Vietnam- an attractive destination for US businesses

US businesses are very keen to invest in Vietnam and want to expand cooperation with Vietnamese counterparts in economics, trade and investment, especially when Vietnam’s macroeconomy is showing positive signs.

This was released by the US-ASEAN Business Council at a press briefing in Hanoi on September 7, which drew the participation of nearly 40 US businesses, including major groups involved in oil and gas, manufacturing, chemicals, finance, and information and technology such as Chevron, Coca Cola, Ford Motor, IBM, Google and Boeing.

General Director of General Electric for Southeast Asia, Stuart Dean, said Vietnam’s business environment has improved significantly in recent times and US businesses are very interested in investing in the country. The goal of diversifying energy sources in the future will offer a wealth of investment opportunity for US businesses, including General Electric.

In reply to reporters’ questions about difficulties and obstacles facing US businesses in Vietnam, Chairman of the US-ASEAN Business Council Alexander C. Feldman said the legal framework and high inflation remain major issues of great concern for US businesses. But he hoped that Vietnam would deal with these challenges in the future to enable US businesses to achieve greater penetration of the Vietnamese market.

Total two-way trade between Vietnam and the US currently stays at US$18 billion and is predicted to pick up in the future.

Korean businesses and their “true dream”

The programme which introduces the Republic of Korean businesses operating in Vietnam will be broadcast every Saturday on HTV1.

Minister Counsellor of the Korean Embassy in Vietnam, Park Noh Wan, on September 7 said the “true dream” programme co-organised by the RoK Embassy and Hanoi Television will be broadcast from September 10 to the end of this year.

Hanoi Television will run programmes on social responsibilities of 20 Korean businesses which are operating in the northern and central regions.

In addition to actively contributing to Vietnam’s economic development, Korean businesses are doing all they can “for Vietnam’s society and people regardless of business profit”. Over the past three years, they have contributed around US$8.2 million to social activities, including providing scholarships, medical services and houses for local people as well as relief aid for flood victims.

Currently, the RoK is the largest investor in Vietnam. By the end of July, the RoK had invested in 2,823 projects with a combined capitalization of US$23.4 billion, generating more than 500,000 jobs for local people.

Textile and garment sector eyes alternative markets

With exports to their traditional markets tending to decline due to economic turbulence, the Vietnam’s textile and garment sector is eyeing other alternatives to maintain growth.

According to the General Statistics Office, the textile and garment’s export turnover in August reached a record high of US$1.4 billion, sending total exports in the first eight months of this year to $9 billion, which is a 29 percent increase year-on-year.

Japan, the EU and the US are still Vietnam’s most important markets, which account for 12 percent, 17 percent and 51 percent of the total exports respectively.

Although export turnover to these traditional markets is on the rise, domestic textile and garment businesses realize certain potential threats.

“Orders from the EU are on the decline, as are those from the US,” Pham Xuan Hong, deputy chairman of the Vietnam Textile and Apparel Association (Vitas), was quoted by Sai Gon Tiep Thi newspaper as saying.

Than Duc Viet, CEO of Garment Co 10, said the tightened spending policies in the US after the public debt ceiling removal in August was likely to affect exports to this market.

Although export turnover in the first eight months of this year rose by 30 percent, many businesses said the actual increase was only 10 percent in volume and 3 percent in value since input costs also soared.

Hong of Vitas said many businesses had thus sought for other markets to fill up the export gap created by the declining orders, and had managed to gain strong export increases from many non-traditional markets.

Exports to Cuba in the first seven months of this year rose by 470.8 percent, while the respective figures recorded for the Indian, Korean, Thai and Chinese markets are 156 percent, 144.2 percent, 131.1 percent and 127.6 percent.

The new markets account for 20 percent of the total export turnover of the textile and garment sector, doubling the figure recorded five years ago.

Phan Van Kiet, deputy CEO of Viet Tien Garment JSC, said the new markets accounted for 10 percent of the company’s exports, while the figure was only 2 percent in 2006.

“Since Vietnam’s textile and garment products can pass the strict technical standards to enter the EU and the US markets, it is not so difficult for them to enter the others,” he said.

