BUSINESS IN BRIEF 23/6

Stocks slide on foreign exchange hike

Stocks lost value last week, while market insiders forecast that trading this week would most likely be volatile amid expectations of second-quarter business results.

On the Hochiminh Stock Exchange, the Vn-Index lost a cumulative 2.4 percent during the week, closing on June 20 at 560.78 points.

Profit-taking across blue chips drove the market down. Shares which gained strongly in the previous week like PV Gas (GAS), Masan Group (MSN) and Vietcombank (VCB) tumbled last week.

The VN30, tracking the top 30 shares by market value and liquidity was also down 1.7 percent, to 607.23 points.

Bargain hunting rose, however, focusing on hot stocks like securities, construction and real estate.

Total market volume grew 22.6 percent over the previous week, averaging nearly 1.9 million shares, worth over 1.73 trillion VND (82.1 million USD) per day.

Strong buys by foreign investors also helped cushion the market. They ended last week as net buyers on the southern exchanges, picking up shares worth 624 billion VND (29.6 million USD).

Their buys focused on large-cap shares including Sacombank (STB), Phu My Fertiliser (DPM), and seafood producer Hung Vuong Group (HVG).

On the Hanoi Stock Exchange, the HNX-Index inched down just 0.48 percent, ending at 76.31 points on June 20.

Trading decreased here, however, as the daily trading volume went down nearly 9 percent to an average of over 50 million shares, worth 522.5 billion VND (24.8 million USD) per session.

Foreign investors were also net buyers, responsible for a total value of 113.6 billion VND (5.4 million USD). They bought PetroVietnam Technical Services Corp (PVS), Sai Gon-Ha Noi Bank (SHB) and VNDirect Securities (VND) most.

The market in the short term will be segmented as cash flow will focus on stocks that benefit from the higher value of the USD, particularly export companies such as textiles, oil and gas and fisheries, Le Thi Bich Hang, stock analyst of FPT Securities Co said.

Estimates of the second-quarter business results of listed companies, which will be released towards the end of this week, are expected to draw attention of investors.

Hot money is likely to pour into shares of companies posting positive business results, while the ones paying dividends in July will probably go up.

New exchange rate not affecting inflation control

A senior State Bank of Vietnam (SBV) official has affirmed the bank’s June 19 decision to raise the VND/US$ rate by 1% will help boost exports and not put pressure on inflation control efforts.

Director of the SBV's Monetary Policy Department Nguyen Thi Hong said in the context of a stable monetary market with inflation in check, the rate adjustment is expected to stimulate exports, which grew at a robust 15.4% in the first five months of the year.

In the reviewed period, Vietnam enjoyed an export surplus of US$1.6 billion while the international balance of payments saw a record surplus of more than US$10 billion, raising the central bank’s foreign reserves to a record high of US$35 billion.

Hong added that as inflation remains low, as evidenced by the May consumer price index (CPI) rise of only 1.08% over late 2013, the new rate should have minimal, if any, impact on the inflation control target set by the Government.

The bank’s monetary policy has so far this year helped stabilise the macro-economy and contain inflation at a low level. The national CPI in May inched up just 0.2% compared to April and a modest 4.72% over the same period last year.

The ceiling interest rate is now lower than it was in late 2013 while supply and demand of foreign currencies are ensured.

According to Hong, the adjustment does not come as a surprise to anyone as the SBV announced its directions for the monetary policy and banking activities, including the forex rate adjustment.

Businesses and credit institutions have had ample opportunity to modify their operational plans to accommodate the adjustment as required.

The forex exchange rate adjustment will more likely than not spur exports in the remaining months of this year to support economic expansion, she said.

She revealed the central bank will keep a close watch on the forex market and introduce a series of measures to stabilise it in line with the new ceiling level.

 As of June 19, the new interbank exchange rate is VND21,246 per dollar, up from VND21,036 per dollar

In the remaining months of this year, the SBV will continue to actively pursue a flexible monetary policy to control inflation within the set target’s level, stabilise macro-economy, support economic growth and ensure safe operations of credit organisations, Hong said.

According to financial analysts’ at the Hong Kong and Shanghai Banking Corporation (HSBC), the adjustment is inconsequential, and should not have much effect on businesses and commercial banks nor have any devaluating effects on the Vietnam Dong.

The Vietnam Dong is well supported by improved exports and low import growth, they say.

In addition, foreign direct investment (FDI) in Vietnam has begun to increase to US$1 billion a month on average, helping the central bank to continue to raise its reserves.    

Middle East, Africa potential untapped

Vietnamese firms should be proactive in boosting exports to the promising African and Middle Eastern markets, a seminar heard in HCM City on Thursday.

Together, the two regions have 70 countries with a population of more than 1.2 billion and a huge demand for all kinds of goods, especially consumer goods, offering great potential for Vietnamese exports, said Pham Trung Nghia, deputy director of the Middle East, Africa, West and South Asia Markets Department, said.

African countries need consumer goods, food and foodstuff, machinery, and drugs while the Middle East needs food and foodstuff, agricultural produce, seafood, and consumer goods, he said, adding that Viet Nam is capable of meeting all these needs.

