BUSINESS IN BRIEF 10/6
Strong effort needed to reach nation's credit growth target
Lending by the banking sector must grow by 1.25 per cent per month for the rest of the year if the country hopes to meet its full-year target of 12 per cent, according to a National Financial Supervisory Committee report.
"It is a difficult task," said committee chairman Vu Viet Ngoan, pointing out that enterprises' capacity to absorb capital remained limited, the real estate market was still troubled and the economy's aggregate demand continued to be weak.
Dao Van Hung, director of the Academy of Policy and Development, said that interest rates were what they had been in 2005-07, which was an appropriate level for the current economic situation. However, it would take time for the economy and enterprises to absorb capital.
"The lending market will take at least four to six more months to recover," Hung said, adding that any hurry might cause negative impacts.
According to economic expert Vu Dinh Ang, lowering interest rates was not "the cure to all diseases" of enterprises.
"Lowering interest rates does not mean credit growth," said Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council.
Despite the interest rate cuts, enterprises still seemed reluctant to borrow capital, according to Cao Sy Kiem, president of the Viet Nam Association of Small and Medium Enterprises.
To achieve the credit growth target, it was important to accelerate aggregate demand and purchasing power, clear inventories and resolve bad debts, all of which required determination from the Government, he said, adding that enterprises also needed to hasten their restructuring.
As of May 22, total lending by the whole banking system increased by 2.3 per cent over the end of last year, according to the State Bank of Viet Nam.
Legal capital threshold for labour subleasing
On May 23, the Government issued Decree 55/2013/ND-CP for the implementation of Clause 3 Article 54 of the Labour Code regarding the labour subleasing, escrow deposit and a list of jobs for which labour may be subleased.
Accordingly, the enterprises wishing to be granted with a Licence for labour subleasing must satisfy conditions, such as:
. Paying an escrow deposit of VND2 billion and maintaining the same amount of charter capital during the whole operation;
. The location of head office, branches and representative offices must be stable and terms of this location must be two years or more.
. The head of the enterprise, branch and representative offices must have a working experience of three years or more in labour subleasing.
This Decree also provides that the jobs for which labour may be subleased include translation, compiling, shorthand, secretary, administrative assistant, receptionist, tour guide, sale assistant, project assistant, producing system programmer, building or factory cleaner, bodyguard, drive.
The labour subleasing purports to temporarily meet unexpected increases in human resources, to replace employees during maternity, accidents, occupation health leave or matching demand for employing workers with highly technical and professional level.
The Decree further provides some cases in which labour subleasing is prohibited, such as enterprises currently having labour disputes, strikes, replacing dismissed employees because of changing structure, technology or merger, division, separation of enterprise; providing the labour subleasing to work in server condition.
The maximum period for labour subleasing is 12 months. When this period is over, the sublessor is not allowed to continuously sublease to the sublessee the employee who has just ended up the sublease period.
This Decree shall take effect from July 15, 2013.
New principles for wage scales
On May14, 2013, the Government issued Decree No. 49/2013/ND-CP guiding the implementation of a number of Articles of the Labour Code on wages.
The Decree stipulates principles for setting up wage scales and payrolls. In detail, beside the regulation that the lowest wage level of the most simple work or title in normal labour conditions must not be lower than the region-based minimum wage level prescribed by the Government, the Decree also stipulates that the lowest wage level of the work or title requiring employees to be vocational trained (including employees trained by enterprises themselves) must be at least seven per cent higher than the region-based minimum wage levels prescribed by the Government; the wage level of work or title with the heavy, hazardous and dangerous working conditions must be at least five per cent higher than the wage level of work or title of equivalent complexity but in normal working conditions, and at least seven per cent higher for those working in specially heavy, hazardous and dangerous working conditions.
Besides, when formulating and applying the wage scale and payroll, the principle of equality and nondiscrimination must be ensured.
Under the new Decree, enterprises must apply experimentally their newly set labour norm before it is officially promulgated. Enterprises must adjust their labour norm if the actual productivity is five per cent lower or 10% higher than the assigned norm, or the actual performance during a given time period is 5% higher or 10% lower than the assigned norm.
This Decree takes effect from July 1, 2013. However the Decree provides that the provisions therein shall be applied from May 1, 2013.
Local firms see sweet opportunities
The European Commission has decided to lift the import tax for a quota of 400,000 tonnes of refined sugar imported into the European Union during 2013-14, according to the Ministry of Industry and Trade.
This would be an opportunity for domestic sugar companies to reduce inventories, which amounted to over 300,000 tonnes, the ministry said.
But the ministry also noted that increasing sales in such a large market would be difficult for local sugar firms, which had been exporting small quantities for many years.
Measures urged to lure foreign investment in stocks
The State Securities Commission should consider several changes on the stock market to lure foreign capital, such as applying a T+0 or T+1 settlement period and restructuring companies.
The opinion was voiced by the capital market working group on the sidelines of the Viet Nam Business Forum (VBF).
Dragon Capital director Dominic Scriven, a representative from the group, said the Vietnamese stock market showed signs of recovery, but the rally could not yet be called sustainable.
Foreign investors were interested in the market, but still observing and waiting for more opportunities, he added.
Although trading hours were extended until 2.15pm from March last year, it was not the key to boost liquidity.
The main issue, according to experts, was shorter time for stocks to come to investors' accounts. In September last year, the settlement period was shortened from T+4 to T+3. However, investors asked for further improvements.
One of foreign investors' biggest concerns was the efficiency of securities companies. "The number of 105 companies is too many, while in practice, only 10 leading firms have taken over 50 per cent market share," the group stated in a report. "The rest of the pie for 95 companies was too small to maintain operations."
Therefore, the securities commission should promote the restructuring of brokerages to assure the benefits of foreign investors when opening accounts in these companies.
VinaCapital's Terry Mahony highlighted state-run enterprises' (especially in the telecommunications and banking sectors) equitisation as a method to attract foreign investors.
By law, businesses must list shares within 12 months of equitising, but the regulation is still not completely adhered to. Meanwhile, Mahony urged for listing to be mandatory within just one month of equitisation.
To improve trading liquidity, the working group also suggested changes in the price fluctuation limit for stocks (currently 7 per cent on the HCM City Stock Exchange and 10 per cent on the Ha Noi Stock Exchange).
The working group proposed to halting trading within 30 minutes when share prices approached their ceiling or floor prices. After the half-hour pause, these ceiling or floor prices would become the new reference prices.
The 7 per cent and 10 per cent amplitudes were a bar to the natural circulation of cash, the group said.
The commission vice president Nguyen Doan Hung responded that the agency was working on these issues in accordance with the stock market's strategic development by 2020.
HCM City to host pharmaceutical expo
An international exhibition on equipment, products and supplies for the medical pharmaceutical industries, hospitals and rehabilitation facilities will return to HCM City in September.
Pharmed and Healthcare Vietnam 2013 will be held at the Sai Gon Exhibition and Convention Centre in HCM City's District 7 from September 18 to 21, offering industry professionals opportunities to network and compare notes.
The exhibition, organised by Adpex Joint-Stock Company, will exhibit medicine and healthy foodstuff, pharmaceutical manufacturing and packaging equipment, diagnostic equipment, hospital furniture and beauty-care equipment and products.
Several conferences and seminars on hospital waste and waste water treatment, as well as plastic surgery and the pharmaceutical industry, will be held alongside the four-day event.
Power plant operator negotiates selling price
The operator of Nhon Trach 2 power plant is in negotiations with Vietnam Electricity Group (EVN) to raise its power selling price, which currently stands at VND1,200 a kWh, said a top executive.
Hoang Xuan Quoc, general director of PetroVietnam Power Nhon Trach 2 Joint Stock Company, told the Daily last week that since joining the competitive power market, EVN has bought power of the plant at a price lower than VND1,400 per kWh offered to other power plants.
Nhon Trach 2 plant worth US$706 million has a capacity of 750 MW and each year uses around 800 million cubic meters of gas supplied from Nam Con Son gas field. The plant produced 4.6 billion kWh and earned revenues of VND5.45 trillion from selling power last year.
According to Quoc, many other gas-fired power plants are selling power at low prices to EVN, sometimes at as low as a few Vietnam dong during ‘off hours’. The firm is negotiating with EVN to increase the price to cover production costs.
Currently, the power ceiling price is set by EVN, and it is unlikely that the price will exceed the ceiling price after negotiation. As the sole power buyer, EVN wants to buy power at low prices to earn more profits.
Therefore, the situation will be different if there are three to four power buyers, Quoc noted.
Regarding the gas supply for gas-fired power plants in southern Vietnam, there will be a new gas supply source which is Hai Thach-Moc Tinh field providing an estimated volume of some two billion cubic meters per year, enough for three plants like Nhon Trach 2.
Sugar inventory continues to rise
According to the Ministry of Agriculture and Rural Development and the Ministry of Industry and Trade, sugar inventory increased to nearly 600,000 tons by May end, about 222,410 tons higher than in the same period last year.
The Ministry of Industry and Trade said that sugar inventory has been increasing since March because of slow consumption and excess supply from sugar processing plants. The output this year has far exceeded that of previous years.
Sugar plants across the country have processed more than 15.8 million tons of sugarcane to produce nearly 1.5 million tons of sugar, whereas domestic sugar consumption is only 100,000 tons a month.
Next sugarcane crop will bring in 200,000 tons of processed sugar by October, not taking into account the volume of smuggled sugar coming in from Thailand.
Vietnam makes breakthrough in breeding Russian sturgeon
When it comes to aquaculture, people usually think of coastal regions or the Mekong Delta where shrimp and pangasius earn revenues of upto tens of billions annually. However, recently people found mountainous regions in the North and the highland provinces as suitable for breeding Russian sturgeon, a fish variety of high economic value in the world.
In 2008, Russian sturgeon was bred in the Da Mi hydropower reservoir in the central province of Binh Thuan adjacent to the highland province of Lam Dong.
The breeding of this fish was a real breakthrough as the fish grows quickly. It takes 8 to 10 years for the fish to weigh 15 kilograms in Russia but it takes only 4 to 5 years in Vietnam.
Le Anh Duc, Chairman of Vietnam Sturgeon Group, said sturgeons grow faster in Vietnam because the weather is warmer than in Russia.
Breeding in highly controlled environment in fresh water means that farmed caviar can be of as good quality as that in the wild in the Caspian or Lagoda Lake in Russia.
Currently, Tam Long Da Mi Company, under the Vietnam Sturgeon Group, raised over 200 tons of sturgeon in 200 facilities. With its success in breeding, propagating sturgeon and harvesting caviar, the Vietnam Sturgeon Group decided to invest VND300 billion ($14 million) building labs, freezers and processing factories.
Moreover, the Group expanded breeding facilities to the central province of Binh Dinh, the highlands province of Dak Lak and the northern province of Son La.
At present, sturgeon flesh consumed is 1,000 tons a year in big cities such as Ho Chi Minh City, Da Nang and Hanoi. Le Anh Duc said the price will be lower a few years later when more households in mountainous regions take to breeding of this fish.
On the other hand, breeders understand that selling of sturgeon flesh is not the aim. The price of white caviar is US$1,700 per kilogram, Siberi caviar $2,800 a kilogram, Kaluga is $5,800 a kilogram, and Russian caviar $12,000 a kilogram. In 2012, the group harvested around 1 ton, just enough for some five-star restaurants in the country.
Le Anh Duc said Russian holidaymakers are very fond of having the fish when in Nha Trang City in the south-central province of Khanh Hoa.
In addition, due to rampant overfishing in the Caspian Lake, the supply can barely meet demand in the world. Therefore, exporters from European countries have come to Vietnam to study breeding procedures in natural environment.
The group has signed a Memorandum of Understanding with France and Russia to sell black caviar to the two countries by late 2013 or mid 2014.
Russian sturgeon experts said that Vietnam could well become Asia’s sturgeon supplier as the group raises the fish as per Global Gap Standards that offer good quality fish.
High inventory levels pose challenges to cash flow
High inventory levels are attributed to low credit growth and an increase in banks’ bad debts.
Many commercial banks have reduced their interest rates after the State Bank of Vietnam (SBV) decided to cut lending rates to a record low in more than three years to help local businesses iron out snags in their current economic difficulties.
However, there is growing concern among the business community about the flow of capital when the bad debt ratio remains rather high.
By far, 15 of Vietnam’s 39 commercial banks have reduced their annual short-term loan interest rates to 7.5%, while 14 others have cut their rates for non-term loans to less than 2% per year.
Nevertheless, domestic businesses still find it difficult to access bank loans due to strict requirements from lenders.
Truong Hoang Lan, Director of the Tien Phong Commercial Joint Stock Bank’s capital department, says that many commercial banks are unwilling to offer loans to loss-making businesses and those with bad debts. Therefore, the flow of low-cost loans will only reach businesses that can operate with efficiency.
Banks prefer providing incentive loans to businesses that can make a profit to contribute to social welfare, Lan says, adding that those with poor performance will be on the long waiting list.
Dr. Tran Dinh Thien, Head of the Vietnam Economics Institute, says banks are also like businesses and don’t want to face bad debts owned by inefficient borrowers.
In addition, he says, many businesses do not have feasible plans or solutions to earn the trust of bankers.
Dr. Thien argues that up to April 2013, the number of dissolved businesses doubled from two years ago. Both banks and businesses are in a financial fix.
The crux of the matter is how to devise effective measures to cope with the situation but it’s no easy task for them all, he said.
High inventories like a stumbling block to the flow of cash, have led to a high ratio of bad debts for banks and a limit on credit growth.
Financial storm ravages Cai Mep-Thi Vai ports
Delays of port relocation and other planning snafus are causing major troubles at southern Ba Ria-Vung Tau province’s Cai Mep-Thi Vai port complex, which has been projected to become the largest transshipment port in the south.
SP-SSA International Container Terminal is planning to temporarily close its 38-hectare terminal at the Cai Mep-Thi Vai Port complex.
State-owned Vinalines last week reported this plan to Minister of Transport (MoT) Dinh La Thang. According to Vinalines, the Ba Ria-Vung Tau province-based terminal has to stop operating temporarily because of the cargo shortage at the Cai Mep-Thi Vai port complex, and aiming to avoid bankruptcy. Vinalines reported the joint venture between the US’ SSA Marine, Vinalines and Saigon Port had reached an agreement with bankers to extend debt duration and also exempt interest rates in five years.
The case of SP-SSA International Container Terminal illustrates how terminal operators at the Cai Mep-Thi Vai port complex are in a very perilous condition as they have suffered losses since last year. Five years ago, the construction of terminals in this area was considered as the only way to ease port congestion at ports in neighbouring Ho Chi Minh City. This was planned to replace ports in the second city, and to become the main gateway for import-export operations in the south, the country’s economic hub.
Five terminals were put into operation in the complex including Cai Mep International Terminal, SP-PSA International Port and SP-SSA International Container Terminal, jointly invested by state-run Vinalines and Denmark’s APM Terminals BV, Singapore’s PSA International and US’ SSA Marines, respectively. The other terminals are Saigon New Port’s Tan Cang-Cai Mep Container Terminal and Hutchison Port Holdings’ Saigon International Terminals.
In January this year, the Ministry of Transport (MoT) announced plans to open another container terminal there, namely Cai Mep-Thi Vai International Container Terminal. The new terminal will be under management of Japan’s operator Nippon Yusen Kaisha.
Industry experts warned that the slow pace of terminals’ construction in the Cai Mep-Thi Vai complex would negatively affect economic development of the country as ports in Ho Chi Minh City were facing overloading. None of them at that time could imagine that nowadays port developers in this area have to struggling to survive.
Ngo Minh Tuan, deputy director of Saigon New Port, revealed that all terminals in the Cai Mep-Thi Vai complex last year suffered losses, some up to $30 million per year.
According to the latest report of Ba Ria-Vung Tau Provincial People’s Committee, container terminals in the area are operating at just around 15 per cent of their throughput capacity, that mirrors a dire situation for terminal operators at this time. The cargo volume transported through this complex last year declined 6.5 per cent from 2011, forcing most of the terminals to reluctantly accept bulk cargo to reduce losses.
The reason is that these terminals were built to replace ports in Ho Chi Minh City, such as Saigon Port, Khanh Hoi Port and New Port. However, the second city’s ports have not yet been closed, even though the Vietnamese government has already had this plan for many years.
“We now have to share a pie with terminals in Ho Chi Minh City, which should be closed and relocate to Ba Ria-Vung Tau in accordance with the government’s plan,” said Tran Khanh Sinh, director of Tan Cang-Cai Mep.
Nguyen Xuan Ky, general director at Cai Mep International Terminal, said the existing of too many ports in the south “deformed” port development master plan in the region. Actually, at present, most cargo volume is still handled through ports in Ho Chi Minh City and not through the Cai Mep-Thi Vai port complex. Shipping lines now just maintain seven international direct lines to this port complex.
“There are many reasons for shippers to keep on handling cargo via Ho Chi Minh City’s ports. They have a habit of doing customs procedures at inland clearance depots in southern Binh Duong and Dong Nai provinces while the construction of inland infrastructure linking terminals at the Cai Mep-Thi Vai is at a very slow pace,” Ky said.
Six months ago, Infrastructure Working Group of Vietnam Business Forum, proposed the Vietnamese government to stop opening another container terminal funded by Japanese official development assistance in this area. In addition, it also proposed to “immediately ceasing the licencing of all container terminal building projects in Ho Chi Minh City’s inner parts.”
Local exporters slowly regaining their mojo
The export and import turnovers of Vietnam’s domestically-owned enterprises have produced a $3 billion trade deficit for the first five months of the year, a bright spot amid a slew of dark economic news.
The Ministry of Planning and Investment’s (MPI) data showed that local firms’ value of exports reached $20.2 billion, while that of imports touched $23.2 billion. In May, the turnover reached $4.3 and $5.4 billion, respectively, resulting in a $1.1 billion trade deficit, down from April’s $1.73 billion.
Government officials offered an upbeat assessment of the data. “Local enterprises’ export-import activities have seen signals of a recovery, manifested via their trade deficit,” said MPI Deputy Minister Dang Huy Dong.
“The trade deficit is a good signal of local enterprises’ health,” said Huynh Dac Thang, vice head of the Ministry of Industry and Trade’s (MoIT) Export-Import Department. “It means a production rebound as currently 70 per cent of inputs for local production is imported. It is expected that the trade deficit will continue in the coming months, due to a rise in industrial production.”
In this year’s first five months, the index for industrial production (IIP) augmented 5.2 per cent against last year’s corresponding period, when the IIP had climbed 4.2 per cent over the previous year. Notably, the on-year IIP rise for the processing and manufacturing industries was 5.5 per cent, significantly higher than the on-year 3.8 per cent rise of last year’s corresponding period.
Do Huu Phuong, director of home appliance maker Hoang Anh Export-Import Company in Hanoi, said the company’s imported materials like steel, plastics and cloth in May climbed 15 per cent against April, when this rate augmented 10 per cent on-month.
“During this year’s first five months, the rate ascended 12 per cent against the same period last year, when the rate went up 10 per cent on-year,” Phuong said.
Such products imported by this company also saw good growth as prescribed in an MPI report submitted to the government in May. It showed that the import of steel increased 30.1 per cent in quantity and 16.3 per cent in value, plastics increased 16.7 per cent in quantity and 16.1 per cent in value ($2.22 billion), cloth up 17.8 per cent ($3.3 billion) and garment materials up 18.7 per cent ($1.48 billion).
Between January and May, Vietnam’s total export value - including that of foreign-invested enterprises (FIEs) reached $49.9 billion, up 15.1 per cent on-year - and the import value reached $51.9 billion, up 16.8 per cent on-year, respectively, with a $1.9 billion trade deficit.
Specifically, FIEs occupied nearly 60 per cent of Vietnam’s total export turnover for the first five months of the year, during which they also accounted for 55.3 per cent of the country’s total import turnover.
If crude oil exports are excluded, FIEs’ trade surplus would be $1.1 billion. If not, their trade surplus will be nearly $4.1 billion.
During this year’s first five months, FIEs have also exported 98.3 per cent of phones, over 90 per cent of computers and electronic products, and nearly 70 per cent of footwear, according to the MoIT.
Fresh energy for a new direction
Incorporating green features in real estate projects has become increasingly popular. Developers are embracing the strategy to boost the bottom line, improve their brand and protect the environment.
Developing green values in property projects has become trendy.
More people have come to the perception that eco-friendly designs and greater energy efficiency in buildings will help reduce not only energy costs and greenhouse gas emissions, but also increase the value of their projects.
Just last year, Vietnamese architect Vo Trong Nghia won two awards at the World Architecture festival for his design of Binh Duong school in southern Vietnam.
“We, the Vietnamese, need to think about climate change, so we should make a house, a school, a building using less energy,” Nghia said.
But, while green features in modern property projects in Vietnam are often regarded as a new concept, the country’s traditional architecture has long boasted “green” elements, experts said, that have been lost in the rush toward urbanisation.
Professor Nguyen Quoc Thong, deputy chairman of the Vietnam Association for Architecture, said the “green” features Vietnamese traditions, a smooth combination that can be summed in three words: “People – Architecture – Nature.” Even though the green features were applied differently by different ethnic groups, the elements were used in every region of the country.
Rapid urbanisation, however, has damaged the traditional architectural virtues, producing unsustainable development that exacerbates problems. Energy costs in Vietnam have increased by more than 15 per cent annually over the past two years and waste water management continues to be a challenge throughout the country. A Ministry of Industry and Trade (MoIT) report shows that in Vietnam, a building on average uses at least 25 per cent energy more than needed.
Urbanisation has also created more traffic jams and environmental pollution- and all of these problems, in turn, have produced a resurgence of green thinking.
“Green architecture now becomes the current trend. It forces every developer, investor and user to think about it,” Thong said.
The number of buildings and projects which have green characteristics has been increasing dramatically in recent years. Some high-profile projects have been honoured by international and domestic design institutes for green attributes such as Bamboo Wing in Flamingo Dai Lai, Suoi Re Commune House, Vietinbank Hanoi building and Dolphin Plaza Hanoi and a range of resorts stretched along the length of the country like Sai Gon Mui Ne Resort, Six Senses Hideaway Ninh Van Bay and Ana Mandara Villas Dalat.
Thong said the green features in these award-winning projects respected the needs of the natural environment and human beings. “Green architecture is the smooth combination between traditional knowledge and modern expertise, in order to have a friendly environment comfortable for users,” he said.
Green buildings also used green materials and technologies which have low carbon footprint, are energy-saving and minimise the usage of natural resources.
Turner International’s Jim Goldman, project director of Vietinbank Tower in Hanoi, told VIR about his firm’s green philosophy in how it applied to a trinity of values: environment – economic – people. The environment, Goldman explained, meant reducing resource consumption. “Economic regards the tenant’s demand, product differentiation through value, higher efficiency, lower cost of building, increasing productivity and higher quality. Meanwhile, the people reflects the project’s relationship to the community.”
Green features must appear in the project from early stage, when it was still on paper, and solidly developed during the project’s process. “Planning for success, start early,” he said.
Goldman added that in the initial stage of green buildings in Vietnam, the government should educate people from an early age. “It is ideal if the concept of green building can be taught in school, enabling every child to understand the urgent need of how to develop in a sustainable manner.”
Russ Drinker, managing director of HOK - a global architect firm, said that Vietnam had a huge potential for maximising green values.
“Green features must not be used on property only, but for all aspects of people’s life, in an aim toward a more sustainable development,” Drinker said.
“With thousands of under constructions and many other projects were pipelined in the coming time, Vietnam will be a rich destination for any persons who are interested in green and sustainable development,” he said.
Minister of Construction Trinh Dinh Dung said Vietnam would attempt to take measures to accelerate energy efficiency to save 15 per cent in energy use per square metre of new buildings in the next years.
As part of this effort, the Ministry of Construction (MoC) recently signed a cooperation agreement with the International Finance Corporation (IFC) to promote energy efficiency in buildings and reduce greenhouse gas emissions.
Accordingly, the IFC will help the ministry develop procedures and the capacity to implement the Building Energy Efficiency Code between 2013 and 2017.
This agreement is expected to contribute to the implementation of the National Target Programme on Climate Change Adaptation, the National Target Programme on Energy Efficiency, and the National Green Growth Strategy.
Phu Quoc pepper exporters spice up quality of products
Phu Quoc island district in the southern province of Kien Giang is making all-out efforts to improve the quality and value of pepper, aiming to obtain the Global Good Agricultural Practice certificate.
With 385 hectares of pepper plantations, mostly in Cua Duong and Cua Can communes, Phu Quoc reaps nearly 1,000 tonnes of pepper a year.
The locality plans to expand its plantations to 500 hectares by 2015 and 1,000 hectares by 2020, with expected yield of 3 tonnes per hectare.
In 2011, the National Office of Intellectual Property granted a licence to Phu Quoc pepper, helping the district to affirm its product's traditional value and quality while creating conditions for it to introduce its product to the world market.
Phu Quoc district is working on a pepper growing process in an efficient and eco-friendly manner that it will train farmers on.
Local officials said they were targeting clean and safe products to serve both domestic consumption and exports.
According to Nguyen Minh Truc, head of Phu Quoc's Economic Office, the locality targeted organic and sustainable cultivation of pepper plantations while promoting its brand name in domestic and foreign markets.
Apart from local specialties such as pearls, seafood, fish sauce and wine, pepper in Phu Quoc is developing in a sustainable manner in combination with services and tourism, contributing to the locality's socio-economic growth.
Equitisation of state-owned enterprises slowing down
During a discussion about the equitisation of state-owned enterprises (SOEs) held on June 3, the Vietnam Business Forum (VBF) said that there has been a slowing trend.
Dominic Scriven, CEO of Dragon Capital Group, remarked that the process has slowed due to the slump in the stock market. The group suggested that the government set new goals with specific timelines to help the market.
Scriven specifically emphasised the importance of equitising the telecom and banking sectors.
He also outlined the need to determine the takeover value of the enterprise by hiring private foreign consulting firms. Successful equitisation is ideally beneficial to both investors and owners, and requires that there be a sufficient amount of shares to be sold at attractive prices.
The enforcement of mandatory listing is also key to the process. However, even though the law states that SOEs going through equitisation must list within 12 months of the successful completion of the process, few firms have followed this rule. VBF has confirmed that they have received suggestions that SOEs be forced to list within one month of being equitised.
Terry Mahony, Chairman of Vincapital, a fund management company, said the lack of experience of managers for banking issues is one of the main causes for the slow progress. If the bad debt problem is not solved, the economy's liquidity will suffer, he added.
Current estimates of bad debt in the system are generally seen as unreliable, proving that the economy as a whole is in need of more transparency in financial reporting. Mahony suggested that the government make bold policy moves to reform the banking system and speed up equitisation of SOEs.
Cleantech firms target new demand
Vietnam’s growing demand for eco-friendly building products is on the radar of many foreign cleantech construction firms.
Jean-Mann Cho, president of Gmatek Company, which is South Korea’s leader in green building materials, told VIR that Gmatek was seeking Vietnamese partners to export its products to Vietnam, including foamed ceramic boards, incombustible insulators, sound absorption panels and fireproof doors.
“If we succeed in establishing a network of partners here, we will build a factory here,” Cho said. “Vietnam’s climate condition is suitable to our products which can resist water, fire and funguses.”
Cho said the use of foamed ceramic boards for construction could decrease the area of agricultural land used for clay exploitation to make baked bricks, thus helping ensure food security and limit environmental risks.
Gmatek is among nearly 50 South Korean firms coming to Hanoi last week to showcase their eco-friendly building-related products and seek local partners. They said they were encouraged by the Vietnam government’s plans to promote a low-carbon economy, in which environmental-friendly products would gradually be applied in buildings.
For example, under the Ministry of Construction’s Circular 09/2012/TT-BXD regulating the use of unbaked construction materials in buildings, by 2015, unbaked construction materials must occupy at least 30 per cent of bricks for buildings with at least nine floors, rising to 50 per cent in the following years.
The South Korean firms said Vietnam’s urban dwellers tripled from 12 million in 1986 to 36 million now, with an increasing number of buildings. “It is clear that such buildings will need eco-friendly products,” said Samhyun CNS’ managing director Sang-Hee Kang, saying CNS wanted to market five products related to surge protectors in the country.
Bugok Stainless and Kyoung Sung Industry companies also said they were expanding their export networks throughout Asia, with their products including stainless bars and pipes, stainless shots, cut wires, and carbon steel shots and gaskets.
“We have met with 10 Vietnamese partners and deals may be signed. In our studies, Vietnam’s buildings tend to use high-grade products like ours. Thus this is a good opportunity for us,” said Sung Kyu Hong, chief of Kyoung Sung Industry’s planning and management division.
The Vietnam Association for Building Materials affirmed Vietnam’s position as a growing market for environmentally friendly building-related products, with many types of solutions and technologies having been applied in buildings.
Among the foreign firms already making presence in Vietnam’s construction material market is Xella Group, a leading supplier of autoclaved aerated concrete (AAC) and other sustainable building materials such as fermacell dry-lining systems.
“Our long-term goal is to have local production in Vietnam. However at this stage, our plants in China are able to supply Vietnam for the short-term,” said James Blythman, chief representative of Xella Group in Vietnam.
“We believe that Vietnam developers are keen to learn further about the advantages of new and green building materials. Vietnam has a long history of clay-brick masonry and as a result it will take some time to educate the market. Other organisations such as the Vietnam Green Building Council (VGBC) and their Lotus rating programme are playing their part to help educate the market on green building in general.”
Commenting on the group’s performance in Vietnam in 2013, Blythman said: “It is no secret that the Vietnam construction sector has been distressed since late 2011. However, Xella expects a pick-up in the residential and non-residential sector in 2014’s first quarter. The underlying demand in Vietnam remains unchanged and we see many opportunities long term for Xella and green building materials in Vietnam.”
Construction material maker Boral Gypsum Vietnam (BGV) has been building a second plasterboard production line in Ho Chi Minh City. In late March 2013 the company inaugurated a metal frame making factory in northern Hung Yen province. Boral is marketing 26 lines of products in Vietnam.
Established in Vietnam in 2005, Boral supplies a range of interior gypsum board lining solutions under the LAGYP brand. The company was the first to introduce plasterboard production to Vietnam
Meanwhile, Saint-Gobain Vietnam is trying to consolidate its firm niche in Vietnam, with premium brands like Gyproc, Gyptone, Gypfine and Gypfiller.
Popular Chinese LED maker is ready to shine light on Vietnam
One of China’s well-known brand light emitting diode (LED) manufacturers is planning to directly invest into Vietnam.
At last week’s fifth international exhibition on energy efficiency in Hanoi (ENTECH Hanoi 2013), the booth of Hua Bo Tech (Zhuhai) Industry Co., Ltd., based in China’s Zhuhai city, stood out among 200 booths showcasing their energy-saving technologies.
Hua Bo Tech (Zhuhai), whose capital comes from Taiwan, showed off its samples of more than 200 LED products, which will be directly manufactured in Vietnam from this year’s third quarter with state-of-the-art technologies.
LED is a semiconductor light source that is frequently used as indicator lamps in many devices and are increasingly used for other lighting. It can save 30-90 per cent of power as compared to traditional lamps. “Hua Bo Tech (Zhuhai) will invest five million dollars to build a factory focusing on manufacturing products ranging from precise plastic components, vacuum packaging blisters, mold/tooling design and fabrication, label and sticker processing, assembly for OEM electronic products, solar-powered and energy-saving lighting fixtures to LED lamps in Hanoi’s Thach That-Quoc Oai Industrial Park’s Lot 18.
At present, the company has decided to lease a production workshop at the lot. This will be our first factory in Vietnam,” said company sales director James Chen. “We are asking investment permission from the Ministry of Planning and Investment in Vietnam. It is expected that we will receive the investment certificate in June or July and will begin production in September 2013,” Chen told VIR.
“One of the reasons why we come to Vietnam for investment is that many of our big customers like Panasonic, Samsung, Honda, Toyota, Cannon, Sony and Brother Industries have been in Vietnam for years. And we don’t want to lose these customers,” Chen said. “Also, the labour cost in China keeps increasing, while Vietnam boasts a cheap labour cost.”
This 20,000-square-metre factory will employ about 600 local workers and it will be expanded to 50,000sqm by late 2014.
The factory will use imported materials to make over 200 types of LED lamps which will be both locally-consumed and exported to Europe, Asia and North America. Some 20,000 of the 50,000sqm will be used for production, and the remaining area will be used for roads, landscaping and showrooms. This project comes to Vietnam as the government is making efforts to promote a low-carbon economy, in which development of LED technology is prioritised, with the big participation of foreign investors.
“LED technology is becoming an important development orientation of Vietnam’s government. The far-reaching application of this technology will remarkably contribute to the government’s successful implementation of its national targeted programme on energy efficiency,” Chen said. He said in order to carve a firm niche for its products, this company would focus on enhancing product quality and after-sale services for customers, as it was doing in China. “Besides, all workers will receive training courses with each lasting three or six months, and they will become skilled ones,” he said.
Hua Bo Tech (Zhuhai) - www.famei.com.cn, is a member of China-based HUA BO Group, which is a manufacturer of industrial equipment and machines. In China, Hua Bo Tech (Zhuhai) has two factories with one in Zhuhai and one in Zhong shan city. It is a large-scale plastics and electronics company established under the modern enterprise system.
The land area of Hua Bo Tech (Zhuhai) covers 68,000sqm, and the total building area is 95,000sqm. Its main business scopes are precise plastic components, vacuum packaging blisters, mold/tooling design and fabrication, label and sticker processing, assembly for OEM electronic products, solar-powered and energy-saving lighting fixtures.
Its clean-room workshop covers over 2,000 square metres. It also has advanced production facilities.
More chances for sugar exports to EU
Local sugar firms will have more opportunities to access the European Union (EU) market after the EU scrapped import tariffs on some codes of the sugar import list it is applying.
According to the Europe Market Department of the Ministry of Industry and Trade, the European Commission has issued a decision on customs quotas for industrial sugar import this year and next.
Under the decision taking effect last week, from October until September 2014, the EC stops levying tariffs on 400,000 tons of industrial sugar having the code 1701 and the order number 09.4390.
According to the Ministry of Industry and Trade, this creates a great chance for local sugar refineries to boost exports to the EU.
Regarding this issue, the director of a large sugar firm in the central region told the Daily that the tax removal on up to 400,000 tons would help Vietnam sell the sugar inventory amounting to over 300,000 tons of the 2012-2013 crop.
However, Vietnam has mainly exported sugar in small amounts in the past and thus will face many difficulties when accessing a big market like the EU, he added.
The sugar volume of this crop is estimated at some 1.55 million tons, which is 50,000 tons higher than the figure forecast by Vietnam Sugar and Sugarcane Association at the beginning of the crop and 300,000 tons higher than the previous crop.
Kien Giang accelerates key projects on tourism island
The southern province of Kien Giang is focusing efforts and resources on key infrastructure projects in the island of Phu Quoc to meet the goal of turning the island district into a third-category city by 2015 and a special economic zone by 2020.
A 2.4 trillion VND project to build a 51.5km road running along the North-South axis on the island has disbursed 65.7 percent of investment, while the construction of a 193.8 billion VND road that connects the axis road with the sea, running from Ham Ninh intersection to Suoi Da village, also had almost 60 percent of the workload done.
Meanwhile, the project to build a 100km-long road circling Phu Quoc Island has disbursed 20 percent of the total investment of over 3 trillion VND so far.
At the same time, the laying of a 110 KV undersea cable to bring electricity from Ha Tien town on the mainland to Phu Quoc has seen 350 billion VND out of the total investment of 1.759 trillion VND disbursed.
The provincial authorities has urged Phu Quoc island district to work closely with departments and branches to address difficulties facing investors and contractors.
The province has set up inter-sectoral supervisory groups to help Phu Quoc accelerate the projects, especially newly launched ones and those using official development assistance (ODA) capital and funds from Government bonds, and those listed in the national target programme.
According to the Southwestern Steering Committee, Phu Quoc may fail to fulfil the target of becoming a third-tier urban district by 2015 and a special zone by 2020 as instructed by the Prime Minister, if steps aren’t taken to attract investors soon.-
Bright outlook for trade ties with Brazil
Vietnam’s exports to Brazil had a higher growth rate than other Asian countries in the first four months of the year.
Total bilateral trade during that time reaches 654.6 million USD of which Vietnam ’s exports were 349.5 million USD, an increase of 48.5 percent year-on-year, according to Brazil ’s Ministry of Development, Industry and Foreign Trade.
Vietnam’s exports to Brazil also saw a growth rate higher than the average growth rate of exports to the US (12 percent).
Total bilateral trade between Vietnam and Brazil ranks second, only after the US.
According to Vietnam’s Commercial Affairs Division in Brazil, there are still many opportunities for Vietnamese goods to penetrate this market.
Currently, the market share of Vietnamese exports accounts for only 0.3 percent of import demand in Brazil.
Last year, Brazil’s total imported goods exceeded 225 billion USD, of which Vietnamese exports worth 710 million USD.
At many distribution centres and supermarkets, the presence of made-in-Vietnam goods is visible.
However, many Brazilian enterprises have yet to realise the production potential of Vietnamese companies.
Brazil is a huge market, with nearly 200 million people. It is the sixth largest economy in the world, and its industrial sector is the most developed in South America.
Thanks to its economic growth and high loving standards, demand for imported goods has increased.
In the first four months of 2013, Brazils saw a trade deficit of 1 billion USD, while in previous years, the country had a trade surplus.
Brazilian consumers are fond of imported goods, so there are favourable conditions for Vietnamese goods to access the market.
On the other hand, market research specialists said that language was a barrier in strengthening trade relations between the two countries, as few people on either side spoke Vietnamese or Portuguese, the main language of Brazil.
In addition, Brazil’s import procedures take along time and signed contracts must be notarised in Brazil , which hinders Vietnamese enterprises.
Geographical distance as well as cultural and time-zone difference are also obstacles.
To overcome these challenges, Brazil opened a consulate earlier this year in HCM City to support businesses look for partners and seek mutual understanding about each other’s markets.
Currently, Vietnam exports seafood, footwear, electronic parts, textiles and garments to Brazil .
Brazil also has great demand for cosmetics and medicine, two areas in which Vietnam could increase exports. It is also seeking foreign investment in sectors such as seaports, shipbuilding, oil and gas, and bio-fuels.
Total bilateral trade between Brazil and Vietnam is expected to surpass 2 billion US this year.
Unhealthy competition becoming increasingly sophisticated
To corner the market, not a few businesses are resorting to unhealthy or even illegal competition.
According to the General Department of Taxation statistics, there are more than 9,000 foreign directed investment (FDI) businesses operating in Vietnam, many of which have positively contributed to national economic development.
However, not a few are deliberately raising the trading values of input materials, products, and services to create a “fake loss real profit” phenomenon and avoid tax liability. Many domestic businesses had to withdraw from joint ventures, which have been transformed later into 100 percent foreign-invested companies.
Such hard facts not only reduce corporate income tax revenue but directly affect the performance of domestic businesses.
Vietnam Beer, Alcohol, and Beverage Association President Nguyen Van Viet says healthy market competition can fuel mutual development and benefits, but unhealthy competition only drives a wedge between businesses, damaging trademarks and reducing consumer trust.
Viet emphasizes that unhealthy competitive practices violate consumer rights to enjoy freedom of choice.
Former Deputy Trade Minister Luong Van Tu says the majority of FDI businesses operate by Vietnamese law, only some seek to reduce their tax burdens by claiming to suffer losses from price transfer. To ensure healthy competition, Vietnam should put up technical barriers in line with international trade agreements. Domestic businesses should focus on earning the trust of customers.
Tu says defending consume rights is one way of ensuring a healthy and equitable business environment.
Vietnam has issued a Competition Law and a Law on the Protection of Consumer Rights in the hope of encouraging healthy competition. Domestic businesses should officially register and promote their brand names to give customers freedom of choice.
Tran Anh Son, deputy director of the Ministry of Industry and Trade’s Competition Management Department, says underhanded competitive practices are becoming increasingly sophisticated. Domestic businesses, customers, and authorities must unite against unethical competition.
As economists put it, there must be drastic measures to crack down on those businesses violating or circumventing the Competition Law. Everyone is responsible for making the business environment ever healthier.