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SEIKO IDEAS CORPORATION
Vietnam Business Review
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Vol 08, March 15th 2017
BUSINESS REVIEW VIETNAM
Vietnam's Largest State-Owned Coffee Company Plans 2018 IPO www.seiko-ideas.com
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INSIDE THIS ISSUE
HIGHLIGHTS
Vietnam's Largest State-Owned Coffee Company Plans 2018 IPO
Vietnam pushes for fresh bilateral trade deal with US
HCMC Seeks US$50 Billion for Infrastructure Development
ECONOMY
Key economic indicators in February 2017
New U.S. tax plan seen impacting Vietnam exports
Da Nang continues leading PCI ranking
BANKING & FINANCE
Great opportunities await securities investors in 2017
Vietnam stock market capitalization reaches $101bn
INVESTMENT
Hai Phong fosters investment, tourism links with Japan
BIM Group, AEON to build Ha Noi mall
ENTERPRISES
Vinamilk sets up country’s 1st European-standard organic dairy farm
Japanese firm wants to join Vietnam’s tea industry
MARKET & PRICES
Consumer market grows, in both stretch and focus
Hospitality segment on the rise in Da Nang
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ECONOMY
Key economic indicators in February 2017
(Source: VGP)
New U.S. tax plan seen impacting Vietnam exports
SGT - Vietnam’s exports to the United States might be impacted at least in the short term if America
implements its border adjustment tax (BAT) as part of President Donald Trump’s plan to revise tax policy, a
macroeconomic report said.
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The BAT, if implemented, would cause significant disadvantages for countries exporting goods to the U.S.,
including Vietnam, said the report, which was prepared and distributed by MarketIntello and the
Development and Policies Research Center (DEPOCEN).
The March report was released after Trump’s first address to Congress last week.
He once again mentioned his plan to adjust tax policy in order to increase revenues from imports and
encourage firms to invest and produce domestically.
The BAT is part of this tax adjustment package.
America is Vietnam’s biggest market, the report said. It quoted figures of Vietnam’s General Department of
Customs as saying that shipments to America made up nearly 22% of Vietnam’s total exports last year, the
highest in more than 10 years.
Statistics of the department showed Vietnam’s export revenue amounted to US$176.63 billion last year, up
9% over 2015, and enjoyed a trade surplus of over US$2.52 billion.
Vietnam got US$38.46 billion from export sales to America, leaping 14.9% year-on-year; followed by the
European Union (EU) with US$33.97 billion.
The report pointed out effects of the BAT on Vietnamese exports would rely on a number of factors.
It said given declining domestic demand, Vietnam’s economic growth this year should depend heavily on
international trade.
Meanwhile, rising prices of raw materials at the beginning of the year could make inroads into corporate
profits as companies are unable to shift the burden of rising prices to domestic consumers if the State Bank
of Vietnam (SBV) tightens monetary policy to curb a recurrence of high inflation.
The report said that with a share of about 42%, apparel and footwear were the most important goods
Vietnam exported stateside, followed by mobile phones and accessories with a share of 11% and wooden
products with 7%.
The report noted for Vietnam’s top export earners, products such as garments and electronic products
could hardly be substituted by U.S. home products.
To deal with the BAT, exporting countries are expected to use monetary policy to weaken their currencies
against the U.S. dollar to maintain the competitiveness of their exports as a counter-measure to the 20%
border tax.
However, the report said the SBV is unlikely to devalue the Vietnamese dong currency much since it could
pile pressure on inflation.
With the appreciating greenback and a possible rate hike made by the U.S. Federal Reserve (Fed), the
dong-dollar exchange rate could be revised upwards by VND200, according to the report.
In addition, as Vietnam’s economic performance in February was within expectation, it is projected that
the country’s economy would expand 6.3% with a bigger contribution by the recovering agricultural sector
and inflation would grow 4.3-4.5%.
Interest rates throughout 2017 could be maintained at their 2016 levels, helped by efforts of the SBV and the
Government.
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Da Nang continues leading PCI ranking
VNA - The Vietnam Chamber of Commerce
and Industry (VCCI) and the US Agency for
International Development (USAID) on March
14 announced the Provincial Competitive
Index (PCI) 2016, which sees central Da Nang
city continuing topping for the seventh time
and the fourth consecutive year.
