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BUSINESS IN BRIEF 13/9

HCM City wants bio-fuel sold at more gas stations; EVN says extra 700MW for national grid this month; Cashew firms decry shortage of material; Draft investment law bans 11 business areas; Local steel firms concerned about Russian imports

Market info will be richly available at export forum

Business information about potential export markets will be richly available at the 2014 Export Forum this Friday in HCMC, with trade counselors from several countries coming to answer enterprises’ queries, said the organizer.

The Export Forum is the annual event organized by the HCMC Investment and Trade Promotion Center (ITPC) to assist enterprises in exploring potential export markets, and identifying trends and requirements of markets they want to penetrate.

According to ITPC, its discussions with business associations and corporations in preparation for the forum showed that textile, garment, footwear, woodwork and seafood enterprises are boosting exports to traditional markets such as the U.S., the EU and Japan. And such firms want to be kept abreast of market developments.

In particular, textile and garment enterprises also eye markets that are to join the Trans-Pacific Partnership (TPP) and want to promote exports to ASEAN countries.

Meanwhile, in addition to increasing exports to the ASEAN market, woodwork enterprises said they would seek ways to bolster shipments to Eastern Europe and the Middle East.

Due to many changes in the EU market, Vietnam’s footwear industry is shifting attention to markets like the U.S., Japan and Africa. The number of footwear orders is forecast to rise thanks to orders transferred from China and Indonesia to Vietnam to enjoy tax incentives under the General System of Preferences (GSP) of the EU, which took effect on January 1, 2014.

The U.S. is still the leading importer of Vietnamese seafood products, making up 22.8% of Vietnam’s total seafood sales. Other big importers of Vietnam’s seafood are Japan, South Korea and China.

China is Vietnam’s biggest rubber importer, followed by Malaysia and India. Local rubber enterprises are striving to boost exports to the Indian market as the auto industry in India is forecast to recover, and thus India’s demand for natural rubber to manufacture tires is expected to soar in the coming years.

In addition to the U.S. and the EU, cashew enterprises are targeting such potential markets as Western Asia, South Asia and Japan. Meanwhile, Vietnam’s vegetables and fruits have good prospects in the Japanese and South Korean markets.

Ho Xuan Lam, deputy director of ITPC, said the organizer was aware of markets local enterprises are targeting at, so it has invited to the 2014 Export Forum representatives of foreign trade offices, Vietnamese trade counselors abroad and foreign counselors in Vietnam to answer questions of enterprises, provide information and help them seek partners.

Difficulties local enterprises encounter and their proposals will be reported to the Ministry of Industry and Trade, the HCMC government and relevant agencies, Lam said.

Sectors like textile, garment, footwear and woodwork are growing well but supporting industries are still inadequate, and thus enterprises will not be able to make the most of new trade agreements Vietnam is about to sign.

Besides, information about free trade agreements Vietnam are negotiating has not been widely disseminated to enterprises.

HCM City wants bio-fuel sold at more gas stations

Representatives of relevant agencies and fuel trading firms in HCMC have met to discuss ways to boost the sale of E5 bio-fuel at more filling stations here in the city.

There are around three months left for the city to widely distribute E5 as told by the Government, but only 29 out of 504 pumping stations retail the bio-fuel. Some traders have had no station selling this fuel since 2010.

A report by the HCMC Department of Industry and Trade showed that since a pilot scheme for selling E5 was initiated in October 2010, a mere 29 filling stations citywide have been selling E5. Local fuel trading firms have pledged to put into service 29 more E5 filling stations towards the year-end, bringing the total number to 58.

In fact, a number of fuel trading firms in the outlying districts of Hoc Mon, Can Gio and Cu Chi have had to shut down their E5 pumps due to losses in the past four years.

Fuel trading firms are now awaiting the Ministry of Industry and Trade’s detailed instructions about a road map for E5 distribution in December to know if distributors and agents get any support and whether the price mechanism of E5 is different from that of other fuel products or not.

According to petroleum wholesalers, the selling of E5 is costlier than the standard A92 petrol and they cannot force agents to sell E5 if agents make little profit.

Le Ngoc Dao, deputy director of the HCMC Department of Industry and Trade, said the department would continue asking the ministry to issue a guiding document on specific mechanisms and support for firms selling the bio-fuel.

Fuel trading firms said E5 should not be available together with A92 gasoline at the same station because retailing different types of fuel would make it costly to equip extra gas pumps.

Dang Vinh Sang, general director of Saigon Petro, said the company and other wholesalers wanted E5 to be sold like what Quang Ngai Province is doing and stopping distributing A92 from December.

However, the department questioned if fuel trading firms are able to supply sufficient E5, but no fuel traders could answer that question at the meeting as they have yet to know the real demand for E5.

The department targets to have one or two filling stations selling E5 in each district towards the year-end.

EVN says extra 700MW for national grid this month

Vietnam Electricity Group (EVN) said it would be putting into operation the second generator of Vinh Tan 2 thermal power plant and the first generator of Song Bung 4 hydropower project this month to supply an additional 700MW for the national grid.

Besides new generators put in place, EVN will make the most of operational hydropower, and coal- and gas-fired power plants in September to ensure power supply for southern Vietnam.

Earlier this year, the first generator of Vinh Tan 2 Thermal Power Plant in Binh Thuan Province came online to provide 622MW for the national grid. EVN started work on Song Bung 4 hydropower project with two generators having a combined generation capacity of 156MW in June 2010.

EVN plans to sign an engineering, procurement and construction (EPC) contract for the extended Duyen Hai 3 Thermal Power Plant this month. This US$870-million project has an initial capacity of 600MW and is scheduled to generate electricity from 2019.

Duyen Hai 3 is one of the three power projects located at the Duyen Hai-Tra Vinh Power Center with a combined generation capacity of 4,200 MW. The other projects are Duyen Hai 1 and Duyen Hai 2 with each having a generation capacity of 1,200 MW.

