Last update 7/18/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 18/7
Earnings data helps lift shares
 
After brief declines on Monday, shares on both of the nation's stock exchanges climbed again yesterday.

On the HCM City Stock Exchange, the VN-Index rose 0.86 per cent to close at 417.55 points, while the value of trades rose by 40 per cent from the previous day to nearly VND782.7 billion (US$37.3 million).

Advancers overwhelmed decliners by 199-36, once again led by blue chips. The VN30 Index, tracking the 30 leading shares by market capitalisation and liquidity, rose 0.9 per cent to close at just over 493 points. Tan Tao Investment Industry (ITA) was the most active share on the HCM City market, with 1.75 million shares exchanged before closing up by 3 per cent to VND6,900 per share.

On the Ha Noi Stock Exchange, the HNX-Index also gained 2.3 per cent to end the session at 71.40 points. The value of trades jumped 21 per cent over Monday's level, reaching nearly VND370 billion ($9.6 million) on a volume of 40.5 million shares. The HNX30 Index also rose by 3.66 per cent to close at 136.23 points.

Securities companies were the biggest gainers on both exchanges, largely on the strength of improved earnings in the first half of this year. Sai Gon Securities Inc (SSI), HCM City Securities Co (HCM), Bao Viet Securities Co (BVS) and VNDirect Securities Co (VND) all hit their ceiling prices after reporting high profits in the first six months ranging from VND60 billion ($2.9 million) to VND348 billion ($16.6 million).

VNDirect Securities (VND), with nearly 4.6 million shares exchanged, was again the most-active share yesterday, closing at its ceiling price of VND10,700.

According to technical analysts of Kim Long Securities Co, stock indices have continued to decline despite the market signalling a short-term uptrend in recent sessions. However, the psychology of grasping short-term profits continues strong among investors, particularly when the market lacks any supportive news, they said.

Foreign investors continued to be net buyers on both exchanges yesterday, responsible for a combined net buy of over VND30.5 billion ($1.5 million) worth of shares.

VN, Japan cooperate in chemical risk management

Vietnam and Japan signed a memorandum of understanding on improving Vietnam’s chemical risk management system, in Hanoi on July 15.

The signatories were Deputy Minister of Industry and Trade Nguyen Nam Hai and Japanese Deputy Minister of Economics, Trade and Industry Mitsuyoshi Yanagisawa.

The MoU aims to enhance the implementation of the Law on Chemicals in Vietnam and mitigate negative impacts of the chemical industry on human health and the environment for sustainable development.

Under the agreement, the Ministry of Industry and Trade (MoIT) and Japan’s Ministry of Economics, Trade and Industry (METI) will share information, knowledge, experiences, regulations and technology in chemical management and work together in personnel training.

The two sides will organise annual dialogues on topics and issues of mutual concern.

Addressing the signing ceremony, Deputy Minister Yanagisawa affirmed that the MoU will serve as an important framework for bilateral coordination in drafting standards and institutions for the management of the chemical industry to match regulations of the region and the world.

According to Deputy Head of the MoIT’s Chemical Department Phung Ha, from now until 2015, the two sides will build a chemical database and a list of chemicals to assist the implementation of the Law on Chemicals as part of the Asian Sustainable Chemical Safety Plan.

With METI assistance, the ministry will open training courses for staff in relevant State agencies and enterprises to increase their capacity in chemical risk assessment and management and safety management of toxic chemicals.

Lotte seeks to become 100% foreign invested

Lotte Vietnam, the operator of the namesake supermarket chain in the country, has recently submitted a proposal to become a 100 percent foreign invested company, according to the Ho Chi Minh City Department of Planning and Investment.

The company intends to buy the remaining 20 percent stake of the Vietnamese Minh Van Co.

Lotte’s total registered capital is currently US$65 million, or VND1.29 billion, according to its business license issued in October 2006.

Minh Van Co holds a 20 percent stake, worth $13 million, while Lotte Vietnam holds 80 percent, at $52 million.

The proposal is now pending approval from the city’s People’s Committee.

South Korea’s leading retailer entered the Chinese market in 2007 by re-buying the giant Makro supermarket chain, which was still operational at the time. The company then expanded its investment to Indonesia, also by purchasing the Makro system there.

The Korean giant has also planned to take over the Bien Hoa Confectionery JSC, a local confectioner widely known as Bibica, where Lotte, as a strategic partner, owns a 38 percent stake.

This year has seen many mergers and acquisitions in which foreign companies have sought to increase their stake in local firms to take over the latter.

