BUSINESS IN BRIEF 4/5
HAGL to earn living from rubber, sugarcane

A sizable portion of profits for Hoang Anh Gia Lai Group (HAGL) in the next three years will come from rubber and sugarcane, and a small portion from property projects in Myanmar.

HAGL chairman Doan Nguyen Duc informed rubber, mineral and hydropower began to generate profits for the group in 2012 and their contributions would increase in the coming years. “HAGL will make its living from rubber and sugarcane,” he said at the annual shareholders’ meeting of HAGL held in HCMC last week.

In 2012, rubber brought in revenue of VND46 billion, which is forecast to shoot up to VND512 billion this year and reach VND2.7 trillion in 2015. Meanwhile, sugarcane this year will fetch an estimated VND638 billion, which will sharply rise to nearly VND1.85 trillion in 2015.

This year, HAGL will plant an additional 7,000 hectares of rubber to accomplish its plan for developing a 51,000-hectare rubber area. In addition, the group will grow 4,470 hectares of sugarcane to expand its material zone to 10,000 hectares.

Although rubber prices are going down, HAGL’s rubber sales will not be affected, said Duc, adding that even if prices dropped further, his firm would still obtain profits.

“Through the application of Israeli technology for mechanized cultivation and drip irrigation, almost all rubber plants can be harvested in 12 months, while in Vietnam they can be harvested in only seven months due to water shortage, so the yield is about 30% higher and the cost is only VND23 million per ton,” he said.

Tire producer Michelin has offered to buy rubber latex from HAGL, but the group could only sell 40-50% of its output to Michelin (if the two parties reached agreement). “As rubber is one of the key sectors of HAGL in the future, it is unsafe to sell to only one partner,” said the chairman.

He said sugar produced in Laos was mainly sold to China rather than brought back to Vietnam. The group is seeking partners for export to Europe.

As for hydropower, HAGL will use the profits earned from the operational projects to develop new projects, so that it can prioritize financial resources for property tasks in Myanmar.

HAGL is investing in an office, hotel and apartment complex in Yangon City, Myanmar, set for operation in 2014 costing HAGL 20% of its total capital.

HAGL aimed at a profit of over VND1 trillion for 2012, but it could only achieve VND525 billion in pre-tax profit, down VND1.17 trillion against 2011.

At the shareholders’ meeting, HAGL revealed its revenue target for this year is VND3.62 trillion, with a pre-tax profit of VND1.1 trillion.

HAGL stock (HAG) on Tuesday fell 1.85% to VND21,200 per share, marking the third consecutive decline since April 18.

SCG acquires 85% stake in Prime Group

Thailand’s SCG has recently acquired an 85% stake in Prime Group, a local building material producer, thus becoming the world’s largest ceramic tile maker.

In a statement on the business results of SCG coming out on Sunday, Kan Trakulhoon, president and CEO of the group, said the investment worth VND5.12 trillion, or US$240 million, in Prime Group had turned SCG into the world’s biggest ceramic tile producer in terms of capacity.

The total ceramic tile capacity of SCG in ASEAN nations is currently 225 million square meters, with 48% made in Thailand, 33% in Vietnam, 14% in Indonesia and 5% in the Philippines.

Recently, the Thai group has carried out strategic corporate restructuring, integrating three of its core operations including cement, building materials and distribution into one subsidiary called SCG Cement-Building Materials.

Kan said SCG would further invest in cement-building materials as the market potentials remained considerable.

Last year, cement-building materials brought in US$5.18 billion, accounting for 36% of SCG’s total revenue, and generated a profit of around VND9.37 trillion, US$440 million, half of the group’s total profit. In the next five years, this sector is forecast to be responsible for over 40% of SCG’s total revenue, said Kan.

Before acquiring Prime Group, the group had taken over nearly the entire stake in Buu Long Investment and Industry Joint Stock Company with a cement factory in Dong Nai.

With 18 subsidiaries in Vietnam, SCG earned some VND1.76 trillion, or US$83 million, in the first quarter, up 14% year-on-year thanks to better performance in chemicals, paper and cement-building materials.

SCG is a large industrial group from Thailand active in three main sectors, namely chemicals, paper and cement-building materials. The group is running over 200 subsidiaries with more than 40,000 employees.

SCG began to invest in Vietnam in 1992. Currently, the group has 18 subsidiaries in Vietnam with total assets of more than US$400 million, a staff of over 6,000 members and revenue of US$419 million.

Low-cost homes seen as lifeline for troubled developers

Listed realty developers have come up with new business strategies for 2013 including concentrating more on low-cost homes after a year struggling with slackened housing demand.