"Many Vietnamese products have won trust among African consumers and the Middle East, with its high per capita GDP, has high purchasing power and payment capability," he said.

He noted that Viet Nam's trade with Africa and the Middle East has risen sharply in recent years, reaching US$4.3 billion and $9.6 billion respectively last year compared to $3.49 billion and $6.6 billion in 2012.

Vietnamese investment in African countries has increased recently, mainly in telecom and oil and gas, and many companies plan to set up factories to process cashew and timber in Africa, he said.

Many African and Middle-Eastern firms too have invested in Viet Nam in many sectors including industrial processing, wholesale, retail, information technology, oil refining, infrastructure development, dairy farming, and steel.

Despite the potential, a lack of information about each other as well as differences in culture, religion, and business practices have prevented trade with the two regions from fulfilling their potential, the seminar heard.

Besides, there are still risks Vietnamese companies face while doing business with them, including payment issues, Nghia said.

To avoid this, payment should be made by banks using letters of credit and exporters should negotiate with importers at least 30 per cent advance payment, he said.

Since each country in the two regions has its own import regulations, enterprises should study the markets carefully, delegates said.

Besides, food, pharmaceuticals, and cosmetics exported to the markets must have Halal certification, they said.

Bui Thi Thanh An, deputy head of the Viet Nam Trade Promotion Agency in HCM City, said Viet Nam has diplomatic relations with all African and Middle Eastern countries, creating favourable conditions to boost exports as well as investment.

Viet Nam's main exports to Africa and the Middle East are agricultural produce, mobile phones, computers and accessories, seafood, coffee, garment and textile, footwear, and pepper.

It imports crude oil, copper, liquefied gas, feedstock for plastic, cashew, and wood.

The seminar was organised by the agency and department.

New project targets large scale emissions reductions

The Support to the Nationally Appropriate Mitigation Actions (NAMAs) Project in Viet Nam was officially launched yesterday in Ha Noi by the Ministry of Natural Resources and Environment and the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ).

NAMAs is an integrated, national scale mitigation project that allows potentially large-scale emission reductions by aligning national socio-economic development goals into preventative activities.

The project is being co-implemented by GIZ and the Viet Nam Institute of Meteorology, Hydrology and Environment.

It will run from 2014 to 2018 with a budget of up to four million euros (US$5.4 million) as part of the International Climate Initiative.

The German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety is supporting the initiative following a decision adopted by the German Bundestag.

The overall objective of the project is to strengthen State management in response to climate change, and these efforts will monitored throughout. Attracting domestic and international funding will also be a priority.

These efforts will help realise the government's greenhouse gas emission reduction targets under the National Green Growth Strategy.

The best practices and lessons learnt from this project are expected to benefit local NAMAs projects and other countries through regional and global dialogues and peer-to-peer exchanges.

Banks eye bonds to capitalise on low rates

After companies, it is now the turn of banks to issue bonds to take advantage of the low interest-rate regime to raise funds and also, in some cases, increase Tier II capital to achieve capital adequacy.

Bond coupon rates now stand at very low levels. Interest on government bonds have fallen by 110-120 basis points (100 basis points equal 1 percent) since early this year to 5.6 percent for those with a two-year maturity, 6.1 percent for three-year bonds, and 7.1 percent for five-year bonds.

Ho Chi Minh City Development Commercial Joint Stock Bank (HDBank) plans to issue three-year bonds to a group of individual investors, according to its preliminary prospectus.

This is part of the bank's plan to raise a total of 1.4 trillion VND (66.35million USD) this year to augment its long and medium-term funds to meet companies' credit needs.

Two major State-owned banks are also completing procedures to issue bonds.

One of them plans to issue five-year bonds worth 2 trillion VND (94.78 million USD). The other will issue 10-year bonds that will increase tier II capital and improve its capital adequacy ratio (CAR).

Early this year the Investment and Development Bank of Vietnam (BIDV) had revealed that it was considering an issue of bonds to increase its tier II capital to achieve CAR stipulated by international norms.

Analysts said one of the above bond issues would carry a coupon of only 7.5 percent, just 1.4 percent higher than the rate on government bonds with the same maturity.

In the past the gap used to be much bigger.

Just last October HDBank issued three-year bonds at 10.5 percent interest, which was 3-3.5 percent higher than that of comparable government bonds.

Some medium-sized banks plan to issue bonds at 2 percent higher than government bonds.

Banks' bond issuance is starting earlier this year than last when the first issue only took place in August.

DBJ becomes Fecon's strategic partner

Vietnam’s one of leading contractors Fecon Foundation Engineering and Underground Construction JSC today signed a strategic investment and cooperation deal with the Japan Southeast Asia Development Fund of the Development Bank of Japan (DBJ).

Under the deal, DBJ will spend VND195 billion ($9.3 million) buying Fecon’s convertible bonds for the year 2014 to become the latter’s strategic investor.

Fecon will use the money to innovate the firm’s equipment and strengthen its construction capability at major on-going projects, including Nghi Son petrochemical plant, Thai Binh 1 thermal power plant, Danang – Quang Ngai expressway, Kyoei Steel Ninh Binh plant and many other projects in the coming time.