Cashew firms decry shortage of material

Domestic cashew processing companies have found themselves in hot water as many foreign crude cashew suppliers have failed to make deliveries as contracted, prompting a shortage of material for processing.

The Vietnam Cashew Association (Vinacas) recently said many international raw cashew suppliers did not observe the delivery schedules specified in the contracts, or the quantity and quality of shipments are not aligned with signed agreements.

Parties made deals when crude cashew prices were low. Therefore, foreign exporters had a tendency to cancel contracts to avoid losses at the time of delivery as prices climbed sharply.

Vinacas is now waiting for reports about the shortfall of cashew compared to the signed contracts from its members.

In a written request sent to domestic businesses, this association also asked for the names of discrediting cashew exporters to make a black list to warn the business community worldwide.

According to the Ministry of Agriculture and Rural Development, Vietnam imported 406,000 tons of crude cashew worth US$418 million in the first eight months of this year, down 3% in volume yet up 4.5% in value. This year’s raw cashew import is expected to be around 500,000 tons, mainly from Cambodia, Indonesia and African countries.

In January-August, Vietnam exported 188,000 tons of cashew nuts, obtaining over US$1.2 billion, up nearly 14% in volume and 15% in value compared to the same period of 2013.

The seven-month export price of cashew nuts averaged out at US$6,438 per ton, rising 1.4% year-on-year. The U.S., China and the Netherlands account for 58% of Vietnam’s cashew nut export value.

Nam Con Son Pipeline conducts gas leak drill

Nam Con Son Gas Pipeline Company on September 9 conducted a drill to fight a leak on its gas pipeline around 300 kilometers off the coast of Vung Tau City.

Hoang Minh, general director of Nam Con Son Pipeline Company, told the Daily that the national energy security could be seriously undermined if any incident hit the gas pipeline. Therefore, the company has practiced the drill simulating a real gas leak to ensure the safety of the pipeline.

Minh recalled a gas leak on the gas pipeline system in August last year. However, the operating unit of the company had promptly fixed it within 48 hours owing to the available process of activating the emergency response system.

Energy experts noted that if the Nam Con Son gas pipeline had any unexpected supply interruption, Vietnam Electricity Group (EVN) would be forced to resort to oil to generate power with a cost of VND400 billion a day.

The Nam Con Son gas pipeline with total investment of US$1.3 billion is now jointly operated by PetroVietnam Gas Corporation with a majority interest of 51%, Russian oil firm Rosneft with 32.67% and Anglo-French company Parenco with 16.33%.

The gas pipeline conveys 22 million cubic meters of gas onshore a day to supply gas-fueled power plants that are responsible for one-third of the nation’s electric power output.

Draft investment law bans 11 business areas

The latest draft law on investment sent to the National Assembly (NA) Standing Committee for discussion on September 9 lists 11 prohibited business areas compared to eight banned areas in the earlier draft.

In fact, there are only two more business areas added to the prohibition list: trading of cultural products jeopardizing national security and breaching social morality; and trading of counterfeit and toxic products harmful to human lives and health, except for products listed in the conditional business areas.

Meanwhile, the banned area of human trafficking and prostitution mentioned in the initially proposed list is now split into prostitution business and trafficking of humans and human organs.

The updated draft only suggests banning trading of GMO animals instead of GMO products in general as proposed earlier, which means production of genetically-modified plants such as corn can be approved.

Eleven business areas which are to be banned include:

- Trading of military weapons and equipment; specialized military and police vehicles; military equipment for the armed forces; specialized components, parts, accessories, equipment, specialized technology to produce such items, except for ones produced on the State’s orders;

- Trading of drugs prescribed in Appendix 1 of the law, except for the use for analysis, testing, scientific research, medicine, criminal investigation under the provisions of the State;

- Trading of chemicals in Table 1 in accordance with the international conventions in Appendix 2 of the law;

- Trading of firecrackers, except for signal flares, toy crackers under the provisions of the State;

- Prostitution business;

- Trafficking of humans and human organs;

- Trading of wild plants and animals mentioned in Appendix 1 of the Convention on International Trade in Endangered Species (CITES), endangered, rare plants and animals of Group 1 mentioned in Appendix 3 of the law;

- Activities related to human cloning;

- Trade in GMO animals;

- Trade in cultural products jeopardizing national security and breaching social morality;

- Trade in counterfeit and toxic products risking human lives and health, except for products listed in the conditional business areas portfolio.

Dairy industry focuses on tech, product diversity

Vietnamese dairy firms are stepping up investments in technology and manufacturing facilities to diversify their products and enhance quality to meet the consumers’ rising demand, heard a seminar in Hanoi on September 9.

Vu Ngoc Quynh, general secretary of the Vietnam Dairy Association (VDA), was quoted by Vietnam News Agency as saying “the local dairy industry has made remarkable breakthroughs in terms of processing and cow breeding technologies.” He was speaking at the seminar on development and diversity of dairy products for public health co-organized by VDA and the Vietnam Association of Food Science and Technology in Hanoi.

Many dairy plants comparable to the world’s advanced dairy facilities have been established in Vietnam such as two liquid milk factories by Vietnam Dairy Products Company (Vinamilk) worth a total of VND2.4 trillion, Quynh added.

Vinamilk has also built another plant producing powdered milk for children with an annual capacity of 54,000 tons a year. It is also equipped with a closed automatic production system meeting international standards.

Statistics of the Ministry of Industry and Trade showed that powered milk output increased by nearly 5.5% in the year’s first five months compared to the same period last year. Meanwhile, the national herd is expected to increase to 240,000 dairy cows next year and 400,000 in 2020.

Vietnam is one of a few Asian nations to have exported dairy products. The country shipped abroad a wide variety of dairy products worth over US$230 million last year with Vinamilk accounting for a dominant share of US$210 million, Quynh noted.

However, he said although Vietnam is a dairy exporter, the local dairy consumption remains lower than in South Korea, Japan and other regional nations.