The annual report, the 12th of is kind so far,
gathers feedback and assessments the community on the business environment, economic management
quality and administrative reform efforts of the municipal and provincial governments across Vietnam.
According to VCCI President Dr. Vu Tien Loc said that PCI collects opinions of private firms, with an aim to
promote their growth, especially micro, small and medium-sized enterprises, while creating jobs for people.
US Ambassador to Vietnam Ted Osius commented that PCI report is important to investors and businesses
interested in Vietnam.
The collection and analysis of data for the report show that competition helps improve operation
effectiveness, he said, adding it will also promote trade affiliation as well as economic growth and
prosperity.
According to the report, the northern province of Quang Ninh came second with 65.6 points, followed by
Mekong Delta Dong Thap province with 64.96 points, southern Binh Duong province with 63.57 points, Vinh
Long, 62.76 points and Lao Cai, 63.49 points.
Notably, Hanoi managed for the first time in many years to exceed the 60 point level and ranked 14th.
Dau Anh Tuan, head of the Legal Department of the VCCI, commented that the quality of governance of
cities and provinces has been improving.
Compared to 2015, bright signs have been seen in various aspects, including dynamism and pioneering of
the provincial administrations, informal cost, labor-force training, equal competition and business
registration.
However, administrative procedure burden and land access have yet to be solved while legal environment
is yet safe, posing obstacles for many domestic businesses, he said.
The PCI report 2016 has also reflected the rising trend of household businesses, as 65 percent of the firms
enjoyed profit, the highest figure in the recent five years.
The capital scale of a firm averaged a record high of 18.1 billion VND in 12 years, doubling that in 2006,
while the ratio of firms recruiting more employees also rose to 13 percent in 2016 from 12 percent in the
previous year.
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BANKING & FINANCE
Great opportunities await securities investors in 2017
VietNamNet Bridge - Securities investors found it
easy to make money in the stock market in 2016,
and they may have even bigger opportunities in
2017.
The VN Index reached 664.37 point threshold on
December 23, 2016, which represented a 29.3
percent increase in comparison to earlier this year.
The index exceeded a 9-year peak in 2016 with
numerous opportunities for securities to make
money.
Optimistic signs
Donald Trump will officially become the 45th US President on January 20, 2017. He wants to protect
domestic production and is anti-trade liberalization. If the US President rejects the TPP, this will have an
impact on Vietnamese enterprises in the fields of textiles & garments, seafood, footwear and logistics.
Analysts forecast that in the second half of 2017, the US FED would two times raise the prime interest rate,
which means that the domestic market would not bear big effects in the first half.
Vietnam’s economy has been performing well recently, while the expected GDP growth rate in 2017 is 6.6
percent.
The target of obtaining stock market capitalization value of 70
percent of GDP by 2020 shows the government’s strong
determination to turn the stock market into an important channel for
businesses to mobilize capital.
Analysts say the P/E in the Vietnamese stock market is at low level,
but the growth potential is great. With many enterprises with high
capitalization value in the time to come, the expected profit increases and more favorable conditions to
be set by the state, Vietnamese stocks are relatively cheap with numerous investment opportunities.
Investment opportunities
The VN Index has been increasing steadily since 2009 and the liquidity of the stock market has been
increasing year after year. It is expected that the VN Index may reach the 700 point threshold in the first half
of 2017.
The oil price recovery in the world is foreseeable as OPEC countries have agreed on the reduction of the
exploitation output. The high demand from China and the appreciation of the US dollar will support prices
of goods, especially crude oil. As such, the opportunities for oil & gas companies (GAS, PVD, PVS and PLC)
will be great in 2017.
Securities investors found it easy to
make money in the stock market in
2016, and they may have even
bigger opportunities in 2017.
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At present, oil & gas shares are being traded with a P/E of 9.6.
Analysts predict that the shares of FCMG manufacturing companies would see new breakthroughs.
The shares of the companies, including VNM, HNM, BHN and SAB, have been hunted on the stock market.
Many powerful enterprises plan to make IPOs in 2017. These include PV Oil, PV Power, VEAM (machinery),
Vinatex (textile & garment) and Vietjet.
