BUSINESS IN BRIEF 16/9

AirMekong offers discount fares on domestic routes

Mekong Aviation JSC (AirMekong) is offering over 220 discounted tickets on its domestic routes each day from now to October 14, the carrier announced last week.

The routes included in the promotion are from HCM City to Buon Me Thuot, Pleiku, Phu Quoc, Con Dao and Quy Nhon as well as from Ha Noi to Da Lat, HCM City, Buon Me Thuot, Pleiku, Con Dao and Phu Quoc.

During the period, the carrier will also increase flights on some domestic routes to meet anticipated demand.

Hau River canal gets refunding
 
The construction of a canal for heavyweight vessels from the sea to the Hau River in southern Tra Vinh Province will begin again under a Build-Transfer contract, with a payback period from 2020.

This investment form was the most reasonable to ensure construction was completed next year, said Transport Minister Dinh La Thang, on a working visit to inspect major transport construction in the province.

He urged project investor Viet Nam Maritime Administration to seek a competent partner for construction.

The administration said a Built-Operation-Transfer method was not suitable as few investors were interested in such public infrastructure and travelling fees were limited by the Government.

The construction of the 40km passage was first kicked off in 2009 with an investment of VND5 trillion (US$238 million) passage from Government bonds. However, by the middle of 2010, construction had ground to a halt due to lack of funds.

Head of Marine Project Management Board 3 Trinh Ngoc Thai said to Dau tu (Viet Nam Investment Review) that construction costs had increased when extra work was included.

He said the project was begun in tandem with the Duyen Hai Thermal Power Plant construction. Sand dredged from the river to open the passage was to be used in the foundation of the power plant in the same district of Duyen Hai.

Also, inflation and changing policies had added to drive up the costs, he said. At present, the estimated cost was VND10 trillion ($476 million).

Experts said, however, the cost was still "acceptable" because of the project's positive impact on the Mekong Delta region's socioeconomic development.

According to the Marine Administration, the Mekong Delta transported 9-12 million tonnes of goods by sea each year but only 30 per cent passed through ports in regional areas. The other 70 per cent went via ports in HCM City and Vung Tau, requiring land transport with freight costs of $10-15 per tonne.

Also, road transportation affected the quality of goods, especially agricultural products, and added to maintenance costs on the southern road network.

The opening of a canal to the Hau River would help reduce transport costs, and make regional products more competitive.

At present, vessels enter ports along the Hau River via the Dinh An passage which can take vessels under 5,000 tonnes. The new 40km canal makes a shortcut from the sea for vessels up to 20,000, passing through the Quan Chanh Bo channel to the river.

It's expected to transport 21-22 million tonnes of goods each year and 450,000-500,000 TEU [twenty-foot equivalent units] of containers each year by 2020.

Company appointed to manage Sunrise City complex

The Property & Management Company (MPC) was appointed by real estate developer Novaland to manage the Sunrise City residential complex, which recently made its debut in HCM City's District 7.

The US$500 million complex, which includes 12 sky-high buildings ranging from 30 to 35 floors, was built by international contractors including Bureau Veritas, Surbana and Kumho E&C.

Headquartered in Ha Noi, PMC currently manages a number of property projects nation-wide with total area of 500,000 sq.m.

Seminar promises stock-market insights

Securities companies and experts will dissect the working of the stock market at Super Stock Day to be held in HCM City later this month.

The event, organised by financial information company Vinabull Co and Entrepreneur magazine, will see 30 booths showcasing financial products and a seminar offering insights into the market.

Several topics will be discussed – such as the role of State and investors in regulating and improving the stock market; investor relations; forecast on the return on investment in the stock market compared to other asset classes (like real estate, gold, foreign currency, bank deposits) in the next five years; transparency; and corporate governance.

Young executives will be targeted to provide information about securities investment.

The event will seek to help investors orient investment towards companies that are transparent and have good corporate governance.

Pham Ngoc Bich, a senior executive at Sai Gon Securities Inc, said most Vietnamese companies were weak in corporate governance.

The Vietnamese stock market was easily influenced by investor sentiment and economic policy, leading to volatility, he said.

But foreign investors did not worry much about these and remained invested in stocks of companies with good growth and good corporate governance, he said.