Figures recorded last year indicated that every Vietnamese consumed an average 51 kilograms of milk while a Japanese person consumed more than 81 kilograms. This is one of the reasons behind the malnutrition of the Vietnamese people as seen in their height far lower than the average in Southeast Asia.

Nguyen Quoc Khanh, executive director of Vinamilk, said the company has policy to aid dairy farming households in breeding dairy cattle and build large-scale and modern farms with thousands of cows.

It also has a number of dairy farms meeting GlobalGAP (Good Agricultural Practice) located in the provinces of Nghe An, Lam Dong and Tuyen Quang.

One-stop customs mechanism planned by year-end

National Single Window, a one-stop customs mechanism, is expected to get into full swing in December this year as part of the Government’s moves to simplify customs procedures for enterprises.

As scheduled, the ministries of Finance and Transport will prepare for the one-stop customs mechanism to come online this November. In the initial stage, only certain registration procedures for ship arrivals and departures will be applied.

The electronic administrative system will be connected to the ministries of Finance, Transport, and Industry-Trade in the first phase to be implemented until the end of 2014 before other ministries and agencies.

Enterprises will be allowed to send their files to the system so that ministries and agencies can process them online and issue licenses in line with relevant procedures and approvals by participating agencies.

Earlier, Deputy Prime Minister Vu Van Ninh, head of the national steering committee for the one-door customs mechanism, signed Decision No.56/QD-BCDASW assigning duties to relevant ministries and agencies in preparation for the launch of the system in December after informing businesses of their connections to the system.

The new mechanism enables individuals and organizations involved in import and export activities to submit information and standardized documents to only one address. Initially, it will be implemented on a pilot scheme for the import, export and transit of cargo and transportation means in accordance with the Customs Law.

Belgian region keen to promote investment in Vietnam

A seminar was held in Ghent, Belgium’s East Flanders region on September 10 to promote investment in Vietnam under the framework of the Accenta International Trade Fair 2014.

During the fair, speakers described Vietnam as a fast growing economy with political stability, low-cost labour force and open market.

With many advantages, Vietnam is capable of becoming one of the biggest economies in the 21st century. To fulfil the target, Vietnam should boost economic restructuring towards an industrialised economy to attract foreign investment.

Belgian Ambassador to Vietnam Angelet Bruno emphasised that economic relations between Belgium and Vietnam have developed constantly with bilateral trade increasing by 70% in the 2003-2012 period. Belgium is Vietnam’s sixth European trade partner with two-way trade exchange reaching EUR1.2 billion each year.

Mr Ralph Moreau, Economic and Trade Counsellor for the Flemish Region from Flanders Invest & Trade (FIT) said Vietnam’s localities have many advantages to attract investment from companies in the Flanders region. Flanders is cooperating with HCM City and the central highlands of Lam Dong to develop sea ports and grow flowers and vegetables respectively. Additionally, the region has also helped Vietnam in the educational field.

Lawyer Luong Van Ly, Adviser and Head of Investment and Trade Desk of VLT Lawyers introduced participants about Vietnam’s economic and investment policies in Vietnam. The country is striving to improve investment environment to further attract Belgian investors in particular and others around the world.

This year, Vietnam’s Mekong Delta Can Tho city is the honorary guest of the ACCENTA Flanders International Trade Fair in 2014, which opened in Ghent, Belgium on September 6.

Tokyo Keiki launches new factory in High-Tech Park

Japan based Tokyo Keiki Precision Technology on September 10 inaugurated a US$40 million 30,000 sq metre facility producing high tech electromagnetic switching valves and high pressure pane pumps in the central city of Danang.

General Manger of Tokyo Keiki Technology said the company decided to invest in Danang as a result of sound relationship between Vietnam and Japan as well as abundantlabourforce in the locality.

The company will expand market share in developing countries in a bid to meet growing demand for hydraulic equipment, he noted.

Minister of Construction urges more low-income housing

Minister of Construction Trinh Dinh Dung has asked contractors to prioritise invests in low-income housing projects, as 90% of citizens can only afford the homes in this sector.

According to Dung, even though these domiciles are listed as homes for low-income people, they are the only residences within the reach of most Vietnamese citizens. He said that 90% of citizens have a need for apartments costing less than VND15 million (USD714) per square metre.

"We still can't meet the huge demand. There are still many poor families in the cities and in the industrial zones. I once saw a five-member family living in a 16-square-metre house," he added.

Dung proposed that local authorities in Hanoi create more favourable conditions for investors to convert commercial spaces into social housing. He said these homes would be prioritised to meet the real demands of disadvantaged families.

On September 9, the minister, along with the authorities of Hanoi People's Committee, conducted inspections of several social housing and dormitory projects. The minister showed his approval with the quality and suggested that contractors also provide furniture at low cost.

Nguyen Ngoc Tuan, vice chairman of Hanoi People's Committee, said Hanoi is one of the cities to most quickly implement low-income housing projects. As of now, the city has 44 projects.

However, Deputy Minister of Construction Nguyen Tran Nam said that according to the approved plan, Hanoi must have at least 20,000 low-income apartments by 2015. Even with 15,000 apartment projects, there is little in the works, making the aspirations for next year seem difficult to attain. Nam asked that Hanoi municipal authorities propose new plans to investors.

American investors fired up over TPP

A wave of American investments is hitting Vietnam in anticipation of the Trans-Pacific Partnership Agreement.

According to the 2015 ASEAN Business Outlook Survey of American Companies recently released by the American Chamber of Commerce in Singapore and the US Chamber of Commerce, 79 per cent of 77 respondents in Vietnam said the Trans-Pacific Partnership Agreement (TPP) would help them boost regional trade and investment. This is far higher than the ASEAN average of 51 per cent.

In addition, 62 per cent of respondents in Vietnam said the TPP would affect their investment plan in the country and the region. This rate was also the highest among all ASEAN member states and also much higher than the bloc’s average of 40 per cent.

US-backed agricultural firm Dekalb Vietnam’s corporate engagement lead Nguyen Hong Chinh told VIR that “We’re committed to invest another $1 million over the next five years in Vietnam into corn research and development.”

