BUSINESS IN BRIEF 18/6

Petrol price hike hits markets

The unexpected rise in petrol prices on June 14 hit the stock market on the first trading day of the week on June 17 with indices falling on both major exchanges.

Steeper declines for large-cap shares in the afternoon pushed the VN-Index down by a further 11 points, or 2.06 percent, to close the day's session at 498.52 points.

On the Ho Chi Minh Stock Exchange, up to 25 of the top 30 shares by market capitalisation and liquidity lost value.

The biggest losers included Southern Rubber Industry (CSM), property developer Hoang Anh Gia Lai Group (HAG), PV Gas (GAS), software giant FPT Corp (FPT) and steelmaker Hoa Phat Group (HPG) with losses ranging between 2 to 6 percent.

The VN30 was also down 1.82 percent to 552.73 points.

However, trading remained positive, with market volume up 25 percent from the previous session to 75.8 million shares and fund certificates worth 1.4 trillion VND (66.7 million USD).

Tan Tao Investment Industry Corp (ITA), the most active code on total trades of over 5 million shares, closed down 4.94 percent at 7,700 VND (0.37 USD) a share.

The poor performance of the southern bourse also weighed on the Hanoi Stock Exchange, with the HNX-Index falling 1.23 percent to 64.82 points.

Market conditions were negative as 155 codes slumped, 68 advanced and 47 closed flat.

However, the trading volume was up 50 percent from a day earlier, to more than 54 million shares worth 430 billion VND (20.5 million USD).

Sai Gon-Ha Noi Bank (SHB) was again the most active on the northern bourse with nearly 10.3 million shares changing hands, but the shares slipped 2.8 percent to end at 7,000 VND (0.33 USD) per share.

Foreign investors concluded the day as net sellers on the HCM City market, unloading shares worth 76.7 billion VND (3.7 million USD), but they were net buyers on the Hanoi market with a slight margin of 3.3 billion VND (157,100 USD).

Vietnam, EFTA hold FTA negotiations

The fourth round of free trade agreement (FTA) negotiations between Vietnam and the European Free Trade Association (EFTA) was held in Oslo, Norway, from June 3-7.

More than 70 delegates from Vietnam and the four EFTA members (Switzerland, Norway, Liechtenstein, and Iceland), as well as the EFTA Secretariat took part in the event.

Talks were focused on opening the market for goods, especially farm products, services and investment. They reached consensus on a number of issues related to legal affairs and institution, trade services, trade facilitation, safeguard measures, and rules of origin.

According to the Vietnam Ministry of Industry and Trade, the negotiations were conducted in an atmosphere of openness and mutual understanding.

The two sides agreed to consult internally before the fifth round due to take place in Hanoi in August 2013.

Last year, EFTA signed a memorandum of understanding with Vietnam, recognising the country’s market economy status and agreeing to kick-start bilateral FTA negotiations.

During a visit to Vietnam in April 2013, Norwegian Minister of Trade and Industry Trond Giske voiced his government’s support for the signing of a FTA between Vietnam and EFTA, creating a legal framework for both sides to increase business cooperation and investment.

Herbal medicine firm chairman arrested

The chairman of Bao Long Medical Group, a Vietnamese famous producer and trader of herbal medicine, has been taken to Hanoi for questioning following his arrest in HCM City on Saturday.

On Saturday, July 15, the HCM City Police arrested Nguyen Huu Khai following approval from the Hanoi People's Procuracy. The arrest was made following allegations that Khai had violated the law and appropriated assets already sold to the Bao Son Tourism and Construction Investment Group Joint Stock Company in violation of Article 142 of the Criminal Code.

His violations are under further investigation by the Hanoi Police.

According to the initial investigations, due to great losses, in March 2011, Bao Long Group had to sell its entire stake and assets as well as the product trademark to the Bao Son Tourism and Construction Investment Group Joint Stock Company. Later, Bao Son transferred VND227.5 billion (USD10.8 million) to Bao Long, however, Khai did not conform to the contract articles agreed by the two sides. He has continued appropriating these assets, causing losses to Bao Son. Therefore, the Bao Son Group has lodged its petition to investigation agencies.

Khai, 61, was born in a poor family in My Duc, Hanoi. His company is based in Xuan Thoi Thuong Commune, Hoc Mon District, HCM City. After returning from the army, studied at the Architecture University, but due to difficult conditions, he stopped and went to China. During the stay in China, he learnt many herbal remedies from an owner of pharmacy.

He was imprisoned for three years for his illegal trip to China on his return. After being freed, he returned his hometown to use the remedies learnt in China to provide treatments to locals. Later, he went to HCM City to work as a herbal doctor. In 1987, he set up a traditional medicine class in District 5. In 1993, he formed Bao Long Traditional Medicines Ltd. Co., in HCM City then he expanded the firm across the northern region.

In 2005, he built Bao Long General Hospital in Son Tay, Hanoi and worked with a range of academics and doctors. At that time, Bao Long Medical Group was expanded nationwide with more than 1,000 staff members. In 2007, he began construction on a martial arts school.