For instance, Japanese food company Ezaki Glico bought shares from Kinh Do, a giant Vietnamese confectioner, and Nichirei Food bought shares from Cholimex Food.

Earlier this month Thailand’s Nawaplastic Industry announced plans to buy an additional 800,000 shares from Binh Minh Plastic, increasing its stake in the company to 20.38 percent.

Other cases include the Singapore-based Orchid Fund Private Limited, which owns a 9.81 percent stake of FPT, and CFR International SPA, which holds as much as 45.49 percent of Domesco, a medical equipment import-export company.

Furniture exporters plagued by tightened rules
 
Many furniture exporters in Ho Chi Minh City and the neighboring province of Binh Duong have failed to pass customs declaration on their exports due to a new regulation aimed at clarifying the origins of the wood from which the products are made.

Circular No 1 of the Ministry of Agriculture and Rural Development stipulates that wooden products must be approved by local park rangers prior to their shipment.

The new requirement was issued and took effect unexpectedly at the weekend, leaving exporters unable to seek approval on time, they complained.

Consequently, their shipments have been stuck at the customs agencies, building up fears that their reputation will be damaged as the exports will arrive late to their overseas customers, they said.

A representative of Phu Thien Phat Co told Tuoi Tre on July 16 that he is still unable to complete customs declaration for two 40-foot containers set for export to the UK, though the products arrived at Cat Lai port three days ago.

The products are all furniture made from oak wood imported from the US, according to Tran Van Man, who is in charge of completing export procedures for the company.

Man said his customers have begun to complain of the late delivery.

“We too are extremely concerned as the contract is worth as much as US$46,000,” said Man.

Phan Thi Thuy Hang, director of Khanh A Co, also said her shipments have been detained at Saigon Port for four days due to the lack of park ranger’s approval on the wood’s origin.

Hang said her facility does not make the products, but buys them from another manufacturer and only decorates them to export to another partner.

“We have all necessary papers to prove the wood’s origin, but without the very approval from park rangers, it is impossible for the goods to be shipped,” lamented Hang.

The company is now charged VND400,000 per each container on a daily basis, and Hang said the larger risk is that the company’s prestige may be destroyed for late delivery.

Hong Van Sang, import-export executive of Lam Thanh Co Ltd, said it is illogical that businesses have to seek certificates for their wood’s origin, as they already have to complete that procedure when importing raw wood materials.

Nine furniture exporters who have 13 containers being held in Cat Lai Port on Saturday filed a complaint to the Saigon Port Customs Agency over the obstructed export procedure.

In response, the customs agency said it has forwarded the petition to the city’s customs agency, which will work with the park ranger agency to handle the case.

Meanwhile, the Cat Lai Customs agency said it has strictly adhered to circular No 1 in refusing to approve the exporters’ customs clearance.

However, since exporters have complained, the institution said it will find ways to reduce damage for the businesses.

Footwear sector: low-cost labour no longer advantage

Researchers have warned that low-cost labour will not be a competitive advantage for Vietnam’s footwear sector by 2030.

More than 700,000 people are currently working in the sector and most of them are not well trained. As a key export earner, the sector contributes to bringing in a large amount of foreign currency.

Nguyen Duc Thuan, Chairman of the Vietnam Leather and Footwear Association, says in the first six months of this year the sector earned as much as US$3.8 billion from exports, up 25 percent against the same period last year.

He is confident that the sector will be able to meet the yearly target of US$7-7.3 billion.

He also says the sector’s surplus increased sharply from 38-40 percent in 2011 to 40-45 percent in the first half of 2012.

Some businesses even enjoyed a surplus of 50 percent.

This indicates that the sector’s strategy to increase its value is on the right track, Thuan stressed.

However, he points out a number of difficulties facing the sector such as a recent reduction in orders and the failure of enterprises to sign enough orders for production from now until the end of the year.

Other factors affecting business operations include unstable supply of human resources and higher wages for workers.

Over the past three years, their minimum wage has doubled to VND3.8-5.5 million a month, Thuan says.

The low quality of the workforce is also a big problem. Most businesses have to retrain their staff in design, sales and marketing.

As the cheap labour force is no longer its advantage, he says, the sector will have to find ways to resolve the issue.

The Ministry of Industry and Trade has asked other monistries and agencies to provide support for vocational training.

According to foreign experts, it is essential to take advantage of skilled workers instead of just cheap labour, as many Vietnamese workers still fail to meet employers’ requirements.

Therefore, they suggest, Vietnam should encourage labour associations and businesses to participate in vocational training to improve the quality of the workforce.

