BUSINESS IN BRIEF 16/3

Authorities checking milk prices

The Ministry of Finance’s Price Management Department has asked the provincial market monitoring authorities for coordination to inspect prices of dairy products for children aged under six.

Inspections will mainly focus on prices of products of four leading firms – Mead Johnson Nutrition (Vietnam), Vinamilk, Nestle Vietnam, and FrieslandCampina Vietnam.   

Mead Johnson Nutrition (Vietnam), Vinamilk and Nestle Vietnam have already adjusted up their prices while FrieslandCampina Vietnam has not yet applied new prices though the date for price revisions which it registered with authorities was on Tuesday.

As specified in a statement sent by the Price Management Department to provincial market monitoring agencies, Mead Johnson Nutrition (Vietnam) hiked prices of 15 items

from December 12, 2013; Vinamilk raised prices of 22 items on February 10; and Nestle Vietnam revised up prices of 11 items from January 31. The number of items of which FrieslandCampina Vietnam registered to increase prices is 16.

A source from FrieslandCampina Vietnam said the firm had registered new prices of 16 items but these prices have yet to apply as it is still conducting an internal review regarding this matter.

Underground commercial center awaits investors

No Japanese firms have expressed interest in a major project to develop an underground commercial center at the future central metro station in downtown HCMC, according to the Japan International Cooperation Agency (JICA).

JICA president Tanaka Akihiko told HCMC chairman Le Hoang Quan on Tuesday that his agency had yet to find any Japanese companies ready to get involved in this commercial center project.

Akihiko said JICA had provided the city with US$2 million to do a feasibility study for the central urban railway station, including design and construction of an underground commercial facility under a public-private partnership (PPP) model.

However, the central station cannot be up and running in late 2017 or early 2018, he said.

Regarding the rehabilitation projects for Tan Hoa-Lo Gom, Doi and Te canals, Akihiko said the possibility of increasing ODA loans for such projects would be affected if the city did not accelerate the pace of disbursement.

Government-backed loans still rise despite restrictions

The total value of government-backed foreign loans still rose in 2013 though the Government has urged restrictions by approving a debt management program in the 2013-2015 period with an aim to cut guarantees for foreign loans.

The Ministry of Finance underwrote 11 borrowing programs and projects, and domestic and international bond issues with the total value of nearly US$4.2 billion in 2013. This amount included investment projects funded by local credit institutions and domestic bond issues with the total value of US$1.3 billion, and seven projects funded by foreign banks and international bond issues worth nearly US$3.9 billion.

The ministry did not announce how much the figure had increased against the previous year. However, it confirmed a rise, explaining that the restructuring of domestic and foreign debts owed by groups and corporations and bond issues of the local policy banks were the cause of the rise.

In 2013, for example, the Government had to back Debt and Asset Trading Company (DATC) under the Finance Ministry in issuing bonds for restructuring two debts of Vinashin, including VND11 trillion it borrowed from local banks and US$600 million from foreign creditors.

The situation has gone against the Government’s debt management scheme in medium term. Given the program, the Government aims to guarantee only those loans taken for urgent projects and those of national importance.

According to the Debt Management Bureau under the Finance Ministry, the Government had backed foreign loans and bond issues with the total value of over US$15.3 billion as of October 31, 2013. Of which, 80 projects are in the process of repaying debts while 20 others have finished debt payment.

Guarantees for Vinashin’s bond issue accounted for around 4% of the total debt value. The remainder was used to cover seven projects in the aviation sector, 17 in the cement sector, 49 in the power industry and seven in the oil and gas sector.

For foreign loans, the ministry has advanced capital for servicing debts of nine projects, accounting for 8.9% of total number of projects guaranteed. Cement projects have faced most difficulties in debt repayment and the ministry has advanced US$251 million to support the projects.

European companies upbeat on business environment

Business confidence and outlook among European businesses in Vietnam have significantly increased, according to results of the 14th quarterly EuroCham Business Climate Index (BCI) survey released in Hanoi on Tuesday.

This quarter the BCI has for the first time since 2012 gone above the midpoint - from 50 to 59 points. This is an important increase, which further demonstrates the strong belief of European companies in the Vietnamese market.

“The rise is likely to be linked to the upswing of sales and general business optimism around the Tet period, as we have experienced in previous years,” said EuroCham in the report. However, an increase of 9 percentage points seems to suggest that other factors than just Tet optimism are at play.

Other factors such as the decreased fear of inflation, confidence in the macroeconomic outlook and the hope of the conclusion of a much-expected TPP agreement later in the year, are also likely to have had an impact.

Just under half of the businesses that participated in the survey are active in the services industry, a quarter in manufacturing, one fifth in trading and around 10% are engaged in other activities.

