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Vietnamese Dong News

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Many export markets still have barriers to Vietnamese fruit

Last update 17:00 | 08/03/2016

VietNamNet Bridge - Though Vietnam has fulfilled the procedures and paper-work related to plant quarantines to enter new markets, many countries are still slow to accept Vietnam’s products.



Hoang Trung, deputy director of the Plant Protection Agency, an arm of the Ministry of Agriculture and Rural Development (MARD), noted that Australia was very difficult to please. Vietnam can only export litchis to the market.

Vietnam has also fulfilled all necessary procedures to ask Australia to open its market to other Vietnam’s products, such as mango and dragon fruit. All the technical issues relating to mango exports have been settled. But Australian agencies will send staff to Vietnam to examine radiation establishments in Vietnam.

Though Vietnam has fulfilled the procedures and paperwork related to plant quarantines in order to enter new markets, many countries are still slow to accept Vietnam’s products. “However, Australia has not set up any detailed plan to do this,” he said.

Vietnam’s dragon fruit, longan and rambutan have received a license to enter the US market.

But star apple and mango, the other specialties of Vietnam, still cannot, even though Vietnam and the US have finished negotiations on the procedures for plant quarantine after eight years of negotiation.

It is still unclear why the US does not allow Vietnam to export the two kinds of products to the market.

“We have followed all necessary procedures and have mentioned the issue at all the meetings, low- and high-level ones, but the US side only said it was still considering this,” he said.

It is also difficult to penetrate the Taiwanese market. After Taiwan stopped importing Vietnam’s dragon fruit eight years ago, the Plant Protection Agency conducted negotiations with the Taiwanese appropriate agencies to resume the export.
It has satisfied all the requirements set by Taiwan. However, Vietnam’s dragon fruit still cannot come back to the market.
“Vietnamese businesses are looking forward to the information from Taiwan because this is a large market,” Trung said, adding that in the past, Vietnam exported about 20,000 tons of dragon fruit a year to Taiwan.

A report of the Vietnam Vegetable and Fruit Association (Vinafruit) showed that in 2015, Vietnam exported $1.85 billion worth of products, an increase of 24 percent over 2014. China remains Vietnam’s largest export market.

The report pointed out that the fruit export volume to China soared in 2015: with the turnover of $1.1 billion, it accounted for 2/3 of total export revenue instead of 1/3 as in the years before.

As such, Vietnam could export $400 million more in 2015 thanks to the high demand from China. Analysts noted that Vietnam has more heavily relied on the Chinese market in the last four years.

Read more: http://dongtalk.com/forums/index.php/topic/51885-many-export-markets-still-have-barriers-to-vietnamese-fruit/#ixzz42KLbcabd

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Chinese FDI in Vietnam: It is time to tighten, experts say

Last update 12:30 | 08/03/2016


VietNamNet Bridge – Since 2010, the FDI from China has skyrocketed, from a few hundred million US dollars to several billion US dollars.




The $2 billion Vinh Tan 1 Coal-fueld Power Plant in Binh Thuan, with 95% of Chinese capital.



Experts said that China's FDI projects come with cheap labor, intensive use of natural resources and destruction of the environment and that it was time for Vietnam to tighten regulations on FDI to prevent such projects.

Among Chinese investors in Vietnam, Texhong Group is the most notable name, with a $300 million fiber plant in Quang Ninh Province, which went into operation in 2013.

In 2014, Texhong kicked off the project to build the Texhong Hai Ha Industrial Zone, also in Quang Ninh, with a total investment of $215 million and poured $300 million into a chain of textile plants inside its industrial zone. To serve the secondary projects here, Texhong is also preparing to build a 2,000MW thermal power plant.

The Chinese group planned to invite about 200 Chinese enterprises to invest in its IZ in Quang Ninh, aiming to turn this IZ into a close textile-garment chain in Vietnam.

Another big Chinese-invested project in Vietnam is the $2 billion Vinh Tan 1 Coal-fueld Power Plant in the central province of Binh Thuan, a joint venture between two Chinese investors and the Vietnam Coal and Mineral Group (Vinacomin). In this project, the Chinese partners hold up to 95% of capital.

