Last update 5/9/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 9/5
Local gold dips as world price plummets

The local gold price has hit a 9-month low after the world gold price dropped below $1,600 an ounce.

As of 9 am Wednesday the gold prices of Saigon Jewelry Co (SJC), Vietnam’s biggest gold trader, lost over VND650,000 compared to Tuesday’s closing price, falling to around VND41.05-41.25 million a tael for bid and ask, respectively.

As of 10:30 am, the price had risen slightly to VND41.15-41.3 million a teal for bid and ask, respectively.

In Hanoi, SJC gold sold at DOJI Co have been quoted at VND41.1-41.3 million a tael for bid and ask respectively, down VND670,000 a teal day on day.

Since the beginning of the week, the gold price has dropped about VND1.3 million, continuously setting new lows over the last two weeks.

In mid-August the gold price was the highest ever, VND48.35 million a tael, but ever since gold has plummeted by more than VND7 million a tael.

The world gold price is still some VND800,000 a tael lower than the local price, according to the benchmark Vietcombank exchange rate.

On the world market, spot gold prices fell by $39.8 an ounce compared with the previous session to $1,598.3 an ounce, its lowest level since early January, according to online trading floor Kitco.com.

The world gold price is under selloff pressure from investors after the price slipped below the $1,600 threshold.

Meanwhile, concerns over whether Greece will receive aid or not and the European debt situation as a whole have also had negative impact on the price of gold.

At the closing of Tuesday’s session, the local gold price dropped some VND500,000 a tael, losing its VND42 million threshold.

In early afternoon, SJC gold price was quoted at VND41.66 million and VND41.96 million for bid and ask respectively, the lowest price since January 3.

Up until 4pm that afternoon, the company had had to adjust the SJC gold price 19 times.

The bid and ask prices then were VND41.92 million and VND42.42 million, respectively.

On the world market, gold prices continued to drop. At 4:50 pm local time, spot gold prices on the Kitco floor hit $1,626.2 an ounce, down $16.5 (1 percent) an ounce compared to the morning’s price.

On Wednesday night (local time), gold pierced the $1,600 threshold, its 2-month low, due to a massive selloff over fears of a renewed European financial meltdown.

Gold prices on the world market fell by more than 2 percent in the session, the lowest level this year, because of doubts over whether aid will come to Greece and fresh concerns about the European debt crisis.

Considered a risky asset, gold’s year-on-year growth has contracted from about 5-8 percent to less than 3 percent.

Analysts said that given Francois Hollande’s, the new president of France, views against austerity measures, and the unstable political situation in Greece, they are unsure how European leaders can find billions of euros to solve the current debt crisis.

“Absent new monetary stimulus, gold doesn’t make sense. When people are fearful of the fiat currencies eroding their wealth, that’s when gold catches its bid,” newswire theglobeandmail.com quoted Jeffrey Sherman, commodities portfolio manager of the $33-billion asset manager DoubleLine Capital, as saying.

At the close of Tuesday’s session, spot gold prices fell 2 percent to $1,604.7 an ounce. At one point during the session prices had even dropped to $1,594.94 an ounce, the lowest since January 4.

Gold futures for June delivery on the Comex trading floor fell $34.6 to $1,604.5 an ounce. Trading volume increased strongly to a 1-month high, rising 40 percent higher than the average rate in the last 30 days.

Since the 2012 high of $1,790 an ounce, the gold price has dropped $180 an ounce as the possibility of another stimulus program in the U.S. has become increasingly unlikely.

On Tuesday, due to the falling gold price, the value of assets of SPDR Gold Trust fell to $65.657 billion, down $1.691 billion compared with the previous amount.

Since the beginning of May, SPDR Gold Trust's assets have fallen a total of $2.477 billion, despite the 0.9 tons of gold purchased on Monday.

Index sustains gains despite strong sells

Stocks managed to post gains on the HCM City Stock Exchange by the end of yesterday's session as investors continued buying despite increased profit-taking selling pressure in the afternoon.

On the HCM City Stock Exchange, the VN-Index advanced to 491.52 points in the morning before sliding to 488.07, up just 0.36 per cent over Monday's close.

Heavy profit-taking sales pushed the market volume up 33 per cent to nearly 133.2 million shares while the value of yesterday's trades also jumped 23 per cent to VND2.22 trillion (US$105.7 million).

Blue chips were mixed. Thirteen of the 30 leading shares by market value and liquidity rallied while 11 lost ground and six closed unchanged. The VN30 Index increased 0.85 per cent to close at over 557 points.

Banks sustained their rises in the afternoon with Military Bank (MBB) and Sacombank (STB) continuing to hit the ceiling, while Eximbank (EIB) rose 2.7 per cent to VND18,800 ($0.90) and Vietinbank (CTG) increased 1.8 per cent to VND22,500 ($1.07). Vietcombank (VCB) jumped to VND34,400 ($1.64), but slid to VND33,700 ($1.60) by the end of the session.

