Vingroup secures loan from international market

Vingroup Joint Stock Company has announced that it has completed the negotiation and signing of an international syndicated loan agreement worth US$100 million.

Vingroup’s leaders said that the US$100 million loan will be disbursed in October with Libor interest rates of 5.5% per year and will be paid gradually for three years. The loan  aims to develop Vingroup’s future real estate projects.

Credit Suisse AG (Singapore), Maybank Investment Bank Berhad and Deustche Bank AG (Singpaore) will arrange the loan.

With the loan, Vingroup will become the first property company in Vietnam to approach the international syndicated loan market successfully. Earlier, Vingroupwas the first Vietnamese business to issue the US$100 million international convertible bond in 2009.

Last year, Vingroup issued US$300 million convertible bonds. In May 2013, Vingroup and investment fund Warburg Pincusofficially signed an agreement under which Warburg Pincus will invest US$200 million to buy 20% of shares from Vincom Retail, a branch of Vingroup which aim to possess, manage and develop world class trade centres.

G-guaranteed bonds issued to help Vinashin

Vietnam will start listing Government-guaranteed bonds at the Singapore Stock Exchange from October 11 to help the troubled Vietnam Shipbuilding Industry Group (Vinashin) repay its creditors.

The bonds, issued as global fund certificates, have been registered at the New York Stock Exchange, it was reported at a press conference co-hosted by Vinashin and the Finance Ministry’s Debt and Asset Trading Corporation (DATC) in Hanoi on October 10.

The move will help the State-run Vinashin cover a foreign loan worth US$600 million, which the chairman of its board of directors Nguyen Ngoc Su said is crucial for the group to repay other foreign debts, allowing it to speed up the badly-needed restructuring of the company.

The bonds will be issued for 12-year terms with an annual interest rate of 1 percent.

The reform of Vinashin was ordered in 2010 after Government inspectors uncovered the group’s financial malpractices. At the end of 2009, the company was more than VND86.7 trillion ($4.1 billion) in debt.

Ca Mau fishery sector moving towards sustainable exploitation

The Ca Mau Agriculture and Rural Development Department has asked all local ship owners not to discharge oil and waste or over exploit aquatic products, said Director Le Van Su.

The department has also asked fishermen not to throw dead fish or exploit aquatic products within three nautical miles from the coastline in an effort to help the provincial aquatic sector develop in a sustainable manner.

Su noted that in the long run, the province will also have a comprehensive fishery development plan and set up fishery co-operatives.

Ca Mau currently has 4,400 fishing vessels with more than 20,000 fishermen exploiting 200,000 tonnes of seafood annually.

Fishing is an important industry in the southernmost coastal province of Vietnam.

Dong Nai imports another 1,500 cows from Australia

Trung Dong Limited Company received 1,500 cows imported from Australia on October 9 in Dong Nai province.

All numbered on their ears by the Australian Veterinary Association.

The local veterinary agency will continue to monitor and test epidemic diseases and transport move them to a farm in Bien Hoa City.

This is the second shipment ordered by the company to meet the consumer demand for Australian high-quality meat at suitable prices.

The first shipment of 1,500 cows worth US$3 million from Australia came in 2012.

Power grid connects Vietnam, Laos, Cambodia

Deputy Prime Minister Hoang Trung Hai has approved a 500kV power transmission line project to bring 80% of hydropower supplies from the southern part of Laos and the northeast region of Cambodia to Vietnam.

The Hatsan-Pleiku project has a total investment of US$95.47 million, of which US$79.17 million in Official Development Assistance (ODA) is sourced from the Asian Development Bank.

As part of Vietnam’s 2011-2020 electricity development plan, the line is expected to provide high-quality and safe electricity for the country and the Central Highland region in particular, creating a premise for connecting the three nations’ electricity systems.

US$2.5 billion shrimp export target within reach

Vietnam’s shrimp exports are expected to fetch US$2.5 billion by the end of 2013, surpassing its set target of US$2.3 billion, said VASEP Secretary General Truong Dinh Hoe.

Hoe made the prediction during a recent interview granted to a VOV reporter.

He praised Vietnam’s great efforts in combating shrimp epidemics and increasing seafood output, thus generating more opportunities for shrimp exports.

In the past nine months, seafood exports were estimated at US$4.6 billion, including nearly US$2 billion worth of shrimp. This was in part attributed to the US Department of Commerce (DOC)’s confirmation that Vietnam did not dump shrimp products on the US market, Hoe said.

According to the VASEP Secretary General, Japan had remained Vietnam’s largest shrimp importer over the years.

However, he warned local businesses should get updated on the potential of supply in the world.

Previously, Thailand planned to reduce its seafood output by 50% but later readjusted the figure to around 30%. Therefore, Vietnamese businesses should be more cautious about negotiating with trade partners in order to ensure their stable supply, Hoe suggested.