Other major Chinese-invested projects include the $400 million Viet Lan Tire Plant in Tay Ninh province and the $337.5 million Vietnam-China Mining and Metallurgy project in Lao Cai province.

According to the Foreign Investment Agency’s statistics, Chinese FDI registered in Vietnam rocketed from $312 million in 2012 to over $2.3 billion in 2013. In January 2016, FDI China ranked third with $179.51 million.

Dr. Nguyen Duc Thanh, Director of the Institute of Economic and Policy Research, the Hanoi National University, said Chinese capital was flowing around the world, not only to Vietnam. As a neighbor of China, the flow is stronger.

He noted that China has capital but does not have modern technology like Japan and South Korea so its FDI focuses on exploitation of natural resources and cheap labor.

Dr. Thanh said such projects don’t benefit Vietnam. "Regarding mining projects, as the price for minerals is currently low, some provinces that are in budget deficit want to sell more. Chinese investors understand this fact so they invest heavily to buy cheap resources. Vietnam currently sells natural resources at low prices and in the future it will have to buy natural resources at expensive prices," Thanh said.

Economist Bui Trinh said that by welcoming Chinese FDI coming with outdated technology and exploitation of natural resources, Vietnam would lose natural resources while the country’s environment would be harmed.

"That problem has been considered for a long time but it has not been resolved," said Trinh.

Dr. Trinh said Vietnam should tighten regulations on FDI to prevent such projects.

Dr. Tran Dinh Thien, Director of the Vietnam Institute of Economics said Vietnam was excited about integration and has forgotten the tragedies that can happen later.

Read more: http://dongtalk.com/forums/index.php/topic/51891-chinese-fdi-in-vietnam-it-is-time-to-tighten-experts-say/#ixzz42KL94Qbg

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FDI and Vietnam’s right to choose investors

Last update 14:00 | 08/03/2016


VietNamNet Bridge - Foreign investors have been flocking to Vietnam as they can see great opportunities here. Vietnam needs to use the right to choose investors in the best way so as to fully exploit foreign direct investment (FDI), experts say.

20160303093533-fdi.jpg Japanese FDI in Vietnam


At least 63.9 percent of Japanese businesses said they want to enlarge business in Vietnam, the highest figure among 19 countries and territories where Japanese have invested.

Meanwhile, only 38.1 percent of Japanese investors said they want to expand their operation in China.

The figures were released by Yasuzumi Hirotaka, head of the Japan External Trade Organization (Jetro), at an event on January 23.

Though the number of Japanese businesses that made profits in 2015 decreased by 3.5 percent and the number of businesses that took loss rose by 1.3 percent, Japanese still consider Vietnam as an important investment destination.

This is because 85 percent of Japanese businesses still saw revenue increasing. And more importantly, they still can see opportunities for high growth rates when investing in Vietnam.

Jetro’s chief noted Vietnam has strong advantages to attract FDI, especially a cheap labor force. The production cost in the manufacturing sector is just equal to less than half of that in China, Thailand and Malaysia.

Meanwhile, 70 percent of Japanese businesses put high expectations on the tariff mechanism to take effect with the Trans Pacific Partnership Agreement (TPP).

Japan is now the third largest foreign direct investor in Vietnam with $1.842 billion worth of FDI projects registered in 2015.

Vietnam’s right to choose investors

An analyst said that not only Japanese but American and other investors also say they want to invest in Vietnam.
At least 63.9 percent of Japanese businesses said they want to enlarge business in Vietnam, the highest figure among 19 countries and territories where Japanese have invested.  

However, Vietnam cannot fully exploit the opportunities brought by the foreign investors.

“Vietnam opens the doors widely to welcome guests, but it has not prepared itself well to receive guests,” he said.

“If Vietnam does not change, foreign investors, no matter whether they are from Japan, the US or any other country, will come to Vietnam just to sell products and to hire labor and use or buy natural resources. If so, Vietnam will not earn money,” warned Bui Ngoc Son, a renowned economist.