Military Bank (MBB), the fifth largest listed lender, continued to be the most active code on the southern bourse yesterday with 7.6 million shares changing hands, closing at the ceiling of VND15,700 ($0.75).

Stock analysts said many investors decided to sell shares to take cash profits as they expected a correction ahead of a 500-point threshold following several days of gains.

Stocks nominated for ASEAN Star

Both the HCM City and Ha Noi Stock Exchanges yesterday selected a total of 30 leading shares by market capitalization and liquidity for the ASEAN Star, a list of 180 ASEAN stocks representing the 30 blue chips of each ASEAN country.

On the HCM City exchange, the 15 leading shares included Sacombank (STB), VinGroup (VIC), Saigon Securities Inc (SSI), Masan Group (MSN), FPT Corp (FPT), Hoang Anh Gia Lai (HAG), Kinh Do Corp (KDC), Eximbank (EIB), Phu My Fertiliser (DPM), Vinamilk (VNM), Refrigeration Electrical Engineering (REE), Ocean Group (OGC), Becamex Infrastructure Development (IJC), Vietcombank (VCB) and Phu Nhuan Jewelry (PNJ).

On the Ha Noi Stock Exchange, they comprised Asia Commercial Bank (ACB), Habubank (HBB), Kim Long Securities (KLS), Dabaco Group (DBC), Tien Phong Plastics (NTP), Ocean Hospitality (OCH), PetroVietnam Southern Gas (PGS), Petrolimex Petrochemical (PLC), PVI Holdings (PVI), Petrovietnam Technical Services (PVS), PetroVietnam Construction (PVX), Sacomreal (SCR), Saigon-Hanoi Bank (SHB), Vinaconex (VCG) and Vinaconex 1 (VCS). Daily transaction information based on these 30 shares will be updated daily at aseanexchanges.com. — VNS
Meanwhile, stocks on the Ha Noi Stock Exchange fell for the first time in the last four days with the HNX-Index declining from a one-year high to 83.64 points, a loss of 0.18 per cent over Monday's close, despite advancers outnumbering decliners by 182-135.

Trading value grew 22 per cent, totalling nearly VND1.44 trillion ($68.6 million) with 123.4 million shares exchanged.

While other leading shares such as VNDirect Securities (VND), Kim Long Securities (KLS) and PetroVietnam Construction (PVX) declined, the rise of Habubank (HBB) helped support the market. HBB was the most active share with 10.23 million of its stocks traded, gaining another 1.52 per cent to settle yesterday at VND6,700.

BIDV Securities analysts said both indices exceeded short-term peaks and resistance levels at around 520 points for the VN-Index and 90 points for the HNX-Index.

"The stock market will continue to benefit from the support policy for enterprises. Therefore, investors should pursue the buy and hold strategy during this period," they recommended via a research note yesterday.

Foreign investors remained net buyers on both exchanges yesterday, picking up a combined VND77 billion ($3.7 million) worth of shares.

Trade turnover with India healthy

Trade turnover between Vietnam and India reached nearly US$937 million in the first quarter of this year, an annual decline of 7.25 percent, reported the Vietnam Overseas Trade Office in India.

Despite the decline, India remained one of Vietnam’s 10 biggest trade partners, it said, adding that thanks to a free trade agreement signed more than two years ago, commerce between the two countries has developed significantly.

In the first quarter, Vietnam’s total export turnover hit US$336.2 million, up 11.3 percent over the same period last year with key products achieving high growth.

In particular, the export value of machinery increased by more than 188 percent while that of computers and electronics upped by 38.3 percent.

Rubber exports reached the highest growth rate at more than 300 percent.

Other exports enjoying growth were seafood (more than 95 percent) and footwear (51.7 percent).

Products that experienced a downturn in trade included steel and iron (80.7 percent) and pepper (90 percent).

According to the Vietnamese overseas trade office, in addition to rubber, electronics and garments, India has a high demand for Vietnamese agricultural products like pepper, tea, cashews and coffee.

In terms of imports, Vietnam spent only US$600 million, a year-on-year slump of 15.2 percent, which downed the trade deficit by 39.3 percent.

Imports were mainly materials for domestic production such as cotton, accessories, and machinery.

Trade turnover between the two sides has grown, hitting US$1 billion in 2006 and US$2.8 billion in 2010. The two countries target to boost the figure to US$7 billion by 2015.

Vietnam stocks jump on gov't measures

Vietnamese stocks rose sharply on Monday with strong buying demand after the government announced measures late last week to support domestic companies.

Foreigners bought 141.81 billion dong ($6.78 million) worth of stocks and sold shares valued at 100.52 billion dong in the Ho Chi Minh Stock Exchange, the exchange said.

VN INDEX

+2.10 percent at 486.31 points.

Volume of shares traded: 100.55 million shares.

Value of shares traded: 1.80 trillion dong.

