Last update 5/12/2012 7:00:00 AM (GMT+7)
  

BUSINESS IN BRIEF 12/5
Mekong Delta trade, tourism and investment fair opens

A Mekong Delta trade, tourism and investment fair opened in Xuan To industrial zone, Tinh Bien district, in An Giang province on May 9.

The event aims to create favourable conditions for businesses to introduce new products and trade names to consumers in border districts between Vietnam and Cambodia.

There are 400 stalls, including 40 from An Giang province, 25 from Mekong Delta provinces, 265 from the southeastern region and Ho Chi Minh City, and 20 from Cambodian businesses.

The fair is divided into nine areas: one for socio-economic and cultural exhibits of An Giang province; one for specific products from the Mekong Delta; one for seafood and processed food; one for machines, interior decoration and building material; one for agricultural products; one for commercial services; one for products of traditional craft villages; one for food; and one for products from Cambodian businesses.   

The event, which will last until May 14, is expected to increase import-export turnover through the Tinh Bien (An Giang)-Takeo (Cambodia) international border gate.

Boosting Vietnam-Russia trade ties

Vietnam hopes to increase trade ties with Russia following a trade and investment promotion workshop to be held in the capital city of Hanoi on May 11.

The workshop will be hosted by the Hanoi Municipal People’s Committee, in collaboration with the Ministry of Planning and Investment, the Ministry of Foreign Affairs, the Ministry of Industry and trade, the Vietnam Chamber of Commerce and Industry, the Bank for Investment and Development of Vietnam (BIDV) and the Vietnam-Russia business council.

Economic and trade cooperation between Vietnam and Russia has grown and flourished in recent times. In 2011 two-way trade hit US$2.12 billion, of which US$1.38 billion was generated from Vietnam’s exports to Russia, up 66 percent against 2010, marking the first year Vietnam obtained an export surplus from this potential market.

In the first two months of 2012, Vietnam exported US$223.7 million worth of goods to Russia, a year on year increase of 35.8 percent, according to the Vietnam General Department of Customs.

Both countries have set a target of raising bilateral trade to US$3 billion in 2012 and US$5 billion in 2013.

Russia joined the World Trade Organisation (WTO) in December 2011, offering great opportunities for Vietnam to enjoy lower tax rates when shipping its commodities to this large market.

Currently, Russia, Belarus and Kazakhstan are entering into negotiations for a free trade agreement (FTA) with Vietnam. If the agreement is signed, Vietnamese exports will be exempt from tariffs or enjoy the minimum tax rates.

At the workshop, Hanoi will introduce a Hanoi-Moscow cultural and trade centre, a cooperation project between the two capital cities. Both sides are putting the finishing touches to the project to be inaugurated in May 2012.

French carmaker seeks ways to enter Vietnamese market

French carmaker PSA Peugeot Citroen is planning an approach to the Vietnamese market through an official channel of distribution formed in 2012.

Peugeot is scheduled to sell imported Complete Built Unit (CBU) automobiles through authorized distributers.

According to VnEconomy, the first Peugeot showrooms are under construction in a northcentral province.

In addition to Renault and Citroen, who also belong to the same French multinational manufacturer, Vietnamese consumers will have more cars to select.

Paving the way for key export products

Export businesses are facing a fall in both output and export turnover and they need an effective solution to help them through a hard time.    

According to the Ministry of Industry and Trade (MoIT), in the first four months of this year, the export volumes of garment and textile products fell by 0.4 million units.

Now in peak season, most of businesses claim to have received export orders for the second quarter of this year, just a few are lucky to negotiate contracts that last until the end of the third quarter.

Deputy Director of the National Textile and Garment Group (Vinatex) Hoang Ve Dung says this requires businesses to make greater efforts to boost exports in the coming months.

Over the past four months, the footwear sector could only export less than 100 million pairs of sport shoes, down 3.9 percent from a year earlier.

In addition, leather & footwear businesses also found themselves in a difficult position to go along with strict regulations on quality and environmental standards and social responsibilities set by major global markets.