Nguyen Viet Ha, managing director of the US’ investment consultant Bower Group Asia Inc, told VIR that US enterprises, especially those producing goods for export to the US, such as garments and textiles, footwear and aquatic products, were seeking investment opportunities in Vietnam to benefit from the TPP’s investment and trade-related incentives.

Expected to be clinched next year, the TPP is a multilateral free trade pact between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Once signed, the pact will cover almost 40 per cent of global gross domestic product.

Under the TPP, all tariffs for exported agricultural products would be reduced to zero per cent, if 70 per cent of the products are sourced from TPP members.

Kevin Gardner, senior director of Walmart Global’s International Corporate Affairs, told VIR that Walmart was a strong advocate of the TPP negotiations which could greatly benefit it in the Vietnamese market.

“This comprehensive trade agreement provides market access and will bring a wide range of Vietnamese goods and agricultural products to consumers in our key retail markets in the US, Canada, Mexico, Japan, and Chile,” he said.

Also under the survey conducted in May and June, Vietnam was the second most listed location for business expansion in ASEAN, after Indonesia.

Specifically, 41 per cent of respondents select Indonesia, while 37 per cent select Vietnam, followed by Myanmar (35 per cent), Malaysia (32 per cent), Thailand (30 per cent), the Philippines (28 per cent), Cambodia (21 per cent), Singapore (18 per cent), Laos (13 per cent) and Brunei (7 per cent).

Some 66 per cent of respondents expected profits to increase in Vietnam during 2014, while 82 per cent predicted profits in 2015. 75 per cent said they would expand production in Vietnam in order to diversify their customer base, make use of readily available human resources and exploit the reasonable production costs. Some 57 per cent said they would increase their workforce in Vietnam.

Vietnam’s strengths include positive sentiments toward the US (66 per cent), the availability of low cost labour (66 per cent), and the level of personal security (61 per cent).

Vietnam registered the highest percentage of respondents who plan to diversify their investments from China into Vietnam, from 22 per cent in 2013 to 27 per cent in 2014. Meanwhile, 75 and 45 per cent of surveyed companies said business conditions were more favourable when compared to Asian and Eastern countries, respectively.

Vietnam brewers gather to pinpoint challenges of beer ban regulations

The Ministry of Industry and Trade’s draft decree on managing beer production and consumption contains many unrealistic and infeasible regulations that need to be either amended or omitted, local brewing companies said at a conference on Tuesday.

Vietnamese brewers were invited by the ministry to the event to give feedback on the draft decree, which aims to ban beer sales on the sidewalk and to people under 18 years old, as well as pregnant and lactating women.

The ministry has also proposed forcing beer companies to place stamps on their products to fight counterfeits, warn drinkers of alcohol abuse, and prevent tax evasion.

The draft document was announced early this month and immediatelygreeted with objections from brewers, beer vendors, and drinkers, who say it lacks feasibility.

The ministry thus held the conference in Hanoi, asking brewing companies “to share solutions to improve the decree, instead of criticizing it.”

Nguyen Van Viet, chairman of the Vietnam Beer Alcohol Beverage Association, said it is impossible to tell whether a woman is pregnant or breastfeeding and refuse to sell beer to her.

“We should not put things we cannot control into a decree,” Viet said. “This should only be stated in educational or warning documents.”

Lu Bang, from the Department of Industry and Trade in the central coastal city of Da Nang, also believes that it is infeasible to ban beer sales to pregnant or lactating women.

Bang, however, showed support for the ban on sales to people under 18, saying this is “necessary for a civilized society.”

$75.31 million to stamp beer products

Meanwhile, Vu Xuan Dung, deputy general director of the Hanoi Beer, Alcohol, and Beverage JSC, blasted the regulation on stamping beer products as “too costly,” adding that no country forces producers to place warning labels on liquor products.

Vietnam produces some three billion liters of beer a year, meaning 10 billion units (cans or bottles) would need to be stamped, Dung said.

Given that a stamp costs VND160, the total expense for stamping every unit would be VND1.6 trillion (US$75.31 million) a year.

“If a regulation is costly and ineffective, we should consider whether or not applying it is a good idea,” he said.

Nguyen Tien Sy, deputy head of marketing of the Saigon Beer-Alcohol-Beverage JSC, calculated that stamping its products would cost the company VND800 billion ($37.65 million) a year.

“This will greatly affect our salary fund and social costs,” he said, adding that it could also “create a market for fake stamps.”

Trinh Thi Hang Nga, head of the legislation department under the Ministry of Transport, said she wonders how regulatory agencies would detect breaches of beer regulations and enact sanctions on the violators.

After hearing feedback from the delegates, Phan Chi Dung, head of the Light Industry Department, the main composer of the controversial draft decree, rejected the notion that banning sidewalk beer sales is impossible.

“Some localities, such as Da Nang, have successfully enacted the ban,” he said.

Dung added, however, that the regulation “will be reconsidered and may be omitted.”

As for the beer stamp regulation, the official said that citing large beer production is a weak argument, as cigarettes, whose annual production is around four billion packs, are currently stamped.

“We will report this to the government, and will enforce the regulation if it is green-lighted,” he said.

Ethanol fuel to go available nationwide next year

Ethanol gasoline blend or bio gasoline E5 will be mandatorily used in seven provinces and cities of Vietnam from December and available nationwide from next year-end, according to a plan approved by the Prime Minister.

The seven provinces and cities include Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, Can Tho, Quang Ngai and Ba Ria-Vung Tau.

Gasoline E5 is a blend of five percent ethanol and 95 percent traditional gasoline, said Dr. Pham Huu Tuyen from the Hanoi University of Technology.

The bio gasoline helps increase engine power, reduce fuel consumption and exhaust fume emission. It has already been used in developed countries, aiming to protect the environment, he said.

In Vietnam, input costs for production of the gasoline E5 are rather high making it unattractive enough to encourage consumers.

