BUSINESS IN BRIEF 10/10

PM launches new vision for agribusiness

The Vietnam government is actively pursuing a strategy of diversifying markets for agricultural products through forging stronger trading links with the Association of Southeast Asian Nations (ASEAN) and other free trade deals.

However, if such a vision is to be realized, one of the first things the government and business community with the assistance of academia must focus on is developing world class supply chains both domestically and globally, say leading market analysts.

Presently, inconsistent quality and availability of transportation infrastructure is impeding not only the flow of goods in the country but is adding significant cost to logistics operations and creating a variety of other losses such as post-harvest spoilage.

These groups working collectively must devise and implement a long-term strategy to enhance the industry’s supply chain capabilities if they intend it to be a serious competitor in the world market.

To this end, the Prime Minister has rolled out a new national policy making achieving excellence in supply chain education, research, and decision-making.

The strategy aims to encourage agribusinesses to sell substantially all of their products utilizing e-commerce in the domestic market and through foreign distribution networks in overseas markets in just five short years.

The project also launched a business support program providing funding from the state budget, autonomous private businesses such as from the EU along with a variety of other funding sources.

This is a formidable undertaking as it results in the upper echelons of management of these agribusinesses learning to understand the local customers and local customs in each and every country they serve.

Vietnam would be wise to pattern themselves after US based Walmart, some leading market analysts have suggested.

Over the past ten years, Walmart has become the world’s largest and arguably most powerful retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount store in history.

According to Supply Chain Digest, this retail giant stocks product made in more than 70 countries and at any given time, operates more than 11,000 stores in 27 countries around the globe, and manages an average of US$32 billion in inventory.

Leading analysts laud Walmart as one of the world’s greatest logistical and operational triumphs and its transition from a regional retailer to global powerhouse in such a short time frame has made its name synonymous with the concept of successful supply chain management.

However, as recently as 2006 Walmart was forced to exit the German and Republic of Korea (RoK) markets because the management team failed to take the necessary steps to understand the habits of the typical customer and losses overwhelmed the giant company.

This lack of understanding of local customs and customers is in direct contrast to what is happening in the US, where Walmart has been highly successful and very aware of customer views and shopping habits. 

It is not easy for a Vietnamese company to join Walmart’s supply chain for agriculture food and related products in foreign supermarkets, according to Le Quang Hung, Chairman of Garmex Saigon.

Under a Walmart supply chain initiative called Vendor Managed Inventory (VMI), for example, Vietnamese companies would be responsible for managing their products in Walmart’s warehouses.

Cross docking is also a logistics practice that is the centrepiece of Walmart’s strategy to replenish inventory efficiently.

It means the direct transfer of products from inbound or outbound truck trailers without extra storage, by unloading items from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars (and vice versa), with no storage in between.

Suppliers deliver products to Walmart’s distribution centres where the product is cross docked and then delivered to Walmart stores. Cross docking keeps inventory and transportation costs down, reduces transportation time, and eliminates inefficiencies.

In addition, Vietnam will have to expand the number of personnel that possess effective communication skills in English and other foreign languages as well as business management skills to effectively manage such a sophisticated supply chain within Walmart’s logistic masterpiece.

On the other hand, distribution and retail systems in a few countries in Europe have purchasing directors and getting goods in foreign supermarkets is much easier than Walmart, said General Director Nguyen Van Thinh of Viet A Chau Investment & Development Corporation (VITACO).

In its relentless pursuit of developing a state-of-the-art supply chain it will be necessary for Vietnam agribusiness to embrace technology, and become an innovator in the way that domestic stores track inventory and restock their shelves, thus allowing them to cut costs.

Suppliers and manufacturers within the supply chain will also need to synchronize their demand projections under a collaborative planning, forecasting and replenishment scheme, and connect every link in the chain through technology that includes a central database, store-level point-of-sale systems, and satellite networks.

The new approach will mean frequent, informal cooperation among supermarkets, distribution centres and suppliers and less centralized control.

Furthermore, the nation’s supply chains, by tracking customer purchases and demand, will allow consumers to effectively pull merchandise to stores rather than having the companies push goods onto shelves.

Supply chain management is all about moving the right items to the right customer at the right time by the most efficient means and the new initiative by the Prime Minister certainly presents a daunting challenge to the entrepreneurial talent in agribusiness.