Largest gainers, largest losers

HNX INDEX

+3.10 percent at 83.79 points.

Volume of shares traded: 99.38 million shares.

Value of shares traded: 1.10 trillion dong.

Largest gainers, largest losers

Analyst comments

Tran Minh Hoang, analyst, Vietcombank Securities:

"Stocks rose strongly thanks to the government's new policies to support domestic enterprises, including applying a 15 percent ceiling on lending rates for four major sectors.

"In addition, the market expects monthly inflation rate in May to be less than 0.5 percent, which will be a prerequisite for a further interest rate cut, possibly later this month or early next month.

"Stocks may correct later this week but the market's medium-term outlook is positive. The VN Index could hit 495 points this week."

Dinh The Loi, director of brokerage and advisory, Bao Minh Securities:

"Positive news that Vietnam's government has announced measures to aid businesses and to apply the ceiling on lending rates was major drivers that pushed stocks up strongly today.

"The market's sentiment is optimistic. Cash inflows are stable. If the VN Index hits 490 points tomorrow, stocks are likely to correct. However, the medium-term upward trend is firm."

Giang Trung Kien, head of analysis, FPT Securities:

"Stocks jumped steeply thanks to following elements:

"Firstly, demand-stimulus packages are worth 29 trillion dong via tax concessions. Secondly, the central bank capped lending rates for some sectors.

"Stocks could hit strong resistance levels at 512 points in the main market and 85 points in the Hanoi exchange." ($1=20,920 dong)

Vietnamese buyer confidence down

Consumer confidence in Vietnam has dipped to its lowest level since the third quarter of 2010 as concerns remain over the gloomy economic situation, a survey has found.

Global consumer research firm Nielsen said in its press release that the consumer confidence index for Vietnam dropped five points from the previous quarter to stand at 94 points for Q1 2012. Its survey also found that “three out of every four Vietnamese online consumers believe it is not a good time to buy the things they want and need over the next 12 months.”

The Nielsen global survey has since 2005 tracked consumer confidence, major concerns and spending intentions among more than 28,000 Internet consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

In the first quarter of this year, it said, Vietnamese consumers were most concerned about job security, the general economic situation, rising food and fuel prices as well as healthcare costs. “53 percent of Vietnamese online respondents described their job prospects in 2012 as good/excellent, a slight decline from 58 percent in Q4 2011 and 60 percent from a year ago. Only 49 percent of Vietnamese consumers are confident that their personal finance will be good/excellent in the coming year, dipping 5 points versus the previous quarter and 7 points versus Q1 2011,” the release said.

It said the decline in consumer confidence was also reflected in the fact that saving spare cash has become top choice (69 percent) among Vietnamese consumers, up four percent over the previous quarter.

As in the previous quarter, 84 percent of the survey respondents said that had changed their spending to save on household expenses, mainly on new clothes (65 percent), gas and electricity (65 percent), out-of-home entertainment (61 percent), replacement of major house items (52 percent), and upgrading technology (48 percent).

The survey, done between February 10 and February 27, 2012, polled more than 28,000 online consumers in 56 countries of the Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America.

Rubber exports up 30.4 pct in first four months

Vietnam exported 258,000 tonnes of rubber for US$754 million in the first four months of this year, showing a year-on-year increase of 30.4 percent in volume and a decrease of 12.9 percent in value, according to the General Department of Customs.
    
In April alone, the rubber export volume reached 45,000 tonnes with a value of US$130 million.

It is forecast that Chinese businesses will continue signing contracts to import Vietnamese rubber in May and June, and Vietnam hopes to deliver 1,000 tonnes of rubber per day to buyers instead of 600-700 tonnes at present.

By the end of 2012, the country expects to export 930,000 tonnes of rubber, 14 percent more than last year.

Animal feed imports drop to US$618mln

Vietnam spent US$618 million importing animal feed in the first four months of this year, down 19.3 percent from the same period last year, said the Ministry of Agriculture and Rural Development.
 
An official of the Vietnam Animal Feed Association attributed the lower import value to decreasing prices of imported fodder and more abundant supply of products on the local market.

"Lower import prices stem from the reduced prices of raw materials for fodder, mostly corn, cereal grains, soy-beans and cassava," said Pham Duc Binh, deputy chairman of the association.

In addition, it was time for the harvest of cereal grains, potatoes, wheat and winter-spring rice crops, causing paddy prices to fall considerably.

The considerable dependence on raw material imports for fodder has made the prices of final products in Vietnam 10-15 percent higher than in Thailand and China, Binh added.

At the same time, supply of fodder on the local market is insufficient to satisfy local demand.

Le Ba Lich, chairman of the association pointed to the fact that Vietnam has to import 35 percent in volume and 45 percent in value out of the total demand of the local market. According to him, Vietnam still lacks a master plan on land for material plantations.

He added that cassava is essential in feed processing and the Ministry of Agriculture and Rural Development should map out specific plans for cassava plantations so as to meet local market demand as well as to support a decrease in import taxes.