US investors welcomed in Hanoi

The Vietnamese Government and National Assembly always welcome and create favourable conditions for foreign investors, including those from the US, to do business in the country.

Danang seeks more US investment

NA Vice Chairwoman Nguyen Thi Kim Ngan made the affirmation in Hanoi on July 16 while receiving a delegation of US investors led by Robert L. Livingston, Chairman and CEO of Washington-based Livingston Group LLC.

At the reception, Ngan said that the US is a major export market of Vietnam and now one of the largest investors in the country.

The Vietnamese NA has issued a number of laws, including the Law on Foreign Investment, to encourage and create an attractive investment environment for foreign businesses, she added.

Robert, who was the 106th Speaker of the US House of Representatives, spoke highly of Vietnam’s policy and determination to continue renewal and promote international integration, as well as the country’s efforts to stabilise the macro economy and curb inflation.

He suggested that to become a regional financial centre, Vietnam should build synchronous and sound investment policies to lure foreign investors.

Promoting trade and investment in Laos

Boosting trade and investment in Champasak province and Vientiane capital in Laos was the focus of a seminar held in Ho Chi Minh City on July 16.
 
Participating businesses were given information on the policies and development potential in the two countries and were encouraged to learn more about the areas of their concern for effective, long-term cooperation.

Lao Deputy Prime Minister Thongloun Sisoulit said his Government creates favourable conditions for Vietnamese businesses to operate in Laos and to benefit both countries.

The seminar is one of the activities co-organized by Vietnamese and Lao localities to celebrate Vietnam-Laos Friendship Year 2012 and commemorate the 50th anniversary of their diplomatic ties and the 35th anniversary of signing the Vietnam-Laos Friendship and Cooperation Treaty.

Two-way trade turnover between Vietnam and Laos reached US$734 million in 2011, up 50 percent compared to the previous year. In the first quarter of this year, it gained US$136 million, a year-on-year increase of 66.6 percent.

Vietnam is currently the second biggest investor in Laos with 424 projects worth nearly US$2.6 billion. HCM City has 35 businesses that have been granted investment licenses in Laos with a total of US$306 million in capital.

APEC forum aims for better investment climate

Leading economists and senior officials from the Asia-Pacific region gathered at a dialogue forum on Ho Chi Minh City on July 16 to discuss the investment polices and business environment in Vietnam.

The event was part of the 2012 Asia-Pacific Economic Cooperation (APEC) forum, leading up to the APEC Summit scheduled for Russia in September.

Domestic businesses voiced their concerns about Vietnam’s incentive policies for foreign investors, putting domestic businesses at a disadvantage in competition.

Foreign delegates worried about unfair competition if the State issues preferential regulations for domestic businesses.

They called for more support from the Vietnamese Government, stressing the need to increase the competitive capacity of local companies in the current context of global economic integration.

Hoang Van Dung, Chairman of Vietnam’s APEC Business Advisory Council (ABAC Vietnam), highly valued the participants’ opinions, saying these will help the Vietnamese Government improve the business climate.

He also touched upon other important issues such as financial transparency, human resources development, and fair competition.

*** The third APEC Business Advisory Council (ABAC) meeting opened in HCM City later the same day.

Addressing the opening ceremony, State President Truong Tan Sang affirmed Vietnam’s contributions to boosting the Trans-Pacific Partnerships (TPPs) agreement, and committed to opening up the market towards the global trend of trade liberalization.

He voiced strong support for APEC’s leading role in promoting free trade areas and boosting investment, while ensuring peace and security in the region and the world.

Participants at the three-day event will focus discussions on technology transfer, infrastructure and green development, as well as global economic integration.

Japanese businesses eye Vietnamese market

A Vietnam-Japan business meeting was held in Ho Chi Minh City on July 16 to introduce investment opportunities of both countries.

The event attracted many Vietnamese and Japanese businesses, most of them operating in design, manufacturing, industrial software, machinery, ceramics, food, and home appliances.

Hantano Yoshio, Chairman of the Small and Medium Sized Enterprises’ Association in Osaka (Japan), said that many Japanese firms are keen to invest in the Vietnamese market.

Nguyen Hong Ha, Deputy Head of the Ho Chi Minh City Chamber of Commerce and Industry (VCCI-HCMC), stated that two-way trade between Vietnam and Japan reached over US$21 billion in 2011, including half from Vietnamese exports.

In the first five months of this year, Vietnam’s exports to Japan grew by 46 percent compared to the same period last year.