EVN: Progressive pricing helps save electricity

Vietnam Electricity Group (EVN) has insisted a progressive pricing mechanism leads to the efficient use of electricity.

EVN backed the progressive pricing mechanism at a seminar held in HCMC on Wednesday to collect comments on an electricity tariff improvement scheme. The group said the pricing mechanism would not push up electricity prices or increase its revenue.

Last month, those experts invited to a seminar in Hanoi to comment on the scheme did not back a switch to a same-pricing mechanism from the current progressive pricing one.

Speaking at the seminar in HCMC on Wednesday, Nguyen Tien Thoa, general secretary of the Vietnam Valuation Association, said Vietnam generates electricity mainly from fossil fuels including oil and gas and that renewable energy accounts for a small fraction of the country’s total electricity output.

Thoa said current electricity output cannot meet demand, so it is necessary to call for consumers to use electricity efficiently.

Thoa said the electricity tariff improvement scheme would help balance the interests of the State, electricity producers and consumers but the average electricity price will remain unchanged. The price is calculated on a principle that the less electricity people consume, the less they pay and the more they use, the more they pay.

Unlike other commodities with prices lowered to fuel consumption, electricity is always in short supply. Therefore, there must be a new pricing scheme to encourage electricity saving. 

According to EVN, households currently consume 29% of the country’s total electricity output. Households using less than 50 kWh per month account for 11% of the total number while those using more than 400 kWh monthly make up 2%.

Dinh Quang Tri, deputy general director of EVN, told the seminar that the current electricity capacity is around 35,000 MW. Electricity supply in the northern region is stable but inadequate in the southern region.

Tri said before the seminar was held, many people advocated the same-price mechanism but more people supported the progressive pricing scheme as it encourages electricity saving.

Regarding electricity tariffs in the coming time, Tri said it would not rise towards the year-end and in the first half of next year.

In reply to the Daily’s question about whether the decline in input costs in recent times has led to lower electricity production cost, Tri said falling gas and fuel prices are not sufficient to offset losses caused by the volatile exchange rate as 85% of EVN’s finances used to build thermal power plants come from foreign loans.

The electricity sector is still under much pressure to bring down electricity losses from 8% to 5% in 2020 and meet an electricity consumption increase by 12-13% per year. Besides, some VND33 trillion is needed to expand the national power grid to all households in rural areas.

Tri said EVN needs around US$5 billion a year to invest in new power projects.

Of the electricity production structure, hydropower, gas-fueled power and coal-fueled power plants make up 35-40%, 30% and 30% respectively.

According to EVN, electricity prices will be adjusted up if the costs constituting the electricity price pick up over 7% and the power price review period is every six months.

German businesses setting up shop

Many German companies have increased their investments to set up stable production bases in Vietnam, to meet the country’s growing demands amid deeper global integration.

Siemens, Mercedes-Benz, and Bosch made the move after they realised the huge potential of the local market, where approximately 46 per cent of all Vietnamese machinery imports are from Germany.

One German company that has been present in Vietnam long-term is Siemens, which dates back to 1979, when the company supplied and installed the first two industrial steam turbines at the Bai Bang paper mill. The establishment of its representative office in 1993 and the shift to a limited company in 2002, as well as the inauguration of the Siemens Automation System plant in the southern province of Binh Duong in 2005, mark key developments and milestones in Siemens’ history in Vietnam. In particular, Siemens Vietnam was entrusted by Siemens AG to establish a hub with qualified staff to work in site management, construction, commissioning, environment, health and safety, and quality control for Siemens’ power plant projects in Asia and the Middle East.

Siemens Vietnam president and CEO Pham Thai Lai stated that the company had been on track for growth over the past five years. Last fiscal year, for example, the company achieved and surpassed many business targets, ending in an increase of 20 per cent in revenue and 200 per cent in net income against the previous fiscal year. For the last fiscal year, Lai expected a similar growth rate.

He is also very confident about the bright future of the busway factory in Binh Duong. Siemens is now the No.1 supplier of busway products on Vietnam’s market, and is exporting to more than 30 countries across the world, helping to ensure stable employment and income for hundreds of Vietnamese employees and workers. 

