Hai Duong province IP welcomes new factories

Key facilities at Lai Vu industrial park in Kim Thanh district, the northern province of Hai Duong, have been completed and the zone is ready for operation, a leader of the Lai Vu Limited Company has announced.

Hong Kong’s Pacific Vietnam Textile and Crystal Corporation is implementing two projects to build a textile and garment complex in the park at a total cost of 545 million USD. These are the largest foreign invested projects in Hai Duong.

The 425 million USD textile project will produce 360 million metres of knitwear per year and create jobs for 6,000 people when put into service in March next year.

Meanwhile, the expanded garment plant, worth 120 million USD, is set to produce 170 million products for export each year and provide jobs for 16,900 people.

The construction of Lai Vu industrial park was started in 2004. About 212.89 hectares of land has been reclaimed for the park so far.-

Phu Yen asked to build on farming economy

Phu Yen province should build on its farming economy in the north central region, National Assembly Chairman Nguyen Sinh Hung said while working with top provincial officials in the locality on December 9.

Concurring with three key priorities in infrastructure, institutional reform and human resources development, he asked local officials to come up with flexible and concrete plans aligned with the province’s strengths, towards developing marine-based and forestry economies.

He also sought stronger attention to poverty reduction, expansion of industry, trade and services so as to offer locals better lives.

Home to a majority of rural workers, Phu Yen must exert stronger will to build new-style rural areas with farmers as a focus while building up a strong political system at the grassroots level, he said.

Reviewing past achievements, the top legislator praised the province for its economic growth of over 10 percent in the past years, saying that it is an encouraging performance against the backdrop of the present economic downturn.

Over the past three years, the local economy has grown on average by 11.78 percent per annum, generating a gross domestic product of 27.3 million VND (1,300 USD) per capita, up 72.8 percent from 2010.

Revenue going to the State budget has risen by 18 percent each year while the annual rate of poor households has fallen by over two percent, settling at 13.3 percent this year.

Phu Yen has poured over 18.7 trillion VND (890 million USD) into agriculture and rural areas, with 21 out of 29 communes meeting 10-16 national criteria for new-style rural areas.

The local officials asked for more funding from the State in sea transport and the Ba River monitoring system, and support for fishermen in offshore fishing.

Meeting with local lecturers and students from Phu Yen University, who vote for National Assembly deputies the same day, Chairman Hung required Phu Yen to focus on formal education, including vocational training for rural workers, with priority to the families of those who rendered services to the nation and live in difficulty.

He pressed for a ramp-up in education quality by rolling out a self-reliance mechanism and mobilising more social funding for education.

Voters suggested adding social skills courses to curricular activities in universities, colleges and schools. Simultaneously, it is necessary to review and forecast workforce demand at both national and local levels, as part of efforts to help youngsters choose their most suitable jobs.-

Economic, political benefits of joining TPP

The participation of Vietnam in the Trans-Pacific Partnership (TPP) agreement will improve Vietnam ’s position on economy and policy in the region and world, Minister of Industry and Trade Vu Huy Hoang has said.

He added that with the consistent policy of the Party and State on international economic integration after joining the World Trade Organisation (WTO), Vietnam has continued negotiations for a free trade area (FTA) as the TPP with 12 participating countries which account for 40 percent of the world’s GDP and 30 percent of its import-export value.

The TPP agreement will help boost export development and increase foreign direct investment (FDI) in Vietnam , the Minister said.

Furthermore, the agreement will offer Vietnam a great opportunity to accelerate the restructuring process in association with the innovation of economic growth model in Vietnam .

However, it will inevitably create drawbacks that need to be anticipated and avoided, particularly in business competitiveness.

According to Hoang, the agricultural sector will be the most vulnerable because Vietnam is basically an agricultural country with small-scale manufacturing, low labour productivity and high costs.

Therefore, during the negotiations with the US and other members, Vietnam has asked to consider the difference in development between member countries.

Vietnam has asked for a suitable roadmap to implement TPP commitments for slow developing countries like Vietnam in some fields such as tax reduction and exemption.

On the other hand, Vietnam ’s agricultural businesses need to take time to deploy the roadmap to overcome its shortcomings and to improve product competiveness.

Dairy sector looks to triple cattle population

Viet Nam is aiming to triple the number of cows by 2020 in order to meet domestic demand for fresh milk, heard a recent conference on the country's dairy industry.

