Rice exporters to face stiff competition

 

With global demand for rice expected to rise, 2011 is likely to be a good year for Vietnamese rice exports although an opening up of the grain market in line with trade commitments will pose new challenges to exporters.

 

According to the Viet Nam Food Association, world rice demand will rise from 29 million tonnes last year to 31 million tonnes since many countries have announced plans to increase their imports.

 

Indonesia did not import rice in 2008 and 2009 but bought 1.5 million tonnes last year and plans to import a similar volume in 2011.

 

Bangladesh too seems set to increase imports. Viet Nam shipped 400,000 tonnes to the South Asian country last year and has signed deals to export 250,000 tonnes in just the first two months of this year.

 

Malaysia has also indicated plans to import 800,000 tonnes in all this year and the VFA hopes to sell half or more of this quantity.

 

Vietnamese rice exporters achieved record numbers last year, shipping 6.8 million tonnes of the grain for US$3.2 billion.

 

Significantly, during certain periods last year Vietnamese rice prices were equal to or even higher than that of comparable Thai grains.

 

Food Association chairman Truong Thanh Phong said the export successes of last year are positive factors that will encourage exports this year.

 

But he warned: "There will also be difficulties for rice exporters this year since Viet Nam has to open up its rice market to foreign traders under its World Trade Organisation commitments."

 

It will allow foreign traders to directly undertake rice trading in the country and export Vietnamese rice, and they will no longer need to enter into joint venture with local companies, he said.

 

A glaring weakness of Vietnamese firms is their small size and limited funds compared to their foreign counterparts, he said.

 

It throws up the possibility that many Vietnamese exporters will be forced to turn into local suppliers for foreign partners, he said.

 

"To improve their competitiveness, Vietnamese exporters need to be able to but rice from farmers at reasonable prices."

 

Ministries, companies, and localities should co-operate to work out reasonable rice production costs, which could then be used to establish prices to be paid to farmers.

 

Phong also made some forecasts about the domestic market this year – Viet Nam will be able to ensure food security and rice prices will be rather stable; paddy prices will not be less than VND5,000 per kilogramme.

 

Chinese firm rents debt-laden Vinashin cruise ship

 

A China-based shipping company has inked a contract with Vietnamese shipbuilder Vinashin’s offshoot to rent the latter’s Hoa Sen (Lotus) ship for six months.

 

The contract will cost the Lianyungang CK Ferry Ltd. Company US$16,500 per day to use Vinashinlines’ Hoa Sen cruise ship, which was designed to be a three-star floating hotel following European Union standards.

 

After the short-term contract, the Chinese company will continue to hire the cruise ship for longer period of two years.

 

Troubled state-owned shipbuilder Vinashin bought a Hoa Sen passenger ship for VND1.3 trillion (US$66.6 million) in 2007.

 

The Hoa Sen started plying a route between southern Ho Chi Minh City in and northern Quang Ninh Province, the home of Ha Long Bay, in mid-December 2007.

 

That route ground to a halt in 2009, with the company citing technical problems. The Hoa Sen sit unused and permanently docked at a port in the central province of Khanh Hoa.

 

Vinashin, came to the brink of bankruptcy last year with debts totaling VND86.6 trillion and the government ordered the conglomerate to be restructured.

 

The government has offer debt-laden shipbuilder Vinashin loans with zero interest to pay employee salaries, unemployment compensation and social, health and unemployment insurance.

 

Viet Nam to continue importing essential goods this year

 

Viet Nam will continue import meat, salt, sugar, animal feed and steel products for this year, the Ministry of Industry and Trade has predicted.

 

This year, total domestic demand for all meat products would increase 6.5-7 per cent to 2.9 million tonnes, the ministry said. There would be a resultant shortfall of 90,000-100,000 tonnes of meat which would need to be imported.

 

The ministry also estimated Viet Nam would import 182,000 tonnes of salt this year because domestic demand was expected to reach 1.35 million tonnes while local production would be just over 1 million tonnes.

 

The country would also import 250,000 tonnes of sugar this year, lower than 2010's 300,000 tonnes, the ministry said.

