BUSINESS IN BRIEF 4/10

Q3 results boost national indices
 
Vietnamese stocks managed to rally yesterday, with markets seeing improved trading values after a four-day decline.

In the absence of other supporting information, investors kept their eyes on third-quarter earnings, with Viet Dragon Securities Co analysts pointing to a few productive companies, including Vinamilk (VNM), steelmakers Hoa Phat (HPG) and Hoa Sen (HSG), food processor Bourbon Tay Ninh (SBT), Da Nang Rubber Co (DRC), HCM City Securities Co (HCM) and PetroVietnam Technical Services Co (PVS).

However, analysts for the financial information website vietstock.vn warned, "The market may recover slightly, but the downtrend can hardly be reversed."

On the HCM City Stock Exchange, the VN-Index closed up 0.27 per cent to 385.37 points, with more than half of listed stocks adding value. Over 36.5 million shares changed hands, with a total value of VND567.6 billion (US$15.3 million) – an increase of 58.7 per cent over Tuesday's level.

About two-thirds of the 30 leading shares tracked by the VN30 Index rose, including insurer Bao Viet Holdings (BVH), which closed up by 2.7 per cent, and real estate developer Hoang Anh Gia Lai (HAG), which gained 3 per cent. The VN30 advanced by 0.33 per cent to 450.44 points.

On the Ha Noi Stock Exchange, HNX-Index also saw a modest rally, adding 0.46 per cent on the day to conclude the session at 54.19 points. Although the value of trades improved, it remained low at just VND143.8 billion ($6.8 million). Volume was a meagre 20.8 million shares.

The HNX30 Index, tracking the 30 leading shares on the Ha Noi market by capitalisation and liquidity, close up by 1.16 per cent to 100.71 points.

Foreign investors concluded yesterday as sellers on both exchanges by a combined margin of VND19.6 billion ($900,000).

Electricity prices to remain stable in October  

Though a recent resolution has allowed electricity price adjustments every three months, the Ministry of Industry and Trade (MIT) denied an increase in October because the inspection over power production cost has not been completed.
 
At a regular press conference on October 1, Dang Huy Cuong, Director of Electricity Regulatory Department under MIT confirmed the decision not to increase electricity prices this month.

For approval of the most recent increase on July 1, 2012, the Electricity of Vietnam (EVN) had to calculate the total expenses beforehand. To have another price hike, the MIT and the Ministry of Finance must inspect the power production costs of EVN in 2011 and EVN must estimate the total cost for the period of 2013-1015.

After the results of the inspection are finalised, the MIT will make a proposal to the Government for an adjustment plan for the last months of this 2012 and for 2013.

Since September 15, coal prices for local electricity procurers have increased by 28-40%. The price increase is expected to bring the National Coal Mineral Industries Group (Vinacomin) an additional VND600 billion in revenue this year (USD28.5 million).

However, Cuong said the actual electricity price increase will depend on costs from both 2011 and 2012.

Investment fund predicts seven-year term to sell 70,000 apartments   

Vietnam will need at least seven years to sell 70,000 apartments that lie empty if the country does not apply any stimulus measures.

The comments come from Dragon Capital and were included in a report presented at the Autumn Economic Forum recently hosted by the National Assembly's Economic Committee.

Statistics revealed that at present the apartments in Hanoi and HCM City have not yet been sold, however, the research group said the real figure was likely to be much higher.

According to the report, by the fourth quarter of 2011, 69 listed real estate companies owed debts of VND67 trillion (USD3.19 billion) and were having to spend VND13.4 trillion (USD638 million) in interest annually.

Short-term loans in the fourth quarter of 2011 increased to VND26.4 trillion (USD1.25 billion) adding increased bite to the debt schedules. This leaves real estate developers having to source VND39.8 trillion (USD1.8 billion) to pay off their debts in 2012.

Meanwhile, the report showed that 69 companies only had enough funds to pay a quarter of the debt, while their profits were capable of only covering a third of the annual interest.

If the apartments were sold at an average price of VND1 billion (USD47,600), much lower than the prices two to three years ago, the total value of the apartments would reach VND700 trillion, said Head of the Vietnam Economics Institute Tran Dinh Thien, adding that this was a worrying figure which could threaten the Vietnamese banking sector. This would continue to add pressure to local government to deal with the real estate sectors bad debts.

Methanol production at a standstill

Vietnam still has to import 100% methanol for the industrial sector as the nation’s two large methanol projects have yet to get off the ground due to a number of difficulties.

Speaking at a workshop sharing international experience on methanol use in HCMC last Friday, Van Huy Vuong from the chemistry unit under the Ministry of Industry and Trade said that there are around 40 enterprises in the country importing methanol from Brunei, Malaysia and Indonesia at VND15,000-16,000 per liter.

They import from 50,000 to 90,000 tons of methanol each year to meet demands of woodworking, glue production, propylene synthesis and formaldehyde production.

According to the Government’s development plan of the chemistry industry until 2010, the Ministry of Industry and Trade earlier approved construction of a methanol plant in Ba Ria-Vung Tau Province with the capacity of 660,000 tons yearly. The U.S.-based Celanese Company in 2010 also planned to build a US$1.3-billion methanol plant with annual output of one million tons.  

