Private flight license revoked; monopoly possible

The flight license of Indochina Airlines (ICA) has officially been revoked by the Ministry of Transport, said a state official from the Civil Aviation Administration of Vietnam (CAAV).

The license withdrawal was executed because the private carrier has not operated for 12 months, said Dinh Thang, deputy head of the CAAV.

ICA, the first Vietnamese private carrier to obtain a license, in May 2008, was established by composer Ha Dung, who also acted as the airline’s general manager.

ICA began flying on November 25, 2008 with two leased Boeing 737-800 aircraft.

But it hasn’t flown since November 2009, thanks to financial problems stemming from the fact that ICA was asked by the local government to repay over $1.3 million in debt to the Ho Chi Minh City-based Viet A bank.

Ceiling airfares blamed for increasing losses

All Vietnamese airlines providing domestic flights, including Vietnam Airlines, Jetstar Pacific Airlines (JPA) and AirMekong, have reported financial losses, while placing the blame on the ceiling airfares set by the Ministry of Finance, according to Sai Gon Tiep Thi newspaper.

Fuel prices have increased by 40 percent so far this year, while the ceiling airfares have been adjusted very slowly.

Managers of the national flag air carrier VNA have said many times that the airline has been incurring losses with domestic flights, and that the losses can be only offset by profits made from international flights.

It has been reported to the CAAV that VNA forecasts a loss of around VND1.8 trillion for domestic flights this year.

JPA incurred a loss of $10 million, or some VND200 billion, in 2010.

The CAAV has recently submitted to the Ministry of Transport two new airfare solutions.

If the proposals are approved by the ministry, the ceiling level would increase by at least 50 percent from the currently applied level.

With an aim to protect consumers, Vietnam is still applying the ceiling airfare mechanism.

Meanwhile, airlines can offer different airfares after considering their business plans so as to obtain reasonable profits.

Experts argue that, while the low ceiling airfare is certainly a factor in the airline’s losses, the companys also need to reconsider their management skills.

Under current circumstances, the airlines which have better management methods would have bigger advantages than those with inferior operations.

For example Air Asia, a Malaysian budget airline, still makes profits while maintaining competitive airfares in comparison with other airlines.

Experts believe that the minimizing of services on flights, plus good expense management skills, have helped make the airline profitable.

A report released in October 2010 showed that the revenue per seat of Air Asia was $4.87, while the expenses were $3.52. Meanwhile, the figures for JPA were $4.84 and $5.07, respectively, according to the Centre For Aviation.

Fruit shipment hindered by rule

Vietnamese fruit exporters say their products are being hindered by the American Food Safety Modernization Act which took effect earlier this year.

Speaking at the seminar on farm produce export to the US held in HCMC, Mai Xuan Thin, director of the fruit trading company Red Dragon, said his firm is anxious about shipments.

Since 2009, Red Dragon has smoothly exported 67 containers of dragon fruit by sea. However, the U.S. import agency has recently increased inspection frequency, taking samples of all shipments.

He said three containers of the firm had been held by the U.S. Food and Drug Administration (FDA) to test plant protection drug residues with the longest case up to seven days.

The problem is the American authorities have yet to issue the specific maximum residue limits, or MRL, so local exporters are unaware of the barrier. Therefore, if pesticide or fungicide residue is detected, the shipment can be cancelled.

In addition, the duration a shipment is held before clearing through customs is quite long, whereas fruit products must be sold out within seven days after arriving in the U.S. “This greatly affects exporters,” Thin stressed.

According to an American partner of Red Dragon, laboratories in the US are currently overloaded as the new statute is applied, prolonging the testing time of numerous fruit shipments.

Previously, export fruit to the U.S. must only undergo epidemic safety testing. Now the new statute requires food safety testing as well, said an expert from the Ministry of Agriculture and Rural Development.

This is likely a way of setting up technical barriers, probably due to the surging volume of dragon fruit shipped to the US, he said.

Particularly, according to the Plant Protection Department, only 100 tons of dragon fruit was exported to the U.S. in 2009, but the volume jumped to 856 tons in 2010 and possibly some 1,300 tons this year.

Nguyen Tu Cuong, former director of the National Argo Forestry Fisheries Quality Assurance Department (Nafiqad), said the enactment of this statute is unfair to local fruit exporters since Vietnam’s fruit products have undergone multiple processes and local firms have strictly cooperated with the American agriculture department to have the license to enter this market.