He noted that over the past two or three years, some traders have bought a large volume of raw shrimps export to China, making it difficult for local shrimp producers to purchase raw materials when farmers prefer selling their products to traders than getting involved shrimp exports to the Chinese market.

Hoe revealed that General Department for Aquaculture will go ahead with the white-legged shrimp cultivation programme ahead of time to deal with the shortage of raw materials.

Vietsovpetro may escape back tax threat

The Vietnam-Russia petroleum exploration and production joint venture Vietsovpetro may not be required to pay back taxes on machinery and equipment imports between July 2007 and the end of 2008.

Recently the Ministry of Industry and Trade (MoIT) agreed with the Ministry of Finance’s (MoF) proposal to not require the oil company to pay back taxes on equipment imports for its petroleum extraction Block 09-1.

The MoIT defended the idea by saying that it facilitates and supports the operation of Block 09-1 as per the spirit of cooperation for petroleum exploitation in Vietnam’s southern continental shelf signed in 1991 and again in 2010 between the two governments.

Clause 8 in the 1991 agreement stipulates that Vietsovpetro is exempt from paying customs duties on bringing in and sending out materials, equipment and goods to serve the joint venture’s major operations.

Clause 7 in the subsequent 2010 agreement also spelled out the same content.

However, it also required that materials, equipment and goods already in the domestic market that change ownership would incur customs duties and relevant taxes as per Vietnamese law.

In reality, current regulations governing customs duties are not clear and imports into Vietnam are generally subject to three different taxes – import duties, value added tax (VAT), and special consumption tax.

Another issue is that the agreement was inked in 1992, while the law on VAT came into force in 1999 which can be confusing to customs authorities in calculating applicable taxes.

The potential back taxes are in the millions of US dollars.

Also important is Vietsovpetro claiming difficulty in interpreting and following this year’s amended tax law.

The joint venture said the annual financial plan agreed to by both sides had Vietsovpetro retaining 35 per cent of exploited crude oil to cover their operating costs.

The company signed a package contract with PetroVietnam Oil Corporation (PVOil) under which the latter would act on behalf of Vietsovpetro in negotiating and signing agreements with purchases and resolving payment issues, including tax. For its services PVOil receives $0.90 for every tonne of oil the joint venture exports and the local enterprise does not currently have the available capital to immediately pay export duties and taxes for crude oil export as required by the amended tax law.

An MoF circular guiding taxes on oil and gas exploration and production by Vietsovpetro at Block 09-1 under the 2010 agreement said the deadline for paying crude oil export duties is 35 days after completing customs procedures.

Vietsovpetro has proposed the MoF allow it to follow tax obligations set forth in the circular and the 2010 agreement rather than this year’s amended tax law.

How consumers adjust their grocery buying habits in response to rising food prices

Seventy per cent of Vietnamese consumers say rising food prices will impact their choice of grocery products, according to a new study by Nielsen, a leading global provider of information and insights into what consumers watch and buy.

The Nielsen study shows that in-home food products were not the only areas of spending impacted by rising food prices. A notable area where 66 per cent of Vietnamese respondents would change their spending include dining out; buying new clothes saw 63 per cent. Meanwhile, nearly half of consumers said they will change spending on recreation, entertainment and vacations. 37 per cent said communications services.

When asked about likely spending changes to specific food categories, 13 per cent of respondents indicated they would buy more fresh or frozen fruits and vegetables. 9 per cent said they would stock up on packaged cereal products. More than half of respondents had no plans to change their spending on staple categories like meat and poultry, fish and seafood and dairy products. 43 per cent said they had no plan to change their spending on bread, bakery goods and organic products.

However, nearly two-thirds of all respondents said they would buy fewer products such as candies, cookies and other sweets, carbonated beverages, alcoholic beverages, prepared meals, chips and other snack foods.

“Traditional trade is still dominant in many countries, and in these markets, commodity purchases are part of consumers’ daily lives,” said James Russo, senior vice president of Global Consumer Insights at Nielsen.

“The challenge for marketers will be introducing new brands and products when food inflation is suppressing the ability of these consumers to grow their shopping baskets,” he added.

The rising food prices also impact where consumers shop. When asked about how rising food prices may affect where they purchase grocery items, almost one-third of Vietnamese respondents indicated they would grow their own food or shop more at de-stocking stores and discount stores and more than half would continue shopping at fresh food markets. Supermarkets were most affected as 47 per cent of respondents admitted to shopping less in these establishments, followed by convenience stores and outlet stores.

“When it comes to rising food prices, nearly everyone feels the pain,” said Russo.

“Determining which product categories have staying power and which are more vulnerable is critical as consumers make trade-offs and tough in-store decisions. “Likewise, as consumers continually look for ways to stretch their budgets and find the best value for money, marketers need to identify retailers that will satisfy the unique demands of consumers around the world,” he continued.