 

Domestic demand would reach 1.3-1.4 million tonnes while domestic supply would be roughly 1 million tonnes.

 

Animal feed was another of the essential goods that would need to be imported in 2011 because domestic supply would total only 15.2 million tonnes of the estimated total demand of 20.6 million tonnes.

 

Total imports would reach 7.7 million tonnes this year against 6 million last year.

 

Meanwhile, steel imports were predicted to reach 1 million tonnes this year as the domestic demand was estimated at 6.5 million tonnes while local production was expected to reach just 5.8 million tonnes.

 

VN stock markets continue slide

 

The VN-Index edged down 0.27 per cent to close at 480.55 today with investors remaining uncertain about the state of the market.

 

This is despite the State Bank of Viet Nam coming out late last week to officially deny a rumour that it planned to increase the compulsory currency reserve ratio from 3 to 7 per cent.

 

Investors had been concerned that such a move, designed to rein in inflation by removing money from circulation, would negatively impact money flow into the stock market.

 

Today's total trading volume stood at 33.8 million with a total value of VND790.4 billion (US$37.6 million), almost equal to last Friday's figures.

 

In HCM City, gainers outnumbered losers 195 to 50, while 36 remained steady.

 

The most active share was Sai Gon Thuong Tin Bank (STB) with 2.3 million shares changing hands.

 

HN-Index also closed at 107.47, down 2.37 per cent on the previous session. The number of decliners rose to 237. There were 50 gainers and the value of 83 shares was unchanged.

 

Trading volume at the Ha Noi bourse was 31.4 million shares, valued at VND592.5 billion ($28.2 million). This was slighlty higher than the 26.5 shares with a total value at VND508.7 billion ($24.2 million) which changed hands last Friday.

 

The most active stock in Ha Noi belonged to Kim Long Securities (KLS) with 2.8 shares changing hands.

 

Vietnam Airlines expands horizons

 

Vietnam Airlines plans to fly to more destinations and increase its total fleet to 163 as part of a bold move to achieve an annual revenue of US$7 billion by 2020.

 

The company has also targeted a 45-per-cent share of the country's aviation market in the same year.

 

The new aircraft would include Boeing 787s or Airbus 350s which would be capable of carrying 35 million passengers and 620,000 tonnes of goods per year by 2020, the carrier announced last week.

 

Last year, Vietnam Airlines carried 12.3 million passengers with 4.3 million foreign passengers for a profit of VND356 billion ($18.3 million), an increase of 164 per cent on 2009. The company also received revenues of VND36.265 trillion ($1.86 billion), a year-on-year rise of 33.7 per cent.

 

After 15 years of operation, the airline had flown a total 678,550 domestic and international flights, accounting for 87 per cent of domestic market share and 40 per cent of international market share, Vietnam Airlines' General Director Pham Ngoc Minh said.

 

According to a Vietnam Airlines' report, the carrier had carried 82 million passengers in the past 15 years with an annual growth for the domestic and international market of 12.1 per cent.

 

The national flag carrier has also increased the number of domestic flights for the third time since January 3 for the upcoming Tet (Lunar New Year) holiday.

 

For the periods January 27-February 1 and February 4-14, the carrier will add more flights from HCM City to Hue, Phu Quoc island, Quy Nhon, Pleiku and Vinh.

 

Under the change, there will be a total of 41 flights from HCM City to Hue for the two periods, with a total of seven flights per day.

 

The HCM City-Phu Quoc route will have a total of 20 flights; HCM City-Pleiku, 13 flights and HCM City-Vinh, six flights.

 

The airline said tickets for flights from HCM City to Ha Noi and Da Nang from now to January 26 are still available. These are mainly evening flights from January 27 to February 2.

 

The additional flights from Ha Noi or Da Nang to HCM City from February 6-13 are mostly evening as well.

 

It plans to sell any remaining tickets for the period on January 17. Customers on waiting lists will be given priority.

 

Alcohol imports rise in lead-up to Tet

 

The import of beer and alcoholic beverages is likely to spike in the lead-up to Tet, the HCM City customs department said.

