WB commits to promoting economic restructuring
The World Bank has committed to backing Viet Nam’s bid to restructure its economy for further growth to be made in the coming years, the institution’s director has said.
At a reception given to the Director Victoria Kwakwa in Ha Noi on August 7, Deputy PM Vu Van Ninh said that Viet Nam has deployed a string of measures to restructure the economy including numerous consultations and recommendations which were proposed by the WB.
The measures were workable in reality and WB-funded programs in Viet Nam have been conducted proactively, he said.
On behalf of the Government, Mr. Ninh thanked the largest multilateral lender’s positive support for Viet Nam over the past time.
Director Victoria Kwakwa said that her institution respects Viet Nam’s endeavors in economic restructuring especially in the banking system, SOEs and public investment. These fields play the decisive role in Viet Nam’s long-term development.
The WB, said Ms. Victoria Kwakwa, acknowledges the achievements of Viet Nam particularly in macro-economic stability and FDI attraction.
According to the guest leader, Viet Nam succeeded in establishing the Viet Nam Asset Management Company in line with the country’s economic and social conditions. The company is expected to handle non-performing loans in the economy and revitalize the banking system.
On this occasion, the WB executive agreed to support Viet Nam in training experts in finance and SOEs restructuring processes and backing operation of VAMC.
SOFRI wants royalty from new dragon fruit variety
Southern Fruit Research Institute (SOFRI) wants to earn royalty from exports of the dragon fruit variety with purple flesh that it has created.
SOFRI Director Nguyen Minh Chau said his institute and the New Zealand Institute for Plant & Food Research would jointly develop and commercialize purple-flesh dragon fruit. The New Zealand partner will commercialize this dragon fruit variety and then pay SOFRI royalty, help the institute upgrade this variety and study new types, he said.
Royalty will make up 2-5% of the total exports of purple-flesh dragon fruits, Chau told the Daily on the sidelines of the launch of a US$4-million agricultural project sponsored by the government of New Zealand in HCMC on Wednesday.
It took SOFRI ten years to create the purple-flesh dragon fruit variety, which has not been sold in the market yet.
“After the dragon fruit type with red flesh was successfully created in 2005, purple-flesh dragon fruit is our latest invention, but we’re having difficulty bringing it into the market due to financial distress and the lack of experience in export.”
“We want to follow the international example, meaning a research institute creates new varieties and gives them to companies for production, packaging and export, and they pay the institute royalty,” said Chau.
He said SOFRI had tried to discuss this issue with many dragon fruit trading companies in Vietnam but failed.
He informed that under the agreement with New Zealand, Vietnamese companies would not be able to export purple-flesh dragon fruits to the markets where New Zealand firms have sold this type of fruit to.
Tran Ngoc Hiep, chairman of Hoang Hau Dragon Fruit Co. Ltd., one of the nation’s largest dragon fruit traders, remarked it was difficult to distinguish between purple-flesh dragon fruits and red-flesh dragon fruits, the latter strain having been long available in the market.
On the visit to Vietnam of Jerry Mateparae, the Governor-General of New Zealand, the Vietnam/New Zealand New Premium Fruit Variety Development Project was officially launched on Wednesday.
The project worth US$4 million will be carried out in the next five years, aimed at supporting sustainable economic development in Vietnam through the development and commercialization of high-value fruits. The project will be jointly implemented by the New Zealand Institute for Plant & Food Research, SOFRI and Vietnam Institute of Agricultural Engineering and Post-Harvest Technology.
Five Vietnamese enterprises roll out co-branding card
Vietnam’s leading retailer Saigon Co.op and major banks Vietcombank, BIDV and DongA Bank launched a co-branding partnership last week amid fiercer retail competition in the country.
The newly-launched card is a combination of the close customer cards of two supermarket chains Co.opmart an Co.opXtra, and debit cards of the three leading Vietnamese banks. Co.opmart is the Vietnamese retailer’s own brand, while Co.opXtra is one of the two brands of Saigon Co.op-FairPrice, a joint venture between the Vietnamese retailer and Singapore’s leading retailer NTUC FairPrice, set up this May.
The new card is a replacement for cash payment and also a banking card. The four Vietnamese enterprises will issue more than 15 million cards for the new partnership, projected to increase the number of customer and cut costs for them. The cardholder will get some separate discounts for the five enterprises’ promotional programmes when shopping at Co.opmart an Co.opXtra supermarkets.
Saigon Co.op CEO Nguyen Thi Hanh said all of the supermarkets, as well as mega-supermarket Co.opXtra Plus Thu Duc in Ho Chi Minh City, had already accepted this card payment.
Saigon Co.op-FairPrice’s Co.opXtra brand is for individual consumers and households, while Co.opXtra Plus targets corporate buyers like enterprises, factories, schools, restaurants and hotels.
