Last update 7/21/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 21/7
Trade with Brazil surges by 35 percent

Two-way trade between Vietnam and Brazil topped US$876 million during the first half of this year, representing a significant increase of 35 percent, according to Brazil’s Ministry of Development, Industry and Foreign Trade.

Vietnam exported $369.6 million worth of goods to the Latin American country, including footwear, frozen fillet fish and printing machines, up 23.4 percent year-on-year, while Brazil’s imports from Vietnam rose by 45 percent, hitting US$507 million, said the ministry.

In 2011, bilateral trade turnover exceeded US$1 billion for the first time, surging 53.8 percent against 2010.

Businesses to join Paris food fair

Deputy Prime Minister Hoang Trung Hai has approved a plan to showcase Vietnamese products at an international food trade fair in Paris and introduce local farm produce to markets in South America.

During the 2012 SIAL Paris, the world's largest international food and beverage trade exhibition, a variety of Vietnamese products will be displayed, including seafood, grains, fruits and vegetables, and other nutritious produce.

Local businesses are also expected to sign contracts with foreign partners from France and other European nations.

The event will take place at Paris-Nord Villepinte Exhibition Centre from October 21-25, with the participation of numerous countries from around the world.

Meanwhile, the Ministry of Industry and Trade is making a plan to advertise Vietnamese agricultural products to a number of potential markets in South America as part of its trade promotion campaign over the second half of 2012.

More than 6,500 hectares under rubber plants in Laos

More than 6,500 out of 10,000 hectares have been put under rubber plants in Laos’ Champasak province over the past five years by the Dau Tieng Viet-Laos Rubber Joint Stock Company.

The project is part of a cooperative programme between the two governments.

The first 700ha of rubber plantation in 2007 will be exploited in September this year.

The company’s president, Tran Van Du said while assisting local people in rubber plantation and exploitation his staff has invested VND8.26 billion in building schools, and roads, installing electric poles, and digging wells.

The company will put another 1,500 hectares under rubber plants in 2012 and build a rubber processing factory with an annual capacity of 22,000 tonnes in Champasak in 2013.

Champasak Mayor, Sonsay Siphandon, spoke highly of the project, which has generated jobs for nearly 1,000 local people, contributing to the reduction of poverty in the province.

FTAs expected to boost apparel exports

Vietnam’s garment and textile exports have achieved an annual growth rate of 25-30 percent in recent years, earning US$15.6 billion in 2011.

Vietnam’s share is still modest in comparison with the world’s annual apparel consumption of about US$350-400 billion, but there are more opportunities for the country’s garment industry in the near future.

According to trade experts, free trade agreements (FTAs) between Vietnam, ASEAN and other countries and regions, which are in force or under negotiations, are a useful tool for raising the industry’s turnover in the future.

It is clear that the Vietnam-Japan Economic Partnership Agreement, which took effect in late 2009, has opened major opportunities for the country’s growing industry as it regulates to cut all tariffs on apparel products to Japan to zero percent.

In the first six months of this year, Vietnam shipped garment and textiles to Japan worth US$882 million, a rise of 23.8 percent compared to the same period last year, accounting for 13 percent of the industry’s total export turnover.

Similarly, the industry’s exports to the Republic of Korea (RoK) saw strong growth of 50 percent in the first four months of this year, reaching US$380 million thanks to an FTA between ASEAN and the RoK, which came into force in 2010.

The Vietnam-EU FTA, which is under negotiations, is expected to cut tariffs on more than 90 export items, including garment and textiles.

In 2011, Vietnam shipped apparel products worth US$2.4 billion to the EU, accounting for 16 percent of the export share. But the figure was only US$1.12 billion in the first half of this year, down by 3.3 percent year-on-year.

Besides, the Trans-Pacific Partnership Agreement (TPP), which involves Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam, is also bringing high hopes for Vietnam’s apparel industry to access and expand exports to TPP members, particularly the US – a market consuming one quarter of the global garment and textile products.

The US is Vietnam’s top importer, reaching US$5.1 billion last year and US$3.5 billion in this year’s January-June period.

Le Quoc An, senior advisor to the Vietnam Garment and Textile Association, predicted that Vietnam’s exports to the US in the next five years will double the current figure, if the TPP is signed.

Once the TPP takes effect, Vietnam’s apparel products to the US will enjoy zero percent tariffs compared to the current level of 5-25 percent, increasing advantages of Vietnam’s garment and textiles against other countries.

Sacombank offers VND1.11 trillion in preferential loans

Sacombank signed an agreement on July 17 offering VND1.11 trillion (US$53.28 million) in preferential loans for 16 selected Ho Chi Minh City-based enterprises.
Such enterprises include those operating in egg production, stationery, animal feeds, industrial and civil construction materials and fuels.

Under the agreement, each enterprise can borrow between VND30 billion (US$1.44 million) and VND300 billion (US$14.4 million) for up to six months at an interest rate of 13% per year. Companies can apply for loans from now until the end of 2012.