Matthew Lantz, an expert of the USAID STAR plus project, advised Vietnam’s agricultural agencies to work with the American agriculture department to early issue specific MRL for export fruit products, preventing damage to local exporters.
 
Gov’t considers tightening investments

Overseas investment projects using state-owned capital will be supervised more strictly if the draft decree to amend Decree 78/2006/ND-CP concerning outbound investment is approved.

A seminar to collect the ideas of enterprises regarding the draft decree was held last week in HCMC by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Vu Van Chung, director of the Overseas Investment Division under FIA, said that outbound state-owned investment projects would be supervised regularly by both investors and state agencies.

According to the draft, any investors applying for outbound investment licenses are required to submit a legal document proving they are allowed to use state-owned funds to invest abroad.

After these schemes are licensed, state agencies have the right to check if enterprises adhere to the prescribed investment steps including project formulation, assessment, approval, bidding and capital use.

According to Do Nhat Hoang, head of FIA, the main point of the draft is that investors have to report about their business performance. Those failing to fulfill this duty will be fined or have their investment licenses revoked or it will be announced publicly on the website of the Ministry of Planning and Investment.

The efficacy of Vietnamese-invested projects abroad sparked concerns among local economic experts 12 months ago, just after the ministry had reported that profits collected from such investment activities were modest while these investments devoured a huge amount of foreign currency.

As of September, US$1.93 billion had been disbursed by outbound investment projects while total pledged capital is over US$10 billion, with the state sector accounting for about 60 percent - 70 percent, FIA said.

Competitive growth in focus at business forum

The Vietnam Business Forum 2011, themed “New period for Competitive Growth” opened in Hanoi on December 2, serving as a venue for domestic and foreign-invested enterprises, donors and the Vietnamese Government to discuss Vietnam’s business environment.

According to the report on the current business environment presented by the forum’s secretariat, Vietnamese enterprises faced various difficulties in 2011.

A survey of 240 enterprises revealed that their assessment of the business environment in 2011 was the most negative for the past three years, with an average score of 2.04 points, in comparison with 2.52 points in 2010 and 1.9 points in 2008 (during a global financial crisis).

Only 26 percent of surveyed enterprises said the business environment was good or very good, half of last year’s figure.

However, 69 percent of the surveyed enterprises said they will expand business in the next three years, taking into account the long-term potential of Vietnam’s economy.

Macro-economic management was listed for the first time as one of three top concerns about the business environment. Foreign-invested enterprises were more pessimistic than their local counterparts.

Chairman of EuroCham in Vietnam Alain Cany said that his office’s quarterly business environment index reduced from 78 points to 52 points in 2011. He attributed European firms’ concerns about the 28-percent decrease in FDI in the first nine months of this year and an inflation rate of nearly 20 percent.

According to Cany, Vietnam needs to speed up reform of its economy, finance and education, if the country wants to pursue a sustainable economic development model.

To attract quality foreign investors, he suggested the Vietnamese Government in 2012 focus efforts on removing unnecessary restrictions in market access which harm trade liberalisation.

The Government should continue solving bureaucratic and corruption issues, reduce and simplify administrative procedures at all levels, as well as providing protection and effective enforcement of intellectual property rights.

Chairman of AmCham in Vietnam Christopher Twomey shared information on the improvement of business conditions to promote socio-economic development in the country, stressing that trade and foreign investment-related areas generate jobs and income while tax turnover, exports, foreign currency and technology transfer orient the socio-economic development strategy.

He proposed Vietnam implement sound economic policies, legal system and regulations, transparency and efficiency in administrative agencies and public infrastructure agencies, including transport, electricity, communications, education and health care network, to absorb investment, promote trade and stimulate socio-economic development.

At the forum, the Vietnamese Government’s representatives answered recommendations and proposals from working groups on banking, capital markets, production and distribution, taxation and land.

The Vietnam Business Forum is an annual event held on the threshold of the Consultative Group Meeting scheduled for December 6. It was chaired by Minister of Planning and Investment Bui Quang Vinh, Country Programme Director of the World Bank Keiko Sato and Regional Director of the International Finance Corporation Simon Andrew.

Chinese jewelry disguised as Italian products

Many gold jewelry products currently marketed to Vietnamese consumers as Italian imports are in fact Chinese-faked products of dubious gold purity, Nguoi Lao Dong newspaper reported.

Such products have won many consumers over thanks to their sophisticated and attractive designs and their competitive prices, compared with the locally-made counterparts.