Postal service shows potential
 
The domestic postal service has great potential to develop, but first urgent solutions must be found to overcome the existing market difficulties, experts said.

General director of Viet Nam Postal Corporation (VNPost) Do Ngoc Binh said the domestic postal service market has an average growth rate of 10-25 per cent per year, which has attracted the attention of many enterprises that trade postal and express mail services mainly in large cities such as Ha Noi and HCM City.

Viet Nam is now integrating into the world economy, and the postal market would have new chances to develop, he said.

According to the commitments that accompanied World Trade Organisation membership, Viet Nam must open the domestic postal service market this year.

The move would permit foreign-invested enterprises to enter the local market and spark competition, meaning that local providers would have to improve the quality of their services, Binh said.

Viet Nam has 44 enterprises that are licensed to trade express mail services, although many others have provided the same services without licences.

Nguyen Thai Khang, Information Technology editor at the Viet Nam Post newspaper, said many foreign firms were expected to acquire shares at equitised State-owned postal enterprises.

However, local express mail service providers were not prepared to co-operate with other local firms in order to develop, due to a lack of investment and low-quality delivery networks, Khang said.

Luong Ngoc Hai, general director of Viettel Postal Joint Stock Company (Viettel Post), said the existing economic crisis has affected the local postal service market.

Postal firms have not dared to increase their service fees to compete with rivals although the cost of petrol and transport has increased sharply on the market. Instead, they have had to restrict operation costs to reduce losses.

In the future, Hai said local post firms would have to compete with four global express mail service providers: FedEx, UPS, TNT and DHL. These firms would expand their market shares in Viet Nam after the local market opened under the WTO commitments.

Hai said it is necessary to build an association of postal and express mail service providers ahead of time, in order to help local firms improve the quality of their services and compete against their larger rivals.

Nguyen Thanh Hung, deputy minister of Information and Communications, said the ministry would support the establishment of the association. Local firms should carefully consider the advantages and disadvantages of the proposal to succeed in future business endeavours.

Hai also said the State should build a strategy for the development of human resources within the larger scheme to improve Viet Nam's postal services.

Experts warn of investment bubbles

Experts at a conference entitled Bubble Economy: Lessons from Japan last week raised concerns about gold and real estate "bubbles".

A bubble is caused when prices of something – gold, shares or real estate – surge and then investors sell, causing the "bubble" to burst.

Naito Junichi, chairman of the Japanese Credit Union, said Viet Nam's current situation was similar to Japan's from 1990-2000 when the country fell into financial crisis.

Junichi said the Japanese Government curbed shares and real estate prices at an early stage to limit excessive bank credit that could result in a bubble.

Takeshi Hachimura, former senior advisor of Japan International Co-operation Agency at State Bank of Viet Nam said countries could learn from Japan's lesson.

Hachimura said it was time for Viet Nam to find a suitable way for its economy.

He said the country should build an elastic financial system and enhance its currency value.

Management agencies should retain transparency of the banking sector by setting up a bad debts warning and resolution system.

Experts said Japan was actively pouring public investment into banks which were in need of capital. However, Viet Nam should choose merging its best banks to create strong financial institutions. It should also give priority to restructuring.

Tran Dinh Thien, director of the Viet Nam Institute of Economics, said Viet Nam should have an independent agency supervising financial activities of State-owned enterprises.

Textile JSC invests in new products

The 10/10 Textile Joint Stock company has cooperated with its Denmark partner to invest VND300 billion (US$14.3 million) in installing a new production line equipped with German technology in Hung Yen Province.

The investment aims to raise its production capacity from the current 1,000 tonnes to 1,600 tonnes of mosquito nets per month to help the company reduce raw materials from China, Bangladesh and Thailand.

It is expected the new production line will be operational in September this year to create more than 150 jobs. The company's main products include various types of tulle, net, curtains and mosquito nets.

Country set to spend $4m on energy

Viet Nam is expected to save over 90,000 tonnes of oil while cutting its CO2 emissions by more than 1,200 tonnes thanks to a US$4 million project on cleaner production and energy efficiency.

The Ministry of Industry and Trade (MoIT) and the Global Environment Facility will carry out the Clean Production and Energy Efficiency Project from 2012-16, said the MoIT recently.

The project, which was approved by the ministry last year, will be implemented across all 63 provinces and cities nation-wide and include technical assistance on cutting down power use at enterprises, especially in the manufacturing, chemicals, food, beverage, paper, plastic, textiles, brick and ceramics industries. Energy service providers will also receive technical assistance under the project.

Work will also be carried out on building energy efficiency action plans for key industrial sectors, development of energy service providers, and building capacity for program management, monitoring and evaluation.

Initially, the project will focus on key industries that use a lot of energy and can benefit the most from technological upgrades.

Viettel takes official control of EVN

Electricity of Viet Nam (EVN) announced that Viettel Corporation has officially taken over EVN Telecom.