Earlier on July 15, Sacombank cut interest rates on existing loans to 15% in compliance with the State Bank of Vietnam’s request.

Since the beginning of this year, Sacombank has dispersed VND5.5 trillion (US$264 million) and US$180 million in low-interest loans.

Titanium mining uprooting protective forest in central region

Titanium exploitation in Quang Loi Commune of Quang Dien District in Thua Thien-Hue Province is leading to the destruction of vast areas of protective forests that local residents and authorities have taken great efforts to plant over dry sand hills.

Sand hills in Co Thap Hamlet of Quang Loi Commune are being drilled ceaselessly to extract the ore with tens of machines and hundreds of people working at the exploitation site and trucks continuously transporting titanium from the area.

One local resident said that commune authorities and residents have worked hard to grow a protective green cover by planting trees over large areas, but titanium exploiters are hacking down the trees for their own selfish gains.

Hoang Thao, deputy chairman of the People’s Committee of Quang Loi Commune, said that the Thua Thien-Hue Minerals Corporation was licensed by the provincial People’s Committee to mine titanium in the commune for three years, since August 2011.

The company was permitted to mine 26,000 tons of titanium from an area of more than 87 hectares of which 40 hectares is under protective forest cover, and only 500 meters from residential areas.

Titanium exploitation has greatly affected residents’ lives, according to Mr. Thao. Transportation of titanium by trucks has also destroyed roads in the commune.

Wastewater from titanium exploitation flows into nearby rice and vegetable fields. Local people reported their complaints to commune authorities after which the mining site was inspected, but the mining company only dammed up the dykes to prevent wastewater from overflowing into surrounding areas.

Vo Quang Dieu, director of the exploitation unit in Quang Loi Commune said that the company has 135 workers digging 28-30 tons of titanium per day in Co Thap Hamlet.

Local woman Nguyen Thi Hien said that titanium exploitation has resulted in the chopping down of a large number of trees which they have spent the last 15 years to nurture. The protective green cover was necessary for them to prevent sand grit from flying into their houses and covering their paddy fields.

Dieu said that the company would replant trees in November and spray water when it is windy, so as to limit the sand from blowing into people’s homes. However, local residents believe this measure will be like spraying one bucket of water to quench an entire field.

Vietnam, Sri Lanka expect to sign Trade Agreement

Vietnam’s Foreign Minister Pham Binh Minh met with his Sri Lankan counterpart, Gamini Lakshman Peiris, on July 17 during the latter’s official visit to Vietnam from July 16-18 and unanimously agreed to sign a joint Preferential Trade Agreement in the near future.

Both the foreign ministers expressed their pleasure at the development and cooperation between the two countries in various fields like policy agreements, security, national defense, economy, trade, investment, oil and gas, culture and education.

Last year’s trade turnover between the two countries had touched US$100 million and both the foreign ministers expected this to reach US$1 billion by 2015.
    
More subsidized loans for business rolled out

Local banks have been rushing to make more subsidized loans available for corporate clients over the past three months.

Sacombank on Tuesday struck deals with 16 businesses to provide a credit line of over VND1.1 trillion with an annual interest rate of 13% for the first three months. Under the special lending program, the loans may vary from VND30 billion to VND300 billion with the maximum term of six months and money will be disbursed from now until end-December.

This is part of the program ‘Soft loans in U.S. dollar and dong for corporate customers’ by Sacombank starting last Tuesday. The bank’s credit line of VND2 trillion is on offer at 13% per annum for all new loans while its US$50 million is for exporters and importers with interest rates starting from 4.5% a year.

Phan Huy Khang, general director of Sacombank, said his bank as of Monday had disbursed more than VND400 billion and US$30 million for corporate customers so that they could increase their working capital for production and business operations in the second half.

Since the beginning of the year, the bank has launched 12 preferential lending programs for companies with a combined value of VND5.5 trillion and US$180 million.

Similarly, Eximbank CEO Truong Van Phuoc told the Daily that the low-interest lending program combined with a hedge against exchange rate volatility his bank has introduced since the middle of last month has had over VND5 trillion disbursed with a rate of 7% a year. The disbursed amount has improved Eximbank’s credit growth over the past month, Phuoc said.

With the soft loans made available, Eximbank’s corporate borrowers pay a maximum interest rate of 13% if the exchange rate rises up to 3%, equivalent to the preferential rate applicable at other banks. However, upon the repayment of principal, if the exchange rate increases more than 3% compared to the time of disbursement, Eximbank will bear the difference.

Pham Linh, deputy general director of OCB, said his bank had already used up the VND2 trillion set aside for preferential lending. Now the bank is offering US$35 million in credits to small and medium sized exporters with an interest rate of 5.5-6% annually thanks to financial assistance from International Financial Corporation, a member of the World Bank Group.