BIDV deputy CEO Tran Xuan Hoa said five million among the 15 million customers mentioned were BIDV clients. He added banks in Vietnam were now seeking to intensify relations with retailers as they were promoting retail banking, while the retail industry was being a very hot business, where the race includes both local enterprises and international retailers.
Among the 15 customers, six million would be DongA Bank clients, said Pham Van Bu, the lender’s chairman.
Large investors favored on Phu Quoc
Kien Giang Province, at the request of Deputy Prime Minister Vu Van Ninh, will deliberately select investors for the island district of Phu Quoc, with a preference going to those making sizable investments, using high technology and protecting the environment.
Such a request is given in a statement giving conclusions on the scheme for policy research for development of Phu Quoc Island. The statement was released after Ninh had had a meeting with the Southwest Steering Committee, representatives of central agencies and leaders of Kien Giang Province in Can Tho last month.
As requested by Ninh, the Southwest Steering Committee, the Ministry of Planning and Investment and the government of Kien Giang will jointly conduct research on policies for development of Phu Quoc.
As suggested, Phu Quoc Island will become the first ever special administrative and economic zone under central management in Vietnam. Therefore, Ninh asked the Southwest Steering Committee in collaboration with Kien Giang Province to carefully study the need for specific policies for Phu Quoc, together with the feasibility and the effectiveness of such a scheme.
Besides, the above parties should refer to the proposal of Quang Ninh Province regarding policies for Van Don Island and on that basis map out an orientation and a schedule for long-term development of Phu Quoc Island.
The planning for Phu Quoc development should place the island in the relationship with Southeast Asia and the connection with the Mekong Delta, HCMC and other localities, says Ninh in the statement.
The deputy prime minister asked the concerned parties to continue to reform administrative procedures and the procedures for immigration, residence and travel to facilitate Phu Quoc development.
Moreover, it is very to develop roads, seaports, airports, power and water supply systems and other essential facilities on Phu Quoc Island. Given the tight budget, the related parties are told to seek ways to mobilize resources for development of Phu Quoc.
The Southwest Steering Committee and Kien Giang’s government are requested to review advantages, difficulties and arising problems for Phu Quoc Island after nearly ten years of implementing Decision 178/2004/QD-TTg of the Prime Minister on research for long-term development of Phu Quoc.
As the nation’s largest island, Phu Quoc is said to have great potentials for economic development and hold a special position in national defense and security.
However, due to a slow start, limited resources, poor infrastructure, inconsistent policies and asynchronous legal framework, Phu Quoc faces difficulties in attracting investment.
In May 2010, the Prime Minister passed the adjusted plan for development of Phu Quoc up to 2030.
As per the master plan for socioeconomic development in Kien Giang Province, Phu Quoc Island will be turned into a special administrative and economic zone in 2020, playing the role of a transport hub and a center of ecotourism, finance and scientific research. The island will conserve forest and marine biodiversity and occupy a special position in national defense and security.
Footwear export orders up 10-15%
Most companies in the leather-footwear industry have won export orders sufficient for production until end-September or the year-end, showing a growth rate of between 10% and 15% year-on-year, said the Ministry of Industry and Trade.
According to the ministry, January-July footwear export value is estimated at a combined US$4.79 billion, a rise of 15.6% year-on-year, while the seven-month output volume is estimated at 148.7 million pairs, up 11% year-on-year.
The ministry attributed the good news to the fact that more foreign buyers now are shifting their orders from China to Vietnam.
Specially, as Vietnam is entering the final rounds of talks on the Trans-Pacific Strategic Economic Partnership Agreement (TPP) and is in negotiations for a free trade agreement with the European Union, many opportunities have emerged for foreign investment in the industry. This means local firms are given more chances of gaining access to advanced technologies and big global brands, the ministry explained.
Vietnam somehow enjoys benefits from the transfer of orders from the neighboring country of China, noted Diep Thanh Kiet, vice chairman of the Vietnam Leather and Footwear Association (Lefaso). Footwear exports to the U.S. have also been rising since U.S. importers are also bracing for the TPP, he remarked.
The U.S. and the EU are the two biggest importers of Vietnamese leather-footwear items but local shipments bound for the EU are falling while exports to the U.S. are on the rise, which is ascribed to the saturated demand and plenty of barriers in the EU.
Footwear exports to the EU represented over 52% of the country’s total footwear exports in 2008, which then slid to 36.7% in 2012. In the meantime, footwear exports to the U.S. jumped to 31.3% of total footwear export value of over US$7.2 billion in 2012 from more than 22.5% in 2008.
Vietnam attends Cambodia Int’l Machinery Industrial Fair 2013
Vietnamese businesses operating in the fields of construction machinery, garments and packing are taking part in the Cambodia International Machinery Industrial Fair 2013 (CIMIF 2013), which kicked off in Phnom Penh on August 8.
The four-day exhibition also draws the participation of 240 machinery businesses from China, Czech, Germany, India, the Republic of Korea, Japan, Malaysia, Thailand, Singapore and the US.
