Vietnam

Sabrina Moles published in Economy and trade, Vietnam

Vietnam, how hard it is to give up coal

Hanoi is facing one of the most critical periods for electricity supply in areas hit by heat waves. Fossil sources are again the first choice in a country considered among the most promising for clean energy production in Southeast Asia

In Vietnam it is not yet time to say goodbye to coal. The figure emerged last May 31 at a meeting of companies and institutions from the Esg (Environment, Society, Governance) world in Ho Chi Minh City and was reported by several Asian newspapers. But the problem has existed for some time, and is symptomatic of a rapid and haphazard development process. For the past few years the country has been at the center of a significant conversion to renewables never before seen in Southeast Asia, but the rush to green energy is still not enough to support an energy demand that has doubled in less than a decade.

As with China today - caught between promises of sustainable development and an energy system yet to be stabilized - the problem of balancing energy supply and demand is already a reality for Hanoi. And climate change adds an additional difficulty in holding the power grid and managing energy peaks. Starting in May, several industrial areas in the north of the country began experiencing an unprecedented series of power outages. "This is the first time this has happened in ten years," a worker in Bac Ninh province tells VnExpress. The manager of the plant, which assembles some telephone components, warned employees that they would not be able to work the next day due to a power outage lasting twelve consecutive hours.

Energy crisis and transition

Undoubtedly justifying the energy crisis in recent weeks is a record rise in temperatures, a factor that in turn is causing a spike in energy demand related to industrial cooling systems and use of air conditioners in buildings. But the supply side also lacks continuity. As many as 11 hydropower plants have been shut down due to water shortages, according to reports from the Ministry of Economy and Trade, while at least one million tons of coal would be needed to run thermal power plants in the north.

Last June 7, the director of the Ministry of Industry's Electricity Regulatory Authority, Tran Viet Hoa, had spoken of "serious shortages" in energy supply, saying that-including imports-the actual availability was only 18,000 megawatts, against a forecast of energy demand capable of touching peaks of 24,000 megawatts. By the end of May, dam output was capable of sustaining only four more days of peak energy; a few days later - on June 3 - major hydropower plants were unable to produce power for the entire day.

Dependence on coal

The hydropower crisis is undoubtedly a factor slowing Vietnam's advancement in the world of renewable energy, and it inevitably pulls the country back toward a source considered-at least in theory-more secure and available. While the collapse of hydropower production has brought out a deficit in the stock of coal for power generation, fossil sources have never left a gap in the national energy mix. On the contrary, they have simply increased to make up for the economic boom. As the International Energy Agency (IEA) reports, Vietnam is one of those countries that, while being one of the largest ASEAN investors in renewables, plans to double the output of coal-fired thermal power plants.

Moreover, "Vietnam's problem is that coal-fired power plants are very young, some are less than 10 years old," Tung Ho, national head of energy consultancy Allotrope, explained to Nikkei Asia. So much so that lawmakers are considering not so much abandoning this energy source but converting the plants to technologies that fall under the semantic umbrella of "clean coal technologies." These include the use of ammonia as a co-fuel to reduce harmful emissions, a technology that is still much debated because there is still no firm evidence of its effectiveness.

What is the future for Vietnam's energy transition?

Coal in Vietnam occupies more than 50 percent of the energy mix, surpassing all other countries in the ASEAN group. The second largest coal consumer in the region is Laos, a key country for supplies of this fuel to Hanoi. While the outlook of Power Development Plan 8 (PDP8) speaks of green transition as an opportunity to attract foreign capital and achieve carbon neutrality by 2050, the Vietnamese leadership continues to evaluate a number of ambitious coal-related infrastructure projects. Such is the case with a 160-kilometer highway that would connect the Lao provinces of Sekong and Salavan to the Vietnamese district of Hai Lang.

The PDP8 itself calls for the construction of new coal-fired power plants until 2030, a year that should mark the actual beginning of an exclusive transition-at least at the infrastructure level-to sustainable energy production facilities. These are therefore deadlines that do not include the closure of coal-fired power plants, but only a ban on new procurements. Although forecasts show a gradual decline in coal-related production (a 10 percent reduction over the next ten years), it is important to remember that the outlook for total production is ambitiously upward. In fact, according to the development plan, Hanoi aims to produce more energy than countries such as France and Italy.

Vietnam's plans will also have to reckon with international promises. As of 2022, the country has joined the Just Energy Transition Partnership. The scheme, adopted together with partners such as the U.S., Japan, the U.K. and the European Union, plans to unlock more than $15 billion to support member countries' energy transition. At COP26 in Glasgow, Hanoi also declared that it will stop using coal as an energy source by 2040. In 2022, the Economist had described Vietnam as "a bright spot on an otherwise black as night map" for its rapid development in solar energy. But it still has a long way to go.

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Lorenzo published in Politics and strategy, Vietnam

Vietnam's versatile political system

Hanoi is growing commercially and diplomatically, but it is at the center of the interests of global powers. Continuing to take advantage of this in a positive way will not be easy, , but Vietnam wants to continue the process that lifted millions of people out of poverty after the war

Almost two years before the 20th Congress of the Chinese Communist Party, the 13th Congress of the Vietnamese Communist Party was held. Almost two years before Xi Jinping won a historic third term as general secretary, so had Nguyen Phu Trong. It was there that the 19 members of the Politburo and, most importantly, the four crucial positions in the Vietnamese system were appointed: general secretary of the party, president of the Republic, prime minister, and president of the National Assembly (the unicameral legislative body). These are the figures on which the so-called "four pillars" principle is based, holding up the Vietnamese political system.