Japan is now one of Vietnam’s major export markets. The two countries are enjoying a fruitful trade relationship thanks to incentives in the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) and the Vietnam-Japan Economic Partnership Agreement (VJEPA).

Banks fail to cut loan interest rates

Many banks in HCM City have yet to cut interest rates on existing loans to 15 per cent per year as called for by the State Bank of Viet Nam, Tuoi tre (Youth) newspaper reported.

The State bank earlier this month asked lenders to lower rates to 15 per cent from last Sunday in a bid to assist businesses struggling to secure capital.

A deputy general director of a local major joint stock bank, which held a meeting on the matter yesterday, said it would be very difficult to reduce interest rates for all existing loans as every loan had a different risk level.

"Lending for real estate and securities investment, or short-term or long-term lending, can't be given a similar interest rate," he said.

"Outstanding loans at property firms are huge, amounting to hundreds of billions of dong, so it's impossible to slash rates to 15 per cent immediately."

Another joint stock bank's general director was reported to have said his bank hadn't considered the 15-per-cent rate offer.

"We will offer rate cuts to enterprises based on a balance of interest among all parties; we are sharing difficulties with companies but won't be able to bear too much disadvantages," he said.

Online news VnEconomy estimated banks would see a combined drop of VND16.5 trillion (US$793.27 million) in profits if interest rates for existing loans were cut to 15 per cent.

Last week, several banks already announced rate cuts starting Sunday, including BIDV, Vietinbank, Sai Gon-Ha Noi Bank and Agribank.

Low chicken prices may lead to shortages
 
Many chicken breeders have incurred big financial losses due to a sharp drop in the price of chicken, and if the situation continues, farmers will scale down their production or stop breeding.

Without timely measures, there will be a shortage of chicken in the domestic market in the coming months, according to Nguyen Dang Vang, chairman of the Viet Nam Animal Breeding Association.

The price of industrially-raised chicken has dropped many times in the first half of the year.

Currently, chicken prices at farms is only VND19,000 a kilo, down about VND12,000 compared to a month ago.

Nguyen Thanh Phuong from Emivest Viet Nam said production costs for a kilo of chicken had risen to more than VND30,000. At current prices, the company has lost about VND11,000 for a kilo of sold chicken.

Phuong said a reduction in purchasing power was the main factor behind the chicken-price drop.

If the situation does not improve in the next few weeks, the company might cut back on its breeding activities.

Many chicken farms in Dong Nai, Binh Duong and Ba Ria-Vung Tau provinces have already scaled down their breeding or suspended breeding activities. Some have begun to breed chicken for foreign companies.

According to the Binh Phuoc Chicken Breeding Association, about 50 per cent of chicken farms in the province, mostly household-size farms, have stopped breeding and want to sell their farms.

Pham Thi Tam, owner of an egg-laying hen farm in Dong Nai Province, said she had to reduce her hen herd by 40 per cent since she incurred a loss of VND200 for each sold egg.

To remedy the situation, the Viet Nam Animal Breeding Association has asked the Government to subsidise animal-feed prices, slash corporate income taxes, cut import tariffs on animal-feed materials, and offer preferential loans.

The association has also asked relevant agencies to develop measures to prevent smuggling of poultry from China in an effort to prevent prices from continuing to drop.

In addition, Nguyen Quoc Trung, general director of Japfa Viet Nam, said retail prices of chicken remained high despite a significant drop in prices at farms.

He said authorities should improve price management in the retail sector and outline measures to cut middlemen in the distribution of chicken. This would help chicken prices to become more reasonable and would stimulate consumption.

Retail sales decline despite low prices

The prices of many commodities, especially fresh food, have dropped significantly over previous months, but purchasing power remains low.

The owner of a pork stall at Tan Dinh market said prices have fallen to between VND76,000 and VND95,000 per kilo, depending on the kind, compared to VND85,000-100,000 a month ago. However, sales have seen low.

She said that previously stocks had sold out before noon, but she now had to prolong sales until the afternoon although she cut prices.

Many market management boards, including Ben Thanh, Tan Dinh and Thi Nghe markets, admitted that purchasing power had fallen strongly compared to previous years.

The economic situation had affected sales, they said, adding that poor infrastructure had also caused consumers to hesitate to shop at traditional markets.

Le Ngoc Dao, deputy director of the HCM City Department of Industry and Trade, said only about 34 per cent out of 240 traditional markets in the city were in good condition, with the remaining in serious disrepair.

Dao said sales at traditional markets in the city so far this year had dropped by about 10 per cent over the same period last year.

Many small traders at traditional markets have stopped operations, or have sold their stalls or returned to market-management boards.