However, insiders in the jewelry industry said the products are not made in Italy but are in fact manufactured in China and brought into the country through the informal cross-border trade between Vietnam and China, under fake Italian brands.

“Authentic Italian jewelries are far more costly,” a jewelry maker was quoted by Nguoi Lao Dong as saying.

Other jewelry makers said Chinese manufacturers have purchased modern machinery and equipment to make jewelry products copying Italian designs en mass.

Recently, some local jewelry makers have also imported modern technology and machinery to fake foreign products to sell in the market, they added.

An employee of a jewelry company said although gold jewelry is supposed to be made of 18-carat gold, or 75 percent pure gold, those available on the market are only 60 to 65 percent in purity.

“They have taken advantage of the products’ attractive designs to mislead the customers about the purity of the gold content,” he said.

“There are cases when a jewelry made from 14-carat gold is sold at the price for 18-carat gold, but few customers can tell the difference.”

The head of a gold trading company said customers who bought unbranded gold jewelries often incur losses if they later wanted to sell their possessions.

“The gold shops will buy white gold or diamond jewelries without brand names at a price 30 percent lower than the market rates,” he said.

Linh, a resident in Ho Chi Minh City’s District 3, said recently when she took her white gold necklace back to the jewelry shop where she had bought it, the shop refused to buy it back at the original price she had paid for.

“They said they could not buy it back at the original price since the necklace was imported without warranty,” she said.

Nguyen Thi Cuc, deputy CEO of Phu Nhuan Jewelry Co, warned that Chinese jewelry manufacturers often tried to impress the customers with attractive, sophisticated designs to hide the products’ below-par gold content.

The Mekong Delta provinces are currently the main markets for these products, Cuc added.

According to the head of a jewelry department of a gold company based in HCMC, some local businesses have recently released on the markets many low-priced jewelries made of 10-carat and 14-carat gold that can compete with Chinese products made of 18-carat or 24-carat gold in terms of design and sophistication of techniques.

“Some of these businesses even asked us to produce 5-carat gold for them to use in making jewelry,” he said.

“But such products cannot be called gold jewelry because the gold content is only 20 percent.”

Another head of a gold trading company in HCMC said his company recently had to cancel an order on processing gold.

“Our Hanoi-based partner wanted us to sell them ‘18-carat gold’ that has the purity level of only 60 percent, as opposed to the proper level of 75 percent,” he said.

Chinese firm uses fake Vietnam brand for US export

Anti-trafficking authorities in Dong Nai Province has caught a Chinese company red-handed trying to pass Chinese products as Vietnamese ones before exporting them to the US.

The SPC Tianhua Vietnam, a 100% Chinese invested company based in the Nhon Trach Industrial Zone No 3, was on 21 November busted replacing Chinese labels with Vietnamese ones on chemical products due for export to the US.

Thirteen tons of them were found bearing counterfeit Vietnamese brands. The remaining 87 tons still bear Chinese labels.

The total products are worth VND4.5 billion (US$214,000).

The products, used to treat water in swimming pools, were made entirely in China.

The illegal practice could stem from the fact that Vietnamese products enjoy favorable tax rates in the US.

According to Dong Nai Newspaper, the company in 2011 exported 133 tons of chemical solution called Long Lasting Chlorinating Granular 89% Min (TCCA MULTI-GRANULAR) via the Nhon Trach Customs Office.

Strangely, the Tianhua company one month uses just 46 cubic meters of water and 585kWh of electricity. It hires just under 10 employees.

The water and electricity consumption is equal to an average amount used by one normal household in Vietnam.

Local authorities suspect the company is not involved in production but just a front to illegally import products from China to export them to the US.

Chinese airlines eyes more flights to Vietnam
 
Sichuan AirlinesChina's Sichuan Airlines which launched flights from Ho Chi Minh City to Nanning-Chengdu six months ago is now considering increasing them to daily flights instead of the current twice-a-week service.

Deputy CEO Hu Pingshu said there were also plans to make the service direct, VietnamNet reported.

The flights now stop in Nanning in southern China where passengers have to transit.

According to Thoi Bao Kinh Te Saigon, the airlines plans to increase the frequency to three or four flights a week next year, and to seven.

Hu was very optimistic about the potential.

But since most passengers yet were Chinese, the airlines is offering promotions to transport more Vietnamese tourists to Chengdu, a famous Chinese tourism destination.

Chengdu leads to some famous attractions like the UNESCO heritage site Leshan Giant Buddha Scenic Area and the Mount Emei Scenic Area.

