Vietnam Business Foreign News: Latest Trends (June No. 4)

【Renewable Energy】 National Electricity System Coordination Center (A0) transferred from EVN to the Ministry of Commerce and Industry.

The National Power System Coordination Center (A0) was established in 1994 and is solely responsible for directing the production, transmission, and distribution system of electricity in the country.

Since the establishment of the State Capital Management Commission in 2018, the restructuring of the A0 has been entrusted to this institution, but has not been approved and implemented to date.

The Ministry of Commerce and Industry has submitted a proposal to the Prime Minister to transfer the A0s to the Ministry. This transfer will be implemented in June 2023 under the Prime Minister’s direction.

A0 is positioned as the center of Vietnam’s power system and is responsible for operating the power system, mobilizing appropriate power sources, minimizing power disturbances, operating a fair, transparent, and competitive power market, and ensuring a sustainable, safe, and high-quality power supply. However, several problems have existed with A0 in the past. In particular, there have been challenges regarding the mobilization of renewable energy sources, and the formation of a competitive electricity market has not progressed for a long time.

If A0 is transferred to the Ministry of Commerce and Industry, its objectivity will be greater than when it belonged to EVN, and electricity mobilization will be completely independent of EVN activities. As a result, the Ministry of Commerce and Industry would assume responsibility for the country’s electricity supply.

The effort to transfer A0 to the Ministry of Industry and Trade is an important step in Vietnam’s efforts to build a competitive electricity market.

【Renewable Energy】Many preferential policies for roof-mounted solar power were proposed.

On June 13, 2023, the Ministry of Industry and Trade of Vietnam issued Draft Decision No. 74/BC-BC-BCT, “Draft Decision to Promote the Development of Rooftop Photovoltaics Installed on Residential, Office and Corporate Headquarters”. The draft focuses on the development of rooftop photovoltaic power generation for residents and buildings, and aims to introduce the policy especially for areas where electricity shortages are a concern.。

According to the proposal, the mechanism to promote the development of this source of electricity will be applied exclusively to rooftop photovoltaic systems installed in residences, offices, and corporate headquarters, which will be used for self-consumption. These sources will not be connected to the national transmission network, and rooftop photovoltaic systems installed in offices will receive priority budget allocation. Organizations and individuals who invest in and use such systems will be exempted from the procedures for business licenses for power projects and registration certificates for power projects, will be exempted or reduced from various taxes and fees, and will be able to obtain loans at preferential interest rates according to regulations. The Vietnamese Ministry of Industry and Trade will prepare a legal document specifically directing these preferential policies.

Furthermore, in addition to the above benefits, new points raised by the Ministry of Commerce and Industry in the draft are as follows

(1) Clarify the definition of rooftop photovoltaic. For ease of application, the draft clearly defines “rooftop photovoltaic system” as “a photovoltaic panel system installed on the roof of a residence, office, or corporate headquarters.”

(2) Clarify the responsibilities of each agency. The proposed decision clarifies the responsibilities of ministries, local governments, the Vietnam Electricity Corporation, investors, and users of rooftop PV systems.

With these preferential policies, Vietnam will be able to achieve its goal of increasing its PV output by an estimated 2,600 MW by 2030.

【Carbon Neutral】 Development of a Carbon Credit Market in Vietnam

The carbon credit trading market is positioned as an important instrument for Vietnam to achieve carbon neutrality (virtually zero emissions) in the future. The market will operate through the sale, purchase, and exchange of carbon credits, based on the principle that “polluters” will pay compensation for their emissions.

With the EU, the U.S., and other developed regions currently applying carbon tariffs on imported and exported goods, it is expected that China, Japan, and other countries will follow suit in the near future. In this trend, Vietnam will face many difficulties if it fails to establish a carbon credit trading market. But at the same time, this is both a problem and an opportunity for management agencies, organizations, and enterprises to reform themselves, deepen their research, and adopt environmentally friendly solutions to reduce emissions and implement measures to generate and accumulate carbon credits.

In order to realize a carbon credit trading market in Vietnam, approximately 1,900 enterprises in the commerce, construction, transportation, and natural resources industries will be required to provide data and information on their annual greenhouse gas emissions in 2023, in accordance with government guidance. The data would facilitate the establishment of a carbon credit trading market.

【Apparel】 Underdevelopment of “sustainability” is a challenge for Vietnam’s apparel industry.

According to data from the General Administration of Customs, exports from Vietnam’s apparel industry reached $12.64 billion in the first half of this year, down 15.6% from the same period last year. With continued weak global demand, Vietnam’s apparel export sales are projected to decline by about 5% from 2022, with revenues estimated to be around $700 billion.

On the other hand, Bangladesh, a major exporter of apparel products, has not been affected by this slump in demand. According to the International Finance Corporation (IFC), Bangladesh was quick to adopt a “greening” strategy, or sustainable production. Ninety percent of the world’s largest sustainable textile mills are located in Bangladesh.

In contrast, the percentage of apparel factories in Vietnam that utilize renewable energy is still low. Only about 20% of the textile industry and 35% of the garment industry use renewable energy.

The case of Bangladesh makes it clear that Vietnam’s apparel industry is not yet sustainable and is on the verge of a setback. If this trend continues, Vietnam could lose market share to more advanced producing countries and also gradually lose its traditional competitive advantages (low prices, cheap labor, preferential treatment for foreign direct investment firms, etc.). Sustainable production is therefore a prerequisite for Vietnamese apparel products to once again dominate the market. In addition, the increase in renewable energy generation capacity and efficiency under the 8th National Basic Plan for Electricity Development (PDP8) will be key for Vietnam’s apparel industry to further “green” its production.

【Pharmaceuticals】Potential for pharmaceutical sales on TikTok

Over the past few years, many pharmaceutical, cosmetic, and health food brands, as well as large hospitals in Vietnam, have been promoting their brands through TikTok.

According to TikTok’s statistical data, there are currently more than 40 million TikTok users in Vietnam (41% of the population) interested in health and beauty.

As users become more health conscious, interest in self-care content tends to increase as well; hashtags on TikTok offer a wide variety of health-related content, each with relatively high view counts.

TikTok is emerging as a new channel for people to search, exchange information, and learn about health care. It is a platform for pharmaceutical brands to leverage the viral power of short-form video and expand their reach to potential target users. Through this, brands in the pharmaceutical industry can easily build their brand image and develop creative and unique content strategies.

Ads on TikTok also directly stimulate the target audience and encourage viewers to visit the website, e-commerce platform, or brand landing page.

TikTok is recognized as a platform with high potential for the pharmaceutical industry.

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