Viet Nam reported a total of 174,000 dairy cows this year, producing 420,000 tonnes of milk. However, production only served 30 percent of the domestic market, said Deputy Minister of Agriculture and Rural Development Vu Van Tam at a recent conference held on December 4.

Tam said 70 per cent of domestic demand for milk had to be met with imports primarily made up of sterilised, reconstituted milk. Because of this, Viet Nam remains one of the top 20 milk-importing countries, importing around US$841 million of milk in 2012.

In a bid to lower the country's dependence on foreign milk, the sector aims to have 500,000 dairy cows by 2020 and produce 1 million tonnes of milk per year, said Nguyen Xuan Duong, Head of the agriculture ministry's Livestock Production Department.

Former Deputy Prime Minister Nguyen Cong Tan said Viet Nam had been disadvantaged in developing its own dairy sector, but that technology had facilitated the industry's growth.

In the past 10 years, the growth rate of milk production has increased 10 per cent due to new breeding and technology methods.

Minister of Science and Technology Nguyen Quan said Viet Nam needed to apply the world's latest technologies in addition to creating its own technologies.

At present, most dairy herds in Viet Nam are developed on a piece meal basis, with 120,000 out of 173,000 cows raised in 19,000 households nationwide. With each household on average raising 5 cows, the sector aims to lift the number to between 10 and 15.

Su Thanh Long, a lecturer at the Ha Noi University of Agriculture, said consistency in milk quality across different households was difficult to ensure due to lack of appropriate feed.

Professor Nguyen Lan Hung, General Secretary of the Union of Biology Associations, added it was important to develop the dairy sectors while taking into account the important role of farmers.

Chairman of the Viet Nam Livestock Association, Nguyen Dang Vang, said currently many household farming models were profitable, including those in Moc Chau Town in Son La Province.

"Raising livestock at the household scale is a sustainable way for developing agriculture. Viet Nam's farmers in the dairy sector currently have the highest milk productivity rate in Southeast Asia," Vang said.

Agriculture leaders, however, urged dairy cow breeders to use advanced technology to increase livestock numbers, life the quality of fresh milk and improve productivity.

Secretary General of the Viet Nam Dairy Producers' Association Trinh Quy Pho said the association encouraged dairy enterprises to co-operate with farmers to provide technical, logistical and commercial support in bring fresh milk from the cow to the market. This was a sustainable development trend, he said.

Head of the agriculture ministry's Livestock Production Department Duong, meanwhile, suggested establishing a national committee for oversight of the dairy sector.

"It would help both cow breeders and dairy factories achieve a win-win solution: cow breeders can sell milk profitably and dairy factories can buy milk at reasonable price," Duong said.

HCM City petition targets capital transfers

HCM City People's Committee has petitioned the Ministry of Finance to create mechanisms and policies to manage capital transfers and the franchising of businesses.

According to document No 6450 issued on December 5, the committee suggested that capital transfers be required to set up value added bills so that businesses pay value added taxes and business income taxes according to regulations. Firms that receive capital from other organisations without legal bills would not have its business income taxes reduced.

Meanwhile, businesses that transfer capital to other businesses will need to show payment receipts. If they can not show receipts, tax agencies will have the right to set the price and the cost of the transfer, based upon regulations in laws on tax management.

Businesses which only perform procedures to change lists of their shareholders must show transfer bills with capital transferred firms and must list the personal income tax and personal tax deductions for individuals who transfer the capital.

For organisations without bills and for individuals without any documents showing tax payments after transfers, enterprises which individuals transfer capital to will be in charge of listing the taxes and paying taxes, instead of those organizations and persons who perform the transfers.

The proposal was made after a recent investigation showed that capital transfers were carried out in different ways which tax agencies could not examine and properly control, according to Customs Newspaper.

Specifically, a contract listed for tax agencies showed that selling prices were the same as the cost, not generating profits and, thus, not having to pay taxes.

Intel Asia Holding Limited company, for example, transferred capital to another company in the same corporation with the selling price being equivalent to US$100 million. The transfer did not generate any earnings.

Further, there were contracts with high values, which still generated small profits. For instance, Masan Consumer Corporation transferred its capital to Vietnam Growth Capital Pte Ltd at a price of more than VND1,061.8 billion ($50.56 million). Compared with its cost of VND1,061.6 billion ($50.55 million), the earning were only VND246 million ($11,714) and the business income tax was VND61 million ($2,904).

The committee also discovered that capital transfers generating profits were not listed for tax agencies, such as in the case of Pho 24 Commerce and Service Joint Stock Company.