Compared to the results of last quarter’s BCI, the number of respondents assessing their current business situation as positive has jumped from 38% to a very strong 45% - an increase of seven percentage points. This finding is supported by how respondents assess their sales and level of business activity in the last 12 months compared to previous years, with 42% finding the past year to have been more profitable –explaining the jump from last year’s BCI at 48 to this year’s 59.

However, a considerable 32% of respondents found the past 12 months to have been less profitable.

Looking to the future, the business outlook for respondents has equally experienced a considerable improvement with members having positive expectations rising to 49% compared to the last quarter’s 44% and significantly higher than last year’s 30%.

In line with this development, reported investment plans have remained positive, with 78% of respondents intending to keep or increase their investment.

EuroCham Executive Director Csaba Bundik said in the report, “The BCI having gone above the midpoint is indeed great news and the first time we see this since the second quarter of 2012. This is a very healthy sign, as it demonstrates that European companies are regaining trust in the Vietnamese market.”

Pigs transported to south for consumption

Provinces with big herds of pigs like Dong Nai normally transport pigs to northern provinces for consumption, but now the opposite is happening as the price in the south is VND5,000-7,000 per kilogram higher.

This has helped stabilize the pig price in southern provinces though the bird flu is spreading.

According to a member of the Dong Nai Livestock Association, southern provinces currently have a huge number of pigs transported from the north, which is contrary to what normally happened in previous years.

China imported a large volume last year and after it bought almost all in northern provinces, traders had to buy pigs from the southern region to supply the north. However, big exports to China have almost come to a standstill this year.

“In the past few years, live pigs in the south were always priced at VND2,000-3,000 per kilogram higher than those in the north. With such a differential, plus transport costs, traders will suffer losses if transporting pigs to the south. However, as the current price differential is VND5,000-7,000 and even VND8,000 some time, pigs are being transported southward,” he said.

The tendency of transporting pigs from the north began with a company having a large distribution system in the southern region a couple of weeks ago. Some other traders have followed suit.

Nguyen Xuan Duong, deputy director of the Animal Husbandry Department, said that supply from a region with a low price to another with a higher price would help market stability.

Nguyen Xuan Thoi, a farmer in Dong Nai Province’s Thong Nhat District, told the Daily that normally when a bird flu outbreak occurred, consumers normally shifted to using pork, pushing up prices of live pigs.

However, this time the pig price has declined by around VND2,000 per kilogram compared to last week while the chicken price has stay put at around VND44,000-45,000 per kilogram, Thoi added.

Pork prices at supermarkets and traditional markets have been stable over the past few weeks.

According to the HCMC Department of Agriculture and Rural Development, the city consumes around 9,000 pigs a day, mainly supplied by neighboring provinces like Binh Duong, Long An, Tien Giang, Ba Ria-Vung Tau and especially Dong Nai.

Central provinces offer joint attraction

Viet Nam's first three-in-one tourism promotion initiative can be a model that other localities can emulate successfully, a senior industry official said yesterday.

His comment came after three provinces and cities in the central region – Quang Nam, Da Nang and Hue – signed a memorandum of understanding (MoU) to promote themselves as a single tourism destination.

The MoU sets out a programme initiated and sponsored by the European Union under which the three localities will jointly develop attractive products, train human resources and implement tourism promotion programmes. To oversee these tasks, they will form a steering board and a standing committee.

"The localities are key tourism destinations.

The three-in-one model will be a good example for other localities to work together for effective, sustainable tourism development," said Nguyen Van Tuan, director of the Viet Nam National Administration of Tourism (VNAT).

He noted that while Quang Nam and Hue have huge heritage value, Da Nang has well-developed hospitality facilities.

Quang Nam is home to two UNESCO World Cultural Heritage Sites: the environmentally-friendly Hoi An Town and the My Son Sanctuary - a holy land where Champa culture and temples are preserved.

The ancient capital city of Hue boasts a complete world heritage complex comprising a citadel, mausoleums, temples and other buildings of the feudal era. It is also the home of nha nhac (Hue royal court music), recognised as an Intangible Heritage of Humanity.

Sandwiched between the two, Da Nang offers visitors modern accommodation facilities including luxury hotels, resorts and entertainment centres.

The MoU aims to enable the three localities to use each other's strengths towards making their tourism destinations more appealing.

In related news, Tuan also said that the goal of attracting a million Japanese visitors by 2015 can be achieved if the domestic hospitality sector further improves the quality of its travel products and services, and present a clean environment.

He also emphasised the importance of developing new products and services that can be offered to Japanese tourists, saying they were very demanding.

Vietnamese companies should participate in international tourism and travel fairs held in Japan and concerned agencies should advertise the nation's tourism attractions on Japanese media, he said.