He was presented with many medals and cups for his successful business and charity activities. His life was portrayed in a Life Debt which was turned into a film broadcasted by VTV.

Ministry denies lead contamination in export rice from Vietnam

Nguyen Xuan Hong, head of Plant Protection Department under the Ministry of Agriculture and Rural Development, confirmed that quarantine measures have been tightened and that export rice from Vietnam is not contaminated with lead.

He made this statement after some US businesses expressed doubt over lead-contamination in Vietnamese rice.

According to Phung Huu Hao, deputy head of National Agro Fisheries Quality Assurance Department, the Vietnam Northern Food Corporation recently exported a large rice consignment to the US to American Rice Company in Texas.

However they faced opposition from other US rice trading companies and the transport vessel was not allowed to dock.

Vietnam Northern Food Corporation sent a delegation to the US to work with American Rice Company, proposing transfer of the consignment to another country to avoid unnecessary dispute which would affect the image of Vietnamese rice exports.

However the importer is still waiting for an analysis report from the US Rice Federation.

Mr. Hao said that Vietnamese rice is much cheaper than US rice, which might result in conflict.

US rice is priced up at US$625 a ton while Vietnamese rice costs only $400 a ton.

Vietnamese businesses optimistic about FTAs

A seminar was held in HCM City on June 17 to emphasize the need for domestic businesses to enhance competitiveness and effective use of human resources with the the framework of Free Trade Agreements (FTAs).

A representative from the Ministry of Industry and Trade (MoIT) said apart from boosting trade and diversifying exports, FTAs require close coordination between the State and private sectors in improving export-import business.

Hirotaka Yasuzumi, Executive Director of the Japan External Trade Organisation (JETRO) in HCM City, suggested both State agencies and businesses should have good planning.

Other experts spoke of the Regional Comprehensive Economic Partnership’s would-be benefits to ASEAN, FTA trends and the Generalised System of Preferences (GSP), regulations on the origin of goods in Asia, and the future application and implementation of FTAs and Economic Partnership Agreements (EPA) in Vietnam.

Largest poly-metallic mine to be operational soon

Vietnam’s largest poly-metallic mine in the northern province of Thai Nguyen is set to roll out its first products in the next few months, according to the Deputy Director General of Nui Phao Mining Company Limited, Vu Hong.

Hong said the construction work on Nui Phao poly-metallic mine at Thai Nguyen’s Dai Tu district has been basically completed three years after the project was started.

The mine, which has a total investment of US$500 million, will produce around 3.5 million tonnes of tungsten, fluorspar, bismuth, copper and gold a year, 80 percent of which will be exported.

The tungsten processing factory at the mine will use the latest technologies from Europe, Canada, the US, Australia and India.

More than 600 households had to relocate to make land for the mine, which is expected to create stable jobs for more than 1,000 local workers.

HAGL group builds airport in Laos

Vietnam’s Hoang Anh Gia Lai Group will invest US$74 million in a project to build Nongkhang airport in Houaphan province.

A spokesperson for the Lao Ministry of Construction confirmed on June 16 that representatives of the Lao Ministry and the Vietnamese Group have signed an airport building contract in Vientiane.

Under the contract, HAGL Group will build the airport which is designed to accommodate large planes such as ATR72s and FOK-KER70s.

The project is scheduled to be completed in 2015.

Located in north Laos, Houaphan was considered the country’s capital of war resistance during wartime. Today, its transportation and communication with capital Vientiane remain in difficulty.

Vietnam, Mozambique target US$100mln trade turnover

Vietnam and Mozambique are striving to raise two-way trade turnover to US$100 million by the end of this year, a forum was told in HCM City on June 14.

The Vietnam-Mozambique Trade Forum stressed with a large market of 24 million consumers, Mozambique shows great potential for exports, and serves as a gateway to a larger South African market.

Vietnam’s export earnings to Mozambique totaled US$85.67 million in 2012, up 20 percent from a year earlier. Its key exports include rice, cement, and steel products.

Vietnam primarily imports cotton, textiles, wood, and raw materials for tobacco production.

Forum delegates also encouraged Vietnamese businesses to take advantage of Mozambique’sincentive policies and investment opportunities, highlighting the African country’s agricultural, food production, trade, and tourism industries.

Mozambique’s Ambassador to Vietnam Gamilied Munguambe said his country attaches great importance to fostering its economic relations with Vietnam.

Mozambique is committed to promoting trade and investment with Vietnam through diplomatic visit exchanges, trade promotion programmes, and trade fairs, he said.

The Ambassador also described the advantages Mozambique can offer to foreign investors interested in the coal, fuel, energy, transport, telecommunications, banking, and financial sectors.

More China buyers seen at woodwork exhibitions

Chinese companies are shifting from selling exterior and interior wooden furnishing products and gifts to buying those items at exhibitions, offering a business chance for Vietnamese woodwork sellers, said German exhibition firm Messe Frankfurt.