In the meantime, the biggest problem for the agro-forestry-fishery sector is falling prices. Director of the Can Tho provincial Industry and Trade Department Nguyen Minh Tan, says despite the harvest of good winter spring crops in the Mekong River Delta, the price of rice still hovered around VND5,000-6,000 per kg, leading to high unsold inventories in the wake of lower consumption power.

The price of Tra fish also dropped from VND27-28,000 per kg in early April to VND 22,000 per kg and farmers have kept large volumes in stock despite lacking capital.

Vice Chairman of the Vietnam Food Association (VFA) Pham Van Bay says approximately 2.4 million tons of rice are unsold on account of slow delivery.

Over the past four months, rice export earnings hit only US$800 million due to a reduction of 32 percent in volume and 33 percent in price. As a result, the price of most agricultural products dropped considerably compared to the same period last year.

Deputy Minister of Industry and Trade Nguyen Thanh Bien underlines the need to work out an effective solution to help export businesses and craft associations iron out snags in the second quarter as well as in the second half of the year.

Vietnam’s export turnover in the past four months was estimated at US$33.4 billion including US$18.3 billion from foreign invested businesses (excluding crude oil). Foreign invested businesses contributed 44 percent to export growth in the reviewed period.

Domestic businesses say even though lending interest rates have been lowered over the past  month, they still find it difficult to access bank loans at a rate of 18 percent/year. In their opinion, the more reasonable rate for them to restore production is 15 percent or even lower.

Another reason for high input costs, they argue, is that the price of petrol has been raised twice in a month.

FDI inflow into city plunges

HCMC in the first four months had more foreign-invested projects year-on-year but there was a huge slump in FDI inflow into the city due to the modest sums of the newly-registered capital.

The city in January-April granted investment certificates to 113 FDI projects at total registered capital of over US$77.7 million, plummeting 94% year-on-year, according to a report by the city’s Department of Planning and Investment.

The overall figure totaled at more than US$535 million, down 62% from 2011 when counting additional capital raised by 28 existing FDI projects.

The representatives of HCMC Export Processing and Industrial Zones Authority (Hepza) and new urban areas in Saigon South and north-west Cu Chi reported a gloomy outlook for investment activities. Some of them are unlikely to attract a single FDI project.

For instance, processing and industrial zones in the city in the year to date have been home to six newly-registered FDI projects and seven operational projects at combined investment capital of around US$71 million, a 93% year-on-year decrease.

Similarly, the Saigon Hi-tech Park attracted two FDI projects with capital of US$3.3 million.

A source related to the issue said global economic uncertainties had a deep influence on FDI attraction in recent times and it would likely continue in the immediate future.

So far, most international investors are small-sized businesses pouring little capital into their projects.

Despite the shrinking FDI inflow, HCMC is third behind Binh Duong and Haiphong provinces in attracting FDI capital nationwide. Binh Duong attracted FDI capital of US$1.58 billion with Haiphong netting US$664.3 million in the past four months.

Japanese firm builds factory in Quang Ngai

The central province of Quang Ngai licenced Foster Electric (Da Nang) Co., Ltd, a subsidiary of Japanese-based Foster Group, to build a factory to manufacture electronic components.

The facility, the first of its kind in Quang Ngai, will be constructed at a cost of VND174 billion and is designed to have an annual capacity of 480 million products.

It is expected to be put into operation by August this year.

On this occasion, the management board of Quang Ngai industrial zones also granted a licence to the Kizuna project invested by Kizuna Quang Ngai JSC, to build a complex of workshops, office buildings, and support facilities to serve industrial production.

The VND29 billion project covers almost one hectare.

The two projects are located at the Tinh Phong Industrial Zone in Son Tinh district.

Japan’s Itochu Group keen on fibre factory in Nam Dinh

Japan-based Itochu Group has decided to invest in a large-scale fibre factory covering 20 hectares of Bao Minh Industrial Park in the northern province of Nam Dinh, with a total investment of US$120 million.