According to some local newspapers, Pho 24 brand was transferred to Viet Thai International Joint Stock Company at a price of $20 million, while its cost was only VND1 billion ($47,600).

After that, Viet Thai company sold 50 per cent of its shares of Pho 24 to Jollibee, the largest fast food chain in the Philippines, at a price of $25 million.

However, after the investigation by the HCM City Department of Tax, the company registered to change the name of the legal representative, while names of members and the rate of capital contribution still remained. At the moment, the department has asked Pho 24 to explain this.

These different ways of capital transfers and a lack of cooperative mechanisms between tax and licensing agencies has led to tax losses for the state budget.

Induction stoves popular as gas prices rise

With cooking-gas prices rising relentlessly, induction and infrared stoves are seeing boom in demand, HCM City electronic retailers said.

Nguyen Thi Ngoc Thuy, director of the household appliances section at dienmay.com, said "since the middle of last year, demand for these stoves has increased."

In November sales was month-on-month up by 5-7 per cent, she told Viet Nam News.

A marketing staff from Thien Hoa Electronic Centre in HCM City also told Viet Nam News that his chain sold an increasing number of induction and infrared stoves.

An article on a Ministry of Transport website quoted the head of marketing of online seller www.chodientu.vn as saying that electric stoves now accounted for 30 per cent of all sales.

There are many kinds of induction and infrared stoves, both imported and made in Viet Nam.

Thuy of dienmay.com said her company sells many brands like Kangaroo, Media, and Electrolux.

"Price ranges from VND490,000 (US423) to VND2 million ($95).

"High-end stoves cost tens of millions of dong," she told Viet Nam News.

She predicted sales to continue rising in the coming months because Tet (Lunar New Year) is coming around and people need these stoves for cooking hot pots.

Sellers said induction and infrared stoves offered many advantages.

Gas prices are high and the stoves are not as safe as induction or infrared stoves, they said.

Thuy said the latter helps save energy and money compared to gas stoves, is cleaner, and better looking.

"When using an induction stove, consumers can use 95 per cent of its energy.

"The figure is 80 per cent for infrared stoves and only 60 per cent for gas stoves."

Talking about the future of gas stoves, most sellers said though many people were buying induction and infrared stoves, gas stoves would remain essential in Viet Nam due to power cuts.

Thus, many customers are now choosing to use both gas and induction (or infrared) stoves at the same time, they said.

Cashew exports reach $1.5bn annual target

The cashew industry, during the first 11 months of 2013, reached its yearly target of US$1.5 billion in exports, according to the Ministry and Agriculture and Rural Development.

According to officials, during the first 11 months of 2013 the industry achieved a year-on-year increase of 17 per cent in export volume of 238,000 tonnes of cashews and 10.1 per cent increase in value to $1.48 billion.

Recently, the Viet Nam Cashew Association increased its forecast for the export value of cashews from $1.5 billion to $1.7-1.8 billion for this year.

Nguyen Duc Thanh, the association chairman, said the industry has achieved great export results and, in November, many businesses signed export contracts to be fulfilled during the first half of 2014 with export prices up 5 per cent compared to last month.

Viet Nam has been the largest cashew exporters since 2009, with 300 exporters to export cashew products to 100 countries and territories throughout the world.

The three largest export markets for Vietnamese cashews include the US, China and the Netherlands, accounting for 33.2 per cent, 17.2 per cent and 9.9 per cent of total cashew exports, respectively.

To gain positive growth in exports during the past months, even while there are difficulties on world markets, businesses have focused on traditional export markets, such as the US, European countries, China and Australia, and also expanded export markets to the Middle East, Northern Asian and ASEAN countries.

Thanh said that in the past one to two years, Viet Nam processed 1 million tonnes of raw cashews per year, including 600,000 tonnes from domestic crops and imports of 400,000 tonnes from Cambodia, Laos, Indonesia and Western African countries.

To make up for the lack of raw cashews, the industry has promoted the use of modern technology for processing export products to increase added value for cashews, Thanh said.

At the international customer conference in HCM City at the end of November, the association signed a memorandum of understanding (MoU) with the Ivory Coast Cashew Exporters Association (AEC-CI), Benin Cashew Exporters Council (CoNEC Benin) and Nigerian Cashew Association (NCAN), to receive raw cashews for export processing.

According to the association, many raw cashew exporters in Africa, such as the Ivory Coast, Guinea Bissau and Nigeria, have called upon Vietnamese cashew export processors to invest in cashew processing technologies in those countries.