Addressing the opening ceremony, Cambodian Commerce Minister Cham Prasidh said this year’s event sees a 15 percent increase in the number of participating companies, showing the international business community’s belief in the Cambodian market.
The four-day fair is held by the Hong Kong-based Yorkers Trade and Marketing Service Co. Ltd in collaboration with the Cambodian Ministry of Commerce, the Cambodian Chamber of Commerce and the Garment Manufacturers Association in Cambodia.
Vietnam, Japan cooperate in six key industries
Hanoi has played host to an August 8 seminar introducing the industrialisation strategy Vietnam has devised for its 2020 cooperative framework with Japan and its long term vision towards 2030.
The strategy focuses on improving the production capacity of the six key electronics, agricultural machinery, agro and seafood processing, shipbuilding, environment, energy saving, and automobile production industries.
It aims to promote technology upgrades, raise labour expertise, and hone Vietnam’s industrial competitiveness on world markets.
The areas prioritised for development will apply as much advanced clean technology as prevailing economic conditions allow. They are striving towards annual 20 percent increases in production value 30 percent of the industrial sector’s total.
Dr Nguyen Thi Tue Anh, head of the Central Institute for Economic Management (CIEM) Business Environment and Competitiveness Division, described the strategy as a bilateral consensus formalising partnerships in economics, trade, and investment.
She promised Vietnam will cultivate an attractive environment for state and private sector investment.
Both sides will be responsible for criteria formulation, monitoring, and assessment.
Vietnam-Denmark trade turnover declines
The Ministry of Industry and Trade’s (MoIT) European Market Division has reported Vietnamese–Danish trade turnover has slipped 10 percent down from 2012’s levels to US$221.9 million in the first half of this year.
Vietnam’s exports to Denmark were valued at US$133.6 million, a 6 percent fall, while the country’s US$88.3 million in Denmark was 16 percent less than the first six months of 2012.
The garment and textile sector’s 31 percent contribution was the largest to total export turnover, followed by footwear (14 percent), seafood (8 percent), and timber and timber products (5 percent).
Footwear was the only sector to increase its export value, its US$18.6 million up 23 percent, while seafood (US$11.5 million or down 20 percent), garments and textiles (US$42 million or down 26 percent), and timber (US$6.7 million) all finished lower.
Milk and milk products were the leading import commodities, making up 27 percent of the total, followed by machinery and equipment (13 percent), chemical products (14 percent), and seafood (7 percent).
Vietnam’s garments and textiles and seafood exports suffered from tough international competition. The Eurozone’s ongoing public debt crisis was also a factor in their significant declines. Danish consumers are tightening their belts.
Two-way trade turnover is anticipated to reach around US$500 million in 2013, with Vietnam’s exports totalling US$305 million.
Trade exchanges between the two countries are expected to surge after the successful negotiation of a future Vietnam-EU Free Trade Agreement.
M&A deals increase five folds in value in 2012
The total value of all Vietnamese mergers and acquisitions(M&As) increased five-fold to nearly US$5 billion in 2012 said Deputy Minister of Planning and Investment Dang Huy Dong at the August 8 (M&A) Forum in Ho Chi Minh City.
Vietnam is currently implementing a sustainable economic restructuring programme to improve efficiency and competitiveness. M&A activities are not channels for investment but also important contributions to promoting broader investment, business, and banking system reforms, he added.
KPMG Vietnam Director General John Ditty believes more transactions will be completed this year thanks to the Government’s strong commitment to overcoming the difficulties encountered in 2012.
Despite Vietnam’s macroeconomic concerns, M&A activities are still rising rising, he said.
Vinaland Limited CEO David Blackhall said ASEAN investors are interested in pursuing M&As with Vietnamese businessesbecause of the latter’s undervaluing.
He pointed out the real estate sector is anticipating a large amount of foreign investment in 2014.
Japanese RECOF Corporation CEO Masataka “Sam” Yoshida highlighted some key features encouraging Japanese companies to invest in Vietnam, including the stability of the two countries’ bilateral relationship, market growth, and Vietnam’s position as a gateway to the Greater Mekong Subregion.
The M&A Vietnam Forum, jointly hosted by the Vietnam Investment Review and the AVM Vietnam Company, welcomed 350 leaders, representatives, and experts from both foreign and domestic economic groups and consultancies.
Vietnam-NZ fruit tree project to benefit farmers
A US$4-million project funded by New Zealand will help Vietnamese farmers improve their incomes from the growing of new varieties of high-quality fruit trees.
The purpose of the project was underlined by New Zealand Ambassador to Vietnam Haike Manning at the project launching ceremony in Ho Chi Minh City on August 7.
The project will look to creating a new breed of dragon fruit and developing a model of production, post-harvest and commercialisation of the fruit that can be multiplied for other kinds of fruits.
