BUSINESS IN BRIEF 1/2

Investors want legal framework for PPP improved

Investors have urged Vietnam to improve the legal framework for the public-private partnership (PPP) format to ensure benefits for both investors and the State.

Speaking at a dialogue on how to attract investment in HCMC via PPP in the city on January 26, Tran Van Thi, deputy general director of Cuu Long Corporation for Investment Development and Project Management of Infrastructure, said that for PPP, investors should be freed from the bureaucratic “ask-and-give” mechanism.

Thi said a PPP project is usually carried out in tens of years, so its efficiency can only be ensured by mutual trust between investors and the State. He added that information about PPP projects should be made transparent.

Tran Anh Tuan, acting director of the HCMC Institute for Development Studies, said the institute in collaboration with the municipal Department of Planning and Investment is drafting measures to woo investors to PPP projects, and will submit them to the city government for approval.

Given the city’s tight budget, it is necessary to attract investment capital via PPP, so the “ask-and-give” mechanism, which requires investors to go through a labyrinth of procedures, should be eliminated in PPP projects.

Le Quoc Dat, deputy general director of IDICO Infrastructure Development Investment JSC (IDICO), said many domestic and foreign investors are reluctant to take part in PPP projects due to legal hindrances.

He said the HCMC People’s Committee and the municipal Department of Transport on behalf of the State clinch deals with investors of build-operate-transfer (BOT) road projects. But it is the HCMC People’s Council that decides toll hike plans. If the council does not approve toll spikes while contracts have been signed, investors would incur losses.

This impediment also discourages foreign investors from participating in BOT transport projects in Vietnam, Dat said.         

He said IDICO is managing National Highway 1’s An Suong-An Lac section under the BOT format and this section was put into use in 2005. Until now, IDICO has invested in some bridges on the road section and the toll collection duration is extended until 2033.

Apart from transport projects, HCMC is calling for investment in wastewater treatment plants under the PPP format. Businesses said the legal foundation for investor protection is weak.

A wastewater treatment project requires huge investment for treatment plant and pipeline system construction but investors can recover capital via environmental protection fee collection. The fee accounts for 10% of clean water prices, an unattractive percentage.

A representative of the HCMC Department of Planning and Investment said that as for PPP and build-transfer (BT) projects, the city often chooses to pay investors by land. However, the city falls short of land.

In February last year, the Government issued Decree 15/2015/ND-CP on investment regulations on the PPP model to remove any hindrances.

Besides infrastructure projects, commercial, technology, hydrometeorology, economic zone, industrial park and hi-tech zone projects can be developed under the PPP format.

Apartment buildings likely to be categorized

Apartment building projects might be assessed and categorized as A, B and C to serve as a basis for the parties concerned to decide condo prices and management service fees.

The classification of apartment buildings is mentioned in a draft circular which the Ministry of Construction has passed around for comment.

Nguyen Manh Khoi, deputy head of the Housing and Real Estate Market Management Department under the ministry, said at a conference in HCMC over the weekend that the circular would be applicable to commercial, resettlement and multi-purpose condo projects if it is issued.

Apartment buildings will be graded based on architecture, social and technical infrastructure, condo quality and management services.

Khoi said apartment buildings assigned with 90-100 points would be categorized as A, B with 80-90 points and C with less than 80 points.

The appendix of the draft circular has specific criteria to classify apartment buildings. For instance, projects with sport and commercial services available for use less than 500 meters away from condos will be added two points and over 500 meters one point.

Many enterprises said ranking is necessary to evaluate the value of condos as it is a basis to make management service fees compatible with those set by local authorities. This would help prevent disputes over service and management prices.

Nguyen Tien Dung, general director of Saigon Vista Corporation which provides management services for buildings, said though apartment management services depend on districts, residents often complain they do not get their money’s worth with the quality of service.

He said management companies should ask investors to announce the rankings of condos before they put up for sale their products so that customers can make well informed decisions.

Meanwhile, other firms said ranking apartment buildings is unnecessary since homebuyers and investors can strike deals on apartment prices and management services on their own. They said the regulation on rankings may complicate administrative procedures.

Khoi of the ministry said many criteria in the draft circular may cause controversy as they may be different from the reality so the ministry should review and adjust them. He said ranking apartment buildings is inevitable as it is stipulated in the 2014 Housing Law.

Vietnam’s economy to grow at 6.7-6.8% in 2016: financial supervisory commission

The National Financial Supervisory Commission (NFSC) on January 28 predicted that economic growth in 2016 will continued to improve, but at lower levels than in 2015, at 6.7-6.8%.

Macroeconomic will have favourable conditions to remain stable, with inflation at about 2-3% only.

However, the commission warned that economic stabilising policies still need to prevent pressure from the global economic environment for interest rates and exchange rates, as well as increasing pressure from domestic public debt.

According to the agency, in 2016 world trade and the global economy is expected to recover, but with no less uncertainty. Global commodity prices continue to fall but at a lower level. The US has begun gradually raising interest rates whilst a majority of countries worldwide continue to ease monetary policies. In this context, many currencies around the world have lost value against the dollar and the trend is forecast to continue in the coming period.