This information was announced by the Vietnam National Garment and Textile Group (Vinatex) on May 10.

The factory aims to produce high class fibres used for high value added products.

Vinatex, Itochu and their partners are finalizing procedures to break ground on the project in the middle of this year. The factory is expected to be complete mid next year and will create 3,000 jobs, contributing to a strategy to restructure the local economy, and raising the production capacity of the Vietnamese garment and textile industry.

Established in 1858, Itochu’s trade activities mainly focus on mechanical manufacturing, textile industry, chemicals, oil & gas, energy, food, insurance, finance, construction and property.

The group now has seven member companies and its net profit in 2008 reached US$3.344 billion.

Itochu is one of the biggest economic groups in Japan with more than 4,200 staff and a total chartered capital of US$2 billion, and is active in 139 nations including Vietnam.

Itochu’s investment in Vietnam will help the country expand markets and increase production capacity and export earnings.

The garment and textile industry is one of the country’s key economic sectors, helping generate employment for workers and ensure social welfare.

Its export turnover in 2001 hit nearly US$6 billion and the sector targets US$25 billion by 2015.

HCM City exhibition attracts foreign jewelry, watch producers

The ninth International Jewelry and Watch Vietnam (IJV) opened at Tan Binh Exhibition and Convention Centre (TBECC) in Ho Chi Minh City on May 10.

The exhibition attracted nearly 100 producers from Hong Kong (China), India, Israel, Italy, Malaysia, Taiwan, Thailand, the US and Vietnam to showcase the latest designs of jewelry and collections of watches.

Hong Kong’s leading jewelry producers, such as Bestline, Diamond Wear, Glory United, Golden Master, Good Way, Nam Keung Hong, Man King and Tai Fook introduced their products made from diamonds and gemstones.

The event, organized by the Vietnam Chamber of Commerce and Industry (VCCI) Service Company (Vietchamexpo) and Hong Kong World Trade Fair Limited, aims to help businesses promote their products and trademarks.

Bui Thuc Anh, Vietchamexpo managing director, said the exhibition opens an ideal market for the Vietnamese jewelry industry and provides opportunities for domestic businesses to access international markets.

B.K.Chow, Director of Hong Kong World Trade Fair Limited, said the event helps domestic and international producers update to the latest designs and seek new suppliers and customers.

1,200 diplomatic cars to pay tax arrears

The Ministry of Finance said it has completed collecting feedback from relevant ministries and agencies on its proposal to collect taxes in arrears from cars bearing diplomatic plates owned by non-diplomats in the country.

Under the proposal, which will be submitted to the government for final approval, the ministry rules that a tax of 5 – 90 percent will be levied on around 1,200 bogus diplomatic cars that are in use throughout Vietnam, Deputy Minister of Finance Do Hoang Anh Tuan said.

Such vehicles will also be subject to the special consumption tax and value-added tax, with the total collection estimated at VND40-50 billion, added Tuan.

Bogus ‘diplomatic’ cars are those once owned by authentic foreign diplomats who later sold them to non-diplomats after their tenure ended in Vietnam.

In such cases, the diplomatic cars areturned into normal cars, but they have not been taxed yet.

“Though the tax in arrear collection is not too big, what matters here is that we should ensure fairness as many individuals have takenadvantage of the duty-free policy on diplomatic cars to evade taxes,” Tuan told the media.

“So, individuals or organizations purchasing cars with diplomatic plates should exchange them for normal plates and complete necessary procedures to legalize their vehicles.”

Between 1998 and the end of August 2009, 4,366 cars which belonged to diplomatic agencies were imported, according to figures from the Ministry of Finance.

Of these, 230 cars have been re-exported, and 1,758 cars have been transferred or ruined.

Of the remaining 2,378 cars, 1,158 cars are said to be misused and are subject to the tax arrears collection.

Fuel prices criticized for small drops

Gasoline prices in Vietnam gained a total of VND3,000 per liter after the two latest price increases in early March and late April, yet on Wednesday dropped by a mere VND500 per liter.

