BUSINESS IN BRIEF 28/6

Middle East seeks building materials

Vietnamese manufacturers of building materials have been advised to exploit Middle East markets because governments there are investing heavily in building infrastructure, a seminar in HCM City heard yesterday.

Organised by the Ministry of Industry and Trade, the seminar was devoted to the potential for new export directions to the Middle East.

Viet Nam's trade councillor in Saudi Arabia, Nguyen Quoc Hai, said that to meet the increasing construction demand, Saudi Arabia needed nearly 60 million tonnes of cement and 25 million tonnes of iron and steel a year.

Hai said besides buying materials from its usual suppliers, Saudi Arabia was now looking at emerging markets such as Viet Nam.

Other experts said that the Saudi Arabian market was attractive as the 5 per cent import tariff rate there was among the lowest in the world. The low rate reflects the fact that the nation's budget funds come largely from oil exports.

"Therefore, Vietnamese exporters should fully utilise these advantages," Hai said.

Tran Quang Huy, head of Viet Nam's African, West and South-Asian Market Department said most Middle East countries relied on imports of timber and timber furniture because few trees grew in their hot, dry climate.

He said promising markets, especially for cement, included the United Arab Emirates, Iran and Oman.

To tap the market, he advised Vietnamese enterprises to focus on surveying what was needed and offering quality products. Contacting building contractors was also a good idea.

According to the Ministry of Industry and Trade, the Middle East is the fastest growing market for Viet Nam. It now takes five per cent of Viet Nam's total exports to the world market. Last year, total bilateral trade turnover was US$10 billion.

The region's per capita Gross Domestic Product is high due to profits from the oil industry. The Middle East has three-fourths of the world's oil resources.

Indonesia ready to import 500,000 tonnes of rice

Indonesia’s state buyer Bulog must prepare to import 500,000 tonnes of rice, Deputy Minister of Agriculture Rusman Heriawan said on June 24, a move to accommodate a surge in demand linked to the Muslim fasting month of Ramadan starting the next two days.

It is also meant to stabilise food prices in face of El Nino weather pattern which will cause widespread draught.

According to him, Indonesia may more than double its rice imports up to 1.5 million tonnes this year.

The government plans to decide on rice import quota to Bulog next week, after considering domestic output and supply.

Indonesia and the Philippines, which typically buy rice from Thailand and Vietnam, are among the Asian countries facing the gravest threat from El Nino.-

Vietnam to benefits from ADB’s new fund on low-carbon technologies

Vietnam is among the first eight countries eligible for assistance from a new trust fund sponsored by Japan and the Asian Development Bank (ADB) to support the adoption of advanced low-carbon technologies in developing countries.

The ADB on June 25 announced the establishment of the trust fund which receives a grant of 1.8 billion JPY (about 17.65 million USD) from the Government of Japan .

In a press release, the ADB said Japan’s Minister of the Environment Nobuteru Ishihara and ADB President Takehiko Nakao have s ign ed a Letter of Intent for Cooperation on Environmental Issues, which will include cooperation for effective implementation of the Japan Fund for the Joint Crediting Mechanism (JFJCM) .

The ADB quoted ADB President Takehiko Nakao as saying at the signing ceremony on June 25 that t he establishment of the JFJCM is a timely step to help meet the demands of the Asia and Pacific region for sustainable low-carbon infrastructure.

The fund will provide grant finance to reduce the cost of advanced low-carbon technologies, such as those related to waste-to-energy schemes and smart grids, which often have initial high investment costs and long cost recovery periods.

With the establishment of the JFJCM, ADB is the first multilateral development bank to have a trust fund for supporting GHG reduction projects under the Joint Crediting Mechanism (JCM) .

The eligible countries of the JFJCM are developing member countries of ADB that have signed memoranda of understanding for the JCM with the Government of Japan. To date, eight DMCs are eligible—Bangladesh, Cambodia, Indonesia, Lao People’s Democratic Republic, Maldives, Mongolia, Palau, and Vietnam. The list of eligible DMCs is expected to expand.

Hanoi strives to lure more foreign arrivals

Hanoi’s authorities have urged the municipal tourism sector to seek measures to attract more tourists to the capital, especially foreigners, in the coming time.

The number of overseas holiday-makers to Hanoi incessantly surged in recent years, bringing an increasing turnover for the sector. In the first half of 2014, Hanoi greeted 1.39 million foreign visitors, a 17.4 percent year-on-year rise. Of the total, the number of Chinese tourists to the city went up 30 percent compared to that in the same period last year.

Following China’s illegal placement of its oil rig in Vietnam’s waters in early May, Hanoi saw a remarkable decrease of overseas tourists to the city, particularly Chinese arrivals. In the face of this, the municipal authorities have asked the sector to direct its attention to other markets such as Japan, the Republic of Korea, Malaysia, Singapore and Russia.