Vietnam stock market capitalization reaches $101bn
VNE - Stock market capitalization has reached
VND2,260 trillion ($101 billion), equal to 50.3 per
cent of Vietnam’s GDP, a rise of 16 per cent
since the end of 2016 and the highest level since
the market began operations, Mr. Vu Bang,
Chairman of the State Securities Commission
(SSC), told a press conference in Hanoi last
week.
On March 6, the VN-Index stood at 716.29 points,
its highest level for ten years and 7.7 per cent
higher than at the end of 2016.
The HNX-Index stood at 86.55 points, up 8 per cent.
Market liquidity has improved, he went on, with an average transaction value of VND7.365 trillion ($324
million) each session, up 49 per cent against the same period last year and 6.6 per cent higher than the
average in 2016, adding that in the first two months of 2017, capital mobilization was VND40.7 trillion ($1.8
billion), a year-on-year fall of 27 per cent, while capital mobilization in February increased 79 per cent
against January.
Mr. Bang also noted that after some investment funds withdrew capital from Vietnam in the closing months
of 2016 due to expectations of the US Fed raising interest rate and the US dollar gaining value, since early
this year, foreign investors have bought VND1.545 trillion ($69 million) worth of shares and fund certificates
and VND5.960 trillion ($267 million) worth of bonds.
In the first month of 2017, the total value of foreign investors’ portfolios stood at a record $18.4 billion, he
added.
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INVESTMENT
Hai Phong fosters investment, tourism links with Japan
VNS — A forum was held in Hai Phong City
on Sunday to promote investment and
tourism partnerships with Japan, one of the
major investors in the northern port city.
Hai Phong was one of the first localities to
welcome Japanese firms seeking business
opportunities after Viet Nam initiated Doi Moi
(reforms). Its achievements in the past three
decades are partly thanks to Japanese
investors, noted Le Van Thanh, secretary of
the municipal Party Committee.
Japan is Viet Nam’s fourth biggest trade partner and its largest official development assistance (ODA)
provider, Thanh added.
Currently, 486 foreign direct investment projects from 36 countries worth around $14b are underway in the
city. These include 130 Japanese projects, which have a combined capital of $4.14b. Japan ranks first in
the number of projects and second in investment capital in Hai Phong.
The country has also provided significant ODA funds for key projects in Hai Phong and has helped the city
develop waste treatment plants and transport infrastructure, Thanh said.
At the forum, Thanh also promoted Hai Phong as a coastal, tourist city with its magnificent landscape,
hundreds of islands, including Cat Ba, a UNESCO world biosphere reserve, and beaches such as Do Son.
Jun Yanagi, vice-ambassador of Japan in Vietnam, said 2016 had been a successful year for tourism in
both countries. Last year, Japan welcomed 230,000 Vietnamese visitors, while Vietnam welcomed 470,000
Japanese visitors.
Japan now plans to establish an office of Japan National Tourism Organisation in Vietnam, the 16th of its
kind abroad, to promote Japan’s image to Vietnam, especially Hai Phong.
Japanese investment and trade promotion agencies will also work to further boost cooperation between
the two countries in general, and Japan and Hai Phong City in particular, Yanagi said.
In 2016, Hai Phong City posted an economic growth of 11%, which is 1.7 times higher than the national
average. Its port handled more than 80 million tonnes of goods, a year-on-year rise of 17%.
Around $3b worth of foreign investment poured into Hai Phong, making it the top foreign investment
destination in Vietnam, he said. Among the Japanese-invested projects in the city is the Nomura Industrial
Zone (IZ), a $140m project located on 153 hectares of land, all of which is now occupied.
A representative from Dinh Vu Industrial Zone, an infrastructure firm, said the city had welcomed 55
investors, which included huge international groups as well as local companies. The project to expand the
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current IZ and establish Deep C complex had been taken up to attract more investors, especially Japanese
firms.
At the forum, Japanese entrepreneurs talked about how Hai Phong can benefit from more partnerships
with them, especially in the industry and tourism sectors, and create employment opportunities in Japan for
Vietnamese people.
Hai Phong and Japan signed three memorandums of understanding (MoU) on cultural exchanges and
tourism promotion. The city also inked a MoU on flower cultivation with Greenwin Company and another on
developing logistics and transportation systems with Fukuyama Transporting Co Ltd.