The projects have yet to move as investors failed to buy fuel gas and coal, the two main materials for methanol production. Local coal and petroleum companies only prioritize electricity producers in fuel gas and coal supply, Vuong said.

High production cost is another problem. Nghi Son Petrochemical Refinery Complex in Thanh Hoa Province has plans to build a methanol plant with the capacity of 100,000-300,000 tons a year, using the Red River coal bed. However, the enterprise will struggle to compete with less expensive methanol imported from regional nations such as Brunei, Indonesia and Malaysia.

Local demand for methanol is expected to increase as besides uses in the industrial sector, the product can be mixed with gasoline to reduce prices. Huynh Quyen, director of the Refinery and Petrochemicals Technology Research Center under the HCMC Polytechnics University, said given appropriate management, a 3% methanol mix in gasoline will help the country stabilize fuel supply.

Gregory Dolan, director of the U.S.’s Methanol Institute, said that methanol has been used as a bio fuel product over the past 30 years with annual output of around 17 million tons. The U.S. and Europe allow a 3% methanol mix in gasoline while a 15% ratio is permitted in China.

According to the chemistry department, Vietnam has yet to issue standards in methanol mixing ratio. The Ministry of Science and Technology is composing a draft on methanol mixing. Currently, there are gasoline categories such as E5 with 5% ethanol and E10 with 10% ethanol.

Scientists from the institute said there is no proof of methanol-mixed gasoline causing vehicle fires, even with 50% methanol-mixed fuel products.

Exporters see huge challenges ahead

Despite signs of an economic recovery, local exporters have a lot of challenges extending until next year due to tough competition on the world market and a decline in traditional import markets.

Speaking at a seminar on export difficulties this year and the 2013 outlook, economist Nguyen Minh Phong pointed out many challenges for most key export sectors of Vietnam.

For example, the garment and textile industry is considering cutting this year’s export value target of US$19-19.5 billion as the industry obtained only US$9.7 billion in the January-August period. Local firms estimate to net US$16 billion this year given the current difficult situation.

According to the Vietnam Textile and Apparel Association (Vitas), the nation’s key importers such as the U.S., the European Union and Japan have had low consumption demand. Besides, large apparel providers globally have reduced prices 5-7% to improve competitiveness.

Phi Ngoc Trinh, deputy director of Ho Guom Garment Joint Stock Company, said the enterprise has seen a decline in order quantity, changing manpower and rising export costs.

“To fix the problems, enterprises have to maintain traditional markets and find new importers. We also have to use our stabilization funds to maintain wage payments for employees,” Trinh said.

Economist Phong said that domestic enterprises are suffering an export slowdown. In August, enterprises saw an 8.5% month-on-month fall in exports, resulting in a 1.9% decline in the January-August period. Although imports rose 4.5% compared to July, January-August imports still dropped 8.5%, suggesting a production slowdown of the domestic firm sector.

Le Hoang Oanh, deputy head of the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade, said that up to 26,000 enterprises have dissolved or suspended operations.

Concerning the economic outlook at the end of 2012 and in 2013, most participants of the seminar said that they had yet to see prospects for economic stability. The global market outlook is also gloomy.

Inflation, liquidity concerns arising

Surging inflation and liquidity problems in the banking system are the two most worrisome macro-economic risks that the Government needs to handle in the rest of the year, said the National Financial Supervisory Commission.

In a report, which was used as a reference at the recent Government meeting on the January-September economic performance, the commission called for prudence in management of prices of certain goods and services.

“No price hikes should be made in October to calm the market,” proposed the report.

Inflation in September jumped 2.2% against August, the highest in 16 months, breaking the rule of recent years, said the commission.

The report noted an uptrend of inflation was fueled by the strong need for power price revisions and unpredictable fuel prices.

Moreover, goods prices usually pick up in the final months. Food prices, livestock farming cost and diseases are factors that might affect the consumer price index (CPI).

In addition, some warning signs have emerged in the banking market, requiring close attention, said the report.

Deposit rates in early September tended to exceed the ceiling, implying that some banks were facing liquidity problems. Trading in the inter-bank market is slowing down as the volume in September declined 60%.

“This will force the central bank to have a more flexible policy in supporting the liquidity of the troubled banks, even if it is only temporary,” said the report.

Furthermore, local gold prices are volatile in line with the global market trend and due to the central bank’s ban on gold mobilization and lending at banks effective from November 25. However, there have been no specific policies for handling the issues related to gold after the ban comes into force.

The commission recommended that it is necessary to study the effects that may arise after November 25 when the banks stop lending and mobilizing gold.

German investors find an Asian home

Increasing direct investment from Germany to Vietnam is flagging that the Asian country is becoming the promised land for many German companies.

After years in Vietnam, ThyssenKrupp Group - one of the leading industry manufacturers in Germany - saw huge growth potential which led to a decision for investment expansion in this country.

ThyssenKrupp Materials Vietnam, formerly a joint venture between ThyssenKrupp Materials International GmbH and Vietnam’s Dong Do Metal Company, in June announced that it became a 100 per cent foreign-invested company after the German company acquired all stakes of Dong Do Metal Company.

