Last update 7/10/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 10/7
Shares fall on slow credit growth

Shares retreated this morning on both of the nation's stock exchanges. On the HCM City Stock Exchange, the VN-Index closed down 1.76 per cent to 408.12 points, while the value of trades slowed to just VND444.5 billion (US$21 million). Volume was a mere 32 million shares.

None of the 30 leading shares tracked by the VN30 Index managed to post gains, and the VN30 declined by nearly 1.7 per cent to end the session at 482.49 points. Property developers Dic Corp (DIG) and Quoc Cuong Gia Lai (QCG), financial companies Ocean Group (OGC) and PetroVietnam Finance (PVF), and Vinh Son-Song Hinh Hydropower Co (VSH) all bottomed out.

Ninh Van Bay Travel Real Estate Co (NVT) was the most-active share in HCM City with around 1.9 million shares changing hands before it plunged to its floor price of just VND4,200 per share.

On the Ha Noi Stock Exchange, the HNX-Index also tumbled by 1.47 per cent to 68.20 points. The value of trades declined 11 per cent from last Friday's level to VND261.7 billion ($12.4 million), while volume dropped to 27.6 million shares. Losers overwhelmed gainers by 191-53.

On its first day, the new HNX30 Index, which tracks the northern bourse's 30 best stocks, lost 3.6 per cent of its value to close at 127.34 points.

VNDirect Securities Co (VND) was the most-active share nationwide with over 3.1 million exchanged.

The State Bank of Viet Nam reported that credit growth as of June 30 had totalled just 0.76 per cent since the end of last year. While export credit increased by 12.63 per cent and loans to support industries also grew by 7.13 per cent, credit for small- and medium-sized enterprises continued to decline by 13.7 per cent, with many small businesses still facing difficulties accessing loans.

Hoang Van Dung, vice president of the Viet Nam Chamber of Commerce and Industry, urged new measures to help small business. "We should establish credit guarantee funds to open up greater access to capital," Dung suggested.

He also advocated a reduction in administrative procedures and greater efforts to prevent corruption in order to minimise costs for enterprises, as well as more technology transfers to make production more profitable.

VDC inaugurates largest data centre

Da Nang-based Viet Nam Data Communication (VDC) officially put into operation its state-of-the-art internet data centre (IDC) in the central region.

The new IDC infrastructure is developed by synchronised technology solutions and at international standard Tier 3.

The system ensures the safety measures of security, redundancy and load sharing systems as well as the density of integrated network and security devices, allowing continuous operation with the best quality.

Online readers via cell phones rise rapidly

Deputy Director of VC Corp Nguyen The Tan said his company had about 2 million hits via mobile phones per day, accounting for 10-15 per cent of its total capacity.

Thanks to cheap 3G access charges and cheaply priced smart phones, Tan said that in the near future, the number of internet users through mobile networks would reach around 30 million.

Therefore, VC Corp will launch advertising on mobile systems and invest in developing mobile applications for content delivery and payments.-

Nokia says good-bye to local distributor

Nokia will officially stop working with Petrosetco Distribution JSC (PSD) to distribute its cell phones from August 5, 2012.

After the cancellation, Nokia will focus on co-operating with official distributors such as FPT and Lucky companies.

The move aims to assist Nokia to further focus on its business strategy and enhance the quality of its distribution network to meet diversifying demand.

Microsoft appoints new country manager

Microsoft has officially announced this week that Vu Minh Tri has been appointed as its new country manager for Viet Nam

In this role, Tri will be responsible for managing Microsoft's business strategy, operations, and development initiatives in the local market.

He has extensive business management experience in a number of multi-national corporations and has a deep understanding of the technology industry. Prior to joining Microsoft, he held many key leadership positions and most recently was the regional leader overseeing the Indochina and Thai regions for Qualcomm.

Tri previously held positions such as general director for Yahoo! Viet Nam, country manager of Sony Ericsson Viet Nam, and worked in sales and marketing management for BAT, BP and Procter&Gamble Viet Nam.

US firm turns over satellite to VNPT

US aerospace giant Lockheed Martin has officially handed over the VINASAT-2 to the Viet Nam Post and Telecommunications Group (VNPT), marking the full-fledged management of its second satellite.

VNPT General Director Pham Long Tran said Lockheed Martin's experts had carefully checked, tested and successfully ran the satellite before handing it over to VNPT.

Speaking at the official ceremony held in Ha Noi, Tran said all tests on manoeuvrability, technical parameters and overall quality had met the standards stated in the contracts.

Viet Nam Telecom International (VTI), a VNPT affiliate, will be responsible for operating the sputnik from its Qui Duong ground control base in Ha Noi. It said it would provide telecom services from the satellite, including radio, television and telephone transmission, within this month. Meanwhile, Lockheed Martin said it would continue to support VNPT by sending experts to help operate the satellite.