Agreeing with Son, Nguyen Thanh Thu from the HCM City Economics University, said the choice of Vietnam will decide if it can get benefits from FDI.

“We must say ‘no’ to projects which cannot meet the standards on technology and environment,” Thu said.

Nguyen Tri Hieu, also a renowned economist, said that opportunities come and leave regularly, so Vietnam needs to be wise enough in choosing suitable partners.

He went on to say that it is necessary to expand cooperation with countries so as to ease the reliance on certain economies.

Read more: http://dongtalk.com/forums/index.php/topic/51886-fdi-and-vietnam%E2%80%99s-right-to-choose-investors/#ixzz42KKYHMwv

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“Impressive” statistics and the “pride” of Vietnamese

Last update 15:28 | 15/02/2016


VietNamNet Bridge – Some local newspapers recently quoted the Vietnam Beverage Association (VBA) as saying that in 2015 Vietnam’s beer output reached 3.4 billion liters, an increase of 40.72% compared with 2010 and alcohol output (industrial production) of 70 million liters.




However, that did not include alcohol and beer produced by tens of thousands of household-sized distilleries throughout the country.

Also, according to the VBA, in the past five years, the industry gained the average growth rate of over 7% a year, and by 2020, beer output will reach 4 to 4.25 billion liters a year and the alcohol output will be from 320-360 million liters per year.

The beverage industry last year paid VND30,000 billion to the state budget, accounting for about 3% of the total budget revenue. It is a significant source of revenue of the state budget, from a purely economic perspective.

If the volume of beer and alcohol had been mainly exported, the earnings for the country would have been high.

In mid-2015, a report by the VBA also showed that Vietnam ranked 5th out of 10 Asian countries in consumption of beer and wine, just behind Japan, South Korea, Thailand and China.

However, Vietnam’s GDP and per capita GDP are far behind Asian countries such as Japan, South Korea, China, and ranks only 8th out of 10 countries in the ASEAN community.

The Ministry of Health (MoH) recently reported that alcohol consumption in Vietnam doubled in the past 10 years.

Vietnam’s consumption of beer and wine is now among the world's Top 25. It is noteworthy that the amount of alcohol and beer consumption in the world did not increase in the past 10 years.

Read more: http://dongtalk.com/forums/index.php/topic/51878-%E2%80%9Cimpressive%E2%80%9D-statistics-and-the-%E2%80%9Cpride%E2%80%9D-of-vietnamese/#ixzz40FTPOHOI

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M-commerce gears up, outstrips PC-commerce

Last update 10:00 | 15/02/2016


VietNamNet Bridge - E-commerce firms say m-commerce will be the key in their business development strategy in 2016 and upcoming years.



Lazada, the e-commerce website believed to hold the largest market share now in Vietnam, has unexpected stated m-commerce makes up 60 percent of its sales.

In its report about the business performance in 2015, Lazada said m-commerce has made a jump following a series of demand stimulation campaigns launched by the firm and the improvements of apps to make it easier for customers to do shopping with their mobile devices.

Meanwhile, Tran Hai Linh, CEO of Sendo.vn, said 45 percent of the transactions on websites in 2015 were from mobile devices, while Linh hopes the proportion would reach 65 percent in 2016.

Just one year before, the transactions from mobile devices just accounted for 15 percent of total transactions on the website which holds the second-largest market share.

In mid-2015, when answering the local press, Zalora, a website specializing in distributing fashion products, said the pageviews from mobile devices accounted for 30 percent of total page views on zalora.vn.

Just one year ago, experts commented ‘m-commerce is a growing tendency’, but now they say “m-commerce is now a major shopping channel for online shoppers’.

The figures showed the popularity of m-commerce in Vietnam. Just one year ago, experts commented ‘m-commerce is a growing tendency’, but now they say “m-commerce is now a major shopping channel for online shoppers’.

All e-commerce firms appreciate the role of m-commerce in their business, predicting that ‘m-commerce’ will be more popular than e-commerce.