The countries have had tax exemptions and given priorities to the price of buying raw materials for businesses that put technological investments into processing cashews within those countries.

Meanwhile, some Vietnamese enterprises have transferred equipment and technology to businesses in those countries.

Top online retailers are owned by VN firms

The top five Vietnamese retail websites are primarily under the management of Vietnamese companies, according to Nguyen Thanh Hung, vice chairman of the Viet Nam E-commerce Association (VECOM).

The sites include www.vatgia.com, www.lazada.vn, www.5giay.vn, www.enbac.com and www.thegioididong.com. Among these retail websites, only www.lazada.vn belongs to a foreign firm, Germany's Rocket Internet.

Hung told Infonet online newspaper that there were still many obstacles for electronic commerce operations in Viet Nam, including high transportation and delivery expenses and concerns about the security of customers' personal information.

The survey, carried out by VECOM, indicated that international businesses dominated the top five retail websites in Indonesia, Malaysia, Thailand, Singapore and the Philippines. Websites such as www.apple.com and www.amazon.com remain the most popular sites in these countries.

Dollar rises as FX policy remains unadjusted

Despite central bank policies to keep the dong foreign exchange rate against the US dollar unchanged through 2013, the greenback currency has crept up over the past week.

Vietcombank late last week traded one US dollar at VND21,130/21,170, a remarkable move compared to rates of VND21,080/21,120 early this month. The currency strengthened by as much as VND50 per dollar in one day.

Yesterday's rate on the black market was quoted at VND21,180/21,200. "Trading keeps busy as people expect a FX adjustment in coming months," said a FX official at a Ha Noi-based company who asked to remain unnamed.

Responding to market moves, central bank's Deputy Governor Le Minh Hung confirmed that there would be no adjustment until the year-end.

Hung said that the supply and demand of foreign currencies was stable because of sufficient sources. In November, the country enjoyed an estimated trade surplus of $50 million and gained $7.2 billion in account balance of payments by the end of Q3, equivalent to 4 per cent of GDP. The account balance of payments is expected to reach $2.5-3 billion by year-end. Moreover, FX tradings were stable. "It's to understand that the FX moves in recent days have been rooted in speculative rumours of FX adjustments and assessments presented in the macroeconomic report by the National Financial Supervisory Committee," Hung said.

Bank directors need to play by the rules

The vital role played by managing directors at the nation's banks was highlighted during yesterday's meeting between the International Finance Corporation (IFC) and bank officials.

According to Simon Andrews, IFC's regional manager for Viet Nam, Laos, Cambodia and Thailand, Viet Nam has seen the impacts of improper corporate governance over the past four years.

Meanwhile, good governance would help companies, especially banks, earn steady sources of income, better access to capital and equity, and enhance long-term prosperity, he added.

Richard Westlake, business advisor based in New Zealand, said: "Too many bank directors have failed to understand or follow corporate governance rules."

What went wrong was that they understated banking risks. As banks were strongly connected to businesses and to one another, the failure of one bank could risk the loss of confidence in the entire system. Westlake stated the risks of liquidity and solvency, such as being unable to repay depositors on demand and declining quality of assets, worsen when banks become highly leveraged.

Therefore, a good director must have a strategic perspective, independent thoughts, and must understand the banking business, the New Zealand advisor added. He also advocated that the board of directors spend up to 30 per cent of their time addressing risks.

However, Westlake said Viet Nam was not the only country facing this issue. "So there are massive opportunities for the country to take the lead," he said, suggesting banks should start hiring the right people with the right skills, behaving in the right way.

Commission accepts first securities merger

The State Securities Commission of Viet Nam has recognised yesterday's merger of Military Bank Securities (MBS) and VIT Securities (VITS), according to Vneconomy newspaper.

This was the first merger between two securities companies on the Viet Nam stock market and marked the pioneer step in restructuring securities companies.

The new company was named MBS, with charter capital of VND621.24 billion (US$29.58 million). Leaders of the VITS did not take part in managing the new company.

The HCM City and Ha Noi Exchange yesterday also recognised membership of MBS.

MBS will provide five services, including brokerage, proprietary trading, underwriting, advisory and securities custody services.

Seed company issues shares to raise capital

National Seed Company (NSC) will issue over 5 million shares to increase its charter capital from VND100 billion (US$4.7 million) to VND152.5 billion ($7.19 million).

