VCCI accused of misusing state budget funds

On July 10, the government inspectorate announced that the Vietnam Chamber of Commerce and Industry committed wrongdoings when they made bank deposits totaling over VND9.4 billion (USD448,000).

VCCI had been given an amount of money from the budget to prepare for the APEC Summit 2006. After the summit ended, the excess funds were over VND9.4 billion.

However, instead of reallocating this money to the state budget, VCCI deposited it in order to earn interest. "VCCI violated regulations when they withdrew the interest in 2008, 2009 and 2010 for their own activities," according to inspection results.

There were hundreds of contracts and invoices worth tens of millions of VND that also violated regulations.

In addition, members of VCCI did not fulfill their duties. VCCI did not record the meeting of ASEAN Business and Investment Summit on May 10, 2010.

Also, when VCCI's headquarters is being built, they did not evaluate the plan in advance, and instead they allowed Saturn Company become the project investor and signed contracts with a number of contractors. According to regulation, Saturn Company should only have been allowed to sign the contract as representative of the investor.

The inspectorate suggested the Prime Minister take stricter management measures over VCCI's finances. VCCI was ordered to return to the over VND127 million of wrongfully collected interest and illegal invoices to the state budget.

SBV Governor: Big banks also to be restructured

Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh said that from now to the year's end, the SBV will begin restructuring big commercial joint stock banks, as was done with small banks.

Speaking at a meeting to review the banking sector during in the first six months of this year, Governor Binh said that bad debt in the banking system has gradually improved.

Never before have credit organisations in Vietnam set up anything like a hedge fund presence, Binh said, adding that this is a foundation of security for the banking industry, contributing to the system's ability to deal with crises.

According to the governor, the SBV has been in the process of completing legal documents to speed up the settlement of bad debt. To date, Vietnam Asset Management Company (VAMC) has bought around VND50 trillion (USD2.4 billion) of bad debt and plans to acquire between VND70 and VND100 trillion by the end of the year.

Binh disclosed that during the first half of this year, the banking sector’s credit growth was estimated at 3.52%, and is expected to grow to about 7% in the second half.

The target set for the sector was to reach a credit growth rate of between 12% and 14% for the entire fiscal year.

Seminar discusses investment opportunities in the US

A seminar in HCM City on July 10 focused on assisting Vietnamese businesses improve their understanding of American laws and increase their capacity to effectively seek cooperative investment opportunities in the US.

During the seminar, experts agreed that the US Foreign Investment Act has opened up the market to allow for wholly owned foreign-invested companies with adequate safeguards to enforce those rights in American courts.

Hoang Kim Son, Head of Vietnam’s trade office in San Francisco emphasized that Vietnamese businesses should learn more about the laws, regulations and requirements of the US market to operate effectively, especially after the Trans-Pacific Partnership (TPP) agreement comes into effect.

Businesses should co-ordinate with Vietnam’s trade offices overseas to seek partners and business opportunities.

Echoing Son’s views, Vo Tan Thanh, Director of Vietnam Chamber of Commerce and Industry in HCM City (VCCI-HCM City) said that Vietnam-US bilateral ties have developed strongly in recent times.

In addition, the US is the country’sleading trade partner and listed among itstop ten foreign investors. However, local businesses will encounter difficulties in penetrating the US market if they do not adequately prepare themselves and understand US laws and regulations clearly, he said.

VCCI–HCM City also introduced the Vietnamese business community two foreign trade promotion programmes scheduled for this October which will cover a survey of US and Canadian markets and trade exchanges in Japan.

Construction starts on Nam Lik 1 hydroelectric power plant

Construction on the US$124 million Nam Lik 1 hydroelectric power plant got underway on July 9 following more than one year of design preparation.

Once fully operational the facility of Posco Engineering & Construction Co.Ltd will add a capacity of 65 MW to the power supply of Phonhong District, Vientiane, Laos.

Approximately,70% of the total investment capital is sourced from a Thai Exim Bank official development assistance (ODA) loan with the remaining 30% coming from  POSCO E&C, PTTI-a state-run energy corporation of Thailand, HEC, a generation equipment supplier, and EDL, the utility authority of Laos.

The total value for the engineering, procurement, and construction (EPC) contract is estimated at US$81 million.

The Build-Operate-Transfer project located 90 kilometres north of Vientiane, is scheduled for completion within 39 months.

With civil infrastructure experience, POSCO E&C is focusing on hydropower plant projects with the aims of building a green environment campaign across the globe.

VSIPs – a symbol of Vietnam-Singapore economic cooperation

Vietnam-Singapore Industrial Parks (VSIPs) which have sprouted throughout the nation are a reflection of the fruitful bilateral economic relations between the two nations and  the strong support of the countries’ leaders.