“Such price management has run counter to the economic laws,” said economic expert Le Dang Doanh in a talk with Tuoi Tre.

Following the global downward trend of fuel prices, the Ministry of Finance could have reduced prices further, but it opted to increase the import tariff instead.

While imposing a modest price cut on fuel commodities, the Ministry of Finance also resumed the import duties on petroleum products, which were 0 percent prior to the cut.

Specifically, the import tariff levied on gasoline and diesel is 2 percent, while that for oil and fuel oil is 3 percent, a decision Doanh said has made the public lose their faith.

“Recovering the public’s trust, to me, is much more important than increasing budget collection from fuel imports,” stated Doanh.

Other experts told Tuoi Tre that while the shortcomings of decree no 84 on fuel trading management have yet to be rectified, the finance ministry should have slashed prices of all fuel commodities by a greater amount.

Cutting fuel prices will also assist businesses in these hard times of high unsold inventories and low consumption, they said.

The government has offered tax deferrals to help businesses, but lowered fuel prices can also help reduce production cost and boost consumption, experts added.

For their part, transport firms said the recent price cut does not help at all.

“A VND300 per liter cut slapped on diesel oil only reduces cost by 0.5-0.6 percent,” said Tuan, director of a company with 10 DO-fueled container trucks.

Hong Van, another container fleet owner, said most transporting firms in Ho Chi Minh City have yet to cut their service fares due to the tiny fuel price cut.

Meanwhile, Tuoi Tre found that many fuel wholesalers have increased commission rates for their dealers over the last week.

“Commission is now VND500 a liter, excluding transporting cost,” revealed Le Manh Nu Vinh Son, head of the Vinh Son fuel retailer in Ba Ria - Vung Tau.

Meanwhile, S., sales executive of a HCMC-based commercial firm, said commission has been increased by up to VND650 a liter.

“This is three times higher than rates prior to the fuel price hike on April 20,” he said.

Nguyen Tien Thoa, head of the Price Management Agency under the Ministry of Finance, said the ministry had thoroughly considered the issue before announcing the price cuts, together with the 2 percentage point hike in fuel import tariffs.

“As directed by the government, prices should be adjusted in a way that can balance the interests of the government, wholesalers, and consumers,” Thoa told a press briefing yesterday.

“Import duties should be resumed since they have been reduced to zero for too long.

“While it’s stipulated that the tax rates should be 20 percent for gasoline, and 15 percent for diesel, we only increased it by 2 percent now,” he said.

Asked if the price cuts were implemented due to pressure from the media, Thoa confirmed that the adjustment was merely based on factors contributing to fuel prices.

He also said the Ministry of Finance is considering amending decree 84 on fuel trading management.

“It’s now stipulated that prices be adjusted based on the average price over 30 days, and this duration is expected to be reduced to 10 or 20 days,” he said.

China firms to exhibit in Ha Noi

The 2012 Zhejiang Export Fair on machinery, electronics, construction materials, textiles and garments will kick-off next Wednesday and last for three days in the capital.

The 2012 Zhejiang Export Fair, hosted by the Viet Nam National Trade Fair and Advertising Company (Vinexad), will have in attendance 138 Zhejiang companies and manufactures with 150 stalls.

According to Nguyen Khac Luan, general director of Vinexad, the 2012 export fair follows a successful export trade fair to Viet Nam last year.

"The last year's fair recorded as many as 40 business contracts signed between Viet Nam and Zhejiang, especially those on construction materials, textiles and garments," Luan added. "I hope the 2012 export fair will strengthen our current partnership co-operation."

Additionally, the fair will showcase information technology, commodities, and hand tools, amongst others. Last year, the trade volume between Zhejiang and Viet Nam hit just over US$2.8 billion.

Jury out on wood-chip exports
 
Viet Nam is becoming the biggest wood-chip exporter in the world with export volume accounting for 20 per cent of the total global figure.

This record, however, is harming domestic paper production, experts have warned.