Dao said her department had asked relevant agencies to review the situation at traditional markets and work out measures to support small traders.

The department has developed many plans, including building brands for hygiene and food safety markets, and linking up prestigious producers and traders in traditional markets, to encourage customers to shop at traditional markets.

To attract buyers, supermarkets taking part in the city's price stabilisation programme have launched promotions.

The French-owned Big C, for instance, is currently offering discounts of 2-12 per cent on 300 essential items, including fresh food, garments and textiles, cosmetics, foodstuffs and electronic products until September 3.

Along with the discounts, other periodic promotions at Big C are being organised to offer more choices to customers.

Nguyen Thanh Nhan, general deputy director of Sai Gon Co.op, said Co.op Mart supermarkets were also offering promotions to lure consumers.

Cement industry urged to co-operate

Cement companies need to co-operate with, instead of undercutting each other, to liquidate their large inventories through exports, the Ministry of Construction has said.

The inventories are the biggest challenge facing the industry, it said.

There is little co-operation among cement exporters, it said, pointing out that while the Viet Nam Cement Association (VCA) recommended a common export price for members, some still export at lower prices, badly affecting the rest.

Deputy Minister of Construction Nguyen Tran Nam said the VCA's members should exchange information about the volume and price of the cement and clinker they export.

He also suggested setting up an association of cement and clinker exporters.

The ministry would soon discuss this with the VCA as well as exporters, he said.

Earlier, the ministries of Construction and Transport signed a memorandum to increase the use of cement in transport projects around the country.

To help cement companies, many of whom are struggling financially, the construction ministry has proposed a restructure through measures like equitisation.

The industry needs to tweak its development plans based on demand, Nam said.

There are eight cement and clinker exporters in Viet Nam, six of them domestic firms.

In recent months inventories have been rising as a result of low demand and, according to critics, the industry's poor planning.

There had been 2.8 million tonnes by the end of June, and the VCA forecasts the figure for the whole year to be around 6 million tonnes, a year-on-year increase of 23 per cent.

Demand in the first half was at around 28 million tonnes, according to the Ministry of Finance.

The country's annual output is 62-64 million tonnes.

Apartment project gets a lifeline

The delayed  in the capital city has received a lifeline thanks to a VND300 billion (US$14.2 million) loan from the Bank for Investment and Development of Viet Nam (BIDV).

Work on the large scale development project owned by the Song Da-Thang Long Joint Stock Company began in 2009 and was scheduled to be completed in 2013.

Covering an area of 9.2ha, the VND10 trillion ($476 million) project will include a complex of 13 buildings with 2,700 apartments. But work was delayed following the global economic slowdown and stagnation in the country's real estate market.

Nguyen Tri Dung, chairman of Song Da-Thang Long's Management Board said the loan has been a financial stimulus to complete construction of the remaining buildings in the project.

The company is also negotiating with other banks and credit institutions to provide additional loans for the project to help ensure apartments that have already been sold are handed over to their owners.

While the real estate market is forecast to continue struggling with a lack of capital this year, the loan agreement struck by Song Da-Thang Long could be a signal of a recovery in the estate market, according to Dung.

S-Fone workers demand pay

Ailing mobile carrier S-Fone has made most of its employees in Ha Noi redundant in order to end its Business Co-operation Contract mechanism and change to a limited liability company.

The decision was reach-ed under an agreement between Saigon Postel (SPT), S-Fone's parent company, and S-Fone's trade union, according to a company representative.

Viet Nam News reporters yesterday were unable to reach S-Fone officials for information about the fate of its employees.

However, a hotline operator who asked to remain anonymous said there was no information from S-Fone regarding her future.

She said S-Fone had sent her a letter informing her about the redundancy with a promise to fulfil all its duties.

Viet Nam News has seen that several S-Fone outlets in Ha Noi have closed with no notice boards. Mean-while, former employees of S-Fone in Da Nang last Saturday gathered in front of the company branch asking for the company to keep its commitments after they were dismissed last month.

They said the company had failed to fulfil its commitment to compensate them for their premature dismissal and unpaid salary.

Having started operations in Viet Nam in 2003 as the third mobile operator after MobiFone and Vina-phone, S-Fone was a joint venture between Korean telecom giant SK Telecom and SPT.

The company also became the first mobile operator to apply the advanced CDMA technology (Code Division Multiple Access) in Viet Nam, while other carriers used the GSM (Global System for Mobile Communications).

However, due to the limited model of CDMA's terminal handsets, the company was unable to raise its customer base, with just over 1 million after a decade of operations.