During times of rising food prices, 40 per cent of Vietnamese consumers surveyed said they would use social media to find specials. Thirty-five percent of respondents said they would stock up on regular use items when they are on sale, and 34 per cent said they would purchase only sale price items.

“Understanding brand position within the category demand landscape allows for a tailored food inflation response that will protect the most profitable shoppers with optimum efficiency,” said Russo. “While the strategic response to consumer buying behavior may be consistent across regions, market-by-market tactical variations are essential.”

Bank rate review

As bank credit is showing signs of falling, many banks are trying to lure depositors with higher than regulated interest rates.

By the end of August 2013 banking sector credit rose to 6.45 per cent with an annual target of 12 per cent. As of September 20, however, it had retreated to 6.05 per cent.

“Many firms opted to not take out additional credit after paying back previous loans. In one case a business who paid back a $47.6 million loan only took at half that amount for the next period. In my opinion, bank credit will only grow by 9 per cent this year,” said deputy general director of Vietnam International Joint Stock Bank (VIB) Le Quang Trung.

State Bank of Vietnam (SBV) and Ministry of Planning and Investment figures also indicated credit falling in September.

A transaction bureau director at a Hanoi commercial joint stock bank said, “In the latter part of previous years, many banks were focused on getting deposits. They are recently trying to recover loans and boost lending. Firms are not being influenced by low-cost lending because of poor sales and stagnant production.”

As banks struggle to boost lending many are getting depositors thanks to higher than regulated interest rates.

The cap the rate for one month to six month deposits is 7 per cent though some are offering 7.5 to 8.5 per cent on one to three month term deposits.

Economists are explaining the shift as three potential scenarios.

The first is considered a very unlikely scenario where banks balance their lending and deposit ratios.

The second is that banks with high bad debt ratios are hiking their mobilising rate to ensure liquidity by year end.

Third is people are becoming more informed about banking and the lack of stability of some local institutions and opting for those that are strong. This is pushing smaller banks to raise their rates to gain market share.

First active open fund gets State backing

The Bao Viet Equity Dynamic Open Ended Fund (BVFED), managed by Bao Viet Fund Management Company, was granted a licence earlier this week, the State Securities Commission announced on Tuesday.

It is the first open-end fund operated as an active index fund.

For this type of fund, initial investment proportions are based on a benchmark index and the fund manager proceeds to add higher performing stocks that are unrelated to the underlying index.

The fund manager will then actively manage the composition of these non-benchmark stocks in order to earn yields that exceed the benchmark index.

BVFED bases its portfolios according to the VN30, which represents the HCM City Stock Exchange's 30 biggest stocks.

It will actively adjust the proportion of the assets to capture opportunities in both the stock markets and fixed interest rate market (fixed interest rate assets include bonds and deposits).

BVFED is also Viet Nam's fifth open-end fund. Pham Ngoc Quang, vice head of Bao Viet Fund's product development division, said that it would invest in stocks and bonds. The proportion of stocks would be capped at 80 per cent of the portfolios, while bonds would be capped at 95 per cent.

BVFED plans to raise funding first from members of Bao Viet Holdings Group (BVH), then investors from outside the group as well as Japanese investors. It must raise minimum initial capital of VND50 billion (US$2.3 million).

On Tuesday, the commission also approved converting the Vietnam Securities Investment Fund (VFMVF1) into an open-end fund.

Lenders still optimistic for fourth quarter

Credit institutions were expecting brighter business prospects in the fourth quarter, the State Bank of Viet Nam (SBV) announced on Tuesday.

SBV came to the conclusion after polling all domestic and foreign lenders in the country. Ninety-one of the 124 organisations responded to the quarterly survey.

"Although business improvement wasn't up to expectations in the third quarter, credit institutions hope there will be more positive changes to foster loan growth and profits during the final months of the year," the central bank said on its website.

The lenders said declining demand for loans remained the biggest obstacle for credit growth targets this year.

Most expected deposit and lending interest rates for dong loans to stay stable or ease by one percentage point by year-end.

They said lending for prioritised sectors (agriculture and rural areas, export, support industries, and small- and medium-sized enterprises) would continue to be in focus.

More than 50 per cent said they had increased consumer lending in the third quarter or would accelerate it in the fourth.

About 36 per cent said they had focused or would focus on lending to foreign-invested enterprises, while about 40 per cent said they had or would cut property loans.

More than 80 per cent said they would maintain or increase the number of employees in preparation for new opportunities when positive economic changes arrived.

The State Bank said, although credit institutions didn't expect any breakthrough during the remainder of the year, most still hoped for better performances in view of national efforts to prop up production and business activities and resolve bad loans.

VN needs to tackle bad debt

The task to reduce non-performing loans (NPLs) and increase charter capital as well as complete basic ownership structure of weak credit institutions would be given priority in the period of 2013-14.

The advice was made by Le Xuan Nghia, member of the Government Advisory Board and former deputy chairman of the National Financial Supervisory Committee.