They did not rate stocks of diversified companies too highly, he added.

Foreign investors account for 20 per cent of transactions in the Vietnamese stock market, which they expect will develop strongly in future.

The event, to be held on September 21, hopes to attract 15,000 individual investors besides organisations.

Focus on the Mekong
 
The mayors of HCM City, Phnom Penh and Vientiane yesterday agreed they would work together towards making the Mekong Sub-region a single attractive tourism destination.

At the same time, they would further strengthen the relationship between the Mekong region countries and increase exchanges with cities outside the region, they said in a joint statement after convening for the first Mekong Sub-region Tourism Cities Mayors Summit in HCM City.

The summit aims to implement "the strategy of sustainable tourism development and to enhance tourism and culture co-operation and development among the cities in the Mekong sub-region," the statement said.

It said the one tourism destination initiative would strengthen "the spirit of friendship, cooperation, and community development for ASEAN solidarity, peace, dynamism, innovation and sustainability."

Residents of HCM City, Phnom Penh and Vientiane would be encouraged to travel among the cities, and authorities would work together in developing tourism products.

The mayors committed themselves to enhancing tourism departments of their cities to "exchange information and experiences in planning, developing and promoting tourism."

The choice of the International Travel Expo- HCM City as a platform to promote common tourism strengths of the Mekong sub-region cities reflected this commitment, they said.

The cities would "encourage and facilitate one another to attend international tourism events held in each city" and also co-operate in training and developing human resources through hospitality student exchange programmes, the mayors agreed.

They would also encourage linking tourism products on the Mekong River with the aim of promoting cultural and tourism exchanges.

All these activities would set the foundation and keep up the momentum for sustainable tourism development in the region, the mayors said.

The opening ceremony of the eighth edition of the International Travel Expo HCM City – ITE HCMC 2012 was held Wednesday evening at the White Palace in HCM City.

In attendance were leaders of the HCM City People's Committee and the tourism sectors of Cambodia, Laos, Myanmar and Viet Nam (CLMV).

Speaking at the ceremony, the Minister of Culture, Sports and Tourism, Hoang Tuan Anh, affirmed that tourism development has become one of the country's key economic activities.

The Vietnamese Government has always worked to create favourable conditions for both domestic and international travel companies to invest in tourism, the minister said.

HCM City deputy chairwoman, Nguyen Thi Hong, as the representative for the host country, said the city has spared no effort to make the ITE HCMC 2012, themed Four Countries, One Destination, a large scale and professional international event. The event is an ideal one for companies from all countries to establish long-term cooperation relationships, leading to the stable development of tourism in the region, Hong said.

Banks forecast to fall short of credit targets
 
The banking sector's credit growth target for the year has been trimmed and adjusted to a very modest rate of between 8 and 10 per cent, but banks are finding it difficult to realise it.

According to the latest figures released by the banking sector, while deposits increased by 10.26 per cent over last year, credit growth has been a measly 1.4 per cent by August 20.

National Advisory Council for Financial and Monetary Policy member Dr Tran Du Lich said the central bank had injected VND180 trillion (US$ 8.57 billion) into the economy by the end of July, and most commercial banks had tried their best to cut their interest rates.

However, this flow happened mainly within the banking sector and only a modest volume was being pumped into the market, he said.

Given the abysmally low figures of the last several months, the credit growth target of between 8-10 per cent that the Government has set for the year-end was almost impossible to achieve, he said.

It would require a growth rate of 2 per cent per month (equivalent to VND100 trillion) during the remaining months of the year, he calculated.

Business demand for capital often increased significantly in the final months of the year, but the rise was not expected to be as dramatic this year in light of large inventories, depressed consumer demand, and shrinking export markets, Lich said.

Exports in the first eight months of the year surged by 17 per cent year-on-year, but the rise was mainly attributable to foreign-invested enterprises, according to the General Statistics Office. While retail sales revenue during the period increased 17.5 per cent, the inventory index remained high at 20.8 per cent.

Many enterprises, already saddled with heavy debt burdens, would only be able to take out new loans if the Government forces commercial banks to refinance existing debts at lower interest rates.

Lich's assessment was made at a recent meeting between HCM City banks and enterprises that sought ways to increase borrowings.