The New Zealand Aid programme-sponsored project will be jointly implemented in five years by the New Zealand Institute for Plant and Food Research in collaboration with the Southern Fruit Research Institute and its sub-institute on agricultural engineering and post-harvest technology.
During the freshly-finished visit to Vietnam, New Zealand Governor General Jerry Mateparae said New Zealand hopes to continue cooperation with Vietnam in various fields, especially in the field of agriculture.
Housing price index continues to decline
Savills Vietnam has recently announced the Savills Property Price Index (SPPI)--a tool for tracking quarterly price index of different property markets, for the second quarter of this year.
Accordingly, housing price index in Ho Chi Minh City rose marginally by 0.2 percent compared to the previous quarter, but dropped 3 points year-on-year. The number of transactions surged 59 percent year-on-year. The number of sold houses showed rise for four consecutive quarters. Savills noted that the residential price index had gradually increased since the second quarter last year.
As for Hanoi City, housing price index continued to fall 3.6 points to 104.4 points. Thus, the index has plummeted by roughly 25 percent in eight straight quarters. Average price in the market has dropped 30 percent since second quarter of 2011 due to the entry of new projects as well as price reductions on existing projects.
After rising continuously in 2012, the inventory has reduced in the first two quarters of the year with a decrease of 2 points in second quarter sending inventory to 93 percent.
US$35 million plant to make auto parts in Quang Ninh
The Yazaki Haiphong-Vietnam Ltd Company will build a plant to manufacture automobile spare parts at Dong Mai industrial zone in Quang Ninh province.
Construction of the US$35 million plant will start in October 2013 and be completed in August 2014.
Once put into operation, the plant will produce more than 2.7 million sets of spare parts per year and generate jobs for around 3,000 workers.
PM demands strict control on forex rate, gold market
Prime Minister Nguyen Tan Dung has emphasized the urgent need to settle bad debts and strictly control the foreign exchange rate and gold market.
At the July regular cabinet meeting, PM Dung asked the State Bank of Vietnam (SBV) to take a more active role in dealing with bad debts and put the Vietnam Asset Management Company (VAMC) into operation soon in order to make it possible for businesses to access credit loans.
He urged the SBV to effectively implement incentive policies on housing aid and adjust interest rates in line with the inflation situation.
Credit growth needs stimulating, but bad debts must be lowered, Dung said, adding that capital should be channeled into priority-given sectors operating with high efficiency and competitiveness.
The central bank should help cement businesses clear their stockpile under the deferred payment scheme and sell products for traffic upgrade in rural areas, the Government leader suggested.
Banks grapple to boost consumer credit
Banks are finding it tough to boost lending to individual clients, including consumer credit, in the backdrop of a sharp fall in demand among corporate borrowers due to economic woes.
A senior source from Vietcombank said consumer credit only made up a small portion of the bank’s total outstanding credits. The lender has not achieved expected results from this operation as consumers are tightening their purse string.
Sharing this view, the deputy general director of a joint stock bank in HCMC said his bank had not recorded positive changes in consumer credit.
Loans provided to manufacturers and businessmen accounted for 84% of the total outstanding loans in HCMC in the first seven months of the year. The rest were non-manufacturing credits, including loans given to property firms and consumers.
Total outstanding loans in HCMC at the end of July stood at VND903 trillion, up 5.56% from the end of 2012, said the HCMC branch of the central bank.
Consumption was quite slow in the first half of the year due to sluggish demand, but the purchasing power is getting stronger, according to the General Statistics Office.
Total retail sales of consumer goods and services in the first six months are put at over VND1.27 trillion, up 11.9% year-on-year, or 4.9% with the price hike factor excluded, versus 6.7% in the same period last year.
However, consumption is on the recovery path as total retail sales of goods and services registered an increase of 5.1% in the second quarter, higher than 4.5% in the first quarter.
In response to this positive sign, banks are boosting lending to accomplish their profit targets for this year. They have offered many consumer credit packages, some of which are advertised with an interest rate of 0% for the first few months.
HDBank has launched a VND1-trillion credit package aimed at individual clients in need of loans for consumption and business. The lending rate is set at 0% for the first month and in the next 11 months, it is 11.86% for loans worth VND500 million or above and 12.8% for those ranging from VND200 million to below VND500 billion.
Earlier, Nam A Bank has also offered a preferential credit package for homebuyers with a zero interest rate for the first three months. However, Tran Ngoc Tam, deputy general director of the bank, said the results so far were not as good as expected.
Meanwhile, preferential programs for card holders are plentiful and diverse.
For example, those making payments by ACB-Mastercard have a chance to win a trip to Singapore. Western Bank will refund 1% of the bill value to those using its ATM cards to make payments at any point of sales nationwide.
Convenience stores, mini marts outpace big malls
Convenience stores and mini marts have still fared well while the growth of supermarkets and hypermarkets now is seen slowing down, says a report released by the market research firm Kantar Worldpanel.