The city plans to coordinate with the Vietnam Tourism Association to organise annual promotion activities in Japan, while working closely with Japan-based representative office of Vietnamese tour operators to help domestic travel agents easily access the potential market, which sees about 20 million tourists travelling abroad each year.

In additions, Hanoi’s travel agencies will actively participate in tourism fairs in other markets to introduce their services and products. They will also seek to promote the city’s image on well-known and prestigious tourism websites in the world such as Trip Advisor, Smart Travel Asia and Google.

Along with the above-mentioned efforts, the city also focuses on improving the quality of products and services, while expanding promotional programmes with the involvement of other areas related to tourism.

Hanoi will set up a tourism promotion plan for the 2015-2020 period, towards reaching a sustainable tourism growth in the future.

France-funded project helps safeguard local products

A 2-million-USD project funded by the French Government to aid Vietnam and other Mekong subregion countries to improve their legal systems on geographical indication was launched at a ceremony in Hanoi on June 25.

Implemented by the United Nations Food Agriculture Organisation (FAO), the project is expect to foster information exchange and set links between state-owned areas and private ones to promote Vietnam’s products with geographical indications registered in regional and international markets.

Michel Drobniak from the French Embassy in Vietnam said the three-year project will help beneficiary countries further boost rural development through developing geographical indication systems , noting that the field is important for Vietnam, especially as the country has entered into negotiations of free trade agreements with many partners in the world.

Geographical indication is a sign used to identify where a product originates from. The reputation of a product bearing geographical indication is determined by the consumer creditworthiness to that product.

Not only helping safeguard the patent rights of famous traditional products of any country, geographical indication also assists consumers to easily access high-quality products.

Besides, geographical indication increases advantages of a regional product that similar products outside the region cannot afford. Therefore, the normal selling price of a product with geographical indication is often higher than that of other similar products. In EU, sales of products with geographical indications have accounted for billions of EUR.

There have been more than 120 geographical indication registered in Asia. It becomes a vital tool for trade and rural development in many countries.

According to statistics, Vietnam has 38 products with registered geographical indications.

Rubber, rice exports drop in six months

In contrast to the majority of key agro-forestry and seafood products, which experienced significant export growth in the first half of the year, rubber and rice exports fell sharply.

The Ministry of Agriculture and Rural Development (MARD) reported that exports of agro-forestry and seafood products were US$2.227 billion in June, bringing the six month total to US$14.67 billion, an increase of 11.2% over last year.

Of which, export earnings from agricultural products jumped by 6.6% to US$7.15 billion, forestry products by 14.9% to US$3.01 billion and seafood by 24.4% to US$3.45 billion.

Products with high growth in both volume and value included coffee, pepper, cashew nuts, seafood, wood and timber products, while other key products like rice, rubber, tea, cassava and cassava products witnessed significant decline.

As one striking example, pepper exports spiked up 36.2% in volume and 47.8% in value during the first six months of the year.

In June, 16,000 tonnes of pepper were shipped abroad, earning US$127 million, bringing the total exports for the six months to 110,000 tonnes worth US$790 million.

Meanwhile, the country exported 109,000 tonnes of coffee in June, fetching US$229 million, raising sixtotal -month exports to 1.04 million tonnes worth US$2.12 billion (up 31.7% in volume and 24.7% in value).

Seafood brightened up exports with a value of US$3.45 billion in six months, including US$536 million in June (up 24.2%).

Products witnessing a sharp decline were rubber (down 33% in value and 11.7% in volume), cassava (down 12.8% in value and 13% in volume) and rice (8% in value and 9.9% in volume).

Only 3.2 million tonnes of rice were sent abroad in the first half of this year, yielding approximately US$1.44 billion.

Ministry: Ask-and-give practice still exists in realty market

The Ministry of Construction has again pointed out flaws of the local real estate market, saying the lack of transparency in planning, investor selection and trading has resulted in the ask-and-give practice growing popular.

The mechanism has led to corruption, speculation and monopoly at many construction projects. Meanwhile, the real estate market has been developing spontaneously in the past, the ministry said in the strategy on Vietnamese real estate market development recently submitted to the Government.

Due to such flaws, there has been a serious supply-demand imbalance in the real estate market with many housing products failing to find buyers. Specifically, the market has seen a huge surplus of high-class apartments versus a shortage of budget homes for low-income people.

Nguyen Van Duc, vice chairman of the HCMC Real Estate Association (HoREA), told the Daily that there remained such shortcomings as mentioned in the strategy. However, real estate enterprises are facing other challenges as well.

Concerning the ask-and-give mechanism, Duc said the problem has existed for years, making life hard for enterprises when it comes to applying for an investment license.