“The conversion reflects ThyssenKrupp Group’s strong and long-term commitment to the Vietnamese market, especially when Vietnam’s economy and global economy are experiencing a tough time,” said Doan Tuan Viet, general director of ThyssenKrupp Materials Vietnam.

Established in Vietnam in 2007 with initial investment capital of $8 million, ThyssenKrupp Materials decided to increase total investment capital up $20 million.

ThyssenKrupp Materials Vietnam has become one of the leading companies in supplying metal materials for Vietnam. The group has not only expanded in the materials market, but also in other sectors. So far, ThyseenKrupp Group has three companies in Vietnam, namely ThyseenKrupp Materials, ThyssenKrupp Elevator and ThyssenKrupp Polysius and two representative offices.

The rapid economic growth over the past two decades has made Vietnam be an attractive investment venue for investors in Europe, especially in Germany, the largest European economy.

Vietnam’s Foreign Investment Agency reported that as of the end of August 2012, German companies committed to invest in 184 projects in this South East Asia country with total investment capital of around $900 million.

Many well-known German companies have been present in Vietnam for a long time, including Siemens, Schenker, Bayer, Mercedes-Benz, B-Braun, Metro Cash & Carry, Bosch and Messer Group.

Mercedes-Benz is now running a manufacturing facility in Ho Chi Minh City, pharmaceutical producer B-Braun is having two manufacturing facilities in Hanoi. Meanwhile, Metro Cash & Carry opened 17 wholesale centres in Vietnam.

Like ThyssenKrupp Group, many German companies have drawn investment plans in Vietnam.

Robert Bosch last year started investing in a high-tech facility for the production of push belts used for continuously variable transmission in automobiles, at a total cost of $42 million. The firm also announced to build a research and development (R&D) facility in Vietnam. Robert Bosch stated that it would double investment in its pushbelt plant to $132.6 million by 2015.

During the German Minister of Economics Philipp Roesler’s recent visit to Vietnam, Siemens Vietnam – a subsidiary of Siemens Group - signed a contract with Vietnam Motors Industry Corporation for manufacturing an ELFA hybrid bus prototype. Accordingly, Siemens would supply all necessary ELFA components and provide technical support while Vinamotor would prepare the platform and manufacture remaining parts of the bus for operational readiness.

Meanwhile, Germany-based Hellmann Worldwide Logistics, one of the world’s leading logistics providers, is looking for bigger investment opportunities in Vietnam. The firm early this year announced it wanted to establish a joint venture or private-public partnership (PPP) on providing logistics services in the fields of healthcare, fashion and garments, food, electronics, spare parts and specialised logistics services in Vietnam. The joint venture or PPP is set to become the company’s headquarters in ASEAN+3+6+8 and in the region of Trans-Pacific Partnership.

“Hellmann is committed to invest in business joint venture or PPP in Vietnam, becoming a trusted partner of the government and people of Vietnam and contributing to the social economic development strategy in the country,” said Achim Georg Deja, president of Tima International GmBH - a Hellmann affiliate, in his meeting with the Vietnamese Ministry of Planning and Investment.

In the health care service sector, German-based MMS International, specialised in hospital operation and management, is looking for investment opportunities in Vietnam. “We will step into two hospital projects in Ho Chi Minh City and one in Hanoi if things go smoothly,” said Matthias Deters, general director of MMS International.

Another German company, TSB Technology Systems Business AG, is also in the mix. “Hanoi and Ho Chi Minh City are our top targets since most high-paid people are residing here. We are negotiating with some partners to get our investment plans for building quality hospitals in Vietnam up in the shortest time,” said Michael Sprotte, director of the company.

German Minister Roesler, at a business forum held in Hanoi, affirmed German enterprises wanted to increase investment in three sectors including renewable energy, high technology and healthcare.

Most of German companies said that Vietnam could attract more investment from Germany if this country further improved infrastructure systems and legal frameworks.

“Vietnam is moving up rapidly and has invested largely in infrastructure. However, this will remain a challenge in luring foreign direct investment to Vietnam. Vietnam has to further invest in this sector as well as resolve issues related to public investment and financial sector to lure more German investors,” said Christiane Laibach, member of board of management at Kfw Banking Group.

Winds of change need to push wind power sector

German Industry and Commerce Vietnam analysts say German companies have a big appetite for wind energy projects in Vietnam, but there must be more transparent investment policies before German firms muscle-up in this field in Vietnam.

Vietnam has great potential for renewable sources throughout the country. The Vietnamese government is giving greater attention to wind energy projects as part of a solution to the country’s current energy shortage. These sources of renewable energy will partially meet Vietnam’s increasing energy demand.

Wind potential is greater in Vietnam compared to other countries in the region. According to the World Bank’s wind studies for four countries in the South East Asian region in 2001, Vietnam had the greatest wind potential compared to its neighbouring countries such as Laos, Cambodia and Thailand. There are increasing interest and new projects in wind energy from Vietnamese and foreign investors.

