BUSINESS IN BRIEF 9/6

Vasep asks for decree review

The Viet Nam Association of Seafood Exporters and Producers (Vasep) on Tuesday asked the Government to review Decree 36 on tra fish as it had several limitations.

Vasep also asked for an extension of the implementation date of the decree from June 20 to July 1.

The Decree 36, about tra fish raising, processing and export issued recently, regulated that tra fish export contracts must be registered with the Viet Nam Tra Fish Association. Registry of the tra fish association would become a requirement at customs clearance.

This was regarded as unreasonable.

In business, economic contracts were secret and information sharing might cause difficulties to enterprises, the association said.

The decree had no regulations about responsibility of the tra fish association in keeping the business information confidential, or with regard to compensation when the information was leaked or used for self-seeking purposes.

According to Vasep's Vice President Nguyen Huu Dung, the decree also lacks regulations about foodstuff or feeding processes.

In addition, the collection of a fee on evaluating tra fish commercial business might be a burden on enterprises.

According to a report of the Ministry of Agricultural and Rural Development , tra fish export saw a recovery in the first four months of this year.

More than 208,455 tonnes of tra fish, worth US$521.3 million, was shipped abroad. This was an increase of 5.6 per cent in volume and 23 per cent in volume over the same period last year, at an average price of $2.5 per kg.

Cheaper power to boost island prospects

The price of power on Vietnamese islands has been slashed to the same as those on the mainland. Previously, despite Government subsidies, they were up to five times higher.

The energy cuts are part of a strategy to improve people's living on the islands, to boost economic development - and, importantly, heighten security in East Sea territories.

Electricity of Viet Nam (EVN) started applying the new retail prices at the weekend.

The new retail prices range from VND1,100 to 4,000 (5 to 18 cents) per kWh [In Viet Nam, the hourly rate increases with more usage. This is an attempt to stop wastage].

The new island prices cuts are still heavily subsidised by the Government as in the past.

EVN predicts that the cuts will increase power consumption on the islands.

However, it also warned that investment in power production facilities on the islands was still limited.

Therefore it has advised the authorities on islands that have not yet been linked to the national grid by undersea cable to develop energy consumption and saving plans.

Several larger groups of islands were recently supplied with electricity from the mainland, including Co To, Phu Quoc and Van Don. In October, Ly Son Island in central Quang Ngai Province will also be linked to the national grid.

The price cuts are already having an effect. On central Binh Thuan Province's Phu Quy Island, residents are keen to buy electrical appliances and businesses have been alerted to new opportunities, according to vice-chairman of the district People's Committee, Ta Minh Nhat.

Power prices on the island were previously two to five times higher than those on the mainland.

This forced many processors and manufacturers to produce a limited amount of goods - or move to the mainland.

Nguyen Phuoc Kim, vice director of Kim Hoa Seafood Processing Company based in the district, said that in recent years, seafood was mostly taken to the mainland for processing.

Tran Van Hien, head of the district's Seafood Processors' Association, said many of the association's 16 members now planned to resume business on the island itself.

"The price cuts will help reduce production costs. We can process fish at the island instead of renting frozen warehouses on the mainland," he said.

Hundreds of ethnic minority householders in Thu Ngac Commune in northern Phu Tho Province have been told to pay extra for meters to receive reliable power through the national power grid, which was connected early this year.

As a result, many are still forced to use the limited power produced by a local hydro-power plant.

Ha Van Nguyen, a Muong ethnic resident in Co Son 1 Zone, said last week electricians went to his house and asked him to pay VND300,000 (US$14.20) to install a meter.

Nothing happened because he did not have the money. His children still study under the flickering light produced by the hydro-power plant nearby.

However, his neighbour, Nguyen Thi Lam, paid the fee and now has bright light.

Ha Van Dai, another resident in Co Son 2 Zone, said he was told to pay VND500,000 ($23.80) to have a meter installed.

He paid for a total of four meters for his family and relatives, but no one came to do the work.

Ha Van Dinh, village head in Co Son 2 Zone, said that electricians did not inform him about the installation fee.

The first six households had to pay VND300,000 ($14.20), and later increased this to VND500,000.

To compound matters, the electricians refused to accept money to put a meter in the village head's own home because they said he was not a priority.