BIDV to join stock market this year

Bank for Investment and Development of Vietnam (BIDV), Vietnam’s second biggest bank in terms of assets, is preparing for its initial public offering in the last quarter of this year, BIDV’s chairman Tran Bac Ha has said.

Ha said under its equitization plan which is being processed by relevant ministries and the central bank, BIDV has carried out the corporate evaluation, built the IPO plan, and set out
criteria for choosing foreign strategic investors.

BIDV has also strived to conclude the issue of shares to strategic partners in 2011 if market conditions are favorable. The bank expects to fulfill legal formalities so as to become a joint stock commercial bank in the first quarter of 2012.

According to BIDV’s equitization proposal endorsed by the Prime Minister, the time chosen for evaluating the bank was December 31, 2010 while the IPO launching would be carried out in tandem with the selection of foreign strategic investors in 2011.

It will be advised by Morgan Stanley in its evaluation process as well as in selecting strategic investors.

BIDV plans to keep its current state capital unchanged and issue more shares to spur its working capital, but the state will still own the controlling stake of at least 51%. Its shares will be sold in phases, and the stock will be listed on both the local bourse and overseas stock exchanges.

The launch of its IPO before or after selling shares to strategic partners will depend on the government’s approval. As planned for the first stage, the government will hold a stake of 80%, while shares equivalent to 15% will be issued to foreign strategic and financial investors, 1% to staffs, 1% to the bank’s labor union, and 3-5% to other shareholders via the IPO.

Lately, BIDV has equitized its offshoots BIDV Securities Company and BIDV Insurance Company, as well as merging its two finance leasing companies.

According to the consolidated financial statement audited under the Vietnam Accounting Standards, as of last year, BIDV had total assets of VND366.26 trillion. Its outstanding loans reached VND254.2 trillion compared to total mobilized capital of VND251.92 trillion.

The bank obtained a pre-tax profit of VND4.62 trillion in 2010 while its return on assets (ROA) and return on equity (ROE) were 1.13% and 17.96% respectively.

Vietnam downgraded in global competitiveness

The Global Competitiveness Report 2011 – 2012 recently announced by the World Economic Forum (WEF) ranked Vietnam at the 65th out of 142 countries surveyed, dropping 6 spots from last year.

Vietnam lost points in 10 of the 12 indicators considered by WEF, which saw the country’s current two-digit inflation with pessimism.

The big budget deficit (6% in 2010) and substandard infrastructure continued to be major concerns for Vietnam with road infrastructure ranked at No.123 and ports at No.111.

The quality of education, despite progress compared to last year, was still ranked in the low average group.

Administrative procedures continued to be major barriers for investors to enter Vietnam's market.

For instance, investors need an average of 44 days and 9 procedures to get a business license.

WEF also advised Vietnam to improve intellectual property rights, which were ranked at the 127th, and its ability to fight corruption.

This year, Switzerland continued to top the ranking while Singapore overtook Sweden to occupy the 2nd place. Finland jumped from the 7th position last year to the 4th place and the US was downgraded to the 5th place.

The other countries in the top ten were Germany, the Netherlands, Denmark, Japan and the UK.

Apartment buyers surprised by project change

Buyers of an apartment building project in Ho Chi Minh City’s Binh Chanh District say they were surprised to learn through the press that the project would be turned to a hospital.

The project investor, Transport Engineering Construction and Business Investment JSC 584 (584 Co.), has been approved to turn the 976-apartment project into a 1,000-bed hospital which is expected to begin operation by next September.

584 Co. explained that as many customers had failed to clear their payments on time, the company had asked the HCMC People’s Committee to convert the project to a hospital.

The city’s government has thus green-lighted the change and Cho Ray, Tu Du and RHM hospitals have also agreed to provide technical support to the new hospital, which will be managed by Vietnam Medical Investment JSC after completion.

584 Co. said the hospital, which would cost VND1.5 billion (US$75 million), would meet all of the Ministry of Health requirements.

Yet, many customers who have bought the project units said they had only learned about the change of plan though the media.