At the German-Vietnamese Business Conference taking place on September 19, 2012 in Ho Chi Minh City, the German Federal Minister of Economics and Technology, Dr. Philipp Roesler, Vietnam’s Minister of Industry and Trade Vu Huy Hoang and delegates had discussions on business relationship and economic co-operation between Germany and Vietnam.

Roesler affirmed, “Germany is willing to transfer its expertise on renewable energy to Vietnam.” According to the German minister, Germany had great expertise in the renewable energy field as renewable energy accounts for 20-25 per cent of total energy supply in Germany.

Understanding Vietnam’s determination to increase its renewable energy supply and consumption, Germany will prioritise working with Vietnam in this field with an emphasis on Vietnam’s economic restructuring toward a sustainable economic growth, greater competitiveness and higher production efficiency.

Germany is a leader in technological development in Europe, especially clean energy technology and extensive management experience. Germany presents valuable resources to Vietnam’s economic modernisation and sustainable growth with advanced yet friendly technology.

Although the Vietnamese government has issued several investment policies and incentives, more transparent policies and mechanisms are needed to attract greater investment into Vietnam. The current wind energy project development has only tapped into a small portion of Vietnam’s wind potential.

Some of the reasons for the wind energy project development delay are the lack of policies and mechanisms for wind power selling and purchasing schemes, a lack of consistency and transparency between local and governmental regulatory authorities and weak management and technical competency for a wind energy project development.

The greatest barrier to investment in wind energy projects is the low power purchasing price. The current cost of electricity generated from wind power plants is still quite high due to large technical investment. Until the purchasing price is higher, investment from the private sector into wind energy project is expected to be low.

Phu Quoc scraps delayed projects

Southern Kien Giang Provincial People’s Committee has swung the axe at scores of delayed investment projects on Phu Quoc island.

The province will revoke 54 projects, including the $1 billion high-grade US-based Rockingham Asset Management tourism complex and a resort project of Tan Tao Group, one of Vietnam largest private enterprises.

Meanwhile, the committee said it could reject other 41 projects in Phu Quoc if developers failed to meet some development criteria and developers could not prove their financial ability to develop the projects.

The decision follows a Government Inspectorate of Vietnam proposal for withdrawing 95 projects in the province after it inspected land usage in Kien Giang early this month. The provincial leaders’ decisive move shows their determination to improve the island’s investment climate in Phu Quoc island.

“We want to curtail non-serious developers of their investment projects,” said Van Ha Phong, Chairman of Phu Quoc Island People’s Committee and also head of Phu Quoc Development and Investment Management Authority.

Phong said most revoked projects were still on the paper so the revocation process would not take a long time. “They [developers] just registered to invest here to occupy a site, but did nothing to develop projects,” he added.

Phu Quoc island, 120 kilometres off Kien Giang province, is the largest island in Vietnam. The government wants to make it one of the most attractive destinations for developers to promote the tourism sector there, with 75 projects already granted investment certificates.

The projects capitalised at around $2.2 billion, covering nearly 4,000 hectares. Furthermore, the provincial authorities also gave in-principle approval to 180 other projects in Phu Quoc, making this island cramped. However, the revocation of investment approvals will give more chances for late-comers and serves as a warning for other developers dragging the chain.

“For the projects appropriate to the island development plan, we will call for new developers to replace the rejected ones,” said Phong. In related news, according to the provincial people’s committee, Southern Airports Corporation, the investor of Phu Quoc international airport project, has agreed to put the airport into operation in December after nearly four years of upgrading and building some new utilities for the airport. The airport can handle three million passengers each year.

Japanese investments may change direction

Anti-Japanese protests in China could have a positive impact on Japanese investment inflows into Vietnam.

Murakami Daiken, chairman of Japan Business Association in Vietnam, told VIR Vietnam might see expanded investment flows from Japan. “We are concerned about the current serious situation between Japan and China. It is a fact that Japanese companies operating in Vietnam depend on parts supply or products from China,” he added.

Toyota and Nissan halted production at some plants, while Panasonic reported damage to its operations in China as protesters smashed store fronts and cars in demonstrations sparked by Japan’s purchase of islands claimed by both countries in September, according to Bloomberg.

Seven & I Holdings Co closed 211 stores in China and Jusco has shut 30 outlets. Meanwhile, Fast Retailing Co shuttered 42 Uniqlo shops in China, Bloomberg reported. The anti-Japanese protests raises question whether Japanese firms will hasten the investment relocation from China to other countries like Vietnam.

Hirofumi Miyake, economic counselor from Japan’s embassy to Vietnam, said Japanese firms could increase investments in Vietnam instead of investing in China. Japan is now the fourth largest investing country in Vietnam in terms of committed capital, with $21.7 billion.

Since January 2012, Japanese investors committed to invest in 108 projects and expand investment in 28 existing projects with combined total investment capital of $851 million. Tadashi Okamura, chairman of Japan Chamber of Commerce and Industry, said Japanese firms were still interested in Vietnam and he last week led a business delegation of 100 Japanese firms to Vietnam seeking investment opportunities. However, to attract more Japanese firms who want to relocate investment from China, Vietnam has its own challenges.