In a similar move to Siemens, Robert Bosch Vietnam, a member of German Bosch Group, has had a presence in Vietnam since 1994 as a leading global supplier of technology and services through its representative offices. In August 2008, Robert Bosch Vietnam decided to start the continuously variable transmissions (CVT) push-belt production facility in the southern province of Dong Nai’s Long Thanh industrial park to meet the growing demands of the domestic market. In late 2013, the company invested an extra $208 million to increase the factory capacity, raising the total investment for Robert Bosch Vietnam’s plant to $340 million.

According to Vo Quang Hue, managing director of Robert Bosch Vietnam, thanks to proper investment strategies, in 2014, his firm made the total net revenue of $340 million, up 20 per cent from 2013. This was the sixth consecutive year that the group reported a double-digit growth rate in the market. Hue elaborated that Robert Bosch Vietnam would continue to increase investments in the hi-tech plant in Dong Nai by constructing a new workshop and setting up new production lines in order to increase the output capacity.

Meanwhile, Mercedes-Benz Vietnam, which was set up in 1995, put a new environmentally-friendly electrostatic paint factory into operation in 2013, with the investment capital of $10 million. In 2014, the car maker injected an additional  $10 million for its new production line, expansion of  the company’s agent network, as well as promotion for environmental protection.

In the pharmaceutical industry, B. Braun Melsungen, a pharmaceutical company which has over twenty years of experience in Vietnam and is widely considered a successful firm. In 2014, it reinvested $270 million into the facility in Vietnam, including a $66.3 million to establish a new factory.

As of August 20, 2015, German companies have invested in 259 projects in Vietnam with the total registered investment capital of $1.38 billion.

Dong strengthens against dollar

Viet Nam's currency, the dong, has strengthened against the US dollar this week after the central bank's recent regulations on tightening foreign currency transactions.

Commercial banks have started to adjust the exchange rate since Monday many days after keeping a cap on VND22,547 regulated by the central bank on August 19.

The rates quoted by commercial banks have reduced by roughly VND70 to VND90 for the past three days.

After reduction on Monday and Tuesday, Vietcombank yesterday continuously cut the rate by VND20 against the previous day, quoting the buying/selling rates at VND22,340/22,430.

Vietinbank also cut the rate by VND20, listing it at VND22,380/22,440.

BIDV and ACB also listed at VND22,370/22,430, down VND20 against the previous day.

The buying/selling rates at Techcombank were VND22,355/22,455, down VND25 and VND5, respectively.

It was the first time since the central bank's devaluation of the dong against the dollar on August 19 the rate quoted at commercial banks was lower than the VND22,475 rate listed at the State Bank of Viet Nam's Operations Centre.

Industry insiders attributed the reduction to the application of new regulations taken by the central bank on avoiding the dollar speculation and hoarding in the economy.

According to Circular No15/2015/TT-NHNN on foreign currency transactions by credit institutions, which took effect on Monday, foreign currency transactions with banks must be accompanied by documents proving the purpose, amount and duration of payments.

The circular also states that if customers needed to settle with partners within two working days, banks can sell foreign currencies immediately.

When the payment term is more than three days, banks are only allowed to sell forward exchange. For forward exchange transactions, the maximum term is 365 days.

Previously, the central bank had also issued a decision on cutting the interest rate ceiling on dollar deposits to encourage the conversion of dollar deposits into dong deposits.

Under the decision, the interest rate ceiling on dollar deposits offered by commercial banks to organisations and companies was cut from 0.25 per cent to zero per cent per year, while the rate for individuals was reduced from 0.75 per cent to 0.25 per cent per year. 

Real estate transactions skyrocket in 9 months

Some 30,000 real estate transactions were recorded in the first nine months of 2015, which was tantamount to the combined figures from last year, as heard at a seminar on housing development in the Mekong Delta city of Can Tho on October 7.

According to Chairman of the Vietnam Real Estate Association Nguyen Tran Nam, heat in the real estate market has skyrocketed and the number of real estate transactions this year is expected to double 2014’s.

Vietnam’s real estate market has seen positive signs in both social housing and low-income apartment segments, ranging from 500 to 600 million VND (22,700 USD-27,000 USD) per apartment.

Several newly introduced Government policies and regulations coupled with high confidence in the sector’s outlook have convinced investors and customers to return to the market.