BIM Group, AEON to build Ha Noi mall
VNS — Property developer BIM Group and
the AEON Vietnam Co Ltd, a subsidiary of
the leading Japanese retail and financial
services corporation AEON, have signed a
co-operation agreement to build a new
shopping mall in Hanoi’s Ha Dong District.
The mall, with a total floor area of over
200,000sq.m, will be AEON’s second in
Hanoi. Construction will start in 2017 and is
expected to be completed in April, 2019.
The project is designed to provide parking for thousands of cars and will also be connected to public
transportation with the Bus Rapid Transit (BRT) route 1 running from Yen Nghia Station to Kim Ma Station and
BRT route 2 running from Kim Ma Station to Hoa Lac High-tech Park. Eventually it will also be linked to the
Cat Linh-Ha Dong elevated urban railway project.
When put into operation in 2019, AEON Mall Ha Dong is expected to create thousands of jobs for local
workers.
BIM Group is partnering with many famous international brands, including Frasers Hospitality,
InterContinental Hotels Group, Regent Hotels & Resorts, Hyatt Hotels and The Ascott Limited.
AEON is now one of the largest retailing groups in the world with over 179 member companies both inside
and outside Japan. Its business operation expanded to 14 countries and territories, including eight Asian
countries. AEON has been present in Việt Nam since 2009 and currently has four shopping malls in the
country.
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ENTERPRISES
Vinamilk sets up country’s 1st European-standard organic dairy farm
VNS — The Vietnam Dairy Products Joint
Stock Company (Vinamilk) on Monday
began operating the country’s first organic
dairy farm that meets European standards.
The Đà Lạt-based farm with a herd of 500
cows in the first stage is the company’s
second in the Tây Nguyên (Central
Highlands) province of Lâm Đồng.
The 70ha farm, which cost VNĐ200 billion
(US$8.8 million), has received certification
from the Control Union, a Dutch-based
global quality certifier, for meeting European standards.
The entire cow population has been carefully selected and given organic feed.
The farm follows three strict rules: no stimulants, no pesticides in feed and no residues in milk.
Mai Kiều Liên, Vinamilk’s CEO, told the media that the organic farm would not only meet local demand for
milk but also increase foreign markets’ confidence in Vietnamese dairy products.
The giant milk producer has 10 dairy farms around the country and plans to increase the number of farms
that follow Global GAP standards.
Japanese firm wants to join Vietnam’s tea industry
VNA - Japan’s Sasaki Seicha company has surveyed Vietnam’s tea industry for a year and realised that this
is a market not to be missed, the firm’s General Director Iwasaki Masao said.
The Cong Thuong (Industry & Trade) newspaper quoted him as saying that Vietnam used to be the world’s
fourth biggest tea producer, but this ranking has dropped recently. Meanwhile, its tea export prices have
decreased.
The Japanese firm wants to work with Vietnamese partners to export local tea products abroad, he noted.
Sasaki Seicha has been working with the Tea & Food Vietnam JSC to make plans for building tea factories
and tea purchasing and farming in some northern provinces.
Vietnam has a tea farming area of 124,000 hectares, producing 500,000 tonnes of dry tea each year.
It exported 130,900 tonnes of tea worth SU$217.2 million in 2016, increases of 5.1 percent in volume and 2.1
percent in value from the previous year, according to preliminary data from the General Department of
Vietnam Customs.
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MARKET & PRICES
Consumer market grows, in both stretch and focus
VIR - Vietnamese consumer firms will continue to
be in the spotlight of foreign investors in 2017
given their robust growth potential.
According to Ngo Vinh Tuan, head of investment
banking at Viet Capital Securities, overseas
investors will eye possible mergers and
acquisitions (M&A) with domestic companies, as
well as initial public offerings (IPOs) of well-known
names this year.
“We’re likely to see continuous investments from foreign investors, especially Japanese, Korean,
Singaporean, Taiwanese, and Thai. Key industries include retail, consumer goods, real estate, and
industrials,” Tuan said. “As more large Vietnamese firms become available for IPOs and M&As with
foreigners, the size of deals will be larger and more complex.”