“To get new investment, Vietnam must win the competition among investment destinations,” said Daiken, who is general director of Showa Denko Rare-Earth Vietnam. “The Vietnamese government is needed to establish a better investment environment,” he added. According to the Jetro statistics, Japanese foreign direct investment to Indonesia and India this year to date were $3.611 billion and $2.326 billion respectively, both surpassing $1.859 billion to Vietnam.

Airport to see Phu Quoc take off

Phu Quoc international airport is ready to touch down to improve the island’s tourism fortunes.

According to the provincial People’s Committee, Southern Airports Corporation, the investor of Phu Quoc international airport project, has agreed to put the airport into operation in December after nearly four years of upgrading and building some new items for the airport.

The airport covers 905.31 hectares costing VND16.2 trillion ($779.1 million) and can handle three million passengers each year. Along with Can Tho airport, Phu Quoc international airport will help the Mekong Delta region directly connect with cities in Asia.

“Phu Quoc international airport is a break-through aviation work. When operational, it will boost the overall development of Phu Quoc island district and firstly it will help speed up construction pace of a wide range of registered investment projects in the island,” said Le Khac Ghi, director of Kien Giang Department of Planning and Investment.

With an area of 589.23 kilometres, Phu Quoc is considered the island of pearls and will be developed to be compared with Phuket in Thailand or Bali in Indonesia. The island has been catching eyes of a lot of investors, particularly those in tourism.

According to Phu Quoc Island Development and Investment Management Board, Phu Quoc has attracted 299 investment projects which register to cover 10,700ha, most of these projects are in the field of developing tourism, residential areas and urban areas.

Dong Nai labours to work

However, we find it difficult for us to have enough workers even though there were labour sources from those companies which have been busted or decreased production in the province.

Southern Dong Nai province may lack 35,000 labourers needed to meet local firms’ business expansion plans.

Hong Kong-headquartered clothing giant company Esquel Group is having trouble recruiting 1,000 unskilled and skilled workers to its new facility in Dong Nai province.

“With 500 workers, we need 1,000 more when we have more production orders from overseas customers. However, we find it difficult for us to have enough workers even though there are labour sources from other companies which have been busted or scaled down production in the province,” said a source from Asia Garment Manufacturer Vietnam, Esquel Group’s subsidiary in Vietnam.

The world’s leading producer of premium cotton shirts clients includes many top global brands such as Hugo Boss, Lacoste, Nike and Ralph Lauren.

In a similar situation, Dong Nai province’s Nhon Trach I Industrial Zone-based Wha II Vina Company is looking for another 750 workers to be recruited till May, 2013 when its second manufacturing plant’s second phase comes into operational.

This demand, according to Whal II Vina Company, was not a simple story because workers in Dong Nai like to job-hop, especially as the second phase of new facility will start production after next year’s Tet holidays when immigrated workers often leave work for their homeland.

Bien Hoa II Industrial Zone-located Tae Kwang Vina Industrial even announced daily interviews in its production base to grab workers.

The province’s Department of Labour, Invalids and Social Affairs director Dao Ngoc Hoang said in 2012, enterprises in Dong Nai would need around 70,000 new labourers, mainly on garment, foot-wear, processing and electronic sectors. But the lack of local workers will be likely to occur when the province only can provide nearly 40,000 workers.

The Asia Garment Manufacturer Vietnam source said that competition to attract skilled and unskilled workers in Dong Nai’s enterprises was fiercer and up to 50 per cent of the workers in his company were from other provinces.

Also, according to Dong Nai Provincial Department of Planning and Investment’s (DPI) director Bo Ngoc Thu, the lack of workers was hurting the province to lure investors.

Thu said Dong Nai had attracted $1 billion from foreign direct investment (FDI) despite the economic downturn, ranking the province third nationally in attracting FDI after Binh Duong and Haiphong between January and September this year.

Within the first nine months, the province issued 34 new investment certificates for foreign invested projects capitalised at nearly $600 million and approved expanded capital for 44 existing foreign invested firms valued at $445 million. Those projects mainly focused on mechanics, electronic spare parts assembling and food processing.

Tay Ninh turns into the land of broken dreams

Many foreign investors, lured by agricultural sector incentives to southern Tay Ninh province, are in trouble.

The stark reality is only three of 15 agricultural foreign invested enterprises in the province were reported to have enjoyed profits in 2011.

Some $82 million in foreign direct investment (FDI) were pumped into those 15 agricultural projects registered by the firms, covering 3,387 hectares. The projects focus on produce green vegetables, seeds, poultry breeding and processing, rubber cultivation and processing.

The Tay Ninh Provincial Tax Department said agricultural foreign invested firms had reported tax accounts with losses in many years continuously such as Taiwan’s Taichi Biotech, Malaysia’s QL Vietnam Agroresources, Korea’s Dong Nam Agriculture and Korea-Vietnam Agriculture.

In 2011, out of those 15 firms, five recorded losses totaling with a total amount of VND38 billion (around $1.8 million). While the total profit achieved by three others only hit VND4.5 billion ($215,000).

Taichi Biotech, which has a flower and herbal plantation project covering 700 hectares, reported a loss of VND36 billion ($1.7 million) in 2011.