The survey on the fast-moving consumer goods (FMCG) sector conducted in HCMC, Hanoi, Danang and Can Tho shows that sale growth at convenience stores and mini marts was 80% year-on-year in three months as of June 16. The result is contradictory to the slowing development recorded at other shopping channels.
For instance, supermarkets and hypermarkets only obtained a growth rate of less than 5%, similar to that of traditional markets, while this rate posted up to over 15% in the previous survey. Groceries, meanwhile, only grew 10%.
Still, the model of convenience stores and mini marts now is holding a market share of only 5%, increasing one percentage point from the previous survey, according to the report.
Kantar Worldpanel ascribed the attractiveness of convenience stores and mini marts to the convenience such facilities bring for local consumers, many of them wanting to look for and choose products in a short period of time in a modern and safe shopping space.
Many local retailers echo the survey’s results.
Tran Tan An, deputy general director of Vissan, told the Daily that growth of his firm’s network of more than 100 foodstuff convenience stores had always experienced double-digit growth in recent years. The new shopping model of Vissan enjoyed sale growth of 20% year-on-year in 2012, the highest and the most stable as compared to that of other models like traditional markets and supermarkets which the company is involved in.
In the context of current economic uncertainties, the convenience store model has become increasingly favorable among consumers, An said.
“Consumers spend less time at convenience stores as they have already known what to buy there while they are confused at hefty commodity volumes and sale promotions at supermarkets and mega-supermarkets,” he explained.
Similarly, Tran Van Bac, deputy general director of Saigon Trading Group (Satra) as the owner of Satrafoods convenience stores, reported business efficiency of the model is as good as expected after nearly two years of development. Satra is looking to expand the retail network in the near future, citing its modest space and affordable investment.
The high business efficiency of the convenience store model has prompted existing retailers to make continuous investments to open new stores and expand the systems at home. Besides, the local retail market is also a magnet to many new investors.
Recently, Thailand’s Berli Jucker Public Company (BJC) has acquired the convenience store chain bearing the B’s mart brand through a takeover of the FamilyMart store chain.
Ministry vows to protect real estate customers
The Ministry of Construction proposes plans to protect customers of unfinished projects who have been suffered losses because of incapable investors.
Dinh Si Hung bought an apartment four years ago, before it was complete. Because of the investors' weak financial ability, the project has been put on hold. "This project is a victim of serious lack of capital. In the end, the outcome will depend whether customers and investors can cooperate and come to an agreement." Hung said.
Chien, a home buyer of another stagnant project, said his apartment was 85% complete when his investors halted the work because of a lack of funding. They were in dispute for two years before the investors admitted their troubles.
According to the deputy minister of construction, Nguyen Tran Nam, there are many real estate investors who took customers' money, using it for other non-core business ventures. Nam said that this is one of the main reasons that the market is seeing so many abandoned projects, and customers are losing trust.
Another option being put on the table is making the money paid to contractors be put in a private account accessible to the customer only, who would disburse the funds only upon receiving status reports on the construction process.
Nam then asked for cooperation from banks, "We need commitment from investors, customers and the banks to realise this plan. We'll discuss how to solve the issue with all the related parties so as to ensure that banks won't use these funds to pay off shareholders or other debts."
The Ministry of Construction said they are also in the process of studying the option of making insurance policies a necessary part of contracts for the sales of apartments. The ministry said that people who make payments on apartments before construction is complete should be protected.
Real estate investors would be forced to purchase insurance, and if the investors go bankrupt, if the project becomes stagnant or the capital is put to other uses, customers will be compensated.
AIA announced successful business results
AIA Group has officially announced record results for the first six months ended May 31, 2013 with 26 per cent growth in value of new business to $645 million and 29 per cent increase in annualised new premium to $1.527 billion.
At the same time, AIA (Vietnam) Life Insurance Company has estimated business results for the first half of 2013 with spectacular growth figures – value of new business (VONB) up 51.4 per cent and annualised new premium (ANP) up 29.52 per cent compared to the same period last year.
These results are very encouraging given the difficult situation of both global and Vietnam economies.
Illusion of failure shrouds good deals
Real estate has become one of the hottest merger and acquisition (M&A) sectors in recent years, however many of the facts about the deals are rarely made public until well after they are concluded.
M&A activities in real estate sector have always been common, but the sector has a reputation for details to remain sketchy, and it is often third parties that disclose the real facts of a deal.
Some of the consultants have found that press-releasing a successful deal to boost their reputation have proved more inconvenient than keeping entirely silent about their role. A consultant last week was forced to redact the details of a deal they were involved in from a press release as the owner of a shopping centre they had represented was unhappy details had entered the public domain. In this instance it could be argued the deal should have been made public as the centre’s existing tenants needed to know they were about to lose their outlets.
No matter the value of the information being made public, investors and buyers alike are less likely to release the details of M&A deals, especially the value of a transaction.
