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BUSINESS IN BRIEF 1/11

SBV slashes deposit rate cap; Vietham attracts FDI from ASEAN countries; Home loans still hard to come by; Trade surplus hits $1.87b as high-value exports rise; State-owned firms misused funds: MoF

SBV slashes deposit rate cap

The annual interest rate cap for short-term Vietnamese dong deposits will be cut from 6 per cent to 5.5 per cent.

The State Bank of Viet Nam (SBV) made this announcement at its regular monthly meeting here yesterday and added that the decision, the second of its kind this year in support of business, would take effect as of today.

The annual interest rate cap for US dollar deposits of one to six months duration will likewise be slashed from 1 per cent to 0.75 per cent.

The interest rate cap for short-term dong loans granted to the five top-priority sectors of agricultural and rural development, exports, support industries, small – and medium-sized companies and high-technology enterprises, will likewise be reduced from 8 per cent to 7 per cent. People's credit funds and micro-finance organisation will be allowed to apply an interest rate cap of 8 per cent.

The SBV also decided yesterday to maintain the policy rates for refinancing, discount and overnight loans. Accordingly, the refinancing rate remains at 6.5 per cent while the discount rate stands at 4.5 per cent and the overnight rate remains at 7.5 per cent.

At the meeting, the SBV also reported that as of October 24, the total number of deposits increased by 11.88 per cent, of which dong deposits accounted for 13.17 per cent.

As of October 24, credit growth increased by 7.85 per cent over that of last December, largely because of the Government's top-priority industries. The SBV this year targeted a credit growth of 12 to 14 per cent.

After the SBV's interest rate cut of 0.5 percentage points last March, deposit and lending rates declined by one to 1.5 per cent against that of last December.

As of October 9, dong loans with interest rates of more than 15 per cent represented 4.12 per cent of total outstanding loans, against 6.3 per cent last December. Loans with rates of more than 13 per cent accounted for 11.7 per cent of total outstanding loans, against 19.72 per cent last December.

SBV Deputy Governor Nguyen Thi Hong said bad debts were gradually reduced in the past four months, from 4.17 per cent in late June to 4.11 per cent in late July, 3.9 per cent in late August and 3.88 per cent in late September.

Hong added that to reduce bad debts to 3 per cent by 2015, as targeted by the Government, the SBV instructed commercial banks to enhance their risk provisions and use the fund for this purpose to reduce existing and new bad debts.

Nguyen Quoc Hung, chairman of the Viet Nam Asset Management Company, revealed that his company has so far bought VND95 trillion (US$4.46 billion) in bad debts while selling VND3.5 trillion ($164.319 million) in bad debts, thereby exceeding the annual target of VND2.5 trillion ($117.37 million).

Vietnam urged to boost reform to take full advantage of AEC

Vietnam should perfect its market economy institution and accelerate administrative reform to increase its national competitiveness in order to maximise the benefits of the ASEAN Economic Community (AEC) once it is established in 2015, a conference heard in Hanoi on October 28.

Participants in the conference urged businesses to actively research the AEC and put forward measures to increase competitiveness and participate in the region’s supply chain.

Addressing the event, Head of the Party Central Committee’s Economic Commission Vuong Dinh Hue said that once it is formally set up, the AEC will help Vietnam grow more rapidly, generate more jobs, attract more investment, increase production capacities and improve its standing in ASEAN and international forums.

However, he noted that the country will face challenges during the AEC integration process as there is still an economic development gap between Vietnam and other countries in the region.

He called upon all ministries, sectors and enterprises to prepare for the opportunities and challenges involved in joining the regional arena.

According to expert Yoshifumi Fukunaga from the Economic Research Institute for ASEAN and East Asia, participating in the AEC will help Vietnam’s economy grow by an additional 3.5 percent thanks to tariff cuts and the liberalisation of trade and services.

The AEC is scheduled to be shaped in late 2015. From then onwards, ASEAN will be a common market on which goods, services, capital and labour can be exchanged freely.-

Binh Duong runs trade surplus in ten months

The southern province of Binh Duong recorded a trade surplus of more than 2.3 billion USD during the first ten months of 2014.

According to the provincial General Statistics Office, exports fetched more than 12.7 billion USD, a year-on-year rise of 15.2 percent. Of which, over 10.5 billion USD was generated by foreign investors, up by 16.2 percent compared to the same period last year.

Footwear, garments, and timber were the key earners, bringing more than one billion USD to the province, while computers, electronics, and textiles also recorded rapid growth.

According to the provincial Department of Industry and Trade, as many as 111 FDI projects increased their investment capital to a total 757.6 million USD.