During the recent decade, wood-chip exports reached a growth rate 10 times the initial figure. In 2001, the country exported only 400,000 tonnes of wood-chips. In 2011, however, the figure escalated by 5 million tonnes. Export volume in 2011 was about 36 per cent higher than that in 2010.

With this result, Viet Nam replaced Australia to become the biggest wood chip exporter in the world.

Experts attributed the growth to the expansion of paper pulp plants in China.

Many Vietnamese had produced wood-chips to export to China through ports in the central region such as Ky Ha, Dung Quat and Chan May, experts said.

A farmer from Dac Lac said that while selling wood would bring higher profits, they had to sell wood-chips due to capital shortages.

Such mass exports, experts affirmed, would strongly affect domestic paper and wood-processing industries because the price of wood-chips was about four times cheaper than wood.

Wood-chips are raw material used in producing paper. It would bring higher benefits when used to produce paper and pulp, explained Chairman of the Viet Nam Paper and Paper Pulp Association Vu Ngoc Bao.

Vietnamese paper plants were importing paper pulp at a price about 9-10 times higher than the price of exported wood-chips.

One tonne of wood-chips exported to China and Japan earned only US$110 while it was $1,000 for one tonne of pulp, Bao said.

Meanwhile, domestic companies had recently needed wood-chips to produce paper, industrial wood floorboards and wood veneer. This pushed the price of wood-chips up on the domestic market, he said.

To limit exports, some companies have proposed the increase of export taxes from 5 to 20 per cent. This proposal received support from the association.

Some other companies, however, do not agree.

They said that the sudden limit would strongly affect companies and farmers that produce and export wood-chips.

It could even lead to environmental pollution, they said.

These companies added high tax was not suitable. Thanks to wood-chips, farmers and companies could protect forests.

However, they all agree that the industry needs to build as well as boost the productivity of domestic paper and pulp plants to consume domestic wood-chips.

International jewellery dazzles City

The ninth international jewellery and watch exhibition (9th IJV) opened in HCM City yesterday showcasing diamonds, gemstones, jewelry sets, bejewelled timepieces as well as the latest jewelry equipment from local and international suppliers.

Bui Thi Thuc Anh, director of the Viet Nam Chamber of Commerce and Industry's Exhibition Service Co Ltd, said the four-day event offered a rare opportunity for foreign and domestic businesses to seek suppliers and buyers worldwide.

B.K. Chow, director of World Trade Fair Ltd, said Viet Nam has been recognized as a middle-income nation and the number of high and middle-income earners has increased rapidly over the last few years.

Viet Nam's economic growth has been most prominent in the major urban centers such as HCM City, Ha Noi and Binh Duong, where the middle and upper classes represent almost 50 per cent of the urban population.

They have become much more aware of and appreciative of luxury items, with a higher focus on quality and craftsmanship, he said.

"The most attractive part of Viet Nam's jewellery market is its huge young population, who like and easily accept jewellery with modern designs, " Chow said.

Anh said that the growing wealthier and savvier consumer base in Viet Nam provided strong synergies for the development of jewellery market in the country.

The exhibition has attracted top manufacturers from Hong Kong, Italy, Japan, Turkey, India, Israel, Thailand and the USA. They have lined the aisles of the fairground with their finest jewelry and watch collections as well as advanced testing equipment.

Reputable high-end jewellery and diamond manufacturers in the world, including Graziella S.P.S from Italy, Fancy Diamond from India and Kan-Chi from Malaysia are displaying stylish masterpieces of classical and contemporary designs.

Leading Hong Kong jewellers like Bestline, Diamond Wear, Glory United, Golden Master, Good Way and Tai Fook, have showcased 14K&18K jewelry with flawless diamonds and gemstones.

Last year, the event attracted 11,986 visitors from Australia, Belgium, Canada, France, Hong Kong, India, Israel, Italy, Japan, S.Korea, Singapore, Taiwan, Thailand, the UAE and the USA.

The exhibition is organised by World Trade Fair International Limited in collaboration with VCCI Exhibition Service Ltd Co. It is open until Sunday at the Tan Binh Exhibition and Convention Center in HCM City.