EVN Telecom and its five member companies signed documents to hand over their assets to Viettel.

EVN Telecom took a heavy loss after 16 years as a corporation. However, the small company seems to be valuable. Of all the operational mobile networks in the country, EVN Telecom was positioned nearly at the bottom of the ranking with a narrow wave coverage and limited number of subscribers.

Previously, the Prime Minister signed a decision to allow Viettel to take over EVN Telecom on January, 1, 2012.

Investors sniff at shorter settlements

While domestic stock brokerages wait on a shorter settlement period for securities transactions, some foreign investors are actually arguing against the change.

A representative of Deutsche Bank told the publication Dau tu Chung khoan (Securities investment) that clients were already struggling to pay up on the T+3 date, even before the T+2 date. The Vietnamese stock market was based on the principle that securities and money were transferred simultaneously. If the process were changed, many foreign investors would be dubious.

HSBC has also raised some concerns. The transfer of payments to the Bank for Investment and Development of Viet Nam (BIDV) were to a settlement bank that has been equitised and no longer enjoyed a Government guarantee. In developed markets, the settlement bank was the central bank, HSBC said.

The bank also raised concern about how overnight interest rates would be set handled if payments were made one day earlier.

In the most recent two months, foreign investors have been quite active on Viet Nam's stock market, but that trend might reverse if securities regulators did not satisfactorily address these concerns, the bank said.

Representatives of US-based Citibank also said that foreign investors would not be satisfied as their cash accounts would be debited a day sooner than their securities accounts were credited. Risk management was the most crucial principle for foreign investors, the lender said, and they would hardly accept purchase and payment being carried out on different days.

One possible measure that some depository banks have launched was to allow payments by 9am of the T+3 date. They proposed that the Viet Nam Securities Depository Centre complete multilateral clearing procedures during the morning of the T+3 day so that securities would be released to investor accounts in the afternoon.

"As the Vietnamese market cannot be compared with developed markets, there are differences that investors should accept," said the head of the State Securities Commission's market development division, Nguyen Son. He also tried to soothe concerns over BIDV as the settlement bank, noting that it would bear great responsibility to the Ministry of Finance, the State Bank of Viet Nam and the commission.

Vinacomin calls for coal tax rate cut

The Viet Nam National Coal and Mineral Industries Group (Vinacomin), the country's largest coal supplier, has asked the Government to reduce the tax rate on coal exports.

Vinacomin is calling for the tax rate to be lowered from 20 per cent to 0 per cent due to the steady decline in world coal prices and falling demand.

Coal firms producing lump coal and smaller-sized coal have seen sharp falls in coal export prices, up to 30 per cent compared to last September when tax on coal exports was raised.

In addition, falling global coal sales motivated the call for the export tax cut. According to the Ministry of Industry and Trade (MoIT), many industrial sectors in the region and the world such as producers of paper, cement, fertiliser amongst others, have been buying less coal for production.

During the first four months of the year, Vinacomin sold nearly 13 million tonnes of coal, a 9 per cent decrease compared to the same period last year. Coal exports during the first four months totalled 3.9 million tonnes, a fall of 3.1 per cent over the same period last year.

About 8.4 million tonnes of coal were left in storage unsold as of last month. Coal refinery products account for three fourths of the total, at nearly 6 million tonnes.

$1.4b support package sought for producers

The Ministry of Finance has recommended to the Government a support package worth roughly VND29 trillion (US$1.38 billion) to help enterprises revitalise production in the current economic climate.

Vu Nhu Thang, director of the ministry's Financial Strategy and Policy Institute said the proposed measures not only focus on tax relief but also on public spending, price management and administrative procedures.

Within the package, public spending solutions amounted to nearly VND3.6 trillion ($171 million) that could be used to finance urgent ODA projects, irrigation and infrastructure for rural areas.

Thang said this injection of funds would boost demand in construction and other industries.

In addition, a tax break proposal worth VND25 trillion ($1.2 billion) included a six-month deferment of the value-added tax (VAT) and a 30 per cent corporate income tax reduction for enterprises and labour-intensive firms in the agricultural, textile and garment, and footwear industries.

The ministry estimated the total value of the VAT deferment at VND12.3 trillion ($585 million).

The package also plans to cut land use fees by 50 per cent for businesses in the tourism and service sectors and to sustain last year's lowered fees for businesses in the production sector.

The ministry also proposed to exempt fisheries and salt production enterprises from the business license tax, and to exempt low-income lenders and students from the VAT, the individual income tax and the corporate income tax.

The ministry is also considering subsidising electricity and petrol for off-shore fishermen and households in agricultural production if the prices continue to fluctuate.

Thang said that the proposed support package aimed to stabilise the economy, control inflation and create a favourable investment environment.