Yet, the number four has been in the recent past partially eroded. After Tran Dai Quang's death in 2018, Trong was president just until the January 2021 Congress. There he won confirmation as secretary-general on a historic scale. Trong, 76 years old and in health described by multiple sources as "precarious," is now Vietnam's longest-serving leader since Le Duan, Ho Chi Minh's successor, and since Doi Moi, the program of reforms and openings launched in 1986. Set aside the two-term limit, as Trong has been secretary-general since 2011. A sign that no agreement has been reached on a possible successor, but also the completion of a process of centralizing powers that began as early as the dawn of his first term, when the leadership of the Central Anti-Corruption Committee passed from the prime minister to the secretary. Trong, similarly to Xi Jinping, has built his reputation on an ostentatious inflexibility in security and anti-corruption matters, promoted through the ruthless "fiery furnace" campaign that enabled him to get rid of defeated political rivals at the 12th Congress in 2016. Instrument used by Trong immediately after the 2016 congress to launch the "fiery furnace" campaign, through which he increased his popularity and got rid of some political rivals.

The path continued in the past few months as well, when came the "guided" resignation of Nguyen Xuan Phuc, the former chairman lapped up by an anti-corruption investigation as part of the new momentum in the anti-corruption campaign. Phuc was the big disappointment of the 13th Congress, as he expected promotion from premier to party secretary. In his place was appointed Vo Van Thuong, who at "only" 52 years old is the youngest member of the Politburo. Thuong signifies continuity, since like Trong the new president takes a rather orthodox ideological line, cloaked in strong anti-corruption rhetoric but also a drive for business. Born in the southern province of Vinh Long, he interrupted an interlude in which all 4 pillars were expressed by the northern provinces. His appointment thus brings back a kind of regional balancing that had always characterized Vietnamese politics. There are also those who see the appointment of a politician at a still relatively young age as the first sign of a future succession to Trong, perhaps at the next Congress in 2026.

In the meantime, Hanoi will try to continue to attract foreign investment. Several international giants, starting with electronics, are choosing Vietnam to position themselves in Asia or diversify their production chains away from China. A phenomenon spurred by the free trade agreements signed by Hanoi with the European Union and the United Kingdom. But also by the side effects of tensions between China and the United States,which has led of the relocation of production lines to a less politically exposed country with lower labor costs than in the People's Republic. The Vietnamese economy grew by 8.02 percent in 2022, the fastest annual pace since 1997. This is higher than even the ambitious +6.%-6.5% that had been set by the government. Settling in Vietnam are not only low-quality production lines, but also productions of tech and electronics giants. A very long list that includes several Apple suppliers, among others.

But geopolitics is knocking at the door. Vietnam is increasingly the focus of U.S. attention, which is seeking to improve relations with an important player on the stage they care most about, the Asia-Pacific. Not surprisingly, an important visit by Antony Blinken to Hanoi took place in April. Not only that. On March 29, Joe Biden had a telephone conversation with Trong. Not such a usual move, since the U.S. president usually speaks with his Vietnamese counterpart. The timing was also interesting, since the talk took place in conjunction with the White House-organized Democracy Summit. The more malignant have pointed out that a political system that is certainly not democratic may eventually suit Biden if this is part of his strategy or calculation. As, moreover, is already the case with India. Blinken's visit served to lay the groundwork for the elevation of relations, which is expected to take place in July. But Vietnam has no intention of allowing itself to be "enlisted," on either side. To continue a historic process that brought millions of people out of poverty after the ravages of war.

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Carola Frattini published in Economy and trade, Laos, Vietnam

Laos and Vietnam bet on wind energy

ASEAN countries are making progress towards their commitment to renewable energy. In this strategy wind energy is becoming increasingly important.

According to a report by the Southeast Asia Energy Outlook 2022, energy demand in Southeast Asia has been increasing by an average of 3% annually over the past twenty years. This trend is expected to continue until 2030. Although the Covid-19 pandemic has slowed down the economic development of the region, the report projects that the region's GDP will grow by an average of 5% annually until 2030 before dropping to an average of 3% until 2050. Energy plays a critical role in this economic growth. Since the mid-1990s, the region has heavily relied on oil imports from the Middle East and Africa. If current policies remain unchanged, oil imports will increase. However, the recent price hikes and the Ukraine crisis could have a long-term impact on how natural gas is used in the region by affecting public perception of affordability and government attitudes towards investing in gas import infrastructure.

In this context, ASEAN countries are making progress towards their commitment to renewable energy. Indeed, in 2020/2021, they updated their NDC targets and have plans to achieve them by specific years. For example, Thailand aims to reduce GHG emissions by 20-25%, while Indonesia aims for a 29-41% reduction by 2030. Other countries have set their targets and implemented strategies to achieve them. During COP26, 8 of 10 ASEAN countries announced their will to reach net zero targets, the earliest by 2050 and the latest by 2065. To reach these targets, ASEAN governments are diversifying their renewable energy resources. Among these, wind energy is becoming increasingly important.

Before COVID-19, the demand for electricity in Vietnam was projected to rise at a rate of 10% per year. Based on forecasts, this demand is expected to surge by five times its current level by the year 2050. Therefore, diversifying renewable energy technologies and engaging with local partners and governments is essential. At the moment, in Vietnam, the government is prioritizing wind power over solar. With a coastline of over 3,000 km, offshore wind power provides excellent opportunities. Vietnam has a technical potential of up to 599 GW, larger than other Southeast Asian peers. The government has taken prompt action to stimulate wind energy growth by updating supporting mechanisms and introducing a public-private partnership model. Vietnam's commitment to decarbonization is promising, and wind power has immense potential to thrive. 