It seems that the Ministry of Construction is blaming enterprises and citizens for the problems of the realty market. In fact, the ministry should bear responsibility for spontaneous development of the market, he said.

The ministry in the statement suggested solutions to develop the property market, focusing on measures to develop financial institutions. The measures will help attract capital for the market and secure flexible credit policies for entities on the market.

A banker in HCMC told the Daily that to attract capital for the real estate market, it is the central bank that must take responsibility rather than the Construction Ministry, and the two agencies should join hands to solve the problem.

Banks are ready to make loans to real estate companies but they will consider the financial capability of investors carefully, the banker said.

HNX raises VND586 trillion from G-bond sales

The Hanoi Stock Exchange (HNX) raised VND586 trillion from Government bond auctions in the past five years, a breakthrough in the G-bond market.

At the fifth anniversary celebration in Hanoi on June 24, HNX announced the figure surged 75 times compared to 2009. In the secondary market, the total listed value reached VND625 trillion as of May, 17% of the nation’s gross domestic product (GDP).

Liquidity of the G-bond market increased 4.5 times from VND366 billion each session in 2009 to over VND1.6 trillion in 2013 and over VND2.5 trillion in the first five months of this year.

Speaking at the ceremony, Minister of Finance Dinh Tien Dung told HNX to better mobilize capital to finance the State budget and help restructure public debt.

According to a report of HNX, the number of listed firms increased 42% during the period while their value soared by 140%. The bourse has seen 364 listed enterprises with total value of nearly VND90 trillion.

Trading value also grew significantly, from VND127 billion a session in the 2005-2009 period to VND530 billion in 2010-2013 and VND768 billion in the first five months of 2014.

The UPCoM, the market for unlisted public companies, has seen 147 firms, up 17 times. Market capitalization reached VND28.9 trillion, up seven times versus 2009.

HNX, formerly the Hanoi Securities Trading Center, was established in January 2, 2009 given a decision of the Government. It officially started operating on June 24 in the same year.

Banks struggling with low credit growth

Banks in HCMC have been working hard to increase lending but their credit growth is forecast at a mere 1.32% by the end of June against late 2013, according to the central bank’s HCMC branch.

Credit expansion in the January-June period in this southern economic hub of Vietnam is well below the 3.3% recorded in the same period of last year.

Nguyen Hoang Minh, deputy director of the central bank branch in the city, said local lenders have been racing against time to boost capital disbursements for borrowers, instead of buying Government bonds at low coupons. However, banks have found a modest number of corporate borrowers in recent times.

This is why credit growth in the first six months of this year is low, Minh said.

Dang Quang Tien, deputy general director of Military Bank, said his bank’s credit has grown a slight 2.27% against late 2013, much lower than last year’s 7%.

A deputy general director of a small bank told the Daily that its total outstanding loans have remained unchanged since early this year. The banker has just been appointed to the position to help the bank speed up lending and earn more profit from deposits toward the end of this year.

The banker admitted he is facing huge pressure as it is not easy to improve credit growth at a time when enterprises remain hesitant to take out fresh bank loans.

However, medium and long-term credit accounts for up to 46.27% of the total outstanding loans, a strong rise against the previous year. Medium and long-term loans have edged up 4.26% in the first half while short-term lending has declined, Minh said.

A source told the Daily that bad debt and the debt restructuring process have caused impacts on outstanding loans in the banking system. Some banks have scaled down credit to restructure operations and secure liquidity while others have been busy recovering debt.

Meanwhile, the bank-business connectivity program in the city has made progress.

Minh said local banks have provided nearly VND14 trillion of preferential loans for enterprises since early this year, higher than in all of 2013. Some 562 firms, 25 households and five cooperatives have benefited from the financing program.

Banks will continue lending to enterprises and households in districts 1, 3 and Go Vap from now to the end of this month. In the first half, local banks have planned to give loans worth VND16 trillion to borrowers in 24 districts, Minh said.

Lenders joining the program have offered annual lending rates of 7-7.5% for short-term loans and 10-11% for medium and long-term credit, lower than market rates by one to two percentage points.

Last year, banks disbursed over VND13 trillion worth of loans to corporate borrowers, Minh added.

To attract customers, most banks have launched loan packages with interest rate reductions in the first three months. Some even have slashed short-term lending rates to around 6.5% per annum.

BKAV introduces int'l-standard SmartHome solution

The first smart home application made in Viet Nam is being used at Phu My Hung's Green Valley project in District 7 by the Bach Khoa Anti-Virus Centre (BKAV).

The BKAV's SmartHome solution manages and controls houses through a 3D interface on a smartphone or tablet.

Different systems control light, window drapes, security, entertainment and gas cookers.

BKAV's SmartHome uses wireless telecommunication technology from ZigBee and Wifi, and is simple to set up.

Major technology corporations have entered the smart home market which has a lot of potential.