At a press briefing in HCMC on Tuesday, Stephan Kurzawski, senior vice president of Messe Frankfurt, said Chinese customers mainly showcased products at exhibitions a few years ago but now they have become buyers. One feature of Chinese consumers is that most of them are middle-class people who show keen interest in sleek and unique products, instead of low-cost items.

He noted Chinese customers tend to sign contracts for big volumes with makers of wooden furniture products and gifts to supply restaurants, hotels and casinos in their country. Vietnamese enterprises should make the most of this opportunity to become middle- and high-class suppliers for Chinese customers, he said.

However, it doesn’t mean that wooden products sellers should have big brands, he said, adding a furniture supplier for the hotel management firm InterContinental is a small and medium enterprise at the Messe Frankfurt fair.

Messe Frankfurt, a fair and exhibition organizer in Germany, organized 109 exhibitions and fairs last year, with more than half taking place outside Germany.

The consumer goods fair Ambiente held by the company in Frankfurt in February attracted more than 4,680 companies from 81 nations, with 54 entities in the fields of ceramics, handicraft and interior decoration from Vietnam. Among 140,000 buyers at the event, only 106 are Vietnamese.

Shrimp exports top 1bln USD in H1

The country’s shrimp exports in the first half of this year was estimated to be worth 1.03 billion USD, increasing 1.5 percent over the same period last year.

However, the Association of Seafood Exporters and Producers (VASEP) forecast that shrimp exports into the US would hardly improve in the third quarter.

This is due to the US Department of Commerce’s (DOC) recent preliminary decision on anti-subsidy duties on frozen shrimp imported from seven countries, including Vietnam, VASEP explained.

The final decision would be issued in mid-August, according to VASEP, saying that it was possible Vietnamese shrimp would be hit by two taxes on the US market: anti-subsidy duty and anti-dumping duty.

Exports of shrimp into Japan were expected to increase by just 1-3 percent in the second and third quarters over the same periods last year.

The association said the devaluation of the yen against the US dollar caused difficulties for those exporting shrimp to Japan and the check of the Ethoxyquin level in shrimp continued to hinder shrimp exports to the market.

In European markets, shrimp exports would remain gloomy in the third quarter as the EU economy struggled.

Vietnam earned about 2.25 billion USD from shrimp exports in 2012, 6.3 percent lower than 2011. This year’s figure was expected to reach 2.4 billion USD.

Dung Quat refinery imports 300th lot of crude oil

The Dung Quat Refinery in central Quang Ngai province has received its 300th batch of crude oil, with a volume of 80,000 tonnes, from the Bach Ho field, about 145 kilometres off the coast of Vung Tau.

The refinery’s operator, Binh Son Refinery and Petro-chemical Company, released this information yesterday.

Since the refinery was put into operation in 2009, it has imported a total of 23.95 million tonnes of crude oil, of which 20.575 million were sourced from the Bach Ho field and other oil fields in Vietnam.

The company plans to increase the amount of crude oil imported from abroad to gradually replace that extracted from the Bach Ho field.

In the first five months of 2013, the Dung Quat refinery processed 3.1 million tonnes of crude oil to produce 2.7 million tonnes of products and generate over VND60 trillion (US$2.88 billion) in revenue.

Other crops’ problem striking Mekong Delta

Local experts and leaders of the Vietnam Food Association (VFA) have recently called for local farmers to resort to other crops given the third rice crop’s disadvantages but the question on how to ensure outlets for new products is still unknown.

At a conference held in the Mekong Delta city of Can Tho at the end of last month, Truong Thanh Phong, chairman of VFA, proposed provinces in the region to reduce farming areas of the third rice crop to develop other crops instead.

Phong ascribed his proposal to food oversupply worldwide, especially huge inventories in India and Thailand which have driven Vietnamese rice exports into difficulties.

However, Le Van Banh, director of the Mekong Delta Rice Research Institute, wondered what farmers would grow if they stop the third rice crop as well as who will look for outlets for their products then.

Several farmers said meager profits they earn from the third rice crop help them make ends meet and pay school fees for their children in the face of economic difficulties, Banh told the conference.

The local agricultural industry has encouraged farmers to switch to planting other crops and raising other animals but no relevant authorities dare to name those crops to be adopted accordingly, he stressed.

In fact, Can Tho University has repeatedly deployed the model of shifting from rice farming to other crops for years. But the problem is that the model only benefits small scale farmers, while bringing nothing if launched on a larger scale, Banh noted.

The proposal on shifting from rice farming in the third crop to others came after many experts had warned of the crop’s dark side, including small benefits, high production costs and bad environmental outcomes.

In 2009-2011, numerous provinces in the delta focused on enhancing the closed dyke system to grow the third rice crop to ensure food security and produce more rice for exports in line with the instruction of the Ministry of Agriculture and Rural Development.

At that time, the break of the dyke system in Sa Rai Town in Tan Hong District in Dong Thap Province caused heavy damages to the third rice crop in the locality, wasting billions of dong of farmers’ money and great efforts of the local labor force. In reality, the local government’s request on the crop development failed to gain the consensus of most local residents at that time.

