Last update 5/16/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 16/5
Blue chips send shares tumbling
 
Profit-taking continued during yesterday's session, with shares ending in the red at lower trading value.

On the HCM City Stock Exchange, the VN-Index shed 3 per cent, finishing at 455.65 points.

Market value decreased by 20 per cent compared to Monday's level, totalling nearly VND1.6 trillion (US$76.1 million) on a volume of nearly 97.2 million shares.

Only Sacombank (STB) amongst the 10 leading shares by capitalisation added 1.7 per cent, which failed to lift the index as the other nine stocks tumbled. Particularly, the largest share – Vietcombank (VCB) – along with Vietinbank (CTG) and insurer Bao Viet Holdings (BVH) plunged to floor prices.

The VN30 tracking the bourse's 30 best stocks also lost 2.5 per cent to 522.90 points.

On the Ha Noi Stock Exchange, the HNX-Index slid 2.6 per cent, standing at 76.81 points. Losers outnumbered gainers by 268-37.

Around 78.2 million shares worth a combined value of VND806 billion changed hands, dropping 17.7 and 14.5 per cent against the previous trading day's figures, respectively.

The most heavily traded code was again Habubank (HBB) with 7.7 million shares changing hands.

A few days ago, there was information that Viet Nam Electricity planned to increase electricity rates by 5-10 per cent. "This is one of the factors that has made investors more cautious recently, especially when the pressure of profit-taking becomes really strong after a ‘hot' recovery," commented Kim Eng Securities Co analysts.

Meanwhile, according to Bao Viet Securities Co analyst Nguyen Xuan Binh, the correction could last for more than one month. "Investors may sell shares in their short-term portfolios when the indices turned green back," he wrote in a note.

Saigon Securities Inc analysts stated that the market would soon rally. "However, the rally will not retain if there is little support."

While the market needed more supporting information, yesterday's data about widening the cap on lending rates was not strong enough to give a boost.

Garment firms trying on locals for size

Local sources are to meet local textile garment firms’ material needs.

Dinh Vu polyester fibre plant in northern Haiphong city’s Dinh Vu Industrial Park, developed by Petrochemical and Textile Fibre Joint Stock Company (PVTEX), is one local firm to cash in as it made its first batches of polyester synthetic fibre, the first of its kind made in Vietnam, in late 2011.

Though still in the test run period, from December 2011 PVTEX has sold over 20,000 tonnes of fibres and yarns through competitive pricing.

Though the Dinh Vu plant was not officially up and running, some businesses under Vinatex began to use the plant products, according to Vinatex’s deputy general director Le Tien Truong.

As scheduled, in 2012 the Dinh Vu plant will turn out 150,000-175,000 tonnes of fibres meeting 40 per cent of the garment textile sector demand.

In 2011, local supply sources could fill just 30 per cent of local demand for fibre, tantamount to 120,000 tonnes against 450,000 tonnes in total actual demand. Hence, textile firms needed to offset the shortfall with materials imported from Taiwan, Korea and India at $1.3 billion.

Fibre import value in the first quarter of 2012 came to around $350 million, down 2.4 per cent in volume and 13 per cent in value against the same period in 2011.

“If the Dinh Vu plant runs at its full capacity of 175,000 tonnes of synthetic fibre products per year, its production alone can help the textile and garment sector save at least $350 million in 2012,” said Vietnam Textile and Apparel Association (Vitas) chairman Vu Duc Giang.

Textile and garment input materials - raw cotton and fibre - chiefly relied on import sources, said Viet Thang Garment Joint Stock Company director Le Nguyen Ngoc, citing that skyrocketing global fibre prices in the first half of 2011 coupled with the volatile dong-dollar exchange rate cast a big dent in firms’ profits.

“More supply from local producers will help firms take the initiative in production and in negotiating export contracts with foreign partners. This will help sharpen the sector’s competitiveness,” said Ngoc.

Nam Dinh eyes $120m fibre plant

The Viet Nam National Textile and Garment Group (Vinatex) will join hands with Japan's Itochu Corporation to build a modern US$120 million fibre plant in northern Nam Dinh Province.

Construction is scheduled to start soon in the provincial Bao Minh Industrial Zone and is slated for completion next year, creating 3,000 local jobs, Vinatex announced on Thursday.

"The plant will produce the highest quality of fibre to better meet orders for quality garment products in Japan, South Korea and the US," Doan Doan Duc, from Vinatex, said.

He added that the plant had a designed capacity of 40,000 tonnes per year.

With charter capital of $2 billion, Itochu is now one of the largest economic groups in Japan.

It operates in the fields of mechanical engineering, textiles, chemicals, gas and oil, energy, food, insurance, finance, construction and real estate.

"Establishing a partnership with Itochu will bring great benefits to Vinatex, particularly in accessing the Japanese market," Duc said.

The partnership would also help further strengthen Vintatex's relationships with other Japanese companies and promote its exports, he added.

Japan is currently the third largest importer of Vietnamese garment and textile products after the EU and the US. Last year, Viet Nam's garment exports to the market hit $2 billion.