Addressing the conference entitled "Movements of macro-economy and prospects of Viet Nam's bank restructuring process" held in Ha Noi yesterday, Nghia said the basic task for bank restructuring last year was to fundamentally ensure liquidity and handling weak credit institutions.

"After two years of restructuring, the system's liquidity was ensured. The State Bank of Viet Nam (SBV) has partially resolved NPLs," he said.

He added that the central bank has handled eight out of nine weak credit institutions.

However, he said large and prolonged cross-ownership hindered the improvement of governance and risk management in a number of commercial banks.

"The reason was due to lack of transparency about the origin of contributed capital and sanctions to thoroughly handle ownership matters," he said.

He proposed to strengthen supervision and discipline and transparency of the banking system in general and sales of debts in particular.

It is suggested to relieve concerns of banks and enterprises when selling NPLs to the Viet Nam Asset Management Company (VAMC).

The country should have more financial sources besides special bonds to handle NPLs. For example, government bonds or sale of State assets including divestment, sales of State enterprises and real estate to provide capital support for VAMC.

Sharing the ideas, ADB's chief economic Dominica Mellor said the solutions for banking restructure in Viet Nam has been on the right track.

However, bad debts have been an obsession for the economy and needed a high level of consensus from the Government and authorities.

Dominic said implementing NPLs handling should be rushed, as NPLs would cause instability and risks for the economy.

The process is faced with challenges due to a shortage of safe financial resources, an underdeveloped NPLs trading market, lack of legal framework for foreign investors to safely enter the market, and cross ownership.

Tran Phuong, the Bank for Development and Development of Viet Nam's deputy general director, said figures released by credit institutions showed that the NPL ratio was 4.58 per cent at the end of July, rebounded after two consecutive months, and increased 0.28 per cent compared with the beginning of the year; and the scale of the bad debt for the whole system requires a huge resource for treatment.

Phuong said the more extensive economic integration process of Viet Nam together with the participation in Trans-Pacific Strategic Economic Partnership Agreement (TPP) and joining in the ASEAN Economic Community (AEC) would bring huge benefits for Viet Nam on trade, investment and technology, but also the requirement of restructure, enhancement of transparency and competitive capacity of the economy would become more urgent for the effective integration process.

Vo Tri Thanh, deputy director of the Central Institute for Economic Management (CIEM) agreed, saying that Viet Nam's financial sector shared several similarities with that in ASEAN and East Asia in terms of bank-based system, underdeveloped and thin bond market.

"Viet Nam can learn many things from experience in the region. In the short-term and medium-term, the key is to restructure the banking system. In longer term, it is to have a more balanced financial system, aiming on development of a well-functioning bond market," Thanh said.

Experts said evolution of the economy has a significant effect on banking activity. Especially in transforming an economy, as in Viet Nam credit channels through banks has been the main source supplying funds to the enterprises.

Businesses should implement drastic restructuring including strategy, finance, corporate and governance. They should also maximise IT application and improve business analytic.

VN trade poised for late surge

Having stuttered in the year's first half on subdued global demand, Viet Nam's trade flows are expected to gradually pick up in the second half of 2013, HSBC has said in a report.

Nearly half of the country's exports went to advanced economies, a higher proportion than for Indonesia, Malaysia, and Bangladesh.

This should help Viet Nam recover since demand was accelerating in the advanced economies, particularly in the US, its largest export partner.

Clothing and apparel was its largest export sector, helped by wage competitiveness; this sector would contribute 20 per cent of the increase in exports until 2020.

Since signing a bilateral trade agreement with the US in 2000 and joining the WTO in 2007, Viet Nam had become the second largest supplier of clothing and footwear to the US behind China.

Exports of clothing and apparel to the US and Europe were expected to grow at a double-digit pace until 2015.

As the middle class expands, Viet Nam's imports would become increasingly consumer-orientated.

Viet Nam was located in the world's most dynamic trading region and had established a strong foothold in clothing and apparel and telecom.

The demographic trend was very favourable and a long-term growth of more than 5 per cent annually was anticipated.

A rising middle class across Asia would help drive strong trade flows from Viet Nam to the rest of emerging Asia.

The ASEAN-China Free Trade Area (ACFTA) would pay dividends, with Viet Nam's exports to the rest of Asia (excluding Japan) growing by more than 15 per cent per year in 2013-20.

China was expected to be Viet Nam's fastest growing destination for exports through 2030, and India and Bangladesh would be Viet Nam's fastest growing import partners with industrial machinery making up a lion's share of their imports.

Trade between Viet Nam and Malaysia would also become increasingly important. Malaysia's fast growth in the same headline sectors, notably industrial machinery and ICT equipment, would contribute to exports from the country to Malaysia growing by more than 15 per cent per annum in 2016-30. But the US was expected to rank as Viet Nam's second largest export partner by 2030 behind China.