Some high-profile listings and IPOs of 2017 include Vietjet Aviation JSC- completed last month, Saigon
Trading Group, PetroVietnam Oil Corporation, Vietnam urban and Industrial Zone Development Investment
Corporation Co., Ltd., and telecommunications giant Mobifone.
Most investors are lured in by Vietnam’s consumer-related companies thanks to their positive prospects in
the fast-growing economy. In the last decade, Vietnam’s GDP has tripled, with average per capita income
doubled, and one-third of the 90-plus million population now resides in urban areas. About 3.4 million
Vietnamese families now have annual income of US$5,000 or more, compared to only 1.6 million in 2005.
The average Vietnamese is still young at 31 years of age. The changing demographics, with a rising middle-
class in cities and higher disposable income, have bolstered private consumption.
“Compared to the previous generations, Vietnamese consumers are now more willing to spend for personal
fulfilment, thanks to their higher income. They want to open their wallet for experiences, gadgets, fitness
programmes, and education, which are good for companies in these industries,” said Richard Burrage,
CEO of Cimogo Vietnam, a consumer market research company in Vietnam.
However, Burrage noted that not all consumer-related sectors will benefit from shifting demographics in
Vietnam. For example, young Vietnamese consumers now prefer a proactive approach to healthcare,
which means visiting the gym, dieting, or enrolling in fitness programmes rather than buying medicine. The
latest smartphone is now their status symbol, not a fancy motorbike.
“Tourism, hospitality, and air transportation will grow as consumers are eager to travel and discover the
world. Their adventures, and daily lives, are likely to be captured by smartphones and posted on social
media, thus firms offering digital services will also become popular”, Burrage said.
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On the contrary, pharmaceuticals, motorbikes, and fast-moving consumer goods (FMCG) will move to the
back-burner.
It is indeed surprising that FMCG growth in Vietnam may be stalled while Vietnam’s private consumption in
general will surge. Ralf Mattheas, CEO of Infocus Vietnam, reasoned that as Vietnamese consumers
dedicate a larger part of their budget to personal fulfilment goals, they are likely to cut back on the basics,
including FMCG.
“Investors should take notice that FMCG may not experience a ‘great boom’ in Vietnam as consumers
continue to choose reasonably-priced products with good health benefits, rather than splurging on these
basics. Most consumers, in fact, would rather save up for the latest smartphone, enrol in classes, or travel
around instead,” said Mattheas.
Experts also reminded investors that modern retail in Vietnam, including convenience stores and
supermarkets, is still in its early stages, especially in rural areas. It will take a while for modern channels to
phase out traditional ones like wet markets or mom-and pop stores, which are ubiquitous in any
Vietnamese neighbourhood. Investments in modern retail, as a result, should be long-term.
Hospitality segment on the rise in Da Nang
VNE - Da Nang holds substantial potential for real estate investment with major opportunities available in
the hospitality segment, according to the latest report from real estate consultants Savills.
Hotel supply in the fourth quarter of 2016 was approximately 9,030 rooms following the entry of four three- to
four-star hotels, an increase of 5 per cent quarter-on-quarter and 19 per cent year-on-year.
Room tariffs in all segments increased, by 18 per cent year-on-year, and average revenue rose 26 per cent.
Nine four- to five-star hotels supplying approximately 2,200 rooms will come this year.
Condotel stock in the fourth quarter of 2016, meanwhile, was approximately 3,910 units from ten projects, of
which 1,325 were primary supply.
Son Tra district had the most, with 50 per cent, followed by Ngu Hanh Son district with 44 per cent.
Total apartment stock was 3,495 units from 15 projects, of which 520 are primary supply. Ngu Hanh Son
district had the most, with 30 per cent, followed by Son Tra, Hai Chau and Thanh Khe districts.
Savills said that guaranteed returns are offered in many condotel projects’ pre-sales programs.
APEC 2017, being held later in the year in the central city, will likely increase condotel performance and
spur a rash of investments.
The report also noted that Da Nang continues to establish itself as a competitive coastal location for both
domestic and international tourists.
It welcomed 5.51 million visitors last year, up 18 per cent year-on-year, according to the Da Nang
Department of Culture, Sports and Tourism.