Economist Le Dang Doanh said the package would serve as an important remedy in this difficult time and should be realised as soon as possible. However, it would be necessary for the Government and relevant agencies to ensure transparency and accountability throughout its implementation, otherwise enterprises would be negatively affected. Moreover, the procedures of tax reduction and exemption should be simplified so that enterprises could save time and avoid paying unreasonable fees, said he.

Vo Quoc Thang, deputy chairman of Viet Nam Construction Pottery Association, objected that a 30 per cent corporate income tax reduction for SMEs would have no effect.

Instead, he said they needed increased access to bank loans.

Deputy Finance Minister Vu Thi Mai said that if the support package were approved and implemented, the State budget would decrease by VND9 trillion ($428 million).

She said to offset this income decrease, the ministry would be forced to raise taxes and crude oil prices.

Thang said the proposed package would be only a short-term solution and that the current structure should be maintained while a more long-term solution was sought.

Doanh said enterprises should actively seek out their own effective solutions to cut down their production costs, restructure their products and improve their management.

Statistics from the Ministry of Planning and Investment show that more than 15,000 enterprises have failed since the beginning of the year.

Investment Needed To Turn Harvest Local

Of the total 6,600 combine harvesters in the Mekong Delta, foreign machines, mostly from China and Japan, make up a very large portion, dwarfing local counterparts as investment in the domestically-made machines is still modest

“I’ m willing to spend even a half billion dong to own a quality harvester with warranty, rather than buying a cheap one with poor quality,” stated Nguyen Van Tung in Binh Phong Thanh Commune, Moc Hoa District, Long An Province, owner of a Kubota-brand combine harvester.

In recent years, harvesters have become been more and more popular to farmers in the Mekong Delta. However, due to their low quality, assorted components and unsatisfying warranties, consumers have become less confident in the locally-made machines.

According to the Ministry of Agriculture and Rural Development, there are over 6,600 combine harvesters and 4,600 other harvesters in the Mekong Delta, meeting only 40% of the demand for rice harvest. However, over a year to date, other harvesters have been neglected, as farmers now prefer selling paddy right on their fields, and such harvesters cannot satisfy this demand.

Of the total of more than 6,600 combine harvesters, the machines made in China and Japan make up a very large portion, overwhelming the local ones as investment in the domestically-made machines is still modest. Phan Thanh Tinh, rector of the Institute of Agricultural Engineering and Post-Harvest Technology, said: “Rice is Vietnam’s strength, but investment in rice farming in general and in harvest mechanization in particular has yet to receive due attention. Vietnamese farmers have preferred Japanese Kubota harvesters thanks to their high quality, appropriate to local soil, and efficient after-sale services. But I think this is something within our reach.”

Vietnam’s combine harvester manufacturing technology is estimated at only 60-70% of the world’s average, said Tinh. Therefore, if quality is taken into account, Vietnamese machines are much inferior to those produced in Japan and Korea, and even China.

In fact, Vietnam has many guidelines and policies on promoting investment in and use of domestically-made combine harvesters. For instance, the Prime Minister has issued a decision on amendments of and supplements to the supporting policies aimed at reducing post-harvest losses. The State will offer loans equal to 100% of values of locally-produced machines and equipment with local trademarks and the localization rate of over 60%. Also, interest is 100% free in the first two years and is 50% in the third year. However, due to the low quality of machines and unsatisfied warranties, farmers are willing to pay twice or even thrice to get foreign machines.
Tinh said: “Private enterprises have also engaged in the manufacturing of combine harvesters. However, because of their limited investment and sub-standard production lines, the machines they make have low quality.”

For consumers to use domestic combine harvesters, there must be appropriate investment policies and several pioneers in this field. Ngo Van Hung, owner of Hiep Hung, a combine harvester manufacturer in Binh Phong Thanh Commune, Moc Hoa District, Long An Province, said: “Our harvester manufacturing facilities have made gradual improvements, but are always left behind, or more exactly, lagging behind the overall development of the country. Investment policy is a must to encourage investment in this area. It is necessary to have an enterprise to undertake this task.”

Tinh said: “Compared to other types of investments, investment in agrimachines generates low profits, so it is not attractive enough to investors. Therefore, the State should have special support for enterprises which invest in combine harvester manufacturing research, such as special loan incentives or tax exemptions.”

Along with investment in production, development of maintenance facilities, replacement of genuine accessories and machine components is also an important requirement in the strategy for investment in agrimachines. By doing this, Vietnamese manufacturers will certainly win back the local agrimachines market, said Tinh.

Pork, chicken prices in reverse adjustment

From Monday all kinds of pork enlisted in the price stabilization program in HCMC will be cut by VND1,000-3,000 a kilo, while garden chicken prices in the same program will be increased by VND4,000 per kilo.

The price adjustments were the result of a meeting between representatives of related companies and the city’s Department of Finance last Friday.

As such, corporate participants in the price stabilization program will cut pork prices to between VND72,000 and VND93,000 a kilo from Monday.