Three dyke systems suffered breaks in Tan Hong in 2011, including the Ca Mui northern and southern sides and Ca Vang Field, causing damages worth over VND30 billion, said Phung Thanh Hai, chairman of Tan Hong District.

Regarding this issue, Nguyen Tri Ngoc, director of the Cultivation Department under the agricultural ministry, then told local media expanding the third rice crop in the Mekong Delta is the right policy with an aim of producing an additional one million tons of rice to serve local demand and exports as part of the national food security program. On the contrary, numerous scientists voiced their disagreements with the policy, citing the dangers caused by the crop.

VSA: Cut roofing sheet exports to avoid dumping charges

he Vietnam Steel Association (VSA) has advised producers of galvanized and color-coated roofing sheets to scale down exports and control prices of products sold to Malaysia and Thailand to avert possible dumping charges.

The steel associations of Thailand and Malaysia at a meeting last Tuesday continued filing their complaints about the influx of Vietnamese roofing sheet exports at low prices to these markets, said VSA.

The Malaysian Iron and Steel Industry Federation said cheap roofing sheets from Vietnam had recently been found overwhelming the Malaysian market, threatening domestic producers.

Similarly, the Thailand National Iron and Steel Industry Club said the volume of Vietnamese galvanized and color-coated roofing sheets exported to Thailand had been rising sharply.

The Thai side warned that if Vietnam did not have effective measures to restrict roofing sheet shipments, Thai companies would file a dumping case against Vietnamese exporters.

To ease the tension, VSA proposed producers of galvanized and color-coated roofing sheets curb exports and control prices of products sold to Malaysia and Thailand.

In the local market, Thai Trung Steel Co. with a production capacity of 500,000 tons per year started operation in May. Meanwhile, Middle Region Steel Co. with a capacity of 250,000 tons a year has been producing steel bars and is now switching to steel wire production.

An oversupply has caused a strong competition among domestic steelmakers, said VSA in a report on steel production in the first five months, which the Daily obtained on Wednesday.

Many steel firms in the north this May reduced their prices by about VND400-600 per kilo. Some companies cut prices 4-5 times a month to maintain market share.

On May 30, VSA asked large companies such as Hoa Phat, Thai Nguyen Iron & Steel, Vietnam Italy Steel and Vietnam Germany Steel to stabilize prices and maintain a healthy competition, and stop price guarantee measures to prevent price conflicts from damaging the entire industry. However, after just over a week, steel producers continued to slash their prices, disturbing the northern market.

As local supply exceeds demand, businesses are forced to boost exports, but they run into anti-dumping cases and self-defense measures adopted by some countries to protect their producers.

There are some 20 companies producing and exporting galvanized and color-coated roofing sheets to Malaysia, mainly in the southern provinces. The total roofing sheet production capacity is 2.6 million tons per year, far exceeding the actual demand at home.

Shrimp exports to face difficulties Jul-Dec

Although Vietnam’s shrimp exports are estimated to exceed US$1.03 billion in the year’s first half, up 1.5% year-on-year, they are forecast to encounter many difficulties in the second half of the year.

According to a report on Vietnam’s seafood production and exports in the year’s first five months which has just been released by the Vietnam Association of Seafood Exporters and Producers (Vasep), the major reason for the expected difficulties is the recent preliminary decision of the U.S. Department of Commerce on anti-subsidy tax imposed on Vietnamese frozen shrimp. The tariff will result in U.S. shrimp importers reducing their import volumes.

Meanwhile, Ecuador and Indonesia, Vietnam’s two shrimp exporting competitors, will have a chance to boost exports to the U.S. According to the U.S. Department of Commerce’s decision, shrimp exporting firms of Ecuador and Indonesia do not receive any subsidies from their governments.

According to Vasep, Vietnam’s shrimp exports to Japan in the first five months rose only 3% year-on-year under the impact of the yen depreciation.

Shrimp exports to the EU, another major market of Vietnam, is also forecast to remain low in the third quarter as the economic situation in Europe has not recovered.

In related news, although some scientists have announced the cause of massive shrimp deaths in the Mekong Delta in recent times, the situation is still complex and thus farmers have decided to sell shrimp early to cut losses.

According to Nguyen Van Tuan, who transports shrimp for farmers in Tra Vinh Province, there have been many farmers in Cau Ngang and Duyen Hai districts harvesting shrimp early, which is still better than seeing them die.

Farmers Nguyen Van Doi in Cau Ngang District also harvested shrimp in his 0.5-hectare pond to avoid losses after detecting scattered shrimp deaths.

Shrimp harvested early cannot be exported due to small size (100-150 shrimps per kilogram) but are consumed domestically with a price of VND60,000-70,000 per kilogram, according to farmers.

Initial statistics of the Sub-department of Fisheries in Tra Vinh Province showed that among a total of 2,000 tons of shrimp material harvested in the first months of the year, there were around 60% of shrimp harvested early in fear of diseases.

A similar situation is reported in Tien Giang Province. Mai Thanh Loc, head of the provincial agricultural and aquatic extension center, said that shrimps farmed in the province also died after 30-40 days.