Not only participating in financial investment, DBJ is also committed to supporting Fecon to improve management capacity, broaden market and strengthen the relationship with Japanese investors in infrastructure and other foreign invested projects in Vietnam.

Besides, the Japanese partner also mulls introducing top reliable partners from Japan to help Fecon access to and make the most of modern technology transfer (especially in its core field of foundation construction). The access to state-of-the art technologies from Japan will help Fecon boost capability in core activities, effectively serving to the company’s sustainable development target.

DBJ, entirely owned by the Japanese government, reported $172 billion in total asset value and $3.6 billion in total incomes last year. DBJ has been operating in Vietnam in the 1990s through providing loans to and engaging in share investments into Vietnamese enterprises.

Last year, Fecon scored VND1.2 trillion ($57 million) in the total revenue and more than VND116 billion ($5.5 million) in net profit. 2014 is the second consecutive year Fecon was listed among top 50 businesses in Vietnam’s stock market by Forbes Vietnam magazine.

Steel firms lobby against policy favouring Hoa Phat

Both local and foreign firms are claiming that a government decision to ban the export of iron ore is benefiting only a single company – Hoa Phat Group.

In early June, a number of steel manufacturing firms (both local and foreign joint ventures) signed and sent a proposal to the Vietnam Steel Association (VSA), claiming that the government decision to prohibit iron ore exports was detrimental to their performance.

According to the proposal, the main reason behind steel firms’ poor performance was not economic difficulties or the flat lining property market but primarily because of the block on exports.

The signatories said that only one firm, leading steel maker Hoa Phat Group (HPG), benefited from the policy, while most others were in doldrums.

“The ore price in the domestic market has declined sharply, from VND2,200 per kilogram to only VND1,200 per kilogram, a half of that of the world market and entirely due to the government’s decision, Naturally, mining sites have been put in a fix with sliding incomes and these price differences have mostly benefited HPG, which is the leading buyer in the market,” the proposal claimed.

The steel firms also said that “HPG proposed banning ore exports and promised to buy processed ores at a price at least equal to that of the export price. Now it’s buying them at half the world price, directly against its pledge.”

“With material prices only half of what other firms spend on input materials, as they mainly buy steel scrap, HPG has manipulated the market and driven steel firms into hardships,” the proposal noted.

In fact among leading steel makers, only two firms – Thai Nguyen Iron and Steel Corporation (Tisco), also a top player, and HPG – are using blast kilns for ore processing while the rest import scrap for processing.

While Tisco mainly sources ores from mining sites under its management, HPG is the leading buyer of iron ores in the domestic market, so it is clearly the biggest beneficiary of the government decision to ban ore exports.

Last year Tisco turned out 386,619 tonnes of steel billet, 197,629 tonnes of blast-kiln iron, 484,078 tonnes of rolled steel and had reported revenue of VND7.478 ($356 million). But the firm still suffered VND288 billion ($13.7 million) in losses.

This year Tisco has projected turning out 190,000 tonnes of blast-kiln iron, 410,000 tonnes of steel billet, and 596,000 tonnes of steel with a modest profit of VND35 billion ($1.6 million).

With about 9 per cent of rolled steel market share, Tisco currently ranks third behind Pomina and HPG, according to the VSA ranking.

Meanwhile, HPG’s market share jumped from 13.7 per cent in 2012 to 15.2 per cent by late 2013.

Last year the firm scored 12 per cent and 95 per cent growth in its revenue and after-tax profits with VND19.2 trillion ($914 million) and VND2.01 trillion ($95.7 million), respectively.

In steel production and related business, the group posted VND1.668 trillion ($79.4 million) in post-tax profits, more than double that of 2012’s VND730 billion ($34.7 million).

Dentsu Aegis Network Vietnam has new CEO

Dentsu Aegis Network today announced changes in its leadership team in Vietnam as part of the next phase of integration between the former Dentsu and Aegis brands.

The combined network, which employs 162 people in the country, named Toshinori Aoki the chief executive officer for the group’s operations in Vietnam.

He will step into his new role starting from July 1.

With innovative brand building at its core, the Dentsu Aegis Network will continue to provide integrated solutions to clients in Vietnam by tapping into the presence of its strong agency brands in the country: Dentsu Vietnam, Dentsu Media Vietnam, Dentsu Alpha, Carat and iProspect.

“We are lucky and blessed to have so many talented and passionate people in our network and I believe that Aoki is the right person to steer the network in Vietnam into the next era,” said Dick van Motman, chairman and CEO, Dentsu Aegis Network Southeast Asia.

“Vietnam, with all its promise, is of extreme importance to us, and I’m confident that with his experience and understanding of the market, Aoki can take on this challenge,” he added.

Aoki, currently chairman and managing Director at Dentsu Alpha, will lead Dentsu Aegis Network Vietnam and work closely with the respective agency heads of all the Dentsu Aegis Network brands to drive the day-to-day operations in Vietnam.