In 2015, the domestic economy strongly recovered and inflation remained at its lowest level in ten years; economic restructuring achieved initial results, and the business environment has improved. However, the business community, especially in regards to domestic enterprises, still faces lots of difficulties, amidst little support from monetary and fiscal policies.

The basis for the NFSC’s forecast is that in 2015 GDP growth was at 6.6%, higher than set plan early (6.2%). The main driving force for growth in 2015 is the industry with industrial production index increased by 9.8-10% compared to 7.6% in 2014. Business establishment registration saw a strong increase in 2015 in both the number and registered capital, up 26.6% and 39.1% respectively compared to 2014.

Total retail sales of consumer goods and services (excluding the price factor) increased by 10.6-10.8%, the highest level in five years. Consumer confidence index last December was at 144.8 points, 9.2 points increased compared to the same period in 2014 and the highest level since early 2014.

In 2015, inflation was at 0.6%, the lowest since 2001.

Along with that, 2015 is also the second consecutive year to witness improvement in the ranking of Vietnam for competitiveness and business conditions. In particular, the competitiveness ranking rose from 70th in 2014 to 68th and business condition ranking rose from 93rd to 90th.

According to the NFSC, world commodity prices are forecast to continue to decline in 2016, helping reduce domestic prices of consumer goods as well as production costs. However, the decline in world commodity prices in 2016 is forecast at lower than in 2015. Consequently, the gap between inflation and core inflation will not be as large as in 2015.

Macroeconomic stability maintained in the last three years also helps to stabilise distress for inflation among the population.

Aggregate demand in 2016 is expected to increase over 2015, thereby affecting inflation. However, the increase is not large enough to be of concern, even when taking into account the impact of wage increases of public servants in 2016.

The commission forecast that core inflation in 2016 will not be much higher than in 2015, sitting at around 3%, and inflation will be lower than core inflation, at around 2-3%, compared with the goal of controlling inflation at below 5% set by the National Assembly.

Transport Ministry's GrabCar pilot project launched

GrabTaxi Co. Ltd., will implement a pilot scheme on the application of information technology in support of the management and connection of commercial passenger transportation via the GrabCar project from this month.

Under this project, GrabTaxi will be the first and only unit allowed to provide e-contract based cars with fewer than nine seats. Other commercial passenger transport firms will require a contract in order to participate in the project.

The GrabCar pilot project, which was submitted to the Ministry of Transport (MoT) in July 2015 and approved by the prime minister in October, will be carried out in five cities and provinces of Hanoi, Ho Chi Minh City, Danang, Khanh Hoa and Quang Ninh from January 2016 to January 2018.

mot’s grabcar pilot project launched hinh 0

The need to develop information technology (IT) being applied to transportation services in Vietnam has become more evident lately as LiveTaxi, TaxiNavi, Ahamove and Vinasun have already moved to replicate GrabTaxi's success by creating proprietary e-contract apps. However, these software applications have revealed several shortcomings and inconsistencies with current regulations on trading and business conditions for automobile transportation services.

This GrabCar project is considered an important practical basis for fine-tuning the legal regulations related to IT services supporting commercial automobile transportation operations, particularly the state management of contract-based transportation and tourist transportation services.

"The project aims to make transport operations more transparent. The service connects passengers to companies that provide transport services quickly and conveniently. It will also help lower fares, curb traffic jams, save energy and cut down on pollution," said Khuat Viet Hung, vice chairman of the Vietnam National Safety Traffic Committee.

Sharing a similar view, Emily Thu Do, marketing director of GrabTaxi Co. Ltd., the GrabCar application provider, added that, "This MoT decision not only facilitates participating entities but also shows the determination of the ministry to improve the business environment and enhance the competitiveness of businesses.”

Established in Malaysia in 2011 with the name MyTeksi, GrabTaxi headquarters is based in Singapore and operates in 26 cities across six ASEAN countries. In Vietnam, the service has been offered in Ho Chi Minh City since February 2014, in Hanoi since May 2014 and in Danang since June 2015.

Real estate inventory drops as market deals taper off

The real estate sector reported a reduction of VND1.75 trillion (USVND1,738,386 million) in inventory in January from last month to an estimated value of VND49.1 trillion VND (VND48,906 billion).

The Department of Housing and Real Estate Management under the Ministry of Construction said that vibrant transactions in the real estate market have tapered off in property inventories in the month.

The highest inventories were recorded in residential land with over 6 million square metres (sq.m) worth more than VND20.8 trillion (VND20,676,123 million), followed by town houses with 7,474 units valued at VND13.27 trillion (VND13,193,505 million). Unsold apartments were calculated at 7,520 units worth VND10.6 trillion (VND10,537,020 million) while that of commercial land was at over 1.5 million sq.m, equivalent to nearly VND 4.4 trillion (VND4,374,864 million).

Unsold properties in HCM City were valued at VND9.5 trillion (VND9,445,527 million), a decline of VND621 billion (VND617,994 million) from December 2015. Most of the inventories were seen in the apartment segment with 3,952 units (VND6.7 trillion), townhouses with 399 units (VND1.1 trillion) and residential land with 265,000 sq.m (VND1.2 trillion).