Early last month, scientists of the University of Arizona announced to identify the cause of early mortality syndrome (EMS), an emerging shrimp disease also known as acute hepatopancreatic necrosis syndrome (AHPNS).

According to a research team led by Professor Donald Lightner at the university, the agent causing AHPNS on shrimp in the Mekong Delta over the past years is Vibrio parahaemolyticus.

The Sub-department of Fisheries in Soc Trang Province is still testing Vibrio parahaemolyticus on shrimp, but there is no effective treatment as yet.

“Although the cause has been identified, no solutions have been worked out,” said Loc.

The Animal Health Department under the Ministry of Agriculture and Rural Development has only asked shrimp farmers to farm shrimp having clear origins and quarantine certificates of veterinary offices. Besides, farmers should ensure a healthy farming environment to increase their resistance, especially shrimp under one month old.

Japan wants to shift seafood investments to Vietnam

Many Japanese investors have recently started to shift their seafood investments from China to Vietnam, according to the Directorate of Fisheries.

Nguyen Huy Dien, deputy head of the directorate, said on the sidelines of a meeting held by the Vietnam Association of Seafood Exporters and Producers (Vasep) on Wednesday that the directorate on Wednesday had a working session with a Japanese delegation of parliamentary members and enterprises coming to study the seafood farming and processing sector.

The Chinese market has lost its appeal to Japanese enterprises, and thus they want to invest in Vietnam in this sector. Many Japanese enterprises have worked with Vietnamese seafood exporters on detailed cooperation plans, according to Dien.

According to Vasep, Japan is Vietnam’s third largest seafood importer with US$398 million worth of shipments reported in the year’s first five months, over 17% of Vietnam’s total seafood export. Japanese consumers’ favorite products imported from Vietnam include shrimp, squid, octopus and tuna.

The shrimp export to Japan has bounced back after over one year of decline. The falling export resulted from the impact of tests on antioxidant Ethoxyquin which is often found in aquaculture feed.

Last month, Japan increased the level of Trifluralin residues allowed in Vietnamese shrimp by 500 times to 0.5ppm, making it easier for Vietnamese shrimp exporters.

Vasep has forecast the country’s shrimp shipments to Japan in the second and third quarters may slightly rise versus the same period last year, which results from Japan’s increasing import demand and low levels of available stocks.

However, the Japanese yen fall against the U.S. dollar has made shrimp import and consumption more expensive in that market.

Footwear exports gain momentum

Vietnamese footwear exporters are looking forward to big gains this year as their revenue in the January – May period surged 11.4 percent year-on-year to 3.1 billion USD, a positive figure amid the global economic malaise.

According to the Vietnam Leather and Footwear Association (LEFASO), domestic footwear producers have secured a stable supply of orders. Apart from sports and canvas shoes for export, the sector is focusing its on briefcases and handbags to rake in higher returns.

To earn 9.7 billion USD from exports this year (10 percent higher than last year’s figure), the sector is seeking more orders from South America. Domestic companies are stepping up research, development and collaboration to supply footwear materials to promising partners in India and Brazil.

Notably, Vietnam was honoured with five international shoe design awards for Asia after beating 180 entries from 8 regional countries.

The rate of locally-made materials is a mere 40 percent. This is expected to increase to between 60 and 65 percent this year once the Trans-Pacific Partnership agreement is signed.

The Ministry of Industry and Trade is encouraging companies to enhance investment in materials production using environmentally friendly technology. The move is expected to put Vietnam in the top five footwear producers and exporters by 2020.

Once the Vietnam–EU Free Trade Agreement comes into effect, preferential taxes will be cut from 14.3 to zero percent. From early next year, Vietnam’s footwear products destined for EU markets will enjoy tariffs in the Generalised System of Preferences (GSP).

Capitalising on future trade agreements between Vietnam and the EU, numerous UK and German footwear exporters are seeking business opportunities in Vietnam.

The US remains Vietnam’s leading footwear and leather importer with a turnover of 755 million USD, ahead of the UK (149 million USD), Belgium (140 million USD), Japan (121 million USD) and China (114 million USD).

Property experts call for new approach

Government officials and experts met yesterday to discuss ways to revitalise the property market through several measures, including resolving bad debts, adjusting land prices, and balancing supply and demand.

Speaking at the seminar, Chris Brown, general manager of Cushman and Wakefield Vietnam, a leading commercial real estate consultant, said the number of non-performing loans was higher than the reported 6 per cent, and the real estate made up 70 per cent of the figure.

Citing John Sheehan, author of the book Optimising Distressed Loans, Brown said that markets would not recover until non-performing loans were recycled at a price low enough to create widespread confidence.

"Sentiment is a key to recovery," he said.

The seminar, themed "Revitalising Vietnam's Property Market", was organised by the Vietnam Investment Review newspaper and Cushman & Wakefield Co.

Brown noted that one of the biggest barriers to entry, and the single biggest factor in ensuring profitable property development, was the price of land.

Vietnam's major cities have maintained higher prices than Singapore, he added.