For example, early this year, Google bought Nest, a producer of smart temperature control and smoke alarms, and Samsung has introduced its own smart home for all their home appliances. Along with Phu My Hung, BKAV's SmartHome will be deployed in the Ha Noi-based EcoPark soon.

Shipbuilders get new look on path to equitisation

The new-look Ha Long Shipbuilding One-member Co Ltd, is taking shape as the equitisation process nears completion within three months.

According to General Director Nguyen Tuan Anh, the company, which is an affiliate of the Shipbuilding Industry Corporation (SBIC), has made a deal with the Damen Shipyards Group of the Netherlands - one of the leading European groups in manufacturing high-capacity ships.

The restructured company, which has strong ties with other shipbuilding companies in Viet Nam, has encouraged Damen to become a dominant power. After equitisation, the company will focus on building oil and gas service ships.

In 2013, Ha Long Shipbuilding posted an output value of more than VND1.3 trillion ($63 million), or 100.56 per cent of the yearly plan, and a revenue of nearly VND1.45 trillion ($69 million), equivalent to 99.8 per cent of the target.

Foreign investment drawn to Tay Ninh industries

So far this year, the southern province of Tay Ninh has attracted US$432.3 million in foreign direct investment, 2.6 times the figure for the same period last year.

Of the total, new investment accounts for nearly $260 million and the rest is additional investment for existing projects.

Most of the investment is from mainland China, South Korea, Hong Kong, Brunei and Thailand. Much of it is for the production of garments, fabrics, cars, paint and animal feed.

Tay Ninh, one of the largest destinations for FDI, has 217 foreign invested projects with a combined capital of $2.4 billion.

In the period under review, foreign invested projects recorded a total revenue of $426 million, 21.8 per cent higher than for the same period last year. They paid VND148.8 billion ($7.08 million) to the State budget, 63.6 per cent more than the first half of 2013, and created jobs for more than 80,000.

Ha Noi Stock Exchange celebrates fifth birthday

The Ha Noi Stock Exchange has solidified its role in raising capital for businesses and the State budget, with the bourse celebrating five years since its establishment.

The exchange, launched in 2009, has succeeded in developing three separate markets, including the stock exchange, unlisted public company market (UPCoM) and bond market, said Tran Van Dung, the exchange's general director, at its 5th anniversary celebration yesterday.

Dung said the number of companies listing on the northern bourse had increased 42 per cent from 2009, reaching 364 companies. The value of listings had also risen by 140 per cent during the period, totaling VND90 trillion (US$4.3 billion).

Meanwhile, total market capitalisation had reached more than VND120.5 trillion ($5.71 billion), while companies had raised VND45 trillion ($2.1 billion) over the past five years by issuing additional shares to expand operations.

Listings had also helped boost the transparency of firms, with about 97 per cent of listed companies regularly updating information on their websites.

Trading has also seen improvement, with market value rising from VND127 billion ($6 million) per session from 2005 to 2009, and to VND530 billion ($25.1 million) between 2010 and 2013. Value of trades this year also climbed to VND768 billion per day in the first five months.

The exchange has also developed seven new indices that have diversified the base of products traded on the market: the HNX30, tracking the top 30 shares by market value and liquidity, the HNX Free Float Index, three sector indices and two sets of indices based on the scale of shares.

Regarding UPCoM development, the number of companies registered for trading rose to 147 with total market capitalisation reaching VND28.93 trillion ($1.37 billion), seven times higher than in 2009.

To date, seven companies have moved their listings to the stock exchange.

The Ha Noi Stock Exchange has also succeeded in expanding the government bond market which raises funds for the State budget. Over the past five years, the exchange has raised VND586 trillion ($27.8 million) worth of bonds through auctions. The value of bond listings on the secondary market reached VND625 trillion ($29.6 million) this year through May, four times higher than in 2009.

The exchange also enabled IPOs (initial public offering) for 83 State enterprises, raising VND6.784 trillion ($321.5 million), including large enterprises like Vietnam Steel Corporation, PV Oil and Bao Viet Holdings.

Speaking at the ceremony, Prime Minister Nguyen Tan Dung said the stock market was an important and effective channel to raise capital, pointing out total capital raised through the stock market made up more than 20 per cent of total investment.

The PM also presented the exchange with the emulative flag of the Government to mark the occasion.

The exchange also unveiled an investor corner at its headquarters in Hanoi which provides investors with documents and knowledge about the stock market and financial investment.

Smart device popularity drains PC, mobile sales

Personal computer sales dropped 32 per cent in the first quarter compared to the previous one and 20 per cent year-on-year to around 396,000, International Data Corporation reported.

The global IT research and marketing company said Tet in January – when people do not buy computers and phones — and the popularity of tablets and smart phones caused the decline.