Takahiko Ohata, Chairman of the Overseas Tour Operators Association of Japan (OTOA), agreed that Viet Nam's tourism industry should step up promotion activities in Japan so that Japanese people are more aware of the country's beauty and varied attractions.

According to the VNAT, Viet Nam is ranked the third most attractive destination for Japanese tourists. More than 600,000 Japanese people visited the country last year, up five per cent over the previous year.

Last month, 50,500 Japanese tourists visited Viet Nam, up 13 per cent year-on-year.

Viet Nam enjoys the "best-ever conditions" to attract more Japanese people to visit with both countries having agreed to prioritise development of bilateral tourism, Tuan said.

Industry insiders say Viet Nam offers significant advantages that should attract Japanese tourists, including political stability, waiver of the 15-day visa, the short travelling time (five-hour direct flight), and many cultural similarities.

Good diplomatic relations and several tourism attractions that meet Japanese tastes are other positive factors, they add.

The General Statistics Office has reported that tourist arrivals from several major markets have increased sharply this year.

In the first two months, arrivals from Germany rose year-on-year by 262 per cent, from Hong Kong by 222 per cent, Russia by 70 per cent, China by 50 per cent, Cambodia by 40 per cent, Philippines by 27.5 per cent, and Italy by 26.5 per cent.

The number of domestic tourists reached 9.5 million, up 22 per cent year-on-year.

Tourism revenues during this period have reached VND47 trillion (US$2.2 billion), up 34.3 per cent year-on-year.

Total international arrivals in the first two months of this year reached 1,618,200, up 33.4 per cent year-on-year.

SOE equitisation to quicken

The completion of legal institutions and mechanisms is one of the critical tasks to speed the equitisation of State-owed enterprises (SOEs).

According to Pham Viet Muon, deputy head of the Steering Committee for Business Renovation and Development, Government Decree No 99/2012/ND-CP clarified the rights, responsibilities and obligations of the Government, ministries, agencies, local governments and member councils of State-owned economic groups and corporations.

Under the decree, ministries are responsible for exercising the obligations of the State as the owner of SOEs, particularly State-owned groups and corporations, which includes inspecting and evaluating the efficiency of business operations.

Reports show that the implementation of State ownership management has been improved following the issuance of the decree, towards ending State agencies' administrative interference in SOEs' operations.

The management method of State capital in SOEs is also gradually shifting from administrative to business styles.

Between 2011 and 2013, the country equitised 180 SOEs, reducing the number of wholly State-owned businesses to 949. Of these, 19 were State-owned corporations and 21 had State capital of over VND100 billion (US$4.7 million).

Among those that were equitised were the Bank for Foreign Trade of Viet Nam (Vietcombank), the Bank for Investment and Development of Viet Nam (BIDV), Petrolimex, Viet Nam Steel Corporation and Viglacera.

According to the steering committee, after equitisation the businesses have enjoyed considerable growth and performed their tasks more effectively. Also, the appearance of joint stock companies has increased the economy's competitiveness and accelerated the restructuring of the stock market.

Further, the equitised corporations have reorganised business and production activities and reshuffled member companies, while merging those that overlap.

Implementing financial restructuring, a number of businesses have increased their charter capital and withdrawn capital from non-core areas.

Despite numerous difficulties in 2013, 18 State-owned groups and corporations recorded total revenues of VND1.18 trillion ($56.38 billion) and contributed VND191 trillion ($9.1 billion) to the State budget.

Under the 2011-15 SOEs restructuring plan, the country will have to complete the equitisation of 531 SOEs by 2015.

To have the remaining 432 businesses equitised between now and 2015, the Ministry of Planning and Investment stressed the need for a determination and unity from central to local levels to ensure the progress of the restructuring of SOEs.

Authorities attempt to lift property market

HCM City authorities have asked the central government to approve several measures to revive the HCM City property market, as the sector's growth rate fell by 5.5 per cent last year.

The city has proposed that the government reduce the annual interest rate to three percent from the current five percent for sales or rental of social housing or residential apartments priced below VND15 million per sq m with 15-year term loans, according to documents submitted to the Central Steering Committee on Housing Policy and the Real Estate Market.

Another city proposal would reduce the Value-Added Tax for buyers of their first house.

City officials have also asked the government to establish a housing savings bank to create favourable conditions for individuals in Viet Nam to buy or repair their houses.

The city has also requested that the Government readjust its policy to allow investors to reduce the number of apartments and convert commercial housing to social housing.

They have also asked the government to extend the timeline of its VND3 trillion property package from 36 to 60 months.

In recent years, the city and central government have launched stimulus packages to kickstart the property market, but results have been uneven.

Companies in HCM City have more than 10,000 apartments in stock worth VND17.6 trillion, a reduction of 30.6 per cent against 2012.