Linh from Sendo noted that m-commerce has had big impact on the development of e-commerce in Vietnam, and that m-commerce will be the key in Sendo’s business strategy in 2016. Sendo App is one of its strategic targets.

Also according to Linh, six months after the launch, Sendo App had 500,000 downloads, thus making it one of the favorite apps on both iOS App Store and Google Play.

On December 24, 2015, Sendo.vn became the free shopping app with the highest number of downloads on Appstore.

A representative from Zalora said the firm realized the importance of m-commerce very early, and it had been spending big money to develop app on smartphones of its own.

It launched Zalora App in July 2013, just one year after the establishment in Vietnam. Some years ago, the firm predicted that m-commerce would see a boom in 2015.

According to Zalora, Vietnam now has 20 million smartphone users, or 24 percent of the population. Most smartphone users are aged 18-35.

The high number of smartphone users, the low 3G service fee (less than VND100,000 a month) and the large coverage of free wi-fi in large cities all allow Vietnamese to access the internet from smartphones more regularly.

This has led to the rapid development of m-commerce.

Read more: http://dongtalk.com/forums/index.php/topic/51880-m-commerce-gears-up-outstrips-pc-commerce/#ixzz40FSjEbDI

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PetroVietnam to close some oil wells if prices fall below $30/barrel

Last update 17:00 | 15/02/2016

VietNamNet Bridge - With the average price of crude oil at $32.4 per barrel, some subsidiaries of the Vietnam Oil and Gas Group (PetroVietnam) like PVEP and PVOil suffered losses in January 2016.




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PetroVietnam officials said that if oil prices fall to below $30 per barrel, the group will halt or reduce oil output exploited at some oil wells.
At a meeting held by the Ministry of Industry and Trade in early February, PetroVietnam officials said falling oil prices in January continued to affect the group’s economic indicators.
Regarding production, the total output of oil in January 2016 reached 2.56 million tons, equal to 109.7% of the plan.  More specifically:
- The oil output of 1.57 million tons, equivalent to 107% of the targeted plan for January
- The gas output reached 0.99 billion cubic meters, equal to 113.4% of the plan;
- Electricity production reached 1.73 billion kWh, equal to 89.2% of the plan;
- Production of gasoline reached 565.6 thousands of tons, equal to 114% of the plan.
However, because the average price of crude oil in January was only $32.4 per barrel, down $9.6 compared with the average price of December 2015 and down $17.8/barrel (equivalent to 35, 4%) over the same period of last year, the total revenue of the group reached only VND81.1 trillion, equivalent to 74% of the monthly plan.
Its contribution to the state budget reached VND6.2 trillion, equal to 72% of the plan.
According to Mr. Do Chi Thanh, Deputy General Director of PetroVietnam, due to the reduction of oil prices, many subsidiaries of PetroVietnam were also affected, especially firms specialising in oil and gas exploration.
Some subsidiaries such as the Oil and Gas Exploration and Exploitation Corporation (PVEP) and the Vietnam Oil Corporation (PVOil) incurred losses in January.
In February, the group is implementing various measures to deal with falling oil prices.

Read more: http://dongtalk.com/forums/index.php/topic/51875-petrovietnam-to-close-some-oil-wells-if-prices-fall-below-30barrel/#ixzz40FSDPH7Q

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US dollar appreciation behind hike in dong deposit interest rate

Last update 10:00 | 08/02/2016


VietNamNet Bridge - The increased demand for loans as well as the dong appreciation has increased the deposit interest rate. 




In September and December 2015, the State Bank of Vietnam (SBV) twice announced the adjustment of the dollar ceiling deposit interest rate, after which the dollar deposit interest rate dropped to zero percent.

The move aimed to encourage people to convert dollar into dong, thus cooling the tense forex market.

However, observers said despite the zero interest rate, people were still keeping dollars instead of dong, because the dollar has appreciated in the world market following the US FED’s decision on raising the prime interest rate.

Therefore, individuals who now keep dollars do not intend to sell dollar for dong.

