improvement in business conditions that was the least marked in five months. That said, the health of the sector has strengthened continuously since December Central to the weak improvement in operating conditions was a much slower rise in manufacturing output. Production increased at a marginal pace that was the weakest in the current 12-month sequence of expansion. Where output rose, panellists linked this to higher new orders. On the other hand, some respondents mentioned signs of softer demand. "New orders continued to rise solidly in October, albeit to a lesser extent than September. New export order growth, meanwhile, accelerated and was the strongest in six months. With new business increasing at a solid pace and output rising only marginally, manufacturers used inventories to help fulfill orders," the report states, adding that as a result, stocks of finished goods decreased for the fourth consecutive month. Rising new orders resulted in further accumulation of backlog of work, the fourth in as many months. This was despite solid job creation in October. Employment has now risen in each of the past 19 months, with the latest increase only slightly weaker than Intellasia 2 November / 52

9 September's six-month high. After having risen at the fastest pace in over six years in the previous month, input costs increased sharply again in October and at a rate that was little-changed from September. Where inflation was recorded, panellists often mentioned raw material shortage. Output price inflation was also broadly unchanged from the end of the third quarter as charges rose for the second month running. As well as pushing up prices for inputs, supply shortage also resulted in longer suppliers' delivery times in October. Flooding linked to storms also contributed to longer lead times as transport routes were affected. Manufacturers increased their purchasing activity at a solid pace, although it was weaker than the previous month. Stocks of purchases rose only marginally, with the latest accumulation the weakest in the current 16-month sequence of increasing preproduction inventories. Firms remained optimistic that output will rise over the coming 12 months, linked to predictions of improving market demand and meeting of company targets. Sentiment was more positive than in September. "The Vietnamese manufacturing sector paused for breath in October, with output rising only marginally during the month. New order growth also slowed, but remained solid amid a faster increase in new export orders. There was further evidence of material shortage impacting the sector, leading to higher input costs and delivery delays," Andrew Harker, associate director at IHS Markit, said. "The manufacturing sector has been a strong performer within the Vietnamese economy so far this year. Therefore, growth will need to rebound from October's slowdown over the rest of 2017 to help meet the GDP target of 6.7 per cent growth. IHS Markit is currently forecasting a rise of 6.5 per cent," he said. NA discusses economic development problems 02/NOV/2017 INTELLASIA THE SAIGON TIMES National Assembly deputies pointed out many problems with economic development in Vietnam and suggested solutions at the lawmaking body's session on the country's socio-economic performance on October 31. Hoang Quang Ham, a deputy of Phu Tho Province, said economic growth is often higher in the fourth quarter and then slows in the first quarter of following year. Vietnam's economic growth rate in the fourth quarter of 2015 and 2016 was more than 7 percent and 6.6 percent respectively, but fell to 5.5 percent and 5 percent in the first quarters of 2016 and According to Ham, this is abnormal. He said although Tet (Lunar New Year), which falls in the first quarter, causes the country's production to shrink as workers have many days off, but consumption soars during the holiday. Therefore, economic growth in the first quarter should not be much lower than in the fourth quarter of previous year. "The government should take measures to buoy economic growth in the first quarter of 2018," he said. Besides, slower-than-expected disbursements for public investments have made several projects fall behind schedule. The National Assembly will adopt the plan for site clearance to facilitate the construction of Long Thanh International Airport and the plan to build the North-South Expressway at its ongoing fourth session. But in the public investment plan for 2018, the government has yet to allocate capital for these projects. Two national target programmes, including rural transformation and sustainable poverty reduction, have received more than VND37 trillion (US$1.63 billion) in three years, meeting 36 percent of the plan. Ham said although the State budget has faced a host of difficulties, investment capital allocated to localities has exceeded the ceilings. According to the State Budget Law, investment allocated to localities should not exceed 30 percent of their budget, but the budget estimate for 2018 is more than 46%. Intellasia 2 November / 52