The Ministry of Industry and Trade has proposed the Government to reduce some fuel tariffs and fees, aiming at lower E5 gasoline price and demand stimulation of the new fuel.

Eight more enterprises receive customs preference

Eight more companies have been granted priority enterprise status by the General Department of Customs (GDC), giving them preference for customs procedures over other companies.

The companies include Samsung Vietnam, Minh Phu - Hau Giang Seafood Processing Company, Soc Trang Seafood Company, UMC Vietnam, Hoa Sen Group, Hoya Glass Disk Vietnam, Yazaki Haiphong Vietnam and Sao Ta Food Company.

According to the GDC, these companies will be entitled to huge advantages including simplified customs procedures, quick customs clearance, reduced charges, and increased business efficiency.

GDC Deputy Director General Hoang Viet Cuong said the priority enterprise programme reflects a change of mindset, from considering enterprises as those to be administered, to regarding them as partners.

Cuong said the GDC would expand the programme in the coming period to also include logistics firms.

So far the GDC has granted priority status to 24 enterprises and is planning to raise the total to 30 by the end of the year.

Local steel firms concerned about Russian imports

Steel companies in Vietnam might find life tougher as Vietnam would have to slash import tariffs for over 167 steel products to 0% next year if the Free Trade Agreement (FTA) between the nation and the Customs Union of Belarus, Kazakhstan and Russia (VCUFTA) is concluded.

The VCUFTA is one of more than 10 bilateral and multilateral FTAs which Vietnam is currently negotiating, and is expected to be finalized early next year. The nation has finished six rounds of talks over the VCUFTA, and will join the seventh round planned in Russia on September 15.

In previous rounds of negotiations, the parties concerned agreed on the general structure of the FTA and its implementation roadmap. Due to little principle difference, Vietnam and its partners have reached a common voice for most issues, except for steel and oil and gas sectors.

Chu Duc Khai, vice chairman of the Vietnam Steel Association, said Vietnam is ready for competition from various sides but the competitiveness of local enterprises are still weak and are not at the same level although their production scales have been improved over the past years.

The local steel industry has seen supply far surpassing demand while many new projects will be put into operation soon, make competition among local steel makers stronger. Therefore, they will face hefty challenges if many FTAs are in place while authorities have not given timely support.

The association has been concerned about steel imports from Russia. It said at present, with the total annual output of 68.7 million tons (ranking fifth worldwide), advanced technologies and an 8.1% export market share in Asia, Russian steel mills would make a stronger presence in Asian markets, especially Vietnam, if the VCUFTA is passed.

When tariff barriers between Russia and Vietnam are removed, local steel companies will have to cope with tougher competition with Russian firms.

Khai clarified that the steel industry will not ask for a protection mechanism but a tariff reduction roadmap in five or 10 years. Besides, it is necessary to calculate the list of steel products subject to tax incentives.

The Ministry of Finance during the six rounds of negotiations suggested that the steel sector enjoy a tax rate of 0% right after the FTA takes effect and other sectors get tariff exemptions after a maximum of five years.

Meanwhile, Russia wanted to cut tax on all 167 goods codes in the sector to 0% after the FTA comes into force, including those with a huge surplus in the country such as steel ingot, construction steel, steel pipe and plated iron sheet.

Experts said tariff reductions for those products are being made gradually under the effective FTA between China and ASEAN nations. Some imports will have to be entitled to 15% in 2018, and steel ingot imports will only enjoy this tax rate in 2020.

Myanmar calls for Vietnamese investments

Visiting Speaker of the Assembly of the Union of Myanmar Thura U Shwe Mann on Sunday called on Vietnamese firms to strengthen investment and trade ties with Myanmar as the country is making the business environment more investor-friendly.

At a meeting with the Association of Vietnamese Investors in Myanmar (AVIM) on Sunday during his official four-day visit to Vietnam, the Myanmar dignitary said both countries have similar natural conditions and culture, which are favorable for nurturing business ties.

Myanmar is actively pushing reform in every aspect, focusing on institutional reform and market expansion to fuel economic development and improve local people’s living standards, U Shwe Mann said. The country is also learning experiences from other nations in bettering its legal framework and simplifying administrative procedures to attract more foreign investors to Myanmar, the speaker noted.

As many as 56 Vietnamese businesses have received investment certificates to do business in Myanmar and seven projects worth US$600 million have been licensed in the country, the Vietnam News Agency reports, citing data from AVIM.

These projects included Hoang Anh Gia Lai Group’s complex of hotels, apartments and offices worth US$440 million and Anh Sao Viet Pharmaceuticals Corporation’s drug making facility worth US$23 million.

Tran Bac Ha, board chairman of Bank for Investment and Development of Vietnam (BIDV) who also serves as AVIM chairman, hoped to raise the association’s investment in Myanmar to around US$1.5 billion by 2015, making Vietnam one of the five largest foreign investors in the country.

AVIM members at the meeting proposed the Myanmar’s Government and parliament build a liberal legal system and set out supportive incentives for foreign investors.

The association also hoped Myanmar will accelerate licensing Vietnamese projects in the fields of textile, agriculture, health care, energy, building material production, finance and banking.

Established under an initiative by BIDV, AVIM comprising of 76 members such as PetroVietnam, Vietnam Airlines, Hoang Anh Gia Lai Group and Song Da Corporation has sent nearly 5,000 Vietnamese businessmen to Myanmar to sound out investment prospects.

Processors to be forced to sign contracts with shrimp growers

Shrimp processing enterprises will have to own shrimp farms with output accounting for at least 10% of their capacity and secure contracts to buy unprocessed shrimp from farmers if a new shrimp farming and processing management plan is approved.

The Vietnam Directorate of Fisheries is gathering comments on the plan aimed at better managing shrimp farming, processing and export in the Mekong Delta region.

As explained by the directorate, it is urgent to devise such a plan to fully tap shrimp resources and change shrimp farming practices to reduce risks in environment, diseases and market volatility.

The directorate calculated there had been nearly 596,000 hectares under shrimp farming in the Mekong Delta as of last year, nearly 91% the country’s total. Tiger prawn made up over 580,000 hectares.