Most property companies are looking to the low-cost home segment in their 2013 strategies as local housing demand is rising. In fact, many firms were able to minimize losses last year by shifting investment to this segment earlier.

Financial reports of multiple industry players show that they still earned profits, albeit small, and that the revenues might have come from different sources, from property trading, financial investment to services.

Truong Anh Tuan, chairman of Hoang Quan Consulting - Service - Trading Real Estate Corp., said his firm posted more than VND300 billion in sales and nearly VND20 billion in profits last year. Hoang Quan’s sales and profit are lower than in previous years but its business result was still healthy in the context of the dreary market in 2012 when a slew of stocks were labeled bad or stopped from trading.

Tuan ascribed the positive performance partly to the fact that his company had focused on developing homes for low-income people with a series of projects in districts 2, 12, Hoc Mon and Thu Duc in HCMC.

Meanwhile, the firm offered townhouse lots for sale at VND250 million to VND600 million each in other provinces. For instance, the Cinderella project in the southern province of Ba Ria-Vung Tau created revenues for the developer during 2012.

Hoang Quan announced to take part in the country’s low-cost housing program with a complex project in the Mekong Delta province of Vinh Long and the HQC Plaza scheme in HCMC’s Binh Chanh District.

Similarly, Thuduc Housing Development Corp. (Thuduc House) recorded a consolidated after-tax profit of some VND27.5 billion at the end of 2012, just nearly half of the year’s plan. That was the first time in 11 years that Thuduc House had posted the lowest after-tax profit as a result of the worsened 2012 business situation.

Most revenues of Thuduc House came from management of farm produce markets which posted a growth of 19%, while its sales from realty trading fell sharply. Entering 2013, the enterprise continues to follow the realty industry as the core business but will pay more attention to building low-cost homes like S-Home products.

Facing the same woe, Petro Capital and Infrastructure Investment JSC (Petroland) experienced a challenging year to achieve sales of VND500 billion and a meager pre-tax profit of VND956 million. In 2013, Petroland still has two apartment projects in District 2 and District 7 to be completed and delivered to homebuyers.

Nha Trang eyes new five-star hotel

Tourists traveling to Khanh Hoa Province’s coastal city of Nha Trang will soon have one more accommodation option as the city will build a huge complex which will incorporate a five-star hotel.

The project’s investor Mien Nhiet Doi Nha Trang Co., a joint venture between Toan Hai Nam Co. and Khanh Hoa Tourism Co., has announced the design of Tropicana Nha Trang complex which is located on Tran Phu Street, Nha Trang City.

Korn Architects from Germany won a contest to design the complex after the decision was announced last week in HCMC.

According to the design, Tropicana Nha Trang complex has two 50-floor blocks featuring sails flapping in the sea.

Paul Stoll representing the project’s investor said that around US$200 million will be spent to make a land site of over 10,000 square meters into a complex consisting of 400 five-star hotel rooms, 900 high-end apartments and a commercial center.

Procedures to make it all possible are currently being conducted, and the project is expected to kick off at the start of next year.

After completion in 2016, Tropicana Nha Trang will be a destination for local and foreign tourists and serve as a venue for events and conventions.

Stoll said that with its location and design, Tropicana Nha Trang will receive much attention from investors despite the current difficulties of the property market.

SII proposes to build Tay Saigon wastewater plant

Saigon Infrastructure Real Estate Investment Company (SII) has proposed to construct Tay Saigon wastewater treatment plant for the Tham Luong-Ben Cat-Rach Nuoc Len basin under the build-transfer format.

Luu Van Tan, head of the wastewater management department under the city’s Center for the HCMC Urban Flood Control Program, told the Daily on Tuesday that the plant is set for operation in 2015. Costing around US$80 million,  the facility will treat wastewater of households living along the basin in District 12, Tan Phu and Binh Tan districts with a capacity of 150,000 cubic meters per day.

Under the planning, the Tham Luong-Ben Cat-Rach Nuoc Len basin will have three wastewater treatment plants, which are Tay Saigon, Tham Luong-Ben Cat and Binh Tan with respective capacities of 150,000, 250,000 and 180,000 cubic meters per day.

According to Tan, the city will start work on Suoi Nhum wastewater treatment plant in District 9 next month, and the plant will have a capacity of 65,000 square meters after completion.

Suoi Nhum plant worth around VND700 billion will be operational late next year.