In another matter, the HCM City People's Committee plans to buy 1,050 unsold apartments in Binh Thanh District to resettle people who had to give up their land for the project to build Phan Chu Trinh Bridge, which is scheduled to be completed in December.

The apartments will be handed over to resettled residents in two phases in June and September.

At least 498 public-works projects now under construction in the city will affect 120,000 households who will have to resettle to other locations, according to a HCM City interdisciplinary survey team.

Land prices in suburbs expected to rise

Land in suburban areas in the capital's communes, such as Co Nhue and Phu Dien in Tu Liem District, Thach Ban in Long Bien District, have shown positive signs and remain attractive.

"Land prices in the areas have not fallen much, as people were waiting for a price hike," said Pham Thanh Hung, deputy general director of CEN group.

Hung added that land prices in the suburbs were not significantly higher than social housing projects. Therefore, home buyers would opt for purchasing land.

Surveys showed that land prices in suburban areas were slightly reduced, compared to the "hot" development period in the property market. For example, land prices in North Tu Liem had been selling for VND25-28 million per square metre, while one year ago it was VND30 million.

Prices in Co Nhue and Phu Dien have been selling at VND25-30 million per sq.m. However, the number of transactions remains limited.

Nguyen Thi Tam in Long Bien District's Thach Ban Commune offered her 90sq.m land for sale one year ago.

Tam said she has not sold the land yet, though she had to lower the selling price from VND27 million to VND16 million per sq.m.

Meanwhile, a report from Savills Viet Nam indicated that in the third quarter last year, selling prices in suburban areas were still at their highest level, at VND48 million per sq.m, in Ha Dong District.

Also, the market remained quiet in the last quarter of 2013. However, selling prices were reduced one per cent against the previous quarter.

Hung expected that the recently enacted policies would open up sales in the land segment.

According to Decree 11/2013/ND-CP and joint circular No 20 between the Construction Ministry and Ministry of Justice, property investors will be allowed to sell land without houses provided as infrastructure beginning January 5, 2014.

Home buyers are expected to seek such land, as they might save up to 30 per cent of building costs if they build their own homes.

In addition, they would have the opportunity to design their own houses.

Several urban housing projects have asked to be allowed to offer this new form of selling, since home buyers have been seeking land, instead of less expensive apartments.’

Shipbuilding industry sees 25-30 pct growth annually

Vietnam’s shipbuilding industry has grown 25-30 percent annually for the past decade in all areas, according to a report by the Government Portal.

Deputy Director of the Vietnam Maritime Administration Do Duc Tien made the statement at the seminar ‘Vietnam Shipbuilding Industry – New Stage of Development’ held in Hanoi on February 27.

Vietnam’s Marine Strategy to 2020 states that the shipbuilding industry is one of the two key pillars of the marine economy, which is expected to make the second largest contribution to the State budget, Tien was quoted as saying.

To realise the target, related legal documents will be amended to help shipbuilding and logistics businesses overcome difficulties, maintain production and improve their market shares while the businesses are encouraged to expand local and international links and set up joint ventures.

In addition, all economic sectors and foreign organisations will be encouraged to invest in developing the country’s fleet. A plan on developing the fleet will be devised to support its restructure, development and modernisation.

According a representative from the Broker Company, the logistics market has seen signs of recovery since early this year as shipbuilding and logistics prices rose, offering opportunities for the country’s shipbuilding industry to explore.

Vietnam’s shipbuilding industry has to compete with those of Japan and China in financial conditions and payments, so relevant agencies should create favourable conditions to attract investors to the industry, said the representative.

Vietnam currently has 120 shipyards building different types of ship with the lowest capacity of 1,000 DWT, forming an important technical foundation for the shipbuilding industry.

Mekong Delta to expand fruit cultivation

The Southwest Region Steering Committee has drawn up a plan to develop an additional 10,000ha of high-quality fruits in the Cuu Long (Mekong) Delta by the end of this year.

Tran Huu Hiep, head of the committee's Economic Division, said the fruit areas would be located in the provinces of Vinh Long, Tien Giang, Ben Tre, Dong Thap, Soc Trang, Tra Vinh and Hau Giang, and Can Tho City.

The areas will grow the delta's specialty fruits such as green-peel and pink-flesh grapefruit, Nam Roi grapefruit, king orange, Hoa Loc mango, Chin Hoa durian, and Lo Ren milk apple, he said.

Each province will choose to plant one to three specialty fruits.

About 90 per cent of fruits in the delta, the country's largest fruit cultivation area, are sold domestically, according to the Southern Fruit Research Institute.

Hundreds of establishments that produce plant seedlings in Ben Tre, Vinh Long, Tien Giang and Can Tho have been producing disease-free fruit seedlings to reduce the prolonged shortage of quality seedlings in the Delta, according to the Southwest Region Steering Committee.