Particularly, the Government’s 30 trillion VND (1.4 billion USD) stimulation package demonstrated its efficiency; 20 trillion VND (909 million USD) of which was signed with banks and 12 trillion VND (546 million USD) was disbursed.

Nam asserted there is an upward trend in Vietnam’s real estate market as many capital inflows have entered the market. To date, about 360 trillion VND (16.4 billion USD) has been invested in the market, accounting for 12 percent of the bank’s total debt system. Meanwhile, around 3 billion USD in foreign remittances were also recorded.

HCM City: Housing supply increases sharply

Seventeen existing and new projects made a total of 9,550 apartments available in the real estate market of Ho Chi Minh City in the third quarter of this year, announced Savills Vietnam, the largest property company in the country, at a press conference on October 7.

Of the figure, 5,220 units were sold, up 4 percent compared to the second quarter, with Districts 2, 7 and Binh Thanh accounting for 57 percent of the transactions.

Savills Vietnam predicted about 57,000 apartments from 92 existing and future projects will be available for purchase from the fourth quarter of this year to 2017

In the July-September period, as many as 1,680 villas and attached houses hit the city’s real estate market, up 47 percent compared to the previous quarter and mainly concentrating in Districts 9 and Go Vap. Meanwhile, 240 land lots in Districts 7 and 9 were being marketed.

It is expected that a total of 53,600 land lots, villas and attached houses will enter the property market from the fourth quarter.

According to Nguyen Thi Van Khanh, Head of the Savills Vietnam consultancy department, the current housing supply rise will not have any “bubble” effects as the economy is recovering and developing impressively and the government has issued a number of policies to support the housing sector.

Meanwhile, property investors said the increasing supply will help the market be more competitive in terms of price and quality.

Promising market for soymilk industry

There is plenty of room for the soymilk industry to develop as over 1.5 million litres of soymilk are consumed in Vietnam every day, only 32 percent of which are canned, the Thoi Bao Kinh te Vietnam (Economic Times) reported, citing statistics of market researching company Nielsen.

More than half of the soymilk sold in the market is hand-made by locals while industrially produced milk has yet to meet consumer demand and investment in the field remains modest.

According to the newspaper, the NutiFood company, the Hoang Anh Gia Lai group and the Institute of Agricultural Science for Southern Vietnam (IAS) signed an agreement on September 29 to create soybean growing areas to supply material for large-scale soymilk production.

CEO of Hoang Anh Gia Lai Doan Nguyen Duc said his group will entrust 1,000 hectares of land to NutiFood and scientists to study the development of organic soybean material. The land fund will be increased to 5,000 hectares in the next five years.

This is the first time a Vietnamese business has a plan to produce soymilk from organic material, he said.

According to NutiFood CEO Tran Thanh Hai, imported soybeans are less expensive than those locally-produced, but NutiFood has chosen domestic varieties to ensure quality. The seeds used in the soybean material development project are produced by the IAS, he noted.

Director of the IAS Tran Thanh Hung said large-scale farming and mechanisation are key to reducing soybean production cost.

NutiFood and Hoang Anh Gia Lai are carrying out the soybean material development project in the Central Highlands. If successful, the pair will partner to produce soymilk.

The Vietnam Soya Products Company (Vinasoy) is the largest soymilk producer in the country at present with over 80 percent of the soymilk output produced industrially nationwide. It is operating two manufacturing plants in central Quang Ngai and northern Bac Ninh provinces. By the end of this year, it will kick start construction of a third plant in southern Binh Duong province.

Last year, Vinasoy grossed 3.1 trillion VND (139.5 million USD) in revenue, a year-on-year rise of 49 percent.

Vietnam targets over 1.2 mln tonnes of fish in Oct-Mar season

The aquatic sector aims to catch over 1.26 million tonnes of fish in the season from this October to March next year, including 1.15 million tonnes of sea fish and 106,000 tonnes of freshwater fish.

The figures were heard at a conference held in the northern province of Thai Binh on October 7 by the Ministry of Agriculture and Rural Development (MARD) and the provincial People’s Committee to review the fish output during the April-September period and make plans for the October 2015-March 2016 season.

To achieve this goal, the sector should continue restructuring; enhance marine resources conservation; closely supervise the building of fishing vessels, especially those with engine capacities of 90 CV or higher; and improving preservation and fisherman competence, said MARD Deputy Minister Vu Van Tam.