"IDC predicts that for the whole of this year the PC market won't grow due to economic difficulties and strong attraction and reasonable prices of tablets and smart phones," Phan Thi Hoang Yen, an IDC analyst, said.

Dell retained its leading position followed by ASUS, thanks to its price cuts.

Though Sony stopped sales of PCs, it still accounted for a nearly 8 per cent market share with its competitive mid-range notebook.

Sales of mobile phones also declined by 4.9 per cent in comparison with the previous quarter and 0.7 per cent from the same period last year to around 6.6 million.

Feature phone sales fell by 13.6 per cent from the previous quarter, losing out to low-priced smart phones.

Smart phones accounted for 38.6 per cent of sales, a sharp rise from the 21.8 per cent in the same period last year.

"In the Vietnamese market, low-price smart phones costing under US$150, have taken the biggest market share," Vo Le Tam Thanh, another IDC expert, said.

"Expensive smart phones have been facing challenges."

Only Apple bucked the trend with its strong growth thanks to a tie-up with FPT.

Windows-based phones recovered after a decline at the end of last year.

Sales of Windows smart phones shot up by 61.3 per cent from the previous quarter and 361 per cent year-on-year.

"Viet Nam is the only market in the Asia – Pacific where the number of Nokia smart phones sold is the same as Samsung," Daniel Pang, head of IDC ASEAN's users' equipment study group, said.

Fruit, vegetable exporters search for new markets

Fruit and vegetable traders and exporters in Cuu Long (Mekong) Delta region are seeking new outlets such as other regional countries and the EU to reduce their heavy reliance on China.

Over the last few weeks, prices of several fruits such as durian, mango, jackfruit and dragon fruit in the region's wholesale markets have slumped, pushing farmers to seek new markets for their products.

Traders and exporters have blamed this unsatisfactory performance for sluggish exports to China – which was Viet Nam's largest fruit and vegetable consumer.

Nguyen Thanh Hiep, owners of a fruit trading facility in Tien Giang's Cai Lay District, said that he has shifted exports to Cambodia since last month.

Even though Cambodians did not consume a large volume of fruits, the proximity of the country resulted in low transport costs, he told Tuoi Tre (Youth) newspaper.

Tran Huu Danh, director of Long Viet Co, which specialises in exporting dragon fruit in Tien Giang Province, noted that his company has took the initiative in expanding markets to some Asian countries, such as Thailand, Malaysia, Indonesia and India, where consumers favoured Vietnamese dragon fruit.

China used to consume 90 per cent of his company's products, but the imports have been postponed because of tension in the East Sea, Danh told the newspaper.

Recently, Long Viet had successfully accessed India with their first shipments to the market.

"India is large and not a demanding market. Our company plans to deeply penetrate into the market in the next three to five years. Our target is to reduce the dependence in Chinese market," Danh was quoted as saying in the newspaper.

Professor Nguyen Quoc Vong, an agricultural expert, said that there was a great demand for fresh and quality agricultural products in the world market.

However, in order to take full advantage of these opportunities, Viet Nam has to change traditional cultivation measures and foster technological innovation to provide high-quality products, he pointed out.

Other experts believed that entering the strict markets such as the EU, the United States, Japan, South Korea and New Zealand would not be a hard task for Vietnamese firms if they well-complied with international standards.

VCBF Blue Chip Fund kicks off IPO

The initial public offering of Vietcombank Fund Management's VCBF Blue Chip Fund opened last Thursday and ended on July 25.

VCBF–BCF is the first open-ended equity fund from the joint venture between Vietcombank and Franklin Templeton Investments, a leading global fund management company.

The fund will invest in listed shares with large market capitalisation and high liquidity.

It is benchmarked against the VN100 Index, which comprises the top 100 stocks in terms of market cap on the HCM City Stock Exchange.

VCBF Blue Chip Fund focuses on generating long-term returns from investments and should be attractive for all types of investors with an investment horizon of three to five years or more.

Avinash Satwalekar, CEO of VCBF, said: "We believe the underlying economic fundamentals of Vietnam continue to improve and are positive on its long-term prospects and ability to deliver value."

Investors have to buy units worth a minimum of VND5 million (US$238) and increments of VND1 million ($48).

Deutsche Bank AG's HCM City branch will provide the supervisory, custodial, transfer, and fund administration services for the fund. Vietcombank owns 51 per cent in VCBF.

Ha Noi Budget funds estimated at $2.94b in H1

Ha Noi is estimated to collect VND62.5 trillion ($2.94 billion) of the State budget in the first half of this year, making it to the list of top State budget collection cities and provinces nationwide, reported the Government's portal chinhphu.vn.

The collection rises 5.3 per cent against the same period last year and meets 49.5 per cent of the annual plan.