In recent years, the delta's provinces have also encouraged farmers to set up co-operatives to grow fruit to reduce small-scale cultivation, improve quality and reduce production costs.

In Ben Tre, Tien Giang and Vinh Long provinces, hundreds of farmers have co-operated to grow green-peel and pink-flesh grapefruits, Hoa Loc mango and king orange.

Local agriculture officials have provided training courses on integrated pest-management programmes on citrus fruits for thousands of farmers in the zoned areas for fruit cultivation.

Farmers have also been instructed to grow fruits in accordance with global and Vietnamese good agricultural practises.

The delta has more than 300,000ha of fruits, according to the Southern Fruit Research Institute. Of the figure, more than 60,000ha is planted with speciality fruit.

According to the Ministry of Agriculture and Rural Development's plan of developing fruits in the southern region in the 2013-2020 period, the delta will have a total of 185,100ha devoted for growing 12 speciality fruits by 2020.

The 12 fruits are dragonfruit, mango, rambutan, durian, milk apple, grapefruit, longan, banana, pine apple, orange, sour sop and mandarin.

Of the 185,100ha, Tien Giang Province, which is the delta's largest fruit cultivation area, will account for 51,500ha.

Besides developing large areas specialised for fruit cultivation, Tien Giang has also provided advanced farming techniques for more farmers and improved the quality of fruit seedlings to increase income for farmers.

The province's fruit farmers earn an income of VND100-200 million (US$4,700 – 9,500) per ha a year.

TPP impacts on livestock breeding sector from expert view

The Trans-Pacific Partnership Agreement (TPP) which currently involves 12 countries is expected to assist local livestock breeding sector with luring more foreign investment, but it appears hard to make this come true in the context foreign imported food flowing into Vietnamese market.

Figures from Ministry of Planning and Investment’s Foreign Investment Agency show that as of December 15, 2013 there were a total 501 foreign direct investment (FDI) projects in agro-forestry-fisheries worth $3.35 billion in total committed capital but representing only 1.5 per cent of the country’s total FDI capital.

Of this $3.3 billion, investments into animal feed accounted for a lion’s share of more than 94 per cent while over 4 per cent of the capital was in breeds and merely 1 per cent was in animal husbandry, according to Ministry of Agriculture and Rural Development (MARD) statistics.

While livestock breeding is less charming to foreign investors, foreign stock has flowed into Vietnamese market.

Last year, Vietnam imported 167,000 cows and 96,000 tonnes of poultry, irrespective of tens of thousands of cows imported into Vietnam via shared borders with Laos and Cambodia and poultry volumes illegally entered Vietnam through borderlines with China, according to figures from MARD’s Animal Husbandry Department.

At present, cattle imported into Vietnam from Australia, New Zealand and ASEAN members incurs 5 per cent tariff while fresh or frozen cattle meat bears 7 per cent tariff.

With the ratification of the TPP hopefully within this year the tariff will fall to zero per cent, facilitating the presence of more foreign stock and food in the Vietnamese market.

“The livestock breeding sector would be at disadvantages following ratification of the TPP. For example, after TPP ratification made-in-Thailand chickens would be shipped to Vietnam and sold at cheaper prices compared to local ones since we have to import most from breeds to food and veterinary drugs for the sector,” said Nguyen Phuong Thanh, chairman of Asia-Pacific Import Export Joint Stock Company.

Animal Husbandry Department deputy head Tong Xuan Chinh added that besides TPP, Vietnam is about to sign a string of free trade agreements (FTA) under which many made-in-Vietnam items will more easily enter relevant foreign markets.

In return, some foreign food will have more chance to ramp up presence in Vietnam and in the livestock breeding sector cattle and poultry food of foreign origin will get the first tickets.

“To survive competition right in the home ground, the [animal husbandry] sector needs to restructure, focusing on some key products only,” said Chinh.

“It is enough time for us to change if we start right from now. We shall only develop advantageous products like pork and poultry. Besides, a shift from individual fragmented farming into farm-based and enclosed model and lower feed cost is a must,” Chinh noted.

Economic experts were concerned Vietnam’s livestock breeding sector could hardly compete with foreign players in the home ground on the back of tariff removal following TPP ratification.

From other angle, chairman of Vietnam National Animal Husbandry Association Nguyen Dang Vang said international integration would entail opportunities for the sector to lure more foreign investment.

The four areas the animal husbandry sector urgently sources investment are processing industry, cow raising, breed production and equipment manufacture serving farm-based breeding of cattle and poultry, Vang noted.

From the part of firms, they said doing business in this field is two risky though there is still room for development.

Besides, it is not easy to benefit from investment incentives.

Accordingly, in 2010 the government enacted Decree 61/2010/ND-CP providing incentives to stimulate businesses to invest in agriculture and rural development.