Phan Xuan Can, chairman of SohoVietnam, a consultancy that has a sales portfolio of more than 100 real estate projects, told VIR that many domestic investors were under the illusion that selling projects was a failure when doing business.
Can said M&A activities should not be considered a negative thing. “The issue that investors sell some projects or buy others is normal in business. They simply want to restructure their portfolio in a better way,” Can said.
“Investors could hold a wide portfolio of projects but thanks to the downturn in the real estate market they might want to cut their losses and return to more focused projects,” Can said.
Meanwhile Le Minh Dung, director of CBRE Vietnam said that some investors did not want to publicise their purchases as they only intended to flip the project for a profit onto someone else and had no interest in developing it themselves.
“There is little transparency in M&A and many investors have missed out on opportunities to find out a suitable deal due to the secrecy involved,” Dung said.
Vietnam’s M&A market recorded approximately 157 transactions worth up to $ 4.95 billion last year, including 35 commercial real estate projects which were largely acquired by domestic investors.
In the first six months of this year, a slew of M&A deals were concluded. Commenting on the wave of deals in the real estate sector, most consultants said that the market would heat up but transactions would be focused on already completed projects.
Chris Brown, country manager of Cushman & Wakefield Vietnam said that demand would continuously increase in the next two years, especially for the retail segment.
“Future buyers will be interested in the projects which have prime locations, transparent ownership and documentation and competitive prices,” said Brown.
Northern central region aims for sustainable sea economy
The northern central region is targeting rapid and sustainable growth as a national sea-based economic hub by 2020.
According to a draft report on the regional socio-economic development master-plan, the region will expand its tourism sector and tourist sites, and serve as one of the key gateways of Vietnam and regional countries through international sea ports and airports.
Thanh Hoa city in Thanh Hoa province will be turned into a development centre, while Vinh city (Nghe An province) will be developed into a cultural-economic centre of the region, under the Prime Minister’s Decision.
Hue city in Thua Thien-Hue province will become a city of festival and tourism, as well as a top-grade trade-service-training-healthcare centre.
The plan also gives priority to developing five marine economic zones (EZs), with Nghi Son EZ to become the country’s second refinery and petrochemical complex while Vung Ang EZ will house the country’s largest steel producer and a national-level sea port, turning it into an international trade zone in the region.
The three other EZs are Chan May-Lang Co, Southeast Nghe An and Hon La.
Regarding tourism development, the north central region can be divided into two sub-regions based on the allocation of natural resources.
The first, stretching from Thanh Hoa to Ha Tinh province with Vinh city as its centre, is home to beautiful beaches, such as Sam Son, Cua Lo, Xuan Thanh and Thien Cam, to name just a few, where a wide range of tourism services can be developed, such as eco-tourism, cruising, resorts and adventure tours.
The second sub-region, home to three World Heritage sites including Phong Nha-Ke Bang, encompasses provinces from Quang Nam to Thua Thien-Hue with the ancient imperial city of Hue as the centre.
Many nice beaches are also located here, such as Nhat Le, Cua Tung, Cua Viet, Thuan An, Canh Duong and Lang Co.
To reach their sea and island–based economic development goals, localities in the region are asked to develop specific plans to implement the Government’s policies in this field in accordance with their own real situation.
They also need to strengthen management agencies and create links between themselves and central ministries and industries.
Consumer Businesses focus more on convenience stores
Many enterprises under the Price Subsidized Program prefer to focus on convenience stores, in the hope of changing traditional shopping habits of the Vietnamese people.
There are two kinds of convenience stores in the country-- stores for just food items or for other consumer commodities. Domestic firms rule in the first kind.
Saigon Co-op was first established on December 27, 2008 at Phan Van Tri Condominium in District 5 and until now, has expanded upto 61 stores in the City.
Co-op stores are very popular with consumers, especially in fresh food items.
After its establishment, Saigon Co-op targeted working women who need to look after their homes as well after work. They need to buy fresh and safe food items for quick and easy cooking at home, as traditional markets cannot satisfy this requirement.
Later, Saigon Co-op in coordination with the Women’s Union and Youth Communist Union took the Price Subsidized Program to distant and remote districts.
The City has seen the growth of more convenience stores of SatraFoods since 2011 and Vissan has expanded to now 130 stores and plans to sell 50 percent of its own products. Until now, SatraFoods has 22 convenience stores in HCMC.
Nguyen Thanh Nhan, Deputy Head of Saigon Co-op, said since convenience stores need a smaller area and can locate in residential blocks; these easily attract lots of consumers. Convenience store chains have seen 100 percent growth.
However, Saigon Co-op, SatraFoods and Vissan all said they are facing difficulties in finding premises. In addition, firms have to pay for premise rents and décor if in suburban districts, resulting in long payback period and low profits that discourage companies to enter the field.
Banks source M&As to boost strength
Banks are mulling tie-outs with foreign strategic partners to foster financial wealth and sharpen competitiveness.
