BUSINESS IN BRIEF 29/4

FMCG consumption edges up

Consumption of fast-moving consumer goods (FMCG) in Hanoi, Danang, HCMC and Can Tho and rural areas showed signs of recovering in the first quarter of this year, according to market research firm Kantar Worldpanel.

The latest report of Kantar Worldpanel shows that in the 12 weeks to March 22, FMCG consumption in the four big cities and rural areas picked up, but this growth was not sustainable.

In urban areas, January-March FMCG consumption increased 1.2% year-on-year while growth in rural areas reached an impressive 8%.

FMCG sales at supermarkets and hypermarkets in the three months climbed 7% compared to the same period last year. Meanwhile, groceries maintained positive growth in FMCG sales but traditional wet markets saw flat business.

Family care products and drinks recorded the highest growth rate in cities while dairy products took the lead in sales in rural areas with a rise of 18% in value and 13% in volume.

In urban areas, liquid detergent sales volume attained an impressive growth rate of 22% as an additional 41,000 families switched to using this detergent, sending the average household consumption rising 10%.

In rural Vietnam, soymilk sales grew 27%, backed by an increase of 9% in the average household consumption.

FMCG sales growth during the Lunar New Year holiday, or Tet, early this year was lower than that in the same period last year.

More customers went shopping at supermarkets during the holiday to benefit from promotion programs and incentives for membership cardholders. This led the supermarkets’ market share to expand, accounting for 17% of FMCG sales revenues during Tet.

Always vulnerable

Media reports about high stockpiles and sharp price falls of various farm products in recent days have revealed the bitter truth about the vulnerability farmers across the country are still facing.

Print and online media said huge backlogs of pineapples, cucumber, mangoes, and watermelons have sent their prices plummeting while the price of fruit specialty thanh long (dragon fruit) in Binh Thuan Province has plunged to VND10,000-11,000 per kilo from VND15,000-16,000 per kilo.

Agriculture newspaper Nong thon Ngay nay cited Lam Dong Province’s Department of Agriculture and Rural Development as saying that onion has sunk to VND1,000-2,000 a kilo but worse still, it is hard for farmers to find buyers.

As usual, bumper crops and sluggish exports are identified as the main reasons behind the sales slump and price falls of farm produce. Experts have also pointed out Vietnam’s heavy reliance on China as a key export market as the root cause of the situation. Long queues of trucks carrying watermelons and dragon fruit are often seen at the northern border gates when these products enter peak harvest seasons.

In recent years, exporters of rice, sliced cassava and natural rubber have also been on the price knife-edge several times a year as a result of China’s on-and-off import policy. Meanwhile, the northern neighbor has seen its exports to Vietnam surging, which is evident in its trade surplus of over US$7.9 billion with Vietnam in the first quarter of this year.

The Ministry of Industry and Trade and other State agencies have been striving to diversify markets for Vietnamese farm produce, and as a result more fruits have gone to the United States, Europe, South Korea and New Zealand. However, the effort has not produced as good results as expected since exports to these markets have remained insignificant due to high standards for quality and food safety.     

Meanwhile, farmers are always in a disadvantageous position as exporters will find ways to suppress farm prices when outbound sales turn tough.

Few cooperatives consume farm produce

A small number of agricultural cooperatives in the Mekong Delta region have been able to buy produce from farmers, heard a seminar on a new cooperative model in Can Tho City last week.

The Mekong Delta had had 1,928 active farming cooperatives as of the end of last year but a mere 8% of them could purchase products of their member farmers and only 18% could supply agricultural materials for them.

Nguyen Thien Nhan, president of the Central Vietnam Fatherland Front Committee, said limited supply of farming inputs like fertilizer and plant protection drugs and low consumption have made it hard for farmers to earn higher incomes.

According to Nhan, individual farmers are unable to negotiate to buy agricultural materials at competitive prices and find it hard to sell their products to modern sales channels such as supermarkets.

“A single household cannot do this but a cooperative can,” Nhan said.

Agricultural cooperatives in other countries have done a much better job than their counterparts in Vietnam.

For instance, cooperatives in Japan consume up to 90% of rice, and 50% of vegetables, fresh milk and beef for farmers. They supply 95.4% of fertilizers, 70% of agrochemicals, 81.9% of packaging and 35.5% of animal feed for farmers.

Huynh Van Thon, chairman of An Giang Plant Protection Company (AGPPS), said cooperatives need to join value chains with support of enterprises to gain easier access to agricultural materials at reasonable prices and bank loans.

Meanwhile, Nhan said farmers should be supported to send their products to supermarkets and other modern distribution channels.

Therefore, the goal of establishing a new cooperative model is to restructure ineffective cooperatives and have five new cooperatives in every locality in the region from now until 2016. The region is expected to have 30 new well-performing cooperatives in the 2017-2020 period.

Enterprises can issue C/O this year

The Ministry of Industry and Trade plans to issue a circular this June showing enterprises how to issue certificates of origin (C/O) for their own goods exported to Laos, Indonesia and the Philippines.

At a seminar in HCMC last week on C/O issuance in accordance with the free trade agreements (FTA) in which Vietnam is a signatory, Le Thi Hong Ngoc, deputy head of the Customs Control and Supervision Division at the General Department of Customs said ASEAN countries have applied this C/O issuing mechanism to two pilot projects.

The first project is applicable to all commercial enterprises, with the participation of Brunei, Malaysia, Singapore and Thailand since 2010 and 2011. Laos, Indonesia and the Philippines have partaken in the second project applicable to production firms since 2012 and 2013.

Vietnam did not agree to join the mechanism for the second project until last September. The country is now in the final stages of completing procedures and issuing guiding circulars to officially adopt the mechanism.

Vuong Duc Anh from the Ministry of Industry and Trade’s Export-Import Department said the guiding circular is being drafted and will be issued in June with effect 45 days after that. The pilot projects will end when ASEAN countries agree on a common mechanism for exporters to issue their own C/Os, possibly next year.

Ngoc said when the pilot project is officially carried out in Vietnam, producers wanting to join will have to register with the Ministry of Industry and Trade and meet requirements in terms of production scale, stable export performance and understanding of goods origin.

Participating firms will be provided with a code and required to certify their goods origins in line with the origin requirements for FTAs to enjoy incentives. Handwritten autographs are also a must to help management agencies detect fake ones, according to Ngoc.

After signing contracts and providing goods origins, enterprises will have to submit them to importers to present to the authorities of importing countries. Production and export enterprises must be responsible for information about their goods origin.

Ngoc said exporters’ issuance of C/Os helps save time and cost but they will be fined if they provide inaccurate origin or do not fully understand the rules of origin.

Many ASEAN enterprises have taken part in the two pilot projects, including 133 in Malaysia, 114 in Thailand, 54 in Singapore, ten in Brunei, ten in Indonesia, three in the Philippines and two in Laos.

Among the FTAs Vietnam is negotiating, the Trans-Pacific Partnership (TPP), the Vietnam-EU FTA and the Vietnam-EFTA FTA allow exporters to issue C/O while the FTA between Vietnam and the Eurasian Economic Union of Russian, Belarus and Kazakhstan does not.

Such C/O issuing mechanism will be discussed in the Vietnam-South Korea FTA after this agreement takes effect.

NA deputies urge tighter budget management

National Assembly (NA) deputy Tran Du Lich of HCMC said the NA should strengthen budget management and ensure budget transparency.

At a discussion of the draft law on State budget last Friday, Lich said the NA should set aside 15-20% of the time of the two annual NA sessions lasting 60-70 days to discuss budget management. “The budgeting needs to be transparent, so it should be put up for discussion at the NA,” he said.

“At the previous meeting of the NA, voters asked why Hanoi City could retain 41% of its annual budget revenues while the permissible percentage in HCMC is only 23%. I did not know how to explain it. If the budgeting had been transparent, no one would have made such a comparison.”

NA deputy Bui Duc Thu also voiced his concern over lax budget management, saying violations concerning budget collections and expenditures are rampant. He proposed replacing the NA’s resolution on budget allocations with a law on annual budgeting to ensure budget discipline.

Speaking at the meeting, deputy Ngo Van Minh underscored the importance of budget transparency. The NA meets twice a year, so lawmakers tend to approve of the budgeting plans going before the NA.

Eximbank wins Best Trade Finance Bank award

Vietnam Export Import Commercial Joint Stock Bank (Eximbank) received the Best Trade Finance Bank in Vietnam award from The Asian Banker magazine in Hong Kong on April 14, marking the second time The Asian Banker has granted awards to Eximbank.

In May 2013, The Asian Banker granted the Best Managed Bank in Vietnam 2013 award and The Asian Banker Leadership Achievement Awards 2013 to Eximbank.

The Asian Banker is a prestigious publication covering the financial-banking sector in Asia-Pacific and the Middle East providing reliable market information and analyses from leading financial experts.

To win the award of Best Trade Finance Bank, Eximbank has to meet six rigorous evaluation criteria of the organizer in terms of franchise value, financial results, infrastructure capacity, distribution, products and services, and professional skills. Eximbank was picked for the award by experts, advisers and scholars in the banking sector.

Regarding business results in quarter one, Eximbank earned VND545 billion in pre-tax profit, around 80% of it contributed by credit activities.

The bank currently has 207 transaction offices nationwide and set up relations with 869 banks and bank branches in 76 countries worldwide. The widespread network is the bank’s advantage in trade finance on the banking market.

Firms urged to enhance trade defence plans

Vietnamese firms have been urged to enhance their knowledge of trade defence and apply trade defence instruments to protect domestic production.

This is increasingly important amidst the deeper economic integration that will follow after many free trade agreements (FTAs) are signed.

The Ha Noi Department of Industry and Trade, along with the Viet Nam Competition Authority and the Viet Nam Chamber of Commerce and Industry on Tuesday held a training class for firms about the impact of FTAs on trade defence instruments.

Experts pointed out that technical barriers were non-tariff measures that had been erected to protect domestic production. However, the technical barriers could not impede trade and must be compliant with established commitments.

When the impending FTAs took effect, foreign products would flow strongly into Viet Nam and technical barriers might be an effective measure to deal with this in the short term, experts said.

The use of trade defence instruments, including anti-dumping, anti-subsidy and safeguards, had grown popular in ASEAN countries during the last four years.

Experts said firms could file lawsuits if they found signs of dumping or subsidies, which could damage the imported countries' production, adding that it was important that firms collaborate with each other.

During international integration, experts said lawsuits related to trade defence against Viet Nam's export products were growing, but domestic firms had not paid enough attention to trade defence instruments to protect their rights.

Statistics of the Viet Nam Competition Authority showed that Viet Nam had faced about 80 lawsuits under the World Trade Organisation's trade defence provisions between 1994 and October last year.

Sacom to merge with Phuong Nam Bank

Sacombank plans to merge with Phuong Nam Bank in 2015.

Sacombank Chairman Kieu Huu Dung revealed this at a shareholders meeting on Tuesday, adding that the merger would help the bank boost competitiveness, enhance its operational scale, as well as optimise capital sources and market potential.

He said this was aimed at boosting the bank's position among the leading multi-function retail banks in the region, while supporting the national scheme to restructure the banking system in line with international standards.

Dung said details about the merger were yet to be finalised, and he would inform shareholders once the official plans were available.

Tram Be, the standing Vice Chairman of Sacombank and a senior advisor of Phuong Nam Bank (Southern Bank), reportedly told a Phuong Nam Bank shareholders meeting on April 20 that 90 per cent of the merger process had been completed and the deal was likely to conclude in the second quarter of this year.

Be said the two banks expected to implement the merger at the rate of 0.75:1, which means every share of Phuong Nam Bank will be converted into 0.75 share of Sacombank. They were currently awaiting the approval of State Bank of Viet Nam (SBV) Governor Nguyen Van Binh.

Although, the majority of Sacombank shareholders had voted for the merger last year, and both banks were spontaneous about the deal, some shareholders had expressed concern that a merger with a weaker bank might be a drawback for Sacombank in the future.

Phuong Nam Bank was among the fragile lenders, which had been directed by the SBV to restructure, but it found that it was impossible to do the restructuring on its own.

On April 20, many shareholders also expressed the worry of Sacombank share prices sliding during the next two years after the merger.

At present, shares of Sacombank trade at around VND17,000 (80 US cents) per share on the HCM City Stock Exchange, while shares of Phuong Nam Bank trade at some VND5,000 (24 US cents) per share on the unlisted public companies market.

In addition, the annual bad debt ratio of Phuong Nam Bank has stayed over 5 per cent for the last few years, reflecting poor development.

Be said the merger wouldn't show benefits in the short term, but it would bring about advantages in the long run. Sacombank was among the best joint stock banks in the domestic market, and that was why the deal would be certainly good for Phuong Nam Bank shareholders.

He added that the Phuong Nam Bank had 4,000 trained employees, a staff Sacombank wouldn't be able to develop in a short period of time, even if it invested VND5 trillion to VND10 trillion ($238.10 million to $476.20 million) into human resource development.

Dung said Sacombank was on a momentum to expand its network and market share, and it was prepared to "bear short-term disadvantages to get to a new high."

Reports before shareholders stated that Sacombank's charter capital was expected to increase by VND2.43 trillion to VND14.85 trillion (by $115.71 million to $707.14 million), and total assets to grow 14 per cent year-on-year to VND214.55 trillion ($10.121 billion) in 2015.

Shareholders also adopted the bank's plans to establish a financial company with an equity of VND500 billion ($23.81 million), a life insurance joint venture with a contributed capital of VND500 billion, and a non-life insurance firm with an investment capital of VND300 billion ($14.28 million).

Work starts on $7m garment plant

The Viet Nam National Textile and Garment Group (Vinatex) yesterday began construction of its new garment production plant in the Cuu Long (Mekong) Delta province of Bac Lieu.

Covering 4.2ha in the provincial Tra Kha Industrial Zone, the plant, valued at more than VND150 billion (US$6.94 million), is slated for completion in October, creating 2,000 local jobs.

Vietnamese investors learn about S Korea

Vietnamese investors gained insight into Pyeongtaek port, an entrepot linked with other international seaports, in South Korea during a workshop in the capital on Tuesday.

Lim Song-hack, Director General of Pyeongtaek Regional Maritime Affairs and Fisheries Office, said the newly operational Pyeongtaek port handled a record 100 tonnes of cargo last year and has the potential to become one of the most dynamic and developed seaports in Korea.

Since Viet Nam and South Korea have concluded negotiations on a free trade agreement, the event enabled Vietnamese firms to obtain more information on business in the maritime transport and logistics sector. Vice President of the Viet Nam Chamber of Commerce and Industry Doan Duy Khuong said there remained significant room for mutual growth in diverse fields, but especially in transport and logistics.

Domestic seafood firms showcase products

Nearly 50 members of the Viet Nam Association of Seafood Exporters and Producers (VASEP), along with several private companies, have opportunity to display their products at the 23rd Seafood Expo Global (SEG) in Brussels, Belgium.

According to Truong Dinh Hoe, general secretary of VASEP, Vietnamese companies have introduced a wide range of products to the largest seafood trade event in the European Union, with shrimp, tra fish and tuna among the products on display.

SEG, that ends today, witnessed the participation of 2,000 enterprises from 100 countries.

Bright future for farms, beverages

Viet Nam's tele-communications industry will continue to face fierce competition while bright prospects of growth are forecast in the beverage and agriculture industries for the next three years.

The news comes from the Viet Nam 2015 Growth Report, announced yesterday at the FAST500 event in Ha Noi. The event also released this year's list of the top 500 fastest growing companies in Viet Nam.

The Ministry of Information and Communications, the Viet Nam Report JSC and the online newspaper VietNamNet co-organised the fifth occasion of the FAST500 business event.

FAST500 recognises both the contributions of enterprises to the economy as well as reports and forecasts business development trends in the country.

Vu Dang Vinh, CEO of the Viet Nam Report JSC says FAST500 enterprises are the "rising stars" of the economy, one which is still recovering from several years of recession.

Vinh believes positive economic growth will return in the coming period of 2015-2018.

The telecommunications industry saw new providers entering the market as the country continued its integration into the WTO, therefore keeping up with new trends and fighting fierce competition on local and international levels will be necessary to stay afloat.

The beverage industry, in contrast, continues to grow, easily attracting more and more investment. The report estimates that beer and other beverage sales will increase 7.5 per cent and revenues will increase by 10.5 per cent by 2016.

The report's analysis declared that consumers are starting to demand beverages with higher value and beer will continue to dominate the market, both in terms of sales and revenue. By 2016 the beer and liquor sector is likely to increase by 32.8 per cent.

Although Viet Nam is among the top 10 countries in the world in beer consumption numbers, the forecast argues that with increases in income, consumers will change their alcohol habits, switching from beer to higher value alcoholic beverages.

The report also draws a promising picture for the agricultural sector, which attracted considerable foreign direct investment, especially as the Trans-Pacific Partnership (TPP) moves forward.

The report argues that development of the agricultural sector will do best with an export-oriented strategy but it will also face several challenge of low technology, poor infrastructure, lack of skilled workers, and severe environmental issues like pollution, climate change, rising sea levels, deforestation and soil erosion.

Besides representatives from the honoured enterprises, the event also attracted foreign trade promotion offices like the Japan External Trade Organisation, Korea Trade-Investment Promotion Agency and Malaysia External Trade Development.

More than 56 per cent of the FAST500 enterprises last year are back on the list this year.

More than 24 per cent of FAST500 enterprises are listed in the local stock market, up from the 22.9 per cent last year.

A majority of the listed CEOs in the construction and real estate industry are under 40.

Cement sector looks for sustainable export

Vietnam exported more than 21 million tonnes of cement in 2014, but this year is forecast to be full of difficulties as demand stalls at traditional markets while many regional cement producing countries plan to raise output remarkably.

The Import-Export Department under the Ministry of Industry and Trade reported at a workshop on cement export on April 23 that the country has 106 cement plants with total design capacity of 82 million tonnes a year, while domestic demand stands at around only 50 million tonnes.

Representatives from the Vietnam Cement Industry Corporation (VICEM) said the sector hopes to boost export to reduce the amount of cement stockpile.

However, the corporation is worried about strong increases in cement production in regional markets such as Japan, the Republic of Korea, China and India, while demands for Vietnam’s clinker show no sign of rising in traditional buyers like Bangladesh, Indonesia and the Philippines.

Deputy Director of The Vissai Ninh Binh group Nguyen The Dat said it would be difficult to export the same amount of cement as in 2014 from now on, as Vietnam cannot compete against other cement exporters, including the RoK, China, Japan and Thailand in terms of prices, transport cost and logistics service.

He added that unhealthy competition among domestic exporters also causes damages to the sector as a whole.

Dat suggested the ministry set up a special team to connect cement businesses and support the sector in terms of market information and forecast.

Deputy Minister of Industry and Trade Tran Tuan Anh stressed that domestic businesses should collaborate to improve their competitive capacity.

He said the ministry will work with the Construction Ministry to complete a development master plan for the cement sector and coordinate with businesses to balance supply and demand. The ministry will also collaborate with related agencies and organisations to address difficulties facing cement exporters.

Le Van Toi, Director of the Construction Materials Department under the Construction Ministry, called for investment in building special ports for cement and clinker products.

Tougher actions needed to fight smuggling

Deputy Prime Minister Nguyen Xuan Phuc on April 23 asked relevant agencies to translate determination into tougher actions in fighting smuggling and trade frauds.

He assigned the Ministry of Public Security to promptly set up an anti-smuggling department to aid the work, which is also intended to deal with the cover of smuggling, trade fraud, and counterfeit production by the insiders.

Several serious cases of smuggling, trade fraud, and counterfeit production were left uncovered in recent time, he noted, asking authorised forces in border and inland areas to hold responsible.

Phuc, who is head of the National Steering Committee on Prevention and Control of Smuggling, Trade Fraud and Counterfeit Goods, pointed out that unaddressed smuggling, trade fraud and fake goods cause bad impacts on the economy as well as socio-economic development management.

He stressed the need for the involvement of the entire political system, ministries, sectors and localities in prevention work.

He also asked the steering committee to intensify communications to raise public awareness of smuggling, trade fraud and fake goods prevention and control.

In the first quarter of 2015, authorised forces detected nearly 50,000 violated cases, retrieving around 3 trillion VND in tax.

They also started legal proceeds against over 430 violators involved in 351 cases.

HCM City, Northern Australia broaden agro-aquatic partnership

An Australian delegation headed by Deputy Governor Willem Westra van Holthe is in Ho Chi Minh City to seek ways to promote agro-aquatic collaboration with the southern city.

Meeting the guest on April 23, Deputy Chairman of the municipal People’s Committee Tat Thanh Cang said various Australian official development assistance programmes have yielded significant achievements, particularly infrastructure and bridges in the Mekong Delta over the past 10 years.

Ho Chi Minh City and the Australian government have also developed a healthy relationship in trading food and agriculture, he added.

In return, the Deputy Governor, who is also Minister for the northern territory’s Infrastructure and Regional Development, praised the Vietnam-Australia friendship over the past 40 years, which has expanded through numerous collaborative programmes.

Westra van Holthe reiterated that the Australian government and its Northern territory appreciate their relationship with Vietnamese partners and will broaden collaboration in agro-aquatics to bolster the bilateral relationship.

HCM City: Economy maintains momentum

Ho Chi Minh City recorded strong economic growth in the first four months of 2015, according to a report from the municipal Department of Planning and Investment released on April 23.

Retail and service revenue totalled more than 221.4 trillion VND (10.3 billion USD) within the period, an annual rise of 10.7 percent.

However, four-month export turnover amounted to 9.29 billion USD, a 3.4 percent reduction from 2014.

The fall in exports was fuelled by decreased volume of crude oil, explained Head of the department Thai Van Re. Excluding crude oil, the total export revenue marked 8.03 billion USD, increasing 8.3 percent year-on-year thanks to the annual 12.2-percent growth in industrial products, he added.

As of April 20, there were 158 licences granted to new foreign-funded projects worth 615.3 million USD and additional investments poured into 52 existing projects.

During the period, 8,823 domestic enterprises were founded with registered capital amounting to approximately 47 trillion VND (2.2 billion USD).

The city collected some 98.2 trillion VND (4.6 billion USD) for the State budget, up 9.36 percent annually, said Director of the municipal Finance Department, Dao Thi Lan Huong.

To maintain the current economic momentum, the southern hub’s authorities will press ahead on a number of measures including enhancing traditional markets, seeking new potential markets and launching a range of trade promotion campaigns to boost local business performance.

HCM City forges stronger future growth

Ho Chi Minh City plans to roll out a number of measures to ensure economic progress is in line with sustainable development, striving for an annual GDP growth of up to 10 percent from 2016-2025, stated a municipal senior leader.

Speaking to the Vietnam News Agency on the city’s key future orientations, Chairman of the municipal People’s Committee Le Hoang Quan said the city will prioritise investment in major socio-economic infrastructure programmes while focusing on improving the living conditions of locals and speeding up administrative reform.

Ho Chi Minh City will continue enhancing its competitiveness and international integration and improving human resources quality, he said.

Specifically, the city will continue intensifying high-quality and effective service groups as well as four industries with high science-technology and added value, including mechanics, electronics-information technology, pharmaceutical chemistry-rubber, and food processing, while boosting the support industry and sustainable agricultural development, he said.

Meanwhile, the city will improve the investment environment, focusing on attracting projects using high and green technology.

The municipal leader also stressed the need for the city to mobilise resources for environmental protection as well as coping with climate change and sea level rise while speeding up building rural areas and paying greater attention to developing education-training, science-technology, healthcare, culture and sports.

Reviewing the city’s 40 years of development, Quan said Ho Chi Minh City has made great achievements and important contributions to the country’s industrialisation, modernisation and international integration.

After its liberation in 1975, the city overcame difficulties to secure political stability, surmount the war aftermath, boost economic growth and become a driving force of the country’s economy, he said.

Accounting for only 0.63 percent of the country’s area and 8.8 percent of population, over the past 40 years, Ho Chi Minh City has become a major economic hub of the country with GDP growing to average 10-12 percent annually in recent years from only 2.7 percent from 1976-1985, 1.5 times higher than the national average.

Particularly, the city maintained a growth of 9.6 percent per year from 2011-2015, 1.66 times higher than the country’s average despite the global financial crisis and economic recession.

Economic sectors have been continuously encouraged to grow, stated the city’s leader. Currently, the city has 238,000 enterprises and over 250,000 business households. The city is hosting more than 5,330 foreign investment projects totalling 36.6 billion USD, accounting for a third of the country’s total foreign direct investment projects and one fourth of the total investment.

The city currently contributes 21 percent of the country’s GDP and 30 percent of the State budget.

Ho Chi Minh City has seen progress in urban planning, management and development with several new and modern urban areas.

Social security has been ensured and local income per capita reached 5,131 USD, expected to rise to 5,538 USD by the end of this year. This is a sharp increase compared to that of 2000 at 1,011 USD and 1976 at 360 USD per year.

According to Quan, the city has successfully provided universal secondary education. The city now has 1,500 schools with 1.3 million students and 65,000 teachers.

Municipal healthcare has also been expanded. By the end of 2014, the city had 105 hospitals with a total capacity of 34,000 beds, providing healthcare services to 29 million people with 14.5 doctors for every 10,000 people.

However, Quan also pointed to a number of difficulties, challenges and shortcomings facing the city, including slow transformation of economic structure, modest growth quality and low competitiveness.

It is also encountering a number of common problems experienced by rapidly developed and highly populated cities such as inadequate urban planning and management, overloaded infrastructure, shortages in high-quality human resources, traffic congestion, and environmental pollution, said the city leader.

Vietnam to inspect major firms after Metro tax case

Many major companies operating in Vietnam will soon come under tax inspections on suspicions of transfer pricing, an official from the inspectorate of the General Department of Taxation said on April 22.

Nguyen Dau, deputy head of the inspectorate, spoke to Tuoi Tre(Youth) newspaper after his unit discovered wrongdoings worth VND507 billion (US$23.63 million) at Metro Cash & Carry Vietnam.

The cash-and-carry wholesaler had been inspected for two months to clarify its transfer pricing signs, and Dau said other firms with the same suspicions will be subject to the same inspection.

“To be honest, we are collecting documents, even from overseas sources, in preparation for the next inspections,” he said.

“Tax agencies will take action immediately after having enough evidence.”

Dau said thorough preparations are essential before the taxman starts inspecting any firms, especially major corporations.

“Once we start any inspection, we will get to the bottom of the issue,” he said.

Metro Cash & Carry Vietnam, a subsidiary of Germany’s Metro Cash & Carry, has been asked to pay VND62.64 billion (US$2.92 million) in tax arrears, the tax inspector said, adding that many dishonest activities have also been found at this firm.

Metro Vietnam’s revenue in 2011 and 2012 was around VND13 trillion (US$605.83 million), but the figure dropped to VND10 trillion (US$466.03 million) in 2013, Dau said.

The wholesaler said it had to spend more than VND1 trillion (US$46.6 million) dumping nearly-expired products as per German food safety standards and VND30 billion (US$1.4 million) on security work.

“But they failed to show proof for this spending and thus had to accept the inspection results,” Dau said.

Dau said Metro Vietnam’s dishonest activities are linked to transfer pricing.

Transfer pricing is the value at which companies trade products, services or assets between units in different countries, a regular part of doing business for a multinational, but a practice which tax authorities often feel can be exploited, according to Reuters.

Metro Vietnam has been found transferring VND699 billion (US$32.58 million) to its parent company in Germany in the form of “salaries for German experts,” according to the official.

The Vietnamese company signed a contract with its German parent firm so that the latter would supply experts to it.

“According to the contract, Metro Vietnam paid a total of VND699 billion worth of wages and bonuses for the experts, but the problem is instead of paying directly to these specialists, the company transferred the money to Metro in Germany,” Dau elaborated.

So the question is whether the German firm has paid the experts the same amount of money it had received from Metro Vietnam, which eventually “failed to present any evidence to prove this,” Dau added.

Another sign of Metro Vietnam’s transfer pricing is that it paid the parent company in Germany VND731 billion (US$34.07 million) in “franchise transfer fees,” according to the official.

This is deemed abnormal as the Vietnamese company is 100% owned by its parent firm.

“We have studied German regulations and found that there are no such cases in which a parent firm transfers its franchise to its subsidiaries,” Dau said.

The official said the tax inspectorate is now “experienced” in scrutinizing firms that show signs of transfer pricing.

“We first have to carefully study the business models of the firms and where their owners are registered,” he said.

“A firm registered in such ‘tax havens’ as the Netherlands should be particularly noticed.”

In fact, Metro Vietnam has its parent registered in Germany but the company that really invests in it is the Dutch unit of Metro, according to Dau.

VN railways sector opens up

A logistics centre and container depot at Ha Noi's Yen Vien station, planned to be built in the second quarter, is set to become the first private investment in the railways in Viet Nam.

Logistics ILT Railway Joint Stock Company will spend VND85 billion (US$4 million) to build the Yen Vien Railway Logistics Centre and a 22,000sq.m domestic container warehouse.

The investor will collect fees for 15 – 20 years from lessees and other customers, the Viet Nam Railway Corporation (VRC) will get higher land rents, the northern division's container transport capacity will increase, and pressure on road transportation will ease.

It is one of four projects the VRC has submitted to the Ministry of Transport in which it is seeking private investment. The three others are stores in Song Than station in the southern province of Binh Duong and Dong Dang and Xuan Giao A stations in the northern province of Lang Son.

"In the past the railways wanted to invest itself, but now we would like to invite private investors, even to operate trains," VRC chairman Tran Ngoc Thanh was quoted as saying by Dau Tu (Vietnam Investment Review) newspaper.

"VRC will provide infrastructure along with necessary services."

More than 10 local investors had evinced interest in railway projects, he revealed.

At a meeting this week Minister of Transport Dinh La Thang said Vingroup – a property giant — had offered to buy Ha Noi, Sai Gon, and Da Nang railway stations and replace them with modern stations elsewhere in the cities to ease pressure on their downtown areas.

"The Da Nang People's Committee has a master plan and decided to move the station out of the city.

"But in the case of HCM City and Ha Noi, more research needs to be done. However, development needs should be considered."

Also at the meeting, the Sun Group offered to buy key railway segments like Ha Noi – Da Nang, Sai Gon – Da Nang, and Ha Noi – Lao Cai.

The group has invested a lot of money in luxury tourism areas around Viet Nam and is ready to invest in 20 luxury rail coaches for its clients whether or not the other deals go through.

"At first, the luxury train will be for our guests only, but later it will open to everyone," Tran Thanh Son, chairman of Sun Group, said.

The Viet Nam Railway Authority has also submitted to the Ministry of Transport a list of projects requiring investment, including concessions for 12 segments and four construction works that could cost $5 billion.

"Every investor will be able to invest in the railway, not just the Viet Nam Railway Corporation," Thang said.

Govt tries to pull documents in line

This week, Prime Minister Nguyen Tan Dung instructed ministries, agencies, as well as municipal and provincial administrations, to stop issuing any documents on conditional business lines or business conditions.

The move came after the Ministry of Justice reported to the Prime Minister that some ministries, as well as municipal and provincial administrations, had issued some documents on conditional business lines or business conditions in an incompetent or illegal fashion.

After reviewing 249 documents issued by 16 ministries and 276 documents issued by municipal and provincial administrations, the ministry found that nine documents issued by ministries and 20 documents issued by provincial and municipal administrations were not in line with current legal regulations.

For example, some provinces had set business conditions for Ca Hue (Traditional Hue Singing) performance or automobile-motorbike-bicycle repair work themselves, the Ministry of Justice reported.

Based on the Ministry of Justice's report, the Prime Minister had instructed relevant ministries; and municipal and provincial administrations to scrutinise the violations and punish the guilty in accordance with current legal regulations. The results have to be reported to the PM by the second quarter this year.

A further review of other documents issued was also required to unveil the remaining illegal and overlapping regulations in order to resolve the matter in a timely fashion and to ensure legal benefits for both individuals and organisations, the PM noted.

Conditional business lines are those that are only licensed to operate when business owners meet specific conditions set out by competent State agencies.

According to the revised Law on Investment, which was approved by the National Assembly last year and will take effect on July 1, 2015, the list of conditional business sectors was reduced from 391 to 267.

The new law also stated that business conditions must be regulated by law, ordinances, decrees or international treaties of which Viet Nam is a member. Ministries, and municipal and provincial administrations, as well as other agencies and organisations are not allowed to issue regulations on business conditions. The new law is expected to ensure people's right to do business, contribute to developing the market economy, stepping up international integration, improving the investment environment, and enhancing national competitiveness.

Such changes in the law will also help enhance management efficiency, boost administrative reforms, and combat corruption.

Decree allows property as REIT capital

Following a recent draft amendment to a Decree, investors might be allowed to contribute capital to a real estate investment trust (REIT) in the form of property assets, besides cash.

However, experts have urged further support to encourage the development of this investment tool, which was officially permitted in Viet Nam in 2012, but none have been established in the country till date. Instead, Viet Nam is currently seeing the dominant presence of foreign REITs.

According to Nguyen Thanh Long, capital contribution is currently only allowed in the form of cash, and the money is used to buy property assets so that investors can invest in real- estate assets by buying REIT fund certificates. He said many investors wished to contribute capital through property assets in exchange for fund certificates.

Nguyen Van Dung, director of the VinaWealth Fund, which is looking to establish a real-estate fund in Viet Nam, was quoted by Dau Tu Chung Khoan (Securities Investment) newspaper as saying that property assets, which are used as capital contribution to REITs, if allowed, must be those which can generate good money flow, such as trade centres, offices for rent, and apartments for rent.

"It would be difficult to find investors with such good property assets," he said, adding that such good property assets were already generating high profits and owners would not want to joint REITs as the profits might be lower.

Dung also pointed out that in many countries in the world, REITs were permitted to use their property assets as mortgages for loans, which might help boost their investment efficiency. However, this has not been mentioned in the draft amendments of Decree 58, he said.

VinaWealth said that to promote the development of REITs in Viet Nam, support policies, such as tax exemptions on income from property fund certificates were needed. Currently, incomes from dividends were taxed 5 per cent for individuals and 22 per cent for organisations.

According to Le Hoang Chau, president of HCM City Real Estate Association, detailed regulations about the kinds of property assets that REITs were permitted to invest in should be based on their net asset value and were needed to ensure efficiency and transparency.

Japanese-invested factory produces handheld tools

The Japanese-invested Tone Vietnam Co started operations at its new factory producing handheld tools in Nhon Trach 3 Industrial Park in a district of the same name on Wednesday.

The company, located in southern Dong Nai Province, invested more than US$5 million in the project.

It is an affiliate of Japan's Tone Co, which has 80 years' experience making tools. It leased two hectares of land at the industrial park in 2010.

Speaking at the inauguration ceremony, chairman of the Dong Nai People's Committee, Dinh Quoc Thai, said his province offered favourable policies for Japanese investment because of the financial strength, cutting-edge technology and responsible staff at their factgories.

Bac Lieu earns $100m from shrimp export

The Cuu Long (Mekong) Delta province of Bac Lieu this month exported 2,700 tonnes of frozen shrimp worth US$32 million, local authorities have said.

The latest figures have raised total exports for the first four months to 8,300 tonnes, earning the province more than $100 million.

The positive export value was attributed to moves by businesses to seek contracts in new foreign markets such as Australia, Hong Kong, South Korea, and several Arab countries. The local firms have also tightened quality controls and food sanitation by carefully selecting their suppliers.

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

Enterprises can issue C/O this year, Vietnam to inspect major firms after Metro tax case, VN railways sector opens up, Govt tries to pull documents in line, Decree allows property as REIT capital
 
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