The company, which has “quietly” bought back units of nearly 70 percent of its buyers, said it couldn’t inform its customers while it was still seeking authorities’ approval. However, on August 31, its CEO Tran Kim Minh did eventually tell buyers of the change.

The company said it would collect customers’ feedback until September 15 in order to figure out a proper refund solution, adding that it would complete paying the buyers by October 31.

For those customers who did not want to resell their apartments, the company said it would negotiate to refund them in cash or offer apartments in its other projects.

Logistics industry faces challenges to integration
 
Domestic logistics companies have only a year to meet commitments to integrate into global transport services.

A report from the Ministry of Industry and Trade states that about 60 per cent of the country's commercial value is from logistics services, which make up between 15-20 per cent of GDP.

The Vietnamese logistics industry has attracted a number of foreign investors and there are currently close to 1,000 companies that have been established in the country.

These firms have under performed in the domestic market and in the international market, according to the report.

The Viet Nam Freight Forwarders Association (Viffas) says the Vietnamese logistics services have not yet fulfilled their potential.

The association says only 10 per cent of companies truly provide logistics services and the remainder just work for foreign companies, adding that a lack of transparency has impacted on competition.

According to Viffas, Vietnamese companies are only able to supply simple logistics services.

Marketing abilities are also noted as weak, lacking professionalism, the association says.

Due to these shortcomings, about 70 per cent of the market share was captured by foreign companies.

This figure may increase when the commitments to the World Trade Organisation to open the market to foreign transport service companies comes into effect in 2014, and similar commitments to ASEAN are instated in 2013.

Viffas has proposed to set up a national logistics committee and a logistic association to address these issues.

If a committee and association were established, the industry would have an official trade mark to mobilise capital and resources to compete in the domestic and international market, said association chairman Do Xuan Quang.

General Secretary of the Viet Nam Seaports Association Ho Kim Lan has a different idea.

According to Lan, improving the industry should focus on management skills and further investment.

He said such changes would allow the industry to build better distribution centres for key economic regions and develop container vessel teams to reduce costs and win a greater market share from foreign companies.

Power monopoly calls for higher prices

After a 15 percent increase in prices in March, the state-owned Electricity of Vietnam Group (EVN) yesterday demanded another hike to offset a massive loss of VND2 trillion (US$100 million) as of August 31.

At a meeting held by the Ministry of Industry and Trade in Hanoi, EVN’s deputy CEO Duong Quang Thanh said power prices must be adjusted to help EVN ease its capital shortage as well as to avoid losses in 2012.

Thanh said EVN was calculating all of the factors affecting power prices such as the exchange rate and fuel price to decide how much power prices should be increased.

Thanh said power supply for the southern region was facing threats as many EVN projects such as the 500kV Pleiku – My Phuoc – Cau Bong power system and thermal-power plants Duyen Hai 1 and 2 had been delayed because of capital shortage.

“It’s a big challenge for EVN to ensure power supply for the southern region between 2013 and 2015,” he said, adding that EVN would need around VND277 trillion between 2011 and 2015.

Thanh thus asked the Ministry of Industry and Trade to help EVN mobilize the VND10-trillion fund as ordered by the government.

EVN would also need ODA funds for its power development projects, he said.

Deputy Minister of Industry and Trade Hoang Quoc Vuong agreed that power prices were the key factor in solving EVN’s financial problems.

But Vuong said the ministry would have to wait for EVN’s calculations.

In March, EVN increased power prices by 15.28 percent and has since repeatedly asked for higher prices.

Car sales up 10 per cent in August

Viet Nam Automobile Manufacturers' Association members sold nearly 9.520 autos last month, an increase of 10 per cent over the same period last year.

Of the total sales, 4,201 were passenger cars, a year-on-year increase of 54 per cent, followed by sports utility vehicles/multiple purpose vehicles with 2,153 units purchased, up by 21 per cent.

Commercial vehicle sales last year had a 24 per cent downturn with 3,164 units sold.

Association sales figures for the eight months up to August were 70,650 units, up 2 per cent compared with the same period last year in which sport utility vehicles/multiple purpose vehicles increased 4 per cent, passenger cars were up 28.9 per cent and commercial car sales fell by 13 per cent.