Chairman of the communal People's Committee Hoang Van Liem said that about 70 households in Co Son 1 and 2 had agreed to pay the price to get electricity.

There were about 200 households in the commune, and nearly half of them were living in poverty, he said.

Hoang Dinh Nghia, a fee collector in Co Son 2, said he was told to collect different fees in the two districts.

Deputy director of the Tan Son Electricity Company Hoang Kim Doan said in principle, people only paid to connect electricity equipment to the electricity network after the meter was installed.

Other additional fees were unauthorised, he said.

The company has set up a team to inspect the incident.

However, Doan refused to comment about the actions of his employees.

Taiwanese firms stay put

A senior figure with the Taiwanese Chamber of Commerce in Viet Nam said Taiwanese would pour more money into Viet Nam.

He said this was because Taiwan industry hit in the recent rioting had been looked after by the Vietnamese Government.

Chairwoman Liu Mei-te gave the assurance during a meeting with Prime Minister Nguyen Tan Dung in Ha Noi yesterday.

She praised the Government's action in stopping the riots and helping enterprises get back on their feet.

However, she suggested the Government could offer more tax incentives.

PM Dung assured his guest that foreign companies, including those from Taiwan, had vast room for growth in Viet Nam.

He said China's illegal oil rig also incited some elements who destroyed and stole property from several firms.

According to the director of the Finance Ministry's Insurance Supervisory Authority, Phung Ngoc Khanh, insurance companies may have to pay out VND2 trillion (US$94 million) for the damage.

Foreign invested companies resume business operations

Around 90 per cent of businesses affected by recent riots in HCM City and southern provinces Binh Duong and Dong Nai have resumed operations.

The riots erupted last month during protests against China's illegal placement of an oil rig in Viet Nam's waters. During the disruption, protesters destroyed property belonging to the State, businesses and individuals, including foreign firms, and clashed with law enforcement, disrupting social order and business activities.

Head of the association of Taiwanese businesses in Dong Nai province Chiang Chih Ming said the recent unrest had affected 131 Taiwanese businesses in the province, with 80 per cent slightly affected and 10 per cent seriously affected.

However, prompt assistance and support from local authorities had helped businesses recover and resume normal production, he said, noting that customs agencies had paid visits to affected businesses to complete procedures for tax-related support.

All 44 affected businesses in Binh Duong have also resumed normal production.

More than 2,100 out of 2,650 foreign experts have returned to their work in industrial zones in Binh Duong, according to Tran Van Lieu, head of the provincial management board of industrial zones (IZs) at a press briefing on the province's socio-economic development situation on Wednesday.

Lieu also said the board has granted work permits free-of-charge to foreign experts. Chairman of the business association of the HCM City Export Processing Zones and Industrial Parks Authority (Hepza) Nguyen Van Be said all foreign-directed businesses in the city had also resumed production.

Soon after interrupted operations caused by the riot, Prime Minister Nguyen Tan Dung laid out a comprehensive plan to support affected businesses, including the provision of sufficient compensation, the reduction of import and export duty rates and the extension of the tax deadline. This was in addition to tax and budget payments arising before May 2014, the longest extension in two years.

Deputy Head of the Customs Department of Dong Nai Province Huynh Thanh Binh said customs officials would continue to work with the affected businesses to guide them through tax-related procedures, particularly those who had their seals, software and relevant documents destroyed.

Customs officials were also assigned to work over the weekend to facilitate import and export activities, he said.

Meanwhile, Deputy Prime Minister Vu Van Ninh has asked the Ministry of Labour, Invalids and Social Affairs to continue guiding localities to assist workers who were forced to stop working during the recent unrest.

Workers will receive wages for days off between May 12 and July 1.

The payment will be equivalent to the wages agreed between enterprises and labourers and will not be below the minimum level prescribed by the Government. The expense used to pay workers will be deducted from corporate income tax obligations.

Corporate governance below average in VN

Corporate governance at listed companies is weak in Viet Nam, increasing the risk they face, experts warned at a conference in HCM City yesterday.

Le Cong Dien, deputy director of the State Securities Commission of Viet Nam (SSC)'s Inspection Department, said most companies' corporate governance standards are below average.

He was referring to a 2012 corporate governance scorecard of 100 listed companies in Ha Noi and HCM City, which rated them at just 42.5 per cent compared to 77 per cent in Thailand, and 74 per cent in Hong Kong.