Though the country's infrastructure was still poor, progress was being made, with its rating in HSBC's Asia Infrastructure Measure (AIM) improving from under 0.28 in 2000 to 0.37 in 2012. •

This year more than 40 per cent of imports would be infrastructure-related and by 2030 this share will rise to around 60 per cent.

Trade with EU on the up

The Ministry of Industry and Trade estimates two-way trade between Viet Nam and the EU will surpass US$40 billion by the end of 2013, a 21-per-cent jump on last year.

Viet Nam's exports will account for $28.6 billion of the total, while imports will make up $11.5 billion, meaning the nation's trade surplus will stand at over $17 billion.

The country's key export market in the EU include economic heavyweights Germany, the UK and France.

So far this year, Viet Nam has exported $20 billion worth of goods to the bloc, while imports stand at $8.5 billion.

Bright forecast for trade links between Viet Nam and Japan

Trade and investment relations between Viet Nam and Japan will see strong growth in 2014 and 2015, Ho Thi Kim Thoa, deputy Industry and Trade minister, said at a forum held yesterday in HCM City.

The forum was organised by the city's Investment and Trade Promotion Centre in collaboration with the Japan External Trade Organization (JETRO) and Japanese Business Association of HCM City.

Thoa said the Viet Nam-Japan Economic Partnership Agreement that took effect in 2009 has reduced tariffs, contributing to an increase in trade, adding that over the next 10 years, under the agreement, tariffs would gradually decline to zero.

Up to 95 per cent of Viet Nam's exports to Japan will enjoy tax reductions, while the corresponding figure for Japan will be nearly 88 per cent. Preferential tariffs will be reserved for seafood, farm produce, textiles and garments, steel, chemicals and electronic spare parts.

"Japan – Viet Nam economic, trade and investment co-operation is a co-operation model between a developed industrial country and a dynamic developing country, which helps each other, creating a win-win situation," Thoa said.

Bilateral trade between Viet Nam and Japan has risen by an average 20 per cent per year since the agreement took effect in 2009, reaching $24.7 billion in 2012.

In only eight months, bilateral trade turnover reached $16.3 billion. Of that figure, Viet Nam's exports to Japan totalled $8.8 billion, with the main products being furniture, seafood, steel, rice, fruit and vegetables. By August 20, Japan ranked first in total registered investment capital ($33.06 billion) and third in total number of projects (2,029) after South Korea and Taiwan. Japan's investment projects are mainly in the manufacturing sector.

Japan is the biggest ODA supplier to Viet Nam. In the past five years, it has made major contributions to develop Viet Nam's electricity industry with 12 ODA projects worth $5 billion.

Yasuzumi Hirotaka, executive director of JETRO in HCM City, said labour costs in Thailand and China had rocketed in recent years, and that Japanese enterprises had decided to move production factories to other countries, including Viet Nam, since they wanted to disperse risks in production and business.

"Choosing Viet Nam as a key investment destination, enterprises want to take full advantage of benefits from the Trans-Pacific Partnership (TPP) agreement when it is signed," he said, adding that Japanese as well as Chinese and South Korean investors in the fibre sector had begun shifting production facilities to Viet Nam. Viet Nam has major advantages, including cheap labour costs and abundant human resources and a stable political situation. It is located in a key convenient transport location.

Hirotaka said that Japanese businesses expected to increase their competitiveness in price by purchasing locally made raw materials and parts to partly cut down expenses.

However, the ratio of local supply is only 28 per cent, while it is 53 per cent in Thailand. Development of support industries has become increasingly important. He urged the Vietnamese Government to develop support policies, including low interest-rate loans, to encourage domestic businesses to invest in the support industry.

Nguyen Thi Hong, deputy chairwoman of the HCM City People's Committee, said Japan was the fifth largest investor in HCM City with 570 projects worth $3 billion.

Japan is also a leading export market of HCM City. In the first nine months, export turnover of HCM City to Japan reached $1.5 billion.

Legal framework prevents foreign investors from buying Vietnam's bad debts

There are many foreign investors waiting to buy bad debts from the Vietnam Asset Management Company (VAMC) but they are challenged by complicated procedures.

On October 9, former the deputy head of National Financial Supervisory Commission, Le Xuan Nghia, discussed the problem at the conference 'Movements of macro-economy and prospects of Vietnam's bank restructuring process' held by BIDV Bank.

VAMC is expected to heighten transparency of bad debt trading and create more access for foreign investors to enter Vietnam's market. According to Nghia, the establishment of VAMC was delayed because they had many opposing opinions about how to deal with bad debt. "It was a huge undertaking by both the state bank and related parties in order to establish VAMC." he said.

When the plan was proposed, the government was worried that they would be unable to attract foreign investors. But in the month that VAMC was established, the number of foreign investors who wanted to participate in Vietnam's bad debt trading was much higher than expected.