VINASAT-2 was successfully launched into orbit on May 21 from the Guiana Space Centre at the European Spaceport in Kourou, French Guiana. Fitted with 24 Ku-band transponders, the satellite has a life expectancy of 15 years and follows Viet Nam's first satellite VINASAT-1, launched in April 2008.

According to VNPT calculations, the US$280 million satellite is capable of covering Southeast Asia and some neighbouring countries, and the organisation would see returns on its investment after 10 years of operation.

VNPT in March signed a US$20 million insurance contract for Vinasat-2 with two local insurers, the Post and Telecommunication Joint Stock Insurance Corporation (PTI) and Bao Viet Insurance Group.

First foreign deal in pharma sector

Chilean pharmaceutical CFR International SPA has acquired a stake in Domesco Medical Import-Export Co (DMC), making it the first foreign strategic partner of a domestic drugmaker.

"This deal has been the most successful in the sector, since co-operation involving foreign factors has normally been difficult to implement in the pharmaceutical industry," said the head of financial consultancy for HCM City Securities Co, Trinh Thanh Can, in an interview with the publication Nhip cau dau tu (Bridge for Investment).

The deal also represents a new trend in M&A in which a group of fund shareholders offer to sell their stakes in a company to a foreign strategic investor. Last year, the Chilean producer purchased around 40 per cent of Domesco held by five different investment funds. The value of the acquisition was VND302 billion (US$14.3 million), equivalent to VND40,000 per share ($1.90) and nearly double the shares' actual price on the market at the time.

After reaching some other agreements with Domesco, CFR then increased its stake in the company to around 46 per cent.

Can said CFR International had sought to invest in a Vietnamese pharmaceutical for a number of years. In addition to Domesco, the company eyed such major domestic players in the sector as Hau Giang Pharmaceutical (DHG) and Imexpharm (IMP).

"However, the shareholder structures in these two companies are quite scattered, making them inappropriate targets for the foreign investor's purposes," Can said.

Domesco also had advantages in some products of which CFR was interested in boosting exports, Can said. With an average growth rate in the Chilean market over the last five years of 24 per cent per year, CFR was hard-pressed to continue its development without expanding to other markets, he said.

Despite the potential of the nation's pharmaceutical market, prior merger and acquisition deals in the sector that involved foreign investors have fallen through.

Hanoi confiscates 8ha following land violations

The Ha Noi People's Committee will issue a land confiscation decision based on 8.2ha of eight businesses in the city this month, according to reports.

Vice chairman of the People's Committee Vu Hong Khanh said all eight firms were found to have violated land laws. As a result, the city has decided to confiscate their properties and issue fines.

The city's property transaction centre and land development fund will make a budget proposal for land clearance and reimbursement for the businesses.

With 8.03 ha of land planned for confiscation, Nam Cuong Joint Stock Group holds the majority. Nam Cuong's property covers seven villages and one town in Thach That District. The land was approved for the Thach That urban residential area. However, after 46 months, inspectors found that the group had failed to pay for the land clearance of local residents and land use taxes. The Thach That District People's Committee will call on local residents to continue using their land in accordance with the law.

Other businesses subjected to the land confiscation include Education Equipment JSC, a mechanical factory under Viet Nam Automobile Corporation, a joint stock company under Agribank Viet Nam, Vina Apollo Tech, Ha Son Binh Foodstuff, Huong Dat and Thang Long Bridge No 5.

First green hydro-power plant opens

Chiem Hoa hydro-power station, Việt Nam's first green hydro-power plant, has opened in the northern province of Tuyen Quang after nearly three years of construction.

The plant is the first to use a reduced supply of water with a low differentiation between the reservoir and the dam. According to power expert Bui Thuc Khiet, using less water helps maintain river flow so it has less affect on the environment.

This type of reservoir also does not have to be large, meaning that no residents have to be moved from the area.

However some compensation has to be paid for land that is swallowed along the river banks.

Khiet said Việt Nam had plenty of potential to develop more green hydro-power plants.

The plant, in Ngoc Hoi Commune, Chiem Hoa District, about 80km from Tuyen Quang City, cost a total of about VNĐ1700 billion ($US81 million).

It was designed to have three turbine generators and a production capacity of 48MW. The next two turbines are expected to be operational by the end of the year.

When completed, the plant will be able to add 193.4 million kwh of electricity to the national grid.

It will also provide an ecological tourist reservoir with jobs for local workers.

The plant is the fourth hydro-electric power plant in the mainstream of the Gam River in the province.

Government to establish Department of Real Estate
 
The Ministry of Construction proposed the establishment of a General Department of Housing and Real Estate Market.
 
Currently, the Ministry of Construction's Department of Housing and Real Estate Market is unable to keep up with the demands of the market, according to many. This, they say, is a result of slow reaction to the realities of the market as well as slow implementation at the local level.

The Minister of Construction, Trinh Dinh Dung, said, though the bureau has tried to achieve prescribed goals, the central Government needs a larger agency.

Management of the real estate market is a difficult task for local agencies because there are so many elements involved, such as finance and taxing, which create inter-agency overlap.