Meanwhile, Ha Noi saw a total inventory value of ND6.56 trillion (VND6,522,282 million), falling VND191 billion (VND188,955 million) from the previous month, mainly in townhouse inventory with 2,129 units worth VND6.26 trillion (VND6,202,170 million). However, thanks to good liquidity, low inventory was reported in the apartment segment with 268 unsold units worth VND299 billion (VND297,882 million).

The Department of Housing and Real Estate Management under the Ministry of Construction said that vibrant transactions in the real estate market have tapered off in property inventories in the month.

The highest inventories were recorded in residential land with over 6 million sq.m worth more than VND20.8 trillion (VND20,676,123 million), followed by town houses with 7,474 units valued at VND13.27 trillion (VND13,193,505 million). Unsold apartments were calculated at 7,520 units worth VND10.6 trillion (VND10,537,020 million) while that of commercial land was at over 1.5 million sq.m, equivalent to nearly VND4.4 trillion (VND4,374,864 million).

Unsold properties in HCM City were valued at VND9.5 trillion (VND9,445,527 million), a decline of VND621 billion (VND617,994 million) from December 2015. Most of the inventories were seen in the apartment segment with 3,952 units (VND6.7 trillion), townhouse with 399 units (VND1.1 trillion) and residential land with 265,000 sq.m (VND1.2 trillion).

Meanwhile, Ha Noi saw a total inventory value of VND6.56 trillion (293.4 million), falling VND191 billion (VND188,955 million) from the previous month, mainly in townhouse inventory with 2,129 units worth VND6.26 trillion (VND6,202,170 million). However, thanks to good liquidity, low inventory was reported in the apartment segment with 268 unsold units worth VND299 billion (VND297,882 million).

Property brokers required to pass exam, get certified

Property brokers must pass examinations to get certificates to practise, according to the Circular 11/2015/TT-BXD issued by the Ministry of Construction recently.

This is being done to revamp the operation of brokers in a real estate market showing signs of recovery.

Accordingly, the provincial and municipal construction department would be in charge of organising the examination at least once a year, or they will authorise eligible organisations such as real estate associations.

The certificate would be valid for five years from the date of issuance.

Statistics of the Ministry of Construction showed that there were around 26,000 brokers granted certificates as of last year. Their certificates would be valid for five years from July 1, 2015, the date on which the Law on Real Estate Business 2014 came into force. The law regulated that passing examinations was compulsory to get broker certificates.

Previously, it was much easier to get certified for the practice of property brokerage as brokers were not required to take examinations but were only required to participate in training courses. The loose granting of broker certificates in the past was among the causes for disorderly practices of brokers.

The circular, which would come into force on February 16, also regulates the foundation and operation of the real estate trading floor.

A real estate trading floor must have at least two people holding property broker certificates and have a minimum area of 50 square metres.

The existing real estate trading floor which was founded before the circular came into effect must meet the requirement by July 1, 2016.

Belgium eyes investment expansion

Belgian businesses are expanding investment activities in Viet Nam to grab opportunities when free trade agreements (FTAs) the country has signed come into effect.

According to the Ministry of Planning and Investment, as of 2015, Belgium ran 59 valid investment projects in Viet Nam in 2015 with total registered capital of VND9,381,060 million, ranking 27th among 105 nations and territories investing in Viet Nam.

Last year, the European country had four newly-licensed investment projects and two registering to increase capital.

Belgian Ambassador to Viet Nam Jehanne Roccas said the number of projects invested by Belgian businesses was quite modest compared to other foreign investors in Viet Nam. However, with Belgium, this was a considerable figure as the country typically only runs about two to three investment projects in a host country.

She said Viet Nam constituted the brightest spot in Asia, adding that with FTAs, the country's export potential would increase in the future.

Viet Nam is also expected to become a manufacturing hub in the world, so Belgian enterprises will consider increasing their presence and activities in the Southeast Asian country, according to the ambassador.

The Ministry of Planning and Investment has said Belgian firms are investing in various fields in Viet Nam, especially construction, processing and manufacturing.

As a transportation center in Europe, Belgium is keen to share experiences and make investments in the field of logistics in Viet Nam.

It has also partnered with Viet Nam to carry out a number of projects in water and health care over the past few years.

Since the two countries signed an agreement on investment encouragement and protection in 1991, Belgian firms have invested in 17 out of the 63 cities and provinces across Viet Nam.

Its two projects worth VND6,179,940 million in Hai Phong have helped the northern port city become one of the leading localities nationwide in FDI attraction.

Bac Ninh province comes second with a Belgium-invested project worth VND933,660 million, followed by HCM City – which attracted the biggest number of projects from the European country, but only small-scale ones (each worth approximately VND8,892,000,000).

In the industrialisation and modernisation process, Viet Nam has big demand for developing transportation, electricity, and mechanics, which are the strengths of Belgium.