The price cut of pork at present is reasonable as the price of live pigs has remained at VND45,000 per kilo recently as cited by Vissan general deputy director Tran Tan An.

Meanwhile, garden chicken prices will be increased up to VND59,000 a kilo from Monday. According to Pham Thi Ngoc Ha, director of San Ha Co. Ltd, the recent price spikes of fuel, salaries and packages have caused garden chicken meat prices to increase.

SJC inaugurates jewelry factory

The factory named SJC Tan Thuan is worth VND132 billion in investment capital, including VND70 billion for construction and VND62 billion for equipment purchase. Covering 4,500 square meters, the jewelry factory consists of four specialized workshops ensuring a close production chain with support of modern machinery and equipment.

SJC Tan Thuan Jewelry Factory helps boost the production output to 50,000 taels of gold bar a day and 350,000-500,000 jewelry products a year.

200 firms face post-clearance check

HCMC’s Department of Customs has plans to launch post-clearance checks on 200 businesses this year to fight trade frauds.

Speaking at a dialogue with entrepreneurs in the city recently, Nguyen Anh Tuan, head of the post clearance checking unit under the department, said the agency would look at firms without examination in the last five years, having high export and import revenue or involved in high-risk items.

Customs officials will look into accounts and documents related to cargo cleared in the last five years. If possible, the agency will check producers and distributors to compare with information on declarations.

The examination targets to evaluate law compliance of the enterprises as they are usually prioritized with green channel declarations. The move will help ensure fairness among businesses, Tuan said.

Customs agencies will give notice to firms before beginning checks so businesses can prepare all documents and cooperate with inspectors, Tuan added.

Since the Customs Law took effect in 2001, local customs officials have uncovered 514 clearance rule violations with VND82 billion worth of taxes collected.

However, the number of firms checked makes up just 1.9% of the total 25,800 exporters and importers in the city, Tuan commented.

Tuan also said that the checks are a chance for businesses to review documents given the instructions of customs officials. Firms are advised to be honest in declaration, ensure full and scientific book keeping to facilitate supervision.

Employers should also check all documents themselves to detect and fix shortcomings before officials’ examinations.

Retail market sees many players stage exodus

Local retailers are experiencing a tough time as statistics show that the distribution and retail sector saw the most enterprises go bust in the first quarter.

HCMC is evaluated as a market with strong purchasing power. Still, enterprises in the city are now facing a dreary business situation.

Multiple shops along the fashion streets such as Hai Ba Trung, Le Van Sy and Nguyen Trai are offering discounts of up to 50-70%. The similar situation occurs at the city-based shopping malls like Parkson, Crescent Mall and Now Zone.

Despite the many promotion programs to stimulate consumption, visitors to commercial centers are sparse.

Even at the peak of the summer sales, Vietnam Fashion Co., known for the brands Ninomaxx and Maxxstyle, is offering an 80% discount to sell off products and fold up some outlets.

Meanwhile, in the Vinatex Mart supermarket system, multiple fashion brands are providing discounts to lure customers.

Nguyen Thanh Nhan, deputy general director of Co.opMart supermarket chain, said clothing products recorded the lowest consumption compared to other items sold at Co.opMart although many enterprises had applied promotion programs.

He explained consumers now tighten their purse strings for essential goods given the economic hardship, causing great difficulty for fashion retailers, with many of them having dissolved.

Electronic appliance retailers are also struggling with shrinking demand. Almost all home appliance shopping centers have launched promotion programs since the year’s beginning, but the market has not improved much.

Analysts indicated that consumers are cutting expenditures due to the economic woes and high inflation, sending retail shops and supermarkets into the tailspin.

As a result, the retail market is witnessing departures of many brand names. Experts said this is a challenging time for retailers, and those lack competence and experience will be eliminated.

The fact that Nhat Nam Joint Stock Company has recently closed Fivimart Phu My Hung, its final supermarket in HCMC, attracts wide public attention as this retailer is still developing well in the northern market.

Vu Thi Hau, deputy general director of Nhat Nam, turned down the rumor that her company was going bankrupt, explaining the supermarket was closed because the land rent term had expired. Still, she admitted doing business in HCMC is far from simple give the rigorous competition here.

Prior to Fivimart, Satra Bau Cat supermarket operated by Saigon Trading Group was closed in November last year due to sales slump.

In addition, many small-scale home appliance centers have switched to other business fields. Even the large electronic appliance retailer like Best Carings in District 7 has also folded up business, following the bankruptcy of WonderBuy and closing of Loc Le and Vietnamshop.com.

Government suspends import of used machinery    

The Government has approved a Ministry of Science and Technology proposal to suspend import of second-hand machinery, equipment and production lines as they are outdated, of low quality and harmful to the environment.  

The ministry is assigned to review and evaluate the quality control mechanism for imported machines, equipment and production lines based on actual requirements, according to a document sent by the Prime Minister to relevant ministries and agencies last week.