Proponents of the new department insist that this requires a strong central department that can deal with the complexities of the market, especially concerning national projects.

First Solar to exit Vietnam

The leading global provider of comprehensive photovoltaic solar systems last week revealed it was selling its factory and leaving Vietnam.

Brandon Mitchener, First Solar director of communications, last week told VIR the company was selling its factory in Ho Chi Minh City’s Dong Nam Industrial Park. In February 2012, the American company completed an evaluation and approved a set of manufacturing capacity and other initiatives primarily intended to adjust its previously planned manufacturing capacity expansions and global manufacturing footprint.

“Due to supply-demand imbalances in the world solar market, regrettably the First Solar plant in Dong Nam Industrial Zone will be postponed until the market demand requires the additional capacity,” said Tymen De Jong, senior vice president of Manufacturing for First Solar.

After deciding not to proceed with its previously announced four-line plant in Vietnam and all necessary construction was completed in April this year, First Solar attempted to sell the plant.

Sales agent Cushman & Wakefield is seeking buyers for the 113,000 square metre manufacturing facility, including 107,000sqm of industrial space divided into two production areas, a large logistics area and 6,000sqm of external office building.

The company’s quarterly report revealed in May 2012 that the Vietnam plant was classified as “assets held for sale” in the condensed consolidated balance sheet. According to the report, as of March 31, 2012, an impairment charge of $92.2 million was levied for the plant. Of which, an impairment charge in the three months ended in March 31, 2012 was $29 million.

Also, according to the report, the carrying amount of the Vietnam plant as of March 31, 2012 was $46.2 million. “The carrying amount of the Vietnam plant represents the fair value of the plant less expected costs to sell,” said the report.

The quarterly report also stated: “We expect to complete the sale of the Vietnam plant within the next 12 months, but the expected selling price is substantially below our cost of construction and there can be no guarantee that such sale will be completed in the next 12 months”.

First Solar has also decided to postpone the commissioning of its previously announced four-line plant in Mesa, Arizona and the construction of their previously announced two-line plant in France until such time as global supply and demand dynamics support the additional manufacturing capacity.

The primary goal of these initiatives is to better align production capacity and geographic location of such capacity with expected geographic market requirements and demand, the company said.

Sugar sector’s bitter taste

Some foreign sugar consuming enterprises are bitter about serious sugar shortages.

The Philippines’ URC Vietnam Company general director Santa Robles Edwin said the Binh Duong province-based company’s $100 million factories were in dire need of 4,000 tonnes of sugar per month for producing confectionery and beverages.

“We are in big difficulties as local sugar suppliers cannot meet our demand. We have had to stop operation of two out of our seven production chains in Binh Duong and Hanoi,” Edwin said.

At present, URC could monthly buy 1,000 tonnes of sugar from Bourbon Tay Ninh company, 400 tonnes from Bien Hoa sugar company, while other suppliers like KCP, Lam Son and Tate&Lyte had yet to decide to sell sugar to URC due to ongoing stock-taking reasons.

Sugar shortages and sudden price hikes have hit many foodstuff companies including Coca Cola, Nestle and Pepsico.

“We sent out a letter to the Ministry of Industry and Trade (MoIT) to urgently request a sugar quota,” said Nguyen Khoa My, corporate affairs head of Coca Cola. Meanwhile, Vu Quoc Tuan, a spokesman of Nestle Vietnam said: “We sent quota applications to the MoIT from March but the ministry has yet to give us any feedback.” Also, URC’s request to allow it to import sugar to fuel its production was met by a muted MoIT response in May.

Meanwhile, the Ministry of Agriculture and Rural Development (MARD) recently reported that in the 2011/2012 sugar-cane crop, Vietnam’s sugar volume was over 1.4 million tonnes, of which 1.3 million tonnes was consumed locally. Therefore, MARD had asked the government to approve a plan to stockpile 200,000 tonnes of sugar.

Ha Huu Phai, a Vietnam Sugar and Sugarcane Association expert, said the stockpiled sugar volume was 300,000 tonnes now, excluding several dozen thousands of tonnes of illicit sugar imported from Cambodia and Thailand.

“But why do sugar consuming enterprises often lament that they suffer from sugar shortages amid a redundancy of sugar in the local market? It is simply because they want the MoIT to allow them to import sugar. The price of imported sugar is 20-30 per cent cheaper than locally produced sugar,” Phai said.

He said the MoIT would allow for the importation of 70,000 tonnes of sugar soon under the World Trade Organization commitment, because the 2011/2012 sugar-cane crop had just concluded.

“The problem is that sugar consuming enterprises and sugar suppliers need to jointly negotiate prices and seek solutions to consume locally-made sugar,” said MoIT Deputy Minister Nguyen Thanh Bien.

Nha Trang hotel seeks talent

Gearing up towards its soft opening by December 2012, Crowne Plaza Nha Trang will conduct a mass recruitment event on the July 16-17, 2012 at the Convention Centre, Nha Trang, aimed at recruiting young dynamic associates.