Bac Ninh province tops FDI attraction

With total additional and registered capital of 1,365 million VND in the first 9 months in 2014, the northern province of Bac Ninh is ranked the top of the provinces that attracts FDI in the country, the Vietnam Business Forum Magazine (VBF) reported.

In September 2014, the Bac Ninh province licensed 21 new FDI projects with total registered capital of 16.91 million USD and granted certificates to 19 projects with adjusted investment.

As of the end of September 2014, the Bac Ninh province granted the investment certificates to 608 FDI projects, among which the most important project is Sam Sung that was licensed in July with a total investment of 1 billion USD. As such, Bac Ninh has emerged as an attractive destination for FDI investors.

The province has determined that FDI plays a very important role to ensure its development towards modernisation. The province has been actively promoting foreign economic activities and implementing measures to attract FDI projects. The province is constantly improving the existing investment environment and focusing on planning, construction and development of industrial zones.

Bac Ninh has 15 industrial zones including those with most modern infrastructure namely VSIP, Tien Son, Yen Phong and Que Vo. In particular, the biggest priorities will go to projects with high feasibility, strong financial resources, high technology, production of new materials, biotechnology, and electronic projects which are environment friendly.

So far, FDI projects in Bac Ninh are operating effectively. Along with attracting new investment projects, investors of current FDI projects have effectively expanded scale of business production and investment capital.

FDI projects in Bac Ninh have facilitated the forming of some key industries such as core industries like electronics to create annual large value and highly competitive products. This helps create spillover to other domestic enterprises and contribute to urban development in the area.

Bac Ninh province aims to attract investment in the coming years to increase the quality, efficiency and environmental protection in accordance with international standards and sustainable development of the province.

Besides, the province also facilitates technology transfer among industries and projects. Other factors like the employee wages, the contribution to the local budget, development of the high skilled workforce and high technology application for environment friendly development services and creation of value-added products as well as an effective use of the resources for a sustainable development are also focused on.

Regional product club makes debut

Over 150 regional products from local enterprises were displayed at the launch ceremony of the Mekong Special Product Club (MekongSP Club-MSC) in the southern city of Can Tho on October 28.

The club is expected to create favourable conditions for local enterprises and traditional villages to link up, exchange experience and cooperate on trade to increase their sales channels and add value to their products.

Speaking at the event, Vo Hung Dung, director of Can Tho’s branch of the Vietnam Chamber of Commerce and Industry (VCCI) called upon local enterprises to improve product quality, and consolidate their prestige with a view to increasing the quantity and value of sales, both domestically and abroad.

At the same time, the club aims to maintain the region’s original characteristics.

The club is founded with 60 members in three key sectors, including handicrafts, food, and natural products. It will promote trade, provide training on management and production techniques, and build a fair business environment by creating a common quality standard for the products.

In addition, the club will give advice on quality standards and provide support on marketing and packaging design.

Tra fish exports bounce back

Tra fish exports in the first nine months of this year increased 0.2 percent to over 1.27 billion USD against the same period last year, according to the Vietnam Association of Seafood Exporters and Processors (VASEP).

Despite a decline of 5.8 percent from the same period last year, the European Union and the United States remained Vietnamese tra fish’s largest importers.

Tra fish exports to the EU and US markets accounted for 20.4 percent and 18.9 percent of the country’s total export value of the item, respectively.

ASEAN ranked third among Vietnam’s tra importer. In the reviewed period, Vietnam’s tra fish export turnover to the bloc reached 102 million USD or a 12.4 percent rise over the same period last year.

Thailand led the association in importing Vietnam’s tra fish, followed by Singapore and the Philippines.

Vietham attracts FDI from ASEAN countries

As a member of the ASEAN Economic Community by 2015, Vietnam has great prospects to attract foreign direct investment (FDI) from the Southeast Asian block, the Vietnam Economic News cited experts as saying.

According to the Ministry of Planning and Investment, ASEAN member countries currently have 2,431 FDI projects with total registered capital of 51.83 billion USD in Vietnam, accounting for 21.4 percent of total registered FDI in the country.

ASEAN projects have an average capital of 21.3 million USD compared with 14.45 million USD worth of average capital for FDI projects in Vietnam.

So far ASEAN has invested in 18 out of all 21 economic sectors in Vietnam focusing on processing, manufacturing, real estate and construction.

Of these, the processing and manufacturing sector has led with 950 projects and total registered capital of 20.07 billion USD, accounting for 39.08 percent of total projects and 38.71 percent of total investment capital.