 

With less than a month to go for the Lunar New Year, imported liquor and beer are overflowing in supermarkets and shops who said people still have a predilection for foreign brands.

 

Khanh Sang, an owner of a shop in Nguyen Thong Street, District 3, said imported liquors priced at VND500,000-VND1 million (US$25-50) are very popular.

 

But those costing above VND2 million ($100), even up to VND10 million ($500), are also in demand.

 

The Coop.Mart supermarket chain is selling a range of products at VND200,000 ($10) to VND7 million ($350).

 

The imported products have fancy designs and come with plenty of freebies.

 

Dao Quang Vinh, a liquor importer and distributor, said this month he has double his import to 6,000 bottles.

 

Imported beers like Leffe, Corona, Asahi, and Bitburger dominate the market despite costing tens of thousands of dong compared to VND7,000-VND20,000 ($0.35-1) for domestic products.

 

For instance, Leffe from Belgium costs VND65,000 ($3.25), Germany's OEI Stinger costs VND30,000 ($1.5).

 

Pham Dinh, a beer distributor in District 10, said 30 to 40 different imported beers are now available.

 

Liquors and beers are imported despite high taxes. Most beers attract an import tariff of 47 per cent and VAT of 10 per cent.

 

Besides the VAT, liquors and wines face tariffs and special consumption tax of up 45 per cent depending on their alcohol content.

 

Those with below 20 per cent are taxed at 25 per cent.

 

The importers said retail prices will jump by 10-15 per cent this year, mainly due to the higher value of the dollar.

 

Norway eyes fish feed plant in Delta

 

Long An-based Anova Corporation, maker of veterinary drugs and animal feed, has set up a joint venture with Norwegian fish feed producer EWOS Group to operate and expand a plant in the Cuu Long (Mekong) Delta Province.

 

Under an agreement concluded last Friday, the foreign partner will invest US$6 million in Anova's fish feed plant in Long An, representing 51 per cent of the total value of the joint venture company.

 

Anova CEO David Serene said the plant will begin operations with the new status as a JV on February 1 with an output of 60,000 tonnes of fish feed, focusing on catfish, which is widely farmed in the Cuu Long (Mekong) Delta.

 

The company will develop growth models to help customers monitor their fish performance against expectations, he said. Feed management strategies will be worked out with customers to make the feeding regime most effective, he added.

 

EWOS deputy managing director Einar Wathne said his company will also work with customers to provide information on the feed to fish buyers in the US and Europe, supporting fish sales in high quality markets.

 

Watermelon shortage expected for Tet holidays

 

The amount of watermelon, which is a favourite fruit used during Tet (Lunar New Year) holiday, is expected to fall as traders have been buying the fruit to export to China and cultivation areas drop in size in the Cuu Long (Mekong) Delta.

 

Ba Chien, a trader who buys watermelon in the Delta to export to China, said the weather in Chinese provinces that border Viet Nam becomes warmer during December and January, and as a result, watermelon sales rise.

 

"Demand for watermelon exports is high, but the domestic supply is small in relation to the demand," Chien said.

 

Chien said in three days he was able to buy only 50 tonnes of watermelon in Long An Province as the quantity that was about to be harvested was not large.

 

Harvesting has begun in some provinces, including Long An, Tien Giang, Tra Vinh and Hau Giang.

 

The central provinces and provinces in the Tay Nguyen (Central Highlands) will only begin their watermelon harvests in February and March.

 

Tu Danh, a trader in Long An Province, said Chinese traders had begun to buy more watermelon for the Lunar New Year holiday, thus causing further shortages in Vi?t Nam.

 

The price of watermelon purchased at fields in the Delta had increased to VND5,500-6,000 a kg according to sizes and types, up 30 per cent against last week because local traders had bought more watermelon for export.

 

Sau The, a watermelon grower in Long An Province's Tan Hung District, said watermelon had reached its highest price and scarcity since the beginning of last year.

 

"My family just sold two ha of watermelon with a price of VND6,000 a kg. After deducting all costs, my family earned a profit of more than VND100 million," The said.

 

The increasing volume of exports has affected supply in recent days.