FDI hits US$12.7 billion in 11 months

As of November 20, Vietnam attracted approximately US$12.7 billion in Foreign Direct Investment (FDI), equivalent to 83.8 percent of the same period last year, according to the General Statistics Office (GSO).

The total figure includes US$9.9 billion in newly registered capital from 919 projects and US$2.8 billion in increased capital from 324 projects.     

The processing and manufacturing industry attracted the largest registered capital of US$6.2 billion, followed by the energy industry (US$2.5 billion), and the construction sector (US$1.1 billion).

In 11 months, 48 cities and provinces licensed new FDI projects with Hai Duong topping the list receiving US$2.5 billion, or 25.2 percent of the country’s total capital value.

Hai Duong was followed by HCM City with US$1.9 billion, Ba Ria-Vung Tau US$880.8 million, Hai Phong US$594.4 million, Hanoi US$513.1 million and Tay Ninh US$481.4 million.

Among 52 countries and territories investing in Vietnam, Hong Kong (China) was the biggest investor making up 29.7 percent of the total capital. Then came Japan (16.2 percent) and Singapore (14.5 percent).

According to the GSO, the FDI disbursement simultaneously reached about US$10.1 billion, rising by 1 percent against the same period last year.

Exports of Can Tho and Ca Mau surge

Can Tho’s exports are estimated to hit US$1.3 billion this year, up 24.5 percent compared to the target set.

Rice and seafood, at US$862 million, accounted for 67.6 percent of the total export value, according to the provincial Department of Industry and Trade.

The province has invested tens of billions of Vietnam dong to install new grinding and packaging lines to improve product quality and the amount of high-quality rice for export to the EU, Japan and North America.

Ca Mau province’s exports this year hit a record high of US$910 million, 7 percent exceeding the target and an increase of 5.7 percent over a year earlier. Of the figure, seafood exports made up nearly US$900 million.

French companies in railway seek opportunities in Vietnam

A delegation of 10 French companies in railway and urban rail solutions will be in Vietnam from December 5-8 to take part in a mission organised by UBIFRANCE-French Trade Commission in Vietnam.

According to the French Embassy in Vietnam, the French delegation will travel throughout Vietnam and meet decision makers, international donors and major actors in the fields of railway and urban rail transportation.

This business trip is expected to help French companies improve their understanding of the Vietnamese authorities’ policy in the sector, and seek opportunities to take part in projects in railway and urban rail transportation as foreign suppliers and investors.

They will also have the opportunity to meet in Hanoi bilateral and multilateral donors, including Japan International Cooperation Agency (JICA), Agence Française de Développement (AFD), and Asian Development Bank (ADB).

The mission is supported by the Ministry of Transportation, the Vietnam Railway Corporation and the Hanoi and Ho Chi Minh City People’s Committees.

Promoting Vietnam sea tourism in Europe

More than 50 delegates from domestic and foreign travel agents and European tourism magazines gathered at a seminar in Khanh Hoa on December 2 to discuss promoting Vietnam sea tourism in Europe.

The conference focused on the great potential of sea tourism in Vietnam and ways to promote it in Europe, as well as measures to develop it.

Vietnam Airlines aims to coordinate with the Vietnam National Administration of Tourism and localities with sea tourism potential, such as Ha Long, Danang, Hoi An, Nha Trang, Mui Ne and Con Dao, to offer attractive tourism products to European visitors.

The airline will work with 10 leading European tourism magazines to introduce the best tourism destinations in Vietnam.

It will also increase its flights to European countries and improve infrastructure at airports and seaports in localities with sea tourism potential.

Key targeted markets include France, Germany, the UK, Belgium, Spain, and the Netherlands, as well as Denmark, Sweden, Switzerland, Austria and Poland.

FDI in real estate set to register five-year low

Foreign direct investment (FDI) in the Vietnamese real estate market this year is expected to be the lowest in five years.

Investment has been slowing down since the beginning of the year, contributing to the market's serious shortage of capital.

Real estate has been the most attractive field in terms of FDI capital in the past few years, but such inflow is declining this year, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Newly registered and increased capital in real estate totalled just over US$464 million this year, ranking it fourth on the FDI-attraction list behind the processing and manufacturing industry, electricity production and distribution, and construction.

Real estate amounted to 3.7 per cent of total FDI inward to Viet Nam in the last 11 months. At the end of the second quarter, it ranked second after the processing and manufacturing industry in FDI attraction.