Deputy general director Luong Ngoc Quy of DongABank said his bank also set aside a credit line of VND1 trillion for enterprises of small and medium sizes and members of the HCMC Young Business Association (YBA), with VND100 billion treated as unsecured loans. But he declined to disclose the specific figure for disbursed loans.

According to Nguyen Hoang Minh, deputy director of the HCMC Branch of the State Bank of Vietnam, the city government is directing relevant agencies to carry out a host of credit programs to pull firms out of difficulties in bank loan access. There have been two programs launched in the city so far, one of which is to target companies in Tan Binh District and the other is for manufacturers initiated by Sacombank.

Minh said his branch is working with the authorities of Phu Nhuan and Can Gio districts to provide soft loans to firms in the localities.

Minh said many firms in HCMC since early June have been able to borrow from banks with preferential rates of 12-13% while the city’s financial package to support troubled businesses has also lent out VND25.2 trillion, nearly equivalent to the VND30 trillion as targeted earlier by the city government.

Besides soft loans, banks are cutting interest rates for old loans owed by corporate clients to below 15% as requested by the central bank.

There are 20 major banks with credit market share of up to 90% of the total having reduced old loan rates as of Tuesday, according to Cac Quang Duong, deputy head of the credit department of the central bank.

He added lending rates for old loans at the banks would be lowered to 14% while the rates imposed on the four priority groups will be revised down to 12%.

Exporters fret over markets in 2nd half amid global gloom

Exporters joining an online conference organized by the Ministry of Industry and Trade on Tuesday worried that their performance in this year’s second half would remain difficult given the dismal global economic outlook.

Traders said they had never encountered huge challenges like in this year’s first half, but added the second half might pose greater difficulties.

Le Phuoc Vu, chairman of Hoa Sen Group and vice chairman of the Vietnam Steel Association, remarked Brazil, India and China were seeing their growth rates falling, while Japan, European and the U.S. showed no optimistic signs.

Therefore, he predicted Vietnam’s steel export would likely decline and the situation would get tougher.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said the biggest difficulty in the first six months was outlets. In particular, the purchasing power of several markets considerably weakened, resulting in fewer long-term orders for many exporters.

“Previously, enterprises received orders six months, or even one year in advance, but now few enterprises have long-term orders, mostly 2-3 months or even one month,” said Bien.

Mai Thi Anh Tuyet, deputy director of the An Giang Department of Industry and Trade, said the province exported only 214,000 tons of rice, equal to 79% of the year-ago figure, meeting 40% of the target. Therefore, An Giang’s authority is now very worried, as export makes great contribution to the provincial GDP.

To reduce the dependence on rice and tra fish, whose prices have dropped sharply, An Giang Province is gradually switching to other crops.

Particularly, the cooperation program between An Giang and Saigon Trading Group (Satra) to grow the vegetable okra for export was launched in May 2012.

Pilot cultivation is carried out on 16 hectares, which will be expanded to 50 hectares by the year’s end and 100 hectares in 2013. Satra directly exports this item to Japan.

An Giang also joins hands with another enterprise to make a plan for exporting mushrooms to Hong Kong. Tuyet said the enterprise would look into the market demand to order farmers to produce.

In addition to product and market diversification, businesses are seeking ways to boost labor capacity and access credit capital with reasonable lending rates.

Do Ha Nam, chairman of the Vietnam Pepper Association, suggested the Government should encourage enterprises to establish companies abroad and borrow from foreign lenders to diversify capital sources.

* Dien Quang Hiep, director of Mifaco Company, member of the executive board of the Handicraft and Wood Industry Association of HCMC (Hawa), said on the sidelines of the conference that Hawa had petitioned the HCMC Department of Customs to help the furniture export shipments denied for custom clearance at Cat Lai port.

Hiep informed some 11 enterprises had reported their shipments were disallowed to go through customs under Circular 01 the Ministry of Agriculture and Rural Development.

“We are awaiting statistics to calculate the accurate losses. But I think the biggest loss is delivery schedule. Enterprises have committed to deliver products on time, or else they would pay penalties, not to mention a loss of prestige,” Hiep stressed.

Last week, Cat Lai port customs announced it would not clear furniture shipments that lacked forest product lists certified by forest rangers.

Cashew traders run into troubles

Due to multiple problems, some two-thirds of cashew processors in Binh Phuoc Province, the largest cashew material production in Vietnam, have had to shut down, put up factories for sale and switch to other business fields.

The main cause is cashew nut prices have fallen below costs as traders have to sell their products at low prices to cut losses and repay bank debts, said the Vietnam Cashew Association (Vinacas).

Statistics show that there are around 300 cashew processors and exporters in Binh Phuoc. The province has about 100,000 hectares under cashew cultivation.

Another reason is several Chinese traders have directly bought cashew nuts in Binh Phuoc through Vietnamese firms and then exported it to China.