They will gradually withdraw dollar deposits from banks when the deposits become mature.

Though they cannot profit from dollars, they still hope they can make money when the dollar price increases.

A banker who asked to be anonymous said the dollar liquidity was now under pressure.
In September and December 2015, the State Bank of Vietnam (SBV) twice announced the adjustment of the dollar ceiling deposit interest rate, after which the dollar deposit interest rate dropped to zero percent.

As businesses need dollars to make payments for imports, which increase sharply in the last months of year, the demand for deposits in dollars at banks has decreased.

In previous years, dollars from other markets, where the interest rate was low, flowed into Vietnam, where the interest rate was higher.

The banker predicted that the dollar capital is flowing out of Vietnam because the dollar interest rate in the world market has increased again following the US FED’s decision.

All these factors have affected dollar liquidity and commercial banks’ forex position.

In order to settle the problem, banks have to use dong to buy dollars to improve their forex position and keep the liquidity stable.

This means that they need more dong and therefore have to raise the dong deposit interest rates to attract more dong deposits.

Dong or dollar?

With the dong deposit interest rates at 5-6 percent per annum currently and the inflation rate expected to be higher in 2016, investors believe that it would be more profitable to keep dollars because the dollar price increase is foreseeable.

International press reported that the portfolio investment flow into emerging markets has changed its direction.

Foreign investors have withdrawn their capital from ETF and sold shares in large quantity recently.

Therefore, analysts said, there might be a wave of investors withdrawing dong from banks and converting  into dollars to pour into short term investment deals. If so, banks’ liquidity would be put under pressure.

Read more: http://dongtalk.com/forums/index.php/topic/51868-us-dollar-appreciation-behind-hike-in-dong-deposit-interest-rate/#ixzz3zayl96qf

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More M&A deals expected in domestic real estate sector

Last update 07:30 | 08/02/2016


VietNamNet Bridge – Mergers and acquisitions (M&As) in the domestic real estate sector are being favoured thanks to the recovery in the market, together with several new policies.



20160201182104-b8.jpgExperts said 2014 and 2015 was the breakthrough period for M&As in the market. — Illustrative Image/ Photo tapchitaichinh


Experts said 2014 and 2015 was the breakthrough period for M&As in the market. In the context of the frozen property market, the progress of several estate projects with favourable locations was stagnant as investors were facing financial difficulties.

Several real estate investors with strong financial abilities, both inside and outside the country, have taken advantage of the land fund to increase the supply to the market.

These projects could rake in big profits in the future while saving initial investment costs.

Novaland has been one of the notable investors which started the wave of M&As in the property sector. In the past three years, Novaland has acquired up to 25 real estate projects. Most of them are medium and high-end apartment projects with selling prices between VND24 million and VND27 million per sq.m.

The company has quickly brought some acquired projects into the market such as Lexington Residence, Icon 56, Galaxy 9, and River Gate, in addition to The Tresor and Lucky Palace.

The acquisition of several favourable locations has helped the company promote its sales.

FLC Group, Vingroup, Him Lam, and Dat Xanh, in addition to Hung Thinh Corp, have also been popular names in the sector with big M&A deals since 2014.

For example, FLC Group's strategy was to focus on both, acquisitions of ongoing projects and investing in new ones.

Over the past three years, FLC has poured hundreds of billions in buying projects of Alaska Garden City (Dai Mo, South Tu Liem District), Ion Complex Tower (36 Pham Hung Street) and The Lavender (Ha Dong District), and 265 Cau Giay.

Vingroup also invested around VND10 trillion for its M&A activities in 2014. It acquired several projects at prime locations such as Giang Vo Exhibition Centre, Starcity Centre, 233, 233B and 235 Areas of Nguyen Trai Street. In addition, Vingroup also bought shares at many businesses which have big land funds in Da Nang and HCM City.

The M&A in the property sector has also seen the participation of foreign investors. Creed Group poured VND4,446,000 million into buying shares and investing in hoing projects of An Gia Investment. Warburg Pinc invested VND2,223,000 million into Vincom Retail of Vingroup, bringing its total investment to VND6,669,000 million to develop the biggest commercial centres in Viet Nam under the Vincom brand name.