It has been followed by real estate with 92 projects and 16.48 billion USD, accounting for 3.78 percent of total projects and 31.81 percent of total registered capital; and construction 166 projects, 3.03 billion USD, 6.8 percent and 5.85 percent, respectively.

Investors from ASEAN member nations are present in 55 out of the country’s 63 provinces and cities by September.

Three top destinations in terms of ASEAN investment include Ho Chi Minh City, attracting 13.2 billion USD and accounting for 25.46 percent of total investment capital, Hanoi 8.53 billion USD and 16.47 percent, and Ba Ria-Vung Tau 6.16 billion USD and 11.89 percent, respectively.

Vietnamese businesses have invested in nine countries in ASEAN through 515 projects and total registered capital of 9.67 billion USD. Of these, Laos, Cambodia and Malaysia have attracted them the most.

Vietnam has great prospects to attract FDI from ASEAN in the near future since it has not only actively implemented ASEAN’s general commitments but has also boosted bilateral cooperation in many areas. Trade and investment relations between Vietnam and ASEAN are developing rapidly.

When compared with other countries in the region, Vietnam has advantages including a wealth of natural resources, a young labour force, the large consumer market and the stable political system which have been appreciated by foreign investors.

MoH proposes immediate equitisation of three vaccine makers

The Ministry of Health Portal has reported that the authority has asked the prime minister’s approval for the equitisation of three vaccine companies within this year, according to Dien dan Doanh nghiep (The Business Forum) online.

Accordingly, Nha Trang Biophaco Ltd., Pasteur Da Lat Vaccine Company Ltd., and Biophaco 1 Ltd. are awaiting the premier’s final decision on their restructuring plans.

Another two units, the Nha Trang Institute for Vaccines and Medical Biologicals and the Centre for Research and Production of Vaccines and Biologicals will be converted into the one member limited liability company model that will later become a joint stock company.

The ministry (MoH)’s proposal was issued at a conference on evaluating the restructuring of state-owned enterprises, held on October 21.

The MoH made the recommendation after conducting a comprehensive survey on the vaccine production units and found the decrease of their production while they still have great need of capital.

Can local support industry meet the expectations?

With the  Decision 9208 issued by the Ministry of Industry and Trade (MoIT) on October 8 on approving a new support industry plan with a focus on three main areas – spare parts, industrial textiles and hi-tech, local enterprises are highly expected to meet the demand of local and international industries.

By 2020 Vietnam is expected to host 1,000 businesses supplying spare parts, accounting for 11 per cent of the entire manufacturing industry.

This would meet 45 per cent of essential domestic production and export demand and account for 25 per cent of total industrial production value. By 2030 Vietnam will be able to produce 70 per cent of the spare parts needed to supply the domestic demand.

By 2020 Vietnam plans to satisfy 60 per cent of demand for metal, plastic-rubber and electrical-electronics parts, 65 per cent of supporting materials for the textile industry, and 70-80 per cent of footwear materials.

The primary objective of the plan is to ensure that by 2020 Vietnam is an industrialised country.

The Japan External Trade Organisation (JETRO) once pointed out that domestic production of components and raw materials for industrial production only made up 27.8 per cent of the nation’s industrial output, while the figures for China or Thailand were as high as 50-60 per cent. The added value of Vietnamese products ranges from only 15 to 30 per cent for industrial products, including high export value products like garments and footwear.

Professor Nguyen Mai emphasised the fact that only 200 out of 500 enterprises operating in the supporting industries were qualified to meet the foreign demand, chiefly in the motorbikes and electronics manufacturing segments.

In particular, the automobile industry in 2010 set a localisation target of 60 per cent by 2020, but so far has only achieved 7-8 per cent. Likewise, the garment industry planned to achieved the localisation rate of 60 per cent by 2015, yet it still imports 99 per cent of its cotton, 60 per cent of its fibre, and 70 per cent of its fabric for the local production.

Vietnam has two supporting industry development complexes in the southern province of Ba Ria-Vung Tau and the northern port city of Haiphong, through a co-operation framework with Japan. But after 13 years they have still failed to effectively identify product demand. As a result, most of the spare parts are actually provided by foreign invested firms.

According to Vietnamnet, the Vietnamese government’s recent moves to boost the development of supporting industries may narrow the gap between expectation and reality. Local businesses have great opportunities with the expansion of major brands like Samsung, Nokia, LG and Intel in the country.

The ground is laid for domestic enterprises to modernise their technologies and enhance their human resource training to produce spare parts that meet the requirements of both local and international industries. The question is: will they seize the opportunity?

New Thu Thiem Bridge likely delayed

As work will begin next month on a new bridge connecting downtown HCMC and Thu Thiem Peninsula, the Ministry of Defense has asked the central Government to delay the project until 2018 to allow Ba Son Corporation to fulfill its defense contracts.