These traders often sell the products to China at 20-30 U.S. cents lower than the prices quoted by local enterprises. As a result, some exporters have lost their orders to Chinese rivals.

Over the last three weeks, cashew export prices have constantly dropped. The price of the popular cashew type for export coded WW320 currently stands at US$3.1 a pound (or 0.454 kilo), down US$1 over the same period last year.

Given such difficulties, Dang Hoang Giang, general secretary of Vinacas, predicted the 2012 cashew export turnover could only reach US$1.1 billion, or US$400 million lower than the association’s forecast in the first quarter.

The U.S. remains the largest importer of Vietnamese cashew in terms of both volume and value. Specifically, in the first six months, Vietnam exported some 29,000 tons to the U.S, bringing in US$168 million.

China is Vietnam’s second largest cashew export market, with over 16,300 tons worth US$108 million, up 16% in volume but down nearly 4.5% in value against the same period in 2011.

According to data of the General Department of Customs, in the year’s first half, Vietnam exported over 88,500 tons of cashew of all kinds, with a turnover of more than US$602 million, picking up 28% in volume and 14% in value year-on-year. The average export price reached over US$6,800 per ton.

With Olympic London and Ramadan festival to take place in the coming time, Vinacas forecast cashew consumption would surge strongly. This will help push up prices or at least prevent prices from dropping further to below US$3.1 per pound, the lowest level in three months.

Shipbrokers cut rates to woo customers

While many shipping lines have increased their rates, surcharges and other charges to make up for dwindling revenue, shipbrokers have cut their fees to try and woo more customers.

There has been a huge decrease in the shipments of agro-products and apparel, especially shipments from Vietnam to the EU, said a representative of a Singaporean shipbroker. Meanwhile, shipping rates and surcharges are on the rise.

“As shipbrokers are now competing harshly with each other, we have to mark down brokerage fees to US$30-40 per TEU from US$70-100 a year or two ago in a bid to attract clients. However, despite that we still don’t have any positive signs,” said the shipbroker.

Lower export volume is seen as the key factor leading to a downturn in the cargo shipping industry. It makes no sense to curb brokerage charges when there are fewer orders given the low purchasing power.

Woodwork exporters are currently recording tumbling exports to the EU despite the fact it is the peak time for the EU to boost imports for the year-end holidays. In the face of such a grave situation, several ship owners will still continue increasing their rates and adding surcharges on cargo shipped from Asia to the EU.

Ship owners MSC and Hapag-Lloyd announced they will impose a peak season surcharge of US$350 per TEU from August 1. The surcharge has been applied by Hapag-Lloyd since May and the carrier recently announced a US$250 per TEU general rate increase, starting on August 15.

Most shipping lines explained they mark up rates in order to offset high operation costs caused by low marine cargo traffic.

Ministry wants Gov’t bonds for irrigation projects

The Ministry of Agriculture and Rural Development is seeking VND279.5 billion worth of government bonds to develop an irrigation system across the Mekong Delta.

In a document just forwarded to the Ministry of Planning and Investment and the Ministry of Finance, the agriculture ministry said such an irrigation system would help expand farming areas in the country’s rice basket.

The budget will help Mekong Delta provinces such as Dong Thap, An Giang, Tien Giang and Ben Tre construct their canal systems. Meanwhile, Bac Lieu and Soc Trang province will be able to develop drainage systems to control saltwater intrusion.

The fund will also be used for completing the second phase of Bao Dinh irrigation project in Tien Giang Province which once in place will help expand the farming areas by an additional 20,000 hectares in Tien Giang and 13,000 hectares in Long An Province.

The irrigation development is part of the master plan that the Southern Institute for Water Resource Planning has mapped out to help the Mekong Delta response to rising sea levels and salinity intrusion, said Nguyen Ngoc Anh, head of the institute.

This institute is now undertaking climate change adaptation measures in seven Mekong Delta provinces in an effort to attain sustainable agricultural production and rural development. The project requires nearly US$2.1 million including a US$1.6 million in non-refundable aid provided by Japan.

The Mekong Delta is among the world’s five regions most vulnerable to climate change. Therefore, irrigation and embankment systems must be built across the region in order to secure its total rice growing area of 1.78 million hectares.

The Southern Institute for Water Resource Planning calculates the Mekong Delta will need VND171 trillion to develop its irrigation system between now and 2050 in case the sea level rises 30-50 cm.

PPP projects get stuck in absence of legislation

A lack of regulations has prompted some 20 projects under the public-private partnership format to come to an almost dead halt, while potential investors remain on the sidelines due to fears of risks, heard a dialogue on Tuesday.

Over 20 infrastructure and public service projects suggested for development under the PPP format are moving at a snail’s pace or not proceeding at all due to an incomplete legal framework, speakers said at the meeting in HCMC.

To remove the problems regarding the legal framework for PPP projects, it is necessary to have a specific law on this investment format, rather than merely a decision by the Prime Minister providing a trial basis for this investment form.