The city's State budget spending in the period is estimated at VND21.024 trillion ($991.6 million), fulfilling 45.2 per cent of the annual plan.

In the second half of the year, Ha Noi will focus on boosting the State budget collections through improving management, preventing losses and handling tax arrears.

Construction material demand set to increase

The consumption of building materials in the domestic market at present is just 30 to 50 per cent of production, although peak time for construction is approaching.

Chairman of Viet Nam Building Materials Association, Tran Van Huynh said that consumption saw a slight increase compared to the same period in previous years, when Viet Nam's real estate was gloomy because of high inventories.

He said that this year was still a difficult time for building material producers because the domestic real estate market was just warming up.

Increased production costs had also pushed up prices of building materials, he said.

"This leads to a modest consumption of building materials despite the fact that this was considered peak time for construction," he said.

However, he said, the consumption of cement was quite high, almost 80 per cent of production, thanks to the export promotion policy.

Owner of a steel and iron store in Ha Noi's De La Thanh Street, Nguyen Ngoc Anh, said that prices of steel and iron had increased 5-10 per cent due to increased transport and warehouse costs.

"My sale has been five per cent higher than that of the last few months," she said.

Director General of Thach Ban Group Joint Stocks Company – a brick producer, Nguyen The Cuong said that input costs of electricity, fuel and transport had increased, which made it difficult for firms.

Cuong said that the situation was not too bright in the near future.

"It's time for firms to think further about restructuring their production and renovating technologies," he said.

A representative from Viet-Uc Steel Company said that the health of the housing market directly affected the consumption of all building materials, including steel.

Moreover, domestic steel companies faced a major difficulty that related to the import of steel containing boron.

Overseas exporters mixed a little concentration of boron to the steel before exporting to Viet Nam so that they could avoid paying import tax.

The representative said that a little concentration of boron could not change the physical characteristic of steel, but the action was a kind of trade fraud to evade taxes.

The imported products were then sold as rolled construction steel, while authentic construction steel is subject to a 10 per cent import tariff.

Huynh, from Viet Nam Building Material Association, said that reducing production or lay-off was just a temporary solution for domestic producers.

He suggested that enterprises in the sector pay more attention to finding ways to export their products.

Firms try to cut reliance on imports

Increasing the localisation rate would be one measure that could reduce enterprises' reliance on imported raw materials, according to independent market watchdogs.

Analysts said that such reliance, including the high rate of materials sourced from the Chinese market, was affecting the economy.

According to the Viet Nam Garment and Textile Association (VGTA), in 2013 the domestic apparel industry used 7.4 billion square metres of fabric, of which up to six billion square metres were imported.

Of the imported fabrics, between three and four billion square metres were from China.

Apparel enterprises using Chinese materials and accessories accounted for up to 80 per cent of the total. Such reliance was causing difficulties as supplies were not stable.

Tran Viet Anh, vice chairman of the HCM City Rubber and Plastics Association, also said that local plastics enterprises were heavily dependent on the Chinese market.

Ninety per cent of machinery and equipment, and 80 per cent of raw materials and accessories used in the local plastics industry came from China, Anh said.

To reduce this reliance, analysts said that domestic businesses needed immediately to diversify materials sources by importing from various countries instead of only China.

Pham Ngoc Hung, deputy head of the HCM City Enterprises Association, however said that many domestic enterprises still lacked information on overseas markets so it would be difficult to find various import markets.

To solve the problem, Hung called on Vietnamese trade promotion agencies abroad and the Viet Nam Chamber of Commerce and Industry to provide domestic enterprises with more detailed information on import markets.

Over the long term, however, Hung said that domestic producers should develop raw material resources inside Viet Nam.

Domestic raw material sources would enable enterprises to take the initiative in their production plans, thus ensuring sustainable development, Hung said.

He said domestic enterprises should increase investment in production technologies and equipment that can help them manufacture standard materials.

In other words, developing support industries was a key measure to help domestic producers reduce reliance on imported materials, he said.

VGTA vice chairman Le Tien Truong said that the association had recently sent an official letter to textile and garment firms calling for them to seek other potential markets to import raw materials and accessories instead of only China.

The agency suggested the domestic textile and garment firms should import fibers from Thailand, South Korea and Indonesia, and import fabrics from South Korea, Thailand and Malaysia, said Truong.

"At present, many large-scale fiber production enterprises have already prepared plans to expand production activities in order to improve their production capacity, meet the fabrics demand of domestic apparel which is expected to increase when Viet Nam officially takes part in the Trans-Pacific Partnership Agreement," he told Tin Tuc (News) newspaper.

However, to increase the localisation rate, the domestic textile and garment industry needs more support policies from the Government, he said.

Le Van Khoa, director of the HCM City Department of Commerce and Industry, proposed that the municipal People's Committee give credit preferences to firms involved in production of raw materials and accessories for the textile and garment industry.