This affirmation was made by Singapore Second Minister for Foreign Affairs Grace Fu at a Singaporean Parliament on July 9.

Minister Fu was asked a question by member of parliament R Dhinakaran about solutions taken by the Vietnamese Government to support Singaporean firms operating in VSIPs in Binh Duong and Quang Ngai provinces following recent social disturbances.

In response Fu said that most businesses have resumed normal operations, adding that the Vietnamese Government has taken numerous measures to stabilize the situation in the disturbance-affected industrial zones.

Minister Fu emphasized that the Vietnamese Government has also pledged to conduct a full investigations and intensify necessary measures to deal with law-breakers and extremists.

Fu assured Singapore Parliament members the two governments are closely cooperating to protect Singaporean investors’ interests in Vietnam.

Hai Duong lures four more foreign businesses

The Hai Duong province Industrial Parks (IPs) management board on July 10 granted foreign investment licenses for the construction of four new manufacturing facilities.

The four licensed projects include the Republic of Korea’s Believe Zone Co, Ltd, SD Global Vietnam Co, Ltd, DUSCO VINA Steel Processing Co, Ltd and the Republic of Seychelles’ CHANGHONG Technology Co, Ltd with investment capital of US$800,000, US$20 million, US$5 million and US$15 million respectively.

In the coming time, Hai Duong province will continue to focus on strengthening investment promotion activities with large multinational groups, build trust among investors and implement administrative reform to facilitateforeigninvestment.In the first half of the year, the locality has attracted over US$390 million in direct foreign investment (FDI), up 3.9 times against the same period last year. Some FDI businesses have increased investment capital to US$88 million to expand production activities.

Hai Duong has so far attracted 271 FDI projects capitalised at over US$6.2 billion which have generated over 1.3 thousands jobs.

Fruit and vegetable exports enjoy fertile growth

Fruit and vegetable exports have outpaced the national average in recent times, making agriculture one of the leading export sectors.

Fruit and vegetables grossed US$658 million from exports in the first half of 2014, an increase of 132% against the same period last year, meeting 54.83% of this year’s plan.

Last year, their export value hit nearly US$1.1 billion, US$200 million higher than the set plan, and this year’s total export earnings are expected to surpass US$1.2 billion.

The Vietnam Fruit and Vegetables Association (Vinafruit) reported that in the first six months the country enjoyed a US$400 million trade surplus from fruit and vegetables.

In the European market, with the exception of dragon fruits, exports of most fruits such as pomelos, mangoes, rambutants are modest. Vegetable exports have rebounded but their overall value is limited.

In late May, the New Zealand Embassy in Vietnam and the Plant Protection Department under the Ministry of Agriculture and Rural Development (MARD) signed a deal to guarantee exporting of dragon fruits to New Zealand.

The agreement opens the door for shipments of high quality dragon fruits to enter New Zealand, said Vinafruit Secretary General Nguyen Van Ky.

According to MARD’s Agro-forestry Processing and Salt Industry Department, in the past year

Vietnamese fruit and vegetables have been exported to more than 40 countries and territories, including China, Japan, the US, the Republic of Korea, Russia, the Netherlands, Thailand, Malaysia, and Singapore.

China is the largest importer, accounting for one-third of total export revenue. Vietnam mainly exports mangoes, longans, lytchees, bananas, dragon fruits, star-apples, and coconuts via Chinese border provinces of Guangdong, Guangxi and Yunnan. However, exports to China are mainly through informal channels with unclear trading methods and verbal agreements, causing a number of inherent risks.

To avoid these risks, domestic businesses must have clear contracts, require bank payment and know their partners well, MARD cautions.

The second largest consumer of Vietnamese fruit and vegetables is Japan which accounts for 7-8% of total export value.

Vietnam mainly exports frozen fruit and vegetables, such as soya beans, cabbage, cucumber, mushroom, cherry, dragon fruits and mangoes. Other products like canned fruit juice and processed vegetables are now favoured in the market. Recently, Japan began to import lychees and sweet corns.

The third largest partner is the US which makes up 5-6% of total export value.

Despite quite high growth in the first months, difficulties have arisen due to global complications, especially following the recent East Sea stand-off caused by China’s illegal placement of Haiyang Shiyou-981 rig in Vietnam’s waters.

A possible reduction in Chinese imports is likely to put the burden on the agriculture sector to shift its emphasis to expand into other more high demanding markets.  

Vinafruit Vice President Huynh Quang Dau said in order to reduce overdependence on the Chinese market, businesses should master advanced technology and develop large-scale material zones, enabling them to break into demanding markets such as the EU, Japan and the US.

Grant Thornton: Vietnam attractive to investors

Roughly 51% of surveyed private investors revealed that they have plans to expand operations in Vietnam over the next 12 months, according to a Grant Thornton Vietnam report.

The report on private investment recently released by Grant Thornton Vietnam, a leading audit, tax and advisory company, said that Vietnam is still a more attractive investment destination compared to other regional countries.

Grant Thornton Vietnam Director Ken Atkinson said despite facing challenges, macro-economic stability has been improving and the economy shows positive signs of recovery. Foreign direct investment (FDI) is flowing into Vietnam at high levels through mergers and acquisitions (M&A) activities, a trend that is forecast to continue in the coming years.

The report revealed that private investors were interested in Vietnam’s retail market, especially for food and beverages, reasoning Vietnam is a large market of more than 90 million consumers with steadily rising incomes - a driving force for future growth.

In addition, real estate is also drawing much attention from investors, particularly in M&A activities.

At a Vietnam Investment Forum (VIF) held recently in Ho Chi Minh City, domestic and foreign experts said emerging markets, including Vietnam, are highly appealing destinations for international investment capital inflows.

Dr Marc Faber, a well-known financial strategist, forecast that foreign investment in Vietnam’s stock market would grow rapidly in the coming years.

More seafood businesses to ship products to Argentina

The National Food Safety and Quality Service of Argentina (Senasa) will consider increasing the number of Vietnamese seafood processors eligible for exporting products to Argentina from the current 204.

The National Agro-Forestry-Fisheries Quality Assurance Department of Vietnam (NAFIQAD) and Senasa recently signed a memorandum of understanding on agro-fisheries export, opening opportunities for Vietnamese seafood processors.

The MoU regulates that each shipment of Vietnamese seafood to Argentina must have a NAFIQAD certificate.

The Vietnam Association of Seafood Exporters and Processors (VASEP) says in the face of shrinking markets in the EU and US, having the new market will help seafood businesses maintain production and boost exports.

Vietnam Customs statistics show that Vietnam’s export earnings to Argentina reached nearly US$64.5 million in the first five months of the year with main products like rubber, garment, footwear, garment and footwear materials, and ceramics.

Meanwhile, Vietnam mainly imported animal food, corn and soya beans worth more than US$399 million.

In South America, Vietnamese seafood has just penetrated Brazil with tra (Pangasius) fish being the main dish. Its five-month seafood export value was more than US$52 million, trailing behind mobile handsets and components.

H1 auto sales of VAMA members up strongly

The Vietnam Automobile Manufacturers’ Association (VAMA) estimated its member firms sold nearly 55,000 units in the first half of this year, a whopping increase of 27% compared to the same period last year.

VAMA’s preliminary statistics showed the volume of autos sold by its members rose 32% to 10,853 units last month, including 7,192 passenger cars and 3,661 commercial cars.

Notably, Truong Hai Auto Corporation (Thaco) reported sales of nearly 3,500 units last month, up 48% year-on-year. With this result, the local assembling firm took up 32.1% of the market share and June was the fifth month in a row that Thaco had taken the lead in auto sales on the local market.

Other members of VAMA also posted strong June increases, including Ford Vietnam with sales growth of 67% when selling 972 units and Toyota Vietnam with nearly 3,450 units sold, or 590 units higher than a year ago.

Among the nearly 55,000 units sold in the January-June period, Thaco accounted for over 17,850 units, increasing by 40% over the same period last year and accounting for 32.5% of the market share of VAMA. Toyota Vietnam came second with sales of over 16,800 units and a market share of 30.6%.

Given the measures the Government has adopted to beef up economic growth, VAMA forecast the auto market in the second half of this year will increase by 11% compared to the first half and 140,000 units would be delivered to customers this year, up 27% year-on-year.

HCM City deputies still concerned over economic growth in H2

Despite positive improvements in the first half of this year, HCMC is still coping with a host of challenges in the second half, said Nguyen Thi Quyet Tam, chairwoman of the HCMC People’s Council.

Tam raised the concern given the adverse impacts of China’s illegal placement of its oil drilling rig in Vietnam’s waters in the East Sea at the 14th session of HCMC People’s Council which opened on July 8 morning.

At the opening day of the session, deputies urged local authorities to have timely and effective solutions to help small and medium-sized enterprises overcome tough times.

Tam said the city’s economy continued recovering in the first six months of this year with stable gross domestic product (GDP) growth and better budget collections.

However, many challenges loom large in the second half due to a slow aggregate demand increase, sluggish credit growth and high bad debt. Many enterprises have been struggling with difficulties while workers have seen their incomes contracting.

Moreover, the city government had yet to efficiently address social issues related to environmental pollution, flooding, hospital overloads and poorer-than-expected health check-ups and treatment services, Tam said.

According to the HCMC People’s Committee, the city’s GDP in the January-June period reached VND379 trillion, up 8.2% year-on-year and higher than the same periods of 2012 and 2013.

The city’s imports were more than US$12.4 billion in the period, down 2.2% year-on-year. Imports of many materials for garment and textile sector, insecticide, steel and machines will be impacted by the East Sea tensions as cited in a report of the HCMC government.

Complicated developments in the East Sea since early May have hit production activities, especially the products dependent on Chinese imports and exports such as rice, fruits and garment materials.

However, the challenges would bring about opportunities for local enterprises to diversify markets and improve their competitiveness. Now is the right time for firms to change import markets to enjoy tax incentives of bilateral and multilateral trade agreements, including the Trans-Pacific Partnership (TPP) which is expected for conclusion soon.

HCMC will also focus on development of material sources to raise value of key products such as apparel, high-quality furniture and fine arts. The city will propose the Government set up technical barriers to reduce unnecessary imports.

Retail sales up over 10% in H1

The total retail sales of goods and services reached nearly VND1,440 trillion in the first six months of this year, a year-on-year increase of 10.73%, according to figures of the Ministry of Industry and Trade.

The ministry’s figures released last week showed retail sales in June inched up by 1.7% against the previous month, owing to the growing revenue from the hospitality sector and buoyed by better electronics retail sales due to the World Cup.

The increase in retail sales last month mainly came from the hospitality sector in coastal provinces as they were in the high season of summer travel, said the Local Market Department under the ministry.

According to the department, retail sales rose slightly due to the current economic slump, as consumers tightened their spending.

In addition, the purchasing power has been reducing in recent months compared to the beginning of this year, said enterprises.

Only electronics products experienced a steep increase in the months before the FIFA World Cup football tournament currently taking place in Brazil. More specifically, sales of television sets in June went up 50% against May and doubled year-on-year, said Nguyen Huu Quoc Cuong, director of an electronics firm called dienmay.com.

Meanwhile, sales of cell phones and mobile devices edged down, said FPT Shop recently.

If the electronics sector is faring well due to the World Cup, mobile phones sales stood on the opposite side, said Nguyen Bach Diep, general director of FPT Retail, the owner of the FPT shop system.

Experts scrutinise slow pace of bad debt resolution

Banking experts are looking at ways to more effectively tackle the country’s bad debt situation.

State-owned Vietnam Asset Management Company (VAMC) was reported to begin selling its bad debt stocks in the first part of the third quarter.

According to Can Van Luc, the director of the Bank for Investment and Development of Vietnam (BIDV)’s staff training centre, bad debts are likely to be sold indirectly to investors through intermediaries in the initial stage.

One investment fund representative was quoted as saying, “In respect to selling debts to foreign investors, the VAMC should hold public auctions to directly present its products to investors instead of selling through middlemen, as no investor wants to buy debts through an intermediary.”

But while advocating that debts should be sold in complete transparency, some experts say that Vietnam is first likely to sell debts indirectly to gain experience before holding public auctions.

“Vietnam needs to sell bad debts in a way that attracts foreign investors first, and from there take the experience to overcome legal obstacles,” HSBC Vietnam deputy general director Pham Hong Hai suggested.

In a report released in early July, HSBC Vietnam experts expressed their concern over the efficiency of how the VAMC is handling the bad debts it has bought up.

“Overall, banking sector reform has been sluggish and the bad debt situation has yet to be tackled in a comprehensive way. With taking immediate action, how will Vietnam settle its bad debts?” the report stressed.

Economist Le Xuan Nghia has suggested giving VAMC more rights in tackling bad debts, “Otherwise, the process will continue to be slow and Vietnam will miss opportunities to sell bad debts.”

Since being established in July last year, the VAMC has been proactive in buying non-performing loans from banks.

Buy early July this year it had bought more than VND50.7 trillion ($2.4 billion) in NPLs and is readying to buy another VND1.2 trillion ($57 million) from state giant VietinBank.

However, at this point the VAMC has only succeeded in selling and rectifying around VND996 billion ($47.4 million) of bad debts.

According to VAMC chairman Nguyen Quoc Hung, the organisation has developed a list of debts that may appeal to foreign investors and around 10 potential overseas buyers have expressed interest.

But not a single transaction has yet to be made because of a lack of guiding documents and authorities being too slow in completing legal procedures due to their fears of the risks associated with the process.

Also, foreign investors have reportedly valued the debts they want to buy at only about 30 per cent of the original value, which has made the VAMC reluctant to sell.

Vietnam apparel market share expands

The nation’s global market share for garment and textile products has expanded steadily over the years and is expected to rise further in the coming time thanks to free trade agreements (FTAs), said Le Tien Truong, deputy general director of Vietnam National Textile and Garment Group, or Vinatex.

Speaking at a recent seminar introducing Vinatex’s initial public offering (IPO) in HCMC, Truong said Vietnam’s garment and textile exports account for only 2% of the global trade. However, the sector has reported annual export growth of 15% since 2001, with some years even seeing expansion of over 30%.

Though major markets such as the U.S. and Japan have scaled down apparel imports in recent years, Vietnam’s exports to these two nations have still increased by around 25%. Vietnam’s apparel market share in the U.S. has risen from 3% to 9% over the past six years, he said.

Quoting data of the Office of Textiles and Apparel (Oxeta) of the U.S. Department of Commerce, the Vietnam Textile and Apparel Association (VITAS) said that Vietnam’s market share stateside increased from 8.38% in 2013 to 9.37% in the first four months of this year.

Between January and April, apparel imports from Vietnam into the U.S. surged 15.5% year-on-year, reaching over US$3 billion in value. Meanwhile, imports from China increased only 0.68% at US$11.4 billion.

Oxeta’s data showed that apparel imports from India, Indonesia and Bangladesh into the U.S. also increased versus a shrinking market share of China’s apparel products there. China’s apparel market share in the U.S. dropped from 39.79% in 2013 to 34.9% in the first four months of this year.

For Japan as a major buyer of apparel products, VITAS’ statistics also suggested that Vietnam’s apparel export value to this market was the second biggest after China. The nation’s market share in Japan increased from 6.74% in October 2013 to 7.62% in the first quarter of 2014 while that of China fell from 71% to 66.55%.

In terms of export growth rate, Vietnam also took the lead among the top five exporters in Japan in the first quarter, jumping 40.5% in volume and 32.4% in value.

Meanwhile, Vietnam’s market share in the European Union (EU) has also grown steadily from 2.61% in September 2012 to 2.7% in the Jan-Apr period this year. In contrast, China’s market share in this market dropped from 41.9% to around 34.4%.

The figures indicated that Vietnam’s garment and textile industry has high competitiveness and exports may increase further, Truong said.

Vietnam exports over 60% of apparel output to the U.S. and Japan. Therefore, the Trans-Pacific Partnership (TPP) plays an important role in boosting exports to the two markets.

In addition, the Vietnam-EU FTA expected to be concluded late this year and take effect in the second half of 2015 will help Vietnam raise apparel exports to the key market, Truong added.

Cat Lai Port refuses containers to ease congestion

Cat Lai Port in HCMC’s District 2 will stop taking containers from other surrounding ports located in HCMC and Ba Ria – Vung Tau Province from early August due to its overloaded facilities.

In a notice sent to shipping lines and customers, Saigon Newport, the operator of Cat Lai Port, said the halt was due to the congestion of containers that hinders its operation. However, containers from other sister ports under Saigon Newport are still admitted.

Many exporters have chosen Cat Lai Port as a transit point to ship their goods to final destinations due to its simpler procedures and transport convenience.

The congestion at the port is believed due to authorities tightening control on overloaded trucks transporting containers to and from Cat Lai Port, resulting in slower clearance.

Le Hong Viet, deputy chief inspector of the city’s transport department, said at a meeting on July 8 that the number of overloaded vehicles had dropped significantly. In the first four months of this year, there were as many as 5,200 vehicles violating load control rules, but the number decreased to only 98 in June.

In May, the city’s transport department collected comments from several port operators on placing a weigh station inside ports but the idea faced disagreement from certain companies, saying it would lead to cargo congestion. In addition, if a truck is forced to unload part of the cargo, it has to pass through customs procedures, complicating the port operation.

Upon such comments, the transport department urged all the ports to commit to closely check the vehicles to prevent the overloaded ones.

Massive central highway project to soon be underway

Great efforts are being taken to finish first phase construction on the billion-dollar Ben Luc-Long Thanh expressway project by late this year.

The consortium building the highway project consists of Japan’s leading contractor Sumitomo Mitsui and reputable local partner Civil Engineering Construction Corporation (Cienco 4) was recently selected as the contractor for the first bidding package (J2).

The 57-kilometre long highway is expected to pass through Ben Luc and Can Giuoc district in the southern province of Long An, then Ho Chi Minh City and finally Nhon Trach and Long Thang districts in the southern province of Dong Nai.

The J2 package spans 4.7km and consists of a bridge crossing the Cha River and an overpass through Ho Chi Minh City’s Can Gio district.

The $143 highway is designed for vehicles to travel at speeds up to 80km/h in the first phase, and up to 100km/h once fully complete.

There are a number of reasons why the Ministry of Transport (MoT) and developer Vietnam Expressway Corporation (VEC) hope for the J2 package to be complete prior to schedule. It was set at 32 months in the contract.

The first reason is the employment of Cienco 4, which is regarded as one of the transport sectors best performers in recent years.

For Hanoi’s beltway 3 project, Cienco 4 completed the project 263 days ahead of schedule while Sumitomo Mitsui, which has 16 years operating in Vietnam, finished its part 454 days ahead of the deadline.

The Sumitomo Mitsui-Cienco 4 consortium will contribute human resources, equipment and finance for joint implementation of the bidding package, instead of each contractor building a separate road section, as seen in some previous projects.

“This method will maximise the advantages of both sides as Sumitomo is strong in finance and technology while Cienco 4 has a skilled and disciplined workforce,” said Cienco 4 general director Le Ngoc Hoa.

The consortium will have around 20 days to make preparations before starting work on this package by the end of this month.

The Ben Luc-Long Thanh expressway project is one of the most sizable in terms of capital ever implemented in the central region.

Of the total projected investment of more than $1.6 billion for the project’s first phase, $636 million will come from the Asian Development Bank as a loan, another $635 million will be lent by the Japanese government through the Japan International Co-operation Agency, and the remaining $337 million will be Vietnamese government reciprocal capital.

Part of the southern key economic zone, the Ben Luc-Long Thanh expressway is regarded as highly attractive to investors.

The project’s consultancy unit, Japan’s Takahira-OC consortium, has estimated that the economic internal rate of return (EIRR) of the project is high, at around 30.13 per cent provided that the toll is set at VND1,000 per km per vehicle.

“We are busy finalising bidding procedures and ensuring sufficient capital is available for the project to begin in its entirety late this year,” said VEC’s general director Mai Tuan Anh.

The expressway is part of beltway 3, which links the western and eastern southern region and routes to major ports including Hiep Phuoc and Thi Vai-Cai Mep. It may also link up with Long Thanh international airport.

The expressway may also connect with the still-on-paper Ho Chi Minh City-Vung Tau highway, shaping part of the southern economic corridor under the Greater Mekong Subregion spanning from Bangkok to Phnom Penh, Ho Chi Minh City and finally Vung Tau.

Rent-A-Port inks Quang Ninh MOU

Belgium’s Rent-A-Port and InfraAsia Investment Ltd from Hong Kong signed a memorandum of understanding with the Quang Ninh Provincial People’s Committee to build an industrial park and seaport in the province.

The memorandum of understanding (MOU) was signed late last month during an investment promotion conference held by the local authorities. The two companies will work closely with the local authorities to complete administrative procedures to push the project forward.

The developers have also agreed to provide documents proving financial capability “as soon as possible” and submit a feasibility study for the project to the local authorities for approval within this year, the MOU stipulated. The development underscores Rent-A-Port’s commitment to Quang Ninh. It completed its feasibility study, targeting the Mac Dynasty Lagoon area in Quang Yen district. The committee previously approved 490 hectares that would include an industrial park and a seaport valued at around $120 million.

In April, Rent-A-Port and consultancy and engineering firm Ecorem submitted their study to the local authorities.

Ecorem looked at 3,710ha to select the best location for the project. It proposed expanding the scale to 1,000ha but so far the committee has only approved an initial 500ha. If the expansion is approved, the first phase would take place between 2016 and 2020 and cost $412 million.

This is Rent-A-Port and InfraAsia’s second port and industrial park complex project in Vietnam, after the Dinh Vu port and industrial park complex in the northern port city of Haiphong, which borders Quang Ninh.

Rent-A-Port and InfraAsia – in association with Belgim International Port Engineering & Management – started investing in the Dinh Vu Industrial Park in 1997. The first phase of the project is entirely occupied and the developer is starting on the second phase, which will cover 377ha. According to Rent-A-Port, nearly 50 per cent of the second phase is already occupied. The project has attracted 53 projects so far with the total investment capital of $3 billion. Foreign investors in the zone include Bridgestone, Shin-etsu, Chevron, Toyota Tsusho, and JX Nippon.

Positioned on the border of China’s Guangxi province and bordering Vietnam’s Lang Son, Bac Giang and Hai Duong provinces and Haiphong, Quang Ninh is emerging as the north of Vietnam’s third major industrial hub after Hanoi and Haiphong. It is also home to the nation’s largest coalmine, 11 industrial parks and two economic zones. The Vietnamese government is preparing to establish a special economic zone in the province to further bolster the local economic growth.

Thailand’s leading industrial land developer Amata Corporation has similarly proposed to build a hi-tech park and township complex in Quang Yen district, capitalised at around $2 billion. This proposal has yet to receive the Vietnamese government approval.

Southern hub promoting supporting industries – hi tech links

Ho Chi Minh City is seeking to boost ties between the supporting industry and high technology sector, as well as support the development of both, towards luring more foreign investment.

The city’s Department of Industry and Trade, HEPZA (the industrial zone watchdog) and Saigon Hi-Tech Park (SHTP) signed separate deals last Friday to carry out a plan to accomplish this goal. SHTP, which is already home to the $1.04 billion Intel chip factory, and HEPZA will join forces to take measures under the leadership of the city government.

The signing was part of a workshop held by the municipal People’s Committee to call for more investment into the two sectors. City deputy chairman Le Manh Ha told media at the vent that the southern economic hub has not borne much fruit in terms of developing support industries serving hi-tech over the past 10 years.

Now the city’s government has set aside Hiep Phuoc Industrial Park (stage 2) in Nha Be district and Le Minh Xuan 3 Industrial Park in Cu Chi for support industry firms. In Hiep Phuoc, Vie-Pan Techno Park is currently under construction and once complete will be a $31 million industrial zone for Japanese support industry companies primarily supplying hi-tech companies. Vie-Pan is listed in Japan’s national strategy to support Japanese small and medium-sized enterprises.

Vie-Pan Techno Park vice chairman Doan Hong Tam said the park’s unique business model of providing pre-fabricated workshops and investment procedure services has gotten the attention of numerous Japanese companies.

Yasuzumi Hirotaka, managing director of the Japan External Trade Organisation’s Ho Chi Minh City office, said that in order to develop support industries in Vietnam, the government must support the development of local companies and foster technology from overseas. “If we attract only foreign-invested support industry companies, technology transfer will be limited and little will be accomplished in terms of developing Vietnam’s support industries.”

Hirotaka listed six main reasons for Vietnam’s underdeveloped support industries: “Enterprises have not been able to access capital, personnel training is not meeting demand, Vietnam lacks incentive policies, there isn’t a development playground for companies in the same sector. Where are excellent Vietnamese enterprises? There is no big market.”

At the seminar, corporate representatives said Vietnam did not have a national development strategy for the support industry, and therefore its development was slower than expected.

SHTP management board chief Dr. Le Hoai Quoc said most of its corporate tenants were using products provided by foreign suppliers, mainly from Japan, Korea, Taiwan, Malaysia, Thailand and Singapore. At the billion dollar Intel project, the American giant divides materials into direct and indirect. At present, Intel is focusing on buying only materials produced in Vietnam, but so far has only been able to source 10 per cent of what it needs while importing the rest.

“Intel is facing difficulties in seeking qualified suppliers here. Because what they want to buy are indirect materials and the number of orders isn’t stable. Therefore local suppliers do not want to invest in new equipment and technology to only supply Intel. For direct materials, Intel still has no long-term plan for local orders,” Quoc added.

According to SHTP, so far Intel has disbursed $280 million into its Vietnam project.

The $100 million Jabil Vietnam project, which produces computer, storage, telecom, and healthcare equipment as well as many other hi-tech products, has disbursed $47.8 million thus far, while Japanese-invested Nidec Copal Precision Vietnam has released $35.1 million of its $100 million commitment.

Quoc said Jabil Vietnam was one of only a few cases at SHTP where a producer had increased its local material sourcing. The firm’s number of local suppliers has risen from zero in 2010 to more than 200 now, supplying more than 10 per cent of its total input.

GE Aviation eyes Vietnam as global supply chain link

The world’s largest jet engine maker GE Aviation, an operating unit of US industrial conglomerate General Electric, is looking to incorporate Vietnam into its global supply chain, taking advantage of the group’s strong presence in energy manufacturing in Vietnam.

David Joyce, president and CEO of GE Aviation told VIR that GE Aviation was “actually looking at putting some of our work in GE’s operating energy facility in Vietnam”. Joyce did not go into detail about the plan other than claiming that it was likely “this will happen”.

Joyce referenced the Haiphong manufacturing complex located in the northern port city of Haiphong, which GE has invested more than $110 million in since 2009 and now employs more than 500 local engineers and skilled workers. Wind turbine generators and other energy products manufactured at the Haiphong facility are exported to GE’s manufacturing and service centres around the globe.

With GE Aviation’s plan turning into a reality, Vietnam is likely to become a bigger player in the global aviation industry supply chain.

European aircraft maker Airbus announced this April that Nikkiso Vietnam, a Vietnam-based Japanese company, would produce and supply composite interior parts and outer panels to retrofit planes to meet new Sharklet specs. Production was implemented under a sub-contract with the Korean Air Aerospace Division, the sole supplier of Sharklet for Airbus. Airbus said that when production commenced before the end of the year, about 50 Vietnamese employees would work directly for Airbus through the Nikkiso contract.

Three year ago, Nikkiso Vietnam also shipped its first set of blocker doors, a key component on Boeing 777 airplane engines, to Spirit AeroSystems. Nikkiso Vietnam is a wholly owned subsidiary of Japan’s Nikkiso, located in northern Hung Yen province. The facility, with an initial investment capital of $1 million, started operating in 2010.

Meanwhile, last year, Japan’s Mitsubishi Heavy Industries, after four years manufacturing flaps for Boeing aircraft in Hanoi’s Thang Long Industrial Park, decided to expand its production capacity for aircraft components, aiming to supply more spare parts to Boeing. The new factory will produce components for the Boeing 777 jumbo jet that are currently made at the Mitsubishi Heavy Industries’ Nagoya Aerospace Systems Works.

Mitsubishi Heavy Industries built their first factory in Vietnam in 2007 and started production in 2009. The factory, initially capitalised at $7 million, produces flaps for the Boeing Next-Generation 737.

Korean Aerospace Industries Ltd, South Korea’s aeroplane maker, also had plans to build a manufacturing facility in Vietnam to manufacture equipment and components for Airbus aircraft. The facility, with preparatory steps still under discussion, could be built in the central city of Danang’s hi-tech park.

Headquartered in Cincinnati, GE Aviation currently employs 44,000 people and operates 79 manufacturing facilities and 11 engineering centres in 24 countries worldwide. The company, which recorded revenues of $21.9 billion last year, has announced seven new factories in the past seven years to manage higher production levels and a growing services business.

In October last year, the national flag carrier Vietnam Airlines signed a $1.7 billion deal to purchase 40 GEnx engines from GE Aviation to power its fleet of Boeing 787 Dreamliners scheduled for delivery in 2015. The value of the deal was said to be the largest in two decades of GE’s operations in Vietnam.

“The delivery streams are set and we are very excited about that order,” Joyce told VIR.

In a similar move, a representative of CFM International, a 50-50 joint venture between GE and France’s Snecma, told VIR that the first airplane from the budget carrier VietJet Air’s most recent order would be delivered in November. VietJetAir announced at the Singapore Air Show in February this year that it had selected CFM International’s CFM56-5B engine to power its 21 Airbus A320ceo family aircraft. The agreement is valued at more than $800 million.

GE Aviation has announced that the firm would participate in the Farnborough Airshow in the UK. Every two years the show receives a phenomenal public following due to an unrivalled weekend of Aviation excellence and family entertainment.

The July 19 and 20 this year will witness the best ever Farnborough yet. A feast of new activities will deliver what promises to be a day out like no other.

Celebrating 100 years of Aviation History, witness a hearty selection of the great and the good, stemming back from WW1 and spanning through to modern day technology.  The 4 ½ hour flying display will be bumper to bumper of non-stop action and guaranteed to get your pulses racing.

And it doesn’t stop there, our on the ground entertainment offers the newly introduced Farnborough Airshow Live, the interactive  and informative live stage show with fun and colourful presenting, competitions and interviews.  

Major banks post strong H1 results

Three major Vietnamese joint stock banks have posted or are expected to post strong business results for the first half of 2014.

TPBank reported its profits of VND263 billion ($12.3 million) in the first half of this year, coming to 60 per cent of its annual target. The total credit grew by 8.8 per cent, of which lending to businesses and individuals rose by 16.3 per cent, while deposit by individuals and organisations grew by 4.5 per cent. Its bad debt ratio was a low 1.66 per cent, down 0.3 percentage points against the beginning of the year.

TPBank is one of only a few banks recently approved to against set up new branches. Over the past six months it has opened five new locations, including two in Hanoi, two In Ho Chi Minh City and one in the southern province of Binh Duong.

Meanwhile, Vietcombank (VCB), Vietnam’s third largest joint stock bank in terms of total assets, has been assessed by Bao Viet Securities (BVS) to have made VND912 billion ($42.8 million) in net profit in the second quarter this year, up 5 per cent on year.

BVS assessed VCB’s income from lending grew by 8 per cent and it estimated the bank’s total lending rose by 3-3.5 per cent by the end of Q2. It said Vietcombank’s total deposits have gone up 7.5 per cent so far this year and its net interest margin (NIM) has also increased.

BVS said projected that for the whole year, Vietcombank’s revenue and net profits will reach VND17.317 trillion ($810 million) and VND4.439 trillion ($207 million), up 12 per cent and 2 per cent on-year.

BIDV, Vietnam’s largest joint stock bank in terms of total assets, posted pretax profits of VND2.5 trillion ($110 million) in the first five months of this year. The bank’s total deposits grew by 3.3 per cent to VND431 trillion ($20.2 billion), while the total lending went up by 2.3 per cent to reach VND396 trillion ($18.6 billion). BIDV’s bad debt ratio is under 2 per cent.

By the end of the year, BIDV plans to increase its total deposits and lending by 13 per cent, reach pretax profits of VND6 trillion ($281 million), to keep its bad debt ratio under 3 per cent, and issue a dividend of at least 9 per cent.