The suspension of Thu Thiem 2 Bridge project, the ministry reasons, will make it possible for Ba Son Corporation to complete its defense deals with the ministry by end-2017, which will help protect Vietnam’s sovereignty over waters and islands.

According to the ministry, the bridge would pass lowly above the shipyard of Ba Son Corporation 2 and occupy around 12,000 square meters of land of the firm, directly affecting Ba Son’s shipbuilding operations.

If the Ministry of Defense’s proposal is accepted, the old trees along Ton Duc Thang Street would remain intact until 2018, instead of being chopped down or relocated to make room for construction of the bridge.

Dai Quang Minh Real Estate Investment Company has been picked to replace Vietnam Construction and Import-Export Corporation (Vinaconex) to implement the project under the build-transfer (BT) format.

When the Thu Thiem 2 Bridge project was passed around for comment, transport experts said it was not necessary to build the bridge as the city already has Thu Thiem 1 Bridge and Saigon River Tunnel nearby and the cable-stayed Phu My Bridge downstream. Traffic between HCMC and District 2’s Thu Thiem remains light, so it would not efficient to spend a lot of money building a new bridge.  

However, the HCMC Department of Transport forecast Thu Thiem New Urban Area would have 120,000 residents by 2030 and another 350,000 people coming there for work a day. Therefore, the city will need to have four bridges, one pedestrian bridge and one river tunnel leading to this urban area.

The new investor has adjusted the 1.2-kilometer Thu Thiem 2 Bridge from four lanes to six lanes. The project will cost around VND2.3 trillion.

Home loans still hard to come by

Homebuyers still find it difficult to gain access to the VND30-trillion home loan package although the Government has agreed to extend the support to low-income people.

Decree 61 issued late August allows customers who sign home purchase contracts with a total land and house value of less than VND1.05 billion each to take out loans from the program. However, the policy has not been deployed as there have been no circulars guiding its implementation.

At a conference on the home loan program organized by Vietcombank and Nam Long Investment Joint Stock Company last Saturday, many homebuyers raised questions over procedures.

Le Hoang Chau, chairman of the HCMC Real Estate Association, said that the program has been applicable to commercial condos measured at 70 square meters each or smaller and priced below VND15 million per square meter.

Although Decree 61 allows for contracts with a total land and house value under VND1.05 billion each, banks have yet to do it due to the lack of guidelines, Chau said.

A representative of Vietcombank said that customers now can take out loans if meeting commercial home regulations mentioned above with an interest rate of 5% per annum. However, the bank has yet to approve loans for home buying contracts worth less than VND1.05 billion.

Nguyen Van Dung, deputy director of the central bank’s HCMC branch, said nearly 1,300 individual and corporate customers in the city had pledged to borrow over VND1.3 trillion from the package as of September 30 and that VND689 billion has been disbursed.

Dung attributed the slow disbursement to administrative procedures on the part of local governments and the lack of determination in solving investment procedures of low-cost housing projects. In addition, there have been obstacles to commercial house project conversion and condo size adjustment.

Chau of HoREA said the Ministry of Construction now only approves preferential loans for homebuyers if they sign house trading contracts with first-grade investors. If signing with secondary investors who buy projects from primary investors, homebuyers are not eligible for the low-interest credit.

Chau said the ministry should not discriminate between primary and secondary investors. Therefore, HoREA has suggested the ministry loosen the regulation to help more customers benefit from the program.

According to the central bank’s website, five banks offered nearly VND3.3 trillion worth of preferential home credit as of September 30. BIDV granted nearly VND1.4 trillion worth of loans, VietinBank VND892 billion, Vietcombank VND676 billion, Agribank nearly VND300 billion and MHB VND45 billion.

Finland funds agro-aqua exports in Mekong Delta

The Finnish government wants to help local enterprises in the Mekong Delta boost agro-aqua exports to Finland as part of a project for facilitating shipments of such products to Nordic nations.

Finnish ambassador to Vietnam Kimmo Lähdevirta told the Daily on the sidelines of a ceremony for launching the project in Can Tho City last week that Vietnam exports a variety of commodities to Europe, especially agro-aqua products. However, their revenues remain insignificant due to low added value.

Nguyen Phuong Lam, deputy director of the Vietnam Chamber of Commerce and Industry (VCCI) in Can Tho, said trade ties between Finland and Vietnam have made progress but remained modest.

The two countries’ bilateral trade totaled a mere US$228 million last year while Finland has only eight projects worth a combined US$336 million in Vietnam.