"Even Blackstone Group L.P., an American-based multinational private equity firm, said they hoped to buy products worth over USD1 billion." Nghia said. "Until the end of 2013, VAMC can buy VND50-60 trillion of bad debts if the inflation rate is stable."

Currently, a huge number of banks want to sell their bad debts but VAMC only has 50 employees. After selling their bad loans, these credit institutions may use VAMC-issued bonds to ask banks to lend them money.

This could affect the monetary policies, so VAMC has to work carefully with the state bank. They cannot buy debts too quickly or it might cause inflation. In addition, many foreign investors have raised concerns over Vietnam's complicated procedures.

Simon Andrews, IFC Regional Manager for Vietnam, Laos, Cambodia and Thailand, said investors are challenged by Vietnam's legal environment and one of the biggest challenges is they cannot own land in Vietnam. They cannot buy debts if they do not have rights over the debt collateral.

Economist Phan Thi Thu Ha also said, "If the government were to issue a legal framework for foreign investors to buy bad debts in Vietnam then we may not need VAMC." According to Ha, bad debts are estimated to be around VND256 trillion, accounting for 10% of Vietnam's GDP. Most of bad debt is from real estate projects and losses caused by failing state-owned firms

Vietnam to foster Good Agricultural Practice

Vietnamese farmers should follow Vietnam Good Agricultural Practice (Viet GAP) in order to improve and expand their business.

The problem was discussed at a seminar on market co-operation for Viet GAP Standard products, held by Metro Cash and Carry Vietnam, on October 8 in HCM City.

It's years since the implementation of Viet GAP and Global GAP certificates in Vietnam, but the aquaculture sector only used Viet GAP for whiteleg shrimp, Asian tiger shrimp and Tra fish.

Le Bao Ngoc, CEO of VinaCert-Control JSC, said, by following Viet GAP standards, farmers will make a good impression with importers. However, Ngoc also raised the concern that Vietnam has many farm households but these households may not be able to meet Viet GAP standards. "Will VietGAP increase the prices? If VietGAP aims to help farmers expand their domestic market business then where's the support and the advertising?" Ngoc said.

Tran Van Lam from Vietnam Farmer's Union, in the southern region, agreed with Ngoc. He went on to say if Viet GAP standard products can not find a place in supermarkets, they will have to be sold in normal markets with higher prices than other products. "How can we make consumers believe that this is a genuine VietGAP standard product and ask them to pay a higher price for it?" he said.

In the provinces of Ben Tre and Tien Giang, several households have given up on Viet GAP because of the extra expenditures involved, so they need a secure outlet for their products. For example, Metro can inform farmers of the number and kind of products they'll need in the next year so farmers can collaborate to set up a plan to meet these requirements.

Answering the questions, Pham Anh Tuan, deputy head of the Directorates of Fisheries, said that GAP helps to develop  sustainable development and a chance for farmers to enter bigger markets.

Currently, there are many standards for food products so producers only need to fulfill consumers' requirements. In the near future, it will be necessary for the various standards-makers to cooperate with each other. For example, if a producer already meets all requirements for VietGAP standards and wants to gain a certificate from GlobalGAP, they'll only need to meet the additional requirements that VietGAP does not cover.

Truong Dinh Hoe, secretary of Vietnam Association of Seafood Exporters and Producers, said, " VietGAP needs to be the basic, the mandatory requirement for all aqua-products exporters. But in fact, it takes a lot of time to grant a certificate. Last year, only seven or eight companies asked for VietGAP certificates yet none has been given."

Experts affirmed that not only will farmers not have to bear extra expenditures, they'll be able to save some money. Nguyen Huu Dung from Vietnam Accreditation Body said, farmers in Dalat implemented VietGAP 10 years ago and they've saved a lot of money.

Philipe Bacac, head of Metro Cash and Carry Vietnam also agreed with the experts and said farmers will have stable outlets for their products too.

Vietnam-Japan trade turnover at US$16.3 billion in first 8 months

Speaking at a forum on October 9, co-organized by Investment and Trade Promotion Center of Ho Chi Minh City (ITPC) and Japan External Trade Organization (JETRO), Ho Thi Kim Thoa, Deputy Minister of Industry and Trade, informed that Vietnam-Japan trade turnover in first eight months of this year was at US$16.3 billion.

The Deputy Minister said that the Vietnam-Japan Economic Partnership Agreement in 2008 was a turning point in the history of Vietnam-Japan relations.

Japan is one of the most important economic partners of Vietnam and the first G7 country to recognize Vietnam’s market economy in October 2011.

Taking advantage of the Economic Partnership Agreement, the two countries have raised two-way trade.

In first eight months, trade turnover was at US$16.3 billion, of which Vietnam’s export turnover was at $8.8 billion and import was at $7.5 billion.

Trade surplus recorded was at $1.3 billion, an increase of 28.4 percent year-on-year.