The hotel’s mass recruitment event is the first step in its long-term vision to nurture a team of high-caliber associates. The training provided to associates as well as the diverse career advancement opportunities will prove Crowne Plaza Nha Trang to be a leading employer of choice in Vietnam.

Colin McCandless, general manager of Crowne Plaza Nha Trang, said: “We are very much looking forward to meeting the talented and motivated individuals looking to embark on a career in a brand defining Crowne Plaza Hotel.”

Son Tra peninsula to lift Danang tourism

Danang’s Son Tra peninsula is hosting  a range of remarkable real estate and tourism projects.

Danang People’s Committee recently allowed Sun Group to develop a theme park and a resort on the peninsula.

Son Tra Ocean Park will see the construction of an entertainment complex, 10 ha for a commercial and recreational zone as well as 14ha for infrastructure and a port area.

This is the second project of Sun Group in Son Tra, with the other - the InterContinental Danang Sun Peninsula Resort, opened last month. Another project located in Son Tra peninsula is the Mercure Son Tra Resort developed by Saigon General Service Corporation.

With a total investment of $20 million, Mercure Son Tra will feature 22 beach villas, a five-storey hotel and a 500 metre private beach.

Tokai Kogyo’s plant takes shape

Japan’s Tokai Kogyo last week started construction on a plastic and rubber manufacturing plant to supply parts for automotive industry in central Danang city’s Hoa Cam Industrial Zone.

The plant, which covers 47,000 square metres with a total investment of $10 million, will provide accessories for car-makers in Vietnam and the region. This is the fifth plant of Tokyo-based Tokai Kogyo and the third in Southeast Asia after Thailand and Indonesia.

“We selected Danang as our location for the plant because the city is situated in the central region of Vietnam and at the end of the East-West Economic Corridor linking Myanmar, Thailand, Laos and Vietnam,” general director of Vietnam Tokai Company Isao Takahashi said.

Tokai’s project, operational in March 2013, will significantly contribute to the supporting industry for the automotive industry in Vietnam.

Malaysia’s Tan Chong Holding Berhad is now building an assembly plant in Danang which will start manufacturing Nissan cars in 2012. Last year, Japan’s Mazda Motor Corporation opened an assembly factory at Chu Lai Economic Zone in neighbouring Quang Nam province, about 100 kilometres south of Danang. In addition, the Vietnamese government introduced a strategy for the development of automotive industry and also started to develop a hub for automotive industry in Quang Nam.

Deputy Chairman of Danang People’s Committee Phung Tan Viet said Tokai’s project would help to boost industrial production and exports in Danang city.
 
Taiwan’s Formosa plugs into huge power plan

The Vietnamese government has agreed to add the 1,500 megawatt thermal power plant invested by Taiwan’s  Formosa Plastic Group into the national power development plan until 2020.

This means that the proposed plant in central Ha Tinh province will be connected with the national electricity transmission grid. The Ministry of Industry and Trade and the Ha Tinh Provincial People’s Committee will guide the power plant’s preparation and investment activities in accordance with the current regulations, Deputy Minister Hoang Trung Hai said in an announcement released by Government Office last week.

Located in Ha Tinh’s Vung Ang Economic Zone, this independent power plant is part of a mammoth steel manufacturing and seaport complex developed by Formosa Plastic Group. According to the group, the power plant will be mainly responsible for supplying electricity to its steel complex and other industrial charges.

Formosa Plastic Group, in 2008, was licenced to build a 7.5 million tonne steel facility and a deepwater port with total investment capital of $8.9 billion. But the investment capital, at this time, jumped to around $10 billion, said Chu Chun Fan, the group’s representative in Hanoi.

The Taiwanese investor is now constructing the first phase of the 250ha, 14-berth Son Duong port, and apartments for workers, office buildings and a 427-room guest house. It has also completed leveling 961ha of land out of 1.966ha, accounted for 48.9 per cent of the site.

The investor plans to start constructing the steel factory this November and put it into commercial operation at the end of 2015, a year later than the initial schedule due to the delay in its master designing work.

Can Tho refinery reaches end game

Can Tho Municipal People’s Council said the eight year delay had made local people’s lives unstable and hurt the province’s investment image.

The long-delayed Can Tho oil refinery is set for the bullet. Can Tho Municipal People’s Council said the eight year delay had made local people’s lives unstable and hurt the province’s investment image.

Vien Dong logded an application to develop Can Tho refinery in 2004 and in May 2008, the investor received an investment certificate to build a $538 million refinery on 250 hectares in Phuoc Thoi ward, O Mon district with the annual capacity of two millions tonnes of crude oil. A joint venture between Vien Dong and US’ Semtech Limited was formed, of which Vien Dong contributed 30 per cent of the capital investment.

However, the foreign partner withdrew from the project in 2009, due to financial difficulties and Vien Dong proposed to reduce the project’s financial scale to $350 million on 50ha.