Delta boosts tra fish stock quality

The Research Institute for Aquaculture No. 2 has handed over 101,000 mature tra breeder fish to eight Cuu Long (Mekong) Delta provinces and Can Tho city as part of efforts to improve the quality of tra stock in the region.

Vinh Long was the first province to benefit, receiving 10,000 breeder fish.

Pham Thi Thu Hong, head of the province's Sub-department of Fisheries, said her agency has in turn handed over the fish to local breeding centres.

"We have also transferred breeding techniques to the centres and make regular checks to ensure good quality tra fry are supplied to farmers," she said.

To sustain quality, breeder fish are only allowed to breed twice a year, she said. Each fish has a tag carrying its age, place of breeding, and other details.

The origin of fish is soon going to become an export requirement.

Pham Truong Yen, deputy director of the Can Tho Fisheries, Plant and Animal Breeding Centre, said his agency got 1,000 fish weighing an average of 1.1kg each from the institute this year.

The new stock would gradually replace the city's existing breeder fish, which have degenerated, he said.

The programme is part of a 2010 Ministry of Agriculture and Rural Development programme to create high-quality breeder fish stock in the delta.

The fish handed over to the provinces would meet about 60 per cent of farmers' fry requirements in the next few years, the institute said.

They need 1.8-2.4 billion fry every year.

Nguyen Van Sang, deputy head of the institute, said it would hand over 30,000-40,000 more fish to the provinces each year for the next three years.

To improve the quality of the breeder stock, provincial fisheries sub-departments also regularly provide farming households training in farming tra fry and preventing diseases.

The Can Tho Fisheries Sub-department has also instructed tra breeding farmers to adopt global good agriculture practices, or GlobalGAP.

Rice farmers enjoy benefits

From July 1 this year, the Government will provide subsidies to rice farmers if their crops are damaged due to natural disasters, in addition to their regular annual subsidies.

This is regulated in Government Decree No 42/2012 ND-CP signed by Prime Minister Nguyen Tan Dung on May 11.

Under the decree, the Government will subsidise 70 per cent of the cost of fertiliser and pesticides when losses top 70 per cent; or 50 per cent when farmers lose from 30-70 per cent of their crops.

In addition, the Government will also pay for 70 per cent of the cost of reclaiming fallow land, or rehabilitating land for wet rice cultivation.

According to the decree, the Government will provide rice seed free of charge to farmers in the first year in areas which have been reclaimed, while supporting 70 per cent of the seed price for the first rice crops on rehabilitated land.

The Government is also committed to supporting insurance costs for rice production in accordance with Vietnamese law.

The decree also regulates that the Government will subsidise VND500,000 (US$25) per hectare per annum for land used specifically for cultivating wet rice, and VND100,000 ($5) per hectare per annum for other types of rice – excluding terraced rice fields claimed by the farmers themselves.

The decree calls on relevant authorities to encourage rice cultivation rather than other crops, and to urge people to reclaim fallow land for wet rice cultivation.

It also prohibits any activity that causes pollution, degrades or distorts the land which would make it infertile.

Project bids to protect medicinal plants

The nation's first project to protect plants that rural communities rely upon for traditional medicine is being implemented in the northern province of Bac Kan.

The project is carried out by TRAFFIC, the wildlife trade monitoring network, which is a joint effort of the World Wide Fund for Nature (WWF) and the International Union for Conservation of Nature (IUCN).

The project has been implemented jointly by the Bac Kan Forest Protection Department (FPD) and the People Resources and Conservation Foundation (PRCF) with support and funding from the Critical Ecosystem Partnership Fund (CEPF).

The plants targeted by the project were threatened by unsustainable harvesting and habitat destruction, according to TRAFFIC.

Located in the South Xuan Lac Species and Habitat Conservation Area, the project will abide by the FairWild standard, which assesses the harvest and trade of wild plants against various ecological, social and economic requirements.

The standard's guidelines have been drawn up to ensure the sustainability of wild medical and aromatic plant harvesting.

South Xuan Lac was chosen for its unique floral composition, local communities' use of medicinal plants and evidence of uncontrolled harvesting.

TRAFFIC will help train local workers in wild plant resource management, harvest monitoring, sustainable collection and value addition processing techniques.

"It is important to develop strategies that ensure the sustainable use of natural resources and to ensure the local collectors whose income depends upon wild harvested plants gain greater economic security and a fair and equitable return from the sale of their product," said Naomi Doak, Programme Coordinator of TRAFFIC's Greater Mekong Programme.

Hoang Van Hai, chairman of Bac Kan FPD, said the project would help local villagers manage their natural resources.

"It will also help to stabilise local household income and reduce pressure on natural resource harvesting," he said.

According to TRAFFIC, there are an estimated 50,000-70,000 plant species that are traded and used for the creation of medicinal products throughout the world, the majority of them obtained through wild collection.

It said wild plant species formed the foundation of healthcare practices throughout much of Asia, particularly traditional medicinal practices.