He said that Thailand recovered its real estate market by offering credit packages to home buyers at a low interest rate and a long payment term. Thailand also issued bonds to buy the bad debts held by commercial banks.

Dang Hung Vo, former deputy minister of Natural Resources and Environment, said since 2010 the property market had seen a surplus of supply, resulting in a big inventory of high-priced and medium-priced houses.

As a result, supply and demand became imbalanced.

He said this was an inevitable result of an investment boom that was not adequately and effectively controlled, even though it had contributed to economic growth.

The property market boom also fueled inflation.

Last year, amid a large number of property inventories as well as non-performing loans at commercial banks, investors reduced prices to a very low level, he said.

But their products failed to sell, Vo said.

Meanwhile, although there was a high demand for cheaper houses, the supply was insufficient.

Nguyen Viet Manh, head of the State Bank of Vietnam's credit department, said the current inventory in the property market was still high.

In addition, as long as there is a huge unsold volume in the top-end housing and office-for-lease market, the supply for low-end and social housing will remain modest.

Manh said there was a need to restructure the property market to match people's actual demands.

In recent months, many commercial housing developers in Hanoi and HCM City have asked for permission to convert projects to social housing.

They have also been able to access the government's new credit package designed to help builders and investors save costs and lower prices.

Many said this was a good sign that the market was responding to people's housing demands.

However, the property market would remain stagnant for the rest of the year, and would not likely rebound in the near term.

On May 18, the Government passed Decree 53 that regulates the establishment, organisation and operation of a national asset management company (VAMC) for Vietnamese credit institutions.

The State Bank of Vietnam (SBV) is ramping up efforts to be able to put VAMC into operation on July 9.

The asset management company is expected to help the economy tackle bad debt and revitalise the moribund property market.

This could help thaw the amount of unsettled bad debt and bring vitality to the market, he said.

Taxes also need to be adjusted, according to Nguyen Mai, former deputy chairman of the State Commission for Cooperation and Development (now the Ministry of Planning and Investment).

He said the reduction of corporate income tax and value-added tax rates were necessary to help businesses, including property firms.

The Government and ministries should also introduce guiding documents to bring these regulations into effect as expected from July 1, he added.

Housing policy, including the Housing Law and the Law on Property Business, also plays an important role in the recovery of the property market.

Mai said that in May the Ministry of Construction noted the Housing Law was eight years old and the Law on Property Business, seven years old.

The two laws had failed to inspire market players to take part in housing, especially social housing development, he said.

Housing prices in general are too high relative to most people's incomes, he added.

The deputy chairman of the Vietnam Federation of Civil Engineering Associations, Pham Sy Liem, said it was now time to give birth to new laws that are closer to the reality of today's market.

Most banks' gold accounts to close

Most banks have closed their gold accounts to meet the State Bank of Vietnam's deadline of June 30 this year.

The SBV said that only five or six banks still had outstanding gold accounts to date, adding that the banks would be pushed and even ‘forced' to close all gold accounts by the end of this month to meet the deadline.

According to the SBV, gold deposits fell by 75 percent in the first five months of this year, while gold loans decreased by 40 percent.

Deputy Director of the central bank branch in HCM City Nguyen Hoang Minh said that gold auctions had helped banks to cut their outstanding gold deposits.

The central bank on June 13 sold 25,900 taels of gold out of 26,000 on offer at its 30th auction.

At the auction, gold bars were sold to eight banks and gold firms from 40.63 million to 40.58 million VND per tael, slightly less than at previous auctions, according to the SBV.

In the previous auction three days earlier, the central bank sold the same volume at 40.66-40.63 million VND per tael.

Year to date, the SBV has organised 30 auctions for 848,000 gold taels, of which it has sold 761,600 taels or 27.3 tonnes. Industry insiders said that most of the gold had been bought by banks to close all their accounts before the June 30 deadline.

Standing Vice Chairman of the Vietnam Gold Trader Association Nguyen Thanh Truc expected the gold premium to gradually narrow starting from June 30, thanks to lower domestic demand.

Liberty sells insurance for used cars

Liberty Vietnam Insurance Company on Wednesday introduced Liberty MyCar, a collision insurance product applicable to cars with eight seats or less and a mileage of more than three years.

Liberty MyCar covers more than 95% of risks related to physical damage with premiums lower than Liberty AutoCare, another auto insurance product with more comprehensive coverage, by 25-60%. The insurer will cover 100% of repair cost and depreciated spare part cost.

According to Liberty Vietnam, this product is developed from collision insurance products of developed countries and compensation statistics over the past years. Its premiums average out at around VND6.5 million a year, which could help car owners save insurance costs.

Policyholders will have their cars repaired at qualified garages appointed by Liberty and get guarantees on repair quality. Customers will also receive 24/7 road assistance services such as provision of information, free towing service up to VND4 million per year in case of accident, vehicle breakdown, flat tire and gas running out.

Enormous demand for low-cost homes: report

Some 700,000 low-cost homes will need to be built from now to 2015 to meet the demand of citizens, said the Agency of Housing and Real Estate Market in a report to the Minister of Construction.