However, until present agricultural sector projects enjoying the incentives have only accounted for less than 1 per cent of total project numbers.

“That was because the procedures to enjoy these incentives remain complex. Lack of state budget to execute incentive policies is another issue,” Chinh said.

In late 2013, the government enacted Decree 210/2013/ND-CP amending Decree 61/2010/ND-CP with more preferences to agricultural sector investors.

The decree was hoped to fuel investment into agriculture, particularly livestock breeding in the upcoming period.

Japanese firms remain optimistic about Vietnam growth

One of every three Japanese companies operating in Vietnam reported losses, reported the Japan External Trade Organisation (JETRO).

In a report released in Hanoi on Monday, JETRO said 25.6 per cent of Japanese firms operating in Vietnam saw losses last year, a 6.1 per cent increase compared to the previous year with 19.5 per cent. Around 60 per cent of respondents reported profits.

“This means that one in three Japanese companies operating in Vietnam are reporting losses,” said Atsusuke Kawada, head of Hanoi’s JETRO office.

Regional countries see similar results with 60-70 per cent of Japanese firms reporting profits. Thailand holds 72.4 per cent, Indonesia 64.8 per cent, and China 60.7 per cent. These results are considered solid amid a difficult global economy.

According to Kawada, the report showed export processing enterprises outperformed others with only 19.4 per cent reporting losses while the rate for enterprises in other sectors was 32.8 per cent.

“The reason for greater inefficiencies in enterprises not operating in export processing zones are likely to be focused on the domestic market as Vietnam’s economy faced low consumption troubles in 2013,” Kawada explained.

In fact, not only Japanese but also Vietnamese and other foreign invested enterprises (FIEs) operating with export advantages have greater returns. Vietnam’s economic growth reached 5.42 per cent last year, partly due to high export growth and a total value of $132 billion. Among FIEs operating in Vietnam, Japanese firms contributed up to 60 per cent of the total export turnover for the foreign invested sector.

Kawada said that in the coming time Japanese firms would continue to emphasise export processing.

“For Japanese enterprises, Vietnam’s advantages are not only cheap labour but also its export strengths compared to other ASEAN nations,” he added.

The JETRO report also showed that up to 33.9 per cent of Japanese respondents considered export processing the main business activity in Vietnam. This rate is significantly higher than Thailand’s 3.8 per cent, Indonesia’s 8.8 per cent, China’s 7.8 per cent and Malaysia’s 12.3 per cent. This also means that not many Japanese firms focus on the domestic market.

According to JETRO, Japan is the single largest foreign investor in Vietnam with over 2,000 projects valued at $34.6 billion. Last year alone, Japanese investors pledged $5.7 billion to the country.

A recent survey revealed that up to 70 per cent of Japanese investors planned to expand their operations. If this comes to pass, Vietnam would overtake regional rivals such as Indonesia, Thailand and the Philippines in the race to lure Japanese investments.

Most of the Japanese respondents placed a high value on Vietnam’s growth potential, social and political stability and inexpensive workforce. Many companies plan to build more factories in Vietnam and expand operations outside major industrial parks.

HCMC launches business registration at home, electronic ISO system

Authorities in Ho Chi Minh City officially inaugurated services for business registration at home and an electronic ISO management system on February 28.

The city’s Department of Planning and Investment (DPI) started the registration services on January 2, and 319 domestic enterprises had been registered by that way till February 19, DPI deputy director Tran Thi Binh Minh said.

She added the service helped lessen paperwork, save time and cost for enterprises and the regulator, and make life easier for entrepreneurs, and the agency expected it to be able to serve foreign-invested companies soon.

DPI also expects to see 10 per cent of the new enterprises making registration at home this year and a double of that in 2015.

As for the city’s electronic ISO management system launched on February 28 for all 24 districts, the metropolitan administration considers it a major improvement in organisational efficiency as it helps manage all of the documents.

The system will provide city dwellers with online public services such as applying for construction licences, home repair licences, and filing dossiers. Residents can also know the status of their dossiers via email or SMS, and know a new day of completion if the progress is behind schedule.

Minor coups noted in insurance sector

The latest data on the life insurance market showed a modest shift in the market shares of top players in the sector.

According to the latest report from the Ministry of Finance’s Insurance Supervisory Authority Department, newcomer PVI Sun Life advanced to the third position, ahead of Manulife, AIA and Dai-ichi, in terms of new premiums in 2013. Its performance has made a significant contribution to the total sale value of the life insurance sector.

Top market players include Prudential with an estimated market share of 23.1 per cent, Vietnam Life Insurance with 21.1 per cent, PVI Sunlife with 13 per cent, Manulife with 11 per cent, AIA and Dai-ichi with 8.3 per cent, ACE with 6.4 per cent and Prevoir with 5.4 per cent. Other smaller businesses include Hanwalife with 1.1 per cent and Cathay with 0.5 per cent.