He’s had more than 25 years in the creative industry with experiences across the media and account services division locally and abroad.

“As one of the biggest emerging economies, Vietnam is set to become a greater force in this region. In terms of organic growth, the new structure allows us to be more agile and client-centric in the way that we do our business. I am excited to be a part of leading the company into the next phase of growth and to chart our future course,” said Aoki.

As part of Dentsu Inc., Dentsu Aegis Network, active in brand, media and digital communications services, is headquartered in London and operates in 110 countries worldwide with over 23,000 dedicated specialists.

Online food delivery marketplace wins European Tech Startup Awards

Leading online food delivery marketplace foodpanda/hellofood was just selected as the best ecommerce startup at 2014 European Tech Startup Awards “The Europas” on June 10, 2014 in London.

The company was also honoured with vote of confidence by a group of expert judges as well as public vote.

With services in over 40 countries since its launch less than two years ago, the company startup has proven to be one of the most exceptional startups worldwide.

Besides its successful worldwide expansion, foodpanda/hellofood has reached another milestone by partnering with over 30,000 restaurants worldwide.

Recently foodpanda started its service in the Philippines.

Its global managing director, Ralf Wenzel said “It’s a great honour for us to be awarded for our achievements of the last months. We are on an enormous growth track and we look forward to bring this proven business model everywhere and become the number 1 choice platform for our customers.”

Founded in 2009, The Europas are the premier awards for Europe’s best startups.

The awards celebrate the most forward thinking, progressive and innovative tech companies in Europe.

The online marketplace helps restaurants to increase delivery sales through online and mobile platforms and provides them with constantly evolving technology and analytics.

Customers can choose their favorite meals online and foodpanda processes the orders directly to the restaurants, which deliver the meal to the customers.

Indian animal feed suppliers to explore Vietnam market

A delegation of animal feed suppliers from India will join a seminar in Ho Chi Minh City on Wednesday to meet potential local importers and producers and establish future business relationships.

They are on a fact-finding trip to explore new opportunities in the Southeast Asian market, which imported $4 billion worth of animal feed and raw materials last year.

Those Indian suppliers are the members of the Solvent Extractors’ Association of India (SEA), an apex body of the solvent extraction industry in India with over 850 members comprising manufacturers, processors and exporters in the South Asian country and abroad.

Their main job is to process oil cakes, oil seeds and rice bran in modern solvent extraction plants, and to produce the extractions or meals of rapeseed, soybean, groundnut, copra, de-oiled rice bran, sal seed, cottonseed, sesame seed, mango kernel, safflower seed and sunflower seed.

Those animal feed products, which have passed strict quality control tests, can be used for poultry and cattle as they contain high nutritional value with a protein content ranging between 15 percent and 50 percent, said SEA.

The fact-finding trip and the seminar are held to strengthen relations with end users of Indian De-oiled Meals in the Far East countries and to explore new markets for oil meals, according to the SEA.

They are also meant to undertake on-the-spot studies on overall demand and to understand quality requirements of oil meals by end users, they added.

It will offer both Indian and local firms a chance to study the overall feed industry, the supply and demand of feed ingredients and to enhance mutual co-operation between suppliers and importers.

India is one of the world’s leading oil seed producers with total production currently standing at over 30 million tons per annum.

Indian exports account for over 5 million tons of oil meals annually.

Piaggio Vietnam's production reached more than 410,000 units

More than 410,000 two-wheelers have been manufactured by Piaggio Vietnam’s manufacturing complex in the northern province of Vinh Phuc since the the start-up of the group’s operations six years ago.

The figure, which was announced at the visit of the Italian Prime Minister Matteo Renzi to Piaggio Vietnam’s factory today, include 220,000 Vespa scooters, for sales on all the group’s main markets in Southeast Asia and Asia Pacific such as Vietnam, Indonesia, Japan, Thailand, Singapore, China, Australia and New Zealand.

Piaggio Vietnam’s current products include Vespa LXV, Vespa GTS, Vespa Primavera, Piaggio Liberty, Fly and Zip scooters.

According to the company’s statement, Piaggio Vietnam’s production capacity is around 120,000 units per year while its engine production facility could reach 300,000 engines per year.

3 big Vietnamese firms join in $566mn cattle project

A multifaceted group has joined hands with a major dairy producer and a leading cattle-slaughtering company in a multi-million-dollar project that will raise cows and bulls for meat and milk in Vietnam's Central Highlands.

Hoang Anh Gia Lai Group, Vissan, and NutiFood inked the cooperative deal for the project that will include as many as 236,000 cows on Monday.

The property developer HAGL will cover half of the VND12 trillion (US$566.04 million) investment required to raise the cattle.

NutiFood will earmark VND5 trillion ($235.85 million) to set up a fresh milk and yoghurt manufacturing plant, using raw materials from the project.

Meat supplier Vissan will cover the remaining investment.

HAGL will raise 120,000 meat cattle of Australian breed to supply to Vissan, which will slaughter the animals and distribute their meat domestically, chairman Doan Nguyen Duc said.

It will also breed 116,000 dairy cattle imported from Australia to supply raw milk to the NutiFood plant.