In June 2010 Nguyen Van Duc, general manager of the Vien Dong, announced that he had chosen the Taiwan’s Crystal Future Incorporation to replace the US one. However, in October 2010 Crystal Future Incorporation announced its withdrawal from the project, claiming that it wanted to be given cleared land by the local authorities before joining the project, meanwhile the local authorities asked the two sides to set up new joint venture first.

Duc even presented a letter of confirmation of the Far East National Bank Ho Chi Minh City Branch to express its interest in providing Vien Dong the financial support with an amount up to $150 million, to be used for the first phase of the project. The letter expired in July 7, 2011.

Rich Korean export potential

Vietnam is to enjoy healthy textile garment exports to South Korea.

In the first six months of 2012, Vietnam reaped $400 million from exporting textile garment products to South Korea, currently the country’s fourth largest market for such products, a 27 per cent jump on-year.

This made South Korea the textile and garment sector’s fastest growing export market, whereas the sector’s exports to the EU hiked 22 per cent, the US up less than 10 per cent and the EU sank 2 per cent against the same period in 2011.

In 2011, Vietnam’s textile and garment exports to South Korea leaped 148 per cent climbing to $900 million.

The 400 Korean-invested firms operating in textile and garment field in Vietnam had remarkably contributed to accelerated textile and garment exports to South Korea in recent years, said Vietnam Textile Apparel Association (Vitas).

In fact, apart from filling export orders for partners from big global markets, Korean firms based in Vietnam have shipped their products back to Korea.

Most of companies appeared on Vitas’ list of best export performers in the first five months of 2012 were Korea-invested. For instance, Hansae Vietnam posted more than $160 million, Hyosung Vietnam $100 million and Hansoll Vina (HSV) and Eins Vina $80 million each.

Of them, Hyosung Vietnam just came to Vietnam in 2007. At this time this wholly Korean-invested firm has opened three factories in Vietnam employing 3,500 labourers. The firm is part of global multi-field Hyosung Group based in South Korea.

From the part of local firms, Bac Giang Garment eyes export to South Korea surpassing $50 million per year.

South Korea is one of Bac Giang Garment’s top export markets behind EU and the US, making up around 20 per cent of the company’s annual total export value.

“In the forthcoming time, South Korea will remain among top targets of local textile and garment exporters in their hunt for global outreach and Bac Giang Garment is not an exception,” said the company’s director Nguyen Huu Phai.

Industry experts assumed in the late six months Vietnam’s largest textile and garment export market the US would be unlikely to maintain its rapid growth 15-17 per cent as seen in the same period in 2011 whereas the EU as Vietnam’s second largest market for textile and clothing is in a fix.

In this context, Korea and China will be good options to help the textile and garment sector ramp up export to make up for the shortfall from EU and some other markets.

Vietnam expects to earn more than $1 billion from textile and garment exports to South Korea in 2012 out of its full year target of $15 billion export value from textile and garment products.

Construction sector experiences downturn
 
State-owned construction firms performed poorly in the first six months of the year, with unfinished projects and slow growth compared to last year.  

The Ministry of Construction said in a report that both construction and consumption of materials are down because of cuts in Government investment.

According to the report, due to high inventories, many companies have had to cut production to avoid further losses.

For example, there were 9.6 tonnes of cement produced in the last six months, 37.8% of the initial plan, but 0.4 tonnes are sitting idle in inventories.

Construction glass 62.9% of the production goal was met, but 2.6 million square metres are still in stock. Tile production reached 33% of what was planned, but 2.6 million square metres lie in stock. 

Building construction was at 59% of the same period last year because of a lack of investment capital.

The ministry reported that a number of companies did not follow the business plans they had registered, investing less than claimed. For example, Vietnam Cement Industry Corporation invested only 6.3% of its investment plan, Vietnam Fitted Lilama invested 12.9% and Bach Dang Construction Corporation invested just 13.2%.

The ministry has requested that construction companies focus on the problems facing them in order to better the situation for the remainder of the year, specifically restructuring debts, changing high-interest short-term debts to long-term ones with less interest, and focusing on core business activities.

Other goals include reorganising management and financial system to establish large subsidiaries, raise registered capital and avoid competition among subsidiaries of the same group.

Banks ordered to lower lending rates for old debts

Banks are now requested to lower lending interest rates on their old debts to below 15 percent a year, and at most 13 percent for loans targeting the preferential sectors, Governor of the State Bank of Vietnam Nguyen Van Binh said at a meeting Saturday.

“Liquidity has been improved and inflation has been restricted to 2.52 percent, creating conditions for both deposit and lending interest rates to be lowered,” said Binh.

Binh urged that lending rates should be cut in order to achieve the target credit growth and contribute to national economic growth.

“Banks will receive nothing, neither of the original loan nor the interest, if they keep on imposing exorbitant lending rates on a borrower which is in financial problems, and incapable of clearing the liabilities,” he said.

“Therefore I demand that lending rates be cut to below 15 percent a year.”

Many credit institutions said it will not be easy to implement the central bank’s order as long as their bad debt worries are not eased.