Vincent Decuyper, a member from Belgium's Solvay corporation, which is active in the field of chemicals and materials, said the group defines Viet Nam as a good market to expand operations in the Asian region.

He added that foreign chemical companies have been shifting their investment to Viet Nam, so his corporation is following that trend.

To prepare for long-term operations in Viet Nam, the Belgian firm recently held the "Solvay Vietnam Days" to explore opportunities in the market, especially in the fields of oil and gas, fertilizer, chemicals and milk.

Apartment proposal draws mixed reactions

The construction ministry is drafting a circular about the classification of apartment buildings, which is drawing mixed opinions from both experts and developers.

According to the draft circular, apartment buildings that were put into use from the beginning of July 2015 would be classified into A, B and C.

The ministry's housing and real estate market management department said the classification would be based on four criteria.

These four criteria are planning and architecture (which includes connectivity to school, hospital, public transport and park, besides surrounding landscape and area); technical and social infrastructure (which include fire prevention system, water supply, elevator capacity and parking space, besides lighting system); apartment quality (which includes quality of construction and equipment); and management service quality (which includes security, facilities and operational quality).

Class A will include starred apartment buildings that score 90 to 100 points; Class B will have apartments with scores from 80 to below 90 points; and Class C will have apartments that score below 80 points but are complying with the existing standards.

The draft circular said the classification would be implemented by provincial and municipal departments of construction.

The "stars" would be reviewed every five years, the draft said.

The draft is attracting mixed reactions.

Tran Duc Phuong, director of the Nam Tien Real Estate Company, said the classification of apartment buildings was necessary, as it would help prevent investors from exaggerating the quality of their projects.

Similarly, Nguyen Xuan Quang, chairman of the Nam Long Real Estate Company, said the criteria for apartment classification were in line with international practices and would contribute to cleaning up the property market, in which project quality was a vague factor.

"However, it is important to have measures to prevent shady behaviour during the classification of apartment buildings," Quang said, adding that an independent organisation should be founded to verify the set of criteria and classification.

Le Hoang Chau, president of the HCM City Real Estate Association, said the draft must clarify standards for high-end apartment buildings. Currently, many investors classify their projects as high-end units to push up prices, even though the classification is not justified.

Chau said the draft proposal still had unclear and impractical regulations, such as specifying the minimum area of high-end apartments as 60sq.m, which needed to be revised.

Nguyen Dang Son, deputy director of the Institute of Urban Research and Infrastructure Development, said the classification of apartment buildings should be done only for evaluation of quality that follows common standards as recommendations to home buyers.

Son said the prices should be decided by the market's supply and demand law, while service quality should be negotiated between the operators and the clients.

The classification regulations must be strict to prevent investors from lobbying to get higher classifications for their projects to push up prices to an unreasonable level.

Nguyen Trong Ninh, director of the Housing and Real Estate Market Management Department, said the draft proposal was expected to be issued at the beginning of the second quarter of this year. The draft proposals were incomplete and needed to be improved, Ninh said.

He said the classification of apartment buildings could be optional, adding that if developers needed to get a star classification for their projects, they could register for classification.

Vietjet launches 1 million cheap tickets

To welcome Vietnam’s Tet holiday, Vietjet will offer 1 million cheap tickets just from VND 0.00.

The program will run from February 1st to 3rd, 2016. The promotion is applied for all passengers flying with Vietjet on the airline’s domestic routes and international routes connecting Seoul, Taipei, Singapore, Bangkok and Yangon from February 16th, 2016 to March 31st, 2016 (excluding public holidays).

Tickets can be booked at www.vietjetair.com (also compatible with smartphones athttps://m.vietjetair.com) or at www.facebook.com/vietjetvietnam (just click the “Booking” tab). Payment can be easily made with Visa, MasterCard, JCB, American Express, and ATM cards issued by 24 Vietnam banks that have been registered with internet banking. 

Industrial production slows down in January

Month-on-month growth of the country's index of industrial production (IIP) in January stood at 5.9 per cent due to a decline in consumption in both, domestic and export markets.

According to the General Statistics Office (GSO), the rise remained lower than that in the past years, excluding January last year, when the index slid 2.8 per cent.

The GSO experts attributed the slowdown to a decrease in demand which caused the consumption index of the processing and manufacturing industry, which accounts for 70 per cent of the total national industrial output, to increase only 11.9 per cent, down 0.7 per cent against the previous month.

Besides, a long New Year holiday in January also caused a slowdown in domestic production, the experts said.

In January, power production and distribution posted the highest increase of 13.2 per cent, followed by the processing and manufacturing sector with 8.2 per cent.

However, the month saw production in the mining industry decline 4.2 per cent. Exploitation and production of crude oil alone, the main staple of the mining industry, declined 8.5 per cent due to a plunge in oil prices in the world market.

In the manufacturing sector, production of mobile phones and motorcycles was also down nearly 11.5 per cent.

However, some industries still reported high growth in January. These included automobiles at 39.9 per cent, television at 26.2 per cent, steel products at 21.3 per cent and animal feed at 18.4 per cent. Other products that witnessed high growth of between 10 per cent and 15 per cent were beverages at 15 per cent, iron products at 14.1 per cent, textiles at 12.1 per cent, and processed seafood at 11.3 per cent.