SII was established in May, 2010 after Viet Thanh Construction Investment Company was acquired and renamed. SII plans to invest around VND5 trillion in seven water supply and treatment projects combined with power production in HCMC, Gia Lai, Ninh Thuan, Long An, Khanh Hoa and Lam Dong provinces.

Saigon Port to be equitized in 2014

Saigon Port will be equitized in June 2014, said Le Cong Minh, chairman and general director of Saigon Port Co. Ltd., in response to the Prime Minister’s decision on selling State stakes in first-grade seaports.

As per the decision, first-grade seaports like Haiphong Port, Danang Port, Quang Ninh Port, Saigon Port and Quy Nhon Port will have to sell 25-49% of their shares by 2014.

Quy Nhon Port, Danang Port and Haiphong Port will complete equitization this year.

“The equitization of Saigon Port will begin later because the port is being relocated to Hiep Phuoc,” said Nguyen Ngoc Toi, secretary of the board of members at Saigon Port Co. Ltd.

However, Saigon Port has already started looking for partners to sell its stake even though this is very difficult, said Toi.

Equitization of first-grade seaports is considered a strong measure to diversify resources for seaport development and thus minimize the State investment. Moreover, equitization will improve operational efficiency of seaports, and thus assist the restructuring of the maritime industry and combat the problems faced by the shipping industry.

A maritime expert said seaport equitization would change the model of management and enhance operational efficiency of seaports.

From now to 2014, nearly ten first-grade seaports and other units under Vietnam National Shipping Lines (Vinalines) will be equitized. This means State stakes worth trillions of dong will be put up for sale to private investors.

“In the current context, it is not easy to completely absorb such an amount of capital,” said an expert.

Cambodia eyes Vietnam as key visitor-generating market

Cambodia is eyeing Vietnam as a huge source market for its tourism industry, having attracted as many as 763,000 tourists from Vietnam out of the total number of international arrivals at 3.5 million last year.

Cambodia’s Ministry of Tourism said at a seminar held in Phnom Penh on Wednesday by Cambodia Angkor Air that arrivals from Vietnam in 2012 accounted for 21.3% of the total.

Tekreth Samrach, Secretary of the State of Cambodia’s Council of Ministers and chairman of Cambodia Angkor Air, said that the country’s tourism contributed 20% to GDP and attracted 24% of investment capital.

Despite economic difficulties, the number of international tourists coming to Cambodia is on the rise, jumping 24.3% to over 3.5 million arrivals last year. Such a number was significant compared to only one million arrivals recorded in 2004.

Among the top ten visitor-generating countries for Cambodia’s tourism last year, Vietnam ranked first with 763,000 tourists, followed by South Korea with only 411,000 tourists.

The number of Vietnamese tourists visiting Cambodia this year is expected to amount to 850,000.

However, only 48% of international tourists who came to Cambodia last year traveled by air while the rest traveled by land and by sea, said Tekreth Samrach.

Therefore, Cambodia Angkor Air held the seminar to promote Cambodia’s tourism and the carrier’s air services.

Cambodia Angkor Air is a joint venture between the Royal Government of Cambodia and Vietnam Airlines set up in July, 2009. The carrier having three Airbus A321 and two ATR 72 currently operates three domestic air routes in Cambodia and three international services with 42 flights and 68 flights per week respectively.

The carrier plans to have one more ATR 72 this year and will open several international routes to China, South Korea, Hong Kong, Japan and India.

Last Saturday, Cambodia Angkor Air invited Ly Nha Ky, Vietnam’s first tourism ambassador, to Cambodia to promote destinations of the country to international tourists, especially Vietnamese tourists.

Forest items buoy agro-aqua-forestry export growth

Forest products with export growth of 14.5% year-on-year have helped push up the export turnover of agro-forestry-fisheries items in the first four months by 0.4% despite the declines in both farm produce and seafood exports.

Agro-forestry-fisheries exports this month are estimated at US$2.37 billion, taking the turnover in January-April to US$8.67 billion, says a report by the Ministry of Agriculture and Rural Development.

So far, the major export agro-products have fetched US$4.54 billion, down 6.2% year-on-year, and seafood has brought in US$1.7 billion, down 4.6%. On the other hand, the main export forest items have generated US$1.7 billion, or a growth of 14.5% over the same period last year.

In particular, exports of wood and wooden products have reached US$1.6 billion, up 14.8% year-on-year. Except Germany, the other main buyers purchased a lot more wood-related items in the first quarter, with exports to the U.S. rising 8.6%, China 23%, Japan 17.9% and South Korea 49.7%.

As per the report, the drop in seafood exports is ascribed to the weakened purchasing power of the three largest importers. Seafood exports to the U.S., Japan and South Korea in the first quarter fell by 4.2%, 6.3% and 24.5% respectively, while exports to China and Thailand achieved respective growth of 50.2% and 23.7%.

Meanwhile, most of the major export agro-products suffered a price decline in the first quarter.

The average rice export price in the first three months was US$445 per ton, dipping 12.4% against the same period last year. In the year to date, rice exports have brought in around US$1.04 billion, down 0.2% year-on-year.

As for rubber, exports in the first four months are estimated at US$610 million, a sharp drop of 24.2% over the same period last year. The average rubber export price in the first quarter was slightly above US$2,680 per ton, down 8.7% year-on-year.

Similarly, the average cashew export price was US$6,036 per ton and the price for pepper was some US$6,620 a ton, down 14.6% and 3.4% year-on-year respectively.

Only coffee and tea recorded higher export prices in the first quarter, although the price increases were modest, 4.4% and 7.7% respectively.

The estimated value of coffee exports in the first four months is US$1.3 billion, down 11.1% over the same period last year. Meanwhile, tea exports so far have brought in US$58 million, down 3.2%.

Ninh Thuan says will roll out red carpet to Japanese investors

The south-central coast province of Ninh Thuan promises to offer the best incentives to attract investment from Japanese companies, especially those in the clean energy industries, heard the seminar “Development cooperation of Ninh Thuan Province in the Vietnam-Japan relationship” in Hanoi on Thursday.

Nguyen Chi Dung, Party chief of Ninh Thuan Provionce, noted that the locality was selected by the National Assembly for developing the country’s first two nuclear power plants, with the second plant’s construction to be assumed by Japanese firms.

Therefore, to stay ahead of the next capital influx from Japanese investors, Ninh Thuan has prepared a plan for building Ca Na Industrial Park (IP) covering 1,000 hectares with an aim of making the industrial estate for Japanese investors in the central region, he said.

According to Hirokazu Yamaoka, chief representative of the Japan External Trade Organization (JETRO) in Vietnam, numerous Japanese firms are planning to expand their operation to other Asian nations.

Thailand and China have welcomed the most Japanese investors so far. However, after the historical floods in Thailand in 2011 and the Chinese minimum wage hiked to US$300 a month, Vietnam has become another attractive investment destination to Japanese entities.

To attract Japanese investment, Vietnam needs to have stable macroeconomic conditions and create a healthy investment environment including applying investment incentives, developing human resources and focusing on infrastructure improvement, he noted.

Ninh Thuan Province has attracted only 13 foreign investment projects totaling some US$500 million over the past five years, with only one project by Japan.

“There is a high possibility that nuclear power plant projects will change Ninh Thuan’s economic situation for the better,” Yamaoka insisted.

Motonori Tsuno, chief representative of the Japan International Cooperation Agency, committed at the seminar that Japan will apply the latest safety standards to Ninh Thuan nuclear power plants in the context that the earthquake and tsunami disasters in Japan’s Fukushima have sparked public concerns over the facilities’ safety.

Ninh Thuan Province’s chairman Nguyen Duc Thanh informed his locality will set up a university meeting international criteria as the two local nuclear power plants alone need up to over 5,000 workers.

The province will seek to lure investment into six major industries to make a breakthrough in economic growth in a rapid and sustainable way. Among these, four economic sectors that play a key role socio-economic development are clean energy, tourism, agro-forestry-fisheries, production-processing and education-training and construction-real estate trading.

Investors deem PPP format still risky

Investors think they will face more risks from the public-private partnership (PPP) format in Vietnam than in other countries, said Bill Magennis, lawyer at Allens Pte Ltd.

Therefore, Vietnam should minimize the risks to investors through law amendments, said Magennis at a workshop on PPP held in HCMC on Thursday.

The lawyer with 25 years’ experience of working in Vietnam and participating in multiple build-operate-transfer (BOT) projects here named a number of factors that are deemed risky for investment in PPP projects.

Land is one of the risks as it is not guaranteed that site clearance and compensation have been done for investors to immediately carry out projects. Many projects in Vietnam have been put on hold due to site clearance problems, while in Australia the government always provides investors with cleared sites.

In Vietnam, several State agencies, like the ministries of industry-trade and finance or the central bank, are involved in one project, easily leading to confusion. Foreign investors want only one agency in charge.

For the success of a PPP project, Magennis proposed the Government pay attention to its progress since a lot of projects in Vietnam have fallen behind schedule, pushing up costs and posing more risks.

Financial arrangement before PPP contract signing is also important. Many investment contracts have been signed even when funding is not secured, he explained.

Jonathan Pincus, economist from the U.S. Harvard Kennedy School’s Vietnam Program in HCMC, said his colleague had studied infrastructure development costs in Vietnam. The results show that the cost of building an expressway in Vietnam, such as Danang-Quang Ngai Expressway, is much higher than the cost in China and the U.S. (five times higher than in the U.S.).

This is ascribed to the costs of site clearance and compensation, bridge construction and some other unexplainable costs. Therefore, investors will hardly gain profits from PPP projects, said Pincus.

The aforesaid risks, together with the risks related to exchange rate and future revenue, should be foreseen and then discussed and specified in the contracts signed between investors and the Government, said the above two experts.

The workshop on PPP is part of the 4th Regional Working Group Meeting of the Lower Mekong Initiative (LMI), taking place in HCMC on April 25 and 26. PPP is considered as a promising way for infrastructure development and stronger cooperation between the U.S. and the five Lower Mekong nations including Vietnam, Laos, Cambodia, Thailand and Myanmar.

Thu Thiem’s main road construction gets off the ground

Thu Thiem new urban area management board and Vietnam Infrastructure Development and Finance Investment Joint Stock Company (VIDIFI) last Friday commenced work on four main roads in the urban area with a total investment of VND10 trillion.

The four main roads are the six-lane arch avenue, the four-lane central lake-side road, the two-lane Saigon River-side road and an overpass across the southern ecological garden.

These works come under BT (build-transfer) format and are expected to finish in 2016 to connect with eight main functional sections of the urban area.

Besides, the investor will construct 10 bridges, including five on the arch avenue, four on the central lake-side road and one on the Saigon River-side road. The investor has completed bomb and mine clearance and necessary surveys to begin the project in June.

Speaking at the ground breaking ceremony, HCMC chairman Le Hoang Quan said that it takes over 10 years to prepare and evacuate 15,000 households in District 2 to facilitate the project.

Up to now, the city has finished 99% of site clearance. Local government will also try to ensure living conditions for residents affected by the project, Quan said.

VIDIFI held the ground breaking ceremony for the four main roads in January, 2010 but failed to proceed due to complicated procedures and slow site clearance.

The city government has plans to organize a promotion conference into the urban area early next month.

The area has 20 projects underway such as 6,200 resettlement condos, multifunctional tower, international convention center and central square.

Retail sales grow mildly on sluggish demand

Total retail sales of goods and services in the year to date have picked up a mere 4.6%, excluding the price hike factor, says a report by the General Statistics Office on Sunday.

Such a growth rate is modest compared to the average of 7% in recent quarters, pointing to the extremely low demand. Over the same period last year, the total retail sales have risen 11.8%, reaching VND849.9 trillion.

In the first four months, the index of industrial production (IIP) is estimated to increase 5% year-on-year, versus 5.9% in the year-ago period.

The mineral industry sees growth of 2.1% in IIP, while the processing-manufacturing sector records 5.5% and the power industry registers 9%. In the same period last year, their IIPs have picked up 3%, 6% and 12.9% respectively.

IIP in HCMC goes up 3.9% over the same period last year and Hanoi witnesses a rise of 4.7%. The IIP increase of Dong Nai is 7%, Binh Duong 8.6%, Haiphong 2.5%, Bac Ninh 7.6%, Vinh Phuc 15.1%, Can Tho 5.8%, Hai Duong 7.7% and Danang 10.7%.

As of April 1, the inventory index of processing-manufacturing had edged up 13.1% year-on-year. Other industries with strong inventory growth are beverages (41.5%), motorized vehicles (35.2%), furniture (35%), chemicals (26.6%), electrical equipment (22.1%) and medicine (17.9%).

The inventory index stood at 73.4% in March and 77.8% in the first quarter.

April records a trade deficit of around US$1 billion, or 10.3% of the total export turnover. Trade deficit in the first four months is put at US$722 million, or 1.8% of the total export turnover.

U.S. offers US$53 mil. for Lower Mekong projects

The U.S. government grants US$53 million to the projects on environment and water, health, education, connectivity, agriculture-food security and energy security in five Lower Mekong countries including Vietnam.

This was informed on Thursday at the 4th Regional Working Group Meeting of the Lower Mekong Initiative (LMI) held by LMI and the Ministry of Foreign Affairs in HCMC. LMI was formed in 2009 on the initiative of the U.S. with six members including the U.S. and five countries in the Lower Mekong Basin namely Cambodia, Laos, Myanmar, Thailand and Vietnam.

At the two-day meeting, 90 LMI delegates are discussing and proposing specific cooperation programs and projects on the above areas to be deployed in the next three years with the funding from the U.S.  LMI will extract US$2 million from the U.S. funding for the fisheries partnership program and US$1 million for a hydropower study of the Mekong River Commission.

Earlier, at the 3rd LMI meeting held in Phuket, Thailand in September 2012, Vietnam put forward the drafts of two projects on groundwater management and water management during the dry season in the Lower Mekong Basin, which were highly appreciated.

In the field of environment and water, LMI has launched the program “Forecast Mekong” and promoted environmental cooperation in order to build automatic monitoring stations to observe climate change in the Mekong Sub-region.

As the LMI nation in charge of environment and water, Vietnam will determine a number of priorities for sustainable management and use of water resources in the region, said Deputy Minister of Foreign Affairs Bui Thanh Son.

Currently, development of hydroelectric dams in the Lower Mekong Basin is drawing a lot of attention because food security for over 60 million people living along the Lower Mekong Basin would be seriously threatened if more dams were built.

Mekong is one of the major rivers in the world, from the Tibetan Plateau running through six countries before forming the Mekong Delta in Vietnam and flowing into the East Sea. Although China has built a number of dams upstream, the downstream nations (Thailand, Laos, Cambodia and Vietnam) maintain the natural flow to provide food to more than 60 million people living along the river basin.

VCCI wants corporate income tax slashed to 20%

Chairman Vu Tien Loc of the Vietnam Chamber of Commerce and Industry (VCCI) has suggested slashing corporate income tax (CIT) rate to 20% from the current 25% from July 1 this year.

Speaking with the Daily on Wednesday, Loc said his agency has submitted to the Government a road map for lowering the CIT rate to 20% to help relieve difficulties faced by local firms. This is also one of the proposals that VCCI will send to related committees of the National Assembly (NA) at the business dialogue forum in the middle of next month featuring 30 Vietnamese leading enterprises and leaders of delegations of the Vietnam Business Forum hosted annually by the World Bank.

Local businesses have run into troubles, Loc said. Over 13,000 enterprises halted operation in the first quarter alone, up 26.1% against the same period last year, the Ministry of Planning and Investment reports.

“Domestic enterprises will continue facing difficulties in the next few months as basic problems are yet to be resolved,” Loc said. He pointed out the crucial problems are the weak competitiveness of companies, overheated economic growth in the past time and shortcomings of the current business environment.

Loc noted that several entities have mainly pursued short-term business goals instead of setting up long-term strategies while governance at big firms is unable to keep up with their large-scale model. Therefore, he said, besides mechanism and business environment reform activities on the part of the Government, local entities need more time to restore their internal power to survive the tough times.

However, Deputy Minister of Finance Vu Thi Mai at the NA Standing Committee sitting last week announced that the Government will only present a road map to adjust the CIT rate down to 22% in the forthcoming meeting and that the adjustment will take effect from next year. And the tax rate of 20% will only be applicable from 2016, she added.

Local enterprises more upbeat on 2013

Vietnam enterprises have now been more optimistic about economic growth prospects for this year, and most of them believe that the economy has improved compared to one year ago, recent surveys show.

Findings from a survey conducted by WVB Vietnam Financial Intelligence Service Company Ltd. (WVB FISL) between late last month and the middle of this month show the Business Confidence Index (BCI) in the first quarter is 114 points, up 31 points from last year’s fourth quarter.

The survey was conducted among 129 enterprises operating in major sectors of the economy, and its results were released on Thursday.

Up to 40% of surveyed enterprises say that the economy is better than 12 months ago while 35% say the economy is unchanged and the rest say it is worse.

In addition, there are up to 71% believing that the economy will be better in the next 12 months while only 9% show worries about the economy’s future.

Such a psychological turning point results from the implementation of the Government’s Resolution 13 on dealing with difficulties of enterprises. Reduced interest rates, loosening policies and lower taxes which aim to remove difficulties are positive results of the resolution, the survey explains.

Among surveyed enterprises, 36% will hire more employees compared to 17% which say they will reduce the number of employees in the coming time.

Besides, the proportions of surveyed enterprises saying they will invest more, maintain their investment costs, and reduce costs for fixed assets in the next 12-month period are 43%, 43% and 14% respectively.

Most of surveyed enterprises believe that their revenues will be higher than those earned in last year’s fourth quarter, with 59% positive. Meanwhile, only 6% of them are worried that the revenues will decline.

Finally, according to the survey, 60% believe to have higher profits in the next 12 months.

WVB Vietnam is under the U.S.-based multinational company World’Vest Base which specializes in collecting and providing financial information and data for banks and financial institutions worldwide.

In another business confidence survey whose results were released on Thursday, the findings are more or less the same.

The business confidence index of Vietnamese enterprises in the first quarter has increased strongly from 26% recorded in last year’s fourth quarter to 40% in this year’s first quarter, according to the International Business Report (IBR) released by Grant Thornton.

The report also points out an optimistic signal, as 56% of enterprises in the report say they will increase their human resources, higher than 44% of last year’s fourth quarter.

Such an increase in the confidence index is similar to the overall optimistic view worldwide with 27% global enterprises say that they are optimistic about the economic outlook compared to only 4% recorded previously.

The confidence index in Southeast Asia rises slightly from 45% to 47% while that of Chinese enterprises rises to 29% from 19%.

Besides, according to the report, the confidence index of the global economy is staying at the highest level recorded since early 2011. The investment sentiment has also improved as enterprises have focused on building platforms for development.

IBR which is conducted quarterly collects opinions from around 3,000 senior leaders of enterprises around the world.

Binh Thuan to receive 123,000 tourists

According to statistics of the Department of Culture, Sports and Tourism of Binh Thuan Province, the locality will lure around 123,600 tourists during this week’s holiday.

The figure is 14% up year-on-year, with 13,000 of the visitors from Russia, Germany, Sweden, Austria, Australia and the U.S.

Although room occupancy is nearly at 100% the prices for
accommodation and services have only been increased 10% compared to normal days. Most of the resorts and hotels in Binh Thuan have special entertainment programs for guests, including vehicle racing on the sand dunes, shopping at Phan Thiet market, city tour in Phan Thiet, visiting Doi Duong sea park, enjoying traditional music of Cham people at Po Sah Inu Tower, seafood buffets and folk games.

As this year’s national holiday is over five days, a lot of students or company staff members have chosen to stay at Tien Thanh-Ham Thuan Nam which is 28 km southwest of Phan Thiet City and La Gi Town which is 64 km from the city.

These locations feature resorts such as Sao Mai, Xom Chai, Bo Bien Vang, Non Nuoc, Saigon-Suoi Nhum, Doi Su, Anh Duong, Princess D’ Annam Resort, Mom Dá Chim and Dat Lanh. The resorts will run numerous activities such as camping, night parties and music performances on the beach.

According to Binh Thuan’s Tourism Association, apart from some luxury resorts in Ham Tien-Mui Ne, other community tourist sites like Hon Rom, Tien Thanh-Ham Thuan Nam and La Gi are also fully-booked for this week.

The province in April is expected to have lured 301,084 travelers which is 12.9% higher year-on-year, 31,300 of which were foreigners. Total revenue is estimated to reach VND473.3 billion.

Investment delays dog Hai Duong power project

Nearly two years after Malaysia’s Jaks Resources Berhad gained an investment certificate for its $2.25 billion coal-fired power plant in northern Hai Duong province, the project has remained standstill due to the investor’s inability to find potential partners.

Jaks Resources Berhad (JRB) has announced that Sanjung Merpati Sdn Bhd, which last December entered subscription agreements with JRB’s subsidiary Jaks Power Holding Limited (JPH) to invest in the 1,200 megawatt Hai Duong power plant in Vietnam, decided to terminate the agreement.

This means China-based Wuhan Kaidi Electric Power Engineering Company, which also entered subscription agreements with JPH to invest in the project last December, is now the solitary company willing to invest in the Hai Duong project.

“Kaidi will be the engineering, procurement and construction (EPC) contractor as well as an investor with 40 per cent equity stake in the project. Such investment by Kaidi alongside JPH creates a strong alignment of interest between the sponsor and the EPC contractor,” JRB said in an announcement.

“Through the proposed joint venture, JRB would also be able to leverage on Kaidi’s experience and track record in securing financing for the project,” it added.

JRB obtained an investment certificate to build the power plant in Vietnam in August 2011 under the build-operate-transfer contract with the Vietnamese Ministry of Industry and Trade. The registered investment capital of the project is around $2.25 billion, currently planned to be financed 80 per cent by debts and 20 per cent by equity. As of March 31, 2013, JRB said it had invested approximately $31 million in the project.

According to the investor, the construction of the power plant, comprised of two 600 megawatt generating units, is scheduled to begin in the first quarter of 2014. The first and second generating units are scheduled to commence generation of power in the third quarter of 2017 and the first quarter of 2018 respectively.

But this is just a plan, the construction of this project now depends on the investment decision of Kaidi. Actually, the Kaidi subscription agreement shall be effective upon preceeding conditions being satisfied or fulfilled on or before June 30, 2013 with an extension of two months. These include the execution of the EPC contract, the approval of the board of directors and shareholders of JPH, and Kaidi obtaining relevant approvals for its investment in this project from the Chinese governmental authorities.

Early last year, JRB had also signed subscription agreements with two companies, Malaysian Island Circle Investment Holding Limited and Chinese Meiya Power Limited, to invest in the project. In the end, both terminated the partnership late last year.

If Kaidi fails to complete the Kaidi subscription agreement or breaches any of the terms of the agreement, JRB will have to continue its lonely search for other new interested partners.

FDI disbursement, attraction rise

In the first four months of this year the foreign direct investment (FDI) inflow to the country has hit $8.219 billion, a 17pct year-on-year increase.

Meanwhile, while the FDI disbursement has reached $3.75 billion, up 3.9pct compared to the same period last year, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

As of April 20, Viet Nam has had 341 new FDI projects, capitalising at $4.873 billion, a 14.6pct year-on-year increase and 121 projects registered to add $3.34 billion to their investment, an increase of 20.7pct against the same time last year.

The FDI inflow focuses o­n 18 industries, particularly processing and manufacturing with 164 new projects and an added capital of $7.413, amounting to 90.2pct of total invested capital.

The real estate sector recorded newly registered and added investment of over $307 million while trade and repairing services attracted more 49 projects with total investment of $127.62 million.

Among 37 countries and territories investing in Viet Nam, Japan remains the biggest foreign investor with total newly granted and additional capital of $3.635 billion, accounting for 44.2pct of the total capital invested in the country.

Singapore, with newly granted and additional capital of $2.331 billion, accounting for 28.4pct of the total capital, is the second while Russia comes third with $1.105 billion, accounting 12.4pct of the total capital.

The most attractive provinces to FDI are Thanh Hoa, Thai Nguyen and Binh Dinh, with $2.8 billion, $2.016 billion and $1.009 billion respectively.

FDI businesses have made a trade surplus of $3.341 billion in the first four months while the country face a trade deficit of $722 million.

Bosch secures coveted hi-tech recognition

Bosch last week announced that it had received an in-principle recognition as a high-technology company from the prime minister, overcoming the last obstacle to continue expanding its investments to 230 million euros by 2015 in Vietnam.

The Prime Minister Nguyen Tan Dung’s in-principle recognition came after reviewing proposals from the Ministry of Planning and Investment, the Ministry of Science and Technology, the Ministry of Finance and the Ministry of Industry and Trade.

The decision means Bosch will pay just 10 per cent corporate income tax on their income for products at its operating high-technology factory in southern Dong Nai province.

“We view the high-technology qualification as an affirmation of Bosch as a global leader in innovation and technology,” said Vo Quang-Hue, managing director of Bosch Vietnam.

Bosch established its first wholly-owned subsidiary in Vietnam in 2008 for trading, as well as the planned investment in a continuously variable transmission pushbelt manufacturing plant.

In 2011, the high-technology plant opened its doors in Long Thanh Industrial Zone in southern Dong Nai province. By the end 2012, Bosch said it had invested approximately 100 million euros in this factory.

The German firm planned to expand its investments to 230 million euros by 2015 through the construction of new production workshops and import new equipment and machinery to raise production capacity to 5.7 million units per year.

“We are heartened by the progressive direction that the Vietnamese government is taking to not only attract new foreign investments into the country, but also to incentivise existing companies to expand their operations within the company,” said Martin Hayes, president of Bosch Southeast Asia.

He believed this decision demonstrated Vietnam as a “pro-investment country” not only to other business divisions within Bosch, but to the rest of the world as well.

Since Vietnam wants to attract more investments from multinational companies, the government has granted the highest possible incentives to transnational companies such as Samsung Electronics, Nokia, Intel and now Bosch.

The Vietnamese government is now also mulling over offering more giant foreign investors alluring incentives to attract important investment projects in the country.

According to the latest draft Corporate Income Tax Law proposed by the Ministry of Finance sent to the National Assembly last month, the Vietnamese government will directly negotiate with foreign investors to offer more investment incentives for their mammoth projects which are due to have big impacts on the country’s socio-economic development.

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