After SK Telecom withdrew from the venture last year, S-Fone has been unable to find a new investor to develop its ailing network.

The company, which also wants to change its network technology from CDMA to HSPA (High Speed Packet Access) to trigger demand, had a turnover of merely VND786 billion (US$37.78 million) in 2011.

Another mobilephone company, Vietnamobile, last month planned to seek a bailout from the Government to stave off bankruptcy as the operator was struggling to compete in a telecom market dominated by three major players.

Meanwhile, Gtel Mobile in April spent $45 million to acquire a 49 per cent stake in the Beeline network, a brand currently owned by Russia's second-largest telecom operator VimpelCom.

Even before Beeline announced its withdrawal, others mobile networks were already experiencing major problems.

The Vietnamese telecom market, which has 135 million phone subscriptions, is dominated by VinaPhone, Mobi-Fone and Viettel, which hold a combined 95 per cent market share, while Beeline, Vietnamobile, and S-Fone share a minuscule 5 per cent.

Shareholder contests board election

Building contractor 565 Construction Co (NSN) has violated regulations on appointment of its board of management, claims disgruntled minority shareholder Leadvisors Capital Management, which holds an 11-per-cent interest in NSN.

Leadvisors aired its complaint in an interview with the publication Dau tu Chung khoan (Securities Investment), claiming that, while the company charter of NSN requires that at least a third of board members be independent, all five members appointed on July 10 for the 2012-17 term were holders of key executive positions within the company.

Leadvisors asked for new board election but was rejected, NSN management claiming that "all board members are independent as they are not governing at the time."

Yet Leadvisor said, at the time of election, all five members were entitled to wages and other compensation from the company and could not be considered independent. Independent board members must not receive salaries other than payment for their board services and must have no material relationship with the company or its subsidiaries, it said.

Leadvisors wrote to both NSN and its parent company, Truong Son Corporation, asserting that move was unlawful. While Leadvisors said it did not intend to participate in governance of NSN, it nevertheless said that maintaining independent, non-executive board members would ensure compliance with the law and creating a monitoring mechanism to ensure the rights of shareholders.

NSN chairman and director Nguyen Manh Toan said that, although the selection did not meet the criteria of the company charter, it was legitimate as a majority of shareholders had approved the election.

"During the previous term, all board members were introduced by Truong Son Corporation," Toan said. "There were no independent board members, but everything still worked out fine."

Meanwhile, one of the new members had already resigned and was currently working as an assistant to the director.

Hanoi proposes removal of apartment service price cap   

The Hanoi People’s Committee has asked the Ministry of Construction to issue a price list for apartment service fees to replace the existing regulation on the service price cap.

According to the committee, the price list will be a base for apartment investors, managers and people to discuss and decide the application of their own apartment service prices.

In September 2011, the municipal People’s Committee approved the regulation for apartment service fees. The lowest of VND2,400 (USD0.11) per square metre per month is applied for apartments without elevators, and those with elevators can have the fees ranging from VND3,100 to VND4,000 per square metre.

However, due to the diversification of the apartment segment and characteristics of each development, the ceiling price regulation is unrealistic. Besides, taking advantage of the regulation, many apartment managers try to misinterpret it on purpose to impose the highest fees for households. This has been the main cause of disputes in apartment use in the city recently.

Last year, hundreds of residents at Hanoi Keangnam Landmark Tower, Vietnam’s highest building, demonstrated against new service fees imposed by the management board, which they refused to pay, and were subsequently banned from using the lifts.

The development's management board has enforced a service fee of VND18,843 per square metre per month, but the residents claim they were only required to pay VND4,000 per square metre, according to regulations set by the city's People’s Committee.

Service fee-related disputes have also occurred at other buildings in Hanoi such as The Manor, Golden Westlake, and Sky City.

State-owned groups trim staff salaries
   
Many state-owned corporations and groups have cut their staff salaries by 5-30% to meet their commitments to the Ministry of Finance and save operational costs this year.

Representatives from Electricity of Vietnam (EVN) and the Vietnam National Coal and Mineral Industries Group (Vinacomin) reported they had been slashing salaries over the past few months.

Staff at a number of EVN affiliates have had their salaries cut by over 10%, and those at Northern Power Corporation have had to suffer a 30% wage cut.

An official from the Hanoi Power Corporation said their staff’s salaries were safe for the time being, but an allowance for some positions had been adjusted.

The situation at EVN has partially been caused by affiliate EVN Telecom, that has failed to attract subscribers after starting operations more than seven years ago. EVN Telecom is now in debt to many of its partners, including Viettel and the Vietnam Post and Telecommunications Group (VNPT).