Meanwhile, QL Vietnam Agroresources has invested $18.5 million in a chicken and egg production facility with the capacity of 1 million eggs per day and 75,000 chickens per month since 2008, a 36ha project into . The project covers 36ha and the firm’s disbursement in this project accounted to $15.5 million.

Leong Hong Hing, director of QL Vietnam Agroresources, said that investment incentives in Vietnam’s farming sector were good but there were transport infrastructure problems, unreasonable VAT policy and low purchasing power caused by the economic downturn. The company had a loss of VND1.7 billion ($80,000) in 2011.

QL Vietnam Agroresources enjoyed corporate income tax (CIT) exemption in the first four years of operations and 50 per cent CIT exemption in the next nine years. It also received land lease exemption during the first 11 years.

However, for example, a poor transport system in the country increased logistics costs, said Hing.
The Ministry of Planning and Investment reported that the FDI slice in the agricultural sector had been decreasing.

During 1998-2008, the pie only accounted for 4.24 per cent of Vietnam’s total registered FDI fund, but in 2011 it was 2 per cent and 0.5 per cent in the first eight months of this year, valued at merely $40 million.

$4.5bn petro plan beats impasse

A solution has been found to the land rental impasse hurting a $4.5 billion petrochemical complex in southern Ba Ria-Vung Tau province.

Thailand’s SCG and its partners including Qatar Petroleum International and PetroVietnam have reached an agreement with local authorities to ease the land rental bottleneck of the Long Son complex project.

A Ba Ria-Vung Tau Department of Planning and Investment source said the two sides had agreed to calculate the land rental for 400 hectare site of this petrochemical complex.

“There is no exact rental fee at this time, but this is an important move to push the long-delayed project ahead. The agreement allows investors and local authorities to implement other works such as site clearance and then construction,” he said.

According to the agreement, the source said, the two sides would calculate land rental rates based on the land price issued in 2012 by the provincial people’s committee. This rent excludes costs for infrastructure development. Furthermore, the investors will enjoy land rental exemption during the first 15 years, comprising four years of construction and 11 years of operation.

The Ba Ria-Vung Tau Provincial Department of Finance will soon have to calculate the exact land rental fee for this project. Meanwhile, the provincial people’s committee must prepare a land compensation and site clearance plan conducted after the investors pay the land rental in advance.

SCG, which now holds 46 per cent share of Long Son project, was not available to give comments.

The Long Son petrochemical complex, located on Long Son island, was to have started in 2008 by SCG, PetroVietnam, Vinachem and Qatar Petroleum International. However, in July this year, state-run Vinachem announced to pull out of the giant petrochemical project.

According to a SCG announcement early this year, the complex’s capacity will consist of 1.4 million tonnes olefins from a flexible cracker utilising feedstock as ethane, propane and naphtha, with supporting infrastructure, such as storage facilities, port, jetty, power plant and other utilities.

Furthermore, the cracker will be fully integrated with a wide range of downstream products, including polyethylene, polypropylene and vinyl chloride monomer. The majority of these products will be consumed domestically.

However, Long Son’s construction has been delayed as the investors and the local authorities failed to reach an agreement on the land rental.

The local authorities planned to define the land rental rate at $20 per square metre for the project’s lifespan. However, the investors complained it was higher than $10 per square metre applied for surrounding projects.

Meanwhile, Ba Ria-Vung Tau Provincial People’s Committee claimed that with the total fund gained from the rate of $10 per square metre, they could not afford to develop infrastructure such as roads, electricity and water supplies to the project site.

Exports prove to be a good news story

Vietnam’s exports are painting a bright picture. The General Statistics Office (GSO) last week reported Vietnam’s export earnings in the past three quarters soared 18.9 per cent on-year to $83.8 billion, triggering hope for the beating of the National Assembly’s target of $108.5 billion reaped from exports in 2012.

Agricultural exports increased slightly to $11.1 billion, up 6.2 per cent on-year. Notably, Vietnam’s rice exports have lost from market price fall as the world’s biggest rice exporter had to ship 4.5 per cent more in volume to gain 6.1 per cent less in value compared to the first nine months of 2011.

Meanwhile wood exports promise a better prospect with American, Chinese and Japanese markets expected to import more from Vietnam in the next months, said Dang Quoc Hung, deputy chairman of Ho Chi Minh City’s Handicraft and Wood Industry Association.

Hung said Vietnam wood exports could exceed the $3.95 billion mark in 2011 to reach $4.6 billion this year thanks to such market expansion.

Vietnam’s garment and textile exports grew 8.4 per cent on-year to $11.3 billion in the year’s first three quarters, but the pace was much lower than the 30 per cent rate achieved one year ago.

Ngo Trung Kien, chairman of Sau Gon 2 Garment Joint Stock Company said that meant “enterprises are only working to keep their customers. It is hard to attain [high] growth rate and profits”.

Pham Xuan Hong, deputy chairman of Vietnam Textile and Apparel Association (Vitas), said in 2012’s third quarter, orders from Vietnam’s largest textile and apparel markets including the US and the EU drop by 5 per cent from the second quarter.

Textile and apparel products are among Vietnam’s top export earners. The GSO also announced Vietnam’s imports rose 6.6 per cent on-year to $83.7 billion, resulting in a trade surplus of $100 million.