In addition to highly competitive traditional commodities such as wooden items, arts and crafts, sea food, Vietnam also exported mechanical equipment, telephones, computers and cameras in large quantities to Japan.

Lately Vietnam has supplied agricultural produce to Japan as well.

In recent five years, Japan has become one of the leading investors in Vietnam. Japan’s registered investment in Vietnam is more than US$33 billion with 2,029 projects. Moreover, Japan has made great contribution to Vietnam’s electricity sector and many other significant industrial projects.

Hue craft villages given lifeline

Traditional craft villages in Hue get a chance to foster a revival during modern times thanks to a support package valued at VND9 billion (US$430,000) from the local budget.

The package will focus on improving capacity of the villages, including capacity improvement for managers and skilled workers, and innovation in product design to meet the needs of modern lifestyles.

The disbursement will include training programmes for new workers, aiming at creating jobs for at least 1,500 rural labours, and waste treatment in the craft villages.

Central Thua Thien Hue Province is home to more than 80 traditional craft villages, but few have thrived in the current of modern life. The Bao La bamboo knitting, for instance, is maintaining the traditional craft under the form of a cooperative.

Meanwhile, the Thanh Tien paper flower village has fewer than 10 households working in paper lotus production. The production depends on contracts with artisan Than Van Huy, who revived the craft in 2006.

Households in the Phuong Duc bronze casting are facing big losses at a time when their products are too heavy for tourists to take home, while locals prefer intricate bronze products from mainland China and Taiwan for their ritual purposes.

However, experts wonder if the package from Thua Thien Hue Province People's Committee will produce effective results.

Experts concerned about the effectiveness of the package say training more workers would be a huge waste at a time when products are not being sold in the market.

"The best is finding a stable market for Hue's crafts," said artisan Than Van Huy of the Thanh Tien paper flower village.

Huy suggested an investment in a demonstration house in the city, where visitors to the former royal city can watch artisans from the villages make their crafts. The demonstration would inspire tourists to buy the crafts as well, he said.

He also wanted roads leading to the villages upgraded since rural roads are inconvenient for visits.

Condos for lease still far from reality

Although the Ministry of Construction is seeking ways to help enterprises and individuals develop commercial apartments for lease, investors are still facing many difficulties, especially high lending rates they have to bear when building these condos.

The ministry is fielding suggestions for the draft Amended Housing Law to complete the legal framework for this sector. If the law is passed, local people who cannot afford to buy homes will be able to lease homes in long term while the realty market will have more products.

Le Hoang Chau, chairman of the HCMC Real Estate Association (HoREA), said that the national housing development target should include condos for lease at around VND2 million each unit a month to meet the demand of low-income earners. The products will also improve the property market and help local people adapt to home leasing culture like in other countries.

The draft law includes new articles that encourage enterprises to develop commercial condos for lease, and launching projects will various condo sizes onto the market to meet housing demands of residents. The new law will also protect legitimate rights and interests of investors and tenants during the validity of the leasing contract.

Enterprises joining this sector will enjoy incentives such as land use fee exemptions or reduction, corporate income tax exemptions, and preferential credits. In addition, investors are allowed to use the ground floor of apartment buildings for other services to compensate for management costs and sell homes after the leasing period.

In fact, investors have found commercial condos for lease unprofitable compared to direct sales that allow them to recoup capital quickly. As a result, just a few enterprises have joined the market.

Le Thanh Construction Company is developing Le Thanh Tan Tao project that will offer condos for lease in 15 years at VND240 million and in 49 years at VND350 million a unit. Located in HCMC’s Binh Tan District, the project is expected to supply the market with around 1,000 condos for lease.

Customers will pay VND50 million when signing the leasing contract. For the remaining, they will pay VND6 million each month without any interest rates.

Besides, C.T Group used to announce to develop condo project Bee Home in HCMC’s Tan Binh District for lease. However, none of these projects has been completed so far.

As a big city with a fast pace of urbanization and a large number of immigrant workers and foreigners, HCMC has never seen the housing demand subside. However, aside from small supplies from individuals, real estate investors have just focused on high-income customers, developing serviced apartments that are operated by foreign companies.

According market research enterprises, the city has nearly 4,400 serviced apartments of all types with rents averaging out at VND500,000 per square meter a month. With the total area of around 260,000 square meters, the market generates around VND130 billion each month, or over VND1.5 trillion every year.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said that it is necessary to set up the legal framework for condos for lease. However, building these apartments actually is not simple.

Despite laws and incentives, enterprises are still hesitant at investment as home rents cannot offset high lending rates of banks, Duc said. He said that it is ridiculous to compare home leasing ratios in other countries, at 70-80% of all home users, with Vietnam. This means that just a small part of residents of other nations buy homes while all Vietnamese people prefer to own a house.

The reason is that enterprises in those countries enjoy low lending rates at only 1-2% per annum while Vietnamese developers have to pay rates as high as 14-15% per annum. With the high rates, enterprises could not step in the market though they want to.