However, Nguyen Van Duc, deputy general director of Dat Lanh Real Estate Company said the number of projects which are needed for M&As is big. In HCM City alone, there are 700 stagnant real estate projects.

The pressure to handle stagnant projects was big, thus opening opportunities for investors to acquire them at cheap prices, Duc said, and added that the M&A would be the main strategy of several estate firms in the upcoming time.

Sharing ideas, Stephen Wyatt, general director of JLL Viet Nam, said this year would witness a boom in M&A activities in the property market.

He said that foreign investors would increase their investment in the sector as Viet Nam had been considered one of the most attractive markets in the region. Some foreign investment funds wanted to increase their presence in Viet Nam through JLL by acquiring or co-operating on domestic projects.

Read more: http://dongtalk.com/forums/index.php/topic/51870-more-ma-deals-expected-in-domestic-real-estate-sector/#ixzz3zayPfwit

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Private economic sector blocked by three powers

Last update 14:00 | 08/02/2016


VietNamNet Bridge - Private businesses, according to economists, have been hampered by state-owned enterprises (SOEs), foreign invested enterprises (FIEs) and state management agencies. The capital cannot reach the private economic sector because it has been taken away by the state budget.



Dr Nguyen Dinh Cung, head of the Central Institute of Economic Management (CIEM), said at a recent workshop on reviewing the economic performance in 2015 that while macroeconomic indexes look better, the driving force for growth has not changed much and the potential has nearly been used up.

“This is quite a vicious circle. In order to improve the competitiveness of Vietnamese goods, it is necessary to devalue the dong. However, if Vietnam devalues the local currency, it will bear heavier debts, while the state budget will get weaker,” he commented.

Cung said Vietnam reaped big fruits in 2015 with the GDP growth rate reaching 6.68 percent, exceeding the targeted rate, and a low inflation rate at 0.6 percent.

A lot of problems still exist: the budget deficit may exceed 5 percent of GDP threshold, the GDP growth rate was lower than that in 1990-2010 and the exports decreased.

However, a lot of problems still exist: the budget deficit may exceed 5 percent of GDP threshold, the GDP growth rate was lower than that in 1990-2010 and the exports decreased.

Cung pointed out that the government cannot figure out the debt payment plan with a stable source of revenue, but just ‘robs Peter to pay Paul’.

In 2016, the state has to pay a debt of VND110 trillion dong, including VND55 trillion in the first quarter of the year, and it plans to issue VND76 trillion worth of bonds.

“It is clear that with the money raised from government bond issuance, we will not have much money for investment after paying debts,” commented Nguyen Anh Duong, deputy head of CIEM’s Macroeconomic Division.

“The government borrows money mostly to pay debts,” he said. “The low-cost capital should have been lent to the private economic sector to help them expand production and business. However, the capital has been borrowed by the government for long term.”

Pham Chi Lan, a renowned economist, also commented the bond government issuance blocks  credit flow to the private sector.

“It is understandable why many private businesses have shrunk and they will die one day: they have been hampered by three big powers,” Lan said.

Lan went on to say that newly set up businesses still cannot pay tax to the state budget and generate growth.

Therefore, the state budget revenue still relies on operating businesses. It is estimated that businesses have to reserve 40.8 percent of their profit to pay to the state.

The experts emphasized that state agencies complain that the state budget is small but in fact, the Ministry of Finance always fulfills its task of collecting tax for the state.


Read more: http://dongtalk.com/forums/index.php/topic/51866-private-economic-sector-blocked-by-three-powers/#ixzz3zaxz4Hec

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Low-income earners travel by air as aviation market competes on fares

Last update 08:00 | 25/01/2016


VietNamNet Bridge - To gain market dominance, domestic airlines have to compete on fares but they also have to face extreme problem of profit margins.





Vietnam Airlines spent nearly VND22,000 billion (nearly $1 billion) to renew the fleet in 2015, but its margins on sales reached only 0.45%.