The IIP slowdown in January also contributed to lowering the inventory index to 9.2 per cent by January 1, 2016, down against the rate of 9.5 per cent on December 1, 2015.

Production of beverages and electronic products reported the highest inventory with a rise of up to 95.7 per cent and 89.5 per cent, respectively.

Despite the IIP slowdown in the first month of this year, many businesses in the processing and manufacturing industry have been more optimistic about this year prospects thanks to improvement in the final months of last year, a GSO survey recently released.

Ho Chi Minh City apartment sales up 47 percent in Q4

Total apartment sales in Ho Chi Minh City reached nearly 7,700 units in the fourth quarter of 2015, up 47 percent from the previous quarter, according to Savills Vietnam’s Market Brief released on January 29.

Sales of Grade A apartments rose 129 percent quarterly. Grade Bs were up 79 percent. Both Grade A and B have reached their highest sales levels in the last five years, thanks to banking support and diversified products.

Meanwhile, the office market performed its best in the past four years.

The total take-up was 60,000 sq.m, up 264 percent from the figure of entire 2014– mostly Grade B and C office space.

This year, more than 71,000 sq.m in six projects are expected to be made available, pushing the total stock up 4 percent from 2015.

Nguyen Toan Thang, Director of the municipal Department of Natural Resources and Environment, said the city collected more than 10.6 trillion VND (481 million USD) in land use fees, up 34.56 percent from 2014.

Nearly 45,000 certificates of land use, home ownership and ownership of other properties associated with land were granted to individuals and households. More than 11,000 were granted to organisations, raising the total number of licences to 1.4 million, or 92.8 percent.

The department also submitted a plan to municipal authorities to reclaim 3,290ha for 491 projects and take back 229ha in 32 slow-progressing projects.-

Fast-moving consumer goods trying to capture domestic market

In recent years, fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) have grown rapidly in both rural and urban areas of Vietnam.

Products like milk, alcoholic beverages, soft drinks, and school notebooks have been a growing share of the domestic market.

This is a major opportunity for Vietnamese enterprises in the field to expand production and markets in 2016.  

Fast-moving consumer goods are predicted to generate about US$140 billion in turnover this year. But international integration is challenging fast-moving consumer goods firms, who have limited financial capacity and are dependent on imported materials.

New free trade agreements could create increased competition for Vietnamese companies in this area.

Le Thi Hoang Yen, director in charge of communications and marketing support for the Nestle Company in Vietnam, said, “Vietnamese distributors and retailers must improve their competitiveness. Small-scale companies and shops used to traditional trading need to be trained to meet the requirements of modernization and consumers’ changing preferences.”

According to Phan Chi Dung, head of the Light Industry Department of the Ministry of Industry and Trade (MoIT), rural Vietnamese whose incomes have grown 44% in the past three years are particularly interested in fast-moving consumer goods.

But he said only 54% of the FMCG companies’ turnover comes from the rural market.

Economist Le Dang Doanh noted, “Vietnam will face severe competition in agricultural and industrial production. Fast-moving consumer goods is the area in which Vietnam has the highest competitiveness and an area which has seen incredible progress."

"To be able to stand firm in the domestic market against products imported from other ASEAN countries, Vietnamese enterprises should increase their coordination and links themselves into a chain of value,” he added.

80% of domestic consumers trust the quality of made-in-Vietnam fast consumer goods and prefer to buy them.

Deputy Minister of Industry and Trade Ho Thi Kim Thoa said domestic businesses should improve their processing capacity and reduce their dependence on imported materials.

She underscored the need for “State management agencies to develop a more transparent market but consumers should protect themselves by giving feedback to companies and management agencies about product origin and labeling. Enterprises must improve their competitiveness, meet consumers’ needs and find ways to protect themselves from fake goods.”

Rural consumers account for 68% of Vietnam’s 90 million people. Increasing market share in rural markets is vital for domestic enterprises, who should further improve their product quality and variety.

Increasing agricultural competitiveness for international integration

Discussion topics at the 12th National Party Congress included ways to increase agricultural competitiveness for international integration.

Delegates said specific measures are needed to realize new international commitments in order to reduce risks and create opportunities for the agricultural sector.

Many delegates agreed with Deputy Prime Minister and Foreign Minister Pham Binh Minh’s report that preparations for domestic production to conform to international commitments have been slow. They agreed that Vietnam should be more proactive in production, technology, and market issues to fully implement WTO commitments and commitments of new generation free trade agreements over the next 5 years.

They said that although agriculture is Vietnam’s strength the sector is facing many challenges in the context of integration. Pham Minh Dao, a delegate from Dong Nai province, said “Increasing productivity, product quality, and scale of production is essential during integration. We should encourage links between farmers and businesses in production and sales and investments in agriculture and rural development.”