A representative of the Bank for Investment and Development of Viet Nam (BIDV), who declined to be named, agreed that credit had grown so slowly over the last eight months that the annual target was very difficult to reach. Over the last few months, the central bank had continuously applied several methods to pump more money into enterprises, one of which was to allow 10 credit institutions to increase their allotted credit growth targets from 15 and 17 per cent to 25 and 30 per cent, he said.

Meanwhile, commercial banks have vied with each other to launch several preferential credit packages worth thousands of billions of dong with lending interest rates even lower than the rate of short-term loans.

The HCM City Development Joint Stock Commercial Bank (HDBank), for instance, has lowered its interest rate to 8.6 per cent per year for the first three months, lower than the 9 per cent fixed by the central bank for short-term loans.

However, these efforts had not produced the results hoped for, Lich said.

He said interest rates were no longer the biggest obstacle preventing enterprises from taking bank loans.

"Rising inventory is the main cause," he added.

To tackle the inventory problem, it is necessary to have measures that stimulate the market's purchasing power via Government investment channels.

For instance, funds can be set up to enable more people to buy houses on instalment plans.

If such measures were implemented strongly, they could help banks pump more money into the economy, but this should happen at a "proper level" so that inflation does not increase, Lich said.

Senior economist Dinh The Hien agreed with Lich, saying rising inventory was a national problem that needed to be tackled urgently.

If this problem was settled, enterprises wilould able to push up their production and business activities and the economy would benefit, Hien said.

Reasons behind Highlands Coffee's sale to Philippine fast food giant
   
The sale of Vietnam’s popular Highlands Coffee to the Philippines’ Jollibee Foods Corporation (JFC) earlier this year has surprised many.

The details of the deal were announced on January 24 by Jollibee, when it admitted it had acquired a 50 percent stake worth $25 million in Vietnam-based SuperFoods Group from its partner, the Viet Thai International Joint Stock Co. (VTI), which owns Highlands Coffee and operates Highlands Coffee Shops, Pho 24 restaurants, and the Hard Rock Café franchised stores in Macau, Hong Kong and Vietnam.

Highlands Coffee has 54 trendy stores in Vietnam serving Vietnamese coffee and light meals.

According to some merger and acquisition experts, the reasons for VTI’s selling of Highlands Coffee and other high-quality products while they are bringing them annual sales of around $30 million was not hard to understand.

First of all, Jollibee has in turn extended a $35-million loan at low interest rate of 5% to VTI after the sale.

Some people also assume that VTI and Jollibee have co-operated to prepare for the competition with Starbucks which is likely to come to Vietnam in the near future.

According to JFC, its joint venture with VTI aims to offer Asian mass consumers high quality coffee and café experience at affordable prices through the Highlands Coffee Shops and Highlands Packaged Products.

Jollibee said it plans to serve Highlands Coffee in the restaurants of its various brands in order to upgrade the quality of its coffee at prices its consumers can afford.

The Jollibee Foods Corporation operates the largest restaurant chain in the Philippines with a total of 2,003 stores in the country and 468 stores overseas as of December 2011.

SJC seeks to turn jewelry into gold bullion

Saigon Jewelry Co., the country’s sole gold bullion producer, has recently asked permission to turn gold jewelry into SJC gold bars to make up for the short supply, but insiders said this will open the door to smuggled gold.

The proposal was submitted to the State Bank of Vietnam for consideration early this week, but SJC has yet to receive any response, it said.

The country’s largest gold trader said domestic sources of raw material for gold bar production have increasingly fallen short, while the market is full of gold jewelry, which is much cheaper than raw material gold.

“Converting [gold] jewelry into gold bullion will help increase supply and narrow the gap between domestic and global gold prices,” the company said.

It added that it is now a suitable time for collecting jewelry from the public, as gold prices remain high.

SJC also asked to be allowed to use the gold material bought from domestic gold mines to produce gold bullion.

“As the mines all have licenses, authorities can manage the gold production it supplies us,” the company said, adding that the move, too, will help increase supply without affecting the exchange rate.

Industry insiders, however, expressed concerns that once the proposal is approved, smuggled gold will be regularized and thus affect the market as well as the foreign exchange rate.