As for agro-aqua goods, local firms in the Mekong Delta mostly shipped tuna and tra fish to Finland but with limited value.

However, Vietnam holds potential to step up agro-aqua exports to Nordic markets.

To do that, local companies should enhance product quality, conduct market research and improve packaging and labeling. In addition, they have to get updates about new criteria and regulations required by Nordic nations, secure worker health and upgrade equipment, the ambassador suggested.

Nguyen Tuan Hai, director of the project, said it is necessary to help local enterprises get access to export-related standards and requirements imposed by Nordic countries with the assistance from the project.

The management board of the project is expected to organize a fact-finding trip for local firms to meet with Nordic importers and distributors in late 2015 or early 2016.

The Finnish government’s financial aid for the project is estimated at nearly VND3 billion, which goes to training local enterprises and holding seminars to inform them of necessary tips and requirements of Nordic markets.

2014 drug supply tenders found low

The HCMC Department of Health has found the approved pharmaceutical supply tenders this year are much lower than those announced by hospitals years ago following the agency’s thorough checks.

Le Anh Tuan, office manager of the department, said the bids for many pharmaceutical products this year’s first public drug auction in the city are 40-50% lower than the prices publicized by hospitals in 2011 and 2012 although many of the suppliers and the products are the same.

At the first bidding, 753 locally-processed pharmaceuticals were chosen, taking up 63.12% of the total volume and 57.3% of the total value.

Regarding the quality of Vietnam-made drugs approved at the bidding, the department said it has plans to establish a team consisting of representatives of management agencies and experts to inspect all the processing facilities in HCMC whether they meet GMP (good manufacturing practice) standards or not.

Russian tourist arrivals fall sharply

October is normally the high travel season for international tourists but foreign visitor arrivals in Vietnam this month are estimated at 559,000, down 11.1% year-on-year, due mostly to a sharp decline in Russian holidaymakers.

According to statistics from the General Statistics Office, the sector has seen falls in visitors from all markets but Cambodia and South Korea. Russian arrivals are down by a sharp 32% versus the same period last year.

October is the fifth consecutive month international visitor arrivals have declined. However, the total figure in January-October still grew 8% year-on-year to 6.6 million tourists.

Some travel firms and hotels said the overall situation is difficult. Occupancy at hotels in HCMC has remained low. International visitors to popular tourist destinations have edged down recently.

The international cruise ship tourism segment which brought large numbers of guests to Ha Long Bay in previous years may slow down in this season.

European firms more confident in Vietnam outlook

The confidence of European companies in Vietnam’s outlook has grown strongly amidst positive news about future ties between the EU and the country, particularly their determination to a swift conclusion of talks over a free trade agreement (FTA).

The European Chamber of Commerce in Vietnam (EuroCham) confirmed the increasing confidence of its corporate members in the domestic market in its latest quarterly Business Climate Index (BCI) survey released last week.

Results of the 16th quarterly EuroCham BCI survey, which was conducted last month, showed business confidence, outlook and expectations for the future among European businesses in Vietnam climbed to 74 in the third quarter of this year compared to 66 in the second quarter.

“The rise is influenced by high expectancy on the current negotiations of the EU-Vietnam FTA,” EuroCham said in a review report on the new survey. “Four in five respondents expect that the FTA will bring about changes to their business.”

There was a rise in the number of respondents (48%) that saw their business situation as positive, and this was the largest group of respondents, according to EuroCham, which groups more than 850 European businesses.

EuroCham chair Nicola Connolly explained in a statement that the positive perception seems to mirror the numerous media reports, relevant meetings and events held in recent months, including the Vietnam visit by European Commission President José Manuel Barroso, the envisioned FTA as well as the visit of Prime Minister Nguyen Tan Dung to Brussels as part of his Europe tour earlier this month.

“Therefore some of the optimism in the BCI is pulled forward by anticipations held by the members and could reverse if these expectations are not met,” Connolly said.

Asked about the operations of their enterprises in the coming months, 62%, or roughly two in three respondents, described the outlook of the next quarter as “good” given macroeconomic stability and an improving macroeconomic outlook for.

“In the previous quarters, BCI saw 46% expecting stabilization/improvement and 26% expecting deterioration. In this quarter the strong trend of high expectancy continues as 61% of respondents say that the macroeconomic situation in Vietnam will stabilize and improve,” EuroCham said.

Csaba Bundik, executive director of EuroCham, emphasized a clear trend where the European business community are excited and are gearing up for the future. “The signing of and importantly the realization of the FTA will be crucial steps in assuring that these preparations have not been made in vain,” he said.