To develop more local raw material sources, Anh of the HCM City Plastics and Rubber Association said that banks should give more loans to enterprises involved in support industries, and the government should give tax preferences.

Such policies would encourage domestic support industries to increase their production activities to ensure supplies of raw materials and limit imports.

More policies needed to develop high-tech support industry

So far, high-tech industries have recorded the lowest localisation rates, accounting for only 15-20 percent of product prices. Therefore, more policies are needed to encourage investment and development in this segment, the Vietnam Economic News reported.

According to head of the Saigon Hi-Tech Park (SHTP) management board Le Hoai Quoc, the localisation rates in new industrial products account for only 20 percent and the remainder depends on imported materials. Take the electricity – electronics sector which is growing strongly in Ho Chi Minh City for example, although the localisation rates increase but account for only 20-30 percent, which remains too low compared with requirements. Operating electronic enterprises in Vietnam mainly deal with assembling and integrating accessories and parts to make products based on imported basic electronic parts like circuit boards and transistor components.

General Director of Intel Products Vietnam Sherry Boger said Intel has become one of the investors that have the biggest export revenue in the SHTP. However, until 2013, the localisation rate of this group only reached 10 percent, equal to about 11 million USD. Even though the group wants to increase this rate but the capabilities of Vietnamese enterprises to meet Intel’s requirements remain quite modest.

Like Intel Group, Director of the Japan External Trade Organization (JETRO) in Ho Chi Minh City Kazuhiko Osato said in 2013 Japan undertook over 500 projects in Vietnam with total capital of nearly 6 billion USD but unfortunately, the Vietnam’s localisation rate for Japanese enterprises have not reached 32 percent yet, equal to half of the rates of China and Thailand.

Deputy head of SHTP management board Le Bich Loan said the high-tech enterprises in SHTP have been aware of the importance of localisation and given more priorities to seeking domestic partners.

However, material sources for localisation are mainly to make simple products like packaging and plastic trays. Vietnamese enterprises have not been capable to produce high tech demanding electronic spare parts like transistor components or electronic mechanical parts.

Vietnamese enterprises are just at the stage of doing research or piloting production on small scales like wafer FRED of the SHTP’s R&D Centre or pressure sensors jointly produced by SHTP and Vietnam National University Integrated Circuit Design Research and Education Centre (ICDREC).

According to Director of the Ho Chi Minh City Investment and Trade Promotion Centre (ITPC) Pho Nam Phuong, apart from current preferential treatments for enterprises working in the support industry, the city has asked relevant departments and sectors, including the SHTP management board to study and offer better preferential packages regarding tax, infrastructure and training workforce to encourage domestic enterprises join the support industry.

In terms of infrastructure, preferential policies on land lease need to be adopted. In pieces of land where no infrastructure has been built, the land lease rentals should be calculated like those levels in the High-tech Park in District 9: from 12,300-18,500 VND/sq.m a year. As for pieces of land with infrastructure: from 17,200-26,000 VND/sq.m a year and workshop rentals from 4-5 USD/sq.m a year depending on different locations.

UNDP report promotes energy sector reform

The United Nations Development Programme (UNDP) announced a report titled “green growth and fossil fuel fiscal policies in Vietnam” at a meeting in Hanoi on June 16.

Presenting the main content of the report to participants, UNDP’s Policy Advisor in Economics Michaela Prokop acknowledged Vietnam’s commitments to promoting green growth, including the restructuring of the energy sector.

She underlined the significance of reforming fossil fuel fiscal policies, saying that it will help enhance energy productivity and supply resources and ensure national energy security.

Reform will also contribute to speeding up GDP growth, reducing fiscal burden and protecting the environment, Prokop added.

The report stressed that Vietnam’s recent efforts in its restructuring of the energy sector are expected to help the country implement a more sustainable growth model in the future.

Measures to protect low-income people and enterprises, who are usually affected by the price increase of fuel, were also set forth in the report.

The report, built on the studies of the Central Institute for Economic Management, the Vietnam Academy of Social Sciences, the Energy Institute, the Institute of Financial Strategy and Policy, the Gbobal Subsidies Initiative and the International Institute for Sustainable Development, is expected to importantly contribute to setting up a roadmap for further reform.

HCM City seeks tax incentives for kindergarten investors

The HCMC People’s Committee has suggested central-level agencies consider exemptions and reductions of corporate and personal income taxes for the investors of private kindergarten projects to help develop pre-schools in the city.

Speaking at the 13th meeting of the HCMC People’s Council opened on Saturday, HCMC vice chairman Hua Ngoc Thuan also called for agencies of higher levels to apply land rent breaks for private kindergartens in districts 2, 9, 8, 12, Binh Tan, Thu Duc and Tan Phu District and a 50% reduction for the kindergartens in Phu My Hung Urban Area in District 7 and other districts.