 

In HCM City's wholesale markets such as Tam Binh and Thu Duc, only watermelon less than 2 kg is being sold, as local traders have bought fruit that weighs more than 2 kg a fruit to export to China.

 

During last year's Tet holiday, most watermelon transported to HCM City came from Long An, Tra Vinh and Hau Giang provinces, but this year the supply is mostly from Tra Vinh Province.

 

In Long An Province, farmers have grown more than 1,700 ha for the watermelon winter-spring crop 2010-11.

 

Of that figure, 450 ha have been harvested, according to the Long An Province's Department of Agriculture and Rural Development.

 

The area of watermelon cultivated to sell during Tet in Long An's districts located in Dong Thap Muoi (Plain of Reeds) region has fallen significantly, as flood waters receded late this year, according to the department.

 

Many farmers have also switched from planting watermelons for Tet to growing rice this year as the price of rice has risen.

 

In addition, unfavourable weather conditions and bo tri, a kind of dangerous pest that affects watermelon, have also caused damage to many watermelon cultivation areas in the Delta.

 

Industry Ministry asked to restructure

 

The Ministry of Industry and Trade has been asked to adopt a new structure with regards to environmental protection, industrialisation and modernisation, as well as improving people's living conditions in rural areas.

 

Permanent Deputy Prime Minister Nguyen Sinh Hung made the statement at a conference to launch this year's ministry targets.

 

Hung hailed the industry for its important achievements in exports and the expansion of the domestic market, contributing to the sector's development and the country last year as well as the past five years.

 

The deputy PM said the industry should improve low competitiveness and reduce dependence on imported materials.

 

In addition, he said energy and food security had faced difficulties due to power, oil and fertiliser shortages.

 

He asked the ministry to take measures to achieve a growth rate of 14.8 per cent, and increase industrial value by 8 per cent and exports by 10 per cent.

 

FDI policies need rethink, say experts

 

Experts yesterday raised concerns over the preferential treatment given to Foreign Direct Investment (FDI) enterprises, saying domestic companies might be disadvantaged if the Government did not implement timely changes to policy.

 

In a meeting to assess the effects of preferential policies for FDI projects on the Vietnamese economy, Nguyen Tu Anh of the Central Institute for Economic Management (CIEM) said that FDI tax breaks and deduction policies totalled VND10 trillion (US$500 million) each year, or 0.7 per cent of the country's Gross Domestic Product.

 

Economist Le Dang Doanh, former head of CIEM, said that active integration meant less need for preferential treatment to attract foreign capital sources.

 

Doanh then asked if granting FDIs better land than local companies was unfair.

 

In response, Anh said that policies encouraging investment only played a limited role in the foreigners' decision to invest. The decisive factors were market scale, real income level, the availability of skilled workers and necessary infrastructure, as well as the stability of the political system and macro-economy.

 

In other words, decisive factors were necessary conditions while preferential policies constituted sufficient conditions, he said.

 

To date, nobody had conducted research into whether the real costs for preferential treatment were reasonable. Meanwhile, there remained a shortage of supervision to ensure FDI projects were efficient, Anh said.

 

He said preferential policies for FDI projects were regulated in 50 legal documents in fields as diverse as investment, corporate income tax, export-import tax, land and promotion of small- and medium-sized enterprises.

 

Because of overlapping jurisdictions and inconsistency between legal documents, some FDI enterprises were doubly favoured when they opened a production factory in a preferential sector and in a preferential locality, Anh added.

 

The Government should reconsider which sectors most deserved preferences and rebuild criteria for particular priorities, Doanh stressed.

 

Tran Dinh Thien, director of the Viet Nam Economics Institute, said that the Government should pay more attention to developing local enterprise systems and that policies aimed at encouraging FDIs should define their targets more clearly.

 

Most companies which invested in Viet Nam were subsidiaries of multinational groups, and this limited opportunities for other Vietnamese companies to access technology. Therefore, there should be policies to encourage parent companies to directly invest into the country, Anh said.

 

The attractiveness of Viet Nam to foreign investors lay mainly in cheap labour and the stable politic system, he added.

 

From 2001 to 2010, Viet Nam attracted more than 12,000 projects with a registered capital of $192 billion.

 

Small firms struggle to obtain credit

 

Small- and medium-sized enterprises will face increasing difficulties in accessing credit now that the central bank has decided to limit credit growth this year to 23 per cent, says Association of Small- and Medium-Sized Enterprises chairman Cao Sy Kiem.

 

Tighter credit and monetary policies were part of an overall State Bank of Viet Nam strategy this year to focus on curbing inflation and stabilising foreign exchange rates, said Kiem.

 

But the association was urging banks to change their lending policies to increase unsecured loans to small- and medium-sized enterprises (SMEs) that demonstrated effective business operations and current payments on debts, he said.

 

An Binh Commercial Bank deputy director Dang Minh Hai agreed that financial institutions themselves should create new lending products which meet the needs of SMEs.

 

"Banks should base lending decisions on the cash flows and business plans of SMEs, rather than on the size of collateral," Hai said.

 

A small business that was able to show a contract with an established, big-name partner with good payment capacity should receive loans at reasonable terms from commercial banks, he added, although SMEs also bore a burden of preparing detailed business plans and clear debt repayment plans.

 

"SMEs need to pay back loans on schedule while improving their financial statements, making them more transparent in order to help banks make sound decisions," Hai said.

 

Viet Nam Association of Accountants and Auditors chairman Dang Van Thanh said the proportion of banks' bad debts coming from SMEs was low, yet most commercial banks still hesitated to lend to them.

 

A recent survey of SMEs conducted by the Ministry of Planning and Investment's Enterprise Development Agency found over 32 per cent said that they were able to access bank loans, while another 35 per cent reported difficulties. The remainder was unable to obtain credit from financial institutions.

 

Financial institutions were blamed for limited abilities to assess credit risks, while SMEs were frequently unable to satisfy bank lending conditions due to unfeasible business plans or inadequate capital.

 

"Commercial banks prefer to lend large or State- owned enterprises to SMEs due to their prestige, better business plans and more substantial financial statements," said the deputy director of the Viet Nam Chamber of Commerce and Industry's Department of Business Development, Nguyen Minh Tuan.

 

The conflict between easing credit for businesses and curbing inflation was likely to continue, said National Financial Supervisory Commission vice chairman Le Xuan Nghia.

 

"Tax policies and Viet Nam's commitments under WTO and regional trade agreements will also pose additional difficulties for small business," Nghia said.

 

SMEs were also facing difficulties raising capital through the sale of shares or bonds on securities markets since their assets and reputations were not great enough and their management lacked sufficient transparency to attract investors, he said.

 

The nation currently has around 500,000 enterprises, with 95 per cent of them SMEs, according to the Association of Small- and Medium-Sized Enterprises. Those SMEs contribute 20 per cent of gross domestic product and 50 per cent of total export value while generating about 50 per cent of the nation's jobs.

 

Banks continue to breach deposit-rate cap

 

Many banks continue to exceed the deposit interest-rate cap of 14 percent cap they agreed with the State Bank of Vietnam last month by surreptitiously offering gifts and even fines to depositors.

 

Some banks enter into a contract with depositors that allows them to make late disbursements, thus adding 1-2 percent interest as a “fine,” the general director of a bank in Ho Chi Minh City’s District 1 – who wished to remain unnamed – said, pointing out some even offer “gifts” in the form of a percentage or two of interest above the contracted rate.

 

A deputy director of a District 5-based bank said large depositors would withdraw their money if banks stuck to the cap.

 

However, if there is no crackdown on the violations, another interest-rate war like the one at the end of 2010 will break out, he warned.

 

In early December, commercial banks began to competitively hike deposit-interest rates after Techcombank suddenly raised its maximum rate to 17 percent plus a 0.6 percent bonus.

 

The central bank stepped in and, together with the Vietnam Banking Association, ordered Techcombank to roll back the hikes to bring a truce.

 

Loan interest rates are also pretty high – at 18-19 percent for businesses and 20-22 percent for consumer loans.

 

Some banks have stropped lending.

 

PV