Mr. Nguyen Ngoc Vinh, a Hanoi man has been a teacher in Dak Lak province since 2010.

Every year, Vinh often visited his home in May instead of the Lunar New Year as others to both take advantage of the long summer vacation of teachers and to save travel expenses.

Previously, this teacher often chose cars as the main means of transport, with travel time of approximately 2.5 days, and travel cost of about VND1.8 million (nearly $90).

However, in the past three years the teacher has visited home by air, with travel time of only three hours and the similar travel expenses.

Such stories are very popular today along with the rapid development of the aviation industry in recent years.

After reaching the landmark of 62.2 million passengers in 2015, the aviation industry is expected to maintain a growth rate of 20% for at least another year.

All groups of air routes are expected to grow, in which the domestic routes are forecast to attract a lot of money to low-cost carriers.

Experts said that thanks to the establishment of low-cost carriers with cheap tickets, even low-earning people and students can afford to travel by air.

Air transportation is getting more popular and attractive to passengers for its advantage of time savings while the travel expenses are not much higher than other forms of transport services.

However, air transport did not become more popular until 2011, when the first low-cost airline was formed. Previously, for the majority of Vietnamese people, travel by air was a luxury because the airfare for a domestic trip was very high, at least several million VND.

In terms of market share, Vietnam Airlines, the national air carrier, still dominates the domestic market, accounting for approximately 47%.

This figure is high compared to other carriers, but it has significantly reduced compared to previous years. In 2014, Vietnam Airlines held 56% of the market share, 61% in 2013 and 68% in 2012.

While the market share of Vietnam Airlines is gradually reducing, the remaining air carriers have better business results.

Vietjet Air currently holds 36.3% of the local market share, an increase of 9% over 2014, equal to the reduction of Vietnam Airlines.

Sometime this carrier reached the equivalent market shares with Vietnam Airlines (40-40), while Jetstar has 14.9%, an increase of almost 2% compared to 2014.

Still difficult to form bipolar status

Having to share part of the market to low-cost carriers, Vietnam Airlines has to set modest goals on the number of passengers in coming years.

In the next three years, Vietnam Airlines aims to grow by 16.1% per year, particularly maintaining the local market share at 40.8% in 2016 (not including the market shares of Jetstar Pacific and VASCO, in which Vietnam Airlines has capital).

Meanwhile, Vietjet Air aims to grow 50% in 2016, or reach over 42% of the local market.

However, Vietnam Airlines is trying to expand its fleet.

In 2015, the carrier invested $1 billion to renew its fleet, with nine super aircraft, including four Airbus A350 and five Boeing 787-9 planes.

Particularly, Vietjet Air increased its fleet to 29 planes, including the narrow-body, fuel saving aircraft A321 CEO Sharklet. Jetstar Pacific's fleet currently operates with eight aircraft, unchanged compared with 2014.

According to the Centre for Asia - Pacific Aviation (CAPA), the number of seats filled on Vietnam Airlines and Vietjet Air in January 2016 may be up to half a million seats per week, two times higher than January 2015.

An official of a local airline said that air carriers would be forced to reduce fares and accept the tradeoff of profit for market share if they want to maintain the current growth rate.

In fact, the fares of Vietnam Airlines currently are not that different compared with other airlines.

For local routes, the fares have almost leveled among the airlines.

The difference lies only in the main routes, when Vietnam Airlines has advantages in the segment of business, VIPs customers, and at the peak season and holidays.

Though Vietnam Airlines is a local airlines with the best profit its profit margin (including the activities of VASCO) in 2015 was modest.

Its revenues in 2015 reached VND57,100 billion, with a profit of VND260 billion, equivalent to the profit margin of 0.45%.

This means that for every one million VND of revenue, the firm earns only VND4,500 of profit.

US$1 = VND22,500

Read more: http://dongtalk.com/forums/index.php/topic/51844-low-income-earners-travel-by-air-as-aviation-market-competes-on-fares/#ixzz3yGxiUyZW

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