Delegate Nguyen Van Cong of Dong Thap province said that despite Vietnam’s recent reforms in agricultural production toward international integration more investment policies are needed with a focus on applied science and technology

“I hope that the Party Central Committee will devise policies to encourage large-scale production and scientific and technological application. This will facilitate business investment in agriculture and rural development. We should have plans to develop agricultural cooperatives to increase productivity”, Mr Cong added.

Delegates said there should be specific strategies for each region to create local specialties for export.    

Remittances pour into Vietnam as Lunar New Year nears

Vietnam’s inbound remittance has been rapidly increasing since the beginning of this week and is expected to rocket next week, when the current lunar year reaches its final days and Vietnamese are ready to celebrate Tet (Lunar New Year).

A director of a Vietnamese remittance company, which is managed by a local joint-stock bank, revealed that the amount of overseas money wired via the firm has hit US$50 million in January, up US$8 million compared to its monthly average in 2015.

A hike in inward remittances has been recorded this month as its ending, when overseas workers receive their salary, also happens to be near the end of the current lunar year, the director explained.

January 29 coincides with the 20th day of the final month of the lunar year. Vietnamese people are on a shopping spree to prepare for the Lunar New Year, which falls on February 8 and is considered the biggest celebration in the country.

Overseas remittances are expected to soar next week, Tran Van Trung, director of DongA Money Transfer, a subsidiary of DongA Commercial Joint Stock Bank, said, adding that money transfers have been on the increase since the beginning of this week, forcing the firm to push its personnel to meet clients’ demand.

According to Nguyen Hoang Minh, deputy director of the Ho Chi Minh City branch of the State Bank of Vietnam, said that inbound remittances often surge between the final quarter of a year and the first month of the following.

Remittances are mainly wired from the United States, Australia and Canada, among which the US is the biggest sender of the money with about US$7 billion in total in 2015, said Tran Thi Tuyet Mai, general director of VietinBank Money Transfer.     

Over 70.8% of Ho Chi Minh City’s inward remittances are directed to local business activities, 21.6% poured into real estate, and seven percent given to families and relatives, according to the southern branch of the State Bank.

Overseas money is being channeled into realty as the industry has warmed up and ranked second in attracting foreign direct investment in Vietnam, Ngo Tri Long, an economist, said.

Another expert, Nguyen Tri Hieu, backed the opinion by saying that overseas Vietnamese as well as foreigners are encouraged to purchase houses in Vietnam, as related policies and requirements have been loosened.

There has been concern over the possibility that the amount of overseas cash sent to Vietnam will be affected because US deposit interest rates were reduced to zero percent in late 2015.

However, many remittance firms stated that their business has not been heavily affected by the reduction.

The World Bank said in its latest report that Vietnam’s inward remittance in 2015 was worth US$12.25 billion while that of 2014 was US$12 billion.

Many banks in Vietnam are trying to increase their inbound remittance flow by expanding their service to non-traditional markets, namely Russia and Taiwan (China), where there is a considerable number of Vietnamese people, businessmen and workers.

Sao Vang Rubber Company falling on hard times

Sao Vang Rubber Joint Stock Company (SRC)’s delay in relocating and expanding the operation of its radial tyre factory makes it lose out on important business opportunities in the radial tyre production sector.

In 2015, SRC revealed its plan to construct a shopping mall and luxury apartment complex on a 62,400-square metre area in Thanh Xuan district, Hanoi and relocate its existing factory to a new area. The plan propelled the company’s share value to VND34,200 ($1.5) per share during the transaction session on November 24, 2015. However, the delay in implementing the plan brought shares down to VND28,300 ($1.2) per share.

SRC will cooperate with Hoanh Son Joint Stock Company from the central province of Ha Tinh, which operates in the trade, transportation, mineral, and construction sectors, to establish Sao Vang-Hoanh Son Joint Stock Company with a chartered capital of VND1.67 trillion ($74.5 million) to provide support for relocating its radial tyre factory to Chau Son Industrial Park in Ha Nam province.

In October 2015, SRC and Vietnam Bank for Industry and Trade (VietinBank) signed an agreement for the relocation project. According to the agreement, VietinBank pledged to arrange a credit limit of VND3.1 trillion ($138.3 million), or 80 per cent of the project’s capital.

SRC has been harbouring the plan for four years, however, the plan has been delayed because a large majority of SRC’s shareholders disagree with the choice of Hoanh Son Joint Stock Company as a strategic partner.

The delay in developing the radial tyre factory costs SRC in the competition with domestic rivals, namely Southern Rubber Industry Joint Stock Company (CSM) and Danang Rubber Joint Stock Company (DRC).

SRC, together with CSM and DRC, is a 50 per cent-owned subsidiary of Vietnam National Chemical Group (Vinachem).

The total output of the three companies currently makes up 68 per cent of the tyre and tube supply in Vietnam. 10 per cent of this is produced by SRC, 33 per cent by CSM, and 25 per cent by DRC, with the remaining 32 per cent made up of imported products.

SRC is strong in manufacturing tyres and tubes for bicycles, motorcycles, and small-sized cars and CSM produces mostly for motorcycles and medium-sized cars, while DRC targets trucks and specialised cars.