However, for the moment Vietnam generation capacity is not able to satisfy its energy needs and the aim of net zero emissions by 2050. Indeed, Vietnam and Thailand have set goals to achieve net zero greenhouse gas emissions by 2050. Laos is looking to capitalize on this demand. The growing demand for renewable energy in neighboring countries has led Laos to turn to a wind power investment strategy. Laos exports approximately 80% of its electricity to neighboring Thailand and Vietnam, contributing 30% of its export value. Additionally, the country is building transmission infrastructure in order to supply power also to Cambodia. 

Indeed, Laos, a prominent hydroelectric power exporter in Asia, is diversifying its energy portfolio by venturing into wind power to reduce its reliance on water resources. In this context, Laos is making a significant effort to reduce its dependence on hydropower for electricity generation. While hydropower currently accounts for 70% of the country's total electricity generation, concerns about its dependence have prompted Laos to shift towards wind power generation. This shift is due to a couple of reasons. Firstly, Laos' hydropower production usually decreases during the dry season. Secondly, China's control of the upstream rivers poses a risk of sudden changes in water levels, which poses a threat to agriculture and fisheries. Furthermore, a hydroelectric dam built by South Korean and Thai companies in the Attapeu province of southeastern Laos broke out in 2018, resulting in at least 71 deaths and over 6000 homeless. Nowadays, wind power generation has become a promising option for Laos. Wind farms are more efficient than solar panels as turbines can work almost day and night. 

The country is currently constructing a wind farm in the scarcely populated mountainous region of southeastern Laos, which is slated to commence operations in 2025. The project involves several companies, including Mitsubishi Group (Japan) and BCPG Renewable Energy Company (Bangchak, Thai Energy Group). It will supply electricity to Vietnam for a period of 25 years. The Monsoon wind farm will occupy an extensive area of 70000 hectares and comprise 133 wind turbines, making it one of Southeast Asia's largest onshore wind farms, with a generation capacity of 600 megawatts. Laos' energy policy is export-oriented, and the country has already planned similar wind power projects.

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Redazione published in Economy and trade, Vietnam

Asian tech giants set their sights on Vietnam

China's electric car giants are looking to Vietnam as a manufacturing hub. And Taiwanese suppliers to Apple are also doing the same

By Tommaso Magrini

Also Taiwanese contract manufacturers for US giants such as Apple are increasingly looking to South-East Asia and Vietnam in particular. Electronics manufacturer Quanta Computer, the main contract manufacturer of Apple's MacBooks, signed an agreement this month to build its first Vietnamese factory in the northern province of Nam Dinh. Initiatives such as this, aimed at diversifying production away from China, have been underway for years for manufacturers that have witnessed rising wages. Further impetus comes from trade and technology tensions between Washington and Beijing. Quanta had exploited its Chinese manufacturing base for rapid growth, recording sales of over USD 41 billion in 2022. But in 2022, due to anti-Covid restrictions, it was unable to produce its main MacBook Pro, delaying deliveries for more than two months and disrupting Apple's plans. TrendForce estimates that in the three years to 2025, the company is expected to increase production outside the country to around 30 per cent of the total. In the first quarter of 2023, the number of Taiwanese FDI projects in Vietnam grew by 87 per cent year-on-year. The leading iPhone assembler, Foxconn, is investing heavily in the northern province of Bac Giang. Last summer, Foxconn informed the local media of its intention to spend an additional USD 300 million and hire 30,000 people, and in February it signed a contract to lease a 45-hectare site until 2057. By 2025, about 30% of production is expected to take place outside China. Pegatron, which ranks second in iPhone production, has made major investments in the coastal city of Haiphong, while No. 4 Wistron plans to start a personal computer factory next year.

Chinese electric car manufacturers are unceremoniously aiming for global leadership. And to achieve this goal, they are increasingly establishing themselves in South-East Asia. In recent days, carmaker BYD Co. made it known that it intends to expand into the production and assembly of electric vehicles in Vietnam. The Xi'an-based electric vehicle manufacturer plans to open a plant in Vietnam for the production of car parts, with the aim of exporting the components to an assembly plant planned in neighbouring Thailand. In a government statement issued after a meeting between BYD founder and chairman Wang Chuanfu and Deputy Prime Minister Tran Hong Ha, Wang said he expects Vietnam to create favourable conditions for BYD to complete investment procedures. The Chinese company, which currently operates a factory to assemble electronic devices and parts in the northern Vietnamese province of Phu Tho, has also proposed to form a local supply chain. BYD's presence would pose a direct challenge to VinFast, a Vietnamese electric vehicle manufacturer that began selling cars in 2019 and plans to expand into the US and Europe. BYD's interest in Southeast Asia goes beyond Vietnam. Last September, the company, backed by Warren Buffett's Berkshire Hathaway, announced the construction of an electric vehicle assembly plant in Thailand with an annual capacity of 150,000 cars starting in 2024. The company sold 210,295 vehicles in April, about twice as many as a year earlier and slightly more than the previous month. Although the majority of sales come from mainland China, BYD is expanding overseas, mainly in Asia, Europe and Latin America. Exports account for about 6% of electric vehicle sales.