For instance, an enterprise borrows VND15 million to build a square meter of middle-class commercial condo. If it takes out bank loans at lending rate of 12% per annum, or 1% per month, it has to pay VND150,000 to the bank each month. Meanwhile, that square meter is leased at only VND80,000-100,000 a month, Duc explained.

Another problem is occupancy. If investors cannot lease all apartments of a project, losses will pile up. Besides, enterprises will have to pay maintenance fees and other fees during the leasing period.

To build commercial condos for lease, enterprises must find out capital sources at lending rate of around 5% per annum, Duc added.

Manufacturing sector trailblazes recovery

New Purchasing Managers’ Index figures show foreign invested enterprises are leading the way in the recovery of Vietnam’s manufacturing industries.

Nguyen Thi Nhan, a 25-year-old worker from Taiwanese-backed auto spare-part maker Chun Fun in Hanoi was pleased by the company’s decision in September to raise wages in recognition of increased productivity. “The company’s production has been far better than in previous months,” she said. Chun Fun is just one of many foreign invested enterprises (FIEs) in Vietnam that have been performing well, despite the on-going economic woes.

For instance, Chinese-backed cloth-maker Texhong Ngan Long reported that it had invested about $120 million in this year’s first nine months, with the figure for the whole of 2013 forcasted to reach $150 million. Since April 2012, when its $400 million cloth making factory in the northern province of Quang Ninh was licenced, the company has invested $160 million. The Singaporean-Vietnamese joint venture Cai Lan Oils and Fats Industries also reported that its investment capital in Vietnam would be $11.14 million this year. These companies all reported high export turnovers.

Also in Quang Ninh, VFM-Wilmar, a Singaporean and Samoan joint venture producing and exporting wheat, and Hong Kong-backed Loi Lai entertainment company planned to invest $15 million and $22.73 million, respectively, in their projects this year.

In another case, investors from the US, South Korea and China have invested more than $452 million in this year’s first nine months for their Mong Duong 2 power project, with this sum expecting to reach $641.8 million for the year.

The Ministry of Planning and Investment (MPI) reported that the majority of Vietnam’s local production and exports for the year to date were courtesy of FIEs. So far in 2013, FIEs’ investment capital disbursement has reached $9.62 billion, up 6.4 per cent on-year, and their newly registered investment capital has hit $15 billion, a 36.1 per cent on-year rise.

FIEs’ export turnover totaled $58.5 billion, accounting for 60.6 per cent of Vietnam’s total export value.

Nguyen Van Sang, a representative from South Korean-backed garment maker KJ Vina, said that his company’s total revenue for 2013 would increase 15-20 per cent on-year, thanks to a surge in exports to the US and Europe. “The local economy is bouncing back and foreign firms like ours are quite upbeat about Vietnam’s economy,” he said.

HSBC Vietnam last week announced that its Purchasing Managers’ Index – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – ascended to 51.5 points in September, from August’s 49.4 points, the banks best reading since April 2011.

Hi-tech waste-to-power plant eyed

A Japanese-Korean joint venture  is eyeing construction of a $200 million waste-to-power plant in Hanoi.

The Han & Han and Pedco joint venture would build a waste treatment and power production complex with the capacity to treat 75 tonnes of waste daily in Hanoi.

Nguyen Quang Huy, chief executive officer of FDI Vivina, which operates in events management, trade promotion and investment consulting services for foreign investors, announced the project.

He said the plant would use innovative US technology for the treatment of solid and liquid organic waste which would produce between 7-9 megawatts of electricity and also produce high-value by-products including raw materials for metal and glass.

This technology would treat 100 per cent of the waste. In addition, all green house gases and fumes would be controlled and cleaned before being emitted into the environment. The energy generated during the incineration process would be used to produce electricity.

The timely project comes in the context of Vietnam’s rapid urbanisation, which has led to ever-growing amounts of industrial waste, combined with growing concern about power shortages.

Vietnam currently produces three million tonnes of industrial waste. It is estimated that the total waste that Hanoi alone will need to treat up to 2.7 million tonnes per year by 2020.

In Southeast Asian countries, land fill sites are often used for the disposal of industrial waste, but there is a short supply of available land in Vietnam. Power generation from waste is likely to become increasingly popular in the region and would also meet Vietnam’s growing power demands according to Japan’s New Energy and Industrial Technology Development Organisation (NEDO)’s website.

Late last month, another waste-to-power plant kicked off in Hanoi’s Soc Son district developed by the Urban Environment Company and NEDO with the total estimated investment capital of nearly $30 million.

Last year, Australia’s Trisum International announced that it would pour $400 million to build a waste-to-power plant in Ho Chi Minh City.

Vietnam is calling for investments in modern waste treatment technology, particularly rubbish incineration for power generation. However, none of them will come online due to the absence of a regulatory framework and low retail price of electricity.