"They follow laws and rules to avoid being punished, but do not believe that laws and rules would help their companies function healthily and transparently," he said.

The importance of good corporate governance cannot be underestimated and should be a priority for companies, shareholders, and governments alike, he said.

Enhancing corporate governance brings increased protection for shareholders, additional security to employees and directors, and advantages for companies in the competitive environment and for governments as they seek to create an attractive environment to entice investments, he said.

The risks and costs resulting from inadequate attention to good corporate governance can be significant, from both the financial and reputational angles, he said.

Failure to implement adequate corporate governance practices can result in substantive damage to a company's brand as well as its performance along with personal exposure for employees and directors, he said, adding this creates significant operational risks for many companies and a diminished competitive edge.

Susan E. Loftus, CEO and general director of insurer AIG Viet Nam, said: "Regulatory investigations have moved to the forefront of exposures that board members face in Viet Nam.

"The right preparation in this increasingly stronger regulatory environment is essential to leading a successful and profitable organisation."

Owen Hakes, a partner at KPMG, said: "The role of each manager in risk management is more and more important. And the individual responsibility of managers needs to be clarified."

Strict laws and the ability of in-house controllers and levels of punishment would force companies to significantly improve their corporate governance, he said.

"The biggest fault in managing a company is not implementing good control."

David Lee, an investigations lawyer based in Hong Kong, underlined the increasing individual responsibility, saying "this is the best way to reduce management risks."

He suggested that whistle blowers or in-house controllers must be good enough to immediately discover any problems at the company, but companies must also have a good system to verify what whistle blowers reveal.

Some companies that have very good policies fail to apprise all their staff about them, and in such cases, when the system does not work smoothly, someone must take responsibility.

Jason Kelly of AIG Asia Pacific said that responsibility must be fixed for even tiny problems and top managers have to be reminded that even criminal liability is a possibility.

"Corporate governance and liability management protection for company executives" conferences are being organised by AIG and KPMG, Norton Rose Fulbright, PARIMA — the region's risk management organisation — in seven countries in May and June.

They began on May 6 in Singapore and moved to Malaysia, Indonesia, Philippines, and Viet Nam.

They will be held next in mainland China before concluding in Hong Kong on June 26.

Dong Nai continues export growth trend

The southern province of Dong Nai earned over US$1 billion from exports in May, with a massive $931 million gained by foreign-invested firms, a trade official reported.

The state and domestic private sectors contributed $98 million and $13 million, respectively, according to the Deputy Director of the provincial Department of Industry and Trade Nguyen Van Quan.

In the first five months of 2014, Dong Nai recorded around $4.98 billion in export earnings, a surge of 16.1 per cent per year, driven by high-value garments, wooden products, iron, steel, machinery and coffee. The high performance is in part due to a series of trade promotion events that the sector has hosted inside and outside the country since the beginning of this year.

BPO joint venture opens in central city

The Viet Nam Business Process Outsourcing (VBPO) and Japanese partner GROP company have opened the first Offshore Dedicated Centre at Da Nang Software Park.

It's the first BPO office in Viet Nam that aims to provide BPO (Business Process Outsourcing) services and technology solutions.

BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions to a third-party service.

Viet Nam-made power plant boilers exported to India

Korean-owned Doosan Vina has sent the eighth and final shipment of supercritical-once-thru power plant boilers to Kudgi in India.

They will make up two 800MW boilers that will each deliver 2,550 tonnes of high pressure steam per hour.

The 13,102 tonnes of coils, panels, headers, and links will be assembled onsite in India and soon begin producing power.

Doosan Vina in the Dung Quat Economic Zone in the central province of Quang Ngai employs nearly 2,500 workers.

Pepper exports to break annual record

The pepper industry will, for the first time, make a full-year record gross of 1 billion USD from selling the spice this year, buoyed by a bumper harvest and high prices, according to the Vietnam Pepper Association (VPA).

Pepper exports are hoped to reach around 150,000 tonnes in 2014.

In the first five months of this year, the sector shipped 92,000 tonnes worth 645 million USD, posting the highest ever increases of 33.6 percent and 42.3 percent, respectively, year-on-year.

The US, Singapore and India topped the list of buyers, making up 40 percent of country’s pepper exports, according to the Ministry of Agriculture and Rural Development.