He also asked coastal localities to ensure maritime security and raise fishermen’s awareness of protecting maritime environment and resources while setting up offshore fishing groups to increase productivity.

Total fish output during the April-September season hit more than 1.73 million tonnes, a rise of 5.39 percent compared to the same period last year, including 1.66 tonnes of sea fish.

According to the Fisheries Information Centre, Vietnam has two main fishing seasons – the first from April to September and the other from October to March based on the southwest and northeast monsoons.

Rate of locally-made energy contents discussed

The rate of locally-made contents in the energy sector is the main focus of a conference that was opened by the Ministry of Industry and Trade in Hanoi on October 7. 

As part of activities to promote sustainable energy development within the Asia-Pacific Economic Cooperation, the two-day event offers an opportunity for experts and policy makers to share experience and make proposals towards building a favourable regional business environment in this field. 

According to Nguyen Duc Cuong, Director of the Energy Centre under the Vietnam Institute of Energy, coal-fuelled thermal power is projected to make up half of the power sector’s capacity by 2030. 

Regulations on the rate of locally-made contents, once applied, will support renewal energy projects, protect immature industries like mechanics and clean energy until they are ready to compete in the international market and take part in the global supply chain, and generate jobs for local labourers, he said. 

Many held that if the market scale is not big enough, expanding the rate of locally-made contents will result in higher power prices and negatively affect trade, investment and the environment. 

Therefore, Cuong underlined the need to have a substantial market scale and incentives offered by the Government, among others, to actualise the plan. 

Echoing Cuong’s views, Ronald Steenblik, Senior Trade Policy Analyst at the Organisation for Economic Cooperation and Development (OECD), said it is essential to have policies that support research and innovation in this regard. 

A report made by the OECD showed that the increased rate of locally-made contents in the energy sector would spur each country’s production. 

However, about 75 percent of international investors in solar and wind power said this will hinder foreign capital inflows into clean energy and raise production costs.

Footwear export sees 18.4-percent growth

The leather and footwear sector earned 8.8 billion USD from exports in the first nine months of this year, up 18.4 percent from the same period last year, reported the Saigon Giai Phong newspaper. 

In the period, the sector produced 241.9 million pairs of shoes, an increase of 24.1 year-on-year. 

According to the Vietnam Leather and Footwear Association (Lefaso), many of the industry’s enterprises have secured major export contracts thanks to the signing of a number of free trade agreements. 

The sector targets to produce 280.2 million pairs of shoes and earn 14-15 billion USD from exports in all of 2015; rising to 314 million pairs and 16-17 billion USD in 2016. 

It also aims to raise the rate of locally-made contents in finished products to 60-65 percent. 

The Ministry of Industry and Trade called on footwear businesses to apply advanced technology in production in order to enhance product quality and design, meeting the demand of domestic and international markets. 

Connectivity among enterprises should also be strengthened in tandem with enhancing management to ensure the sustainable development of the sector, it said. 

Communication campaigns should be promoted to facilitate access to relevant free trade agreements while actively joining trade promotion events to expand potential markets, it added.

Da Nang’s tourism revenue surges over 30 percent

The central coastal city of Da Nang raked in 10.2 trillion VND (453.86 million USD) from tourism services in the first nine months of this year, a year-on-year increase of 30.2 percent.

The city welcomed over 3.7 million tourists in the period, shooting up 23.6 percent from last year’s figure.

Da Nang was listed among the top 10 most attractive destinations in Asia in 2013 and 2014 by readers of Smart Travel Asia, a leading regional online travel magazine. It also took the top spot in the online travel review site TripAdvisor’s “Destinations on the Rise in 2015” awards, and ranked sixth of the 10 most improved cities globally in 2015 by Canada’s Richest magazine. 

Under the city’s tourism development orientations through 2020, the city will continue promoting its image in traditional markets such as Western Europe, Northern America and Eastern Europe while expanding to others in Middle Eastern countries and India.  

The city expects to welcome more visitors from Hanoi, Hai Phong, Quang Ninh and Ho Chi Minh City, along with Mekong Delta and Central Highland localities. 

It is now home to 74 investment projects in tourism and services worth 8.042 million USD. Of the total, 17 are foreign-invested projects with a total capital of 1.45 million USD and the remaining 57 are domestically invested with a total sum of 6.592 million USD. 