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Redazione published in Politics and strategy, Vietnam

US courts Vietnam, but Hanoi remains neutral

Antony Blinken's visit confirms Washington's intention to elevate bilateral relations. Hanoi is willing, but does not want to get involved in confrontational logic

By Tommaso Magrini

The United States is hyperactive on Vietnam. This was evidenced by Secretary of State Antony Blinken's trip to Hanoi a few days ago, but also, and more importantly, by his intention to elevate bilateral relations. Vietnamese Prime Minister Pham Minh Chinh and Blinken have expressed a desire to deepen their ties. In his first visit to the Southeast Asian country as a senior U.S. diplomat, Blinken met with senior officials, including Vietnamese Secretary General Nguyen Phu Trong and Prime Minister Pham Minh Chinh. The main topic was the possibility of strengthening bilateral relations in all areas. 

"For President Biden and for Washington, this is one of the most dynamic and most important relationships we've ever had," Blinken said during the press conference that concluded his meetings in Hanoi. "It has had a remarkable trajectory over the last two decades. Our belief is that it can and will grow even more." 

Prior to the meeting with Blinken, Chinh said both sides are trying to elevate ties "to a new height," following last month's phone call between President Joe Biden and Vietnam's ruling Communist Party chief Nguyen Phu Trong, a conversation that Chinh said was "very successful."

According to analysts, the diplomatic anniversary and the Biden-Trong phone call could lead to a meeting between the two in July or other high-level meetings. 

Blinken told reporters that security is one of the key components of relations between the two countries. Washington and U.S. defense companies have openly stated that they want to strengthen their military supplies to Vietnam-until now largely limited to coast guard ships and training aircraft-as the country seeks to diversify from Russia, which is currently its main supplier.

Since the late 1990s, military modernization efforts have seen Hanoi import 36 more multi-role aircraft, six submarines, a number of coastal defense missile systems and four frigates from Russia. But delivery of the latest frigate was delayed following Moscow's annexation of Crimea in 2014 because the engines were built in Ukraine, prompting Hanoi to rethink, and eventually cancel, its planned purchase of two more Russian warships.

"The Vietnamese military has realized that we can no longer access Russia's huge industrial capacity," Nguyen The Phuong, professor of international relations at Ho Chi Minh City University of Economics and Finance, told the South China Morning Post. "We have been reusing many Soviet-origin weapons for so long.... It is necessary to change, we have to find new ways to modernize."

Vietnamese policy does not allow foreign bases, foreign troops or alliances against other countries. Hanoi has also been deterred by the relatively high price of U.S. arms and the fear that supplies could be blocked by U.S. deputies over human rights concerns. Although direct agreements with the United States are unlikely in the short term, any official improvement in relations will facilitate trade with Western allies, including the purchase of secondhand U.S. weapons from South Korea.

Beware also of the significance of elevating relations, which would certainly be relevant but would not mean that Vietnam is ready to be "enlisted" in confrontational logics.

 

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Lorenzo published in Politics and strategy, Vietnam

Italy-Vietnam, 50 years of relations

Rome and Hanoi celebrated the 50th anniversary of diplomatic relations as a rotation in the Embassy is prepared

March 23, 2023 marked the 50th anniversary of diplomatic relations between Italy and Vietnam. As announced by the Italian Embassy, a reception was held in Hanoi at the Residence, attended by Deputy Foreign Minister Le Thi Thu Hang and representatives of Vietnamese authorities and the Italian and international community. In Ho Chi Minh City, on the other hand, a ceremony organized by the municipal authorities was held at the Opera House and attended by People's Committee Chairman Phan Van Mai. But the program of events is much broader and spans both Italy and Vietnam. "It is also the 10th anniversary of the strategic partnership that Italy entered into with Vietnam in 2013 and thanks to which relations between our two countries have expanded to the areas of trade, investment but also culture, tourism and science," Ambassador Antonio Alessandro stressed while speaking on "Casa Italia" on Rai. Alessandro pointed out that the business volume between the two countries reached 6.2 billion euros in 2022 and that today the leading sectors are obviously those related to technology and creative industries. Italy has about 150 companies active in Vietnam. Among the most interesting initiatives, the following were mentioned: the Design Day, this year dedicated to urban lighting, and an event dedicated to the manufacturing industry; for the performing arts, on the other hand, there is the annual Film Festival while scheduled for classical music is the Cavalleria Rusticana to be staged at the Hanoi Opera House. Vietnam is now a different country from the images that have come down to us in books," Alexander explained, recalling that Vietnam has gone from being one of the poorest countries in the world, as it was in the 1970s, to a middle-income country that aspires to be high-income. "Today it is a vibrant country: it has 100 million people, young and open to the rest of the world," the Ambassador added, noting how the country in question is at the center of an area, Southeast Asia, which is also a place of socio-economic expansion. Last week, among other things, the Council of Ministers appointed a new Ambassador to take Alexander's place at the end of his term. He is Marco della Seta, former Ambassador to Seoul.

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Sabrina Moles published in Politics and strategy, Vietnam

Vo Van Thuong, who is Vietnam's new President

Close to Secretary Trong and the youngest member of the Politburo, his political parable is part of the broader political reshuffle of recent times

"I am flesh and blood with my people / the same sweat, the same drop of boiling blood." It is by quoting the most famous Vietnamese poet of the 20th century that Vo Van Thuong officially took office as president of the Socialist Republic of Vietnam on March 2, 2023. After the unexpected resignation of Nguyen Xuan Phuc (the first in the history of the Socialist Republic) last Jan. 17, the political elite seems ready to leave behind a period of scandals and arrests.