Le Hung Dung, chairman of Eximbank, said his bank will lower lending rates on old loans as ordered by the central bank as of July 15.

“However, we still have to wait for official guidance in documents from the central bank,” he said.

The chairman of another commercial bank in Ho Chi Minh City also said he is waiting for the same thing.

“We can cut rates for old loans in the preferential sectors, but it is impossible to impose rates of below 15 percent for all loans, as some of them are high-risk liabilities,” he said.

“For these kinds of loans, the central bank should allow banks to calculate lending rates through their own initiative.”

Meanwhile, a bank’s deputy CEO said the requirement will put pressure on small banks which are applying 20 percent a year interest on their lending.

“We are also waiting for guidance from the central bank, but the situation is expected to become complicated as we will have to renew all loan documents as well as resign the contracts,” he said.

Meanwhile, the chief of a bank in Hanoi said frankly that many banks do not respect the interest-lowering order.

“The central bank should have only encouraged banks to cut lending interest to a reasonable rate rather than capping the loans at 15 percent,” he said.

“Some banks may follow the order but will find another way to recoup the lowered interest rate -- for instance, they can force borrowers to pay interest immediately or charge them with additional fees.

“Generally speaking, banks will find loopholes to save themselves,” the anonymous banker stated.

Firms collude to manipulate medicine prices

Healthcare company GlaxoSmithKline Pte Ltd Singapore (GSK) has been found to have colluded with a local pharmaceutical manufacturer to manipulate medicine prices, with the products eventually coming to customers at prices four to five times higher than their original rates.

During the 2008 – 2011 period, Savi Pharmaceutical JSC, or Savipharm, a medicine maker located in the Tan Thuan Processing and Exporting Zone in Ho Chi Minh City, received licenses from the Drug Administration of Vietnam (DAV) for the circulation of 15 types of medicine.

In 2010 and 2011, Savipharm requested to transfer the licenses to GSK, in additionto renaming all of the aforementioned drugs, a proposal which was green-lighted by the DAV.

“Only the name of the company who receives the license and the names of the medicine are changed, while the license registration application of Savipharm at DAV remains unchanged,” the DAV said in its document approving the transfer.

The DAV later granted new licenses on the renamed medicines for GSK, with the same registration codes that it gave Savipharm earlier.

Savipharm later signed a ‘manufacturing and supplying medicines’ agreement with GSK.

During the period between October 18, 2011 and May 17, 2012, Savipharm manufactured six out of the 15 said medicines, and sold them to GSK under an in-country export transaction, with the help of importer Phytopharma, at very low prices.

An in-country export is a transaction in which a Vietnamese company sells products to a foreign one but transfers the goods to another company based in Vietnam, as assigned by the importer.

Specifically, it exported 103,963 boxes of medicine to GSK at prices declared with the customs agency of VND3.1 billion (US$148,800). However, Phytopharma imported all of these products and declared their values at more than $1 million, or nearly VND18.2 billion, with the customs agency.

The medicine packages had been changed from domestically manufactured products into imported ones, and thus had prices three to four times higher than their original prices. However, they will be sold to customers at even higher prices.

For instance, the Meloxicam GSK 7.5mg is exported at VND14,440 per pill, while it is imported at VND70,746 a pill, up by 490 percent, and finally sold to customers at VND78,292, which is a 542 percent increase compared to the export price.

Savipharm CEO and chairman Tran Tuu said GSK has conducted a large amount of technological transfers and personnel training for his company, enabling it to produce medicine at GSK standards.

By selling the products to GSK under the in-country export scheme, Savipharm has helped local patients to access medicine with similar quality, but at 40 – 50 percent lower prices compared to imported drugs, said Tuu.

However, when asked about the fact that patients have to buy medicine at exorbitant prices, Tuu said he had no knowledge of such a problem.

The director of a major pharmaceutical firm who wishes to remain anonymous said it is unreasonable for the medicine prices to be sent skyrocketing after the license transfer between Savipharm and GSK.

“Scientifically, the product quality remains unchanged after the registration is transferred, so there must be something non-transparent going on here,” he said.

A gloomy picture of national economy

Vietnam's GDP grew at 4.38 percent in the first half of 2012, much lower than in the same period last year, says Dr. Tran Hoang Ngan, member of the National Assembly Committee for Economic Affairs.

If urgent measures are not taken promptly, it is difficult to achieve a higher growth rate, Dr. Ngan says.

In addition, there’s an increasing number of loss-making businesses, many of them have gone bankruptcy. Unemployment rates are growing rapidly while State budget collection is declining.

According to Ngan, a paradox is existing at the moment when the national economy is facing numerous difficulties. In the first six months of this year, the total budget collection was estimated at more than VND346,000 billion while budget spending reached up to VND414,000 billion. Moreover, he says, banks are worried about bad debts, which are threatening the whole banking system.

Ngan suggests the Government set up an agency to deal with bad debts to prevent negative impact on macro-economy.