Ho Chi Minh City-based Sacombank- a leading joint stock commercial bank in the country- is scaling up efforts to source a suitable foreign partner to come up with its second phase capital hike plan, slated to finalise in 2013’s fourth quarter.
In the recent past, Sacombank was approved by the State Bank to hike its chartered capital in the first phase in 2013 from VND10.74 trillion ($511 million) to VND12.425 trillion ($591 million), up 17 per cent through issuing shares for paying dividend in 2011 and for distributing to top executives.
“The strategic foreign partner is a wealthy financial group,” said Sacombank chairman Pham Huu Phu.
Sacombank, however, still withheld information about this foreign partner.
Sacombank once had foreign strategic partners- ANZ Bank which retained around 10 per cent stake and DragonCapital over 7 per cent. However, ANZ had divested from Sacombank and sold its stake in the bank to another local bank-Eximbank.
Dragon Capital- a leading institutional investor in the Vietnamese stock market- also made exist from Sacombank several years ago.
This time, Sacombank envisaged selling 20 per cent stake to the foreign strategic partner.
The leader of a joint stock commercial bank, also based in Ho Chi Minh City, unveiled this bank would complete selling part of the chartered capital to a foreign strategic shareholder, possibly a financial group coming from Japan, right in this year.
“The two sides have completed negotiations and are setting remaining procedures for submission to competent government agencies. Besides, in the upcoming time our bank would also open a branch office or forming a banking joint venture in Myanmar,” said the leader.
Hanoi-based DongA Bank is also under negotiations to find foreign strategic partners, according to a bank executive.
The bank’s management, however, said selling stake to foreign partners would take place in a suitable time to ensure existing shareholders’ benefits since the market is still fraught with hardships with many bank shares falling below their par value.
Former State Bank Governor Cao Si Kiem said banks should consider teaming up with foreign partners only when analysis revealed the deals could be beneficial.
“Banks need to find suitable partners, but not in haste. Suitability in vision and strategic orientation etc. between cooperative parties is a prerequisite for effective operation. We source opportunities to leap faster but banks could still handle their growth plans effectively without support from the strategic partners,” Kiem said.
PPP deal preferred for airport
South Korea’s Joinus Company Ltd has proposed switching from a build-operate-transfer model to a public-private-partnership investment approach for the northern province of Quang Ninh’s Van Don international airport project.
According to the local people’s committee the investor and the local authorities discussed the advantages of the public-private-partnership (PPP) model over the build-operate-transfer format two weeks ago.
Nguyen Van Thanh, Vice Chairman of Quang Ninh Provincial People’s Committee, said the Korean investor believed the airport project would be more feasible if it was conducted under the PPP model in which the state would also be liable for a share in the risk.
“We haven’t yet replied to Joinus, as the decision as to whether it becomes a PPP project would need to be discussed with relevant governmental agencies and receive a stamp of approval from the prime minister,” said Thanh.
However, it would not be surprising if the Joinus proposal was accepted as the Vietnamese government previously earmarked aviation infrastructure as a priority sector for applying the PPP model.
Van Don international airport would represent a key infrastructure project in the Quang Ninh Economic Zone. Located near the world heritage Halong Bay, the Vietnamese government has long regarded the site as an ideal location for the development of a trading and high class tourism hub, helping develop the key northern economic region.
Once completed, it would become the third international airport in Vietnam’s northern region, joining Noi Bai in Hanoi and Cat Bi in Haiphong.
The project was initially proposed by the US-based Rockingham Asset Management LLC, but the firm had to withdraw from the project because of the global financial crisis.
Two years ago, Joinus announced that it had replaced Rockingham. The Korean investor also proposed to build a $1.5-2 billion motorway connecting Quang Ninh’s Halong city and Van Don island.
In February 2012, the South Korean firm signed a memorandum of understanding with Quang Ninh Provincial People’s Committee, underlining its commitment to invest in the projects.
At the meeting with Quang Ninh Provincial People’s Committee two weeks ago, Thanh confirmed that the investor had sent the local authorities plans for project funding and predictions of aviation transport demand in the province.
Thanh believed the airport would be a driving factor in the development of the Quang Ninh Economic Zone as many investors were waiting for the airport to go ahead before committing funding to the zone.
Positioned on the border of China’s Guangxi province and bordering Haiphong city, Lang Son, Bac Giang and Hai Duong provinces, Quang Ninh is emerging as an attractive destination for investment in the north of Vietnam.
Gtel Mobile’s growth stutters
Telecommunications service provider Gtel Mobile is scratching its head over its growth strategy.
Last year saw Vietnam’s biggest merger and acquisition deal in telecommunications sector in which Vietnam’s Ministry of Public Security purchased a 49 per cent stake worth $45 million from a joint venture between Russia’s VimpelCom Group and Vietnam’s Gtel Mobile Company.