Before Phuc, also in January, the two deputy ministers Pham Binh Minh and Vu Duc Dam also handed in their resignations. Throughout the course of 2022, the Vietnamese Communist Party's (VPC) anti-corruption campaign was intertwined with the scandal of bribes for reparations during the pandemic and that of the scam around testing for Covid-19. Signaling the need to clean up the image of the political leadership also falls under the timeliness of electing a new president without waiting for the National Assembly in May. The new president is named Vo Van Thuong and his election was approved by a vote of 98.8 percent.

Who is Vo Van Thuong

Vo Van Thuong is a native of the southern province of Vinh Long. He was born in 1970 and is the youngest member of the current Politburo. It is no coincidence that the CPV and the National Assembly chose a South Vietnamese to serve as president. Traditionally, the "four pillars" of Vietnamese politics-that is, the PCV general secretary, head of state, prime minister, and chairman of the National Assembly-equally represent the country's two poles. As of 2021, however, no Vietnamese had yet assumed one of the four main offices. In Thuong's case, however, it is important to remember that his family had moved to North Vietnam and remained there until the end of the war.

Unlike his predecessor, who majored in economics, Thuong majored in Marxist-Leninist philosophy at Ho Chi Minh University. But like Phuc, he soon climbed the Party ranks after years of active militancy in the world of youth associationism revolving around the CPV. He joined the Party in 1993, at age 23, and was elected to the Politburo during the 12th Congress in 2016. Analysts identify him as a loyalist of current Secretary Nguyen Phu Trong, who entrusted him with the PVC Executive Secretariat at the 13th Congress. With this track record Thuong had long been considered one of Trong's possible heirs, and today he is confirmed as a reassuring choice in troubled times. Not only that, the Vietnamese economy is experiencing one of the most prosperous periods in recent years, and confidence is no longer just a matter of domestic politics.

What Thuong's election means for the Vietnamese economy

Today, Vietnam is one of the most promising countries economically: GDP growth exceeded 8 percent during 2022, and the International Monetary Fund (IMF) sees the continuation of this upward parabola with a balance +6.2 percent for 2023 (compared to the data from the National Institute of Statistics-quoted above-the IMF had estimated 2022 growth at +7 percent). Following Trong's reappointment to the Party leadership, moreover, what the leadership interprets as signs of stability to citizens and foreign investors seem to be consolidated.

Consistent with what appears to be a purely political course set in motion with the 13th Congress (2021), in his inaugural speech Thuong preferred to give space to fighting corruption and building "a clean [from corruption, ed.] and strong state apparatus." He went on to mention domestic development goals such as reaching middle income by 2030 and crowning the construction of a high-income socialist country by the centennial of the republic's founding, 2045.

Vietnam's bureaucratic moloch remains an obstacle to innovation but, analysts point out, recent upheavals even at the highest echelons of Hanoi's political elite could positively affect the country's economic attractiveness. As Le Hong Hiep, senior fellow at ISEAS - Yusof Ishak Institute, points out, the sudden handover in the past two years would be interpreted as an acceleration in the country's political transition. Trong's third (exceptional) term would, therefore, be instrumental in building a solid and reassuring lineage. Although the competence of the chosen officials is still to be tested.

A period of opportunity is opening up for Vietnam, supported by pushes from within and outside Hanoi: the shift of global value chains away from China, government incentives in high-tech development, and openness to investment in building a resilient energy apparatus. But the Party will need to balance investor enthusiasm with the country's structural problems, from infrastructure to bureaucracy. To do this, one man (or rather, four men) will not be enough to lead the nation. In the meantime, the presidency may just be an initial launching pad for Thuong, who-as a statement released by a Hanoi diplomat to the Reuters news agency claims-could then become Trong's successor to the Party leadership and thus move up to the top role in the political hierarchy.




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Michelle Cabula published in Economy and trade, Vietnam

Lego targets Vietnam as new zero-emission manufacturing hub

Lego has chosen Vietnam for the construction of its first zero-emission factory. In an effort to minimize the impact of trade competition between China and the United States, several multinationals are aiming to diversify supply chains by distancing themselves from what for decades was considered the world's factory.

Lego, the world's leading toy manufacturer by sales, has begun construction of a new plant in Vietnam's Binh Duong province, about 50 kilometers north of Ho Chi Minh City. It will be the Danish company's sixth production base and the second in Asia, after the one in Jiaxing, China, which has been in operation since 2015.

The plant, scheduled to open next year, will be 44 hectares in size, will be powered mainly by solar energy, and will rely on state-of-the-art technology to produce the iconic plastic bricks. The decision will result in the creation of 4,000 jobs over the next 15 years, as well as the injection of more than $1 billion in investment into the area, which is already home to the largest industrial complexes and boasts the title of the richest region in the country. This is the largest investment by a Danish company in Vietnam.

The decision reflects a broader trend that over the past five years has seen Vietnam stand out as a favorite destination for foreign investors fleeing the former world factory in an effort to evade U.S. tariffs on goods imported from China.

Partly spurred by the rush to relocate triggered by the outbreak of the China-U.S. trade war, Vietnamese authorities have devised a plan to proactively attract foreign investment, prioritizing high-value-added projects and promoters of advanced, clean technologies. 