Regarding inflation control, he says, it is essential to give top priority to stabilizing marco-economy and curbing inflation. The Government should implement two groups of solutions for both immediate and long-term periods in order to attract more investors, increase investment efficiency, mobilize social sources and ensure sustainable economic growth.

Ngan highly values the Government’s current measures to exempt and extend taxes, reduce inventory level and promote foreign trade activities. The State Bank of Vietnam has lowered lending interest rates, and is trying to maintain the rates at a stable level of around 10 percent/year.

In his opinion, the Government should control banks’ interest rates following both basic and target inflation rates to avoid shocks from outside. Nevertheless, he says, requirements for loan access should be met to prevent bad debts from recurring.

Ngan also voices concern over the disbursement of investment, especially for public investment projects. He stresses the need to make a public investment supervision mechanism more democratic and transparent. It is also necessary to identify the individual responsibility of chief investors, project mangers and license providers following the Prime Minister’s 1792 Decree.

Commercial banks to cut interest on old loans

State Bank of Vietnam Governor Nguyen Van Binh has asked commercial banks to refinance outstanding loans at lower interest rates in a bid to help businesses in difficult circumstances.

Addressing a recent meeting, Binh said lenders would offer borrowers better rates as of July 15. Therefore, bankers this week needs to identify new rates and immediately inform their networks to begin implementing the adjusted rates.

“We must be responsible for protecting our prestige as maintaining high lending rates is offensive to society,” Binh said.

Binh noted that both deposit and lending interest rates fell sharply in the first six months of the year, but these rates were only applicable to new loans. In the meantime, businesses still suffered from high rates on old loans, and many were facing insolvency unless they saw some relief.

According to the central bank, bad debts in Vietnam had US$5.18 billion by April, or 4.14 percent of total outstanding loans, up from 3.06 percent in 2011.

Binh said interest rates on outstanding loans should be reduced to no more than 15 percent and should gradually to match new, prevailing interest rates.

In May, the State Bank lowered the ceiling on deposit interest rates from 15 to 14 percent per year. Key lending rates were also lowered, while the refinancing rate dropped from 13 to 12 percent, the discount rate from 11 to 10 percent, and the inter-bank rate from 14 to 13 percent.

Many bankers expressed concern about the slow rate of credit growth in the first six months of the year. With regard to the annual growth of the credit market at 15-17 percent, they said, the more realistic figure would be below 10 percent.

Vietnam International Bank (VIB) president Han Ngo Vu attributed the low credit growth to the economic recession which has led to low consumer demand and a cut in production and business.

According to the State Bank’s Hanoi Branch, credit growth in Hanoi reached just 2.36 percent in the first half of the year, a record low in a decade.

Promoting Vietnam-Laos economic cooperation

The Vietnam-Laos conference on economic and investment cooperation took place in Danang, Vietnam on July 7.

Representatives from the two Ministries of Planning and Investment reported on Vietnamese business investment in Laos.

By the end of May 2012, 214 projects have been granted licences to invest in Laos with a combined capitalization of US$3.45 billion. Vietnam ranks third among the 52 countries and territories investing in Laos and plans to raise their total investment capital to US$4.5-5 billion in the near future.

Many projects have been put into operation which has contributed to socio-economic development in Laos and helped raise local people’s incomes.

Lao Deputy Prime Minister and President of the Laos-Vietnam Cooperative Sub-committee, Somsavat Lengsavath, said increasing exchange, investment and cooperation between the two ministries demonstrates the close-knot relationship between the two countries.

Vietnamese Deputy Prime Minister Nguyen Xuan Phuc, President of the Vietnam-Laos Cooperative Sub-committee, highlighted the significance of the meeting because it provided a good chance for the two sides to review recent economic and investment cooperation and devise measures to remove difficulties in the future.

Phuc said the two ministries should help the two Governments to promote bilateral investment and work closely with each other to iron out snags for businesses and accelerate effective investment.

On the occasion, the two ministries presented certificates of merit to individuals in recognition of their contribution to strengthening bilateral friendship and investment cooperation and signed a memorandum of understanding on future cooperation.

Latin America lacks information about Vietnamese market

The lack of market information is a factor in hindering bilateral cooperation between Vietnam and Latin America, claim participants in the Vietnam-Latin America Trade and Investment Forum in Hanoi.

Matias Mori, Executive Vice-President of Chile’s Foreign Investment Committee, said because of this, Vietnamese and Latin American trade and investment remains modest.

The Vietnamese Minister of Industry and Trade Vu Huy Hoang  said it is necessary for both sides to exchange more information about business opportunities available to each other.

Hoang asserted that Vietnam and Latin America should introduce their partners’ potential to the mass media, promote the exchange of trade delegations, host seminars and help foster international relations between enterprises.

According to Deputy Minister of Planning and Investment Dang Huy Dong, Latin America is a dynamic region with notable strengths in the production of spare parts for heavy industry and electronic components, as well as infrastructure development, bio-technology, clean energy, information and communications. Dong believes these industries are appropriate for Vietnam’s demand and development level.