Shrimp bred in brackish water in the region reached 431,570 tons, including 133,500 tons in Ca Mau Province, 85,630 tons in Bac Lieu Province, 68,500 tons in Soc Trang Province and more than 49,150 tons in Ben Tre Province.

But the volume can meet only 60-70% of the designed capacities of shrimp processing plants in 13 localities in the Mekong Delta as shrimp supply depends much on factors such as farming season, disease and the gap between shrimp processing capacity and farming. Enterprises have no choice but to count on imports of unprocessed shrimp.

In fact, there are few seafood enterprises able to develop their own material areas and in deals to buy shrimp from farmers. Many other firms purchase unprocessed shrimp from intermediaries.

Therefore, the directorate has drafted requirements for processing plants to have shrimp farms capable of meeting 10% of their capability in the plan. They will have to buy the remaining shrimp for their processing from farmers in line with contracts signed between the two parties and certified by competent administering agencies.

VietGAP (Good Agricultural Practices) standards will be applied to all shrimp farms in the Mekong Delta region as required in the scheme, which is expected for adoption from 2015 to 2020.

Bilateral trade with Chile rises with increased ties

Total trade turnover between Viet Nam and Chile reached US$560 million in 2013, said Fernanado Urrutia, Chilean Ambassador to Viet Nam.

Urrutia was speaking at a workshop on free trade between the two countries in Ha Noi yesterday.

Bilateral trade reached $560 million in 2013, 55 per cent in favour of Chile. Trade volume has been growing steadily.

The Ambassador said that when he first arrived in 2010, the volume was only $334 million, 69 per cent in favour of Chile.

According to statistics from the Chilean Trade Commission, known as ProChile, between January and May this year Chilean exports to Viet Nam reached $149.1 million, while imports from Viet Nam were $126 million.

This was a trade increase of 19.2 per cent compared to the same period last year.

A Free Trade Agreement that took effect on January 1 created new business opportunities for both sides and made it easier to access other markets within each region.

The agreement covers more than 9,000 products. For Chile, it was important to trade beef, pork, dairy products and fruit.

The FTA is focused on the trade of goods, leaving negotiations about services and investments to a second stage.

According to the agreement, Viet Nam will remove 87.8 per cent of tax for Chilean products over 15 years, while Chile is committed to removing tax on 99.62 per cent of Vietnamese exports by 2017.

Viet Nam is the second biggest trading partner for Chile in South-east Asia. Jaime Rivera, Chilean Trade Commissioner and co-ordinator of ASEAN markets, said Chile wanted to use Viet Nam as a platform to access Laos and Cambodia.

Chile is strong in the production and export of minerals, food, timber, seafood and wine.

ProChile statistics of export turnover of Chilean goods to Viet Nam between 2012-13 show a remarkable increase. The export turnover of dried fruit rose by 2,635 per cent, king crabs by 53 per cent, pharmaceuticals by 58 per cent, seabass by 36 per cent, spare parts for building by 24 per cent, salmon and trout by 23 per cent - and fresh grapes by 20 per cent.

Chile has trade agreements with all other countries in Latin America. That is it is considered as as a natural gateway for Viet Nam.

Compared to Viet Nam's other FTA partners, Chile is furthest away, but their economies supplement each other, said Nguyen Thi Thu Trang, Viet Nam Chamber of Commerce and Industry's World Trade Centre director.

The capitalisation of Chile's FTAs with Malaysia, Viet Nam and Thailand is one of its main objectives in the ASEAN region.

"In these particular markets, we expect to grow at a rates over 20 per cent in goods that exclude copper," said Rivera.

The workshop was organised by the Embassy of Chile, the Chilean Promotion Bureau (ProChile) and the Viet Nam Chamber of Commerce and Industry (VCCI).

Towards an effective, modern public finance sector

Domestic and international experts gathered at a conference in Hanoi on September 12 to work out measures to reinforce the government financial management information system (GFMIS).

The 2014 Conference – Exhibition Vietnam Finance, jointly held annually by the Ministry of Finance and International Data Group (IDG Vietnam), is considered a helpful networking platform and a hub of information sharing on IT solutions in the financial sector.

Deputy Finance Minister Tran Xuan Ha noted the significance of the event, saying it would help Vietnam’s financial sector catch up with the latest development trends in the region and the world.

He called on the local finance sector to speed up its reform process and pay due attention to application of advanced technology in the future.

Participants delivered a wide range of best practices from regional countries in terms of technology, solutions and procedures to ensure effective and modern public finance management.

They gave an overview of the current deployment and improvements in the current GFMIS, which is considered a strategic financial management system, helping the Government to access accurate and timely financial information, ensure financial transparency and manage macroeconomic and monetary policies.

They shed light on Vietnam’s public finance reform strategy until 2020 approved by the Prime Minister in April 2012, aimed at building a healthy national finance, ensuring financial security, maintaining macroeconomic and financial-monetary stability, and increasing the efficiency of financial management.

They introduced initiatives to improve the GFMIS and shared experience in innovating the process of budget reporting and disclosure of budget accounts, boosting the reform of public administrative procedures in public finance towards an effective and modern finance sector.

The delegates discussed IT solutions to boost the formation of a GFMIS system in Vietnam via cloud data centres and risk management applications in tax management. They also touched upon global trends in public administrative reform and emphasised the need to enhance management of expenditure and revenue budget, as well as the use of Commercial Off-The-Shelf (COTS) – a development trend towards a modern GFMIS.

Apart from in-depth discussions, an exhibition also took place to introduce state-of-the-art technologies and IT solutions of the world’s leading firms for a modern financial sector.

Since 2003, the Finance Ministry has strived to build and implement the Public Financial Management Reform Project (PFMRP).  It received close attention to ensure close control of budgeted income and expenditures of the financial management agencies, State Treasury and other ministry and department-level agencies. TABMIS was officially put into operation in late 2013.