Decision 71/2010/QD-TTg on the pilot PPP investment format was released nearly two years ago, but so far the projects chosen for pilot PPP are still moving slow.

“Among over 20 projects that localities and ministries submitted to the Government, only a few are feasible while the remainder are of low viability. Only the Dau Giay-Phan Thiet Expressway project is now making a feasibility study, while the others are still in the pre-feasibility study stage,” said Nguyen Dang Truong, deputy head of the Bidding Management Department under the Ministry of Planning and Investment.

Vu Thanh Tu Anh from the Fulbright Economics Teaching Program said complicated and time-consuming bidding procedures are hindering the progress of PPP projects.

In addition, site clearance is a nightmare for investors. Meanwhile, risks involving lack of transparency in the business environment, an inadequate legal framework and policy uncertainties often emerge during the project execution, said Anh.

The potential for PPP development in Vietnam is huge, but investors do not feel secure with only Decision 71 as a legal framework, so they prefer BOT projects.

Lawyer Nguyen Hung Quang from the law office NHQuang & Associates stressed the definition of PPP investment format is ambiguous. Therefore, consultants do not have sufficient information to encourage investors to join PPP projects.

Duong Quang Chau, deputy director of the HCMC Infrastructure Investment JSC (CII), said even the projects developed under BOT and BT forms are now struggling with the legal framework, let alone PPP projects.

Participants in the dialogue on Tuesday shared the view that there needs to be a law on PPP investment.

“When making such a law, it is a must to clearly determine which sectors are to be developed under this format, and to adopt policies to ensure profits for investors such as offering them land, tax and credit incentives, credit guarantee, and toll collection mechanism among others,” said Tran Du Lich, deputy head of the HCMC delegation of National Assembly deputies.

“The law should specify the duties of investors as well as the rights and responsibilities of relevant State agencies. In addition, it needs to provide a mechanism for project operation,” Lich said.

He said when there is a way out for PPP projects, BT (build-transfer) format, also known as land in exchange for infrastructure, should be removed. He explained the market-driven mechanism requires transparency in investment via biddings, to avoid the ask-and-give mechanism like before.

Truong of the Bidding Management Department said it would take much time to compile a law. To create favorable conditions for the current PPP projects, the Ministry of Planning and Investment will propose the Government revise Decision 71 or issue a decree on PPP investment.

Hong Kong kicks off Danang media onslaught

Vietnam Airlines’ Hong Kong office and Hong Kong-based travel agency Hong Thai Travel Services Ltd have started a huge promotion campaign in the local media in a bid to lure more tourists to the coastal city of Danang.

Danang City’s Department of Culture, Sport and Tourism held talks with HCMC-based Qstar Tour Services Co., a unit of Hong Thai Travel, last week to finalize some last-minute details.

At the business session, local tour operators and hotels committed to offer preferential room rates and flexible booking times to arrange competitive package tours in a bid to lure more tourists from Hong Kong.

A group of Hong Kong’s media representatives are now preparing to make a familiarization trip to Danang City to promote the destination and its services.

In order to woo more customers and increase their stay in Danang, some hotels are organizing special programs. For instance, Crown Plaza Hotel is launching water puppet shows and offering free tourism maps written in Chinese, while Furama Resort is cutting room rates and offering free meals.

Handling of Epco-Minh Phung assets wraps up

The process of liquidating the huge amount of assets of Epco-Minh Phung court case, the country’s biggest lawsuit by assets to be tackled so far, has been basically finished by VietinBank.

As the entity in charge of dealing with the assets, VietinBank Asset Management Company (VietinBank AMC) said it had basically completed the task as of last Thursday.

In line with the instruction of the steering committee for debts settlement and the council for asset assessment of the case, the debt collector had auctioned all the assets handed over by the court at the starting price of VND1.739 trillion. The lender then had collected over VND2.427 trillion from selling the assets as of June this year.

According to the HCMC Branch of the State Bank of Vietnam, out of total assets handed over by the court, the assets of Epco are worth some VND227.3 billion while Minh Phung’s assets are worth about VND1.51 trillion.

As of the end of June, VietinBank AMC had sold all the 323 assets at a combined value of some VND2.428 trillion, with ten assets of Epco and 303 assets of Minh Phung transferred to the authorities of the southern coastal province of Ba Ria-Vung Tau.

Epco and Minh Phung were two separate companies that were involved in a great scandal of land speculation over a decade ago. The two CEOs of the firms were reportedly said to conspire with bankers to take out loans far exceeding the value of land use as mortgage, and in this court case, several people were handed capital punishment.

The Epco-Minh Phung case now is now still the biggest one in terms of assets to be settled, with the assets and properties scattered in many localities such as HCMC, Ba Ria-Vung Tau, Khanh Hoa and Binh Duong.

In fact, the case has up to 390 assets involved including workshops, production lines, machinery, inventories, offices and villas totaling more than VND2.2 trillion in value.

