In Vietnam, strong exports are projected to help growth sustain itself at slightly below 6.5 percent this year, according to WB’s report.

For Vietnam and other countries in the Asia Pacific region, commodity import growth remains generally robust. Therefore, solid domestic demand, strong infrastructure spending and FDI-led investment in manufacturing sectors and services will continue to benefit the country.

After a period of financial market volatility in late 2016, global finance conditions have improved in 2017. Although real credit growth generally moderated on tighter regulations and higher inflation, it remained high in Vietnam and China.

The withdrawal of the United States from the Trans Pacific Partnership (TPP), however, could potentially withhold significant growth opportunities from Vietnam. Changing trade policies would also affect certain economies in the Asia Pacific region, namely those with sizable exports to developed economies such as Vietnam, Cambodia, China, Malaysia and Thailand.

As manufacturing and trade pick up, market confidence rises, and commodity prices stabilise, advanced economies’ growth will accelerate to 1.9 percent in 2017, which also will benefit developed countries’ trading partners. Meanwhile, emerging markets’ and developing economies’ growth will increase to 4.1 percent this year from 2016 number of 3.5 percent.

“With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long term. Countries must also continue to invest in people and build resilience against overlapping challenges, including climate change, conflict, forced displacement, famine and disease,” said Jim Yong Kim, World Bank Group President.

In late March, the General Statistics Office of Vietnam announced that the country’s first quarter GDP growth was 5.1 percent from the same period in 2016. This slow growth is attributed to the manufacturing sector’s underperformance. As such, the low percentage of this year’s first quarter means a potential challenge to the National Assembly’s goal of a 6.7 percent GDP growth rate by the end of 2017.

Nonetheless, Vietnam Institute for Economic and Policy Research predicts that with a gradual increase in each quarter’s GDP growth rate, the goal is still attainable.

VNA

Binh Son Refinery (BSR), the operator of Vietnam’s only oil refinery, Dung Quat, was valued at VND72.88 trillion ($3.2 billion) at the end of 2015, with the State holding a 60 per cent stake, according to the Ministry of Industry and Trade.

An affiliate of the Vietnam National Oil and Gas Group (PetroVietnam), BSR is preparing for an initial public offering (IPO) later this year. 

CEO Mr. Tran Ngoc Nguyen said BSR will sell 5-6 per cent of the company’s shares to the public in an IPO scheduled for November.

The operator of the Dung Quat Oil Refinery will also allow its employees to buy a combined 0.07 per cent stake within the year and will look to attract strategic investors next year.

Chairman Mr. Nguyen Hoai Giang told foreign media on June 1 that the Vietnamese Government had recently given permission for BSR to sell more than half of the company to either foreign or domestic strategic investors, giving a potential buyer a controlling stake.

The company had been in talks with Japan’s JX Nippon Oil & Energy Corp., South Korea’s SK Energy Co., and Russia’s Gazprom Neft, among others, but the talks have failed to progress, Mr. Giang said.

Dung Quat Oil Refinery in the central province of Quang Ngai now meets around one-third of Vietnam’s demand for fuel and oil products with an annual capacity of processing 6.5 million tons of crude oil each year.

BSR has a plan to expand capacity at Dung Quat by 30 per cent at a cost of $1.8 billion while reducing production costs due to cheaper oil prices. 

After completing its expansion in 2021, the refinery’s capacity will increase to 8.5 million tons of crude oil per year, meeting up to 60 per cent of local demand.

The country’s demand for oil and petroleum products has increased every year and the volume imported in 2015 rose 18.7 per cent, according to data from the General Department of Customs under the Ministry of Finance.

The $3-billion refinery posted revenue of VND21 trillion ($923 million) in the first quarter of this year, or 33 per cent of its full-year target. 

BSR projected revenue this year at VND62.4 trillion ($2.75 billion), down 17 per cent from 2016 on an expected fall in crude oil prices and shorter production time due to maintenance work.

2016 was viewed as a successful year for BSR, as total revenue reached more than $3.1 billion and it contributed over $483 million to the State budget, exceeding its plan by $88 million. 

Production was estimated at 6.84 million tons and sales at 6.8 million tons.

In the 2016-2020 period, BSR aims to record production of 28 million tons, of which diesel oil products will account for 50 per cent, with 14.064 million tons, A92/E5 gasoline over 6.383 million tons, and A95 gasoline 4.14 million tons.

VN Economic Times

Vietnam’s foreign debt leaped 6.5-fold between 2001 and 2015, with the World Bank, Japan, and the Asian Development Bank (ADB) being its largest creditors, Minister of Finance Dinh Tien Dung told the ongoing National Assembly (NA) session on May 25.

Minister of Finance Dinh Tien Dung

“Public debt is increasing rapidly, primarily because of weaknesses in managing and using loans,” he told the legislature.

Some debtors with government-guaranteed loans also lost their repayment capacity, passing on the burden to the government. He did not elaborate or name any specific State-owned enterprises (SOEs).

Debts owed to the World Bank jumped 11.5-fold in the fourteen-year period, to VND274.2 trillion ($12.08 billion) while those to the ADB and Japan rose 20.3-fold and 6.8-fold to VND151.1 trillion ($6.66 billion) and VND243.9 trillion ($10.74 billion), respectively.

Vietnam took out nearly $36.6 billion in official development assistance (ODA) and preferential loans from foreign creditors in the 2010-2016 period, while disbursing nearly $32.8 billion worth of foreign loans to finance socioeconomic development projects, Minister Dung said.

Between 2010 and 2016, the government raised VND1.27 trillion ($56.25 billion) worth of government bonds at home, representing an increase of 36 per cent each year. The government also provided guarantees totaling VND632.8 trillion ($27.87 billion) in the period while local governments also borrowed VND139 trillion ($6.12 billion).

Vietnam has depended on foreign loans to develop cash-hungry infrastructure and public projects. Hanoi, for instance, is looking to borrow a further VND53 trillion ($2.3 billion) from foreign creditors to develop its urban railway lines.

Minister Dung said the Law on Public Debt Management needs to be amended to include stricter rules on borrowing and on enhancing capital management.

Borrowings to date pushed Vietnam’s public debt to 63.7 per cent of GDP at the end of 2016, up from 62.2 per cent in 2015 and 50.1 per cent in 2011. The NA has put a curb on public debt of 65 per cent of GDP.

At end-2016, government debt and foreign debt stood at 52.6 per cent and 44.3 per cent of GDP, respectively.

The World Bank has forecast that Vietnam’s public debt will climb to 64.4 per cent this year and 64.7 per cent in 2018. The mounting debt will impose a steadily increasing burden on Vietnam’s economy and make it ever harder to cut the budget deficit, the bank said in a report released last year.

Under Vietnamese legislation, public debt includes government debt, foreign debt, government guarantees, and debts owed by local governments, while debts issued by the central bank, SOEs, and other State-run entities are excluded from the tally.

VN Economic Times