In terms of executed contract numbers, apart from PVI Sun Life, other newcomers such as Generali, Vietinbank Aviva and VCLI also marked high growth rates. It is estimated they collectively signed 5.2 million contracts, up 9.2 per cent on-year.

In terms of premium income however, there was no significant change in market share. Prudential remained the market leader with 33.1 per cent, Bao Viet Life Insurance came next with 28.7 per cent, then Manulife with 10.1 per cent, AIA with 7.6 per cent, and Dai-ichi with 7.3 per cent, stated the report. In 2012, Dai-ichi was ahead of AIA’s 7.6 per cent market share with 8.04 per cent.

Other players with notable market share include PVI Sunlife, ACE, Prevoir and Hanwha Life.

According to the Insurance Supervisory Authority Department, despite economic difficulties the life insurance market continues to grow healthily with premium income reaching VND22.6 trillion ($1 billion).

HSBC system to facilitate US visa fees

HSBC Vietnam has just become the exclusive facilitator of US non-immigrant visa fees throughout Vietnam.

The bank has established a payment system available at all of its branches and transaction outlets for any non-US citizen applying for a visa via the US Embassy in Hanoi or Consulate General in Ho Chi Minh City.

Also, applicants can make payments anytime, anywhere via Vietnam Post Corporation outlets nationwide thanks to HSBC Vietnam’s strategic partnership with State-owned post and telecommunications group – an alliance that bolsters HSBC’s Global Payments and Cash Management network by over 2,000 outlets.

HSBC Vietnam currently operates 18 branches and transaction outlets in Hanoi, Danang, Ho Chi Minh City, Can Tho, Dong Nai and Binh Duong, as well as two representative offices in Haiphong and Ba Ria-Vung Tau.

HSBC has also been appointed as the bank responsible for collecting US visa fees in neighbouring territories such as Macau and Hong Kong.

New regulation defuses “useable area” disputes

The definition of apartment space will now exclude heavy duty supporting columns and utilities boxes.

Circular 03/2014/TT-BXD of the Ministry of Construction, which will come into force on April 8, stated that the value of apartments would be calculated based on the net useable area of an apartment.

This circulation should at a stroke resolve conflicts between apartment buyers and project developers.

Circular 16 issued in 2010 by the Ministry of Construction said contracts for the purchase of apartments needed to specify the area under common ownership, the area under the private ownership of the apartment owners and apartment floor area either determined by the net floor area measurement or gross internal area measurement.

“This only suggested how to calculate the floor area of an apartment in the purchasing contract without identifying common ownership and private ownership of such space,” said a real estate expert.

In addition it doesn’t explicitly state what to include in the net floor area or gross internal area measurement which again led to arguments, he said.

“We suggested that using a basis of measurement that measures only the usable area of a property will avoid any complications and will ensure fairness. These figures must be explicitly stated in any contracts and must be checked by both parties,” he added.

The previous ways of calculation saw developers take advantage of the vagueness to charge for space that was effectively unable to be used by the apartment buyer.

Investors claimed that space devoted to unmoveable fixtures was an integral part of an apartment’s structure and therefore should be included in contracts. Buyers obviously objected to paying for space that they could not use, particularly in smaller apartments, which were affected disproportionately.

The Circular 3 however also states that buyers who bought their apartment before the application of the circular would not benefit from the new ruling.

In a related move, the National Assembly’s Legal Committee last week questioned the Ministry of Construction for having come up with such badly worded original rulings which had caused innumerable problems to apartment buyers.

However deputy minister of Construction Nguyen Tran Nam refuted the accusation that his ministry had acted in the best interest of property developers and bizarrely claimed the two calculations for the area of an apartment were identical.

Vegetables rot as prices stay low

A pile of vegetables is left on the ground in the garden of Nguyen Van Huan, a resident of Chua Village in Ha Noi's Me Linh District. Although fresh, they will not be sold at market.

As Huan examines German turnips in the garden, he said he would lose even if he sold all his produce.

"Vegetable prices have gone down dramatically since Tet holidays. They're so cheap that I don't even want to harvest them. I'll just dig them up and leave them, because I need the area for another crop that may do better," Huan said.

He said the prices of vegetables in his garden were now half what they were at the same time last year.

Nguyen Thi Chau, who has a garden nearby, said she experienced a huge loss this year.

She invested about VND1.5 million (US$70) for 360 square metres of German turnips, but got back about only half that amount.

Tran Xuan Dinh, vice-head of the Cultivation Department, said that good harvests had led to a drastic dip in prices of vegetables throughout Viet Nam.

"A good monsoon enabled farmers to have a good harvest," he said. "Everything grows well."