Regarding the radial tyre sector, in 2015 locally-produced radial tyres met only between 60 and 62 per cent of the domestic demand. The figure will increase to between 65 and 67 per cent by 2020, once DRC and CSM increase their maximum capacities to 600,000 and 1,000,000 items annually, respectively.

In the context of the rapid increase of demand for radial tyres, as well as CSM’s and DRC’s expansion plans, SRC has fallen behind in capital and key products. Notably, both rivals’ chartered capital exceeds VND1 trillion ($44.6 million) and are strong in manufacturing tyres for medium-sized cars and trucks, while SRC’s chartered capital is VND182 billion ($8.1 million) only.

Nielsen releases 2015 market and consumer report

Nielsen has released its report summarizing the market and consumers in 2015, focusing on fast-moving consumer goods (FMCG) and trends among consumers as well as the advantages and disadvantages for manufacturers.

Volumes increased throughout 2015, unlike in 2013 and 2014 when there were months when it went into negative. The maximum nominal value growth between quarters was at 4.5 per cent, from the second quarter to the third quarter.

The Consumer Confidence Index (CCI) in the first three quarters was at 112, 104 and 105, respectively, while the Retailer Confidence Index (RCI) was 71, 72, and 76. There were no major changes but the numbers show that optimism among both consumers and retailers remains fragile.

The growth in Vietnam’s economy led to changes in consumer habits. As living conditions have increased the Health factor has become the most important for consumers when purchasing a product.

The was little change in retailers’ concerns, with the three most important being Consumer Off-Take, Competition, and Revenue/Margin.

From the retailers’ point of view there are a number of matters to note.

The beverage market grew strongly in 2015, with 9 per cent growth, whereas other products such as personal care, home care, and food only grew 1 to 2 per cent.

The number of small-format modern convenience stores tripled over the year, from 147 to 465.

Consumers now pay more attention to lifestyle quality and want to enjoy life as much as they can. Following tradition, however, many still put their money into savings, implying there are still a lot of products they can afford.

Rural areas were a source of growth last year. As urban markets have been exploited for a number of years manufacturers have tried to identify new markets.

The KAfe acquires Mint Cupcakes Creations

Vietnamese food startup The KAfe Group, which secured a $5.5 million Cassia Investments-led Series A funding arrangement in October last year, has acquired local cupcake chain Mint Cupcakes Creations (MCC), a representative of The KAfe confirmed with VET. The value of the deal was not disclosed.

MCC has good products and a good business model, the representative said in explaining the acquisition.

It has also redefined the dessert niche in the local food and beverage industry, which is a popular model around the world and includes Georgetown Cupcakes in the US and Hummingbird Bakery in the UK.

“Focusing on one product helps MCC create their own market and be creative in meeting customer needs and this is particularly suitable with the motto of innovation and creativity in the culinary industry The KAfe pursues,” the representative added.

KAfe Group Limited is the first urban fusion cafe chain in Vietnam offering fresh, affordable, and quality international casual dining for affluent and trendy consumers.

Founded in 2013 the company currently operates a range of outlets in Hanoi and Ho Chi Minh City under four brands - The KAfe, KAfe Village, KAfe Box, and The Burger Box, as well as its beverage merchandise The KAfe Cup and The KAfe Pressed.

KAfe Group emphasizes fresh, unprocessed, and traceable food to offer customers a new and modern lifestyle that is healthy and balanced, through a fresh and seasonal menu featuring high-quality ingredients served in modern, stylish outlets for a delightful all-day experience.

In 2016 KAfe Group will continue to expand the KAfe chain to more cities while providing new models like Burger Box, KAfe Box, and Mint in Ho Chi Minh City.

Jan retail sales at $13.4 billion

Figures from the General Statistic Office (GSO) put retail sales of goods at VND226.6 trillion ($10.2 billion), an increase of 4.1 per cent month-on-month and up 12 per cent year-on-year.

Garments, footwear and hats recorded the highest monthly growth, of 6.2 per cent, followed by food and household appliances with 5.6 per cent and 5.1 per cent, respectively.

Compared with January 2015, household appliances recorded the highest growth, of 15.1 per cent, followed by garments, footwear and hats with 12.9 per cent and food with 11.5 per cent.  

Revenue from accommodation and catering services in January was VND35.1 trillion ($1.6 billion), up 2.6 per cent against December and 10.5 per cent higher year-on-year. Tourism revenue was VND2.2 trillion ($99.1 million), up 0.3 per cent year-on-year but down 13.5 per cent compared with December.

Tourism revenue in Hanoi and Ho Chi Minh City fell 2.2 per cent and 21.4 per cent, respectively, against December.

The GSO noted that the Lunar New Year (Tet) is approaching and this pushes up consumption demand. Enterprises must stock up on goods to meet the rising demand at this time.

It also recommended that local authorities strengthen inspections of and control over the market to prevent speculation and also implement policies to stabilize the price of essential goods.

January trade deficit at $200 million

January’s trade deficit has been estimated at $200 million, or 1.5 per cent of exports, by the General Statistics Office (GSO). Domestic businesses will record a deficit of $1.8 billion while foreign-invested businesses (including crude oil) will be in surplus, by $1.6 billion.