This year, the city hopes to greet more than 4.43 million vacationers and earn 11.8 trillion VND (540 million USD).

PetroVietnam’s qualms over Nghi Son complex

State-owned oil and gas conglomerate PetroVietnam is greatly concerned that the upcoming commissioning of the multi-billion-dollar Nghi Son oil refinery complex would dent a substantial hole on their finances. 

The concerns arose as the Vietnamese government’s guarantorship over Nghi Son complex commits  PetroVietnam to consume NSRP products for a period of 10 years after the complex starts commercial operation. 

As scheduled, NSRP will become operational in 2017and reach its maximum annual capacity of 9.62 million cubic metres of petroleum products by 2018.  

Taken into account the annual capacity of more than 7.8 million cubic metres of Dung Quat oil refinery and 0.69 million cubic metres of four other units currently processing petrol from condensate, domestic petrol supply sources will be in a strong position to meet local demands, according to PetroVietnam estimates. 

Also, by 2018, the demand for petroleum products on the domestic market will be about a mere 17.3 million cubic metres, posting a particularly large excess of more than 0.8 million cubic metres of diesel oil. 

PetroVietnam worries that by that time petroleum trading firms will turn their backs on Vietnamese(-made) petroleum items because selling prices offered by local oil refineries coupled with the import tariffs as prescribed by Circular 78/2015/TT-BTC will result in higher costs than other ASEAN imports which enjoy import tariffs 5-20 per cent lower. 

Moreover, even in case locally-made petroleum products could not be sold, PetroVietnam still has to carry out its obligation of buying NSRP products, according to the signed agreements. 

PetroVietnam estimates that, according to the government’s implementation roadmap with NSRP, in case crude oil fetches US$75/barrel, with current import duties they would need to pay NSRP about VND65 trillion (US$2.98 billion) for petroleum items and VND10 trillion (US$458 million) for petro-chemical items. 

The payment is to fill the difference between actual import duties and the preferential value level calculated for sale price NSRP enjoys (3% for petrochemical products, and 7% for petrol and oil). 

However, relevant guiding documents about the mechanisms related to the financing and associated procedures that enable PetroVietnam to pay the NSRP tax incentives on behalf of the government still remain unclear. 

To avoid its finances being affected upon NSRP commences commercial operation and to assure its paying ability towards NSRP, PetroVietnam has proposed that the government allow it to retain the sum derived when actual import tariffs fetch higher than NSRP’s above-stated preferential value levels. 

According to the government’s guarantee commitment, during the initial 10 years of NSRP’s commercial operation, if the actual import duties of petroleum products are set lower than NSRP’s preferential value levels calculated for sale price, PetroVietnam will pay NSRP the sum to fill the difference between the actual import duties and NSRP’s preferential value levels  when NSRP sells its products in the domestic market, whether through PetroVietnam or other firms.

Foreign retailers arrive en masse

The retail market is seeing an invasion by foreign retailers, which has brought pressure on local businesses who lack financial capacity or experience.

Japan’s Aeon plans to open a shopping mall this month in Hanoi, its third in Vietnam and first in the capital. Aeon Mall Long Bien will be one of the largest commercial facilities in Hanoi, occupying 96,000 square meters of land.

Aeon considers Vietnam its second most important market in Southeast Asia after Malaysia. Its first mall in Vietnam, which opened in January 2014 in Ho Chi Minh City, attracted 13 million people last year.

It plans to open 200 stores across the country, according to The Japan Times.

South Korean retail giant Lotte has increased the number of its supermarkets in Vietnam to 10. It plans to have a total of 60 by 2020.

The chairman of the Hanoi Supermarket Association, Vu Vinh Phu, said Vietnam, with its surging consumer spending in recent years, is squarely in the sights of foreign retailers.

Retail and consumer services sales grew 6.3% last year to VND2,950 trillion ($138.2 billion) outpacing the 5.6% growth in 2013, according to official data.

Vietnam has a 90 million population, and the size of its middle class is expected to double by 2020 since its economy has been growing at over 5% a year since 2000.

Modern retail formats such as shopping malls, supermarkets and hypermarkets will play a crucial role in Vietnam’s future retail sector growth. The modern retail channel now accounts for around 20% of sales in Vietnam, representing a latent market opportunity for investors, he said.