In the survey, more European members (4.61%) forecast a slight increase in inflation compared to 4.26% in the previous quarter. “With high expectations on both macroeconomic stability/improvement as well as general expectations on improved business outlook, a moderate rise in inflation is a logical expected outcome,” EuroCham said.

Thanh Hoa calls for investors

Authorities of Thanh Hoa have said the northern province holds potentials in industries like mineral mining, which investors can come to tap.

Thanh Hoa’s Chairman Trinh Van Chien, speaking at a conference which the province held in HCMC last Friday to call for investors, said his province has the nation’s only chromite mine.

The province also invites investors to get involved in projects such as building and operating Nghi Son Container Port on 180 hectares, and developing infrastructure for Lam Son-Sao Vang Industrial Park (IP) on 1,625 hectares in Tho Xuan District.

The province is developing other IPs like Nghi Son, Le Mon, Bim Son and Hoang Long.

For tourism, Thanh Hoa boasts destinations such as Hai Hoa beach resort, Ma Hao eco-resort, Quang Cu eco-resort, and the Ho Dynasty Citadel, which also need investments as tourism is envisaged becoming a major industry by 2020.

In 2011-2013, Thanh Hoa posted average annual economic growth of 11.2%. This year, it eyes growth of 11.7% and plans to move up to the eighth position in the Provincial Competitiveness Index.

By the end of August this year, Thanh Hoa had attracted 50 foreign direct investment (FDI) projects worth US$16 billion, 90% of them involving Japanese investors.

Chien said VietJet Aviation Joint Stock Company (VietJetAir) would launch an air service connecting HCMC and Thanh Hoa Province in the coming time, and an airport project worth around VND1 trillion would get off the ground in late November or early December this year.

The chairman added major projects underway in the province include Nghi Son oil refinery and Nghi Son 2 thermal power plant.

Nghi Son oil refinery will cost nearly US$10 billion, up from the original level of US$6.8 billion.

Consumers also need backing

Manufacturers and consumers are important contributors to the State budget and Vietnam’s economy as a whole but they have not been given equal support to cushion the impact of economic malaise. While Government agencies have been working out a lot of solutions to help the former pull themselves out of the doldrums, the latter have been provided with little or no assistance to cope with their own problems.

That’s the truth in various cases. For instance, the eighth fuel price cut in the year to last week had led the retail price of RON92 petrol to fall by VND3,300 per liter. However, prices of many goods and services that were pushed higher as a result of the previous fuel price hikes have persistently stood where they are while relevant authorities have not acted to look into the matter.    

Another example shows how the interests of consumers are at stake. The HCMC Department of Health has just discovered prices of many items approved for the first drug supply bidding in the city this year are up to 50% lower than those announced and quoted by hospitals in 2002. This means, in the past two years, patients have used overpriced drugs. In this situation, consumers have no choice but to tighten spending.

A recent report by market research firm Kantar WorldPanel unveiled the consumption of fast-moving consumer goods (FMCG) in urban areas dropped 1.5% in volume in the third quarter for the first time against the same period last year. Of the major sectors of FMCG, household products performed the poorest.

A reduction in consumer spending, particularly on nonessential items, was also reflected in the General Statistics Office’s total retail sales data in the first nine months of this year. The agency is expected to hold an event in Hanoi on October 27 to release relevant figures this month and the January-October period, which could indicate the trend, as the nation’s consumer price index (CPI) has grown slower than in previous years due mainly to continued sluggish demand.

Experts pointed out the weakened consumer demand as one of the major hindrances to the nation’s economic recovery and a lack of strong measures to lift consumer spending. Therefore, besides the care for enterprises, it is equally important to back consumers by launching new stimulus to fuel their spending and confidence that will in return support not only producers but also the Government to realize its gross domestic product growth target of 5.8% this year.  

Bac Ninh holds dialogue with foreign enterprises

More than 150 foreign invested enterprises (FIEs) on October 28 gathered at a forum at the Vietnam-Singapore Industrial Park (VSIP) in Bac Ninh to discuss investment and cooperation opportunities and obstacles.

Representatives from ministries and the Bac Ninh People’s Committee also solicited petitions and other information regarding difficulties the FIEs were experiencing for the purpose of submitting to the Prime Minister for his consideration.

They answered questions of those in attendance on a wide range of matters ranging from cooperation between factories and multinational groups to proposed solutions for businesses to penetrate deeper into the global supply chain.

They also discussed the nation’s macroeconomic situation and investment environment, FDI attraction orientations in the coming time, and measures to boost cooperation.

Speaking at the event, Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Doan Duy Khuong affirmed the Government and FIEs forum was productive.

FIEs are instrumental and effectively contribute to the country’s economic restructuring and the Government realising its industrial development vision to 2030, Khuong said.

In the first nine months of this year, foreign investors have generated US$11.8 billion in revenues in Vietnam, equalling to 74.5% of the same period last year, he added.

For his part, Chairman of the Bac Ninh People’s Committee Nguyen Nhan Chien said as of the end of September, 2014, the province had 510 FDI projects capitalised at more than US$8 billion.

The figures made Bac Ninh one of top provinces in terms of attracting foreign investors, who included world leading groups like Samsung, Microsoft and Canon.

Bac Ninh pledges to create the best possible conditions for businesses to invest, expand production and raise their productivity, Chien noted.

Japanese firms hail Vietnam investment environment

The Governor of Saitama Prefecture of Japan, Kiyoshi Uedaon, has praised the Vietnam investment environment, saying the prefecture will encourage its business community to invest in Vietnam.

At talks on October 28 in Hanoi with Saitama business representatives, Nguyen Thi Bich Ngoc, Deputy Director of the Foreign Investment Agency quoted a survey as saying Saitama businesses have selected Vietnam as the top investment destination in Southeast Asia.

Ngoc said the number of Saitama businesses that have registered to invest in Vietnam has risen significantly in recent times and now stands at 62.

In the coming times, the two sides’ relevant agencies have agreed to closely coordinate to support Japanese businesses investment in Vietnam.

Nguyen Van Phung, Head of the Tax Policy Department under the Ministry of Finance introduced new information and regulations on tax, adding that Vietnam has paid great effort to complete legal framework to improve its FDI attraction.

RoK, Dong Thap province collaborate in agriculture

The Korea Rural Community & Agriculture Corporation (KRC) and Dong Thap provincial People’s Committee on October 27 signed a public-private partnership (PPP) agreement to collaborate in agriculture.

Under the agreement, the two agencies agreed to work jointly to share resources, knowledge, and risks in order to achieve more efficiency in the production and delivery of agricultural products and services.

The KRC assumed responsibility for overseeing the flow of ODA funds from the Republic of Korea (RoK), the International Fund for Agricultural Development (IFAD), the World Bank (WB), the Asian Development Bank (ADB) and the Korean private businesses’ investment into Dong Thap.

In addition, the KRC also agreed to use its best efforts to increase the number of private Korean agriculture enterprises doing business in the province.

Speaking at the signing ceremony, KRC Vice President Lee Bong Hoo said he is confident the agreement will result in increased cooperation between the two sides.

In turn, the Dong Thap provincial People’s Committee agreed to select the most suitable areas to implement the PPP project and provide legal and administrative support.

Firms urged to keep abreast of FTA talks

The Regional Comprehensive Economic Partnership (RCEP), which is under negotiation, would have a positive impact on Viet Nam's economy but would create challenges as well, a workshop heard last Friday in HCM City.

RCEP is a free-trade agreement currently between 10 ASEAN countries and the six countries with which ASEAN has existing free trade agreements (Japan, Korea, Australia, New Zealand, India and China).

The RCEP targets to create a broad and deep engagement with significant improvements over the existing ASEAN+1 FTAs. It also seeks to achieve a modern and comprehensive trade agreement among members.

The core of the negotiating agenda covers trade in goods and services, investment, rule of origin, economic and technical cooperation and dispute settlement.

Claudio Dordi, the technical assistance team leader of EU-MUTRAP, said the agreement would help Viet Nam better integrate with the Asian value chain in the production network.

However, if Korea, Japan, China and India become part of this free trade agreement, "exports from Viet Nam to these countries would face competition from Chinese products," he said.

"This is quite a big problem for Vietnamese exports, so this challenge should be taken into consideration during negotiations," he added.

"Currently, under the framework of ASEAN+1 with Japan and the Japan-Viet Nam bilateral free trade agreement, Viet Nam can export duty-free garments to Japan, while exports of the same products from China to Japan bear a custom duty of 10, 15 or 20 per cent."

Similarly, Vietnamese footwear exported to Japan bears a limited tariff of under five per cent, while duties on Chinese footwear imports are 20-30 per cent.

However, under RCEP, Chinese exports would also benefit from preferential custom duties.

Thus, Vietnamese exporters would face fierce competition with China in the Japanese market.

Viet Nam, Cambodia, Myanmar and Laos would likely gain more from the ASEAN+1 agreements, he said.

However, the RCEP would provide opportunities for Viet Nam to further integrate into the regional value chain, and promote the development of a national support industry, as well as enable the country to benefit from rules of origin, he said.