International arrivals were 1.66 million, an increase of 31.6 per cent, with 3.84 million domestic tourists also
visiting the city, up 12.5 per cent. Total tourism revenue was estimated at VND16 trillion ($727.2 million), up
24.7 per cent.
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HIGHLIGHTS
Vietnam's Largest State-Owned Coffee Company Plans 2018 IPO
Bloomberg - Vietnam National
Coffee Corp., the nation’s largest
state-owned robusta producer, is
planning an initial public offering
next year as the government
reduces its stake in the company.
The IPO will include Vinacafe and 18
units, deputy director general
Nguyen Van Minh, said in an
interview at a coffee festival in the
Central Highland’s city of Buon Ma
Thuot. The government also plans to reduce its stake in seven other subsidiaries by 35 percent in separate
IPOs at an undetermined time, he said. The process valuing the company is expected to start in July, Minh
said.
Vietnam is the world’s largest producer of robusta beans, used in instant coffee. Annual coffee exports are
estimated at $2.5 billion to $3 billion, according to Do Ha Nam, vice head of Vietnam Coffee Cocoa
Association and chairman of Intimex Group, the country’s top exporter.
Vinacafe forecasts revenue this year of between 4 trillion dong and 4.5 trillion dong ($175 million to $197
million), Minh said. That compares with 3 trillion dong in 2016. It expects to export between 80,000 tons and
100,000 tons of beans from next year, up from 50,000 tons in 2017, he said. The company shipped 22,000
tons of last year.
Vietnam pushes for fresh bilateral trade deal with US
VOV - The remaining 11 members of the Trans Pacific Partnership aim to reach agreement on whether to
move ahead with the trade pact without the US when they meet on March 14-15 in Chile.
Vietnam Ambassador to the US Pham Quang Vinh said on March 7 that trade officials from the remaining
TPP countries plan to hold the two-day meeting in Chile to discuss the future of the trade agreement now
that President Trump has withdrawn the US from the deal.
The outcome of those discussions is not clear, Ambassador Pham told a program sponsored by the Asia
Society’s Policy Institute.
But he said the Vietnam government believes it would be a mistake to allow the TPP to die – regardless of
whether it continues as a regional agreement or becomes a template that is used in future free trade
agreements in other parts of the globe.
If the decision is made to forge ahead with the TPP, the next question would be whether to take on new
members, said the Ambassador.
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He also unveiled that trade representatives from the Republic of Korea are planning to attend the meeting
in Chile although it is not a current TPP member.
The government of the ROK had intended to join the TPP once it came into force and was ready to accept
additional members, ROK Ambassador to the US Ahn Ho-Young told the gathering. That was the ROK ‘Plan
A.’
Now the ROK is looking at its ‘Plan B’ – joining the TPP if the remaining members make the decision to move
ahead.
He endorsed the recommendations of a new Asia Society report that the 11 remaining TPP members
continue to implement the accord without the US and open membership to more countries.
President Trump has said he wants to negotiate fresh bilateral trade agreements with the TPP countries that
are not already participating in a free trade agreement with the US.
But the Vietnam government has so far not received any such overtures from the Trump administration,
noted Mr Pham.
However, the Vietnam government would be highly receptive to any trade proposals from the US that
move in the direction of opening new bilateral trade agreement negotiations, he added.
HCMC Seeks US$50 Billion for Infrastructure Development
By 2030, Ho Chi Minh City needs around
US$ 50 billion for infrastructure
development and welcomes the Asian
Infrastructure Investment Bank (AIIB) to
support investors to join the process.
Secretary of the Ho Chi Minh City Party
Committee Dinh La Thang made the
point on March 6 in HCMC while
receiving Mr Jin Liqun, Chairman of the
Asian Infrastructure Investment Bank
(AIIB).
The host leader highlighted the significance of infrastructure for national development. Thus, the city is
willing to cooperate with international financial institutions, including the AIIB in favor of win-win benefits.
In return, Mr Jin Liqun expressed his impression of Viet Nam’s robust developments and vowed to provide
additional credits for development projects in Viet Nam.
“There are wide doors for AIIB and HCMC to tap in development period, especially in settlement of traffic
congestion, sewage treatment, and urban infrastructure development,” Mr. Jin Liqun said.
He also pledged to study preferential credits for private enterprises engaging in infrastructure development.
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