The first batch of the meat cattle will arrive at HAGL’s farm in the Central Highlands province of Gia Lai by the end of this month, Duc said. They will be raised for seven months before being taken to Vissan.

The first dairy cattle imported from Australia are expected to arrive late this year.

BUV receives formal approval as University of London registered centre

British University Vietnam (BUV) just received formal approval as a registered centre by the University of London international programmes.

BUV has been recognised for its commitment and quality of teaching to University of London banking and finance students in Vietnam which was commenced in 2011.

“We are so delighted that British University Vietnam has been recognised as a registered centre of University of London international programmes. This recognition shows our commitment to developing high quality education in respect of teaching, support to students and administrative processes for our student at our BUV campus,” said Chris Jeffery, dean of BUV.

“This collaboration involves both of our organisations working closely together in order to benefit students by enriching their learning experience. We are proud to be one of only 70 centres worldwide including London that has been awarded this status,” he added.

British University Vietnam is the first and only university in Vietnam fully licensed to deliver undergraduate degree programmes awarded by prestigious UK universities: the University of London and Staffordshire University.

The business programmes and international lecturers at British University Vietnam give students a well-rounded education with the learning skills, life skills and leadership skills to make them the most desirable graduates both in Vietnam and worldwide by global employers.

Vietnam strings out yarn forward rule

Vietnam may be allowed to stretch-out its implementation of the yarn-forward rule for the garment and textile industry if it joins the currently under-negotiation Trans-Pacific Partnership.

Minister of Industry and Trade Vu Huy Hoang said at the bi-annual Vietnam Business Forum held in Hanoi two weeks ago that Vietnam had asked the proposed Trans-Pacific Partnership (TPP) members for a ‘transformation roadmap” in implementing the yarn-forward rule, or rule of origin, to the country’s garment and textile industry.

“This proposal has been accepted in-principle by other countries,” said Hoang, implying that it could be approved once the TPP takes effect in the future.

“This means that in five years, or maybe more, if the garment and textile supporting industry is still underdeveloped, other TPP nations would still allow Vietnam to enjoy tax preferences under the TPP despite its importing yarns and fabrics from non-members,” said Hoang.

He said Vietnam introduced the proposal because the country was at a lower level of development than other TPP members. Therefore, it would be very difficult for the country to immediately implement the yarn-forward rule.

The TPP is a free trade agreement currently being negotiated by 12 countries including the US, Australia, Malaysia, New Zealand, Singapore, Japan, Mexico, and Vietnam.

The yarn-forward rule, under the TPP, requires that the yarns, fabrics and final garments exported within the TPP are produced in TPP countries. If Vietnam’s proposal is approved, it would allow garment and textile companies to export apparel   made from yarn and fabric imported from non-member countries such as China, duty free to the US and the TPP markets.

Hoang admitted that the yarn-forward rule was essential to preventing external players from benefiting from the agreement. However, he noted that Vietnam needed time to prepare.

“While implementing the roadmap, Vietnam has to urgently boost its supporting industry for the garment and textile sector. This is an opportunity for foreign investors to get into yarn and fabric manufacturing projects in Vietnam,” said Hoang, adding that Vietnam would welcome all foreign investors interested in this industry.

With its advantage of cheap labour, Vietnam is one of the biggest garment and textile exporters in the world. The country is an important manufacturing base of many brands such as Nike and Adidas.

Since Vietnam started negotiating the TPP, many foreign investors have announced they would increase their investments into the country’s garment and textile industry to enjoy duty-free exports to the US market and other TPP member states.

For example, South Korea’s Hyosung, the largest spandex producer in the world, announced it planned to invest an additional $50 million in the southern province of Dong Nai to expand production. China’s  Texhong Group has also invested in a $300 million textile factory in the northern province of Quang Ninh with a similar expectation of benefiting from the TPP.

Textile and garment sector aims to reduce China reliance

The Vietnam Textile and Apparel Association (Vitas) just sent a dispatch to businesses in the sector requiring them to supply data on their textile and garment materials and accessories, fibres, yarns, fabrics and dyes imported from China during 2013-2014.

“Based on the figures provided by firms, Vitas will have up-to-date figures on the types of materials and accessories imported from China, and will from there devise plans for investment and development of supply sources from the domestic market as well as sourcing output market distribution,” said Vitas deputy chairwoman Dang Phuong Dung.

Priority substitute markets for Vietnamese textile and garment firms to source materials are Thailand, South Korea, Indonesia and India, Dung added.

In the Ministry of Trade’s most recent periodical meeting reviewing the situation in May and the first five months, regarding measures to reduce imports from China, Deputy Minister of Industry and Trade Do Thang Hai said investing in domestic material production would be most sustainable for sectoral development.

In fact, domestic supply of fabrics has increased in recent years, but the production cost is still pricey and mostly higher than that of imported products.

Chairman of Garmex Saigon Le Quang Hung said the company had yet to find another market to supersede China in terms of price, after it conducted surveys in a number of regional countries such as Malaysia and Indonesia.

Last year, total import value of the textile and garment sector came to $13 billion. Of this, approximately $6 billion came from the Chinese market alone.