According to Bruno Jaspaert, chief executive officer of Deep C Industrial Zones, one of Vietnam's largest industrial zone developers, by focusing its efforts on the pressing issues for international investors, such as sustainability as articulated by the United Nations Development Goals, the country "may have the recipe for success."

By issuing Resolution 50 in 2019, the Communist Party of Vietnam emphasized the centrality of the role that foreign economic actors and foreign investment play in the pursuit of a long-term development strategy, stressing the need to attract green and hi-tech technologies that add to the production process.

In fact, already in 2018 FDI had increased by 9.1 percent over the previous year to $19.1 billion, subsequently registering a further 6.7 percent increase to $20.38 billion in 2019. After initially stalling in 2020 due to the pandemic outbreak, they returned to significant growth in 2021, partly in the wake of the massive industrial plant closures caused by the "zero Covid" strategy pursued by Beijing, to reach $38.85 billion.

Lego Chief Operating Officer Carsten Rasmussen himself said in December 2021 that the Vietnamese government's efforts to expand renewable energy infrastructure and collaborative approach with foreign companies contributed to the Group's decision to open a new manufacturing base in the country. ha dichiarato a dicembre 2021 che l’impegno del governo vietnamita per espandere le infrastrutture per la produzione di energia rinnovabile e l’approccio collaborativo con le aziende straniere hanno contribuito alla decisione del Gruppo di aprire una nuova base produttiva nel paese.

However, according to experts, there are structural factors that make it almost impossible for these attractive new destinations for foreign investors, such as Vietnam and the broader Southeast Asian region, to become true alternatives to China's complete manufacturing ecosystem and really challenge Beijing's status as a global manufacturing hub in the short term.

Zhang Monan, deputy director of the Institute of American and European Studies at the China Center for International Economic Exchange in Beijing, said the lack of a complete industrial system and a large domestic market is a major disadvantage for Vietnam. As long as semi-finished products continue to be supplied mainly from China and finished products exported mainly to the United States, the country's industrial development can never emancipate itself from its external dependence.

In addition, Vietnam still suffers from the shortage of skilled labor, as well as the huge disparity in population scale when compared with its huge neighbor. According to official Vietnamese data, only 11 percent of the country's 51.4 million workers are considered highly skilled, compared to the more than 200 million claimed by Chinese authorities (about 26 percent of the total workforce). "With 7 per cent of China's population, [Vietnam] will not be able to displace more than a small fraction of China’s exports," said David Dapice, senior economist for the Vietnam and Myanmar programs at Harvard University's Ash Centre for Democratic Governance and Innovation.

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Sabrina Moles published in Economy and trade, Vietnam

Hanoi's race for renewables is (also) an economic development strategy

Vietnam is not only one of the most promising economies in the ASEAN bloc, but also offers a glimpse of development opportunities through renewables. An overview of Hanoi’s opting-out fossil fuels strategy

Energy transition wanted: in December 2022, Vietnam finalised a Just Energy Transition Partnership (JETP) with the International Partners Group (IPG) consisting of the European Union, United Kingdom, United States, Japan, Germany, France, Italy, Canada, Denmark and Norway. This is a funding programme dedicated to developing countries to facilitate their sustainable growth in the energy field, which in the case of Hanoi provides $15.5 billion to reduce the country's dependence on fossil fuels. With the signing of the JETP, in the words of US President Joe Biden, “Vietnam has demonstrated leadership in charting an ambitious clean energy transition that will deliver long-term energy security”.

With hydropower already covering 40% of the energy mix in 2013 and photovoltaic power generation capacity increasing 25-fold in one year, Vietnam has become one of the most promising renewable energy countries in the region. In 2010, Hanoi began formulating its first plan for the development of new “clean” energy infrastructure, a roadmap that provided the basis for the more ambitious National Strategy for Renewable Energy Development 2016-2030. The plan also aims to reduce fossil fuels by 25% by 2030 and 45% by 2050.

More growth, more demand

Vietnam's rapid economic growth, one of the most promising in the region, is the main driver of its energy ambitions. According to the latest data from the National Bureau of Statistics, 2022 was a record year, with a GDP increase of 8.02%, the highest since 1997 - the year of the Asian financial crisis. The change in economic pace implies a significant development of the domestic market, accompanied by major investments in the manufacturing sectors that contribute to making Vietnam a major manufacturing hub.

The Foreign Direct Investment (FDI) Agency of the Vietnamese Ministry of Foreign Affairs forecasts between USD 36 billion and USD 38 billion of FDI by the end of 2023, much of it directed towards high-tech and sustainability projects. This doesn't come without the cooperation of Hanoi, which since the years of the first market reforms has sought to attract more foreign capital and talent in sectors that are still under-explored and under-developed. Also reinforcing this vision is the ratification of the investment protection agreement included in the EU-Vietnam Free Trade Agreement (EVFTA)’s in 2020 and the entry into force of the Regional Comprehensive Economic Partnership (RCEP) in 2022. Meanwhile, the rising quality of life is accelerating the energy demand of Vietnamese citizens, which - together with the industrial push - will continue to grow by 10% year-on-year until 2030.

Solar boom

The Vietnamese government has advanced several strategies to incentivise companies and citizens to choose the path of “clean” energy sources. The change of pace in solar energy production, for example, has been achieved through a generous sales rate for the energy fed into the grid by the panels installed on one's home: around 0.09 euro per kilowatt hour, then set at 0.08 until 2030. It is a different story for plants that are designed to produce and sell the energy produced in full, where the so-called feed-in-tariff (FiT) is lower but still cheaper than for coal and hydro power plants.