However, given September’s export earnings and import value of $9.7 billion and $9.8 billion respectively, Vietnam saw trade deficit come back last month after three consecutive months recording trade surpluses.

“I think it [trade deficit] is a positive signal, showing enterprises are boosting business and production for the remaining months of this year,” said economist Nguyen Minh Phong from Hanoi Institute of Socio-economic Development, referring to nearly 2,000 enterprises resuming operation in June and July.

Vietnam to host the fourth CSO Awards in 2012

The Chief Security Officer (CSO) Awards, first event of its kind in ASEAN, will be jointly organised by International Data Group (IDG), Vietnam Computer Emergency Response Team (VNCERT) and Department of Information and Communications of Ho Chi Minh City (DIC) during December 4-5.

The CSO Awards looks for and honours outstanding individuals who are responsible for information security to ensure business continuity, minimise business risks and maximise business opportunities in the enterprises, governmental and civic organisations.

Members of board of judges who are representatives of government and leading information technology and security corporations support to look for and nominate potential CSOs.

Qualified individuals from enterprises, government and organisations may also apply by themselves with the confirmation of their direct supervisor or chief in the organisation.

The event is also supported by National Information Communication and Technology Development Authority of Cambodia, Association of Information Security Professionals of Singapore, Thailand Information Security Association of Thailand and International Information Systems Security Certification Consortium.

To participate in CSO Awards, nominees are required to submit information related to a particular information security initiatives.

This includes general description, benefits for the organisation and the community, the role of the CSO and innovative contributions on implementing such information security.

Nominees can also provide more information related to their projects as illustrative pictures or videos.

Green recycling project begins in Da Nang

The central city of Da Nang has begun an environmental project, All in Green, in an effort to raise awareness of environmental protection in the community.

The project has collected over a tonne of used paper, books, cans and bottles.

As scheduled, the project will include a series of seminars on environmental communications from this month through December.

Phu Yen punishes companies that violate environmental regulations

Five companies in the northern province of Phu Yen were recently asked to terminate their production lines due to violations, according to a statement from the provincial People's Committee.

The manufacturers, all located in Phu Hoa and Son Hoa districts, are Dai Minh, Tri Hue, Hai Phu, Viet Nhat and Thanh Danh.

The statement reported that these companies has used from pollution-causing materials such as diatomite, bentonite, and calcium carbonate stone powder for making their products.

Also, they have not been given permission to use these materials or establish factories the statement said.

The provincial People's Committee has assigned the department of natural resources and environment and other relevant units to fine the cooperatives who leased land to the five companies.

The two districts take responsibility for fining the companies and inspecting any further production activities.

Surging demand drives up gold price

Gold prices in the domestic market have remained much higher than the world market as demand, especially from commercial banks, has exceeded supply.

Industry insiders said that commercial banks are boosting their gold purchase to prepare for the November 25 deadline repayment of gold deposits. According to the State Bank of Viet Nam (SBV) regulations, commercial banks will have to halt mobilisation and lending in gold from that date. Meanwhile, gold deposits are estimated at 4.6 per cent of the banks' total deposits or VND122.5 trillion (US$5.89 billion) at the end of June.

Nguyen Thanh Truc, CEO of Agribank's Gold Corporation JSC (AJC) said his company has converted 2,000 its AAA gold into SJC branded ones but all the sum was sold to commercial banks already.

It was reported that Asia Commercial Bank (ACB), DongA Bank, Techcombank, Eximbank and Sacombank are still continuously buying gold.

As demand exceeded supply, local gold prices continued to rise yesterday to VND47.8 million per tael, roughly VND3 million higher than the world price according to the Vietcombank's rate which yesterday rose VND20 against the previous day to VND20,870 per US dollar.

SJC gold yesterday was listed at VND47.61 million per tael for bid and VND47.8 million per tael for ask, up VND250,000 from the previous day's close.

However, Thang Long gold, produced by Bao Tin Minh Chau company, was quoted at VND44.6 million per tael for bid and VND45.1million per tael for ask, almost unchanged from the previous day's close.

Analysts have been calling the SBV to allow gold imports to stabilise the local market.

US to provide financing for Viet Nam satellite project

The board of the Export-Import Bank of the United States (Ex-Im Bank) said it had voted to authorise a US$118 million direct loan to the Vietnamese Government for the export of a Lockheed Martin Space Systems Company telecommunications satellite and additional goods and services.

"As one of our nine key markets, Viet Nam affords American companies unique export opportunities," said Ex-Im Bank Chairman and President Fred P Hochberg.

The loan, which represents Ex-Im Bank's first satellite transaction with Viet Nam, supported approximately 525 full-time equivalent American jobs, according to Lockheed Martin estimates, and financed export sales totalling $215 million, the bank said in a statement on its website.

"These opportunities promote economic growth in both countries, which in turn supports American jobs in vital US industries. The satellite transaction in particular reflects the unsurpassed quality of American technology and the demand for it abroad," Hochberg added.

The loan is for the export of a VINASAT-2, a Lockheed Martin telecommunications satellite.