“My salary was over VND8 million (USD380.9) per month, but now it has been cut to less than VND6 million (USD285.7). My wife and I have a combined salary of only VND10 million (USD476), so we’re struggling with day to day expenses,” said an EVN staff member.

An EVN official said that the group targets to save VND1.8 trillion (USD85.7 million) in its business and production costs this year, including VND160 billion (USD7.6 million) in salary cuts. The firm targets to save 1% of electricity used for people’s daily activities, equal to VND1.3 trillion (USD61.9 million). He, however, declined to comment on the pay cuts.

At the Vietnam Oil and Gas Group (PetroVietnam) where the staff salaries are much higher than many other firms, cuts have also been made over the past few months.

PetroVietnam Chairman Phung Dinh Thuc confirmed the salary reduction of 5-10% to save costs.  However, to retain senior staff, PetroVietnam are still rewarding those it deems to be deserving.

Economist Pham Chi Lan said it is wrong for the companies to cut staff salaries to save costs. Meanwhile, a Government instruction also clearly stipulates that they are not allowed to do so.

“In Vietnam, managers always receive the highest bonuses, but when firms face problems, their salaries aren’t cut,” she noted.

Saving costs is mainly aimed at improving management systems to mitigate waste. The wage cut seems to be widespread, while companies ignore other factors that can also be attributed to high operational costs.

She emphasised that corporations and groups needed to calculate what percentage of their operational costs could be attributed to salaries and productivity.

She cited several experts as saying that for the same electricity output, Vietnam has to use more labourers than other countries, which shows the country’s human resource waste, one cause of EVN’s high operational costs.

Salary cuts are necessary, but they should start with the management.

“The Ministry of Finance has to tighten control of salary cuts to ensure efficiency,” Lan said.

According to the Ministry of Finance, early May this year, up to 83 groups and corporations and four banks had committed to save total VND13 trillion (USD619 million).

Building slump bad news for construction materials companies   

Due to a slump in real estate market, the construction materials companies have been holding onto very large inventories.

Thach Ban JSC, one of the companies that has historically been profitable, is considering cutting back on production.

Deputy Director of Thach Ban JSC, Nguyen Trong Kien, said they currently have two months of inventory, demand has decreased by 30% compared to last year, while the input materials prices have increased. The company increased their prices by 4% in April but they had to lower them by 8% in June due to the slump.

"We have no choice but to accept the losses. We expect some of the factories will lose as much as VND10 billion (USD478,000)," Kien said. To ensure the company's continued operation, they have been making cutbacks and focusing on advertising. "Even the CEOs, directors are taking part in marketing activities to better understand customers."

Viglacera Ha Long has also seen its share of difficulties. In 2011, the company made VND70 billion (USD3.4 million), but in early 2012 they lost VND84 billion (USD4 million).

Nguyen Van Sinh, Deputy Director of Viglacera, said they are only at 65% of production capacity but inventory is still high, with six months of inventory for glass and two months of tile.

The steel industry also felt the impact. The Pomina Company has 40,000 tonnes of inventory.

Do Duy Thai, a representative of Pomina, said the consumption decreased by 20% compared to the same period in 2011. And even with lower interest rates, only some big corporations are able to get loans and others only loans with high interest.

According to Vietnam Steel Association, a 20% reduction in inventory is needed to get back to normal levels.

The cement industry also has three million tonnes of inventory.

Dinh Quang Huy, Chairman of Vietnam Building Ceramic Association, said that enterprises have only been able to sell 70-75% of their products.

"The real estate market is in a slump and capital is hard to come by. The construction materials sector is also suffering," he said.

Le Van Toi, head of Department of Construction Materials under the Ministry of Construction, said the main reason for the problem is companies' inability to balance their books.

Most of their capital comes from loans, so when inflation rises and exchange rates go down these companies take a big hit, he said.

Nguyen Tuan Duong, Vice Chairman of Hoa Phat Corporation, said in order to deal with the current situation the company will operate at 70% of its capacity in hopes of lowering inventory in the next 3-6 months.

"This year prices will likely either stay where they are or rise slightly, but demand is not expected to increase,"

Aside from reducing their production, Viet Duc Steel Company will ask customers for immediate payment, or extend credit for only short periods. They are also seeking to expand exports.

Farmers, enterprises in despair as prices plummet

Farmers and businesses involved in agricultural production in the country are in despair as prices continue to fluctuate and diseases are unabated, causing havoc to livestock.