The shares will be issued to existing shareholders at the price of VND65,000 ($3) per unit. The proceeds will be allocated to increase stakes to more than 51 per cent in other companies in the same industry and invest in facilities. NSC shares closed yesterday's session 2.5 per cent lower at VND77,000 ($3.6).

ETF to add more shares to portfolios

Exchange-traded fund FTSE late last week announced new portfolios, effective December 23, which added PetroVietnam Transportation (PVT) into the FTSE Viet Nam Index and food processor Hung Vuong (HVG) to the FTSE Viet Nam All-share.

Foreign ownership in PVT is currently only 3 per cent, while the permitted amount is 49 per cent. Maybank KimEng Securities predicted FTSE would purchase some 8 million PVT shares and reduce the proportion of existing stocks.

The upcoming list of FTSE Viet Nam Index and FTSE Viet Nam all-share will consist of 22 and 36 stocks, respectively.

PetroVietnam secures foreign loans for power plant

The Vietnam National Oil and Gas Group (PetroVietnam) on December 9 signed credit agreements with foreign banks to the sum of  US$795 million to fund the construction of its Thai Binh 2 Thermal Power Plant.

They included an export credit agreement (ECA) worth US$330 million from the Export-Import Bank of Korea (KEXIM), commercial loan agreement insured by KEXIM worth US$ 270 million and a foreign commercial loan agreement worth more than US$195 million.

The loans aim to help PetroVietnam purchase and install equipment, like generators, boilers and auxiliary equipment provided by Japan-based Sojitz-Daelim Contractors (SDC) for the Thai Binh 2 Thermal Power Plant.

The power plant, which is being built in Thai Thuy district of the Red River Delta province of Thai Binh, consists of two generators with a total capacity of 1,200 MW. Construction of the project began in 2011, with a total investment capitalization of VND31,500 billion.

The facility is scheduled to be put into operation in late 2014 and to supply approximately 7.2 billion kWh/year for the national grid, contributing to increasing PetroVietnam’s electricity generation capacity to 9,200 MW, accounting for 22% of the country’s total thermal power capacity and about 20-25 % market share of the national electricity supply.

Vietnam, Guangdong province boost trade ties

More than 40 businesses from China’s Guangdong province explored cooperation opportunities at a seminar in HCM City on December 9.

These businesses operate in the fields of agro-aqua-forestry, food, pharmaceuticals, and real estate.

In his report, Deputy Minister of Industry and Trade Nguyen Cam Tu noted Guangdong is one of the leading provinces in implementing China’s reform policy, but economic and investment ties between Vietnam and Guangdong have yet to match their great potential.

He suggested that Guangdong authorities should strengthen trade exchange and offer incentives to Vietnamese enterprises. He also encouraged Chinese enterprises to promote investment in Vietnam, primarily in the support industry, processing industry and energy, as well as enhancing import-export activities.

According to Zhao Yu Fang, Vice Governor of Guangdong province, Vietnam’s dynamic economy and developed trade will help foster mutually beneficial economic and trade ties between the two sides.

She said Guangdong province is currently planning to build a new highly competitive economy, and it always creates favorable conditions for foreign enterprises looking to invest in the province in priority areas such as information technology, electronics, architecture, transportation, environment, and transport.

Trade turnover between Vietnam and Guangdong reached US$8.83 billion in the first three quarters of this year, up 43.1% compared to the same period last year. Of this figure,Vietnam exported US$ 3.37 billion worth of goods to Guangdong (down 21.2%) and imported US$5.45 billion (up 61.1 %).

Currently, Guangdong province has 29 representative offices and 41 enterprises investing in Vietnam with a capitalization of over US$2.4 billion.

UN, EU Cost Norms update for Vietnam announced

Representatives of Vietnamese Government, the United Nations in Vietnam and the Delegation of the European Union to Vietnam on December 9 agreed to the 2013 update on the UN - EU guidelines for financing of local costs in development cooperation with the country, better known as UN - EU Cost Norms.

The single set of standardized rates in the UN - EU Cost Norms continues to be used by all national implementing partners and other counterparts in Vietnam for the local costs of ODA programs and projects funded by UN agencies and EU member states’ missions in the country, according to a press release on December 9.

Since its launch in 2009, the UN-EU Cost Norms have been recognized for the many positive results that have been achieved in terms of harmonizing and reducing transaction costs for implementing partners.

The guidelines represent a tangible contribution to aid effectiveness agenda in line with Hanoi Core Statement and Vietnam Partnership Document on Aid Effectiveness and it is rightfully considered as an important tool to promote greater transparency and creating a basis for stronger alignment and harmonization between Government, UN and development partners.

