BUSINESS IN BRIEF 30/3

Enterprises advised to prepare for FTA with EU

Speakers at a seminar in Hanoi on March 20 urged enterprises to quickly prepare themselves for the new opportunities to be ushered in by the free trade agreement (FTA) between Vietnam and the European Union (EU) which will be concluded this year.

When the pact takes effect, there will be over 90% of Vietnam’s products exported to the EU enjoying zero tax and trade flows between the two sides will increase by 30-40%, they said at the seminar on Belgium’s Wallonie region in Hanoi.

Enterprises should proactively learn about benefits and relevant information from the Vietnam Chamber of Commerce and Industry as well as from partners like the Wallonie Delegation and the Belgian Embassy to Vietnam, they said, adding the Belgian region can act as a gateway to the European market for Vietnamese firms.

Le Ky Anh, trade and economic officer at the Delegation of the EU to Vietnam, said Vietnam and the EU have set a target to conclude negotiations on the trade pact in October when Prime Minister Nguyen Tan Dung visits Europe and attends the Asia-Europe Meeting. Nevertheless, it seems that enterprises do not know much about benefits of the FTA.

Anh said that the current tax rates Vietnam is enjoying mainly originate from the Generalized System of Preferences (GSP) the EU unilaterally offers to Vietnam. However, when Vietnam’s economy grows to a certain level and is more competitive, the EU will gradually remove such incentives.

FTA will bring better market access and more incentives compared to GSP with the zero tax rate on at least 90% of the products, Anh stressed.

According to the EU Delegation to Vietnam, trade flows between Vietnam and the EU will rise by 30-40%. Besides, the EU has surpassed the U.S. to become Vietnam’s biggest importer, accounting for an average of 20% of Vietnam’s total exports.

Goods benefiting the most from FTA are Vietnam’s traditional products such as farm produce, apparels, footwear and seafood products.

Once FTA becomes effective, a strong flow of investment from the EU will also run into Vietnam and domestic enterprises can benefit from advanced technology and huge capital sources.

Besides, the EU’s target is not only in the Vietnamese market but also in ASEAN and if the FTA is signed, it means the EU finds a place for boosting production activities.

“If goods made in Vietnam can enjoy incentives when exported to the EU, other investors in ASEAN will think of Vietnam as a new production base,” he added.

According to experts, these are visible and tangible benefits Vietnam can receive from the agreement.

The Belgian government plans to offer many incentives concerning land, capital and equipment to enterprises of ASEAN countries to open offices in the Wallonie region to get access to the EU market.

According to the Foreign Investment Agency, Vietnam has had 815 overseas investment projects with total registered capital of over US$18 billion, but 40 of them are in the EU market with US$110 million (1%).

Few provincial decisions on investment incentives get beyond limits

Last year saw few provincial governments deciding to offer greater incentives for investors than permitted by law to attract new capital, according to experts of Vietnam Provincial Competitiveness Index (PCI) 2013.

Edmund Malesky, lead researcher of PCI 2013, said the spirit of moving beyond the regulatory restrictions among provincial authorities to fuel growth has been waning. This used to help Binh Duong, Dong Nai and Binh Phuoc provinces gain impressive growth but it was on the wane.

Speaking to the Daily at a ceremony held in Hanoi City on March 20 to publicize the PCI 2013 report, Malesky mentioned reform breakthroughs in the past, such as handing over land to farmers without prior permission from the central Government, which helped the nation pass through tough periods.

Creativity is still out there but at a slower pace, he said.

Malesky noted a number of local governments have made information about land and land use much more accessible.

Dau Anh Tuan, a member of the research group, noticed another breakthrough, saying Ninh Thuan Province’s government has established a ‘one-door’ office, thereby allowing investors to visit one place to get everything done.

However, Tuan said it is not easy to run the model as it heavily depends on local government. “I’m afraid this model would continue to be in place when present leaders take up new jobs,” he said.

According to the report, provincial authorities have reached limits in simple reforms such as issuing business registration certificates and processing market entry procedures. In many localities, it takes investors just one day to get an investment certificate.

Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said that while the easiest reforms have been almost exhausted, the reforms that are deemed as most difficult have remained undone.

Nearly 10 years ago, 33 provinces and cities offered investment incentives beyond regulatory limits set by the central Government to lure investors but central authorities prevented them from doing that, he said.

Speaking at the announcement of the PCI report, business executives expressed concerns over the issue, saying the active and pioneering spirit of provincial authorities in favorable treatment towards the private sector has declined steadily since 2007.

They said they were concerned that the private sector has yet to enjoy a level playing field. Enterprises having connections with local authorities, especially joint stock companies and those whose leaders used to be state officials, often have priority to gain access to land and capital, and win contracts.

Small disbursements of low-cost home loans

A mere VND1.32 trillion of the VND30 trillion amount the Government has approved to make cheap loans for those in need of owning an affordable home has been disbursed, the central bank said in a statement.

Though this disbursement accounts for just 4% of the total committed, it is up 64% from late last year.

In the year to March 15, 2014, banks had pledged to lend VND2.9 trillion to 3,048 clients, with VND1.32 trillion disbursed for 3,023 borrowers.

Regarding corporate clients, Bank for Investment and Development of Vietnam, Vietnam Bank for Industry and Trade and Vietnam Bank for Agriculture and Rural Development signed credit contracts with 18 enterprises to fund 20 projects to lend VND1.775 trillion, accounting for 19.7% of the total for corporate clients. Among these, 12 enterprises with 13 projects had their loans disbursed with VND591 billion.

Late last year, the amount pledged was nearly VND1.24 trillion (13.8%).

According to the central bank, it has taken a host of measures to increase disbursements of low-interest home loans such as lowering the lending rate to 5% per year, considering extending the loan duration from ten years to 15, and relaxing borrowing requirements.

However, this housing loan program is a large and unprecedented one, so unexpected problems cannot be avoided in the implementation process, said the central bank. Therefore, the statement says, the program has yet to meet society’s expectations.

For instance, the program is originally intended to back low-income people but supplies of budget and commercial apartments measuring less than 70 square meters each and priced at below VND15 million per square meter are falling short.

The Ministry of Construction has released a list of 81 projects permitted to benefit from the VND30-trillion program but many of them have yet to get through the approval process, making it impossible for banks to lend to them.

The central bank also said in the statement that it would continue to coordinate with the Ministry of Construction and relevant agencies to deal with the problems that have arisen from the lending process.

Besides, the central bank suggested that provinces and cities should accelerate the process of project approval to increase supply of budget and commercial homes that are smaller than 70 square meters each and offered at less than VND15 million per square meter to meet demand of individuals eligible to benefit from this home loan program.

Many banks have attributed the insufficient home supply to the low percentage of loan disbursement.

Automakers launch new cars to increase sales

Auto assemblers and importers are racing to attract customers and achieve sales targets by launching new car models amid poor sales in the early months of the year.

Most recently Toyota Vietnam has unveiled the all new Vios 2014 after competitors in the grade-B segment such as Ford Fiesta and Honda City came out with new models.

Vios is considered one of the best-selling models of Toyota Vietnam, so the launching of the new models at the year’s beginning will help the Japanese automaker increase its sales this year. Toyota Vietnam expects to sell around 600 Vios units this year.

In addition, to maintain its leading position on the Vietnamese market, Toyota Vietnam says it will continue improving other car products to attract the attention of customers.

Meanwhile, Ford Vietnam plans to bring the compact SUV EcoSport to Vietnam in the middle of this year.

EcoSport which will be assembled at Ford Hai Duong factory will help create a competitive advantage for Ford Vietnam as there is currently no similar product assembled in the country.

According to Ford Vietnam managing director Jesus Metelo Arias, Ford’s studies show that both grade-B cars and SUVs have good growth with 14% and 18% respectively. Therefore, the launching of EcoSport, a combination of grade-B car and SUV, can match expectations of city customers due to its compact size and multiple purposes.

At an event held to introduce Kia New Sorento 2014 last week, leaders of Truong Hai Auto Corporation (Thaco) mentioned the tough competition to get customers. It costs VND998 million while the price of the completely built-up Hyundai Santa Fe is VND1.3 billion and that of the domestically assembled Toyota Fortuner is around VND900 million.

According to Thaco, in addition to unveiling New Sorento, it will launch many products equipped with new technology like Mazda 6, Mazda All New, Kia Morning and Peugeot 3008.

Thaco targets to sell 34,000 units in total this year, with 11,500 Kia units, 7,500 Mazda units and 400 Peugeot units.

The launching of new models or new products, according to automakers, always attracts the attention of customers and pushes up sales.

The competition in the luxury segment is no less fierce. Notably Mercedes-Benz Vietnam will bring to Vietnam 18 products this year compared to ten last year.

Since the year’s beginning, this German automaker has unveiled four new products, including S63 AMG, S400L, A45 AMG and G63 AMG, and received positive feedback from customers. Besides, the production volume of S400L and S500L cars is not sufficient for demand and many customers have to wait until July to take delivery.

According to Michael Behrens, CEO of Mercedes-Benz Vietnam, eight new car products introduced last year helped it obtain sales growth of 65%, making Vietnam a market with the fastest growth of Mercedes-Benz in Asia.

BMW, Audi and Lexus will also import new products to meet the increasing demand of customers in the high-end segment.

Vietnamese consumers snub local plastic products for imported fare

Locally-made household plastic products were losing market share to imported products due to their poor designs and R&D activities, reports the Ministry of Trade and Industry

For example, jn just a short period, a high-class brand of Korean plastic appliances has flooded supermarkets. The brand is competing directly with Vietnamese products, reports Doanh Nhan magazine.

Kim Anh, the manager of a restaurant in District 1, HCM City, said Vietnamese products sold at Co.opmart, Big C and Maximark outnumbered imported products, but they still were losing their market share to products from Thailand or Korea.

A representative from Maximark said local products were 20 to 30 per cent cheaper than imports of similar quality but with well-known brand names, imported products still attracted local consumers.

Tran Phuoc An, sales director with Duy Tan Plastics Company, said domestic manufacturers were likely to focus on the low-end of the market. They produced large volumes so that they could offer better prices..

An said that high-end plastic products from overseas relied mainly on marketing and advertising to push their products. He added that many consumers bought imported high-end products because they were convinced they were made from safe materials, which they usually were.

Ho Duc Lam, chairman of Rang Dong Plastic JSC and a member of the Viet Nam Plastics Association, said domestic firms were reluctant to invest more in this segment because of low profit.

He said the association estimated that tens of thousands of billions of dong had been spent on design, plastic moulds and on purchasing new machinery and equipment to make quality products to compete with the foreign imports. However, only a few businesses had enough funds for improvement.

Trinh Chi Cuong, General Director of Dai Dong Tien Plastics Company, said that since 2008 his company had set up an R&D section to produce ecofriendly products every year.

Duy Tan Plastics Company produces at least 10 new products every year. However, most of these new products are improvements on the old design and the firm rarely has a new line of innovative products to compete with the imports.

According to Nguyen Hoang Ngan, General Director of Binh Minh Plastics JSC, the technological innovations made by the local plastic firms had been more than other industries. However, these firms spent mostly on renovated technology and equipment, while the R&D activities remained neglected.

Cashew needs new answers

The cashew industry has achieved impressive growth in recent years, with increasing exports, but a fall in the area under cultivation and other problems threaten its continued development.

To develop in a sustainable manner the industry requires appropriate development strategies, according to the Department of Crop Production.

Speaking at a forum on sustainable cashew development in Binh Phuoc Province last Thursday, Nguyen Nhu Hien, deputy head of the department, said Viet Nam had been one of the world's largest cashew exporters since 2006.

Exports were worth US$1.65 billion last year, the fourth largest agricultural export after rice, coffee, and rubber, he said.

But the industry now faced challenges, he said.

"Area under cashew shrank by 129,900ha in the last seven years to 310,000ha last year," he said, adding that "output dropped by 27,400 tonnes in the period."

Domestic production only met 30 per cent of the processing capacity in the country, he said.

"Cashew output has reduced relentlessly in recent years since farmers chopped down cashew trees to plant other crops for higher profits."

In addition, ageing trees and abnormal weather patterns had decreased yields, he said.

Phan Huy Thong, director of the National Agriculture Extension Centre, said: "Previously we thought that cashew trees should be planted in areas that are not suitable for other crops."

With seedlings and crop care not getting proper attention either, productivity was very low at around 900 kilogrammes per hectare, he said.

Nguyen Van Hoa, another department deputy director, said: "Farmers feared that cashew trees cannot have yields and so felt insecure to invest in them.

"However, in reality, productivity will see a big change if they receive sufficient care, fertilisers, and water."

Vuu Thi Mai, a cashew grower in Dong Tien commune in Binh Phuoc Province's Dong Phu District, who has 12ha of cashew, said she and other farmers joined hands to form a cashew production group with 330ha.

By applying farming techniques provided by agricultural experts, their productivity reached two tonnes per hectare on average, she said.

The farmers in the group also intercrop cocoa and other short-term crops with the cashew to increase incomes, she said.

Delegates at the forum suggested many measures to sustain the development of the cashew industry and improve incomes for farmers.

They suggested that the Government develop high-quality seedlings, support farmers to replace ageing cashew trees, and develop inter-cropping models.

Hoang Quoc Tuan, director of the Agriculture Planning Centre, said advanced technologies should be used in cashew cultivation to improve productivity and quality.

He also called for developing linkages among cashew growers and between growers and businesses.

The industry should consider grafting high-yield cashew seedlings with ageing and low-yielding trees, Hoang Trong Thuy, a cashew grower in Bu Gia Map District, Binh Phuoc, said.

New circular regulating e-customs procedures to imports and exports

The Ministry of Finance has issued a circular regulating e-customs procedures to commercial imports and exports, which comes into effect on April 1, reported the Government news portal.

Accordingly, the procedures are applied to imports and exports in accordance with contracts of sale and to realise processing contracts with foreign traders.

Those, which are imported as materials to produce exports, to implement investment projects and for processing businesses, are also mentioned in the circular.

Digital signatures, which are used in e-customs procedures, must be equivalent to authenticated digital certificates recognised by authorised authentication organisations in accordance with Decree 170/2013/ND-CP.

The digital signatures must be registered with the Customs before use.

If the customs procedures are carried out by trustees, the trustees must use their accounts.

Any changes, amendments or supplements to the signatures, which are accepted nationwide, must be informed to the customs.

The circular regulates that customs procedures must be conducted to exports after they are transported to informed locations or within eight hours after they are exported.

The procedures must be implemented before imports arrive at border gates or within 30 days from their arrival at border gates.

The arrival date is the date of the customs' seal on the import declaration or the primary declaration at border gates; or the date of documents recognizing the transport vehicles’ pass through border gates.

If the vehicles enter the country by implementing e-customs procedures, the imports’ arrival date will be the date of the vehicles’ entry.

New agriculture stimulus discussed

The State Bank of Viet Nam and the Ministry of Agriculture and Rural Development have held discussions on a new stimulus package to boost farming production chains and apply technology in agriculture.

As of now, details about the value of the package, incentives, and lending conditions are yet to be revealed. Major stakeholders are seeking lending mechanisms that can reassure banks to offer loans to farmers and use the Government's support policy.

Although presently the State Bank encourages credit institutions to offer loans to farmers, they are hesitant because of high risk and the borrowers usually do not have collateral.

In a cabinet meeting last month, the Government requested the State Bank to work with the Ministries of Agriculture and Science and Technology to outline a credit program for the agriculture sector that provides preferential loans for models that promote the linkage of farming production chains, scientific and technological application, and the linkage between production and export.

Director of State Bank's Credit Department, Nguyen Viet Manh, stated that time and detailed regulations were needed to launch a new stimulus package for agriculture.

"To ensure the effectiveness of the package, they have to review planning on the sub-farming sectors, production areas, and the linkage of input and output," he noted, adding that comprehensive examination can lead to sustainable financing or even banks will be able to offer loans to borrowers without the need for mortgage.

The package will also target large-scale production models and land consolidation.

Vice Director of State Bank's branch in HCM City, Nguyen Hoang Minh, claimed that this year, credit for farming and rural areas will focus on projects that applied technology or are related to farming product processing in order to improve the quality and competitiveness of the products.

Chairman of Viet Nam Farmers' Association Nguyen Duy Luong remarked that although since 2010, the government has passed a decision on credit for agriculture, rural areas, and farmers, the crediting was still limited.

Beneficiaries somehow failed to show interest in such preferential loans due to limited access.

For instance, banks will not offer another loan if the borrowers did not pay the previous ones, Luong reported, noting that the requirement was too strict.

Former governor of State Bank Cao Sy Kiem stated that a lending mechanism based on production chain was new but reasonable, as it can meet the capital demands of farmers and farming enterprises and will help the banks to recover the issued loans.

This will help to avoid scattered loans, he remarked.

This year, loans for agriculture are expected to be worth VND35-37 trillion (US$1.67 billion–1.76 billion), about 70-85 per cent higher than that of last year. Currently, the interest rate for agriculture loans are less than nine per cent per year and the State Bank is encouraging banks to lower the rate.

Lax firms suffer as their brands are duplicated

Poor vigilance by Vietnamese companies has allowed the trademarks of their well-known products to be mimicked by foreign competitors—a situation that is likely to escalate if left unchecked.

Some 25 per cent of Vietnamese enterprises don't allocate a budget for branding, while 70 per cent invest a little without forming any strategies and 5 per cent run comprehensive strategies for branding and marketing.

The case against fake trademarks spoofing Buon Ma Thuot coffee in China earlier this year, which involved costly legal proceedings, has reignited a sense of self-preservation in the business community.

Other major brands such as Trung Nguyen Coffee and Phan Thiet Fish Sauce, Vinataba, were also illegally registered abroad to cash in on their fame. It is also extremely expensive and time-consuming for Vietnamese firms to fight against trademark infringement.

These notorious incidents have set a precedent for trademark nfringement against Viet Nam's products, thus damaging the reputation of the genuine product and stealing the producer's revenue.

If enterprises don't make a concerted effort to invest in the development and protection of their brands, they may have to pay a much heavier price later on.

However, it seems that Vietnamese companies have not fully understood the significance of this issue, said Vo Tri Dung, an industry expert.

The bulk of the country's exports, including rice, fruit, and fisheries products, lack major brand names, stated Tran Huu Hiep, head of the South-West Region Steering Committee's Economic Department.

Hiep noted that the task of creating location-specific brand names for key products with co-operation between the government, farmers, scientists, and corporations had been attempted in the past but had not been very successful.

On the global market, products that are made in Viet Nam are overshadowed by foreign brands; in many cases, they have to rely on these foreign brands to help them penetrate world markets as subcontractors.

Their intellectual property rights are infringed upon by competitors, or they get exploited in foreign markets.

The Viet Nam Trade Promotion Agency (Vietrade) under the Ministry of Industry has suggested that building a national programme to increase awareness and support local enterprises in building, protecting, promoting and developing their brands is an urgent and strategic requirement.

On the other hand, cooperation between the state and the business community also plays an important role in promoting a common image for Vietnamese products, which is seen as a cost-effective, time-saving way to facilitate penetration and to gain a strong foothold in foreign markets for individual Vietnamese brands.

Speaking on issues affecting the export of local products, Fabienne Berger-Remy, a lecturer in marketing and brand management at IAE Paris, pointed out that culture and location were important factors in brand building, which explains why adaptation is necessary when approaching a new market.

However, she warned, enterprises should be very cautious in determining the degree of adaptation they will follow while retaining the signature style of their products. L'Oreal, IBM, Coca Cola, and Apple, as well as Disney are icons of success that Vietnamese companies nurturing dreams of international branding can emulate.

Stable 2014 pepper output predicted

The country's pepper output is expected to equal last year's yield, which was 120,000-125,000 tonnes, according to the Viet Nam Pepper Association (VPA).

However, in Binh Phuoc Province, one of the country's largest pepper cultivation areas, output is expected to be 5,000 tonnes this year, down 20 per cent against last year.

But two of the five provinces in Tay Nguyen (Central Highlands) will have a higher output, with Dak Nong Province at 3,500 tonnes, up 25 per cent against last year, and Dac Lak Province at 800 tonnes, up 5 per cent.

The average price of black pepper has remained stable this year at VND120,000 (US$5.7) per kilogramme.

Harvest yield as well as the buying and selling prices of pepper remain similar to last year's levels, and in some cases are tending to rise, according to the VPA.

Most pepper orchards in Binh Phuoc, Dong Nai, Ba Ria - Vung Tau, Dak Nong, Dak Lak and Gia Lai provinces, which have had pepper plants for seven to 10 years, have had a declining yield. The yield is expected to continue to fall next year.

In Gia Lai Province, hundreds of hectares of pepper cultivation could disappear within the next two to three years because of disease outbreaks that have occurred on a large scale.

However, in provinces like Dak Lak and Dak Nong, which have favourable natural conditions as well as farmers with financial means, the area for pepper orchards has expanded.

VN priotises investment in scientific, technological researches

Total funding for science this year will reach an estimated 13.666 trillion VND (about 510,000 USD) as the Ministry of Science and Technology (MOST) has decided to focus investment on a number of key scientific activities.

In a recent working session with MOST, Deputy Prime Minister Vu Duc Dam said that to make the whole society more aware of the role of science and technology, it would be better to focus on key scientific sectors than to spread the investment.

Vietnam had achieved several outstanding scientific and technological achievements such as rice genome decoding and oil and gas drilling rig manufacture. These were evidences for a good scientific investment and organisation model that Vietnam should continue to develop.

According to Director of Agricultural Genetics Institute Le Huy Ham, previously scientific investment resources are limited and assigned to many universities, institutes, and science and technology centers.

1,670 existing science and technology organisations in Vietnam, a country with GDP under 200 billion USD, are too many and wasting investment, according to Japanese experts.

“Instead of spreading investment to thousands of research institutes, universities, and centers, Vietnam should focus funding on several best ones and on two or three key industries. For example, the Australian Research Council used up to 66 percent of its scientific and technological funding to fund for five top universities in Australia and finally these five entered the list of 50 world leading universities,” said Rector of Hanoi University of Agriculture Tran Duc Vien.

Recently, capital and development expenditures such as salaries and regular operational spending in more than 1,000 public science and technology organisations have accounted for nearly 90 percent budget funding. Thus, just more than 10 percent budget funding was actually spent on scientific and technological researches and applications.

Research projects should be prioritized in terms of investment especially the most potential projects. Long-term research projects should be subject to periodic inspection on implementation. “Business and social communities will only be persuaded by specific products with obvious commercial value,” emphasised Pham Thanh Huy, Director of Advanced Institute for Science and Technology, Hanoi University of Technology.

According to Minister of Science and Technology Nguyen Quan, experience of the most successful countries in the world indicates that the right investment level and time for education and science and technology will create a strong incentive for socio-economic development.

Therefore, MOST in collaboration with the Ministry of Planning and Investment and relevant ministries is preparing a scientific and technological development master plan to submit to Prime Minister, focusing on reduced rates of scientific and technological development investment, and increased investment rates in scientific and technological researches and applications until 2020, with a view to effectively reduce the financial burden for the state budget.