In May, the spice set its highest price record so far, with black pepper worth 6,600 USD per tonne and white pepper 9,600 USD per tonne. The average price in January-May reached 6,879 USD per tonne, up 4.2 percent year-on-year, due to a considerable fall in global supply.

The world pepper harvest this year is estimated at 320,000 tonnes, down a remarkable 45,000 tonnes over the previous year. Meanwhile, consumption demand increased 4-5 percent per year, according to the International Pepper Committee (IPC).

There has been stable and increasing demand for pepper in Europe, the US and Middle East since the beginning of this year, creating advantages for Vietnamese pepper exporters to occupy the global market, the VPA said.

In 2013, Vietnam exported 134,000 tonnes of pepper for 899 million USD, up 15 percent and 13 percent in volume and value respectively against the previous year.

As the world’s largest pepper producer, Vietnamese spice is shipped to more than 90 countries and territories.

Vietnam has more than 50,000 ha of pepper plantations, mainly in the provinces of Binh Phuoc, Gia Lai, Dak Lak, Dak Nong, Dong Nai and Ba Ria-Vung Tau.

Investors retain confidence in Vietnamese market

Foreign investors declared their continued support for and confidence in the Vietnamese market at the 2014 mid-term Vietnam Business Forum (VBF) in Hanoi on June 5.

Regarding social disturbances across some localities in early May - which caused damage to businesses, including foreign ones - Virginia Foote, co-chair of the forum, praised the Vietnamese Government’s timely response and expressed her belief that Vietnam will address the consequences of the incident in a transparent, reasonable and professional manner.

Minister of Planning and Investment Bui Quang Vinh stressed that Vietnam ’s competent agencies will do all they can to prevent such an incident from reoccurring.

“The country will work tirelessly to improve its business and investment environment and raise its competitiveness in order to make it more attractive to investors,” he promised.

It will also create increasingly favourable conditions for businesses in order to maintain its image as a safe and friendly destination for foreign investment, he said.

President of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc, who also served as VBF co-chair, said that Vietnam is facing obstacles in retaining its stable trade relations with China .

“ Vietnam should reduce its great dependence on this neighbouring market by diversifying its partner markets and taking advantage of opportunities from free trade agreements,” he said.

According to Yoshihisa Maruta, President of the Japan Business Association in Vietnam, a recent survey shows that the Japanese businesses in Vietnam now number 1,320, and 70 percent of them said they will continue to consider the country as an important market and think about expanding their operations here.

Although the enterprises highly value businesses opportunities in Vietnam , they said that improving the environment for businesses remains an urgent need for the country to boost its socio-economic development, he added.

Vietnam should show investors around the globe that its government is making every effort to stabilise the businesses environment for them, said Kim Jung-in, Chairman of the Korean Chamber of Commerce in Vietnam (KorCham).

He suggested the Vietnamese Government offer loans with low interest rates to businesses and grant tax exemptions to those damaged by recent disturbances.

Meanwhile, Tomaso Andreatta, Vice Chairman of the European Chamber of Commerce in Vietnam (EuroCham), stated that Vietnam’s economy can only develop in a sustainable manner if the country creates an equal playground for enterprises and protects intellectual property rights, while eliminating corruption and ineffective investment.

According to the VCCI President, Vietnam is going to finalise many important free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) Agreement, now in its final negotiating stages, and the Europe-Vietnam FTA.

Therefore, the Vietnamese Government and businesses should stay well prepared to deal with both opportunities and challenges from these agreements, he said.

The TPP is expected to bring a good development direction to the Vietnamese economy, as it will help increase the country’s GDP by 28.4 percent and its exports by 35.7 percent by 2025, said Marc Townsend, Chairman of the American Chamber of Commerce (Amcham).

He added that TPP and other trade agreements will offer Vietnam many new opportunities as they support the removal of trade barriers in some areas and the development of new standards in ensuring workers’ rights and intellectual property rights and protecting the environment.

To prepare, Vietnam’s business environment must be transparent and interactions between the State apparatus and socio-political organisations must be enhanced, he said, adding that dialogue between people and businesses should be expanded in various forms.

After the FTA between Vietnam and the EU is signed, the former’s GDP may increase by over 15 percent and its exports up nearly 35 percent, said the EuroCham representative.