Tran Thanh Hai, CEO of the Vietnam Gold Investment and Trading Corporation, said the market is now full of the 1-kg gold bullion, whose prices are VND2-3 million a tael lower than SJC bars.

Such a huge source of gold remains unconsumed because the central bank has recently tightened gold bar production, he said.

“If the central bank permits SJC to convert jewelry into gold bullion, the gold smugglers will take the chance and reap whopping profits,” he warned.

“The smugglers will first turn the 1-kg gold bars into jewelry, then sell the jewelry to SJC and rake in money,” a director of another gold trader said.

VietGap logo to be introduced soon

The Ministry of Agriculture and Rural Development has asked the Cultivation Department to build up the logo of Vietnamese Good Agriculture Practices (VietGap) for agro-products farmed at home.

The logo for local farm produce recognised as VietGap products is expected to bring benefits for local farmers who have been decrying that their logos are imitated in the market. The logo will also help local consumers tell VietGap products from other ones.

The Cultivation Department said in the coming time it will organise a nationwide contest to seek the most suitable logo and to attract the attention of consumers towards VietGap products at the same time.

Vo Mai as board member of Song Tien Gap Club told the Daily that such a logo should have been launched from the beginning when the VietGap program kicked off in 2008. However, it is better late than never, noted Mai, who is also vice president of the Vietnam Gardening Association.

Mai said she had since 2008 asked the agriculture ministry to create a logo for local agro-products but relevant authorities have only promised to consider the issue.

In fact, the agriculture ministry has already set up VietGap criteria for tra fish, tea, fruits and pig farming. And it plans to review VietGap regulations for a number of other farm produce to make them suitable with local conditions and international rules in the near future.

Less production, steel, cement stock down

Steel and cement inventories have declined sharply due to a production slowdown rather than an increase in demand.

The volume of unsold cement products is now two million tonnes, down nearly 800,000 against June, equal to a 15-day output, according to the Vietnam Cement Association.

Nguyen Van Thien, chairman of the association, told the Daily that only 31 million tonnes of cement was consumed locally in the first eight months of the year, dipping 8 per cent year-on-year.

“Cement inventory is no longer a concern, but it has become a disappointment, pointing out that several factories have suspended or scaled down their production due to the poor market demand,” said Thien.

Some cement plants that have cut down production are Hoang Thach Cement, currently operating two out of the three production lines, and many Lang Son-based factories with a daily capacity of around 1,000 tonnes having halted production as the producers failed to find outlets for their products.

“It is difficult to give a forecast for the cement industry in the coming time. However, while 49 million tonnes was consumed in 2011, the industry only targets a consumption volume of some 47 million tonnes this year,” said the chairman.

The Vietnam Cement Association and the Ministry of Construction are reviewing cement projects nationwide to reorganise the industry, with an intention to align the cement output with the current market demand.

Under the current planning, cement production capacity will reach 90 million tonnes in 2015, while demand is 75-76 million tonnes, said chairman Nguyen Van Thien.

Cement consumption in 2012 is estimated at 48 million tonnes. With annual growth of 5-10 per cent, consumption would only reach some 60 million tonnes in 2015, much lower than the forecast given in the planning.

Meanwhile, in a report on steel production in the first eight months of 2012, the Vietnam Steel Association (VSA) said construction steel inventories amounted to 316,000 tonnes as of end-August. In the first eight months, nearly three million tonnes of construction steel was produced, down 10.2 per cent over the same period last year.

As for steel pipe, VSA said local makers are in a fierce competition as supply exceeds demand. Only around 19,000 tonnes of steel pipes is now in stock, because producers have cut back on production.

The report pointed to a drastic drop in output of building materials in the first eight months. Specifically, steel and iron production fell 5.1 per cent; stone, sand, gravel, clay and kaolin extraction slid 21.8 per cent; concrete and cement production went down 12.9 per cent; and production of materials made from clay dipped 6.5 per cent.

“As long as the property market is still frozen, building material industries, including steel, will suffer the same fate. These problems cannot be solved in a short time, so building material industries in general and steel in particular will further struggle to survive,” VSA said in a statement.