Regarding the project’s results, World Bank Country Director for Vietnam Victoria Kwakwa, said: “The project has significantly enhanced fiscal transparency internally between central and local government, supported timely decision-making and improved the efficiency of budget management, cash and payable accounts.”

“The project also facilitates budget audit process and payment transactions, promotes accountability and enhances the confidence of suppliers and development partners.”

“Successful deployment of this project can be considered a major step in the modernization of the financial sector, paving the way for the upcoming projects of the Ministry of Finance, aiming to develop a complete GFMIS in the future,” she added.

Hanoi TPP negotiations show progress

The latest round of Trans-Pacific Partnership (TPP) negotiations concluded in Hanoi on September 10, having made considerable progress in achieving a comprehensive and balanced agreement.

Following a ten-day meeting in Hanoi, delegates were confident that they had made substantial progress and if everything goes smoothly at future talks, there may be a deal by the end of the year.

The Ministry of Industry and Trade (MoIT) reported that TPP negotiators, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam, have resolved many outstanding issues but have not yet nailed down a concise deal.

The delegates spent considerable time and effort on issues related to the opening of goods and service markets, investment, intellectual property, rules of origin, financial services, transparency, anti-corruption, and Government procurement, paving the way for signing of the landmark agreement.

They also agreed to organise another round of negotiations to be arranged soon.

 Experts talk up VN as investment destination

Vietnam, with its 90 million population and growing affluence, and more focused efforts to equitise State-owned enterprises and restructure banks, offers great opportunities for portfolio investors despite some hurdles, a seminar that opened in HCM City on September 11 heard.

Georges Joseph Ghorra, an executive from the IFC, a World Bank arm, told the two-day Gateway to Vietnam: Rediscovering New Investment Opportunities that his institution "is convinced of the long-term growth prospects in Vietnam."

He spoke about the country's "golden demographic structure" with an abundant workforce of 76% of its population and a young and growing middle class with increasing disposable incomes.

Macroeconomic stability has been restored with single-digit inflation while the reform process continues, he pointed out.

The Vietnamese market is currently trading at attractive earnings multiples compared to other markets in Southeast Asia, he said, pointing out further that Moody's and S&P have upgraded the country's ratings respectively to B1 and BB-, indicating stable.

The financial market with the recapitalisation and consolidation of banks under way; the infrastructure sector including hydropower/renewable energy, waste treatment, and logistics, manufacturing, agribusiness, and services all offer investment opportunities, he said.

Doan Hansen of global management consultancy McKinsey & Company said with the rapid urbanisation, 10 million people are expected to move to urban areas by 2030, doubling the number of consuming households.

"Vietnam is primarily in the hot zone for fast moving consumer goods with strong growth expected to continue," she said, asking, "Are you well positioned to meet the rapidly changing needs of Vietnam's consumers, and how can you proactively support and benefit from the growing infrastructure needs?"

Labour cost is still low but so is productivity, she said.

"The country needs transition to manufacturing and exporting more complex and higher value products."

Ghorra listed Vietnam's underdeveloped capital markets and cap on foreign ownership in listed companies (30% for banks and 49% for others) as the main challenges facing investors.

The slow pace of bank restructuring and SOE privatisation, underdeveloped infrastructure, and low competitiveness when the country joins free trade agreements are the other challenges, he said.

More than 430 SOEs were earmarked for equitisation in 2014-15, but in the first half of this year only 31 made initial public offerings.

According to stock brokerage Saigon Securities Inc – which is organising the seminar attended by around 400 participants — foreign investors' participation in those IPOs was insignificant, with only two of them, Viglacera and Cienco 4, attracting their interest.

Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, said it is more important that the assets of equitised companies are used efficiently than the number of equitising SOEs.

Valuation of the SOEs to be equitised is a challenging task, he added.

Alan Phan, managing director of Alan Phan Associates, said the valuations should be decided by the market. He supposed that the IPO of Vietnam Airlines would be made in a foreign stock market with underwriting by an international institution since it would encourage investors both in and outside Vietnam because of the transparency norms there.

Vu Bang, Chairman of the State Securities Commission, said the systems employed by the country's two stock exchanges in HCM City and Hanoi and securities companies are capable of handling the IPOs of SOEs.

"It is regulated that equitised companies must list within a year after their IPOs, and when a SOE makes its equitisation plans, it must have a listing plan as well."

But he wants the time frame reduced, proposing to the Government that equitised companies should list or trade on UpCom not later than 60 days after their IPO to facilitate liquidity to attract investors. The Government is considering his recommendation.

Bad debts or non-performing loans also offer opportunities for foreign investors, experts told the seminar.

Nguyen Khac Hai, deputy CEO of SSI Asset Management Company, said the Vietnam Asset Management Company has bought VND50 trillion (US$2.38 billion) worth of debts from banks since it began operation over a year ago, but has yet to resell any of it.

Obstacles to reselling include a lack of clarity on how to value the debts and how foreign investors can buy them.

Vietnam hails US farm produce import

Vietnam appreciates a US Department of Agriculture (USDA) decision to import several Vietnamese agricultural products like longan and litchi, said Foreign Ministry’s spokesperson Le Hai Binh.

The move is a positive step towards promoting economic and trade cooperation between the two countries, Binh told reporters at a regular press briefing in Hanoi on September 11.

Vietnam hopes that the US will continue granting import licences to more high quality Vietnamese agricultural products, he stated.

Earlier, the USDA announced its official decision to allow for Vietnamese longan and litchi to be ship to the US if they meet American standards for food hygiene and safety. The decision comes into effect as from October 6, 2014.

Vietnam has a medium level of creative productivity in Asia

Vietnam has a medium level of creative productivity in Asia, ranking 16th of out 24 economies, according to the new Creative Productivity Index (CPI) developed by the Asian Development Bank (ADB) and the Economist Intelligence Unit (EIU) on September 12.

The index measures input and output creative productivity. Input is measured through 36 indicators on capacity and incentives for innovation such as the number of global top 500 universities in the country, urbanization rate, research and development spending, protection of intellectual property rights, and corruption and bureaucracy.