However, these potential benefits may be reduced if Vietnam does not commit to fully implementing international trade terms, he warned.-

CIM discusses business environment improvement

The Central Institute for Economic Management hosted a seminar on the improvement of business environment and national competitiveness on June 4.

Businesses pay tax at the Ho Chi Minh Taxation Department (Photo: SGGP)

The Government has issued Resolution 19 on measures to improve the business environment and the national competitiveness in March, said the institute head Dr. Nguyen Dinh Cung, .

However, the resolution has been implemented rather slowly by related ministries while only one third of provinces have built action plans.

The resolution aims to carry out administrative reform as a result of cutting short time and costs on tax payment and customs clearance, he added

However, the most difficult issue is how to cut the tax payment time from 872 hours down 171 hours per year, according to WB.

Tax agencies have made a lot of efforts but seemed unable to considerably reduce tax payment time and costs, said Hoang Thi Lan Anh, deputy head of the Committee for Reforms and Modernization of the General Department of Taxation.

Of the measures, taxation declaration software has been built and is used by over 90 percent of companies for online tax payment since 2013.

According to World Bank, the tax payment time is related to social insurance payment of businesses, she said.

As a result, Dr. Cung proposed a synchronous cooperation among authorized agencies to improve the business environment.

Vietnam’s export and import turnover reaches US$270 billion now, he added. Administrative reform will reduce costs, increase profit and value added for businesses. Capital turnover will be quicker making the economy more dynamic.

NA Deputy: progress on Long Thanh Airport not to be judged by eye

A National Assembly deputy from Lam Dong said that construction on Long Thanh International Airport should not be based on casual observations, as Tan Son Nhat Airport’s capacity can be expanded along with others that can handle the load.

During an NA recent discussion on the revision of the Law on Civil Aviation, Deputy Le Van Hoc said the level of investment for Long Thanh International Airport is very high.

Deputy Le Van Hoc said that construction on Long Thanh International Airport should not be based on casual observations.

Meanwhile, four other airports are operating in the vicinity of Tan Son Nhat or Long Thanh International Airport, namely Can Tho, Cam Ranh, Phu Quoc and Lien Khuong. In total, these four airports have a capacity to serve 20 million passengers per year.

The distance between Noi Bai International Airport and Cat Bi and Thanh Hoa Airport is around 100km.

“The civil aviation and transport sector should not depend on visual reports and inaccurate forecasts when it comes to planning. This could cause losses for the state budget,” Mr. Hoc added.

Deputy Hoc cited statistics from the Civil Aviation Authority of Vietnam, saying that, at present, Tan Son Nhat Airport will be able to serve 76,800 flights per year and by 2020 and is not in danger of facing an overload.

According to Hoc, profit the aviation sector has been very low. Over the past decade, the international aviation market has faced losses of more than USD50 billion. The aviation market of the Asian Pacific is expected to grow by 10% per year, and Vietnamese aviation market is expected to serve around 150 million passengers by 2020.

Under the aviation sector’s planning by 2020, with  a development vision towards 2030, which was approved by the government in 2009, Vietnam will have 26 airports, including 10 international airports.

The country invested USD1.4 billion in domestic airports in the period between 2011 and 2013.

Meanwhile, other forms of transportation also require huge investments from the state budget. The country plans to spend USD80 billion for road network construction by 2020. Vinalines plans to build 160 ships totaling VND100 trillion by 2020.

The Long Thanh International Airport project is planned to take up a 5,000-ha site, and will cost around USD13 billion.

ACE Life launches new insurance benefits package

ACE Life, the global life insurance division of ACE Group, today announced the launch of a new insurance benefits package – “The Gift for Life” in Vietnam.

This product provides parents with more options to find the right insurance and financial solutions to help them plan a secure future for their child against unexpected risks.

This is an enhancement of the Premier Universal Life 2013 product which now offers the added feature of comprehensive protection for the whole family packaged in one policy.

Without proper insurance protection, a child’s future educational funding may be exposed to risk if they lose their parents.

ACE Life’s “The Gift for Life” provides a comprehensive financial solution to ensure children’s dreams can still come true if the unfortunate circumstances happen.

Thus, when selecting the package, which includes Parents Term, Parents Waiver due to Death and Parents Waiver due to Critical Illnesses features, in addition to the standard benefits of the base plan, customers can enjoy additional benefits for extensive protection.