Tan Tao Group not enjoying walk in the park

Central Quang Ngai Provincial People’s Committee recently revoked investment certificate of the high-profile domestic Tan Tao Group’s Pho Phong Industrial Park.

The $13.7 million project is among 11 revoked domestic investment projects in the province during the first half of this year. Tran Van Nhan, director of Quang Ngai Provincial Department of Planning and Investment, said the investment certificate was withdrawn as the construction could not get off the ground since the project was licenced three years ago.

“The developer doesn’t have the financial ability to pursue this project,” said Nhan. He added the provincial authorities did not want Tan Tao Group (ITA) to delay the project’s construction too long as it was impacted not only on local residents, but also on the province’s investment climate.

ITA received the investment certificate for developing the park in 2009, on 157.39 hectares in Duc Pho district and had pledged to finish construction by early this year. “So far, ITA has not done anything on the project. Hence, we will continue calling domestic and foreign firms to invest in the 157.39ha site,” said Nhan.

ITA asked the local authorities for permission to delay the project for an additional period of time but the province did not approve. This is the second ITA’s project, the investment certificate of which was withdrawn by Quang Ngai Provincial People Committee this year. In June 2010, the local authorities decided to revoke ITA’s film studio project, which the firm registered to develop with the total investment capital of $50 million.

ITA is among the largest private groups in Vietnam. It is operating in many fields of property, power generation, water supply and education. Besides the Pho Phong Industrial Park, the developer is operating eight other industrial parks including Tan Duc, Tan Tao, Kien Luong and Ha Nam. The group is also now working on a giant 4,000 megawatt power project in southern Kien Giang province.

According to Quang Ngai Provincial Department of Planning and Investment, apart from 11 revoked projects registered by domestic investors, the province now has 64 delayed domestic investment projects covering 350ha with total registered investment capital of VND320 billion ($15.2 million).

Auto sector hits the brakes

In respect to Vietnam’s auto industry future perspective, industry players assumed at most three stronger brands could survive tough business conditions.”

Most auto industry players face losing their market shares unless they are shifted into specialised importers after enforcement of the ASEAN-China free trade agreement (ACFTA) with low import tariffs.

The ACFTA, effective from January 1, 2010, was considered a gateway opening the door for Chinese-made automobiles and spare parts to flow into South East Asia. Under agreement terms, from 2010 China and six ASEAN members Thailand, Malaysia, Indonesia, the Philippines, Singapore and Brunei will impose 0.1-0.6 per cent tariffs on imported automobiles and parts from relevant countries. Remaining countries Vietnam, Myanmar, Laos and Cambodia will apply these tax levels from 2015.

This means not until 2018 when the import of completely built units (CBUs) into Vietnam will benefit from zero per cent import duty under AFTA’s common effective preferential tariffs (CEFT) scheme local auto industry will face tough competition from imported units.

In fact, Chinese automobiles have not won plaudits from local consumers in the past years. It was evidenced through low sales figures associated with Chinese auto brands like Haima, Geely and Lifan in the Vietnamese market.

By contrast, import value of auto parts and components into Vietnam climbed to $72 million in the first five months of 2012. Imports of replacement parts and components from China is forecast to shoot up in the coming period, especially when import duties will go down under ACFTA terms.
Besides, with a complete production infrastructure, strong supporting industries development and clear investment incentives some ASEAN countries continue to be manufacturing bases for global auto manufacturers.

In respect to Vietnam’s auto industry future perspective, industry players assumed at most three stronger brands could survive tough business conditions, while most remaining local auto firms would have to shift into acting as professional importers to retain their market share upon implementation of Vietnam’s commitments with the international community.

Vietnam currently reports a density of 18 automobiles per 1,000 residents. The Ministry of Industry and Trade forecasts the demand for under 10-seat personal cars in Vietnam will escalate after 2020 on the back of noticeable improvements in per capita people’s incomes and transport infrastructure.

Accordingly, by 2015 from 166,000-235,000 new cars will be added, increasing to 246,000-347,000 cars by 2020 and 592,000-836,000 cars by 2025. Of them, trucks and buses will account for 27 per cent, the remainder will be personal cars.

This means by 2015 Vietnam will need to inject $12 billion into auto imports each year, thus worsening trade deficit picture if the country fails to develop under 10 seat car lines.
 
Nokia reshuffling the pack for a winning card

The jury is out on whether a recalibrated product distribution strategy will boost Nokia’s business efficiency in Vietnam.

From August 5, the global technology company will stop cooperation in cell phones distribution with PetroVietnam General Distribution Services (PSD), that once grabbed 40 per cent of Nokia’s product distribution market in Vietnam.

The Finland-based firm will only retain two distributors in Vietnam-FPT Distribution and Lucky Technology Equipment Import Export. FPT will take care of Nokia products distribution in northern and north central regions, while Lucky is responsible for southern and south-central regions.