The spending on scientific and technological researches and applications will be allocated according to the principle of reasonable investment thresholds for some key scientific and technological tasks, the most important for the overall development of the country, such as the national technology innovation programme and scientific and technological product development programme.-

Textile exports predicted to leap this year

Some major firms in the apparel industry have predicted the industry’s export value this year to grow by a staggering 30% this year given the strong demands in Vietnam’s traditional markets.

Nguyen Van Thoi, board chairman of TNG Investment and Trading Joint Stock Company as a major apparel exporter, told the Daily that he had observed greater demands, and the growth rate of Vietnam’s textile industry is expected to hit 30%.

According to the Vietnam Textile and Apparel Association (VITAS), the industry last year obtained export revenues of US$20 billion, a rise of 18.7% against 2012. Of all, textile and garment shipments accounted for US$17.9 billion while yarn fetched US$2.1 billion.

The turnover is projected to reach US$26 billion this year, Thoi said, adding many enterprises have had full orders for 2014.

Foreign clients consider 2014 a golden year for Vietnam’s enterprises because many buyers of Vietnam’s apparel products had cleared all stocks last year.

TNG’s export revenues climbed to over US$70 million last year, with exports to the U.S. representing 60% of the company’s total export sales. Thoi expected his company’s apparel exports to fetch nearly US$100 million this year.

Bui Van Tien, CEO of Viet Tien Garment Joint Stock Company, also expressed his surprise over the fast-growing rate in the industry.

“More and more orders are flowing to Vietnam. At the moment, we can choose better ones instead of taking them all with low prices previously,” said Tien.

Even though things have turned out to be more optimistic, fierce competition in prices is also a concern. Therefore, firms with low capacity may run into difficulty.

VITAS said Vietnam’s exports to the U.S., the EU and Japan last year generated US$8.6 billion, US$2.7 billion and US$2.3 billion respectively, all showing double-digit growth rates.

Small tax debts collected

Despite efforts by customs officers, the amount of tax arrears collected is tiny compared to the total, with more debts categorized as irrecoverable now from being termed recoverable.

According to the latest report of the HCMC Customs Department, as of February 28 the total tax debts that must be recovered in the city amounted to VND1.65 trillion and are all overdue debts. The amount categorized as recoverable accounts for VND719 billion while VND904 billion is seen as irrecoverable.

Compared to December 31, 2013, recoverable debts declined while others increased sharply.

However, only VND25.5 billion was collected among the debts incurred between July 1, 2013 and February 28, 2014, equivalent to 2.62% of the target set by the General Department of Customs.

The HCMC Customs Department admits that such an amount is small and accounts for only 1.6% of the total tax arrears (VND1.572 trillion). Meanwhile, with debts incurred on January 1-June 30, 2013, VND4.316 trillion was collected.

A leader of the department told the Daily that it could be seen that debts were moving around, reflected by the dropping recoverable debts and the increasing amount of potentially unrecoverable debts.

It is because recoverable debts if not being collected will become potentially unrecoverable debts, which will affect revenues for the State budget.

According to the department, HCMC’s import turnover reached US$5.3 billion in the year’s first two months, up US$270 million from last year’s same period. Meanwhile, the export turnover rose by US$587 million to US$5.48 billion.

The amount of budget collected from export-export business in the period was VND12.85 trillion, rising by 39% and equivalent to 17% of the target.

Lotte Mart to open four more supermarkets this year

Since the opening of the first supermarket in Vietnam in 2008, Lotte Mart has now had six supermarkets and commercial centers, but it will speed up the tempo by opening four more retail outlets this year.

Lotte Mart Dong Da, the seventh supermarket-commercial center of Lotte Mart, will be opened on March 27 in Hanoi City’s Dong Da District. This retail outlet has five floors with a total area of over 20,000 square meters.

Besides, the Korean-invested retailer plans to open one at Pico Plaza in HCMC’s Tan Binh District on August 8, one at Hanoi Center in Hanoi’s Ba Dinh District on September 2, and another in Ba Ria-Vung Tau Province’s Vung Tau City on November 30.

A Lotte Mart supermarket will be present in HCMC’s Go Vap District early next year but its location has not been revealed.

As a result, the Lotte Mart system will have 11 supermarkets-commercial centers in Vietnam after seven years.

Lotte Mart entered Vietnam in 2006 via Lotte Vietnam Commercial Center Co., Ltd, a joint venture with privately held firm Minh Van Trading and Production.

Lotte Mart became wholly foreign-owned in October, 2012 after buying the entire stake of Minh Van. Besides, Lotte Mart adjusted charter capital of Lotte Vietnam from US$65 million to US$120 million.

The South Korean retailer targets to open 60 supermarkets nationwide until 2020 instead of 30 as announced when entering the Vietnamese market.