FDI inflow to the property market peaked in 2008, reaching over $23 billion. Last year, despite the strong negative impact of the global economic crisis, FDI in the real-estate market was valued at more than $6.8 billion.

Singapore is the third-largest investor in Viet Nam, but it has been focusing only on ongoing projects. South Korean investors are also concentrating on big and long-term projects that have already begun.

Experts said international companies had changed investment strategies because of the global financial crisis, which had contributed to the decline in FDI growth in the Vietnamese real-estate market.

In addition, the domestic market is facing many difficulties, namely low liquidity, a stall in transactions and tightened credit, all of which have made foreign investors cautious. This has also contributed to low FDI inward flow, according to experts.

Moreover, the demand for apartments, offices and resorts, which foreign investors have traditionally favoured, has become saturated, and now has low liquidity.

The local property market is facing a serious shortage of capital, according to Savills Viet Nam, a global real-estate service provider.

For this reason, project developers have been searching for new financial sources by either selling entire projects or entering into partnership with others.

Many project developers in Viet Nam, who own large land areas, now want to sell parts of these areas to have capital to invest in other projects.

The vice president of the Asian Real Estate Association of America, David Tran, said investors should look for sources from outside banks, such as remittances, to save their property projects when the market lost liquidity.

Tran said if the legal environment and the law on tax for foreign investors were further improved, a large amount of remittances would flow into Viet Nam from more than 4.5 million overseas Vietnamese.

PM forms Delta economic zone
 
Prime Minister Nguyen Tan Dung has decided to establish a Key Economic Zone in the Cuu Long (Mekong) Delta.

The planned KEZ, which includes southern provinces of An Giang, Kien Giang and Ca Mau as well as Can Tho City, is expected to have a growth rate 1.25 times higher than the average GDP growth rate of the country in the 2011-20 period.

Under the plan, this KEZ in the country's major rice basket would make up 40 per cent in the nation's GDP in 2020.

The zone's economy would be restructured, with an increase in the contribution of the industrial and services sectors and fewer inputs from the agricultural, forestry and fishery sectors.

The contribution of the zone's industrial and construction sectors would rise from 29 per cent in 2010 to 40 per cent in 2020, and the contribution of the zone's service sector from 42 per cent to 45 per cent over the same period.

Meanwhile, the contribution of the zone's agricultural, forestry and fishery sectors would decrease from 29.4 per cent in 2010 to 15 per cent in 2020.

Per capita income of the zone's residents would rise from US$1,200 last year to $3,000 in 10 years.

To reach these targets, the zone must speed up its technological renewal during its modernisation process, with technological renewal of 20 per cent annually.

The ratio of trained workers would be raised from 38 per cent of its labour force in 2010 to 65 per cent in 2020.

In the next decade, the zone will focus on developing three thermal power complexes of O Mon, Ca Mau and Kien Luong, with total capacity of 9,000MW to 9,400MW.

These power complexes will be fuelled by gas from fields offshore the southwest coastline.

Priority will be given to the development of transport infrastructure in the region, including National Highway No1A, the N1 and N2 highways, the road systems on Phu Quoc Island and airports in the zone.

Enterprises and businesses from different economic sectors are encouraged to invest in Built-Transfer (BT) and Build-Operate-Transfer (BOT) forms in insfrastructure projects such as highways, airports and ports, according to the PM's decision.

Sharp rise in domestic coffee prices  

Domestic coffee prices have risen sharply in Vietnam to VND5 million per ton, compared to a month ago, due to limited global supplies.   
 
Coffee prices in the Central Highland Provinces rose VND4,000 per kilogram last week as compared to the week before.

Dak Lak Province saw prices touch VND40,700 per kilogram and in Gia Lai and Kon Tum Provinces they reached VND40,300 per kilogram.

Coffee prices in the Central Highland Provinces increased steadily for the last eight consecutive days.

Vietnam is the second largest producer of coffee after Brazil and with limited global supplies, domestic coffee prices could surge further by year end to VND55 million- 60 million ($2,680-$2,924), said the Agriculture Ministry.

However, traders in Ho Chi Minh City fear that Vietnamese farmers and exporters may take advantage of the high prices and hold on to the present crop.

Farmers in the Central Highland Provinces have already harvested 30 percent of their total coffee crop of this season.

CPI forecast to soar in December

The December's Consumer Price Index is forecast to increase by 0.5 to 0.6 per cent compared with the previous month due to the advent of Christmas and coming Tet holidays.