The results were not long in coming: the scheme has taken Vietnam to the top of the list of ASEAN countries investing in PV, reaching a production capacity of 17.6 Gigawatts. Not yet at the level of the 92 Gigawatts produced by US plants, but signalling the speed with which Vietnam's energy transition process is catching up with its Western partners. A path that began only in 2014 with the first solar power plant in Ninh Thuan province.

Since 2018, new forms of experimentation have also begun to bring wind farms to where there is no shortage of land. Floating photovoltaics, for example, is now seen as an interesting option to exploit the potential of Vietnam's dams: there are over seven thousand of them of various sizes and power throughout the country, and each of them can accommodate floating panels that can be easily hooked up to the pre-existing grid.

First steps with wind power

Of all the renewable technologies adopted by Hanoi, wind power remains one of the least explored. According to experts from the Global Wind Energy Council, Vietnam is one of the countries with the highest wind power potential in South-East Asia and, with proper planning, could soon increase from the current 3.5 Gigawatts to over 30 Gigawatts of electricity generated.

Strategic areas include the coasts, where floating wind power can be attempted. But some of the region's largest power plants are under construction also in the northern and central provinces. These include, for example, the floating wind power plant in Bac Lieu Province, the first of its kind built in the Mekong Delta.

The challenges of transition

As with other countries in the region, economic growth is not enough to initiate an effective and consistent energy transition. Proposals for new projects continue to increase, but there is a lack of a solid electricity grid capable of supporting any peaks in supply and demand. Investments are still insufficient: for Vietnam Electricity (VE), the country's largest energy company, capital invested in the sector would have to reach 150 billion to reach the targets set by the Vietnamese leadership. VE still has a monopoly on the energy market, and only since 2022 has a two-year pilot project been launched to test contracts for the sale and purchase of electricity directly from power plant producers. The goal? To streamline procedures and incentivise investors with the prospect of acting more freely on the market.

In addition to administrative and financial challenges, there are structural ones, ranging from the dilemma of storing energy from renewables to the environmental impact of new projects. While floating plants offer an alternative to occupying land for other purposes, they also hinder the local population's access to water and fish resources. Just as too little attention has been paid in the past to the environmental damage caused by the excessive construction of dams and hydroelectric power plants, it is now becoming problematic to test the criticality of investments in new solar or wind farms where they could seriously impact the ecosystem.

No less important is the debt - financial or “political” - incurred with countries investing in Vietnam. Incentives to invest in renewables are just one of the many strategies adopted by Hanoi to increase the entry of foreign capital into the country and push economic growth by relieving public debt. A necessary gamble with several positive effects on the economy, but with a still uncertain future. Among the European partners' concerns during the signing of the free trade agreement remains the human rights situation in Vietnam - an element that could turn against Hanoi as happened with the freezing of the investment agreement between the EU and China. The Memorandum of Understanding with the US, on the other hand, promises important aid for Vietnam's energy transition, but at the same time binds the country to imports of American liquefied natural gas. China, South Korea, Singapore and Japan are in turn racing to maximise the benefits promised by Hanoi in this area: will there be sufficient resources to monitor the situation?

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Carola Frattini published in Economy and trade, Vietnam

A Vietnamese start-up on the global stage

After successfully defending its domestic market of 100 million against global giants such as Facebook, VNG Corporation, Vietnam's first unicorn start-up, is looking beyond its borders

The tendency to see Vietnam as a country known mainly for textiles and agriculture may soon change thanks to the success of a Vietnamese start-up: the VNG corporation. This start-up, specialising in social networking, e-commerce, digital content and online entertainment, is Vietnam's first Unicorn start-up (the first start-up in the country to exceed the value of $1 billion US dollars).

An overview of the company's history is necessary to assess its evolution. One of the peculiarities of the company is that it was founded when only a tiny fraction of the Vietnamese population had access to the Internet. Founded in 2004 under the name Vinagame, VNG corp started its activity in the gaming sector. Despite its start in an extremely specialised industry, the company gradually managed to expand its services to music sharing, video streaming, messaging, news portals and online payments. Its messaging app Zalo is now deeply embedded in Vietnamese life, especially among young people. By 2020, the app had overtaken Facebook's messaging platform Messenger in Vietnam. According to the Vietnamese Ministry of Information and Communications data updated to February 2022, the app has 74.7 million monthly active users. This is an extraordinary figure since Messenger counts 67.8 million users in the country. Some of the app's strengths are the ability to send higher quality images and incorporate culturally relevant features such as emojis reflecting the Lunar New Year Tet. As pointed out by Le Hong Minh, co-founder of VNG, the company's greatest strength is to understand the preferences and needs of its users. 