In Viet Nam, growing demand and habitat destruction are putting wild plant populations at risk and negatively affecting the health and economic livelihood of rural communities that depend upon the sale and use of these plants.

Additionally, increasing use of traditional medicines in China had seen vast quantities of plants sourced from Viet Nam transported to the Chinese market, putting further strain on wild plant populations, the release said.

In 2008-10, TRAFFIC successfully implemented a FairWild Standard medicinal plant project in Cambodia that established a model for sustainable resource use of two medicinal and aromatic plant species within a community protected area.

Beef project raises farmers' incomes

A project to promote sustainable beef production by the Mong people in remote parts of the northern province of Cao Bang was reported to have achieved positive initial results, according to a workshop held in Ha Noi on Thursday.

The project, which started in early 2011, drew the participation of over 500 farmers and spread across nine communes in Cao Bang.

With a total budget of over US$261,000, the project was implemented by the Le Thanh Construction Company in partnership with the Centre for Agrarian Systems Research and Development with support from the Viet Nam Challenge Fund.

It entailed engaging poor ethnic families in cattle-breeding interest groups, applying a basic traceability system for the beef, and building a professional slaughterhouse which included a waste water treatment system and a biogas production area.

As of April this year, the project had purchased over 300 cows and produced more than 21,000 kilograms of beef for high-end markets, including Ha Noi.

The project has an exclusive sales arrangement with the Rural Food JSC in Ha Noi and recently signed a contract with Big C supermarkets to sell beef in stores across Viet Nam.

According to the project organisers, the initial results were promising with strong sales volume growth, and a Mong beef brand was being established.

The Le Thanh Construction Company said participating farmers would see at least a 15 per cent increase in income because they could sell their beef at a premium.

Government invests in rural infrastructure

The Ministry of Agriculture and Rural Development has finalised plans to develop part of a US$138 million rural infrastructure project in 15 northern mountainous provinces, according to a ministry source.

Construction on the sustainable development project was slated for the 2011-16 period. A total of VND250 billion (US$12 million) will be disbursed this year.

Of the project's total investment, $108 million is funded by the Asian Development Bank and $30 million from the Government.

The project's main goals are elimination of hunger eradication and poverty, improvement of rural infrastructure, promotion of public management of infrastructure, and enhancement of local authorities' power in each province, district and commune.

Living conditions of the poor are expected to be improved significantly when the project is completed.

HCMC plans to develop renewable energy

Ho Chi Minh City plans to promote the development of renewable energy resources in its ‘Green Energy Programme’ by 2015.           

According to the city’s electricity development plan approved by the Ministry of Industry and Trade, HCMC has a high potential for developing renewable energy, especially solar power.

As seen, the average sun time is around 100-300 hours a month, creating advantageous conditions for the city to develop solar power successfully.

Despite the high potential, only few investors have shown an interest in renewable energy projects due to low economic returns, and the city budget is also not enough to independently develop this energy resource.

HCMC now has only about 3MW of power output from renewable energy from the Go Cat waste dumping site in Binh Tan District and the solar panels installed in Thanh An Commune of Can Gio.

The city plans to build two other plants at Dong Thanh and Phuoc Hiep 1 garbage dumps in Cu Chi District by 2015.

As per the ‘Green Energy Programme’, HCMC will strive to increase the consumption of renewable energy to more than 1 per cent of the total electricity demand, accounting for about 48MW, by 2015.

At present, several households, restaurants and hotels are equipped with geysers. However, only 3,400 of them use solar powered geysers, which save 11 million kWh of electricity a year. As a result, the city has set a target to increase this number by 3 per cent each year.

From 2007-2011, the city had implemented several measures to save over 1,000 million kWh of power, accounting for 1.2 per cent of commercial electricity output. The city now targets hiking this number to 2 per cent by 2015.

HCMC authorities have instructed relevant departments to strengthen propaganda and call on residents to restrict usage of unnecessary electric devices during peak hours. They should have a policy to assist low income families to install solar power geysers.

Mekong delta farmers despair as Chinese traders dictate terms

Japanese sweet potato growers in the Mekong delta provinces are facing difficult time as prices have tumbled by 70 per cent compared to the previous time, because Chinese traders suddenly refused to buy the farm produce. Once again, this is an alarm call on cultivation practices that have no official endorsement from the Department of Agriculture and Rural Development.

Last September, many farmers in the Mekong delta region, especially in Vinh Long Province leased their fields for Japanese sweet potato cultivation for around VND40-60 million per hectare (US$1,920-2,880), even though this is the best time for winter-spring rice planting with direct growers earning VND500 million a hectare.
Farmers despair as Japanese sweet potato prices fall in the Mekong delta (Photo: SGGP)

Subsequently, the area for sweet potato planting has gone up substantially, from one hectare to 30 hectares in just one year.

Farmers in the province now sell their crop for a mere VND300,000 a quintal compared to VND1 million a quintal last September. In Tan Thanh, Thanh Trung, Thanh Dong, Nguyen Van Thanh and My Thuan Communes, huge sweet potato fields are now over-ripe but farmers are refusing to harvest, as the price is far too low.