The import value of cotton, fibre, fabrics, and accessories in the first five months of 2014 was estimated at $5.7 billion, with more than half coming from China.

Current power supply allays foreign investor concerns

Power outages are currently not an issue for foreign investors, reported the Ministry of Industry and Trade.

Vu Huy Hoang, Minister of Industry and Trade affirmed to foreign investors last week at the bi-annual Vietnam Business Forum held in Hanoi that, “there are no outages in Vietnam at this time”.

Hoang’s statement was in response to Marc Townsend, chairman of the American Chamber of Commerce, who said that a lack of adequate infrastructure facilities in terms of power and transport had discouraged foreign investment to Vietnam.

Hoang asserted that, “Power supply in Vietnam has never been as good as it is now”. This was aimed at dispelling foreign investor concerns, as in the recent past power shortages had severely affected their operations.

He admitted that there were outages in some parts of the country, but that they were caused by weak transmission systems, and not a supply shortage.

According to the Ministry of Industry and Trade (MoIT), the nation’s electricity generation in the first four months of this year rose 10.28 per cent on-year, reaching 41.9 billion kilowatt hours.

Hoang said this was enough to meet the current electricity consumption demand throughout the country. He added that current electricity reserves were around 20-30 per cent of total generation capacity.

Though Hoang did say there were no outages at this time, he did not address the issue of future outages as demand rises commensurate with economic recovery.

Power shortages have been one of the biggest concerns of foreign investors in Vietnam for many years. To deal with the problem, many companies such as Intel and Formosa built their own power plants to supply their manufacturing facilities.

The Vietnamese government has plans to build more new power plants to ensure national energy security, but most of the projects are moving slowly.

Tran Viet Ngai, chairman of the Vietnam Energy Association, said the government must push up the construction of power plants to increase supply by 2015, when he believes the country could face a severe power shortage due to rising demand.

In order to accelerate the construction of new power plants, last year the government ordered the MoIT to adjust the national electricity development master plan for the 2011-2020 period. The ministry, however, has not yet given any information on the revised content.

According to the government, the construction of many power projects, particularly those in the south, have been delayed, requiring additional supply from the north and central regions to be sent to the south. This threatens the supply security of the entire power system.

Villas and land plot sales competing with apartments

While apartment sales continue along a downward trend, developers of land plots and villas are hoping to attract buyers by reducing their prices.

Traditionally, villas and land plots in Vietnam have been the most valuable property and their prices have remained commensurately high.

However, due to low sales of villas and land plots, developers have decided to lower their asking price, making it more affordable to those who might otherwise buy apartments.

Recently, the developer of a villa project in Hanoi declared that it would sell villas for between VND1.4 to 1.6 billion ($66,600 to $76,200). Furthermore, the developer was offering a VND200 million ($9,500) discount.

In the New House project located on the outskirts of Hanoi, the developer has priced villas as low as VND8 million ($380) per square metre. This price is even cheaper than most units currently on Hanoi’s property market, which mostly range from VND15 to 20 million ($710 to $950) per square metre.

Land plots on the fringes of Hanoi’s central business district such as on Dai Co Viet and Tran Khat Chan are being sold for between VND30 to 35 million ($1,400 to $1,600) per square metre. Those prices, although slightly higher than other land plots, are in line with the pricing of apartment projects nearby.

According to CBRE Vietnam, during the first quarter of this year, the land plot sector saw signs of growth, because many developers had reduced their prices to entice customers.

There were no new housing project launches in the first months of the year, apart from the re-launch of the Ao Sao, Xuan Phuong and Dai Thanh projects whose housing prices range from VND2 billion to VND3.5 billion ($95,000 to $166,000).

CBRE also noted that some recently-launched projects are applying attractive prices that undercut the pricing of many condominiums or residential land in the same district. For example, the Ao Sao project is being sold at VND20 million ($950) per square metre; Dai Thanh from VND26 million ($1,200) per square metre; and Tan Tay Do which is only VND13 million ($620) per square metre.

“This illustrates the emerging trend that the housing market is competing directly with low- to mid-priced condominiums in the VND2-3 billion bracket,” said CBRE.

Land plots in Nam Anh Khanh’s new urban area are now being sold for VND18 to 20 million ($860 to $950) per square metre.

Meanwhile, prices in the Le Trong Tan – Hadong urban development project are only VND15 million ($714) per square metre. This price was reduced by more than 50 per cent compared to 2010.

Price reductions have also been recorded in projects with little activity in the outlying districts of Hanoi such as Me Linh and Quoc Oai.

In an attempt to promote sales, developers are now offering unprecedented payment terms. For instance, buyers in the first phase of Gamuda Gardens (part of Gamuda City) can now move in after payment of the first 20 per cent. The remaining 80 per cent can be made over four years at zero interest.

According to figures from Ministry of Construction, Hanoi now has more than 3,000 unsold low-rise villas. Those villas are mostly in projects far-removed from the city centre, and often are without vital infrastructure. Such projects include Nam An Khanh, Van Khe, An Hung and Kim Trung – Di Trach.