This includes receiving up to 200 per cent of the Parents Term face amount (FA) upon death of either or both father and mother, upon death or critical illness of either or both father and mother until the child attains age 25, insurance costs of the base plan and supplementary benefits will be waived, while the policy account value will continue to earn interest.

Chairman and country president of ACE Life in Vietnam Lam Hai Tuan said “To be ACE insured means that ACE Life is there when you need us the most. In this case, the ‘The Gift for Life’ package is designed to enhance your children’s future and education. This also helps nurture your children’s life planning skills that are necessary for their adulthood.”

With the unique features, “The Gift for Life” is considered as an heirloom which brings financial protection for three generations in a family.

Moreover, after deducting all prescribed fees of the main plan and the supplementary benefits, the policy account value is contributed by the total deposited premiums, while the policyholder will receive the investment benefits from the Universal Life Fund.

With the newly added supplementary benefits, the Premier Universal Life 2013 now offers a total of 13 supplementary benefits for customers to flexibly choose the appropriate financial plan to protect the insured and their family.

ACE Group is one of the world’s largest multiline property and casualty insurers.

In Vietnam, ACE operates both general insurance and life insurance operations where it offers a comprehensive array of protection products and risk management solutions to a diverse group of clients.

Employers discuss 2015 minimum wage increase, better co-ordination and evidence-based data needed

Regional minimum wages in Vietnam could increase in 2015 in accordance with growth rate of the nation’s GDP and inflation, employers’ organisations have recommended.

The Vietnam Chamber of Commerce and Industry (VCCI), Vietnam Co-operative Alliance (VCA), Vietnam Association of Small and Medium-sized Enterprises, Vietnam Garment and Textile Association (VITAS) and other sectorial associations sat down together in Hanoi today to discuss “Employers’ proposal on adjustment of minimum wages for 2015” at a workshop co-organised by VCCI and the International Labor Organization (ILO).

According to the statistics of VCCI, regional minimum wages in Vietnam grew on average by 9.9 per cent in 2010, 30.1 per cent in 2012 and 15.2 per cent this year. The growth rate of regional minimum wages was equivalent to that of CPI in 2010-2011 but three times higher than CPI growth since 2012.

“The increase of minimum wages for 2015 should ensure both the actual salaries of workers and the production of enterprises,” said VCCI Employers’ Bureau director Phung Quang Huy.

According to VCCI, minimum wage adjustment mostly affects garment, footwear and fishery industries.

“Increasing minimum wages by 10 per cent could increase enterprises’ costs for salaries by over 17 per cent due to increased allowances and other social benefits,” said VCCI Employers’ Bureau deputy director Vi Thi Hong Minh.

Representing employers’ organisations at the National Wage Council are VCCI, VCA, Vietnam Association of Small and Medium-sized Enterprises, Vietnam Leather and Footwear Association, and VITAS.

ILO Vietnam’s chief technical advisor on Industrial Relations, Phillip Hazelton, said that it was important to enable and encourage joint and evidence-based discussion and interventions of key employers’ groups on minimum wage adjustment.

The ILO encourages a stronger co-ordination role of VCCI in working with other employer’s organisations on the National Wage Council and hopes that “different associations will be able to work more closely on joint studies and joint activities around this important area”.

“We urge minimum wage adjustment proposals of employers’ organisations and the trade union side to be based on the use of reliable statistics and sound data analysis, taking into consideration both social and economic criteria,” Hazelton added.

Minimum wage is a single wage floor level below which employers cannot go legally.

The ILO suggests that the negotiations should look into the needs of workers and economic factors such as payment ability and competitiveness.

“Minimum wage has limitations and it should not be used to address all poverty issues,” said ILO senior specialist on Employers’ Activities, Gary Rynhart.

He advised Vietnam to avoid indexing minimum wages to CPI because CPI measures changes in prices without providing information on incomes and does not cover all household expenditure.

Regional minimum wages in Vietmam are now deliberated on by the National Wage Council, which was established in 2013 and gave an equal voice to the government, employers’ organisations and trade unions.

Minimum wages for 2014 range from VND1.9 million ($90) to VND2.7 million ($129) per month depending on regions.

 Binh Duong looks to US$1.4 billion in FDI attraction

The southern province of Binh Duong expects to attract US$1.4 billion in foreign direct investment (FDI) this year, higher than its initial projection.