Local firm replaces Daewoo in resettlement project

Ho Chi Minh City’s government has agreed to a local joint venture replacing Daewoo Binh Khanh Investment Co. in the Binh Khanh resettlement housing project in the city’s District 2 after the South Korean investor withdrew.

The joint venture consists of four local investors, namely Vietinbank Coseco Company, Construction Company No. 1 (COFICO), Thuan Viet Construction and Trade Company and Truong Son Construction Corporation.

At first, Daewoo was to develop the project with 2,200 apartments in District 2. In return, Daewoo was to be allocated a land lot in the Thu Thiem new urban area, but the investor has pulled out.

According to the city’s requirement, the joint venture will have to finish the project and hand over apartments for relocated households next year.

The project is part of a program to provide 12,500 resettlement apartments for the Thu Thiem new urban area. Among projects which are being implemented, Nam Rach Chiec Co. has transferred to the city 1,100 of 1,844 apartments of a 17.3-hectare resettlement project in An Phu and Binh Khanh wards, District 2.

GS E&C works with city over Nha Be Metrocity

Chairman Huh Myung Soo of GS Engineering & Construction (GS E&C) met Ho Chi Minh City  chairman Le Hoang Quan this Monday to discuss how to accelerate the progress of the projects of GS E&C, including the new urban area Nha Be Metrocity.

The urban project got the nod from the Prime Minister in 2008, but now the two sides are still negotiating land rents and land use fees.

The city has handed over 260 hectares in Nhon Duc and Phuoc Kieng communes to the investor. Meanwhile, GS E&C has advanced $93 million of the total $131 million pledged to carry out compensation for site clearance, heard the meeting on Monday.

Regarding different understandings of the payments given in the contract signed between the two sides in 2004, director of the city's Department of Finance Dao Thi Huong Lan explained: “Nha Be Metrocity is not just an investment project. It is related to the field of real estate trading.”

“Therefore, under the prevalent law of Vietnam, in addition to land rents, the foreign investor must pay land use fees for commercial apartments,” she said.

At present, GS E&C cannot kick off the project on schedule due to the slow removal of the high-voltage power line and slow site clearance.

GS E&C initially expected to spend about $189 million on infrastructure development from 2009 to 2010, and then begin construction of other facilities in 2011.

The investor can lease the land use right over the areas with complete infrastructure to secondary investors, or use the land use right as capital contribution to set up subsidiaries with lifespan of up to 50 years.

Besides the Nha Be Metrocity, the two sides also discussed the 27-story building set for development in Thu Thiem in District 2.

Huh expressed his concern: “Based on the planning of HCMC in 2005, we decided to build a 27-story building there. However, the Department of Planning and Architecture recently informed the new planning only allows a height limit of 12 floors.

“If this is the case, GS E&C will have to abandon this project due to its lack of commercial viability,” he stressed.

HCM City, JBIC to jointly set up infrastructure venture

The HCMC government and Japan Bank for International Cooperation (JBIC) on Wednesday signed a memorandum of understanding to establish a joint venture which will invest in infrastructure projects in HCMC.

Under the memorandum, JBIC and HCMC Finance and Investment State-owned Company (HFIC) will set up a financial joint venture to mobilize capital sources for infrastructure projects in the city such as metro lines and elevated roads.

At the signing ceremony, HCMC chairman Le Hoang Quan said infrastructure development would be a top priority of the city in the coming years. The city is in dire need of capital for its metro line projects that are being carried out, he added.

According to chairman Quan, in addition to cooperation in infrastructure development, the city also wants to call for Japanese investments in Hiep Phuoc Industrial Park and parks for supporting industries via JBIC. He also expected JBIC to hold its global conference in HCMC to boost foreign investment.

Tadashi Maeda, special advisor to the Cabinet of Japan and managing director of the Global Infrastructure Financial Group in Japan, said that HCMC was an important gateway for domestic and international goods transport, and thus JBIC decided to join forces with the city to develop infrastructure facilities under the public-private partnership (PPP) format.

According to HFIC, HCMC needs around VND50 trillion each year for infrastructure projects, but the city’s budget can supply only some VND10 trillion.

HCMC Finance and Investment State-owned Company (HFIC) is a State-owned financial institution under the HCMC government’s umbrella and is the successor of the now-defunct HCMC Urban Development Investment Fund (HIFU).