From now to 2015, about 1.74 million people in urban areas nationwide will be living in housing with less than five square meters per person, and 1.71 million workers will have the demand for a condo.

To meet the housing demand of low-income people and industrial workers, some 700,000 apartments will need to be built in this period.

Later, from 2015 to 2020, an additional 200,000 budget homes will be sought after.

The demand for low-cost condos is strong in a number of localities. For example, Hanoi needs 111,200 units, HCMC 134,000 units, Danang 16,000 units; Dong Nai 95,000 units, and Binh Duong 104,000 units.

Some of these localities have made plans for low-cost housing development in the period 2012-2015. Hanoi is trying to build at least 100,000 budget apartments, while HCMC is aiming for 67,000.

The Ministry of Construction has requested localities to boost development of low-cost housing projects to address the needs of citizens.

So far, 157 low-cost housing projects comprising 68,500 flats are under construction with total investment of VND19.9 trillion, Among them, 58 projects costing VND10.9 trillion will provide low-income earners with over 33,000 apartments, and the 99 other projects worth VND9 trillion will serve workers with about 35,500 flats.

A number of large-scale budget housing development programs have been deployed. For instance, a social security housing project is being implemented in Binh Duong with a total of 64,000 apartments, of which 4,700 units have been completed.

A housing project for workers is being developed in Nhon Trach Industrial Park in Dong Nai, which will supply 20,000 budget condos, including nearly 3,600 units to be built first.

Since last month, six budget condo projects have got off the ground.

They include the low-cost housing projects in Southwest Linh Dam Lake and Quoc Oai Urban Area and the commercial-turned-budget project in Dang Xa Urban Area in Hanoi. The other three are Hoang Quan Plaza in Saigon South and the low-cost housing areas in Quy Nhon City, Binh Dinh and Vinh City, Nghe An.

In response to Resolution 02 dated January 7, 2013 of the Government, the construction ministry has issued Circular 02/2013/TT-BXD, giving guidelines for apartment project restructuring and conversion of commercial projects into low-cost ones or service works.

So far, 50 project owners have applied for revision of apartment sizes and transformation from commercial housing projects to low-cost ones. Their projects consist of 31,000 apartments and are mainly located in big cities like Hanoi and HCMC.

In Hanoi, six commercial housing projects with nearly 3,500 apartments are seeking to resize their products, and 19 other projects with over 10,000 flats keen to be converted into low-cost housing projects. The city has given approval for conversion of four projects, and the others are being verified.

In HCMC, two commercial housing projects with more than 100 apartments are awaiting the nod to change their apartment sizes, and 20 other projects with nearly 10,000 condos seek the nod to transform into budget projects.

In Dong Nai, two commercial housing projects with over 1,000 apartments are seeking permission to switch to the low-cost segment.

Shortcomings in VAT Refund Program

Several businesses involved in pilot plan to introduce Value Added Tax (VAT) refund to foreign visitors have been unable to sell their products while others have attracted a lot more customers, said Nguyen Duc Chi, an official from the Department of Culture, Sports and Tourism in Ho Chi Minh City.

According to Chi, HCMC has several popular shops where foreigners drop in frequently while in Vietnam. These shops provide lacquer paintings, handicraft items and Ao dai dresses. However, they are not part of the VAT Refund Program.

Chi said that it is necessary to call on these businesses to participate in the VAT refund scheme.

The pilot plan for VAT refund was launched for a one year trial period in July 1 last year to encourage foreign visitors to make purchases in Vietnam.

However, most items listed in the program are imported fashion products like clothes, shoes, handbags, watches and jewelry, while domestic products were not mentioned at all.

In one year since implementation, the VAT Refund Program has attracted 47 businesses, with 190 shops in Hanoi, HCMC and Binh Duong Province.

Of these, HCMC has 32 businesses with 140 shops, Hanoi has 14 companies with 49 stores and Binh Duong has one enterprise with one shop.

Of the 14 enterprises in Hanoi, only two are regularly selling their products while the others have not seen visitors. The unit in Binh Duong Province has been unable to make out a single VAT invoice to foreign customers.

VAT refund has mainly been conducted by some companies in HCMC with delivery channels in large trade centers, selling high-class import products.

According to Vietnam Customs, more than 1,540 foreigners have received VAT reimbursement worth VND4.3 billion (US$205,000) from July to December last year.

In the first three months of this year, the number grew to 1,280 visitors receiving VAT repayment of VND3.8 billion ($181,000).

HCMC alone has 1,158 visitors getting VND3.36 billion ($160,000) of VAT back. The VAT Refund Program has been introduced at Noi Bai and Tan Son Nhat International Airports before being applied nationwide.

Foreign visitors receive 85 percent of the VAT bill value. The remaining 15 percent is used for paying services to banks.

Those wanting a refund must present a bill and fill a tax refund form valid for 30 days before date of exit. Goods purchased must have a total value of at least VND2 million (US$95) and purchased in the same shop on the same day.

‘Green Consumption Month’ launched by Saigon Co.opMart

The 4th Green Consumption Month has been launched by the Saigon Union of Trading Co-operatives (Saigon Co.opMart).