At a press conference on socio-economic updates in the province on June 4, the Binh Duong Department of Planning and Investment said the FDI pledges in the year to May had exceeded US$978 million, or 97.8% of the year’s target previously announced by the province.

The FDI came from 65 new projects with registered capital of over US$370 million and 56 operational projects with combined capital of US$608 million.

The department said there had been 2,295 valid FDI projects with a combined investment of US$19.74 billion as of May.

Also on June 4, the government of Binh Duong Province granted investment certificates to 41 domestic and foreign-invested enterprises and a majority of foreign-invested firms were from Japan, South Korea and Hong Kong. Of the number, around 10 enterprises applied for a license after May 13 when the worker protests against China’s illegal placement of an oil rig in Vietnamese waters in the East Sea broke out.

With positive FDI results in the year to date, the authorities of Binh Duong Province are pinning high hopes that it will attract higher-than-expected FDI this year despite certain negative impacts of the riots caused by ill-intentioned elements during the protests at industrial parks in the province.    

Nguyen Anh Hoa of Dong Hung Joint Stock Company told the Daily that the violence did not affect the confidence of the firm’s leaders in Binh Duong Province. “The impacts of such an incident will soon be over and Binh Duong remains an attractive destination in the eyes of investors,” Hoa said.

Xie Zu Hong, director of the newly-licensed Zhui Rui Vietnam Co., Ltd. (Hong Kong), said he still believed in the investment environment in the province given its supporting policies for FDI attraction.

Mai Hung Dung, director of the department, told the Daily at the press conference that Binh Duong targeted US$5 billion in FDI in the 2011-2015 period but this goal had been realized now.

Le Thanh Cung, chairman of Binh Duong Province, told reporters on the sidelines of the investment certificate ceremony that the province would focus on investments in developing supporting industries and material sources to better serve investors and cash in on the opportunities of the Trans-Pacific Partnership now under negotiation.

Regarding the aftermath of the riots, Binh Duong vice chairman Tran Van Nam said he had been appointed head of a team to address relevant issues of the protest-hit firms at industrial parks and compensation would be implemented very soon.

Nguyen Phung Trung, deputy director of the provincial Department of Labor, War Invalids and Social Affairs, said the province was exerting efforts to arrange jobs for the more than 9,000 workers who have been jobless since the incident occurred.

Financial constraints force ministry to revise expressway projects

The Ministry of Transport has scaled down many expressway projects nationwide due to shortages of State money and difficulties in finding capable investors.

The ministry has announced a list of expressways to be built with two lanes in the first phase instead of four to six lanes as previously planned. A typical case is the Ninh Binh-Thanh Hoa expressway, which will connect northern and central provinces and was initially estimated to cost more than VND30 trillion (over US$1.4 billion).

The ministry has recently divided the expressway project into two phases to make it easy to woo investors to develop two lanes in the first stage at a much lower cost of over VND30 trillion.

Thai Nguyen-Bac Kan, which is another planned highway in northern Vietnam and an extension of the Hanoi-Thai Nguyen Expressway, has been envisaged with two lanes in the first phase at a cost of VND3.15 trillion. With this capital amount, the project is expected to attract domestic investors.

The ministry and Lam Dong Province have proposed the Government allow building two lanes for the planned Dau Giay-Lien Khuong expressway in the first phase for vehicles to run at 60-80 kilometers per hour. This 200-kilometer-long highway linking Dong Nai and Lam Dong provinces was originally designed to have four lanes with a total investment of VND65.35 trillion.

The developer of Trung Luong-My Thuan has found it hard to mobilize sufficient capital for the expressway project in the Mekong Delta region. Duong Tuan Minh, general director of Cuu Long Corporation for Investment, Development and Project Management of Infrastructure (Cuu Long CIPM), said that the first phase of this big-ticket project was put at nearly VND25 trillion and this investment was too huge to mobilize at the moment.

Therefore, Cuu Long CIPM suggested developing Trung Luong-My Thuan in two stages with the first having two lanes 2.5 meters wide each plus sections for vehicles to stop in case of emergency built under the build-operate-transfer (BOT) format. The expressway will be expanded to six lanes using official development assistance (ODA) loans in the second phase.