It is expected that this updated version, with immediate effect, will bring the benchmark for alignment of donor and government cost norms closer to current market rates and conditions.

Goods Fair in Danang attract businesses

Approximately 100 businesses are expected to showcase their products across 350 stands at the Vietnamese Goods Fair, in Danang, on December 12-16.

Key items on display will include garments, fashion, cosmetics, equipment, household utensils, food, and handicrafts. In addition, there will be stands promoting tourism, office space, education and banking services.

Visitors to the fair will also have the opportunity to take advantage of special discounts and attractive promotions on selected products.

The organizing board will put up a special stand to raise public awareness of counterfeit goods and publically destroy fake products worth an estimated VND 1.5 billion.

Japanese exit highway deal

A high-profile Japanese investor has reportedly requested to withdraw from Vietnam’s first foreign-invested build-operate-transfer motorway.

Japanese state-owned company Nexco Central has officially asked the local authorities to exit a project to upgrade Hanoi’s 30 kilometer Phap Van-Cau Gie motorway, Vietnam’s first foreign invested highway project under the BOT model, said Thang Long Project Management Unit (PMU) under the Ministry of Transport (MoT), assigned by the ministry to oversee the project.

“The MoT and other state agencies provided the best possible conditions for the Japanese investor to realise the project. It is unfortunate we are losing Nexco Central before the project even begins,” said Pham Thanh Binh, deputy general director of Thang Long PMU.

After 10 years open to traffic, the Phap Van-Cau Gie had required upgrading and it was decided to renovate into a six-lane modern highway with an estimated investment of VND5.7 trillion ($271 million) over two phases.

The project drew significant attention from the business community when the proposal to upgrade the road was announced by the MoT in June 2012.

Since then, several proposals were received from both domestic and foreign investors and “the MoT chose Nexco Central due its long experience as Japan’s leading player in highway investment, business and operation,” said a MoT source.

In a meeting in late September between Vietnam’s Minister of Transport Dinh La Thang and Japan’s Minister of Land, Infrastructure, Transport and Tourism Akihiro Ohta, Nexco Central’s contract with the motorway was considered one of the major co-operative infrastructure deals between the two countries. In early October, after getting the prime minister’s approval, the MoT finalised procedures to name Nexco Central as the project’s investor.

Nexco was given two months to study the project and negotiate contracts and the project was slated to kick off in early 2014.

After receiving the project documents, Nexco reportedly said it would not proceed after determining a high level of risk.

In a document to the MoT penned in mid-October, the Japanese side laid out their requirements if they were to be involved in the project. Accordingly, it required the Vietnamese government support in site clearance and that the work must be completed entirely before the project starts.

To ensure a return on investment, Nexco proposed a toll of VND1,500 per km (nearly triple the Ministry of Finance’s standard level) which would be revised every three years based on inflation. Toll revenues would be put towards recouping investment.

Nexco also said it could not guarantee implementation of the second phase.

If these conditions were not satisfied, the project would not be realisable and may face insolvency,” said a Nexco Central Vietnam source.

According to a veteran transport expert, Nexco Central’s conditions differed largely from those set forth initially in the project documents, which were developed based on the existing BOT legal framework.

Banking discussions focus on bad debts, foreign ownership

Industry experts are considering how to ensure stability with sustainability of the banking sector.

“Vietnam’s banking system is under tremendous pressure from bad debts and needs enormous capital amounts to spur restructuring,” said Dominic Scriven, a member of the Banking Working Group at the recent Vietnam Business Forum on November 3.

He said Vietnam’s current bad debt level was 4.6 per cent, but was in reality much higher if classified pursuant to a State Bank of Vietnam’s (SBV) circular on debt classification.

According to SBV Governor Nguyen Van Binh, bad debts represented around 8.6 per cent of total outstanding loans by the end of 2012.

“Our rough estimates show that if bad debts stood at 8.6 per cent, the banking sector would need $6 billion more to tackle the issue, bringing the capital adequacy ratio to around 13.8 per cent,” Scriven added.

The Banking Working Group said the creation of the Vietnam Asset Management Company was a good first step but noted that bad debts were a long term issue that were holding back the country’s overall growth.

In support of this, CEO of Standard Chartered Vietnam, Cambodia and Laos Nirukt Sapru said Vietnam was off to a good start in terms of restructuring and addressing bad debts, but as one of the greatest challenges to the economy, they would not be settled overnight.