HFIC’s main task is to mobilize local and foreign financial sources to develop infrastructure facilities and major industries of the city.

The deal cut on Wednesday is a quick materialization of a plan put forth by Chairman Quan at a meeting with Tadashi Maeda in July. At that meeting, chairman Quan expressed hope of cooperation with JBIC to set up a financial investment fund or a financial company specializing in mobilizing investments in infrastructure facilities in the city.

According to Maeda at that meeting, JBIC has set up financial firms in India and China which have proved efficient in mobilizing capital for infrastructure development.

Regarding projects in HCMC and southern provinces, Maeda showed his interest in the Long Thanh international airport project as well as water supply and drainage projects.

Elenex Vietnam attracts 200 firms

Around 200 companies will take part in this year’s Elenex Vietnam exhibition in HCMC from September 19-21 under the arrangement of the Vietnam Chamber of Commerce and Industry.

According to the organizer, the exhibition will be attended by large foreign energy firms such as AKSA Power Generation, Genpower Asia, ABB, Rittal and Mekong Machinery. These enterprises are expected to introduce advanced technology and products in power generation at the event.

The biennial event, covering a total area of up to 6,500 square meters at the Saigon Exhibition and Convention Center in District 7, also features international booths from Germany, Belgium, China, South Korea, Singapore and Taiwan.

The exhibition will also introduce Korea Electric Power Corporation and Korea Electrical Manufacturers’ Cooperative in order to encourage local consumers to use their high-quality products, technology and services.

Imports of outdated machinery halted

The Ministry of Science and Technology (MST) has decided to temporarily suspend imports of secondhand, outdated, and pollution-caused machines, equipment, production lines and technologies.

The regulation is applied to the equipment that the Chinese authorities had no longer used in 18 fields, namely iron production, coal refinery, metallurgy of copper, lead and zinc, electrolysis of aluminium, production of calcium carbide, chemical fiber, cement, flat glass, paper, wine, seasoning powder, citric acid, leather, dying and printing.

It is, however, invalid to second hand machines, equipment and line technologies which are imported for non-use purposes like temporary imports, re-importing, transit and trans-shipment.

Since September 15, 2012, Viet Nam Customs only allows the imports of second-hand equipment, machines and line technologies which were recognized by the MST for not belonging to the list of temporary suspension.

Importers have to submit dossiers of import and product origin to the MST for consideration.

VN and Tariff Alliance to launch FTA negotiations

Vietnamese Minister of Industry and Trade Vu Huy Hoang and Deputy Minister of Economic Development of the Russian Federation A.A. Slepnev on September 10 signed the Proceedings on the impact of the Free Trade Agreement (FTA) between Vietnam and the Tariff Alliance (Russia, Belarus and Kazakhstan).

A number of conducted research has shown remarkable potential in the economic relations between the countries in the Tariff Alliance and Vietnam when the FTA comes into effect.

Accordingly, FTA negotiations between Vietnam and the Tariff Alliance will start in the first quarter of 2013.

All the nations concerned are aware of the comprehensive long-term cooperation in trade, economics and investment and commit to the facilitation of trade and cooperation in the Asia-Pacific.

Eximbank named among the world’s top 1,000 banks

The Export-Import Commercial Joint-stock Bank of Vietnam (Eximbank) has been named among the world’s 1,000 largest banks in 2012 by Banker Magazine.

This is the third time Eximbank was honoured on the list. In August 2012, the bank was appraised as the best local bank in Vietnam by AsiaMoney Magazine and was voted as the trademark most favoured by consumers by readers of the Saigon Tiep Thi (Saigon Marketing) News.

In addition, Eximbank was voted among the local banks with the highest credit index in an annual report on Credit Rating of Vietnam Index 2012 by the Chamber of Commerce and Industry and the CRV Company.

Eximbank was established in 1989 with registered charter capital of VND50 billion (equivalent to USD12.5 million) and was one of the first joint-stock commercial banks in Vietnam. The bank’s total assets have so far reached VND186 trillion and the owner’s equity is more than VND15 trillion with a network of 207 branches and transaction offices nationwide. It has established correspondent banking relationships with more than 852 banks and their branches in more than 80 countries around the world.

 
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