Following meetings with Latin American partners, Foreign Minister Pham Binh Minh said, in addition to huge potential in oil and gas exploration, the southern-hemisphere nations are keen to invest in telecommunication, wind power development, and to export mid-range aeroplanes to Vietnam.

According to Matias Mori, the Chilean government is calling on foreign businesses to invest in energy development, mining, food industry, and infrastructure.

Our government has set a target to improve investment policy in an effort to reduce the operating costs for foreign businesses, he said.

Jorge Pereyra De Olazabal, Chairman of the Argentina-Vietnam Chamber of Commerce, said he will encourage Argentinian businesses to invest in Vietnam.

Argentina will soon build a meat-processing plant and establish a food-supply chain in Vietnam, he announced.

First Vice Minister of Foreign Trade and Investment of Cuba, Antonio Caricarrte, said, for its part, Cuba has always welcomed Vietnamese businesses to invest in tourism, real estate, mining, and renewable energy in the country. He expressed the hope that Vietnam will become a gateway for Cuban products to break into the Southeast Asian market.

The Vietnamese government has insisted that the Foreign Direct Investment (FDI) sector receives incentives to develop on a par with other economic sector.

FDI attraction will be focused on infrastructure development projects and those which use environmentally-friendly technologies and strengthen regional links.

Sectors which can create goods with high competitive advantages and those which are able to participate in the global value chain, such as high-tech, mechanical, information technology products, will also receive priorities.

Korean businesses seek opportunities in Vietnam

Representatives of nearly 80 businesses from the Republic of Korea (RoK), led by the Chairman of the Korea Importers Association (KOIMA), will meet with Vietnamese partners in Hanoi on July 19.

The meeting, held jointly by KOIMA, the Vietnam Trade Promotion Agency (Vietrade) and the Vietnamese Trade Office in the RoK, will provide a good chance for domestic businesses to seek business and export opportunities with Korean partners. It also aims to call upon Koreans to invest in production, industry and services in Vietnam.

Korean businesses specialize in fishery products, garments, footwear, industrial plants, utensils, household furniture, office equipment, agriculture, processing and handicrafts.

Binh Duong boasts a record of FDI attraction

Binh Duong has attracted US$2.83 billion foreign direct investment (FDI) since earlier this year, double this year’s plan.

Currently, there are 2,070 FDI projects with a total capitalization of US$16.838 billion.

Among 51 new projects in the reviewed period include the Tokyu Group’s project worth US$1.2 billion, the Dai Nippon Printing Group (US$35 million), Vietnam Biomin Ltd Company (US$8 million), Net Hoa Company (US$5.2 million). 57 additional capital projects include Sunsteel joint stock Company (US$120 million), United International Pharma (US$6 million) and Liwayway Food Industry Company (US$14.5 million)

This is attributed to local efforts to call for investment from potential markets, such as Japan and the Republic of Korea (RoK).

Most of the projects are focused on services, infrastructure construction and urban development.

Tran Van Lieu, head of the management board of the provincial industrial parks, said in order to attract foreign investors, the province has spared no effort to improve industrial and transport infrastructure, social welfare, human resources training and urban development.

The province has closely coordinated with universities and colleges in ensuring an abundant supply of human resources to both domestic and foreign businesses.

Vietnam Rubber Group receives FSC certification

The Vietnam Rubber Group (VRG) was awarded the Forest Stewardship Council (FSC) Certification for responsible and sustainable management of rubber forests by the Netherlands Control Union Certification at a ceremony in Ho Chi Minh City on Friday.

The recognition is the result of the VRG’s 18-month pilot model for sustainably managing 11,700 hectares of rubber forest based on FSC principles and criteria.

Vietnam is the fifth country in the world to be granted the FSC certification for rubber forests, and the third nation to have FSC-certified rubber latex, with a total volume of 16,000-18,000 tonnes per year.

FSC is a global forestry certification system for forests and forest products. The FSC logo on products guarantees that they come from environmentally appropriate, socially beneficial and economically viable sources.

The FSC certification will help create a unique label for the VRG’s rubber wood and latex products and add more value to those products in local and international markets.

HCM City reduces price on five subsidized food items

At a meeting in Ho Chi Minh City on Friday, the Department of Finance announced plans to reduce the price on five subsidized food items by VND500-3,000 a kilogram.  

The price reduction is being applied on five out of nine food items on the price subsidized program in the city for the period 2012-2013.

Among the food items, price of homegrown chicken and duck will reduce by VND2,000-3,000 a kilogram and duck’s eggs will go down by VND1,000 per pack of ten.

A kilogram of rice will reduce by VND500 and pork price will lower by VND1,000 a kilogram.

According to the finance department, the reduction on price on these commodities is aimed at ensuring that the price of subsidized goods are always 5-10 percent lower than that in the market.

The People’s Committee of Ho Chi Minh City has officially added the   Big C supermarket to the price subsidized program in the City for the period 2012-2013, taking the total number of businesses participating in the program to 26.

 
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