Total exports in January are estimated at $13.8 billion, a 0.5 per cent increase compared to December and 2.2 per cent higher than in January 2015.

Exports of some commodities grew significantly compared to January last year, with rice increasing 62.2 per cent, seafood 10.3 per cent, and electronic components 10.1 per cent.

The US remained Vietnam’s largest export market during the month, with $3.1 billion, a 17.3 per cent increase compared to January 2015. Following was the EU, China, and ASEAN, with $2.7 billion (1.8 per cent higher), $1.7 billion (24.3 per cent higher), and $1.5 billion (12.4 per cent lower), respectively.

Total imports in January are estimated at $14 billion, down 2.1 per cent against December and 0.8 per cent against January 2015.

Commodities seeing strong declines compared to January 2015 were special vehicles and components, by 80.8 per cent, fuel 17.6 per cent, steel 16.3 per cent, and textiles 13.3 per cent.

China was still the largest source of imports, with $4.4 billion, a 0.4 per cent increase compared to January 2015. Following were South Korea with $2.2 billion (1.8 per cent higher), ASEAN $2 billion (2.8 per cent higher), and Japan $1.2 billion (1.1 per cent higher).

Vietnam recorded a trade deficit of $3.5 billion in 2015, or 2.2 per cent of exports, after three consecutive years of recording a trade surplus.

January FDI approvals off to good start

Foreign direct investment (FDI) activity in Vietnam has been off to a good start as foreign-invested enterprises have registered a total of US$1.334 billion for new and existing projects in January, soaring over 100% year-on-year.

The Foreign Investment Agency (FIA) reported that 127 new projects worth over US$1 billion had been licensed in the year to January 20, up a staggering 157.9% against the same period a year earlier. Besides, investors of 56 operational projects registered to inject an additional US$323.41 million, a year-on-year rise of 19.2 %.

The agency under the Ministry of Planning and Investment said 67.8% of total FDI was pledged for the processing-manufacturing industry in the period.

The art-entertainment-recreation sector came second with over US$210 million (15.7%) though there was only one project licensed, followed by water and power generation and distribution with one new project worth US$59.22 million (4.4%).

FDI disbursements were also high in the period with around US$800 million, rising by 23.1% against the same period last year.

Companies from 24 countries and territories have invested in projects in Vietnam this month. Of them, Singapore took the lead with fresh and additional capital pledges of over US$295 million (22.1%), Malaysia ranked second with US$243.57 million (18.2%), and China came third with US$179.51 million (13.4%).

One of the major FDI projects licensed this month is a computerized lottery project worth US$210.58 million invested by Malaysia’s Berjaya Corporation Berhad in partnership with Vietnam Computerized Lottery Company (Vietlott). The project will launch lotto games, digit games and fast draw games.

The FDI sector posted export revenue of US$9.745 billion (crude oil included), up 3.2% year-on-year and representing 70.6% of the country’s total. If crude oil was not taken into account, January exports of FDI enterprises edged up 5.3% to US$9.6 billion.

FDI enterprises’ imports fell by 1.2% to US$8.15 billion in the period, accounting for 58.2% of the country’s total imports. In all, the sector ran a trade surplus of nearly US$1.6 billion this month.

HCM City customs pledges to protect firms

The HCMC Department of Customs has promised to protect the legitimate interests of enterprises when they export and import goods through ports in the city, heard a meeting in HCMC on January 27.

Exporters and importers are encouraged to inform the customs of their problems caused by customs officers. They can call leaders of customs agencies and even the head of the municipal customs department via the phone numbers on the department’s website or at the customs offices, the department’s deputy head Nguyen Huu Nghiep said.

The meeting was organized to honor 17 export-import enterprises which contributed more than VND500 billion (around US$22.6 million) each to the city’s budget last year.

Nghiep said the customs department will not tolerate improper behaviors of customs officers and will strictly handle violations. Therefore, the agency needs cooperation of enterprises.

To nurture sources of tax revenue, customs officers should help enterprises with export-import procedures, Nghiep noted. The department will create favorable conditions for firms to cut costs and increase profits so that they can help meet the target of collecting VND102.5 trillion (US$4.6 billion) for the city’s budget. This target is VND12.5 trillion higher than last year.

The department will apply risk management methods, quicken the scanning process to enable enterprises to save cost and time for customs clearance, and work with relevant agencies specializing in examining and testing export and import goods in the city.

The agency will boost its smuggling and fraud prevention measures and focus on collecting tax arrears.

The entire customs sector is assigned to collect VND270 trillion for the State budget this year, VND10 trillion higher than the 2015 target.

The customs department said that meeting this year’s target is a tough job due to some unfavorable factors. A massive slump in oil prices has affected tax and fee collections from fuel imports and exports.

The tariff cuts and exemptions offered in the free trade agreements between Vietnam and foreign partners will cut into budget revenues in the city.

The department expects more tariff collections from cars under nine seats, food and beverages, beer and wine, household appliances and other products subject to high import duties.

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

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