Huynh Cong Hung, head of the Social and Culture Department under the council, said that 172,274 children were studying at private pre-schools in the city and 10,414 of them were taught at unlicensed kindergartens.

Hung said that the department had agreed with the HCMC People’s Committee on preferential treatments for investors of the projects to encourage the development of private pre-schools here in the city.

He said the city would give priorities to kindergarten developments in industrial zones, export processing zones, and the 11 wards which do not have public pre-schools.

The Social and Culture Department also supported more kindergarten investors to access the loans whose interest rates are covered by the State budget with maturity from seven to 15 years including two years of grace for all approved kindergarten projects depending on their scales.

The HCMC People’s Committee said the city would spend some VND7.6 trillion (US$358 million) on education and training this year, accounting for 25.74% of the total spending and nearly VND230 billion higher than initial estimation.

Maersk Line: More cargo containers shipped to U.S., Europe

Maersk Line Vietnam in its latest trade report said container volumes to and from Vietnam have grown in the first months of this year compared to last year, especially the shipments bound for the United States and Europe because of rising demand from these markets for made-in-Vietnam goods.

In the report released last week, the company said it saw higher container volume growth between Vietnam and Europe compared to the United States in the first quarter of this year. “Exports to Europe grew by 19% and imports rose by 34% compared to the previous year. On the other hand, exports to the U.S. increased by 9%,” the report said.

Nguyen Thi Ngoc Bich, general director of Maersk Line Vietnam and Cambodia Cluster, said the company announced the growth rates based on different sources, including those from the U.S. and Europe.

“The market growth that we experienced in the first quarter of the year mirrors the trends in Vietnam’s overall trade balance. The domestic economy may continue to be hampered by the slow pace of structural reforms of State-owned enterprises and the banking sector, but its heart - manufacturing and production - still remains robust,” Bich said.  

MCC Transport, the sister company of Maersk Line which handles intra-Asia trade, said in the report that other Asian countries such as China, Japan and Korea continued to be Vietnam’s main trade partners.

Albert Van Rensburg, country manager of MCC Transport, said the company was excited by the continued strong growth of the intra-Asia market, both to and from Vietnam. “Despite continued downwards pressure on freight rates, we have been able to maintain healthy year-on-year growth by focusing on profitable trade lanes, instead of just volume growth,” he said.

Maersk Line pointed out the growth drivers for Vietnam this year as improved macro-economic stability with inflation on target for 7%, a steady exchange rate, and a strong export sector posting a surplus. Moreover, the country’s gross domestic product (GDP) growth is forecast to be higher this year, at 5.5%.

Figures of the General Statistics Office showed Vietnam’s goods export revenue in the first five months of this year expanded 15.4% year-on-year to US$58.5 billion while imports stood at US$56.8 billion, rising by 9.6%.

The U.S. was Vietnam’s biggest export market in the January-May period with shipments up 22.6% to US$10.8 billion, followed by the European Union (EU) with 14% and US$10.7 billion and ASEAN down 0.9% to US$7.5 billion.  

Vietnam’s major export markets in the first five months of this year included China with shipments up 23.7% year-on-year to US$6.1 billion, Japan with a rise of 12.6% to US$5.9 billion and South Korea with 34.6% to US$3.5 billion.

Maersk Line Vietnam said with Vietnam’s trade balance on track, the country is looking for new markets and opportunities for its goods through a number of bilateral and multilateral free trade agreements (FTA), including the Trans-Pacific Partnership, the pact with the EU and the Customs Union of Russia, Kazakhstan and Belarus free trade zone.

“In negotiating these agreements, Vietnam is hoping to leverage itself as an attractive sourcing destination with advantages in geography, increasing investment in infrastructure, production capabilities, and mainly with its low labor and production costs,” the report said.

Bich said Vietnam has been benefiting from a growing influx of young workers which has provided the country with a competitive advantage in labor cost but the country needs to make changes.

“It is critical to increase our labor productivity to convince more investors to set up their factories here, and one of the ways we can have significant productivity gains is through technological transfer,” Bich said.

Vietnam’s competitiveness within the region is being eroded by logistics cost which is up to 25% of the country’s GDP and higher than most of its competitors in the region. This is partly attributable to vague regulations which result in additional operational costs and lower productivity for enterprises.

The company said that e-commerce is one of the solutions to help enterprises improve productivity. Automating systems and paperless transactions are the key to increasing productivity, accuracy, transparency, visibility of date and reducing costs.

“E-solutions mean less time, less mistakes and less, if not, zero additional cost being incurred due to documentation errors,” Bich said. “As Vietnam seeks to compete in the world economy and trade in higher value added goods under just-in-time productions, transaction speed and reliability of service will be key.”

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