The move would help Nokia further focus on its business strategy parallel to innovating operation, according to Nokia Indochina vice chairman William Hamilton-Whyte.

In early 2011, Nokia modified its distribution strategy in Vietnam through zoning distribution areas for Vietnamese distributors. Accordingly, each Vietnamese distributor got the right to distribute Nokia products in a specific area, instead of extending distribution across the country.

By that time, FPT was in charge of product distribution from Danang spreading to northern areas, while Lucky and PSD took care of areas from Danang to southern locations. IDC market analyst Vo Le Tam Thanh said the change of contracts to one or several distributors was nothing abnormal.

There is a fierce competition among diverse market players in respect to low-cost and smart phone lines, but Nokia holds a big slice in Vietnam’s cell phone market pie.

“Hence, Nokia will be the top target when other phone companies want to expand their market shares,” Thanh said. IDC’s latest statistics show that Nokia continues to be the top player in Vietnam’s cell phone market as the firm still seized over 50 per cent market share in 2012’s first quarter. According to a FPT executive, the move came as Nokia faced tremendous competition pressures from other market players.

Like other companies, Nokia faces sagging sales revenue in the face of sinking consumption. Retail sales figures by Thegioididong.com show that in the first half of 2012 there was a decline of 23.72 per cent on-year in the number of imported cell phones into Vietnam, equivalent to 6.26 million units.

Foster dials in phone plant

Japan’s Foster Group last week started operating a  mobile phone component  factory in southern Kien Giang province, the firm’s fifth manufacturing facility in Vietnam.

The VND12 billion ($570,000) factory, invested by Foster Electric Danang - a subsidiary of the Japan-based Foster Group, is located in the province’s Vinh Hoa Hung Nam industrial cluster.

Phan Thanh Tung, a senior official of Kien Giang Provincial Department of Planning and Investment said: “This company specialises in manufacturing electronic components to produce headphones and earphones for mobile phones. The products will mostly be exported”.

Covering 7,000 square metres, the factory is designed to produce about one million units a year in the first phase, generating over 1,300 jobs for local people. It is expected to raise its production to two million units a year in the second phase, employing 4,000 local workers.

“Foster told us that in August, this year it would inaugurate a similar factory to supply electronic components to produce headphones of mobile phones in central Quang Ngai province’s Tinh Phong Industrial Zone. The new facility has total investment capital of VND170 billion ($8 million) invested by Foster Electric Danang,” said Tung.

Foster currently operates seven plants in Asia, including four in Vietnam. Specifically, it has two factories in VSIP1 and VSIP2 in southern Binh Duong province, one in Hoa Cam Industrial Zone in central Danang city and one in VSIP Bac Ninh in northern Bac Ninh province.

According to Kien Giang Provincial Department of Planning and Investment, in the first half of this year, the province licenced only one foreign direct investment project worth $500,000.

Foreign investment in garments declines
 
The country's textiles and garment sector is seeing a decline in foreign direct investment (FDI) during the past several years, and the sector is being held back by its reliance on imports of raw materials, according to the Viet Nam Textile and Apparel Association.

FDI in the sector has fallen from an annual average of US$460 million during the peak period of 2000-08, to an annual average of $450 for the last three years, and the number of FDI projects has also decreased during the past three years.

Total registered capital from foreign investors in the sector for 2009 and 2010 was at $185 million and $169 million respectively. The figure was about $450 million last year.

The Viet Nam Textile and Apparel Association (Vitas) said FDI capital pumped into the sector remained low due to the negative impacts of the global economic crisis.

Foreign investors also focused heavily on garment making that required low investment capital and out-dated technologies. They paid less attention to the production of raw materials and accessories such as fabrics and processing such as dyeing, that required high investment capital and high technologies and no promise of a quick return on investment, said the association.

Le Quoc An, former chairman of the association, attributed the situation to the fact that Viet Nam still lacked industrial zones specialising in fibre, textile and dyeing on large enough scale to attract major overseas companies.

Viet Nam earned $14 billion from textile and apparel exports last year, but it had to spend up to $9 billion on imports of raw materials and accessories.

An said the reliance on imports was the Vietnamese clothing industry's greatest weakness. However, he said it was also a good opportunity for the sector to organise its investment priorities and plan for solid growth in the future.

"Once the sector does this, giant foreign investors will enter Viet Nam," An said.

He added that the participation of the foreign investors in the garment sector, especially since the country adopted more liberal economic policies, had helped Viet Nam put its name on the global apparel map and become the 8th largest garment exporter in the world and the 4th largest exporter to the US market.

The major textile and garment investors in Viet Nam include South Korea, Taiwan, Hong Kong, Japan, Germany and Thailand.

South Korean companies have recently made great contribution to the country's clothing exports.

South Korea's Hansae Co is one of the top ten foreign garment exporters in Viet Nam, with export turnover more than $160 million during the first five months of this year.