Farmer Nguyen Van Sau from Tan Thanh Commune said farmers have earned only VND10 million from the crop while they spent more than VND12 million, facing an imminent loss of VND2 million.

The sudden drop in sweet potato price could have resulted from price manipulation by Chinese traders.  When the price of Japanese sweet potato was high and bought by Chinese traders, many farmers switched their vegetable and rice areas to growing the crop, despite warnings by agriculture officers who disagreed with following new and unknown trends.

Most of the fields in Co Do District at the moment are under Japanese purple sweet potato cultivation, to sell to Chinese traders.  Ngo Thanh Son, head of the Department of Agriculture and Rural Development in Co Do District in Vinh Long Province, said authorities are very worried about the increase in area for sweet potatoes as this will destroy the local planting process.

Son added that more than 600 hectares of rice growing area has been transformed into sweet potato fields, most of which were leased to farmers from Dong Thap and Vinh Long Provinces. Agriculture officials have told farmers not to follow the new trend because it is totally dependent on Chinese traders.

Vietnamese people favour sweet potato varieties with white or beige flesh more than the Japanese kind. Consequently, farmers do not plant so much purple variety; however, when Chinese traders pushed up the prices of the farm produce, farmers switched to growing almost 80 per cent of their area with it.

Later, when farmers harvested bumper crops, unscrupulous Chinese traders depressed the price and farmers took the flak, as the domestic market consumes very little of this variety.

Vo Van Theo, director of the Bureau of Agriculture and Rural Development in Binh Tan District in Vinh Long Province, said no enterprise in the country purchases and exports this farm produce except Chinese traders who completely decide prices and quantity.

It also reveals the loophole in law where Chinese traders understand clearly about potato growing areas in the Mekong delta; consequently, they lay down the law and terms.

Son Van Luan, head of Tan Thanh Cooperative petitioned the agriculture agencies that they should plan areas for growing sweet potatoes.

Farmers, businesses on tangent in Mekong Delta

Farmers and businesses in the Mekong Delta have serious differences in assessing farm produce prices and payment terms, with each accusing the other of breach of contracts or trying to squeeze prices.

According to a survey made by Vietnam Chamber of Commerce and Industry (VCCI) in Can Tho City, farmers lament that businesses usually find a pretext to squeeze prices.

In response, businesses say that farmers regularly break contracts and don’t stick to initial negotiations. For instance, they use stimulants to rapidly increase weight of sea foods, vegetables or fruits during harvest time. Farmers also fail to follow proper technical processes to ensure quality standards of farm produce.

Nguyen Huu Duyen, chairman of Chau Phu pangasius fish cooperative in An Giang Province, said that there is an imbalance in trade relations between farmers and businesses.

Specifically, businesses don’t leave a deposit for big contracts to buy pangasius and pay in cash. The payment is usually made one month to one year after businesses buy fish. During that period, farmers still have to pay bank interest, leading thousands of pangasius fish breeders to go bankrupt as has been the case recently, said Duyen.

Nguyen Van Nhut, deputy director-general of Nam Viet Company in An Giang Province, said that it is not feasible and rather risky for businesses to leave an advance deposit.

Nguyen Phuong Lan, head of the legislative division of VCCI in Can Tho, affirmed that breach of contract between farmers and businesses has increased. Local authorities and related associations should now help in reconciling trade relations between farmers and businesses.

HCM City shops unable to lure customers

These days almost all shops in Ho Chi Minh City seem to be in the doldrums and unable to attract many customers, regardless of inviting offers like ‘Heavy Discounts’ or ‘Real Bargains’ displayed on their front windows.

A quick glance around shops in Diamond Plaza, one of the most luxurious department stores in the city, shows many shops with ‘Discount’ signs. One of them is the high-end Coach hand-bag shop, which displays a poster saying ‘50 per cent off’.
A banner saying ‘50 per cent off’ outside a fashion shop on Nguyen Trai Street in District 5 (Photo: SGGP)

Any customer entering the store receives a warm welcome and personal guidance from its sales staff, who try to lure customers to buy their products.

However, this cannot change the mind of shoppers who merely respond by a shake of their head. Patrons still refuse to purchase their merchandise. One of the shop assistants sadly shared that previously, with such a high discount, the store was full of people buying things; but this year, even window shoppers are rare, let alone real customers.

A similar situation can be seen at the Parkson Centre on Le Thanh Ton Street, especially in the clothing area. According to Lee In Kum, a Korean- Vietnamese salesperson, these days he has not been able to sell even a single shirt in his 7-hour shift. If lucky, they might have one or two customers per day, he said. Only Vietnamese-brand stores like N&M or Ninomaxx with affordable prices have a slightly better edge.

While normally shops just launch their promotional campaigns on special occasions such as Valentines Day, International Women’s Day, Reunification Day, etc., but now they run discount programmes in the hope of attracting more customers. Unfortunately, despite their efforts, things seems to worsen and shoppers are still nowhere in sight!

A discount sign ‘Jeans for VND90,000 ($4.3), T-shirts for VND50,000 ($2.4), Shirts for VND99,000 ($4.8)’ displayed on the front window of ‘The Blue Clothing Store’ on 107B Go Dau Street in Tan Phu District, seems to have no appeal in drawing more customers into the shop.

Tran Le Thanh Tam, a shopper at the store, reluctantly gave back the dress she loved so much as she could not afford the price of VND280,000 ($13.4). Likewise, the price of jeans she liked was more than VND300,000 ($14.4), relatively high for her. After looking through everything on the shelves, she was able to choose two shirts for VND50,000 ($2.4) each and a pair of jeans for VND120,000 ($5.76).

Tam, as well as many other consumers nowadays in Ho Chi Minh City, thinks that it is wiser to purchase adequate food and clothes rather than luxury items.

Another popular method of marketing at this moment among stores is the vague discount conditions. For example, at a sports clothing store on Le Van Sy Street in Tan Binh District, there is a sign saying ‘40 per cent off’.

According to its shop assistant, however, only when purchasing two items can shoppers have that discount rate in the store.

Or at Hong Shoe Store on Truong Vinh Ky Street in Tan Phu District, the attractive discount rate of 20-40 per cent off is no longer applied although the notice is still in full display. When asked why such false information is put out right in front of the shop, its manager explained that they have not had time to take it down.

This action, which greatly lowers consumer trust on promotional campaigns, seeing the current grave economic crisis in Vietnam, are among important factors that have reduced consumer confidence in the first few months of this year.

Enterprises struggle with high inventory

Economic difficulties have not only hit manufacturing and real estate companies in the first four months of this year, but also distributors and service companies who saw their inventories rise substantially.

According to Nguyen Nam Hai, Deputy Minister of Industry and Trade, industrial manufacturing and trade showed signs of recovery in April and inventory of some products dropped in comparison with that in March, but in general, industrial manufacturing and trade remained unstable and barely escaped a difficult situation. Purchasing power tended to rise in April but at an insignificant pace and domestic market stayed subdued. Retail sales and services only increased by 6.1 per cent in April.

From an enterprise point of view, Nguyen Huu Toan, deputy director-general of Saigon 2 Garment Joint Stock Company, garment buying power has been extremely slow and the company sales have dropped by 30-40 per cent, as against the same period last year. The number of orders for uniforms from regular buyers has also fallen drastically.

One deputy director-general of a supermarket said that his storehouses had not seen such high inventory as this year. According to business plans, the supermarket had stockpiled just enough goods for the first quarter of the year. However, although April was over, only 60-70 per cent of the products, including clothes, footwear, household goods and household appliances, had been consumed.

According to Cao Tien Vi, chairman of Saigon Paper Joint Stock Company, the economic crisis has forced consumers to reduce spending which has directly affected manufacturing by businesses. In order to balance production and purchasing power, as well as to prevent high inventory, each enterprise should make production plans more carefully. Saigon Paper kept its inventory at a fairly high level in previous years to deal with the situation in which buying power increased unexpectedly. However, the company adjusted its business strategy lately and reduced its inventory to the lowest level, as firms have to bear more loan interest and expenses with a longer inventory period.

Mr. Toan said that Saigon 2 Garment has gradually reduced its production since the end of last year. It only produced the exact amount that its buyers ordered, to control inventory.

Some other companies who did not foresee an increasing drop in purchasing power have struggled with high stockpiles. They had to choose to barter their products like giving free items to customers or offering a discount of 70 per cent.

A director of a garment company said that it is necessary to offer high discounts for two product groups which have a time limit, like fashion clothes and processed foods. A discount level of 70-80 per cent was normal and firms were even able to offer higher discount to clear their storehouses and reclaim their capital, instead of paying more rent for storehouses. At some supermarkets, some products sold at cost price or even at a loss.

However, not every company can reduce prices as they have to consider collecting enough money to maintain their operations. Besides, they might violate the law if they offer extraordinarily high discounts.

Huynh Van Minh, chairman of the HCMC Union of Business Association, said that it requires macro policies to help enterprises to overcome the current difficult situation. The government should remit value added tax for enterprises to help them reduce their costs, increasing competitiveness.

Mr. Vi said that value added tax directly relates to consumers. Thus, if the government remits tax, purchasing power will be stimulated. He also added that tax remission should be applied for a long time to bring back optimum efficiency.

Developers and buyers snub low-cost condos

Developers are indifferent to housing projects for low-income people and factory workers due to capital shortages and slow capital recovery while buyers are not keen on low-cost homes for insufficient infrastructure.

Nguyen Xuan Chinh, head of the Hanoi Authority for Industrial Parks and Export Processing Zones, was speaking at a meeting on a housing development program and low-cost housing projects held by the government of Hanoi City last week.

Housing projects for low-income people and workers are suffering low occupancy, said most business executives at the meeting. Many investors are not keen on rolling out their projects given high volumes of unsold condos and slow capital recovery.

In particular, the CT19 project worth VND179 billion in Viet Hung urban area has 515 apartments but only 270 units has been handed over to buyers so far. The VND121 billion CT21 project, also in Viet Hung, has got approval from the city government to sell 178 of a total of 300 units.

Meanwhile, the project in Dang Xa has only sold 650 out of a total of 950 apartments, according to a report of the Hanoi Department of Construction.

Tran Duc Son, director of Hanoi Housing Management and Development Co., noted the biggest problem lies in installment payment delays after houses have been handed over to customers.

Citing 52 apartments for families of wounded soldiers in Viet Hung as an example, homebuyers have moved in for nearly a year, but have yet to pay a single installment. The investor is struggling to recover the huge capital poured into this project.

Houses for rent to workers are facing the same fate. It is expected 1.6 million square meters of housing for workers will be developed in Hanoi from 2011 to 2015 but so far enterprises have registered to build 536,000 square meters.

The housing project in Phu Nghia Industrial Park, Chuong My, Hanoi has had one of the five planned buildings put into operation, but occupancy is low. Despite loans equivalent to 70% of the project’s cost and an annual interest rate of 3.6%, the project owner is still in trouble.

Enterprises are discouraged to develop condos for workers by a long time of capital recovery and multiple risks associated with such projects. Workers find high rentals unaffordable, said Vu Ngoc Dam, head of the Housing Department Division under the Hanoi Construction Department.

Multiple housing projects for low-income people and students in Hanoi are facing difficulties and have asked for loans from the State budget, said the Hanoi Department of Construction.

For instance, Vinaconex Xuan Mai, the owner of the CT02 project worth VND565 billion, has requested a VND300-billion loan to implement the project on schedule and timely hand over 900 apartments to customers.

Work on the Bac An Khanh project involving Vinconex and Handico has yet to start. The two developers are seeking VND300 billion in aid from the State. The low-cost housing project Thanh Lam-Dai Thanh 2 of Housing and Urban Development Corp. (HUD) is also in need of VND100 billion in cheap loans from the State.

However, even those financed by the State budget are struggling with poor sales. Specifically, Viglacera wants VND100 billion in State loans to proceed with its VND560 billion low-cost housing project in Dang Xa, Gia Lam. Since the project was opened for sale, 400 of a total of 1,000 units have remained unsold because the project is far from the city downtown.

The problem faced by low-cost housing projects is that developers spend big but get back little, said To Thi Hanh, general director of Hanoi City Development Investment Fund. Therefore, enterprises are in need of support polices, such as tax exemptions and preferential loans worth 80% of a project’s value, or even 100%, instead of the current 70%.

In addition, Government assistance is necessary to reduce prices of houses for low-income people and workers and offer developers soft loans.

Sharing this view, Vu Ngoc Dam suggested the municipal authority allocate funds to cheap housing projects and provide investors with interest rate support.

The Hanoi Construction Department proposed the city allocate budgets to develop housing and have a financial mechanism to assist enterprises.

Hanoi vice chairman Nguyen Van Khoi requested the construction department, the finance department and the authority for industrial parks and export processing zones to make detail reports on the general picture of low-cost and social housing. Related agencies are asked to review each project to detect any arising problems.

Binh Duong attractive to Japan investors

The southern province of Binh Duong last Friday granted the investment certificate for a project of Japan-based Dai Nippon Printing (DNP) after having attracted over US$1 billion in Japanese investment commitments this year.

Futoshi Hario, head of the packaging department of DNP, said the firm decided to build a plant in My Phuoc 3 Industrial Park to produce laminate films for the packaging industry after studying Vietnam’s investment environment.

The project’s first phase will be developed on three hectares with an investment of around US$35 million, he said, and this is DNP’s second such plant overseas after the facility in Indonesia.

The plant is set to get off the ground this July and come into operation next April. Its products will be for domestic sale and export to regional countries, with total revenue projected to reach around five billion Japanese yen by 2018.

The chairman of Binh Duong Province, Le Thanh Cung, said DNP’s project was one of the huge investments of Japan in the province.

Binh Duong has attracted many Japanese investment projects since early this year such as a 72-hectare urban area project worth US$1.2 billion which Japan’s Tokyu Corp. and Vietnam’s Becamex IDC will develop and Sun Steel Co.’s (Sunsco) additional capital injection of US$120 million to increase its total to US$420 million, Cung added.

Such big projects placed Binh Duong in the forefront of attracting foreign direct investment (FDI) last month with total pledges of over US$1.46 billion.

Japan has emerged as the biggest foreign investor in Binh Duong with 167 projects worth a combined US$3.11 billion.

With over 130 years of operation, Dai Nippon Printing is one of the large private groups in Japan specializing in producing printing, packaging and electric equipments.

Supporting industry expo to join Metalex, Nepcon 2012

The HCMC supporting industries expo will be organized under the same roof with two other expos Metalex Vietnam and Nepcon Vietnam in October, organizers announced after cutting a deal to this effect on Thursday.

HCMC Investment and Trade Promotion Center (ITPC) and the Japan External Trade Organization (JETRO) as the co-organizers of the supporting industries expo clinched the deal on Thursday with Reed Tradex as organizer of the other two events.

The supporting industries expo will be held alongside with the international machine tools and metalworking technology exhibition known as Metalex Vietnam, and the international electronics manufacturing technology exhibition (Nepcon Vietnam) in HCMC.

Yoshida Sakae, managing director of JETRO in HCMC, said that over 100 local suppliers and Japanese manufacturing firms mainly in automobile, motorcycle and electronics parts manufacturing industries would look for business opportunities at the exhibition.

He said that the incorporation of the three shows would offer local parts makers a chance to meet new buyers while keeping abreast of the latest manufacturing innovations and for overseas investors to meet the right suppliers while reducing the needs to import parts.

Nguyen Thanh Xuan, vice director of ITPC, said that the supporting industries exhibition was aimed at helping raise Vietnamese content in manufactured products.

All the cost of the exhibition will be paid by the national budget of the Japanese government.

Meanwhile, Chainarong Limpkittisin, managing director of Reed Tradex, said that Metalex Vietnam and Nepcon Vietnam 2012 would feature over 700 global brands from 25 countries and territories. The exhibitors will showcase the latest equipment and technology at the Saigon Exhibition and Convention Center in District 7.

Metalex and Nepcon will showcase machinery and equipment in the categories of machine tools, welding technology, factory automation, pumps and valves, material handling, molds and dyes and control measurement among others.

Japanese firms witness low localization ratio

Japanese enterprises in Vietnam have witnessed a low localization ratio in material and industrial components compared to other Asian nations.

Speaking at a contract signing ceremony for organizing 2012 Metalex Vietnam and Nepcon Vietnam expos last week, Yoshida Sakae, managing director of the Japan External Trade Organization (JETRO) in HCMC, said the localization ratio was 28.7% in Vietnam last year. Meanwhile, Japanese firms in China, Thailand, India and Indonesia have localization ratios of 59.7%, 53%, 41% and 39.3% respectively.

“A low localization ratio means investors have to import a lot of overseas materials and components. As a result, production costs in Vietnam are higher than other countries in the region and Vietnamese products will in turn be less competitive on global markets,” Yoshida said.

In addition, weak supply of domestic materials and components is a big obstacle in attracting foreign investment in Vietnam. Therefore, raising domesticalization ratio is urgent to maintain the competitiveness of Vietnamese products against rival Asian nations. This also leads to the demand for developing raw material and accessory providers, or the supporting industries.

However, Yoshida admitted that time is needed to incubate and develop the supporting industries as providers have to improve prices and quality via many evaluation steps of customers.

To help develop the local supporting industry and enterprises in the sector, JETRO since 2004 has cooperated with the HCMC Investment and Trade Promotion Center (ITPC) to organize supporting industry supply and demand exhibitions in HCMC every two years. Vietnamese firms joining the events will receive assistance to set up booths for product display and sale while buyers are Japanese enterprises.

In each exhibition, there are 100 booths for around 50 Vietnamese enterprises and 50 Japanese firms to display products and trade with purchasers.

This year, the expo will be held alongside the international machine tools and metalworking technology exhibition known as Metalex Vietnam, and the international electronics manufacturing technology exhibition (Nepcon Vietnam) in HCMC. The event will take place at the Saigon Exhibition and Convention Center in District 7 from October 4-6.

Japan now has over 1,600 projects in Vietnam with total registered capital of over US$26.9 billion, making it the biggest investor in terms of capital.

Indochina Land wins five int’l awards

Indochina Land, a real estate division of Indochina Capital, announced on Sunday to have won five international awards for its outstanding design and development of several property projects in Vietnam.

The Asia Pacific Property and Hotel Awards 2012 in association with HSBC Bank Malaysia Berhad recognized the company with five awards in a range of categories, in which Indochina Plaza Hanoi was named the top apartment/condominium in the country. Last year, the building took home the award of Best Mixed-Use Development in Vietnam.

The developer also got awards of Best Resort Hotel in Vietnam for Hyatt Regency Danang, the newly opened resort and residential development in the central coast city of Danang, and Best Sustainable Hotel in Vietnam for Six Senses Con Dao, Vietnam’s first property to be awarded the Green Globe 21 Certification.

Besides, Montgomerie Links Vietnam, a golf course and residences project in Danang, was given the award of Highly Commended for Golf Development in Vietnam, and the luxury resort The Nam Hai in Hoi An, Quang Nam Province secured the title of Highly Commended for Spa Hotel in Vietnam.

Indochina Land currently manages three funds with approximately US$500 million of committed capital, facilitating over US$2 billion in property development completed, under construction or in the pipeline.

MASkargo launches A330-200F freighter service to HCMC

Malaysia Airlines cargo subsidiary MASkargo has commenced its Airbus A330-200F freighter service to Tan Son Nhat International Airport as part of a plan for expanding its network along the Intra-Asia routes and seizing opportunities in growing markets.