Meanwhile, output is measured by eight indicators to measure innovation which include the number of patents filed, export sophistication, value added to agriculture, and the number of books and films produced.

The CPI ranks Japan and the Republic of Korea as the most efficient in the Asia and Pacific region at turning creative inputs into tangible innovation. However, Myanmar, Pakistan and Cambodia were ranked as the least efficient innovators.

According to the EIU, Vietnam has a medium level of creative inputs and remains weak in “outputs”. Although over 90% of Vietnam’s population are literate, its school system and teaching curricula are outdated. In addition, Vietnam lacks skills in such sectors as service, information technology, banking and finance. The low ranking in innovation “output” is attributed to poor scientific products including innovations and scientific publications.

The EIU recommended that to increase the “output” in the scientific field, Vietnam further invest in higher education to attract students to get involved in the scientific programs.

Forum examines ways to develop trademarks

The 2014 Export Forum was held in HCM City on September 12 to discuss ways to boost key export items to major markets, improve product quality and develop Vietnamese trademarks.

Dr Tran Du Lich, member of the National Assembly Committee for Economic Affairs underlined the need for businesses to sharpen their competitiveness to seize opportunities and outline an effective business strategy to achieve greater market penetration in the context of international and regional integration.

Trade counsellors from several countries said apart from boosting exports to traditional markets such as the US, EU and Japan, Vietnamese businesses should actively expand their operations to ASEAN and Trans-Pacific Partnership (TPP) nations and target other potential markets.

Effective solutions are essential to create a close links among producers, businesses in order to establish a supply chain which will help control the volume of export goods to the international markets.

However, Japan’s Consul General in HCM City, Nakajima Satoshi said to boost exports to the Japanese market, Vietnamese businesses need to ensure food safety and hygiene under import-export regulations.

There is high hope that TPP agreement will facilitate the opening of trade markets for Asian Pacific partners including Japan and Vietnam.

Sharing the viewpoint, Ministry of Industry and Trade representatives said lower added value of some Vietnam’s key farm produce causes difficulties in building trademarks.

Mahaphant Group opens representative office in Vietnam

The Mahaphant Group, one of the largest manufacturers of fibre cement boards, siding and roofing tiles in Thailand officially opened a representative office in Vietnam on September 11.

Speaking at the inauguration ceremony, Sarat Khiatbanlue, President of Mahaphant Group in Southeast Asia said Vietnam has huge potential for becoming a great market for the company’s environmentally friendly products.

“The establishment of the representative office aims to widen the company’s distribution channel and customer base,” he added.

Established in Thailand in 1974, Mahaphant Grouphas offices in 40 countries throughout the Middle East, Africa, Europe and Asia.

Seminar explores Vietnam-RoK support industry cooperation

Vietnamese and Republic of Korean (RoK) executives examined the possibility of strengthening cooperation in developing the support industry in Vietnam, at a seminar in Hanoi on September 11.

Speaking at the seminar, Deputy Minister of Planning and Investment (MPI) Nguyen Van Trung stressed the RoK is one of Vietnam’s leading partners in the fields of investment, trade, economy, culture, and tourism.

The Ministry is committed to creating favourable conditions for Vietnamese support industry enterprises to get involved in the production chain of Samsung group and other foreign investors in the future, he said.

Head of the Foreign Investment Agency Do Nhat Hoang in turn said the development of the support industry is one of the top priorities of the Vietnam Government.

By 2020 the goal is to give the industry a facelift and multiply the number of domestic businesses in the industry to over 33% of market share, Hoang said.

The support industry also plays a vitally important role in improving economic competitiveness, helping Vietnam become a modern industrialized nation by 2020.

Shim Won Hwan, CEO of Samsung Electronics Vietnam (SEV), said with preferential policies and practical actions of the Vietnamese Government, foreign invested enterprises and domestic suppliers will have more opportunities to exchange and cooperate in developing the support industry.

Samsung always cooperates with domestic suppliers meeting the criteria of quality, schedule and prices, with the aim of increasing the number of Vietnamese suppliers in the supply chain of Samsung, and bringing benefits to both parties, he said.

The group will continue to support personnel training for support industries in Vietnam,

Vietnam Association of Foreign Invested Enterprises (VAFIE) Chairman Nguyen Mai, said Vietnam needs to learn from Samsung experience in technology development and transfer to improve the technological level of domestic enterprises.

Developing a strong support industry network helps reduce costs, increase added value, profits of businesses, and bolster sustainable economic growth in line with the requirements of international integration, he said.

Deputy PM Minh to attend CAEXPO, CABIS in China

Deputy Prime Minister and Foreign Minister Pham Binh Minh will attend the 11th China-ASEAN Exposition (CAEXPO) and China-ASEAN Business and Investment Summit (CABIS) in China’s Guangxi province from September 14-16.

The two events are annually held in Nanning City, Guangxi province by the ministries of commerce/trade & industry of China and the 10 ASEAN countries.

CAEXPO - one of the top ten China’s fairs – will attract more than 2,500 businesses from China and 10 ASEAN countries showcasing their products on 4,600 stands.

China is the biggest trade partner of ASEAN. For the first time this year organisers will invite Australia as their honorary guest with the aim of expanding the 10+1 cooperation mechanism between China and ASEAN and towards 10+6 under the framework of the Regional Comprehensive Economic Partnership (RCEP).

Guangxi borders four northern provinces of Vietnam. In recent years, cooperation between Vietnam and Guangxi province has seen marked progress. Two-way trade turnover hit nearly US$12.7 billion last year, of which Vietnam’s exports reached more than US$1.3 billion, and its imports fetched US$11.4 billion.

Deputy PM Minh’s trip to the two events shows Vietnam’s consistent policy of attaching much importance to strengthening traditional friendship with China, promoting comprehensive cooperation, and maintaining exchange visits between the two countries’ leaders, as well as contributing to boosting ASEAN-China cooperation.

 

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

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