Indeed, Le Hong Minh, co-founder of the VNG corporation, sees the start-up as a point of reference for the emerging technology start-up sector in Vietnam. In an interview at the company's headquarters in Ho Chi Minh City, Le Hong Minh made clear his aspirations of expanding VNG in the global technology industry:"In the future, Vietnam will not only be known for coffee and manufacturing". Indeed, after successfully defending its 100 million-strong domestic market against global giants such as Facebook, VNG corp is looking beyond Vietnam's borders. As co-founder Le Hong Minh reported, gaming will be the strong point of the company's international expansion. The gaming branch of VNG corp has users in more than 130 countries and expects to have 320 million customers worldwide in 2023. Despite this, Le Hong Minh pointed out that VNG is also looking to increase global sales of its artificial intelligence and cloud computing products. The main question is: given the significant expansion within Vietnam, will VMG corp be able to gain the trust of foreign investors? Alec Tseung, partner at KT Capital Group, has a specific view on the issue. On the one hand, he believes that, in theory, VNG will attract the attention of investors due to its similarity with Tencent, a multimedia company already well-known globally. On the other hand, in practice, the company does not have a favourable regulatory environment like Tencent's in China. However, it is important to highlight that according to a research conducted by the Vietnamese National Innovation Center, Vietnam attracted record venture capital investments last year. This increase in investments can create a favourable environment for VNG expansion. Moreover, according to some sources, the company is considering an initial public offering (IPO) in the US. Unfortunately, Le Hong Minh declined to confirm the validity of this news. Therefore, we have to wait and see how this company develops globally. Certainly, investors need to keep an eye on VNG corp developments.

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Agnese Ranaldi published in Economy and trade, Vietnam

Vietnamese electric cars on EU markets

Not only the United States. The Vietnamese giant VinFast also aims to expand into the European market. With a strategy that appears to be winning

Vietnamese electric vehicle brand VinFast aims to expand into the European market. Following the opening of the flagship store in Cologne scheduled for November 2022, the company plans to open new offices in Frankfurt, Paris, Nice, Amsterdam, Berlin, Munich and Hamburg by the end of the year. The company's expansion of EVs (electric vehicles) in EU countries will include a retail network designed to meet the specific needs of the local market, the carmaker said on Monday. As the leading economy in Southeast Asian countries, Vietnam continues to drive growth in the region. At the Paris Motor Show, which was held from 17-23 October, VinFast CEO Le Thi Thu Thuy said his company is proud to return to the Motor Show "to show that Vietnam is not only capable of producing cars, but is also making a big leap towards the electrified revolution". VinFast is the main brand of the Vietnamese conglomerate VinGroup, which is involved in technology, industry, property development, retail and services, and seems intent on expanding into global markets as much as possible. It also announced earlier this year that it will launch a $4 billion assembly plant on US soil. It is a strategy that is consistent with the great success VinFast is also acquiring in the domestic market: between cheaper cars and luxury cars, the carmaker is fully experiencing the 'golden moment' of the Vietnamese electric sector driven by demands for sustainability. The surge in sales recorded in July 2022 was only limited by the component shortage experienced the following August. But according to a report by the Vietnam Petroleum Institute, if the government acts promptly with policies aimed at supporting the sector, Hanoi can take a leading role in the EV market in South-East Asia and abroad.

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Emilia Leban published in Economy and trade, Vietnam

Vietnam leader of the supply chain

But developing a native high-tech industry is not that simple

Apple's future could be in Vietnam. For more than ten years, the Southeast Asian country has been an absolute leader in attracting the biggest technology brands: from Samsung, to Xiaomi, to Intel. And Steve Jobs' company is also producing components for the AirPods here, as well as testing the manufacturing of smartwatches and laptops. Being able to fit into the supply chain of these more complex devices would be a great success for the manufacturing industry in Hanoi.

Vietnam has in fact recorded a growth in the export of technological goods unmatched by any other Asian country. From 13% in 2010, in just ten years, high-tech components have become 42% of the export. Moreover, in recent years the rising cost of inflation in Chinese manufacturing centers has prompted many producers to move their factories to Vietnam, where workers' wages are lower. First the trade war between Washington and Beijing and then the continuous and tight lockdowns in China, have incentivized companies, including Apple, to move to the country. But Hanoi's ability to attract foreign companies to work the components of technological devices in the country goes hand in hand with the difficulty in bringing out an industry of its own. According to reports published by the Ministry of Industry and Commerce in 2019, Vietnam has lagged behind most of its neighbors in the technology sector. 

In previous years, the so-called “Asian tigers” have shown that growing in quality, from being part of the assembly line to becoming a real producer, is possible. Examples are the economies of China, Taiwan and South Korea, which, starting from a base of low-cost products, have turned their industries towards automotive and robotics. Vietnam has similar characteristics to these countries: low production costs, available manpower and an industrial policy coordinated by the state. However, two major problems loom: the lack of adequate infrastructure and highly skilled labor. In fact, managers and skilled workers make up only 10.7% of the entire Vietnamese workforce, the lowest percentage of all the major economies of Southeast Asia. Furthermore, in China for example, entire areas are dedicated to the creation of a single product; Vietnam, on the other hand, does not have these agglomerations. Its industries are scattered throughout the country and poorly integrated.

It remains, then, to clarify whether the success achieved by the "Asian tigers" decades ago can still be replicated today, with a globalized economy transformed by the domination of the Chinese manufacturing sector. The role of Hanoi therefore still remains uncertain: in balance between continuing to be a reliable part of the production chain and, at the same time, ready to develop a strategy to enter the international market. Of course, success in high-tech would mean becoming competitive with big Asian brands, such as the Chinese Oppo or the Malaysian Silterra. But any failure, says the director of the Mekong Development Research Institute Phung Tung, would condemn the country to be "forever a component of the supply chain", with the disastrous consequences of stagnation, social inequality and debt crises.

The solution to continue to attract foreign companies to the territory and, at the same time, develop an autonomous growth strategy, places Vietnam in front of a dilemma: the training of the workforce will increase the country's chances of launching itself into the high-tech industry, but it will also lead to an increase in wages, encouraging foreign producers to relocate elsewhere, such as Cambodia.

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