MASkargo acting CEO Mohd Yunus Idris told reporters in HCMC last Saturday evening that Vietnam was one of the emerging economies with high growth rates after the global financial crisis. “In order to expand our presence along the Intra-Asia network, the flight to HCMC is one of the strategies to tap the growth of the Asian market,” he said.

Idris told the Daily after the press conference that the freighter service by using the Airbus A330-200F aircraft would help Malaysia Airlines increase the cargo transportation capacity of Malaysia Airlines, which currently operates daily flights from Kuala Lumpur to HCMC and Hanoi and vice versa.

Idris was one of MASkargo’s executives who accompanied the inaugural freighter Flight MH6064 from Kuala Lumpur to HCMC last Saturday. As scheduled, the Airbus A330-200F freighter flies twice weekly into Tan Son Nhat International Airport with routing Kuala Lumpur - HCMC - Bangkok - Kuala Lumpur on Tuesdays and Saturdays.

The new service also offers connectivity onwards from MASkargo’s hub in Kuala Lumpur to other Malaysia Airlines passenger destinations worldwide and MASkargo freighter destinations, including Sydney, Shanghai, Taipei, Hong Kong, Manila, Jakarta, Tokyo, Osaka, Frankfurt, Amsterdam and Sharjah.

“I belief that this is the right aircraft to serve this market. Our freighter services will allow us to support the local freight forwarders to distribute their cargo through our extensive network out of Kuala Lumpur to Europe, Australia, Japan and India,” Idris said.

Before MASkargo’s launch of freighter service, Malaysia Airlines was able to handle 42 tons of weekly capacity to the HCMC market on its three daily flights on the B737 passenger airplanes. With a capacity of over 60 tons, the Airbus A330-200F freighter adds more than 120 tons of additional capacity to this market every week and makes MASkargo a significant player in this market.

The strategic addition of HCMC into MASkargo’s network signifies the growing importance of the Vietnamese market and its trade relations with Asian countries, Idris said.

Electronics stuff is among the items that MASkargo targets for their flights from Vietnam. “There are very big electronics manufacturing plants in this country,” Idris said.

Vector Aviation Co. Ltd. is the general sales agent of MASkargo in Vietnam and this company has also acted as Malaysia Airlines’ cargo general sales agent in this market since May 2004.

Do Xuan Quang, managing director of Vector Aviation, said the company was looking to enhance its collaboration with MASkargo to venture into the northern Vietnamese market.

Keangnam tower changes Hanoi office trends

KeangnamHanoi Landmark Tower is changing Hanoi’s office market as more firms look to relocate to the west of the city.

With more than 40 reputable tenants globally and domestically move in to the Tower, Keangnam has signaled a new trend for Hanoi’s office market. Tenants at Keangnam Hanoi Landmark Tower are high-profile and renowned companies such as KPMG, PricewaterhouseCoopers, Ericsson, Standard Chartered Bank, LG, JGC and Cisco.

Hanoi’s city center - or the so-called “old Hanoi Centre Business Districts”, was to be a spotlight of office leasing market with all big companies located in this area. However, after the government decided to develop the city to the west, much attention has been drawn to this part with many buildings reaching for the sky.

The trend has attracted foreign and state-owned enterprises and thanks to the successful transactions with those tenants, Keangnam has filled up 35,000 square metres, which is equivalent to a size of a typical grade A or B building in the city.

Understanding the advantages of owning a strategic position to “create new trend”, Keangnam has seized the opportunities to attract well-known companies to their building. Those tenants see the value and image of Keangnam to match with their companies’ brand names.

More office acquisitions in the west, particularly at Keangnam, has shown that companies are more willing to locate themselves in the new CBDs in Hanoi than a few years ago.

Competitive rental rates and large floor plate are some of the reasons which attract more and more tenants to Keangnam.

“It is a nice surprise to see high credit and profile companies moving to Keangnam. The movement of the big companies will certainly be followed by others because it is now indeed the right time to be in a new address.

It is to refresh a company’s image, re-position itself and strategise the business in a long run. Keangnam is a truly institutional quality building and the right addresses to be at,” said Kien Bui, associate director of commercial leasing of Knight Frank Vietnam.

Knight Frank is the marketing agent for the office at Keangnam Hanoi Landmark Tower.

As the first large-scale multipurpose complex and an innovative design regime with eco-friendly facilities, Keangnam provides prestigious office space for tenants. Tenants shall have the chance to enjoy optimal and satisfying working environment with a large number of added services from Parkson shopping mall, Calidas serviced apartment, Lotte Cinema, Intercontinental Hotel, various kinds of restaurants, gym, spa and fitness centre, event zones and many others located in the same tower.

“Keangnam introduces a new concept of office building with full package of services to Hanoi market. We hope five years later when the west area officially becomes a new CBD, Keangnam building will be the financial tower of Hanoi,” said Choi Yong Ho, marketing manager at Keangnam.

 
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