Banking experts suggested introducing more extreme measures to attract foreign capital into the banking sector’s battle against bad debts.

Accordingly, the foreign holding cap on Vietnamese banks was suggested to be raised to 49 per cent, and even up to 100 per cent for underperforming banks.

They argued that the reality was that many Asian countries have successfully restructured banks through deep involvement of foreign entities.

One example given was foreign holdings in South Korean banks was hiked from 26 per cent in November 1997 to 55 per cent in December the same year, and to 100 per cent five months later.

In Indonesia the cap was raised from 85 to 99 per cent.

With the help of foreign investors, during a turbulent period these countries’ banking systems showed strong recovery.

Responding to the proposals, an SBV source said they submitted a draft decree regulating foreign investor shareholding in local banks that proposed allowing single entities to hold more than 20 per cent of local banks’ chartered capital.

SBV Chief Inspector Nguyen Huu Nghia noted that for underperforming banks the foreign shareholding cap could exceed the regulated cap which would be decided on a case-by-case basis.

Winter could signal end to real estate ‘big freeze’

Experts speculate that the real estate market’s big freeze may be showing signs of thawing, with many confident that some segments will see an upsurge activity in 2014.

According to Jonathan Tizzard of Cushman & Wakefield Vietnam, a range of positive signs have been observed in the past few months, encouraging the real estate market.

“The bad debt in the banking system is a major issue that has stifled the economy in recent times. The problems have not been worked through, but they are being addressed, whether it is through the Vietnam Asset Management Company or the banks identifying their problems and working out their bad loans themselves,” said Tizzard.

The slow recycling of real estate, Tizzard added, was the collateral of this bad debt, and should not be seen as a negative sign. On the contrary, it was described as being part of the normal market cycle as real estate is re-priced at a level that is more attractive to the market.

“When inefficient real estate developers are allowed to ‘sit’ on their unproductive assets, this causes stagnation in the market as has been the case in Vietnam for some time. We expect to see more distressed property being offered to the market in 2014,” he predicted.

Cushman & Wakefield’s experts believe that Vietnam’s monetary environment has been stabilised, particularly as the importance of gold as a currency has diminished and faith in the dong restored. In addition, inflation has very much been kept at a sustainable level and interest rates are coming down. While this has many effects upon the real estate market, the most important over-arching point has been that confidence has slowly been restored to the marketplace.

Vietnamese traditionally invest in gold or real estate, and after many local investors lost out in the gold bubble in 2013, anecdotal evidence suggests that the perception of gold as a safe investment has been skewed, with real estate set to benefit.

Apart from the recovery in domestic demand, Cushman & Wakefield expects an increase in foreign demand for Vietnamese real estate.

“It is being proposed in the National Assembly that there will be more equal treatment between foreign and domestic entities in Vietnam,” Tizzard said.

In agreement with Cushman & Wakefield is last week’s report from Viet Capital Securities. Viet Capital Securities believe that the price of real estate in Vietnam has reached its bottom line, particularly in Ho Chi Minh City.

“We predict that there is little possibility of further reduction in prices in the coming time, because if the prices go any lower, developers will be selling their products below the input costs,” the company said.

Any further pressure to reduce prices would have to come from developers lacking liquidity, which would present a good investment for other investors looking to speculate on the market.

Vietnam’s auto industry opportunities may slip away: Toyota

Japan’s top automaker Toyota warned on Tuesday that Vietnam will lose opportunities to develop the automobile industry if the Government fails to release suitable policies from now to 2025.

Yoshihisa Maruta, general director of Toyota Vietnam, said that if the Government has no policies to secure the gap in production costs between complete knocked-down (CKD) and complete built-up (CBU) cars, it will be a challenge for Vietnam to maintain the auto industry.

Speaking at a seminar organized by Bank for Investment and Development of Vietnam (BIDV) and Japan’s Shinkin Central Bank (SCB) in Hanoi, Maruta said that import tariffs within ASEAN will be removed, resulting in a sharp fall in imported car prices and giving a boost to the automobile market.

Maruta urged the Government to apply supportive measures for the industry. “Now is the most important time to decide the future of the auto industry,” he said.

Vietnam should learn from Thailand that had successfully developed the auto industry before opening the door. After that, the nation has continued to develop the auto industry.

The seminar also discussed other fields of cooperation between Vietnam and Japan.

Phan Duc Tu, general director of BIDV, said that Japan currently is the biggest official development assistance (ODA) donor and foreign direct investment (FDI) investor in Vietnam.