10 He said the country's public debt would amount to VND4.2 quadrillion in 2020, and the State will have to pay more than VND100 trillion in interest a year. Ham suggested the government complete laws on State budget revenue and expenditure, reform the State administrative apparatus, reduce the reliance of local governments on the coffers of the central government, and effectively control the use of official development assistance (ODA) loans. At the session, deputy of Binh Duong Province Pham Trong Nhan drew attention to the economy's reliance on foreign direct investment (FDI), saying this situation will affect the sustainable development of the country. Nhan also pondered the real picture behind the FDI sector, as many FDI enterprises are reportedly deep in the red. Between 2015 and 2017, half of FDI businesses have reported losses, and many others have reported losses for years but still expanded production. Up to 46 percent of the biggest taxpayers in 2015 were FDI enterprises, but they contributed only 37 percent to total tax collections. "FDI enterprises have received a lot of incentives like preferential tax rates, import duty exemptions for fixed assets, and reductions or exemptions of land rent. This is unfair for domestic enterprises," Nhan said. He suggested the government focus on and offer more incentives for domestic enterprises to make this sector the driving force of the country's economic development. NA discusses growth goals, budget estimates 02/NOV/2017 INTELLASIA VNS The National Assembly (NA) on Tuesday started a two-and-a-half day discussion about the socio-economic development and budget estimates for Burning issues such as public debts, disbursement of public investment and solutions to boost growth were also brought to the table. NA deputy Hoang Quang Ham of the northern province of Phu Tho, said that GDP growth statistics had a problemoften low in the first quarters of the year, and then posting miraculous growth rates in the remaining quarters. "This is an abnormal and illogical performance," Ham said, urging the government to clarify it and come up with a solution to ensure substantial and efficient growth. Ham expressed concern over the tense budget situation and inefficient public investment, adding that the sum of VND80 trillion (US$3.5 billion) allocated to major national projects failed to be disbursed during the past three years. Or another clear example was that the project of Long Thanh International Airport had not been included in the capital allocation plan for 2018, although its feasibility study report was expected to be passed at this NA meeting. Ham said that public debt was at 62.2 per cent, nearing the ceiling, while budget collection might fail to fulfill the medium-term plan. Public debt was forecast to reach VND4.2 quadrillion by 2020 and 7-8 per cent of the total budget spending would have to be used for paying interest, estimated to average at VND100 trillion per year. By 2020, the country would have to borrow additional loans worth around VND262 trillion, given the tense debt repayment pressure if no improvements were made. Still, there was misspending, inefficient investments and stagnant projects. "The fiscal policies must be adjusted towards increasing collections, reducing expenses and prioritising paying debts," he said. NA deputy Duong Xuan Hoa of the northern mountainous province of Lang Son, said that it was necessary to have a comprehensive evaluation of the implementation of public investments, as well as clarifying accountability for low disbursements and inefficient investments. Regarding foreign direct investment (FDI), NA deputy Pham Trong Nhan from the southern province of Binh Duong, said that Vietnam should not attract FDI at all costs but focus on quality. Nhan said that around 50 per cent of FDI companies reported losses but many kept expanding investments in Vietnam, citing Oxfam's statistics that Intellasia 2 November / 52

11 the developing countries, including Vietnam, failed to collect $170 billion due to transfer pricing. In addition, many FDI projects used outdated technologies and caused severe environment pollution, he said. Meanwhile, FDI companies were provided with a number of preferential incentives, which domestic firms could not access. "Policies to boost the private economic sector must be enhanced to enable them to become drivers of growth," Nhan said, highly appreciating the government's effort in improving the business climate. "In attracting FDI, there must be strict regulations about technology transfer, local procurement rates and environment protection." During the morning session, NA deputies also urged the handling of loss-making projects to be sped up, the quality of equitisation of State-owned enterprises to be enhanced, measures to improve and promote the participation of Vietnam into a global value chain to be improved and administrative reforms to be hastened. Disaster prevention NA deputies also urged the enhancement of the forecasting capacity of natural disasters and their prevention. Deputy Do Trong Hung of Thanh Hoa Province, said that it was critical to have a comprehensive evaluation of the damage caused by recent natural disasters to the country's economic growth, especially