The upcoming establishment of the ASEAN Economic Community, or AEC, and some free trade agreements, including with the EU and South Korea, which remove tariffs on many goods imported into Vietnam, have given foreign retailers more reason to expand their business in the country, Phu said.

Foreign retailers have also expanded via mergers and acquisitions. Early this year AEON announced the purchase of a 30% stake in Fivimart, and a 49% in Citimart, two major retail chains in Vietnam. Fivimart has 20 stores in Hanoi, while Citimart has 27, mainly in Ho Chi Minh City.

"Vietnam will be one of the next [consumer] giants, and alliances with local partners are important because we see almost no chance of winning if we [operate] independently," Aeon president Motoya Okada said when announcing the new partnerships with Fivimart and Citimart.

Thailand's Central Group recently bought a stake in Nguyen Kim, a major electronics retailer with 21 stores across Vietnam.

The purchase of the 49% stake was done through Power Buy, an arm of the Thai family-run conglomerate.

Last year, Central Group opened two Robins department stores in Hanoi and Ho Chi Minh City.

Central Group says it sees Vietnam as a particularly promising market for replicating the retail dominance it has achieved in Thailand. While Central Group's priority is bolstering its position in Thailand and Europe, it is also considering acquisitions in fast-growing markets such as Vietnam, Indonesia, and Malaysia. The company said acquisitions can boost its sales growth by between three and five percentage points annually.

“We are quite bullish on Vietnam,” Tos Chirathivat, the CEO of Central Group, was quoted as saying by Forbes. “We’re looking to invest quite a lot in Vietnam.”

Phu of the Hanoi Supermarket Association said most local retailers, excluding big businesses like Co.opmart and Saigon Trading Company (Satra), have struggled to remain in business amid the increasing competition from foreign rivals who have the upper hand thanks to their financial strength, management experience and cheap global supply chains.

Fivimart has had to close all of its supermarkets in the south, while Intimex and Hapro have shut down some of their outlets in the north, he said.

Dinh My Loan, chairwoman of the Association of Retailers, said the biggest difficulty for local retailers is finding land.

Many local firms have been beaten to prime retail locations by foreign competitors because they lack the financial capacity and experience to negotiate, she said.

High retail rents remain a major barrier for local companies with weak finances. Rent often accounts for 30-40 percent of retailers' total investment. In Hanoi, rent for downtown real estate could rise to $100 per square meter.

Without famous brand names, domestic retailers are less competitive in wooing consumers and negotiating prices with foreign suppliers than their foreign competitors. Thus, they find it hard to offer competitive prices.

To compete in the market, local businesses should cooperate with foreign partners, Pham Dinh Doan, chairman of local retailer Phu Thai, said.

Foreign retailers now need the cooperation to pass the economic needs test (ENT), he pointed out.

The country wholly foreign-owned retail companies to operate, but when they want to expand outlets to more than 500 sq.m, they must first pass the ENT, which has however been criticized as opaque.

Under Vietnamese laws, ENT comprises an administrative review of the number of existing retail sales outlets in a particular geographic area, market stability, population density, and the relevant urban development scheme.

Loan said the cooperation should be seen as an active measure for the development of the local retail sector instead of a sure-fire way to get taken over by a foreign partner.

Vietnam had 724 supermarkets and 132 shopping malls as of late last year, according to the retailers association. The country hopes to double this number by 2020.

Footwear businesses win major export contracts

Vietnam’s footwear exports jumped 18.4% to US$8.8 billion during the first nine months of this year, according to the Ministry of Industry and Trade (MoIT).

The Vietnam Leather, Footwear and Handbag Association (LEFASO) reported that up to now many businesses have won long-term and stable export contracts, even for the first quarter of next year as the results of Vietnam’s signing of free trade agreements (FTAs).

This year’s target of making 280.2 million pairs of leather shoes of different categories and earning US$14 - 15 billion export revenue is within reach.

Next year, the footwear sector aims to produce 314 million pairs, rake US$16 - 17 billion in export value and increase the percentage of home found materials to 60-65%.

The MoIT warned that domestic businesses should focus on both overseas and domestic markets and invest more in technology to improve the quality of products to meet strict technical requirements of demanding markets like the EU and US.

The sector should spur connectivity among businesses to develop the supply chain of materials towards sustainable development, the ministry said.

The ministry will renovate trade promotion and disseminate information about FTAs to businesses.

India okays amendments to double tax avoidance pact with Vietnam

The Union Cabinet of India has approved the Protocol amending the agreement on avoidance of double taxation and prevention of fiscal evasion for income taxes.

The Protocol provides internationally accepted standards for effective exchange of information on tax issues, including bank information, the Indian Government’s Press Information Bureau said on October 7. 

The protocol also stipulates that information on Indian citizens received from Vietnam can be shared with other law enforcement agencies with authorisation of the competent authorities of Vietnam and India. 

The existing Double Taxation Avoidance Agreement (DTAA) between Ind ia and Vietnam was signed in 1994. 

Both sides agreed to update the agreement’s Article 27 on the “Exchange of Information” in line with international standards and supplement a new article on “Assistance in the Col lection of Taxes. The amending protocol was issued for the purpose.

Japanese firms eye supporting industry in Vietnam

Japanese businesses from the Kansai region have said they are interest in the Vietnamese market, and keen on expanding trade and investment connection with Vietnamese partners, especially in supporting industry, in the time ahead.

They expressed their interest during workshops in the Japanese cities of Osaka and Kobe on October 6-7, which aimed to forge links between Japanese and Vietnamese businesses in the supporting industry.

Japanese firms said they hope for further facilitation from the Vietnamese Government and local-level authorities, enabling them to do business smoothly in Vietnam.

During the workshops, participants were updated on information of Vietnam’s recent economic development and business climate, and those related to the country’s preferential policies in investment attraction.

Japanese firms spoke highly of Vietnam’s foreign investment attraction policies and efforts made by the Vietnamese Government in improving investment and business climate and as well. Representatives from the Vietnam Ministry of Industry and Trade cleared up questions from Japanese firms.

The two sides’ businesses took the occasion to establish links among them, especially in the supporting industry.

Co-hosted by the Vietnamese Consulate General in Osaka and the Ministry of Industry and Trade, the two workshops brought together nearly 200 Japanese firms in the Kansai region and representatives from 15 Vietnamese businesses operating in industrial production, engineering, electrics, plastic industry and import-export activities.

PM instructs accelerating agricultural restructuring

The Prime Minister has instructed localities nationwide to expedite the implementation of an agricultural restructuring project to increase product added value and ensure sustainable development. 

Embracing connectivity between farmers, cooperatives and businesses is essential with enterprises playing a key role. 

It is also important to promote research on and the transfer and application of scientific and technological advances to create breakthroughs in the field, and domestic scientific organisations are encouraged to forge links with businesses towards the goal. 

The PM also urged relevant agencies to work harder to collect information on overseas markets, especially those of partners in bilateral and multilateral agro-forestry-fishery trade commitments, to help businesses increase their competitive edge, while developing the domestic markets and protecting local producers in suitable ways. 

Agencies are requested to pay more attention to developing local trademarks and vocational training for rural workers, particularly those in agricultural cooperatives. 

Localities are told to quickly complete their own agricultural restructuring plans within this year, while those already having such programmes or action plans need to review and properly adjust their contents based on the respective socio-economic development targets from 2016-2020. 

The PM asked localities to establish inter-sector steering committees on agricultural restructuring from communal to provincial levels and review plans on the production of key farm produce in the direction of focusing resources on developing advantageous products. 

Meanwhile, ministries and sectors are instructed to revise mechanisms and policies and build policies specifically designed for different regions in order to facilitate agricultural restructuring.

Dai Quang Minh chooses contractors for Thu Thiem projects

Dai Quang Minh Real Estate Corporation, the first property company to develop housing in HCM City's Thu Thiem Urban Area, on Tuesday signed contracts with interiors and other vendors for its Sarica Condominium and Sadora Apartment.

The two are in the Sala area developed by the company in Thu Thiem.

Sarica is an eight-storeyed apartment building with 175 units whose construction will start this year and will be handed over in May 2017.

The 21-storey Sadora will have 621 apartments that will be handed over in December 2017.

Dai Quang Minh said it would start sales of the two projects on Friday with promotions offered for early booking.

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

PM launches new vision for agribusiness, Real estate transactions skyrocket in 9 months, Promising market for soymilk industry, Foreign retailers arrive en masse, India okays amendments to double tax avoidance pact with Vietnam
 
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