Bilateral trade between the two nations is expected to hit US$29 billion in 2013. By late September, Japanese firms had invested in 2,100 projects in Vietnam.

BIDV has been trying to seek cooperation opportunities to speed up Japanese FDI in Vietnam. The local bank has chosen SCB as one of first Japanese strategic partners to develop the Japanese client segment.

SCB is the sixth biggest bank in Japan and the 80th in the world. It can be called the ‘central bank’ of 270 people’s credit institutions in Japan with thousands of corporate customers from many countries, including Vietnam.

Commenting on the partnership model between Vietnamese and Japanese banks to speed up FDI capital in Vietnam, Do Nhat Hoang, head of Foreign Investment Agency under the Ministry of Planning and Investment, said that this is a good model to support enterprises.

As of November, Japan is the biggest investor in Vietnam with total committed investment capital of US$34.5 billion.

Chinese bicycles increase presence in Vietnam

There are up to 80 Chinese manufacturers of bicycles and components showcasing their products at Vietnam Expo 2013 that opened on Wednesday at Saigon Exhibition and Convention Center in HCMC’s District 7.

According to the exhibition’s organizer - Vietnam National Trade Fair and Advertising Co. (VINEXAD), the number of Chinese enterprises tripled at this year’s exhibition. They come to seek Vietnamese partners to distribute their products.

The participation of Chinese enterprises is organized by the China Bicycle Association (CBA), the China Council for the Promotion of International Trade (CCPIT) and CCPIT Shanghai Sub-Council to encourage manufacturers to seek opportunities in potential markets.

According to CBA, this is the third time Chinese bicycle manufacturers have joined Vietnam Expo, which will last until Saturday this time.

Chinese manufacturers want to boost consumption in the Vietnamese market as a large number of people tend to use bicycles to reduce pollution and save fuels.

Ma Zhong Chao, chairman of CBA, said that the bicycle and electric bike market in Vietnam started quite late but its growth rate was rapid. The Government has provided policies to call for energy saving, protect the environment and promote sustainable development, he added.

Stainless steel traders reject antidumping conclusion

Representatives of 18 enterprises using stainless steel as materials for production have voiced their objection against the Vietnam Competition Authority (VCA)’s initial conclusion about imported stainless steel being dumped in Vietnam.

Local firms have reacted after VCA posted initial findings about cold-rolled stainless steel on its website on Tuesday and proposed the Ministry of Industry and Trade to impose tax rates of 6.45-30.73%, as covered in the Daily on Wednesday.

The case started in May when Posco VST and Hoa Binh Inox, two big local stainless steel producers, filed lawsuits and asked authorities to impose anti-dumping duties on cold-rolled stainless steel imported from China, Taiwan, Malaysia and Indonesia.

VCA decided to investigate the case and stainless steel users in Vietnam also started to send petitions to the Ministry of Industry and Trade.

As only the preliminary decision has been given, importers of stainless steel hope that things can be overturned when there are still six months to go before the Ministry of Industry and Trade gives a final decision.

Local traders said they would officially react to the conclusion.

According to local firms in a statement, if the preliminary tax rates are soon applied, Vietnamese stainless steel processors and consumers will be affected. Besides, it will prevent firms from getting access to cold-rolled stainless steel at a competitive price.

The stainless steel price of Posco VST in the local market is currently 10-20% higher than the global price, they said.

Meanwhile, the four markets whose products are investigated are Vietnam’s main suppliers of materials. Therefore, seeking replacing markets is not possible.

“The current tax of cold-rolled stainless steel imported from markets like Taiwan is 10%, and if more taxes are imposed, enterprises using stainless steel for production in Vietnam have no choice but to scale down their operations. The consequences will be huge damages for enterprises, thousands of workers losing their jobs and the State budget losing dozens of billions of dong each year,” said the statement.

Besides, as Posco VST and Hoa Binh Inox currently hold a stainless steel market share of over 81% in Vietnam, there are concerns over price manipulation once the new tax rates are imposed.

“We are disappointed at the preliminary decision as it shows that the petition of enterprises sent to the Ministry of Industry and Trade is not taken into account seriously,” said Le Tan Quoc, deputy sales director at Minh Huu Lien Joint Stock Company.

Quoc hopes that the management agency will have a final decision which is fair to production enterprises in the coming time.

According to Quoc, although the taxes are temporary, the firm still faces difficulties due to the rising material cost and the high selling price.

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