in the agriculture sector. Hung said that support must be provided to suffering localities. In the long term, the forecasting capacity must be improved, he said. NA deputy Ma Thi Thuy from the northern province of Tuyen Quang, said that natural disaster prevention must be integrated into the socio-economic development plan. Thuy stressed that forest protection and plantation must be enhanced together with strict punishments for illegal deforestation. According to NA deputy Sung A Hong of Dien Bien Province, incentives should be provided to difficult localities to narrow the gap in socio-economic development with other regions, adding that mountainous provinces had poor infrastructure and transport connectivity, making it difficult to attract investments. Nguyen Thi Kim Be, NA deputy of Kien Giang Province, said that attention should also be paid to developing the transport infrastructure in the Cuu Long (Mekong) River Delta to promote regional linkages and enable it to cope with climate change. Working hour adjustments NA deputy Nguyen Van Canh from Binh Dinh Province proposed adjusting the working hours of public sector employees in large cities. Canh suggested working hours should begin at 8:30 am rather than 7:30 am, and that lunch break be reduced from the current 90 minutes or two hours to one hour. Canh said that this would help reduce pressure on the transportation systems. Still, careful evaluation was needed, he stressed. The government's report about socio-economic development in 2017 projected that all of the 13 indicators would be fulfilled and even exceeded. The government said that the GDP growth rate target of 6.7 per cent this year would be within reach. Responding to worries of some NA deputies about the risk of missing the GDP growth target this year, minister of Planning and Investment Nguyen Chi Dung said that growth in the fourth quarter of this year was underway to reach 7.31 per cent to achieve the target for the full year. Dung stressed that the economic figures were reliable. Lawmakers urge strong boost to fruit & vegie export, logistics sector 02/NOV/2017 INTELLASIA VNA Some lawmakers have underscored major benefits to be gained from fruit, vegetables and flower export and logistics services, asking for more attention to boost the development of these sectors. They continued to discuss the country's socio-economic and State budget situation on November 1, part of the ongoing fourth session of the 14th National Assembly in Hanoi. Intellasia 2 November / 52

12 Deputy Nguyen Thien Nhan of HCM City said in 2016, Vietnam exported 2.4 billion USD worth of crude oil and 2.45 billion USD worth of fruit, vegetables and flower. This was the first time fruit, vegetables and flower exports had surpassed crude oil shipments. Meanwhile, crude oil exports were 31 times higher than fruit and vegetables exports in 2005, 7.3 billion USD compared to 235 million USD. He analysed that fruit, vegetables and flower exports have grown by about 30 percent each year and are forecast to hit 9-10 billion USD in However, export turnover of crude oil has fallen by 900 million USD in five years and that of aquatic products has risen by just 5 percent annually. Fruit, vegetables and flower haven't been listed among the county's key agricultural export commodities which have included rice, catfish, and products from mushroom, coffee, brackish water shrimp and ginseng. Nhan, who is also Secretary of the HCM City Party Committee, proposed the government name fruit, vegetables and flower key export items. He said farming these products is a solution to reducing poverty in rural and mountainous areas, adding that each locality should cultivate typical fruit, vegetables and flower products that suit local conditions. Regarding logistics services, deputy Nguyen Quoc Binh of Hanoi cited data from the Ministry of Industry and Trade and the Vietnam Business Logistics Association that the value of Vietnam's logistics market is equivalent to percent of the country's GDP. Logistics services are an important economic sector that is able to fare well in the country. This industry is a direct solution to helping boost GDP growth and the economy's competitiveness, he noted. He pointed out a fact that the logistics industry's contribution to the economy remains modest, only about 2-3 percent of total GDP. Logistics are considered a lucrative but still untapped sector in Vietnam because around 80 percent of the logistics market is being run by foreign businesses. While logistics costs are estimated at 7-15 percent of GDP in developed countries, they account for percent of Vietnam's GDP, directly hampering economic growth. Therefore, it is important to cut down logistics costs and improve logistics services, he stressed. Highlighting advantages for logistics services development, Binh said Vietnam is located in the centre of the Asian-Pacific region in terms of maritime and air transportation. It is a gateway to the East Sea, one of the world's busiest shipping lanes, for three of the four economic corridors in the Greater Mekong Sub-region. It also owns many locations favourable for building deep-water