Figures from the Ministry of Construction reveal that Hanoi has recorded more than 2,300 successful transactions across the entire property sector in the first quarter. In the same period, more than 1,500 villas were sold, which is double the amount compared to the same period of last year.

Important destination for real estate investors

A large number of economists said that the real estate market of Viet Nam is attractive after bottoming out and showing signs of recovery.

Mr. Dang Duc Thanh, Dean of the Viet Nam Economists Club said that real estate prices in Viet Nam fell by a half against 2007 and costs of numerous departments bottomed out.

In the period from Q3, 2014 to early 2015, the domestic real estate market would recover if the Government continues to support enterprises to handle high inventory levels and non-performing loans and raise liquidity for the real estate market so that buyers and sellers would be able to meet each other.

According to Mr. Neil MacGregor, Managing Director of Savills Viet Nam – a real estate developer in Viet Nam, the domestic real estate market is in an attractive period.

Mr. Neil MacGregor said that Viet Nam is standing at the bottom point of a real estate cycle when other Asian markets remain at the other side and are likely to be on the decline in the next few years. Hence, Viet Nam serves as an important destination for investors in Southeast Asia.

He also revealed that customers of Savills Viet Nam from Japan, Singapore, and the Republic of Korea are intending to join long-term and large-scale projects on housing development in Viet Nam.

Phan Thanh Mai, Secretary General of the Viet Nam Real Estate Association said that eight commercial banks are piloting a program to connect investors, bidders, material providers and banks to remove difficulties and handle high inventory levels in the real estate market. The move has defrosted the real estate market.

First quarter sees thousands of company closings

Consequences of the recession still haunt Vietnam's economy, as nearly 28,000 enterprises are reported to have shut their doors in the first five months of 2014.

According to a report from the Business Registration Office of the Ministry of Planning and Investment, in the first five months of the year, 31,228 enterprises were established, with over VND173 trillion (USD8.2 billion) in registered capital. However, the number of enterprises that stopped operations is 27,867, an increase of 20.5% compared to same period last year.

In fact, over 18,000 out of 27,867 firms have effectively ceased operations, but have not yet completed the legal procedures to reflect the fact. These companies were included in the report so as to give a realistic view of Vietnam's economic situation.

The report also pointed out that, even though rescue packages from the government and agencies have shown to be effective, domestic firms still face many difficulties.

According to surveys conducted by the General Statistic Office, private firms have the highest rate of closure, followed by FDI firms and state-ownd enterprises. Of those surveyed, 58.7% of enterprises said they had to shut down because they could not find reliable markets for their products.

Many enterprises said that this year the market is showing signs of more opportunities than last year, but expectations are still not high. Of the enterprises surveyed, 55.8% said they could not make exact assessments of the the supply and demand situation, while 50.5% planned on not taking out business loans.

The Ministry of Industry and Trade and the Chamber of Commerce and Industry of Vietnam are said to have played little role in supplying information to enterprises as far as international markets, having a great impact on the success or failure of domestic firms, particularly those specializing in export.

Banks in deal to support real estate market

Eight banks have entered into an important cooperation deal to provide financial support for property developers, contractors and building material suppliers in an effort to reduce high inventories in the building material and real estate sectors.

The cooperation deal was signed on Wednesday by the Bank for Investment and Development of Vietnam (BIDV), the Vietnam Bank for Agriculture and Rural Development (Agribank), the Bank for Foreign Trade of Vietnam (Vietcombank), the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), Mekong Delta Housing Development Bank (MHBank), the Vietnam Construction Bank (VNCB), Saigon-Hanoi Bank (SHB) and Lienvietpostbank.

BIDV is the lead institution in the group in implementing the deal with the property developers, contractors and building material suppliers.

According to the credit department of the central bank, the cooperation deal would benefit all the parties involved, not only the banks and property developers, contractors and building material suppliers but also home buyers and the economy as a whole.

Previously, some banks developed credit packages to link property developers, contractors and building material suppliers but the result was not generated as wished since banks competed with one another to attract clients. Therefore, the central bank has assigned BIDV to team up with other banks in providing loans for corporate borrowers.

The cooperation is expected to breathe new life into the local construction sector and property market which are still grappling with a host of challenges related to loan access and huge inventories. Experts said housing projects in urban areas and new township developments would benefit most from the cooperation.

In the past years, the Government and its agencies have taken steps to fuel recovery of the economy and the market. For example, early last year, the Government issued Resolution 02 extending support to production, sales and bad debt settlement.

Nearly one year ago, the central bank and the Ministry of Construction launched a VND30-trillion low-cost home loan program for housing projects and low-income buyers but the local property market has not shown clear signs of recovery.

Ministry takes punitive measures against expressway contractors

The Ministry of Transport said it will lower payments for some contractors involved in the Cau Gie-Ninh Binh Expressway project as some stretches of the road have sunk or cracked after a short period of inauguration.

The ministry said in a statement issued on June 12 that Vietnam Expressway Corporation (VEC) had been told to withdraw and deduct more than VND2.1 billion from its payments for the contractors.  