Currently, if Viet Nam imports fabric from China to produce garments and exports to Japan and Korea, the products would not enjoy tariff incentives.

However, this could be changed under RCEP.

He suggested that Vietnamese negotiators pay more attention to rules of origin.

With the number of free trade agreements Viet Nam is negotiating, there would be huge opportunities for Vietnamese companies to expand exports.

To capitalise on these opportunities, firms must create suitable business strategies, focus more on building brands for their products, develop distribution systems, and have a better knowledge of their targeted export markets.

He suggested that Vietnamese enterprises keep up with the status of the negotiations carried out by the Government, and relay their concerns.

Only about half of Vietnamese enterprises understand and use the opportunities afforded by existing FTAs, while most foreign-invested enterprises have taken full advantage, according to Lam Thi Quynh Anh, head of the division of bilateral cooperation, information and propaganda under the National Committee for International Economic Cooperation Office (NCIEC).

In total, the group of 16 nations includes more than three billion people and accounts for about half of world trade.

If negotiated successfully, RCEP would create the world's largest trading bloc and have major implications for Asia and the world economy, said An The Dung, chief of NCIEC.

The workshop was organised by NCIEC, Asia-Pacific Market Department and the HCM City WTO Centre. It was sponsored by EU-MUTRAP.

Trade surplus hits $1.87b as high-value exports rise

Viet Nam has recorded consecutive trade surpluses in the first 10 months of 2014, with the total now standing at US$1.87 billion, according to the General Statistics Office (GSO).

The GSO said the country had enjoyed a trade surplus since the beginning of this year, achieving a trade surplus of $1 billion in the first quarter, $1.3 billion in the first half and $2.5 billion in the first nine months.

During the first 10 months, the nation's exports earned $123.75 billion, a 13.4-per cent year-on-year increase, and its imports reached more than $121.2 billion, an 11.2-per cent year-on-year increase.

Exports of the foreign-invested sector earned $82.48 billion, or two-thirds of the country's total exports, and its imports reached $68.66 billion, thereby achieving a $13.8-billion trade surplus.

Meanwhile, the State-owned sector experienced a significant trade deficit of $11.95 billion. From January to October, its exports reached $40.59 billion while its imports reached $52.54 billion, a 12-per cent year-on-year increase.

Exports of high value include telephone and components with $19.16 billion, a 6.9-per cent year-on-year increase; garments and textiles with $17.62 billion, a 19.3-per cent year-on-year increase; and electronics, computers and components with $8.7 billion, the same figure as that of last year.

Other exports include seafood with $6.51 billion, a 20.6-per cent year-on-year increase; crude oil with $6.27 billion, a 5.4-per cent year-on-year increase; and machinery and equipment with $6 billion, a 20.3-per-cent year-on-year increase.

According to GSO, China remained Viet Nam's biggest source of imports with $35.6 billion, a 17.1-per cent year-on-year increase, followed by the ASEAN with $19 billion, a 6.6-per cent year-on-year increase; South Korea with $17.1 billion, a 2.7-per cent year-on-year increase; Japan with $10.3 billion, a 7.9-per cent year-on-year increase; and the European Union with $7.5 billion, a 3.3-per cent year-on-year increase.

The GSO advised domestic companies to expand their import-export markets to reduce dependence on the Chinese market and avoid possible risks.

State-owned firms misused funds: MoF

An inspection of 24 State-owned economic groups and corporations has revealed violations in the management and use of the business arrangement support funds and in investments in other firms.

The inspection by the Ministry of Finance found that as of the end of June, 10 corporations had not paid into the business arrangement support fund, amounting to a total of VND225 billion (US$10.6 million). The ministry said that one of the main causes for the delay in payment was that the corporations were facing financial difficulties.

Ten corporations reportedly used the fund for wrong reasons. At the end of June, the unrecovered amount was VND589 billion ($27.8 million). The ministry's inspectors proposed that more than VND800 billion ($37.7million) should be collected for the fund.

In addition, 10 corporations proposed to pay a combined VND551 billion ($25 million) to the State budget.

Besides the violations in the use of the fund, the ministry's inspectors also found loose management of State-owned economic groups and corporations' investments in other firms.

The 24 corporations which were inspected invested a total of VND48.4 trillion ($2.28 billion) in 662 other domestic firms. The profits or dividends which needed to be collected, as of June 30, at 23 State-owned economic groups and corporations amounted to VND748 billion ($34 million).

To tackle these problems, the ministry's inspectors proposed amendments to the Law on Enterprise. The proposals included setting deadlines for profit allocation and instructions for dividends paid in shares.

 

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

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