seaports and international transit airports. The deputy said logistics can become a spearhead sector in Vietnam's economy, and the country should work harder to optimise existing potential and advantages. Vietnam's business environment rating improves 02/NOV/2017 INTELLASIA DAN TRI Under the World Bank (WB)'s report namely Doing Business 2018Reforming to Create Jobs, Vietnam ranks 68/190 economies evaluated in 2018, up 14 notches compared to the evaluation in 2017 (82/190 economies). Specifically, in Asean, Vietnam only ranks after four countries including Singapore (No.2), Malaysia (No.24), Thailand (No.26) and Brunei Daruxalam (No.56). However, Vietnam's business environment is higher than the six remaining countries in Asean including Indonesia (No.72), the Philippines (113), Cambodia (No.135), Laos (No.141), Myanmar (No.171) and Timor Leste (No.178). In the region, the leading economies still have the most favourable business environment, not including Singapore (because of belonging to Asean). The report mentions the special economic zone Hong Kong China which ranks No.5 in the world in business convenience, and the teriority Taiwan which ranks No.15 and Japan that ranks Intellasia 2 November / 52

13 No.34 in business openness. The report said Vietnam and Indonesia are the two countries that have carried out the most renovation in the past 15 years, with 39 renovations for each country. "Currently, it takes only 22 days and 6.5 percent per capital income for entrepreneurs in HCM City to register to establish a new business, compared to 61 days and 31.9 percent per capita income in 2003", said WB. The WB's business environment rating is based on 10 assessment criteria including business establishment, construction licensing, energy access, asset registration, loans, protection of minor investors, tax payment, international trade, contract implementation, settlement of insolvency. Under the aforementioned report, Vietnam has eight out of 10 indexes to increase (except for asset registration and protection of minor shareholders). In particular, the index of favourable tax payment jumped to No.86 at points; energy access index ranked No.64, up more than 6.46 points; the loan ratio swelled five points compared to 2017, ranking at No.29. However, the evaluation index of construction permit settlement still ranked at No.20. Although the index increased, it is still the lowest among indexes with just 0.14%. The two indexes of asset registration and protection of minor shareholders did not increase compared to In 2017, the government carried out a series of policies to promote the improvement of business environment, enhancement of competitiveness by direct meeting and dialogues with the private economic sector. Resolutions No.19 and No.35 on improvement of business environment and competitiveness, supporting small and medium businesses have been effectively implemented. Most recently, the Law on Small and Medium Enterprise Support has been approved; the policies that call for ministries, industries and localities to remove or reduce business conditions, small licenses have initially been implemented effectively. Especially, on October 30, the research unit on Private Economic Development (Unit 4) under the government's administrative reform advisory council was launched. The Unit will link with the prime minister's economic research unit to propose measures to discuss about private economy in particular and the economy as a whole, thereby putting it into the Resolution of the regular meeting so that the prime minister can direct the consistent implementation among ministries and localities. Lawmakers call for shake-up of FDI incentives 02/NOV/2017 INTELLASIA VN ECONOMIC TIMES Vietnam offers many land and tax incentives to attract foreign direct investment (FDI) but the sector's contribution to the economy is still limited, National Assembly (NA) delegates have said. Despite accounting for more than 70 per cent of total export revenue, the sector's contribution to State coffers is estimated at per cent, delegate Pham Trong Nhan told the ongoing NA session on October 31. He was also concerned about transfer pricing by foreign enterprises, which hurts the State budget. Even though business is booming in Vietnam, up to half of foreign-invested enterprises announced losses between 2007 and According to Oxfam, a global charity that fights inequality, Vietnam faces annual losses of $170 billion due to transfer pricing, Nhan said, stressing that the country should review existing policies, slash overly generous incentives for foreign investors, and offer local private firms equal treatment. In Vietnam, foreign investors are exempt from corporate income tax and get to use thousands of square meters of land at industrial parks for many years for free. Meanwhile, local firms find it hard to even secure 100 sq m for their workshops. "Why do we make it so difficult for local firms?", Nhan asked, adding that FDI should support the development of Vietnamese products instead of overwhelming local firms. Earlier, NA delegate Truong Trong Nghia warned against the undue dependence on Intellasia 2 November / 52