Accordingly, Saigon Co.opMart will offer thousands of gifts to consumers and 50 percent discount on more than 2,000 products during this period.

The program aims to raise people’s awareness of environment protection and increasing consumption of green products; as well as encouraging enterprises to improve quality of goods and services to attract more customers.

Relocation of Bien Hoa IZ necessary to save Dong Nai River

The People’s Committee of Ho Chi Minh City has proposed to the People’s Committee of neighboring Dong Nai Province to relocate Bien Hoa 1 Industrial Zone in order to protect the waters of Dong Nai River that provides water to the city.

The IZ evacuation will help reduce water pollution to the Dong Nai River, which currently provides water to 20 million residents living in the river valley area, with the City’s ten million residents being directly affected.

Dong Nai River also provides water to other provinces adjacent to Ho Chi Minh City for daily household needs and manufacturing of products.

By 2025, it is estimated that HCMC will need 3.7 million cubic meters of water a day, of which the Dong Nai River will provide upto 2.5 million cubic meters.

Warmer times for Vietnam’s frozen property market

A Cushman & Wakefield seminar on June 13 put revitalising Vietnam’s property market under the microscope.

Many participants said the market would be better by the year’s end and deputy minister of Planning and Investment Dang Huy Dong said the government was seeking to deal with the country’s economic difficulties and Resolution 02 introduced important measures to help ensure property market stability and growth.

The State Bank has also rolled out many measures to support the market, paving the way for low-income people to buy houses. In May, the central bank for the second time this year reduced the prime interest rates to help banks further cut down lending rates. Some banks have launched low-interest credit packages.

Four state-run commercial banks – Agribank, BIDV, Vietcombank and VietinBank – have slashed their lending rates to below 13 per cent.

Meanwhile, the State Bank has just introduced a VND30 trillion ($1.4 billion) credit package to lend state employees, people in the armed forces and low-income people to lease or buy social housing and commercial housing which is below 70 square metres and costing at most VND15 million ($720) per square metre, as well as corporate customers engaged in building social housing or commercial housing converted into social housing. The package’s lending rate is 6 per cent, per year.

The package had drawn big public attention, said Nguyen Viet Manh, head of the State Bank’s Credit Department. He said the credit package was involved with the State Bank and the Ministry of Construction.

Sacombank deputy CEO Phan Dinh Tue said he thought it was a positive move to support the market. He said Sacombank early this year launched a VND1,600 billion ($76.5 million) housing loan package and disbursed VND1,350 billion ($64.6 million) to 240 clients.

Chris Brown, general manager of Cushman and Wakefield Vietnam, said distressed assets had widened market opportunities.

He said Vietnam’s real estate market had been stumbling, with a lack of capital resources punishing many developers unable to finish or continue their projects. Many developers have had to restructure their portfolios to focus on their core and important projects to find ways to take over distress assets.

Brown said some commentators suggested that real estate could make up over 70 per cent of non performing loans in Vietnam. However, bad debts and their assets have not been available for investors to acquire openly from banks or investors.

“The situation is toxic and unless both banks and investors move quickly to deleverage then the recovery will be a lot slower and more painful. There are clear signs of distressed property assets all over Vietnam. It is just a matter of time before they come to the market,” said Brown.

He said the newly-established Vietnam Assets Management Company’s budget was limited compared to NPLs. Meanwhile, NPLs are not attractive to investors at the book value as the reality is they have decreased the loans by 30-40 per cent.

Dang Hung Vo, former deputy minister for Natural Resources and Environment, also said the NPL problem must be solved first.

An idea floated at the seminar was Vietnam to make it easier for foreigners to buy housing in the country. Nam said the Vietnamese government started to allow foreigners to buy housing in 2008 with strict requirements. He added this October, the National Assembly would consider approval proposals already made to make it easier. He said he was leading a group that made the proposals.

Participants said they expected the National Assembly would act rapidly towards the issue.

Another market problem was land pricing was high, said Brown. Vo said Vietnam should change its land tax policy to reduce land pricing. Vo added due to high land pricing, property pricing was many times higher than the levels the market could accept. However, it takes time to cut land pricing by changing policies.

Nam said the government was now concentrating efforts on its national housing development strategy. To that end, the Ministry of Construction (MoC) has urged localities to scale up construction of social housing projects to gradually meet people’s demand. A total 157 social housing projects are now in the development pipeline nationwide with 68,500 apartments altogether, including 58 social housing projects earmarked for low-income people with more than 33,000 apartments, and 99 social housing projects for workers with 35,500 apartments.

Some large-scale social housing programmes underway such as ones in Binh Duong province developed by Becamex IDC, in Dong Nai province by the MoC’s IDICO, in Hanoi by the MoC’s HUD, and many other projects in other provinces and cities.

Nam said property market problems would be gradually addressed in the coming period when the National Assembly approves the amended Corporate Income Tax and amended Value Added Tax, with diverse tax incentives and when the government’s $1.4 billion credit package begins to be disbursed.

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

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