Experts said that scaling down and dividing the planned expressways into stages was an appropriate solution to attracting capable investors and helping shorten the time for return on investment.

Currently, the transport ministry is reviewing many of the 25 transport projects listed to call for foreign investors by 2020 with a view to scaling down and dividing these projects into phases.

Foreign consultants keep PNJ a step ahead

As most Vietnamese enterprises still lack experience, using consulting services for international best practices can offer a major step forward.

Since transitioning to a market economy in 1986, Vietnam has seen considerable socio-economic achievements, but many local companies are still inexperienced in terms of pushing their businesses to ever-greater levels of success.

Phu Nhuan Jewelry (PNJ) is a typical example of one such firm overcoming these obstacles. It is now Vietnam’s largest jewelry company with one-third share of the domestic gold market. It has a fully-integrated operation that encompasses sourcing raw materials, designing finished products, manufacturing by skilled artisans, wholesaling and retailing..

PNJ has an excellent growth outlook, as it has steadily developed its distribution and production chains. It currently has more than 170 retail stores and is looking to expand this to 300 by 2017. Today, PNJ’s business model is similar to that of Tiffany’s in that it designs, produces, and then sells products via its own stores.

Nguyen Thi Cuc, deputy general director of PNJ, attributed the firm’s successful growth to the determination of the board of directors in taking advantage of consulting services provided by international firms. These services have helped PNJ to gain experience and skills in advanced management throughout the production and sales processes, and in terms of developing human resources.

PNJ was first founded in 1988 as Phu Nhuan Jewelry Trading Store with an initial investment of VND14 million (equivalent to a mere 9 ounces of gold at the time) and a staff of only 20 employees.

Two years later it became Phu Nhuan Jewelry, Fine Arts and Currency Exchange Company, which operated under the direct control of the Finance Department under the Ho Chi Minh City People’s Committee. In 1992 it assumed its current name, or PNJ for short. This time witnessed tremendous changes to the firm, resulting from the board of director’s bold decision to invest in Italian production line technology. In the same year, the company also co-founded Dong A Bank and formed a joint venture with Phu Nhuan House Trading and Development Company.

“From our first days we have enlisted the help of foreign consulting firms to advise on our business strategies and to learn the best practices from them” said Cuc, who cited that 25 years ago PNJ hired a group of Japanese consultants to help develop its first jewelry production facility in Ho Chi Minh City.

“For 25 years, effectively using consulting services for best practices have helped PNJ cement its leading position in the jewelry market,” she affirmed.

In 2011, the company worked with its Italian consultant Value Partners Management Consulting in developing its long-term strategy, setting up the firm’s business goals, and coming up with plans to become the leading jewelries manufacturer and retailer in Asia and maintain its number one position in its target segments in Vietnam.

In 2012 PNJ signed an agreement with Cowan, an international brand and packaging design agency, to rebrand the firm in a way that aligned with its business objectives and aspirations.

Accordingly, Cowan worked closely with the firm’s CEO and other key executives to identify the values and attributes of the organisation.

PNJ also has agreements with Hay Group and the former senior vice president of Zales Corp, Sterling Pope, for consulting on its human resources, information technology and retail chain.

“If a company is aware and understands exactly what its goals are, using foreign consulting services is a major advantages,” said Cuc.

She attributed the firm’s successful business results in 2013 to the use of foreign consulting services. During that time, PNJ’s core jewelry business performed extremely well with after-tax profits (deducting financial income) up 45 per cent on-year thanks to the implementation of best practices in operations and improved retail management.

This trend is continuing in 2014, as evidenced by an on-year increase of 58 per cent in after-tax profits from its core business as of April 2014. This is well on-track for the goal of 45 per cent for the entire year.

In fact, many Vietnamese firms have failed in their application of foreign consulting services. This begs the question: how are local firms positioned to follow the advice offered by such consultancies?

“Being open-minded and authentic is a shared culture from top management to every staff in PNJ. We must look directly into our strengths and weaknesses and then look for solutions with experts’ inputs,” Cuc said.

At PNJ, to successfully implement the direction defined by foreign consulting firms all staff and leaders had to be aware of essential changes, she added.

She noted that the company has over 1,500 employees, but that they unify together for common goals without focusing on individual benefit. “That is the foundation needed for any change to be successful.”

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

FDI, Binh Duong, riots, Taiwanese investors
 
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