Ministries and agencies concerned should review the list of potentially unsafe items and revise it to include imported machines, equipment and lines that need to be checked upon arrival in Vietnam, and should promptly issue import standards for those items.

The suspension of old-machinery imports is ascribed to the fact that numerous factories in other countries have shut down, thus discarding lots of outdated machines, equipment and technologies. In China alone, around 2,000 firms have stopped production, throwing away old technology and machinery, said Nguyen Phu Cuong, deputy head of the Science and Technology Department under the Ministry of Industry and Trade.

So far, there have been no records on imports of used machinery and technology from China, said Cuong.

He described the decision to halt used machinery and technology imports as a timely policy move, citing concerns that import of second-hand, energy-devouring and -polluting machinery will turn Vietnam into a landfill for discarded technologies.

“The Ministry of Industry and Trade used to issue a document restricting old machinery imports. Now the Government has taken stronger action,” said Cuong.

Old machines and equipment that are imported for use in a short while will pose a major threat to the environment when they are no longer operational, Cuong stressed.

Over the last 15 years, outdated equipment and technology have been steadily replaced by modern ones. Only small-scale production facilities are still using obsolete technology that consumes much energy and causes environmental pollution, said Cuong.

To remedy this situation, the country has rolled out programs encouraging cleaner and energy-saving production to cut energy costs and boost production efficiency.

Government urged to step up efforts to help Vietnamese business
    
The Vietnam Chamber of Commerce and Industry (VCCI) said that the Government should introduce strong measures to lower business expenses in light of falling demand.

The report, recently submitted to the Government by VCCI at meeting for April, pointed out a number of pitfalls in the economy, but also suggested some solutions.

Vu Tien Loc, Chairman of VCCI, said that there were a number of bad signs in the nation's economic indicators, such as declining profits and revenues, mounting inventories, along with decreased productivity. The labour market also cooled off, he said.

He added that, during 2011 and the first fiscal quarter of this year, 8.4% of businesses have either declared bankruptcy or ceased operations.

He did point out that the failure of businesses, although unfortunate, is inevitable and natural in a market economy. "In developed countries around 25% to 30% of businesses fail within the first three years. This number might be higher in Vietnam because of global financial difficulties and difficulties in competing on the international level," he said.

The report indicated that, while many of the business failures were due to losses, others could be attributed to restructuring.

Of the businesses that were forced to close their doors, 9.2% were domestically run, while just under 2.6% were foreign-invested.

The VCCI explained that FDI firms have certain advantages, such as more stable export markets, better access to capital and a skilled workforce.

Still, during the first quarter of this year, over 18,700 new enterprises were set up, indicating that, despite economic difficulties, many businesses are able to continue and even expand.

Many of the difficulties faced by businesses, according to the report, come from rising costs and inventories, with decreased access to capital. Some of the industries hardest hit have been real estate, construction, processing, manufacturing, trade, and transportation and logistics.

Possible solutions from the VCCI report include the Government creating policies that would aid the production sector and help Vietnamese businesses find outlets for their products, especially export markets.

The VCCI report also underscored the need for The Government to hasten its roadmap to lower corporate income tax rates to 20%, from current 25%.

New fees, including congestion charges should not be applied for presence, and a lowering of trade union fees were also on the list of policy improvements.

Although the VCCI report acknowledged that the issuance of Government bonds and treasury bills could be effective tools in increasing the liquidity of banks, it could also lead to capital shortfalls for enterprises and may not help bring down interest rates concurrently with the inflation rate.

The agency proposed that Government set up a fund for small and medium-sized enterprises to improve their access to credit.

Vietnamese labour market looking up    

The number of jobs created last quarter was higher than expected; due to the Governments policies to bolster certain sectors, said Dang Quang Dieu, Director of Vietnam General Confederation of Labour's Institute of Workers and Trade Union.

Dieu predicted that the second quarter will be difficult for many enterprises. “However, because the Government has made certain essential adjustments in economic policy, such as reducing interest rates, extending categories of loans and seeking ways to help the real estate market, more businesses have access to credit. This, in  turn, helps production. By the third quarter we should see a rebound in the job market," he said.

Statistics released by the Ministry of Labor, Invalids and Social Affairs showed that some 12,000 enterprises, most of which operated in industrial and processing zones, were forced to stop production, many even going bankrupt in the first quarter, leaving about 240,000 workers unemployed or underemployed.

Meanwhile, though food price over the last months has remained stable, the cost of living is still high due to significant increase in prices of petrol and other essential goods.

Dieu pointed out the differences between the labour markets in the north and the south of Vietnam.

“While losing a job may not be as big a problem for workers in the south, it is normally considered catastrophic for northerners. The reason is that in the south there are many more opportunities in the industrial zones of HCM City and surrounding provinces," he said.

Dieu also emphasised the importance of support for the unemployed, as well as the importance of people who are out of work to understand current policies such as unemployment insurance and other available benefits.
 
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