The payment deduction will hit the contractors in packages No. 5 and No. 6 as well as a cost reduction by half for project adjustment for Transport Engineering Design Inc. Besides, the supervision fee of QCI of Cuba is also cut.

The ministry has banned QCI and two units under an equipment and technology consulting and construction auditing firm and Transport Construction Co. Ltd. No. 481 from participating in any projects invested by VEC over a period of two years. In addition, the ministry will not allow 10 Cuban consulting engineers to work as supervisors at transport works in Vietnam.

The ministry has criticized staff of advisory departments, including the Planning and Investment Department and the Transport Construction and Quality Management Bureau.

In March this year, State Audit detected many problems regarding plan preparations for Cau Gie-Ninh Binh Expressway, which cost nearly VND9 trillion.

After being put into use for a while, the 50-kilometer-long expressway connecting Hanoi and Ninh Binh Province has sunk or developed cracks at many sections.

The same problems were also found on the Uong Bi-Halong section of National Highway 18 one week after it was opened to traffic last month. As a consequence, three officials of the project management unit were suspended from their positions.

SKEZ needs US$311 billion for development toward 2020

The total capital needed for development in the Southern Key Economic Zone (SKEZ) until 2020 will amount to US$311 billion, according to a new master zoning plan for the region.

The Ministry of Planning and Investment last week announced the plan for socioeconomic development with a vision toward 2030 and a master socio-economic development plan for the key Mekong Delta until 2020 with a vision toward 2030.

The master plan envisages SKEZ development until 2020 will cost US$311 billion, 1.82 times of the country’s gross domestic product last year, with 30-31% contributed by the State budget.

Vice Minister of Planning and Investment Dang Huy Dong said this was an initial calculation and that this amount would be sourced from the State budget and other sources including from overseas.

According to the Development Strategy Institute under the ministry, the huge investment would be prioritized for the projects related to transport infrastructure development, high-tech, high-quality services and high-quality agriculture.

The projects include HCMC-Long Thanh-Dau Giay, Ben Luc-Long Thanh and HCMC-Moc Bai expressways, belt roads No. 3 and No. 4 in HCMC, upgrades of national highways 1, 51, 22B and Ho Chi Minh Road, phase one of Long Thanh International Airport, and upgrades of Tan Son Nhat and Con Son airports.

Duong Quoc Xuan, deputy head of the Southwest Steering Committee, called for the ministry to pay more attention to the most important projects for development and give priority to the traffic projects as underdeveloped transport infrastructure would hinder the region’s growth and development.

SKEZ groups HCMC, Dong Nai, Ba Ria-Vung Tau, Binh Duong, Long An, Tay Ninh, Binh Phuoc and Tien Giang.

Under the master zoning plan, manufacturing will be moved from HCMC to neighboring provinces like Tay Ninh, Long An, Binh Phuoc and Tien Giang. Large-scale industrial-service-urban complexes in Dong Nai’s Long Thanh District, Ba Ria-Vung Tau’s Phu My new city and Binh Duong industrial-service-urban complex are also envisioned in the plan.

Investments will mainly go to service, industry, science and technology in SKEZ and HCMC will serve as the hub of the region. Ba Ria-Vung Tau Province will be the hub for port and logistics services, petrochemical and supporting industries.

The plan also envisages fruit farms, industrial clusters and border gate economic zones in Tay Ninh and Binh Phuoc. Meanwhile, Long An and Tien Giang will play an important role in ensuring food security and food for export.

In the master plan for the Mekong Delta, Can Tho, Ca Mau, An Giang and Kien Giang will become key food, seafood and fruit producing areas. The region will also be the country’s energy center with three major power centers, namely O Mon, Ca Mau and Kien Luong.

Agribank’s top leaders appointed

Top leaders have been approved by the central bank for Vietnam Bank for Agriculture and Rural Development (Agribank), the largest bank in Vietnam in terms of capital, assets and workforce.

The State Bank of Vietnam on June 9 announced a decision appointing new members of the management board and board of directors of the bank, a move expected to kick off the bank’s restructuring scheme to help the lender improve operations.

Under the decision, the bank’s CEO Trinh Ngoc Khanh is now named board chairman, while Pham Duc An, former deputy general director of Bank for Investment and Development of Vietnam, is appointed vice board chairman.

Tiet Van Thanh, deputy general director of Agribank, now serves as a board member and CEO of the bank.

The State Bank of Vietnam also appointed five other board members for Agribank, with four of them formerly being senior officials of the central bank.

According to Agribank’s website, its total outstanding loans totaled VND530.7 trillion as of May 25, including over VND380.5 trillion extended for the agriculture and rural development.

However, the State Audit of Vietnam in the 2013 audit report hinted unhealthy operations of the lender.

In 2012, Agribank repeatedly violated safety ratios. Its return on equity (ROE) was 5.39%, a strong drop compared to 7.11% in the previous year, the report said.

Ending 2012, Agribank reported credit growth rate of 10.22% but its bad debt ratio was 8.16%, surging by one-third year-on-year.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

exchange rate, Hoa Phat Group, Piaggio Vietnam, real estate market
 
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