Italian life insurer makes official debut

Generali Vietnam Life (GVL) yesterday officially opened its headquarters in HCM City.

"The establishment of Generali in Viet Nam is a key component of our group's expansion strategy in the region, and increases our presence in Asia to a total of eight markets," said Terence Wong, head of the company's Southeast Asia operations. To mark the opening, the company launched its Individual Life and Group Business products to the market after being granted a business license in April last year by the Ministry of Finance.

Generali Vietnam General Director Lam Sui Kong believes Viet Nam's low insurance density, around US$8.6 premium per capita, and insurance penetration at 0.7 per cent premium per GDP, provides large room for business growth.

Generali has an initial charter capital of VND600 billion (US$28.5 million).

Railway fare up for summer trips

Railway fares would increase by 12-15 per cent for all north - south Thong Nhat trains to between VND1.99 million (US$94.7) and VND925,000 ($44) per ticket from May 15 to September 4, according to the Viet Nam Railway Corporation.

The corporation would retain existing discount programmes for old people, wounded soldiers, pupils and kids.

Shrimp exports to Australia soar 100%

Shrimp exports to Australia in the first quarter rose to US$20 million, or double the value achieved in the same period last year, according to the Viet Nam Association of Seafood Exporters and Producers.

Following a slow start in January, exports surged in the next two months, making Australia the sixth largest importer of shrimp from Viet Nam.

Most of the exports were processed products.

Last year, processed shrimp products accounted for 82.6 per cent of total shrimp exports to Australia, with sugpo prawn accounting for almost two-thirds of that.

Figures from the International Trade Centre show that Viet Nam has been the largest supplier of processed shrimp products to Australia in the last four years.

Viet Nam exported $436 million worth of the crustacean in the first quarter.-

South Korea firms seek partners

South Korean businesses are keen on increasing trade and investment ties with Viet Nam, says Chae Byeong Yong, general director of the Korea Industrial Complex Corporation (KICOX).

Yong was speaking on the sidelines of business-to-business (b2b) meetings held between a visiting delegation of 14 South Korean firms and Vietnamese businesses in HCM City on Wednesday.

He said the Korean delegation comprised of businesses dealing in industrial machinery, information technology, electronics, semi-conductor production, solar energy, food processing, fashion and cosmetics.

Nguyen Doan Thong, representative of the Viet Nam Chamber of Commerce and Industry, expressed high appreciation of KICOX's activities in creating favourable conditions for Vietnamese and South Korean businesses to foster investment relations.

He said b2b meetings were an opportunity for enterprises from both countries to exchange information on products and prices and seek strategic partners.

In the last two years, the RoK has surpassed Japan to become Viet Nam's second largest supplier of goods, including garment accessories, footwear, machinery spare parts and plastics.

The RoK is also the fourth largest market importing Vietnamese goods, accounting for 4 per cent of Viet Nam's export turnover.

Viet Nam's Asiatech Environment and Technology Development Co, which specialises in wastewater treatment, and the Republic of Korean (RoK) 's Puree Chem Co signed a co-operation agreement during the b2b meetings on Wednesday.

Two-thirds of firms can't get loans: survey

Nearly two-thirds of 60 businesses in HCM City and Da Nang say they were unable to access credit last year, and that the problem continues this year, according to a survey by the National Financial Supervisory Commission.

The survey found that 61.5 per cent of surveyed companies also expected to meet with difficulties repaying debt over the next 12 months.

It also revealed that domestic businesses were in greater difficulties than foreign-invested enterprises. Local firms saw export demand slow significantly in the first four months of this year, with export turnover rising by only 4 per cent for domestic companies, compared to 36 per cent for the foreign-invested sector.

Foreign-invested businesses still had greater advantages in accessing cheap sources of capital not only oversea banks but from foreign banks operating in Viet Nam, able to access capital from foreign banks at yearly interest rates of 12 to 14 per cent compared to 17 to 19 per cent at Vietnamese banks.