FDI enterprises ignore re-registration

 Numerous foreign direct investment (FDI) enterprises in HCMC have failed to re-register their business with authorities though their investment licenses have expired and they have been given an extended deadline by the Government to do so, said the city’s Department of Planning and Investment.

The department said that as of end-January, 2014, up to 90 FDI companies in the city had their business terms expired but only two of them had renewed the operation as regulated.

Even the department is unknowledgeable whether such enterprises have stopped operations, have dissolved business, or simply have ignored the rules.

Data from the department show three companies have been completing dissolving procedures, which are VikoTrade, Newell Nha Be Vietnam, and Viet Quoc Construction and Decoration.

The department has posted notices to expired FDI enterprises but half of the letters sent had been returned as the enterprises were no longer at the given addresses.

However, some FDI enterprises that failed to re-register still operate as usual such as the OSCAR Saigon Hotel, which has been running business at 68A Nguyen Hue Boulevard in District 1 though its license has expired since November, 2009.

As stipulated in the Government's Decree No. 194/2013/ND-CP, all FDI projects that have expired but not yet re-registered will have their licenses revoked. Therefore, it is illegal for FDI enterprises to still do business, and thus any contract they sign with clients after expiration are deemed null and void.

When an FDI enterprise is re-registered, it will be granted a new Investment Certificate and operates in accordance with the 2005 Enterprise Law.

On the national scale, some 3,000 enterprises out of 6,000 foreign-invested companies set up in accordance with the Foreign Investment Law had failed to renew their operations as regulated by the 2005 Enterprise Law. Such enterprises had total investment of US$18.5 billion and employed 446,000 laborers as per reports from the Ministry of Planning and Investment.

Without re-registration, they are facing the risk of being revoked and this fact would endanger the investment environment.

According to the newly amended Law, any FDI enterprise incorporated under the Investment License granted prior to July 1, 2006 has had its operational duration expired. Those that had yet to be dissolved but wished to continue operation in Vietnam had to re-register operations no later than February 1, 2014.

Private sector needed to help reduce hospital overload

Increasing the number of inpatient beds is the top measure to reduce overload in the local hospital system, and participation of the private sector is an effective solution to the issue, said Health Minister Nguyen Thi Kim Tien.

To facilitate cooperation between public and private hospitals, Tien said there should be a flexible mechanism for patient transfers among hospitals, private and State-run alike, she said at a conference on spurring cooperation between public and private hospitals on Monday.

Besides, private hospitals may serve as satellites for public hospitals so that physicians of public hospitals can give professional support to private ones. Both sides can also cooperate in checkup facilities and equipment.

Speaking at the conference, Luong Ngoc Khue, director of the Department for Medical Checkups and Treatment Management, said the nation now has 1,200 hospitals, including 170 private ones.

Between 2004 and 2013, the number of hospitals increased by nearly 50%, while the bed number almost doubled from nearly 127,000 to 215,000. The ratio of private beds accounts for 4.2%.

According to statistics in 2013, private hospitals made up a modest ratio of health checkups and treatment, at 6.7% for outpatient treatment, 5.7% for inpatient treatment and 10.7% for surgeries. Private hospitals served less than 4% of the total number of 73.4 million health insurance checkups.

Most private hospitals have good facilities, technical equipment and professionalism but they are running under capacity. Around 57% of private hospitals have seen bed occupancy under 60% while 22% have seen 60-85% occupancy.

Meanwhile, public hospitals in HCMC are running at high capacity. Cho Ray Hospital reported 135% occupancy last year while the HCMC Cancer Hospital was 350% utilized, meaning that 560 patients had to share 160 beds, Minister Tien said.

Aside from legal issues hindering public-private cooperation, there are problems related to different hospital fees and quality of technical services between the two sectors.

Nguyen Nam Lien, deputy head of the planning and financial department under the Ministry of Health, said public hospitals are serving many types of patients, so private hospitals must build up a mechanism with various service fee levels to meet demand of all patients.

However, Tien said the biggest problem is that overload public hospitals are still reluctant to transfer patients to private hospitals.

Financially independent public hospitals normally take as many patients as possible to generate as much revenue as they can. Therefore, the most important thing is the spirit of sharing between public and private hospitals, she explained.

Rice exports rely too much on government policy: expert

Government policies encourage the production of low-quality rice at the expense of high-quality rice producers, affecting the country’s competitiveness, according to one expert.

Dr. Alan Phan, a well-known overseas Vietnamese fund manager, said, “The government focuses on producing low-quality rice for export to China, leaving the country struggling to find new market as demand from China falls."

Currently, Vietnam is facing fierce competition to find markets for rice exports as Thailand opens up its rice store with a capacity of 20 million tonnes and the country may sell its rice at prices much lower than Vietnam’s. This would obviously affect Vietnam’s rice export market, especially in the major market of China.