The Ministry of Agriculture and Rural Development has sent a report to the Prime Minister giving the present status of the livestock sector that is facing many difficulties, especially with prices at an all time low since the last two years.

In the south, a kilogram of pork has fallen from VND50,000 ($2.39) to VND38,000 while industrial chicken has gone down from VND35,000 to VND19,000.

In addition, illegal imports of livestock and pork via border crossings in the North have worsened the situation.

According to Nguyen Van Truc, director of the Saigon Agriculture Corporation, the company had earlier sold 12,000 to 15,000 pigs per week but now that has reduced to 7,000 a week.

Nguyen Quoc Trung, director of Japfa Company in the Mekong delta province of Long An, is concerned that industrial chicken bought at VND19,000 per kilogram sold in supermarkets for VND50,000 per kilogram and VND45,000 in retail markets. This is irrational and   while farmers are in despair over low prices, consumers pay higher prices.

Nguyen Quoc Trung said the government should establish wholesale markets where farmers will directly sell their livestock to consumers. In wholesale markets, there can be slaughterhouses to sell animal meat to retailers.

According to Trung, the government should first of all facilitate capital access and offer low interest rates to enterprises to stock and freeze livestock for 3-4 months, as many companies suffer huge losses from price decline. This measure will help surge price after a period of time, especially when there is shortage of livestock.

According to the Vietnam Breeding Association, there will be a shortage of chicken and pork in the upcoming New Year in 2013.
 
Another safety measure suggested by the association is to exempt animal feed from value added tax (VAT). If the government can exempt VAT on animal feed, this will help farmers and enterprises who are burdened with bank interests.

The government should also provide around VND6 trillion ($288 million) to farmers and companies and extend old loan deadlines to ease and maintain production.

Vietnam replaces Thailand as largest rice exporter to Hong Kong

This year, rice exports from Vietnam are expected to take over 50-60 percent of market share in Hong Kong, replacing Thailand as the largest rice exporter in this market.

To achieve this mark, Vietnam had to raise the quality of jasmine and high-quality rice so as to compare with similar rice varieties in Thailand and at a more competitive price.

For instance, Thailand sold jasmine rice at US$1,020-1,030 per ton, and 100 percent B-grade white rice at $595-605 per ton; while Vietnam sold jasmine rice at $615-625 per ton, and 5 percent broken rice at $400-410 per ton.

In the first five months of this year, fragrant rice and high-quality rice exported to Hong Kong reached $40.4 million, accounting for 35 percent of the total market share.

However, Vietnam Food Association has warned rice exporters not to mix 5 percent broken rice with fragrant rice despite importers’ request, to protect Vietnam’s rice standards in this market.

HCM City to provide interest free loans for infrastructure projects

Infrastructure projects in traffic, social housing and waste treatment in the city will be given 50-100 percent interest free loans as part of the city’s stimulation policy, said Mr. Diep Dung director general of the Ho Chi Minh City Finance and Investment Company (HFIC).
 
Traffic infrastructure projects will receive interest free loans from the Ho Chi Minh City Finance and Investment Company (Photo: SGGP)

Investors will receive assistance of 50-100 percent interest free loans on less than VND100 billion (US$4.8 million) projects for a period of seven years.

The 100 percent assistance will be for projects to build or upgrade theatres, cinemas of over 1,000 seats, gym and sports centers, schools, general hospitals, student dormitories, houses for workers and waste treatment systems.

The 50 percent assistance will be for projects to build wholesale markets, economic zones in border gate areas, commercial centers and supermarkets in Lao and Cambodia.

Mr. Dung said that the loan interest rate will be at an annual average rate of four commercial banks in the city, with added 1-2 percent for management fees.

Businesses should have legal and feasible projects and present clear and precise financial reports to obtain loans.

Small and medium businesses should contact professional consultants to set up their projects and complete related documents instead of doing themselves as at present.

Trang Trung Son, head of the economic division under the City Department of Planning and Investment, said that the above policy will be applicable for Vietnamese businesses and the City will not encourage project participation by foreign investors.

However, HFIC has other sources of capital with preferential interest rate for both domestic and joint venture businesses. One capital source is US$50 million from the World Bank and Euro 50 million from the French Development Agency.

In related news, the HCMC Waste Recycling Fund is also offering preferential loans to projects related to waste recycling.

The maximum loan will be VND7.5 billion ($360,000) per project for a period of seven years. Those wanting to access these loans can contact the fund headquarter at 63 Ly Tu Trong in District 1 of HCMC or dial (08)39151980.
 
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