Local companies look for Thai opportunities

Many Vietnamese companies will for the first time exhibit products at Thailand's largest exhibition on manufacturing and support industries in Bangkok from June 21-24.

The Manufacturing Expo will have four main shows on plastics and rubber manufacturing, mold and die manufacturing, auto parts manufacturing and industrial automation and assembly technologies.

Three related shows will feature a sourcing hub for industrial parts, technologies for electronics manufacturing and the textile and garment industries, according to Chainarong Limpkittisin, managing director of Reed Tradex.

Supported by the Government, Vietnamese companies will display support-industry products, including auto and electronic parts, at the Viet Nam Pavilion.

The event is expected to create opportunities for Vietnamese businesses to market their products and discover new business opportunities.

It will also include professional conferences where leading experts, including one from the Viet Nam Textile and Apparel Association, will present the latest advances in various fields.

The expo is expected to welcome 60,000 visitors.

Hydro-electric plant opened in Quang Nam

The Viet Nam Infrastructure Development Investment Joint-Stock Company (IDICO) yesterday officially opened the Dak Mi 4 hydroelectric plant in central Quang Nam Province.

According to Nguyen Van Dat, CEO of IDICO, the plant, which cost VND4,547 billion (US$218 million), has a capacity of 190 MW.

After five years of construction, the project with four groups of generators has been completed, providing an annual electricity output of 780 million kWh for the national grid.

The Dak Mi 4 project includes three plants, Dak Mi 4A, Dak Mi 4B and Dak Mi 4C, all of which are located in Phuoc Xuan Commune in the province's Phuoc Son District.

Foreign help boosts local products
 
The lives of hundreds of poor households in Ha Giang's Vi Xuyen District have improved since their involvement in producing organic tea under a project initiated by the Vietnam Challenge Fund.

The two-year, US$575,000 initiative has trained more than 700 households in applying organic tea farming procedures and practices including crop rotation, green manure and biological pest control.

As a result, incomes have increased by 130 per cent, with 740 tonnes of tealeaves sold at VND5 billion ($230,000) last year alone.

Sponsored by the UK Department of International Development and the Asia Development Bank in cooperation with the Ministry of Planning and Investment since 2010, the project has helped preserve Shan tea, a specialty of the mountainous region grown at 1,300m above sea level and praised for its richness in sugar, vitamins and special flavour. Many plants are hundreds of years old.

To sustainably develop the product, a nursery with a capacity of 400,000 seedlings was established. Thus far, 600,000 tea seedlings have been planted. For each hectare, households received VND2 million ($95) in support.

Part of the investment has gone towards upgrading and building new production lines at the locally based Hung Cuong tea company, which obtains its stock from tea planting households. The company was chosen for its decade-long service in processing tea for the domestic market and export.

Participating at a workshop to review the project in Ha Noi this morning, Dang Thi Niep, 40, from Cao Bo Commune, was happy to say that the Hung Cuong always bought tealeaves at stable prices. She said it was an impetus for her family to care more for the plants they farmed.

"Income from cultivating rice is used to buy food while that from tea is for clothes and domestic appliances," Niep said.

With 6ha of tea, Niep's family earns VND48 million (US$2200) per year, accounting for two thirds of her family's total income.

From the same province, Dang Van Hoa, head of Thac Hung Commune, said that earnings from tea planting helped improve his family life. He revealed that he pocketed VND15 million ($700) for his latest crop, harvested two weeks ago.

As Hoa said, all households in his commune are interested in developing Shan tea.

Meanwhile, Nguyen Van Khoa, deputy director of Hung Cuong, attributed his company's growth to support from the project.

"My company's green and black tea has been exported to 20 countries including the EU and American markets," he said.

The project was additionally fruitful since Ha Giang was home to many traditional tea-growing hills where people have long been familiar with natural tea farming, Khoa explained.

"Guiding them in organic planting has been relatively easy," he added.

Dao Viet Dung, from ADB, said the model could be expanded to other farming regions.

Ethnic minorities could produce high quality products for export if they received suitable support, he said.

 
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