Several other countries in the world have also boosted rice exports, addition to the competition.

“The government meddles too much in the rice export markets and rice exports are controlled by too many agencies and complicated procedures,” Alan Phan said.

According to him, the government should slacken its control over rice exports in order to intensify the country’s competitiveness.

Concerning the fact that Cambodia plans to expand its rice export markets into the US and South Korean markets, Alan Phan said these are market-based economies, so those who meet consumers’ demand would win in those markets.

“It’s necessary to operate in line with the market rule and consumer demand instead of being controlled too much by government policies,” he emphasised.

He went on to say that when a country succeeds in applying the market rules and Vietnam wants to follow suit the country needs to learn their experience to increase its competitiveness and increase its rice export market share in the world.

VN stock market attractive to foreign investors

More foreign capital would make its way into Vietnam’s stock market this year compared to last year, predicted Ong Seng Yeow, Executive Director of Maybank Kim Eng (MBKE) Research.

“We think 2014 will be a Vietnam year in terms of attracting foreign capital flows against its regional peers thanks to three reasons,” said Ong Seng Yeow, Executive Director of Maybank Kim Eng (MBKE) Research, according to Vietnam Investment Review.

“Firstly, the Vietnamese stock market’s valuation is relatively cheap versus competing nations such as Indonesia, the Philippines and Thailand. Secondly, Vietnam’s macro-economic picture is significantly improved. Finally, Vietnam is nearly immune to external volatilities such as Quantitative Easing tapering in the US or political unrest.”

Addressing a stock market workshop in Ho Chi Minh City on March 8, Yeow forecasted Vietnam’s benchmark VN Index would reach 600 points or so this year, thus supporting further gains.

The index is currently just over 580 and has increased by around 16 percent so far this year.

According to MBKE, foreign investors are showing more and more interest in the Vietnamese bourses.

“Specifically, our institutional research team has welcomed numerous offshore institutional investors to Vietnam so far this year,” Yeow continued.

He explained that this year foreign investors are tending to diversify their assets to stable and higher potential markets and they were keeping a close eye on Vietnam.

When asked about which sectors, the researcher said investors showed more interest in industries bound to Vietnam’s economic growth such as consumer goods and oil and gas. They had less interest in the banking sector “as it seems they’re aware of the difficulties it faces.”

Other good news for the market is Vietnam’s considering raising the foreign ownership limit from 49 percent to 60 percent, he added.

“We think the market will see even greater improvement once the foreign ownership cap is raised. As you can see, market breadth is getting tighter and tighter because so many good fundamental stocks have already hit the foreign ownership limit. This restricts foreign investors’ options in putting their money in the market.”

Yeow provided examples where MBKE’s offshore institutional investors showed interest in FPT, Binh Minh Plastics and some other blue chips. But all are already at the ownership cap. Therefore, if this is lifted it is likely that Vietnam would see a surge of new capital inflows.

Dong Nai gives special support to foreign-invested SMEs

The southern province of Dong Nai has decided to offer special support to small and medium-sized foreign-invested projects in the locality, a provincial senior official has said.

Phan Thi My Thanh, Vice Chairwoman of the Dong Nai provincial People’s Committee, said new foreign-invested projects valued at less than 100 billion VND (4.7 million USD) with fewer than 300 employees will receive support in administrative procedures and fees.

They will be financially assisted in finalising documents for investment licences, registering their seals and tax codes and completing environmental impact reports, she said.

The programme, with an estimated budget of 1.9 billion VND (89,300 USD), will run for two years. As many as 70 enterprises will benefit, said Thanh.

The move, with the purpose of attracting more FDI in the SME sector, targets investors who may have previously been put off by the difficulties in accessing local administrative bodies and overcoming the language barrier, she added.-

Pepper production predicted to reach 125,000 tonnes

The Vietnam Pepper Association (VPA) has forecast that the country’s production of the spice in 2014 will hit up to 125,000 tonnes, just equal to last year’s figure.

The association specified that the southern province of Dong Nai will see a 20 percent rise to 2,500 tonnes, while Ba Ria-Vung Tau will enjoy a 30 percent increase to 3,500 tonnes.

Contrastingly, Binh Phuoc southern province will see its pepper yield drop by 20 percent to 5,000 tonnes and the Central Highlands province of Gia Lai is predicted to face a 30 percent plunge to only 8,000 tonnes.

So far, the pepper hub of Binh Phuoc has finished harvesting in three quarters of its total pepper area, while Central Highlands localities have harvested one third.

VPA also reported that pepper prices have remained stable, with no remarkable difference compared to the same period last year.

At the same time, the association warned of a sharp drop in pepper production in the next several years when a large area of pepper trees become old and stunted.-

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

FTA, EU, investment incentives, disbursements, cashew industry, agriculture stimulus
 
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