This deal was expected to shake up the Vietnamese telecommunications market, and Gtel Mobile was predicted to be strong enough to compete with two state-run giants Viettel and VNPT.
However, Gtel Mobile’s operations have witnessed almost no development since then, despite major efforts.
Gtel Mobile announced its new Gmobile brand name several months after the deal was done, replacing the previous Beeline brand, with a new slogan Thinking New and Doing New.
However, since then Gmobile’s subscription base has failed to increase to the predicted five million targeted by Gtel Mobile’s leaders.
The network’s subscription is currently around 3.2 million users.
At present, Gtel Mobile still has to rent Vinaphone’s wavelength to offer calls and text services and other services in localities beyond Hanoi and Ho Chi Minh City.
Additionally, Gtel Mobile only possesses a 2G system and has yet to be provided with 3G or 4G systems, while the firm’s rivals own far more advanced network infrastructure.
Gtel Mobile’s key strategy seems to be based on offering cheap-price fee packages and opening retail outlets showcasing and selling its products.
Previous major shareholder VimpelCom had already invested almost $500 million between 2008 and 2012, prior to the deal being inked.
The take-over was spurred by VimpelCom’s declining share value and lack of capital sparked by Europe’s economic crisis.
VimpelCom initially stated that after many years of investment it wanted to hold a majority stake in the joint venture. However, this was infeasible as Vietnam still bans foreign partners from holding a controlling stake in a telecommunications joint venture.
Moreover, Gtel Mobile’s frequency band also remain s less competitive. It currently has a frequency band of 1,800 MHz, while other operators have frequency bands of 900 MHz, 1,800 MHz and 3G.
Gtel Mobile’s chairman Nguyen Van Du said that during the establishment of the joint venture, the Vietnamese side had yet to invest any money into it. However, he claimed the Vietnamese partner possessed major assets and had a workforce of thousands of workers.
Bad debt eats away at ailing property sector
The true number of non-performing real estate bad debts are feared to be much higher than figures previously reported by credit institutions.
According to the National Finance Supervision Council (NFSC), real estate bad debts accounted for around 34 per cent of the sector's total outstanding loans.
However, State Bank of Viet Nam (SBV) statistics recorded that the sector's bad debt ratio stayed at just 5.68 per cent up to the end of May, representing a 0.41 per cent increase since the end of 2012.
Such figures from credit institutions did not reflect the reality of the property market, the NFSC claimed, adding that the bad debt ratio should be much higher due to the prolonged frozen market.
NFSC said credit institutions failed to accurately account a range of loans between 2010-12, leading to the flattering bad debt ratio figures.
The Council pointed out that many high-risk loans were designated as enterprise bonds, investment trusts or payable debts, instead of their true status as non-performing debts.
A December 2012 construction ministry report cited SBV figures to claim that total outstanding loans in the real estate sector as of October 31, 2012 were estimated at roughly VND207.595 trillion (US$9.886 billion).
Industry expert Nguyen Quang A calculated that using the SBV's ratio of 5.39 per cent, the real estate sector's non-performing debts stood at around VND12 trillion ($571.5 million) – nearly equivalent to half the Government's VND30 trillion ($1.42 billion) property market support package.
Using the NFSC's ratio of roughly 34 per cent, the expert estimated total real estate bad debts at VND76 trillion ($3.62 billion) – more than double the value of the support package.
Taking into account high real estate inventories and the prolonged stagnant market, the latter figure sounded more reasonable, he said.
Experts also urged the Government to apply more precise and consistent figures which reflected the true situation of the property market as base to form policies from.
Real estate firms told to ‘find their own way'
Property companies must find their own way out of the property market slump, a conference heard in HCM City yesterday.
"This the first time that prices have fallen during a real estate market freeze," Dang Hung Vo, former deputy minister of Natural Resources and Environment, said.
"There is no common solution for all companies.
"To escape, they must find their own way and restructure to improve their competitiveness."
He listed some paradoxes that distort the market. He said the first was the mismatch between demand and supply.
While he and also other participants agreed that both demand and supply were high, he said unfortunately the supply was in the high-end segment and the demand in the low-end market.
The other problem is the big gap between incomes and average prices, he said.
"In Viet Nam, the average price of a house is about 25 times the annual income of people.
"In other regional countries, it is only two to four times."
He blamed this on bad management and tortuous policies.
There are multiple laws governing the real estate market — such as the Real Estate Law, Land Law, Housing Law, and Price Law – and they are often contradictory but not amended, he pointed out.
Another reason preventing a market revival is the lack of trust among potential buyers.
Huynh Anh Dung of the Leader Real International Training Academy said: "Customers wait for prices to fall further.
"Moreover, they do not trust developers since many could not keep their earlier promises."
To liquidate the huge housing inventory, he suggested throwing open the market to Viet Kieu (Overseas Vietnamese).
"Many other countries allow this and so should Viet Nam," he said.
Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR