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BUSINESS IN BRIEF 13/11

 Russia affirms its nuclear status in Vietnam; Coffee exports to Mexico fall 19%; Ad firms confront challenges; Phone handset exports up 76%; Central bank backs down on currency

Russia affirms its nuclear status in Vietnam

President Vladimir Putin’s forthcoming visit to Vietnam shows Russia’s willingness to affirm its status as a reliable and proper partner in providing nuclear technology for Vietnam in the time ahead.

The assessment was made by the Economist Intelligence Unit (EIU) of the UK’s Economist magazine on November 10 following the signing of a nuclear cooperation agreement between Vietnam and the US.

During the trip, Putin is expected to sign a number of nuclear cooperation agreements with Vietnam.

Russia’s oil and gas group Rosneft and Vietnam Oil and Gas Group (PetroVietnam) will ink an agreement on offshore oil and gas exploration projects in the waters of both nations under which Rosneft will provide crude oil for PetroVietnam.

It is worth noting that Russian energy corporation Rosatom has partnered with Vietnam to build the first nuclear power plant- Ninh Thuan 1 in the country.

President Putin’s visit will help secure Russia’ top position in wining nuclear power development contracts with Vietnam. In addition, Russia has actively become involved in the process of modernizing the Vietnamese army by providing Kilo class submarines, EIU said.

Coffee exports to Mexico fall 19%

Vietnam shipped more than 30,700 tonnes of coffee to Mexico in the past 10 months, earning US$63 million or down 19% against the same period last year.

The Ministry of Industry and Trade (MoIT) said coffee is one of its five key export items to Mexico with the highest turnover.

Despite the world’s economic downturn and market fluctuations, coffee exports to this market remained steady.

In 2013, the export price of coffee increased slightly by 2.3% over 2012 and declined by 4% compared to 2011’s peak season. It currently hovers around US$1,950-2,110 per tonne.

Vietnam is the world’s second largest coffee exporter. However, its coffee exports fell by 24% in volume and 23.9% in value during January-October 2013.

Ad firms confront challenges

More than 400 Vietnamese and foreign delegates attended the opening ceremony of the 28th Asian Advertising Congress (AdAsia) 2013 in Hanoi on November 11.

In his speech, Deputy Prime Minister Nguyen Thien Nhan noted this year’s theme Re-engineer Advertising was not only the requirement of the communications and advertising sector but also the common requirement of the current world economy.

“Due to the recent global economic recession, Asia and the world are facing challenges”, Nhan said. “However, this is also a big opportunity to active creativity to contribute to the building of a prosperous Aisa”.

He said the communications and advertising sector in Vietnam is still in its infancy, but hundreds of media agencies and thousands of advertising enterprises are playing a big role in boosting international integration.

“Specifically, the National Assembly of Vietnam has approved a Law on Advertisements, opening the doors for investors to join the country’s advertising market”, Nhan said.

“As a result, the AdAsia 2013 is a golden opportunity for Vietnamese agencies and enterprises to access, link and catch up with the modern advertising industry of Asia and the world,” he said.

Nhan believed that the congress will help change public awareness of the power of communications and advertising in popularizing knowledge and images of countries.

During the four-day congress, there will be a series of international forums discussing global economic news, communications and trends of advertising.

Phone handset exports up 76%

Local mobile phone and accessories manufacturers achieved an impressive export growth rate of 76.1% during the past 10 months to rake in US$17.72 billion.

Major global import markets include the United Arab Emirates (UAE), Germany, Austria, the UK, Italy, India and Hong Kong.

Nine-month statistics showed three markets experiencing an import value of more than US$1 billion each were the UAE (US$2.6 billion), Germany (US$1.2 billion) and Austria (US$1.08 billion).

In addition, 22 global markets now have an import value exceeding US$100 million each including the UK, Italy, India, Hong Kong, Russia, France and Thailand. Cambodia and Japan were the only two markets suffering from declines.

HCM City, Flanders cooperate in port development

In the face of looming climate change and rising sea levels,HCM City wants to work closely with the Flanders region, and learn from their extensive experience in the fields of port building and management.

Chairman of the HCM City People’s Committee Le Hoang Quan made this statement at a reception for the visiting Flemish Minister for Mobility and Public Works, Hilde Crevits, in the city on November 10.

Quan briefed his guest on some major blueprints for the city’s port system, especially the Hiep Phuoc Port Urban Area which will house relocated ports from the urban areas.

Once completion, the Belgium-funded project, to dredge the Soai Rap river, should be able to receive 30.000-50.000 DWT vessels, meeting the increasing demand for development of the Hiep Phuoc Port Urban Area.

Quan expressed hopes that the Belgian Government and Flanders will continue to support the city in implementing the next phases of the Soai Rap river project and build the Hiep Phuoc Port Urban Area.

He also encouraged stronger cooperation in other key areas such as economics, social affairs, culture, education and science and technology between HCM City and Flanders.

Hilde Crevits highlighted the city’s potential for port development as well as the efficient cooperation in port development between Belgium, Flanders and Vietnam over the years.

Belgian partners have helped increase the operational capacity of Vietnamese ports and foster connectivity between ports inHCM City, Vietnam as a whole, and the world’s port system.

Regarding future cooperation, she expressed hopes many businesses from Flanders will arrive in HCM City to seek investment opportunities. Both sides will continue to develop and enhance cooperation in economics, especially in the export of coffee and seafood for the mutual benefit of Flanders and HCM City.

Central bank backs down on currency

After proposing publicly to ban people from giving foreign currency as gifts, the State Bank of Viet Nam (SBV) reversed its position, writing that the practice was "reasonable" in a draft decree on Foreign Exchange Ordinance released last week.

"As provisions of the Foreign Exchange Ordinance allow individuals with foreign currencies to deposit and receive principal and interest in foreign currencies, the use of foreign currencies as gifts is reasonable," the central bank wrote.

In late October, SBV announced a draft decree to replace Decree 160, which guides the implementation of the Foreign Exchange Ordinance. Among its contents, the ban attracted by far the most public attention.

While the drafting committee intended the prohibition to prevent dollarisation, people feared it would interfere with local customs. Vietnamese have a tradition of gifting foreign money during the Lunar New Year, believing that US$2 bills and other foreign currency bring good luck.

Experts also warned that the ban would affect the legal flow of foreign remittances. A past regulation banning people from receiving remittances in foreign currency saw the proliferation of illegal remittances.

The proposed decree will be submitted to the Government, and, if approved, will supersede Decree 160.

HCMC taxpayers voice concerns

Difficulties and obstacles that HCM City residents meet when paying their taxes will be the topic of discussion this week during both online and face-to-face meetings.

The week of discussion, called "Listening to the Ideas of Taxpayers 2013", began yesterday.

Organised by the city's Tax Department, the event aims to improve administrative procedures and create an environment that is more convenient for taxpayers.

This week, at the department and its 24 offices in the city's districts and communes, officials will help residents solve problems in a timely fashion.

During the week, the department and its offices will also listen to taxpayers' ideas and opinions, face to face and online

The department will also collect ideas that have been sent to newspapers, including Sai Gon Giai Phong (Liberated Sai Gon), Tuoi Tre (The Youth), Thanh Nien (Young People) and PhapLuat (Law).

A representative from the department will be in charge of answering all questions.

The department said it would try its best to create more effective tax-collection procedures.

In addition, two exchange days will be organised between the department and readers of Thanh Nien (Young People) newspaper today (Nov 12) and with Phap Luat (Law) newspaper this afternoon (November 12).

Programmes on the Tax Law and Personal Income Tax will be launched at local universities and the week-long discussion will end on Sunday.

According to the department, activities to control and manage tax payments are especially important this year because of overdue taxes and the sluggish economy.

Buyers feel the pinch more than last year

Vietnamese consumers are tightening their spending, with more people doing so compared to 2012, according to a survey released last Saturday by the Vietnam Economic Times (VET).

The annual consumer survey, based on 5,000 respondents of different ages and strata of life, said nearly 58 per cent of the respondents revealed that they had cut down on spending, compared to 49.8 per cent last year.

More than 28 per cent said they did not change their spending compared to 23 per cent last year, and 16 per cent said they spent more, compared to more than 27 per cent last year.

Food and beverages accounted for the biggest expenditures, nearly 24 per cent, followed by electronics and financial products/services, each at 13.7 per cent. Last year, food and beverages were much higher, at 38.7 per cent.

The trend of tighter spending was also shown in the results of another survey conducted by Tu Van Tieu Dung (Consumption Consultancy), a publication of VET.

They surveyed consumers' 100 favourite products and services by collecting 15,000 votes via paper and 43,000 via the internet.

Among the selected products and services were Kinh Do confectionery, Vissan's processed food, Moc Chau Milk, Tuong An cooking oil, Acecook Vietnam's Hao Hao instant noodle, May 10 jacket, BIDV-Manchester United credit card, Midea home appliances and VietjetAir.

Value-for-money and environmental friendliness were the major criteria.

MoF aims to increase audit transparency

A draft circular by the Ministry of Finance will afford greater powers to the State Securities Commission to supervise the auditing of listed companies, securities companies and fund management companies.

The move aims to improve auditing quality and provide a higher level of transparency for investors amid the bankruptcies of several listed companies which posted sound financial results.

The recent case of the Vien Dong Pharmacy Company, where auditors vouched for the company's profitability just before it collapsed, was one of many cases leading to a high level of scepticism on the quality of company audits.

According to Nguyen Hoang Hai, general secretary of the Viet Nam Financial Investors Association, who spoke with Dau Tu Chung Khoan (Stock Investment Magazine), investors were justified to doubt the integrity of auditing results, some of which had been distorted by companies to keep investors.

The risk of investing is inherently higher when decision are based on falsified results, he said, adding that the ministry's draft would help restore investor confidence, according to Hai.

However, Hai urged the State Securities Commission to take a tough stance on violations, adding that violations needed to be announced publicly. The collusion between audit and audited companies must be handled firmly.

The Government's Decree 105/2013 will detail tougher punishments for illegal accounting and auditing, which will take effect from the beginning of next month.

Accordingly, auditors who received or asked for a sum of money from audited companies will be fined from VND10 million (US$470) to VND20 million ($940).

Auditors will be eligible for six to 12 month suspensions, if found colluding with companies to provide distorted results.

Gasoline price lowered by VND250 per liter

The Price Management Department under the Ministry of Finance on Monday evening sent a document to gasoline traders asking them to lower petrol price by at least VND241 per liter by 8pm, and continue using money from the gasoline price stabilization fund at VND200 per liter.

The department’s aim is to share benefits and help consumers by easing burden after spate of recent storms and floods.

As for oil products, the department has asked gasoline traders to continue to seek a profit target of VND100 per liter for diesel oil and kerosene, and continue using the money from the gasoline price stabilization fund at VND300 per liter for diesel oil, VND700 per liter for kerosene, and VND200 per liter for engine oil.

Vietnam National Petroleum Group announced that from 8pm of November 11, it will cut gasoline price by VND250 per liter.

Vietnam to build Euorpean tra fish distribution centre

Vietnam will build a tra fish distribution establishment at Zeebrugge port in Belgium to facilitate its exports to the European market.

The Vietnam Association of Seafood Exporters and Producers (VASEP) and Port of Zeebrugge have recently signed a memorandum of understanding (MoU) in order to set up a Vietnamese tra fish distribution centre within the EU.

The move is part of a cooperation agreement between the Vietnamese and Belgian governments which aims to boost Vietnam’s exports to EU.

Zeebrugge Port will give easier access to Le Havre port in France and Hamburg in Germany, and will also serve as a gateway to the rest of the Euorpean market.

As part of the MoU, a direct sea rout from Vietnam to Zeebrugge Port would be set up next year, which will shorten the transport time and cost for Vietnamese exporters.

With electronic auctions at the port, Vietnamese seafood exporters would no longer have to offer their products at unreasonably low prices or attempt to undercut each other by working individually with importers.

According to VASEP, Vietnam’s tra fish exports are tending to fall as demand is on the decrease. The country made tra fish export revenues of USD1.42 billion during the first ten months of this year, down 1.9% from last year.

Timber industry eyes local furniture market

The Vietnam Timber and Forest Products Association said in context of the economic recession, the timber industry should pay more heed to the local furniture market, which still holds good potential.

Nguyen Ton Quyen, General Secretary of the Association, said despite the economic downturn, timber and wooden products turnover in 2013 increased by 12 percent with revenue at US$5.3-5.5 billion.

For more than 10 years the timber processing industry has seen strong growth. Export turnover of wooden products in 2000 stood at $219 million and in 2013 at $5.5 billion.

Vietnam currently tops Southeast Asia’s wood export, is second in Asia and the sixth biggest timber and wooden products exporter in the world. The industry attracts 300,000 laborers working for 3,900 enterprises.

Due to importing regulations based on wood origin, wood import has declined and enterprises have started to focus on sustainable development by boosting use of wood from cultivated forests.

It is forecast that from 2010 to 2030, timber imports will decrease by 40 percent. For instance, total timber import in 2012 was equal to 90 percent in 2011.

Nguyen Ton Quyen said the industry’s growth and requirements to clamp down on illegal timber trade and regulations on origin of wood, such as the Lacey Act of the US and FLEGT of the EU, will be the driving force in planting trees in the country.

Above all, there should be a connection between forest planters, processers and exporters. If there is close connection between these three parties, wood chips export will be limited and there will be more high quality trees grown for making furniture.

This is necessary, as at present trees in Vietnam do not produce as good quality wood as many other nations.

However, enterprises are eyeing the strong local furniture market and a consumer population of 90 million people.

The domestic furniture market is more or less in the hands of handicraft villages and small and medium enterprises which offer inconsistent quality wooden products.

In addition, foreign wooden furniture items from Singapore, Thailand and China are penetrating the home market.

Nevertheless, it is not easy to break into the local furniture market. The government just focuses on timber and wooden products for export rather than for the domestic market. Exporters enjoy tax exemption while enterprises for local furniture will have to pay Value Added Tax upto 10 percent.

Vietnamese goods fair entices border locals

A fair of Vietnamese goods in Khanh Binh national border economic zone in the southern province of An Giang has drawn over 16,800 visitors from border communes and Cambodia’s bordering province of Kandal with sales totalling over 860 million VND (40,900 USD).

The November 9-11 fair displayed 44 booths operated by 44 exhibitors from in and outside the locality, offering a wide selection of local specialities, household appliances, garments, food and hi-tech gadgets to the public.

Discounts of 10-20 percent, gift offers and usage advice were available.

On the occasion, firms donated gifts to 60 local students and households living in difficulty.

As a joint effort between the provincial Department of Industry and Trade and the Business Studies and Assistance Centre (BSA) in Ho Chi Minh City, the fair was part of the 2013 national trade promotion programme and the campaign “Vietnamese use Vietnamese goods”.

Can Tho helps businesses improve competitiveness

The Mekong Delta city of Can Tho is effectively implementing a programme to help businesses improve their competitiveness during the integration process.

Co-organised by the municipal Industry and Trade Department and the Vietnam Chamber of Commerce and Industry – Can Tho chapter, the programme also helps businesses put forth ways to cut their production costs to reduce product prices, intensify technological renovation and expand cooperation with Ho Chi Minh City, the country’s largest economic hub, in producing such strong products as rice and seafood.

They are also supported to directly trade with both domestic and foreign consumers as well as expand their production scale.

The city prioritises developing companies operating in agricultural and aquatic product processing, forestry, trade, tourism and infrastructure construction sectors, as well as increasing the quality of products to meet international standards.

It invests in applying advanced technologies to harvesting, processing and preservation, and providing information and human resources training for businesses.

Local businesses are also helped to raise their competitiveness in finance, the quality of products, food hygiene and safety, and establish a distribution system and study markets inside and outside the country.

Vietnam’s tea products in spotlight at seminar

A seminar focusing on tea products and the development of the tea sector was held in the northern province of Thai Nguyen on November 10, within the framework of the second International Tea Festival.

Delegates heard speeches on tea processing technology, the building and management of Thai Nguyen tea’s brand name and its consumption market.

Challenges faced by the tea sector as well as measures to preserve and raise the value of tea bushes and products of Thai Nguyen province and Vietnam as a whole were also discussed during the seminar.

With 130,000 hectares of tea, Vietnam is now one of the five biggest tea producers and exporters in the world.

Thai Nguyen province, the second largest tea producer in Vietnam after Lam Dong in the Central Highlands, earns more than 10.7 million USD from exporting 7,000 tonnes of tea each year, accounting for 11 percent of the country’s total tea export turnover.

Thai Nguyen tea products are mainly sold to the US , Canada , China , Japan , India , China ’s Taiwan , Russia , Sri Lanka and Pakistan .

After the seminar, the delegates, made up of scientists, researchers and businesspeople in the tea sector, made a fact-finding tour to some tea fields in the province.

On the day, Nguyen Thi My Ly, a 20-year-old student from the Thai Nguyen University of Economics and Business Administration, won first prize in the 2013 Miss Tea Land Contest.

The contest was held to honour the beauty of women in tea regions nationwide.-

Consumers willing to pay more for GlobalGAP rice

Some 60% of the surveyed consumers agree to pay a higher price for rice meeting GlobalGAP (Good Agricultural Practices), according to a survey of An Giang University.

The survey was conducted with 450 consumers and 20 small and large restaurants and hotels in An Giang Province’s Long Xuyen City, Can Tho City and HCMC on GlobalGAP rice consumption.

According to the survey’s research group, consumers normally favor fragrant, soft and sticky rice and are content with the prices of rice they are using.

However, the loyalty to a kind of rice is not high as consumers say they are willing to use another variety.

Only 10% of the respondents know about GlobalGAP rice. However, 78% say they want GlobalGAP rice to be sold on the market and 60% agree to pay more for GlobalGAP rice.

The survey reveals that restaurants and hotels often use Thai rice meeting food safety and hygiene requirements while only a few know about GlobalGAP rice.

According to restaurant and hotel owners, whether they shift to GlobalGAP rice or not in the future depends on the demand of consumers. If consumers favor GlobalGAP rice, they are willing to pay a price which is VND1,000-5,000 higher per kilogram than the normal price.

Nguyen Thanh Long, lecturer at An Giang University and head of the research group, said that although there are rice products meeting GlobalGAP standards, the certification authorities do not allow the word GlobalGAP to be written on the covers of rice bags. This is, according to Long, a barrier when selling GlobalGAP rice on the market.

Le Thanh Tung at the Cultivation Department said that the products with GlobalGAP and VietGAP certification were under the management of the department. Whether enterprises can print the word GlobalGAP on the product cover or not is decided by two relevant sides, he added.

According to Tung, the current GlobalGAP rice farming area in Vietnam covers only dozens of thousands of hectares. Some enterprises farm rice under GlobalGAP standards one time and then stop the practice due to the high certification cost of around VND200 million for 20 hectares and new certifications required every year.

GlobalGAP rice is in fact rice meeting food safety and hygiene requirements and having clear traceable origins while many Vietnamese consumers assume that GlobalGAP rice is the better-taste one and priced higher. Therefore, once GlobalGAP rice fails to sell at a higher price on the market, enterprises will stop farming, according Tung.

China re-imports Vietnamese live shrimps

Almost 12 months after halting the importing of Vietnamese live shrimps to control the early mortality syndrome (EMS), China has now removed the ban.

According to the National Agro-Forestry-Fisheries Quality Assurance Department (Nafiqad), enterprises keen to export live shrimps to China need detailed information about farming area and a certificate issued by Nafiqad. With these in hand, enterprises will be approved to re-export live shrimps by China’s General Administration of Quality Supervision, Inspection and Quarantine.

China announced to temporarily stop fresh and live seafood from Vietnam, especially live shrimps, in November 2012 citing the EMS outbreak in Vietnam as the reason. After that, many other importing countries issued similar announcements.

The Mexican Secretariat of Agriculture, Livestock, Rural Development, Fisheries and Food issued a ban against frozen shrimps imported from Vietnam and ASEAN countries in April this year. Mexico’s reason was to protect its shrimp farming from EMS which was recurring widely in ASEAN countries.

Similarly, the Philippines’ Bureau of Fisheries and Aquatic Resources decided not to import live shrimps and crustaceans from some Asian countries including Vietnam in May.

However, in July a Vietnamese and U.S. scientist both proved that the virus causing EMS cannot be caught from frozen shrimp.

Based on this, Nafiqad has asked Mexico to remove the import ban. Mexico partly removed the ban after the finding but has not allowed import of live shrimps from Vietnam.

KIA earns customers’ high satisfaction

KIA has surpassed other big names in the auto industry to rank the highest in customer satisfaction owing to good after-sales service in Vietnam, according to a study of Singapore-based market research company J.D. Power.

According to the Vietnam Customer Service Index (CSI) 2013, KIA ranks first with a score 830 out of 1,000, higher than the scores of Ford, Toyota, Chevrolet and Hyundai. Last year, KIA ranked third.

Toyota’s position drops from the first place achieved last year (843 points) to the third place this year (824 points). Meanwhile, Hyundai, Chevrolet and Ford see an increase in their position rankings with Hyundai at 819 points, Chevrolet 821 points and Ford 825 points.

This is the fifth year J.D. Power has conducted the study which measures customer satisfaction with after-sales services, including service facility, vehicle delivery, service quality, service advice and skills of technicians.

According to Bui Kim Kha, director of Thaco Kia, the result recognizes the firm’s unceasing efforts of improving service quality to provide customers with practical and sustainable values.

Since 2007, Thaco Kia has opened 54 stores, with over 30 3S (sales, spare parts, services) showrooms and 12 showrooms meeting global KIA standards. KIA’s widespread and professional service facility system provides customers with not only convenience in vehicle maintenance but also after-sales services meeting global standards.

Thaco Kia has put into operation a customer care call center handling customers’ problems concerning after-sales services. In addition, the firm will continue to expand the 3S showroom system next year and keep improving the professional and friendly facility conforming to its Family-like Care model.

Taxman, BIDV cut deal on online tax payment

The General Department of Taxation and Bank for Investment and Development of Vietnam (BIDV) signed an agreement last Friday in Hanoi allowing customers to make online tax payment.

Under the agreement, the two parties will build a system facilitating the exchange of information on tax payment and allowing electronic signatures in transactions. Given this service, taxpayers can make the payment anywhere and anytime they want even beyond working hours or in weekends, according to a statement of BIDV.

The project will be deployed in two phases. The pilot phase beginning in January next year will be deployed in at least 1,000 enterprises in Hanoi, Bac Ninh, and Vinh Phuc that have so far had permitted online tax clarification. The expanding phase will be built up on the success of the first phase.

First tonne of coal extracted from Khe Cham III mine

Khe Cham Coal Company, a subsidiary of the Vietnam National Coal Mineral Industries Group (Vinacomin), celebrated the first tonne of coal mined at the Khe Cham III coal mine in Quang Ninh province on November 10.

The Khe Cham III coal mine project was initiated in 2006 at a total cost of over VND2.2 trillion (US$104.3 million).

The newly tapped coal mine was designed entirely by Vietnamese engineers. It employs the latest in modern coal mining techniques, allowing the extraction of 2.5 million tonnes of raw coal each year.

Boosting tobacco exports to Africa

Vietnam Tobacco Import Export Company (Vinataba) officials have made a fact-finding tour of Ghana and Sierra Leon to increase cigarette exports to these markets.

Vinataba Deputy General Director Bui Nhat Tien said the company’s cigarettes currently reach Africa through Oriental General Trading INC-OGT (Dubai) under an arrangement negotiated in 2001.

The Vinataba brands exported via OGT in 2012 included Gold Seal (20’, 10’), Fisher, Capital (King size - Inter), Oris (Super Slim), Denver, D & J, and Empire (20’, 10’), with 500 million packs shipped in total.

Ghana consumes around 2.2 billion cigarettes annually. Smoking remains popular in urban areas. London King Size cigarettes claim a 50% share of this market. Twenty-five tobacco brands are available in Ghana, but Gold Seal—distributed by OGT’s main distributor Targetlink—controls 5.2% of the market share.

Sierra Leone, despite its poverty, consumes between 200 and 250 tobacco containers annually (around between 100–125 million cigarettes). OGT’s main Sierra Leonean distributor is BSB Company. OGT dominates 75–80% of the market with brands such as Gold Seal, Capital, and Oris.

According to Tien, Vietnamese companies need to organise promotions targeting these export markets.

Vietnam, Japan cooperate in microchip technology

Vietnamese and Japanese businesses signed a memorandum of understanding (MoU) in HCM City on November 9 to boost technology cooperation.

The MoU marked the 40th anniversary of establishing Vietnam-Japan diplomatic ties and formalises a semiconductor chip manufacturing partnership.

The Kyushu Semiconductor Industries & Electronics Technology Innovation Association (SIIQ), which earns 5% of total global revenue from semiconductors, will cooperate in information exchanges, personnel training, and investment promotion with the National University’s Integrated Circuit Design Research and Education Centre (ICDREC) in HCM City.

The ICDREC also signed a cooperative chip design and production agreement with Japan’s Radrix company.

HCM City Semiconductor Industry Association Secretary General Ngo Duc Hoang said the MoU with the SIIQ will help local firms work with Japanese industry leaders.

He expressed hope more Japanese investors will now turn their eyes towards Vietnamese semiconductor producers, citing the Made-in-Vietnam reputable chips marketed overseas.

Slowed credit growth stymies banking sector

Credit growth has slowed since August this year, despite efforts by banks to reduce lending rates to stimulate demand.

After a positive first six months credit growth has remained largely flat Photo: Le Toan

According to State Bank figures, credit growth as of October this year grew by 6.8 per cent. Counting the risk provision and NPLs handled by the Vietnam Asset Management Company (VAMC), credit growth stood at 7.89 per cent.

However, this credit growth was not much of an improvement over last August’s figures of 6.45 per cent.

In 2013, credit growth initially made good headway by jumping from 0.1 per cent at the end of March, to 3.31 per cent at the end of June this year. In the period from June to August, credit growth was similarly impressive, nearly doubling, but then flatlined, remaining almost completely unchanged from August.

The poor results since August are in contrast with commercial banks’ efforts to reduce lending rates to stimulate consumer demand. The lending rate drops among almost all commercial banks saw Tien Phong Bank reduce their rates all the way to 0 per cent for consumer loans.

According to Pham Huy Hung, chairman of VietinBank, the current lending rate is already a sharp reduction, with the average long term lending rate of some banks at only 10-12 per cent per year.

“However, credit growth is still lower than the economy’s expectations. Capital absorption is low. The cash flow circle is not running smoothly as bad debts persist, despite banks trying to settle them by selling collateral,” said Hung.

According to a Military Bank Securities’ report titled Vietnam Monetary Market, to reach 12 per cent by the end of this year, credit must grow by 5.55 per cent in the year’s last two months, a target the report feels is unlikely to be met.

Similarly, HSBC in its Macro Vietnam report released early last week also expressed concern about slow credit growth in the country. HSBC’s report put year-to-date credit growth at a meagre 6.6 per cent, and stated that “credit growth will likely stay subdued as debt remains unresolved”.

One factor that could help to speed up credit growth is the operation of VAMC. Since beginning to buy NPLs last October, VAMC already bought VND15,000 billion ($714.3 million) of NPLs. According to Nguyen Quoc Hung, vice chairman of VAMC, an additional VND38,000 billion ($1.8 billion) was waiting to be sold to VAMC.

Banks which have already sold NPLs to VAMC, include Agribank, Saigon-Hanoi Bank, Southern Bank, Saigon Commercial Bank, PGBank, GPBank, Maritime, and Techcombank.

Banks of better health such as Vietcombank, Sacombank and ACB also plan to sell NPLs in the near future to improve their balance sheets.

In a related move, last month the Ministry of Finance worked with the Japan International Co-operation Agency (JICA) on an agreement in which Japanese businesses would pump 30 billion yen into buying Vietnamese state-owned enterprises debts.

SHB, VRG renew cooperation deal

Hanoi-based Saigon Hanoi Commercial Bank (SHB) on Thursday announced it had renewed its cooperation agreement with Vietnam Rubber Industry Group (VRG) after seven years of good ties.

Nguyen Van Le (L), CEO of SHB, Tran Ngoc Thuan, general director of VRG, and other people from the two sides pose for a photo after the renewal of a cooperation agreement - Photo: Courtesy of SHB

By the third quarter this year, VRG’s 94 subsidiaries had conducted transactions with 14 branches of SHB in Vietnam and two branches in Laos and Cambodia.

Tran Ngoc Thuan, general director of VRG, said in a statement that SHB had supported the group in terms of finance for its new projects especially projects in rural areas.

The new deal will prioritize financing the farming and processing of rubber latex projects among others in the coming time.

By the end of June this year, the total amount of money deposited at SHB had amounted to VND79.5 trillion and its outstanding loans had reached VND58.48 trillion. The ratio of its non-performing loans (NPL) was over 9%, which the bank said could be reduced to less than 5% by the end of this year.

Bad debts cause bank profits to plummet

Escalating bad debts are eating up banks’ profits.

By the end of September most banks reported negative credit growth while their non-performing loans (NPL) rose sharply stymying their profit goals.

By the end of the third quarter, privately held Navibank reported modest after tax profits of $476,000, down nearly 90 per cent on-year. Profits for the quarter were only $124,000, down 60 per cent.

This was attributed to the bank’s credit contracting 8.95 per cent and deposits by 21.4 per cent.

Bad debts rose sharply to 8.7 per cent of the bank’s total outstanding loans by the end of September. This required the bank to put more capital into loan loss provisions which have tripled against the same period last year.

Due to rising bad debts, Southern Bank saw its after-tax profits fall by 71 per cent to $1.7 million in the third quarter. In the second quarter when bad debts only accounted for 2.78 per cent of its total outstanding loans it reported profits of $9 million. Its total profits by the end of the third quarter were $10.7 million.

Last month Southern Bank signed a contract to sell around $10 million in bad debts to the state-owned Vietnam Asset Management Company (VAMC).

Petrolimex Group Commercial Joint Stock Bank’s (PGBank) bad debts hit a record high in September at 9.5 per cent of the banks total outstanding loans (tantamount to $57 million).

Soaring bad debts chewed through the bank’s after-tax profits which amounted to only $2.8 million by the end of the third quarter.

Bank executives are blaming failing business for their soaring bad debts.

Member of the National Financial and Monetary Policy Advisory Council Tran Du Lich specifically pointed out booming credit growth in 2008-2010, primarily to property businesses who reneged on debts after the market collapsed.

Soaring bad debts are certainly the culprit behind poor profit reports in the first three quarters and at present there seems to be no immediate solution.

“Controlling risk on new loans is doable, but it is very difficult to avoid old loans from turning into bad debts as firms are still struggling with their businesses and repayments,” said NamA Bank general director Tran Ngo Phuc Vu.

In the first half of 2013 NamA posted pre-tax profits of $2.4 million making it virtually impossible for it to achieve its pre-tax profit goal of $19 million.

DongA Bank reported modest credit growth of 1.2 per cent in the first nine months though its bad debts also rose quickly, making its goal of $47.6 million in pre-tax profits unrealizable, said bank executives.

VietinBank credit package comes just ahead of share issue

Leading Vietnamese partly private lender Vietinbank launched a $476 million credit package on November 8 to provide enterprises with cheap loans.

The package, in partnership with the CEO Club Ho Chi Minh City, supplies VND loans at an annual interest rate of 6-8 per cent and USD at 2.5-4 per cent. Short-term loans were also made available at 5 per cent a month.

In related news Vietinbank plans to issue 162.5 million shares on the Ho Chi Minh Stock Exchange on November 11, according to a statement put out by the bourse.

Japan’s Bank of Tokyo-Mitsubishi UFJ bought a 20 per cent stake in VietinBank for around $740 million in 2012.

Wind power project gets big credit

Vietnam Bank for Development on Thursday signed an agreement with Cong Ly Construction-Trading-Tourism Co. to provide loans totaling VND2.7 trillion to develop the second phase of its wind power project in Bac Lieu Province’s coastal areas.

In this second stage, Cong Ly will build 52 wind turbines at a total cost of VND4.07 trillion, or nearly US$200 million, said a source from the company.

In the first stage, ten turbines have been commissioned, generating 10 million kWh of power to the national grid.

The project comprises of 62 turbines with a total output of 99MW and a total cost of VND5.2 trillion. The whole project will be completed in December next year, according to the company.

Jewelry enterprises await return of gilded age

Tough conditions at home have made deep cuts into jewelry enterprises, but many said on Thursday on the sidelines of a jewelry expo that they were still pinning hopes on the bright prospects in the coming years when the economy recovers.

Giants like Phu Nhuan Jewelry Company (PNJ) and Saigon Jewelry Company (SJC) see their profits this year tumbling, but they are still investing heavily in the industry in anticipation of better business in the future.

PNJ as the most famous goldsmith in the country reported its third-quarter profit plunging 59% year-on-year. Returns from financial investments in the quarter fell 42%, so the sharp fall in profits was attributed to the company’s jewelry segment.

PNJ said that due to the falling purchasing power triggered by the country’s economic woes, the company had to reduce its profit margins to attract buyers, resulting in a sharp contraction in profits.

Nguyen Thi Cuc, deputy general director of the company, told the Daily that multiple difficulties have affected her company’s business. She cited the ban by the central bank to import gold as material for jewelry making, as well as another ban on taking out bank loans to buy gold. “These are major hurdles that PNJ has to overcome in the coming time,” she said.

But PNJ is still investing in the industry, showing its commitment to the core business.

The director of an investment fund told the Daily he had just acquired more shares of PNJ despite the company’s falling profit, which he said was reasonable given the economic recession. He highly praised PNJ for investing more into research and development and its team of designers, as well as hiring a consultant to restructure the company.

At SJC, the jewelry business only began in 2008 when the company decided to expand business beyond bullion trading. But the restructuring is now still in the early stage, and the company foresees many difficulties ahead as the central bank tightens gold trading, said Do Cong Chinh, CEO of the company.

Chinh said SJC had developed a jewelry factory in Tan Thuan Export Processing Zone in District 7, which turns out sufficient products for its 23 stores and other distributors. The company has also recruited more designers to manufacture more high-quality, sophisticated products.

Chinh admitted that jewelry contributed little to the company’s profits, but expect positive changes in the coming years. SJC has lately also boosted jewelry exports, and have seen encouraging signs from foreign markets, he said.

At the Vietnam International Jewelry Exhibition that opened in HCMC on Thursday, Dinh Nho Bang, vice chair of the Vietnam Gold Trading Association, said small jewelry makers shunned the event this year due to difficulties they are encountering. Their absence is, however, offset by the arrival of many foreign jewelry processors, he said.

Bang said most jewelry enterprises are looking forward to the future despite the current problems, He also proposed authorities to quickly remove difficulties for jewelry enterprises, otherwise the industry will lose to foreign competitors on the domestic market.

The Vietnam International Jewelry Exhibition is taking place at Phu Tho Indoor Stadium until next Monday, attracting 130 exhibitors compared to 140 in last year’s event.

At the opening day, SJC introduced a new jewelry brand named SJC DiaGold, targeting high-income people.

Kien Giang strives for 185 million USD aquatic exports

The southern province of Kien Giang has set a target of earning over 60 million USD from exporting aquatic products in the remaining months of this year, towards fulfilling its yearly plan of 185 million USD.

To reach the goal, the province will continue increasing trade promotion, introducing its products in regional and international markets as well as enhancing cooperation with other localities and foreign partners.

It plans to participate in the 2013 Mekong Delta Economic Cooperation Forum (MDEC), slated for November 21-24 in Vinh Long province, and organise several trade fairs in the locality to introduce its products to domestic and foreign enterprises.

Beside, the province will also create favourabe conditions for businesses to access capital sources, while issuing policies on tax exemption, reduction and extension to promote production and export of goods.

Since the beginning of this year, Kien Giang’s seafood exports hit over 127 million USD, up 10 percent over the same period last year, and equivalent to 68.6 percent of the yearly target.

Local exporters have set up trade ties with their clients in more than 40 countries and territories all over the world. China, the US, Japan and Russia are their key markets.-

Vietnam’s coffee output forecast to drop

Vietnam’s total coffee output for the 2013-14 crop is forecast to drop by 15 percent against the previous season.

With 530,000 hectares designated for coffee growing, the country produces 1.2-1.5 million tonnes of coffee a year.

Vietnam’s coffee exports from the 2012-13 crop fell in terms of both volume and value, with 1.4 million tonnes being exported for 3.03 billion USD, contributing 2% of GDP.

The coffee industry will also see a decline in export prices, predicts the Vietnam Coffee and Cacao Association (Vicofa).

The association says adverse weather is behind the drop in production. The implementation of value-added tax refunds is also a cause of difficulties for both coffee growers and exporters.

Furthermore, the industry has faced a lack of mass production over the past three years because 90 percent of coffee farms are small-scale with an average area of less than two hectares, hindering the application of science and technology from growing, harvesting to processing.

To ease difficulties for the industry, Vicofa emphasised the need of financial support from banks. It also asked for an early launch of a Vietnam coffee development fund to buy coffee for reserves. It is part of an effort to keep domestic and for-export prices stable and protect coffee growers.

Apart from offering financial support to coffee exporters, it is necessary to provide soft loans or investment for coffee growers, ensuring stability of material input for production.

Coffee is one of Vietnam’s major hard currency earners, generating jobs for millions of people as well as ensuring socio-economic development in the Central Highlands, the country’s largest coffee growing area.-

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

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