The forecast by the Domestic Market Management Team under the Ministry of Industry and Trade said the price of a number of goods, including food and foodstuff, would rise due to increased demand.

Flooding in several areas would also have an effect.

Gas prices would surge this month, following increased world prices but the price of steel, cement and other construction materials would remain stable despite it being the peak season for construction.

The sugar price was forecast to fall slightly due to abundant supplies.  

ADB to provide USD80 million for mountainous road improvements

The Asian Development Bank (ADB) will provide a USD80 million loan for a project to improve the country’s roads in northern mountainous areas.
    
The ADB-funded project wil upgrade around 300 kilometres of roads in the northern mountainous region
 
Tomoyuki Kimura ADB Vietnam Country Manager and Governor of the State Bank of Vietnam Nguyen Van Binh signed the agreement on December 2.

The project will upgrade around 300 kilometres of unpaved and frequently impassable roads in the six northern mountainous provinces of Bac Kan, Cao Bang, Ha Giang, Tuyen Quang, Yen Bai and Lao Cai. Most of the roads are located in the areas that often face flash floods.

The project, to be carried out by local People’s Committees, is scheduled for completion by December 2016.

According to Tomoyuki Kimura, the project will help to improve access to social services and trade and investment opportunities for ethnic minority and northern mountainous areas.

Up to 30% of the population Vietnam’s northern mountainous region continues to live in poverty. Their access to health and education services remains very limited. These barriers pose a major challenge to the region’s economic development.

The project is expected to support the Vietnamese Government’s efforts to connect the northern mountainous region with national transport routes and the Greater Mekong Sub-region economic corridors.

Low-income housing price out target customers

Low-income housing projects in Hanoi continue to remain unattractive due to overly high prices.

Construction Joint Stock Company No. 3 (Hanco 3) has to date sold only 30 out of more than 130 apartments in a low-income housing project in Sai Dong Town, Gia Lam District, despite holding a second lottery to deal with the large number of customers interesting in the project.

Another project in Sai Dong Town built by the Hanoi Housing Development and Investment Corp. (Handico5) has found just over 100 customers for their 420 apartments.

Only 15 people signed have signed contracts to buy apartments in a low-income housing project invested in by the Vietnam Glass And Ceramics For Construction Corp. (Viglacera) in the Dang Xa Urban Area in Gia Lam District.

Currently, around 1,000 low-income apartments in Hanoi are still waiting for customers.

House prices for low income earners currently stand at VND13 million (USD619) per square metre compared a common commercial prices of VND14-15 million per square metre.

Nguyen Thu Huyen, a Dang Xa project customer said, “If the state offers the opportunity for low-income earners to access mortgages to buy a 60-square metre apartment over five-year term of payment, then you’d have to pay VND100 million (USD4,739) before interest, or VND8-9 million (USD380.9-428.57) per month. There’s no way a low-income family can afford that.”

People have also complained about the complicated procedures that need to be gone through before buying a low-income house, Huyen added.

Despite making great effort to buy a 70-square metre low-income apartment in Ha Dong District, Nguyen Dinh Toan felt that he couldn’t afford the price. He paid a 30% desposit and now has to pay additional VND200 million (USD9,500) to the investor. This has made it impossible for him to continue with his purchase, and instead he has to pay a fine to back out of the project.

Tran Van Nguyen, Deputy Director Hanco 3, said low-income housing apartment prices vary depending on the market. The rise in construction material prices has raised prices, pushing properties out of the reach of many customers.

Tran Van Can, Chairman of Handico5 admitted low-income houses remained unattractive due to their high prices, noting that many had returned the apartments to their investors after qualifying for the accommodation.

According to Nguyen Van Da, Deputy Director of Vinaconex Xuan Mai, the firm’s Kien Hung project in Ha Dong District was also seeing many customers withdraw from their contracts.

The Ministry of Construction launched a programme to build apartments for low-income earners in 2009. It expected that up to 189 projects would be implemented during the 2009-2015 period to provide accommodation for around 700,0000 people.

However to date, only 39 projects have begun construction with total investment of VND4 trillion (USD190.4 million), yet many projects remain unattractive due to their high prices.

According to Nguyen Tan Van, Chairman of the Vietnam Architects Association, the state should offer preferential rent prices to low-income group to ease the urgent need for accommodation.

Tong Van Nga, Former Deputy Minister of Construction, said low-income housing should be considered as a state asset and leased to people under the management of an agency.

Payment terms should be extended on mortgages to 10-20 years so that more low-income earners could afford to buy the houses.