While suffering losses, farmers have no choice but to continue their efforts in the hope that prices will get better.

"What else can we do? When you are in the agriculture sector, you have to accept that you win this time and lose the next because of the weather," Nguyen Thi Chau said.

Similar losses are being felt in the poultry industry due to outbreaks of avian flu.

Nguyen Thi Binh, a resident of Soc Son District in Ha Noi, said poultry prices went down about 50 per cent after Tet holidays. However, she said input costs, such as foodstuffs and medicines were on the rise.

Binh said she might have to stop raising poultry next year and find other ways to earn a living.

The price of eggs has also dropped dramatically. Nguyen Van Long from Thach That District in Ha Noi, who harvests about 9,000 eggs a day, said he was losing about VND1 million (US$47) every day because supply was stronger than demand.

Tong Xuan Chinh, deputy director of the Livestock Production Department, said in recent years, demand for meat products had decreased partly due to the economic downturn, while the livestock sector produced a similar amount of meat.

"We will have to carry out an overhaul with our livestock before signing important trade agreements such as the Trans-Pacific Partnership agreement and a free-trade agreement with Australia," Chinh said.

Businesses miss Tra fish export opportunity

While the import of Tra fish into the US and the EU markets is booming, many Vietnamese businesses are sitting on the sidelines due to lack of planning and inventory management.

The Vietnam Association of Seafood Exporters and Producers (VASEP) said a number of processing plants in the Mekong Delta region have cut back on production, by as much as half, due to material shortages.

Only proactive businesses with good inventory models in place can keep production at full steam, the VASEP said.

VASEP Vice Chairman Duong Ngoc Minh said tra fish material costs currently stand at a reasonable VND24,000 per kilogram but there is no available material for processing businesses and the shortage is forecast to last through the remainder of the  year.

Another contributing factor is that farmers let cultivation slide by 60% compared to last year. Production of tra fish in March was 60,000 tonnes, much lower than the 150,000 tonnes recorded in March 2013.

In addition, the recent prolonged cold weather has affected the reproductive ability ot Tra fish, resulting in a sharp reduction of fry.

Top 10 export commodities to West Asia

Mobile phone handsets topped the list of 10 leading Vietnamese exports to the United Arab Emirates (UAE) in 2013, earning US$3.42 billion, according to Ministry of Industry and Trade.

The ministry quoted the United Nations Commodity Trade Statistics Database (COMTRADE) statistics, as saying the UAE’s telephone import turnover hit a record high of US$6.8 billion in 2012, accounting for 22% of its total import value, and Vietnamese phones were getting the lion’s share in this market.

The top 10 key exports to West Asia are mobile phone handsets and components, fibers, computers - electronics and spare part, machinery and equipment, seafood, milk and dairy products, textiles, footwear,  clothing, and pepper.

Vietnam’s fiber exports to Turkey darted to US$276.2 million in 2011 and US$339.5 million in 2012.  Export turnover to Turkey saw only a slight decrease in 2013 due to the imposition of anti-dumping duties on synthetic and artificial fiber.

Phones, computers, electronics and spare parts are mainly exported to the UAE, Turkey, Israel, Syria, Saudi Arabia and Lebanol.

Agriculture priority for credit growth

The banking sector will increase agriculture sector and rural lending in 2014.

State Bank Governor Nguyen Van Binh said credit would go towards improving technology and science in food production as part of the government’s hi-tech agricultural push.

Bank loans for agricultural development doubled over the last 5 years, representing 22 per cent of all total outstanding credit currently in the economy. This number equals that of the agriculture sector’s total GDP contribution.

The banking sector’s policy is to continue pushing up credit in agriculture, said Binh.

Deputy director of the Ho Chi Minh City branch of the central bank Nguyen Hoang Minh said local banks would expand lending to agriculture, particularly aiming loans at agri-businesses using hi-tech to promote the quality and competitiveness of products.

“It is expected that outstanding credit for agriculture in the city will rise by 70-85 per cent against last year which would bring the total to VND35-37 trillion ($1.67 billion) this year, compared to VND20 trillion ($952 million) in 2013,” said Minh.

Currently the interest rate on agriculture loans is around 9 per cent. Binh has encouraged local banks to lower it 7-8 per cent for short-term loans and 8-9 per cent for long and medium-term loans.

The State Bank has noted that lending to agriculture faces many difficulties this year such as limited capital sources and difficulty mobilising capital in rural areas.

Binh said the State Bank has proposed a programme to the government that could help facilitate the cause.

The lending rate in Vietnam has been stable recently but has room to fluctuate 1-2 per cent depending on market movements. The banking system is aimed at 12-14 per cent credit growth in 2014.

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

equitisation, property market, Shipbuilding industry, TPP, Agriculture
 
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