The Viet Nam Post and Telecommunications Group (VNPT), a state-owned enterprise based in Ha Noi and acting on behalf of the Vietnamese Government in the transaction, hopes to satisfy the growing demand of the emerging telecommunications and television markets in the region.

"By providing financing for the Viet Nam Post and Telecommunications Group, this Ex-Im Bank loan supports US manufactured satellites and US jobs," said Linda Reiners, Lockheed Martin Space Systems Commercial Ventures vice-president.

"We congratulate our long-term customer VNPT, with whom we have now partnered in the manufacturing of two satellites."

VINASAT-2 is a geosynchronous satellite that was launched on May 15 and recently completed a series of in-orbit testing. Equipped with a payload of 24 active Ku-band transponders, the satellite provides coverage to Viet Nam, Cambodia, Laos, and Thailand.

BNP Paribas will serve as the documentation agent and letter-of-credit bank.

As of the end of FY 2011, Ex-Im Bank's credit exposure in Viet Nam accounted for $185 million of the bank's portfolio. In FY 2012, Ex-Im Bank authorised approximately $1.4 billion to support US satellite exports, exceeding its financing for the industry in FY 2011.

Ex-Im Bank is an independent federal agency that helps create and maintain US jobs by filling gaps in private export financing at no cost to American taxpayers. In the past five years, Ex-Im Bank has earned $1.9 billion for US taxpayers above the cost of operations.

The bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance, and financing to help foreign buyers purchase US goods and services.

Ex-Im Bank approved $32.7 billion in total authorisations in FY 2011 – a record for the bank.

Local firms meet Ukraine partners

Viet Nam and Ukraine have the potential to boost trade and investment, a meeting between businesses from the two nations heard in HCM City yesterday.

Organised by the two countries' Chamber of Commerce and Industry, the event was attended by executives from 15 Ukrainian businesses operating in areas like metallurgy, fertilisers, chemicals, aircraft engines, oil and gas, and others.

Deputy Minister of Industry and Trade Tran Quoc Khanh said, "Viet Nam and Ukraine have a long-standing traditional friendship, and trade between them has surged in recent years to reach nearly US$300 million last year."

The figure topped $175 million in the first eight months of the year, up 17 per cent over the same period last year, he said.

But he agreed with the Ukrainian side that the potential for trade between them remained largely untapped.

Investment in each other's markets also remained low, he said.

The event was a good opportunity for Vietnamese and Ukrainian firms to compare notes and explore business opportunities, delegates agreed.

Valeriy Korol, director of the Ukrainian Chamber of Commerce and Industry's International Economic Department, said only by co-operation and fusing their complementary strengths could Vietnamese and Ukrainian firms achieve global competitiveness.

Hong Kong carrier adds two more flights serving HCM City

Hong Kong-based Cathay Pacific Airway will add two return flights a week between HCM City and Hong Kong from October 31, taking the total number of weekly flights between the two cities to 23.

They will depart HCM City on Thursday and Saturday.

The airline has also unveiled a promotion offering discounts from October 2 to 30 for customers buying with HSBC credit cards

They will get 25 to 40 per cent discounts on tickets from Viet Nam to London, Paris, Seoul, Pusan, Sydney, and Melbourne for travel between November 1 and May 30 next year.

The two signed a deal yesterday.

Dutch Lady announces 5% hike in retail milk prices

Friesland Campina Viet Nam would increase prices of some milk products from 3.8 per cent to 5 per cent on Monday, according to the company.

The price increase this time would apply to milk products such as Dutch Lady Milk 1-litre box and Ovaltine which are not on the list of milk products whose price is controlled by the Ministry of Finance, said Nguyen Ngoc Kinh Luan, the representative of Friesland Campina Viet Nam. Additionally, the price increase was due to increases in input prices and production costs.

Meanwhile, the prices of other FrieslandCampina Viet Nam dairy products would not change so as to retain stability in the local market during the current economic crisis, he said.

Central Highlands province hosts trade, agricultural expo

A week-long agricultural and trade fair is currently taking place in the Tay Nguyen (Central Highlands) province of Dak Lak.

Co-organised by the Central Association of Farmers and the People's Comittee of Dak Lak Province, the event aims to promote the provincial agricultural products and that of other participating localities, as well as to promote trade co-operation.

VietJetAir to begin offering new domestic routes

VietJetAir will open new domestic routes later this year as part of its efforts to meet increasing demand from domestic and foreign passengers, the low-cost carrier announced yesterday.

It will launch the following new routes: HCM City – Hue on November 22; HCM City – Vinh on November 15; HCM City – Phu Quoc on December 20; Ha Noi – Da Lat on December 7.

The airline is also offering a massive promotion by selling 100,000 tickets for just VND10,000 (US$0.47). The promotion is available for passengers travelling on all its domestic routes from October 2012 to 2013.

VietJetAir also announced plans to increase flight frequency on two domestic routes from the country's financial hub HCM City and one flight linking the capital Ha Noi to Da Nang in mid-October. The HCM City – Nha Trang route will have two round trips per day while the HCM City – Da Nang route will increase to three daily round trips. The Ha Noi – Da Nang link will also increase from one to two round trips per day. The route connecting HCM City and Ha Noi will now have eight round trips a day.

 
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