Despite the global economic recession, the company plans to put into operation its third factory in Viet Nam, a project worth $30 million.

The factory, located at Tan Huong Industrial Zone, in the southern province of Tien Giang, will have an annual production capacity of 30 million clothing products.

The second and first facilities in HCM City and the southern province of Tay Ninh have a combined capacity of more than 70 million products per year.

Kim Chul Ho, Hansae Viet Nam's director general told Vietnam Investment Review that thanks to strong business result in the first half, the enterprise hoped it would reach an export value at $400 million by the end of this year.

Air Astana to launch direct flights to Kazakhstan

Kazakhstan's national airline Air Astana will open direct flights to HCM City by the end of this year, the airline has announced.

The company will operate two flights per week, with aircraft stopping over for transit in Bangkok, Thailand.

A representative of Air Astana told Viet Nam News Agency that the opening of the route marked the good relations between the two countries.

The direct flights would help promote bilateral trade as well as tourism, he said.

Viet Nam's Vietway Aviation is authorised to be Air Astana's sole representative in charge of selling tickets, marketing and expanding market share.

Last month Emirates Airline launched direct flights between HCM City and Dubai, with one flight per week on this new route.

BIDV seeks bond issue consultants
 
The Bank for Investment and Development of Viet Nam (BIDV) is inviting domestic and foreign consulting firms to participate in its issuance of international bonds this year. Bidding will be opened at 9am on August 30.

Last month, international credit rating agency Standard & Poor's lifted BIDV's outlook from negative to stable and its bonds continued to be rated B+.

Rival Vietinbank successfully issued US$250 million worth of international bonds in May with a coupon rate of 8 per cent per year. The five-year bonds are now listed on the Singapore Stock Exchange. HSBC and Barclays Capital were consultants for the issue.

Vietcombank also has a plan to sell $1 billion in international bonds this year, while Sacombank plans a $200 million issue. This moves are aimed at raising capital in the context of the central bank's move to impose a cap of US dollar deposit interest rate at 2 per cent per year. The State Bank of Viet Nam reported that by the end of last month, dong deposits at the nation's commercial banks had risen by 8.6 per cent over the previous year, but foreign currency deposits had fallen by 2.2 per cent.

Banks offer loans at below 15% interest

Commercial banks have been offering loans at interest rates lower than 15 per cent annually to help businesses address financial difficulties.

Sacombank on Tuesday entered agreements with 16 companies operating in HCM City to provide them with a total of VND1.1 trillion (US$52.5 million).

The loans range from VND30 billion ($1.4 million) to VND300 billion ($14.2 million) with terms of up to six months.

The interest rate is 13 per cent per year for the first three months.

These companies operate in areas including consumer goods, food, and pharmaceutical and building materials.

It has earmarked VND2 trillion ($96 million) for new loans from July 10 at 13 per cent, and another $50 million for import-export companies at rates beginning at 4.5 per cent. By Monday, the bank had disbursed more than VND400 billion and $30 million.

Sacombank general director Phan Huy Khang said his bank had begun cutting interest rate on old loans to corporate and household business customers to less than 15 per cent per annum.

The Bank for Investment and Development of Viet Nam has reduced its interest rate to under 15 per cent for all loans. In the case of new ones in fields of priority like agriculture and exports, the highest rate is 12 per cent.

Last week, several branches of BIDV, Vietcombank, Vietinbank and Agribank in HCM City inked contracts to lend a total of VND92.6 billion ($4.45 million) to 11 companies based in Tan Binh District at 12-13 per cent interest.

New club established for foreign-invested businesses

Chairman of the the Da Nang People's Committee signed a decision on Tuesday to establish a club for foreign-invested businesses in the city.

The purpose of the club is to create a common community for businesses to exchange information and creativity and connect with authorities. Authorities hope the club will improve the investment environment and attract more investment to the city.

Da Nang issues call for US investment

The city of Da Nang has called for US businesses to invest in solar power power, electronics, waste treatment and the management of sea and air ports.

Chairman of the city's People's Committee, Van Huu Chien, told US business people in San Jose and San Francisco this week that the central city welcomed foreign invested projects. During the trip, the city administration signed a Memorandum of Understanding on friendship and co-operation with Houston.

HCM City needs $13 billion for infrastructure works

The HCM City Department of Planning and Investment is eyeing access to ODA and other funds for building 19 roads at a cost of nearly US$13.5 billion, and wants Ministryof Planning and Investment to intercede with the Government on its behalf.

Thai Van Re, director of the department, said for BOT (build-operate-transfer), BTO (build-transfer-operate), and BT (build-transfer) projects, the city wants the right to award bids.

In case of urgent public projects, especially ones to streamline traffic and prevent flooding, the city wants permission to go ahead with them even if it means ignoring regulations like having investment licences issued before December 31, 2011, and spending approval received.
 
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