Public spending cuts create dilemma for construction projects

The government’s order to cut public spending has put many construction projects on hold, threatening to increase the projects’ total costs once the construction is resumed.

Pham Hong Son, head of the management unit of the Ho Chi Minh Highway project, told Tuoi Tre that 60 of the 100 contracting units involved in the project had to halt their construction due to the lack of capital.

Son said the project was appropriated only VND1.5 trillion (US$75 million) although the requested amount was VND3.8 trillion. Worse, the disbursement for the project has reached VND500 billion only so far.

That the project has been delayed as a result of the government’s reduced spending policy is likely to raise the total expenses as the unfinished items can be damaged by rain or flood and require additional funds to fix before construction work can be resumed.

In addition, the unfinished construction site can also become an obstacle for the passing traffic.
Similarly, the Road Directorate’s project to upgrade the part of the National Route No. 27 passing through southern Ninh Thuan Province also had their investment capital cut off.

According to an official from the agency, the project was scheduled to complete by this year’s end but had received only VND50 billion of the allocated VND420 billion.

He said that the uncompleted road would fail to ensure traffic safety for local residents due to the cracks and portholes on the surface.

The spending cuts have thus put the capital-starved project’s investor and contractors in a dilemma. They could not continue with the construction for lack of capital and yet, if the project is suspended, the construction would likely cause traffic accidents as well as creating more expenses later on.

The latest government spending squeeze also affects a series of construction projects in the public health sector.

The construction of a new treatment center at Bac Giang-based Son Dong Hospital, for instance, has been suspended despite being scheduled for completion by September 2010. Many sections in the center have shown signs of deterioration after a year being left unused.

Nguyen Van Tam, the hospital’s deputy director, said all construction work on the project had been stopped since early this year, causing enormous difficulty for the hospital.

He said the new treatment center had been built on the grounds where an auditorium and traditional medicine center had previously stood. With the old center gone and the new one unfinished, everything has been crowded into the existing narrow space.

“It is too overcrowded here now. We do not have enough working space for the doctors and beds for patients,” Tam lamented.

Nguyen Manh Tuan, head of the Ministry of Health’s Department of Medical Equipment and Facility, said cutting public spending on certain construction projects could help curb inflation.

But those of the health service sector should be prioritized to maintain their progress, he said.

State shipping firm to be audited following losses

The Government Inspectorate yesterday announced plans to inspect the state-run Vietnam National Shipping Lines, or Vinalines, within the next 75 days.

It follows Vinalines’ first ever loss in 16 years of operation when it reported a VND660-billion (US$33 million) loss in the first half.

Part of the losses was reported by the five companies Vinalines had to take over from the embattled Vietnam Shipbuilding Industry Group (Vinashin), another state-owned group.

In August 2010 the government decided to restructure Vinashin, transferring its ships and subsidiaries to Vinalines and the Vietnam National Oil and Gas Industries Group (PetroVietnam) to help it recover from a massive debt of about VND86 trillion ($4.5 billion).

After the restructure, part of Vinashin’s debt of around VND20 trillion will be transferred to PetroVietnam and Vinalines.

Shippers ignore Vietnam ports on losses

Many international shipping companies have announced they will stop sending big bulk carriers to the Cai Mep Deep Water Port in southern Ba Ria-Vung Tau Province due falling container volumes since the beginning of this year.

Just last year they were eager to enter the port, which had then lacked wharves capable of handling them, Saigon Tiep Thi newspaper reported.

But the situation has since turned upside down as it has in other deep-water ports along the Thi Vai River.

Some of them with a capacity of six or seven container vessels a week receive just one, and others have begun to provide other services to remain in operation.

The CKYH Group, which includes Cosco, Kline, YangMing, and Hanjin, has not sent a vessel to Cai Mep since May.

CSAV has stopped its service between Cai Mep and the US west coast since June.

In October, the usual low season in the EU and US, some major carriers plan to cut at least two shipping lines from Cai Mep to Los Angeles and Seattle on the US west coast.

While some shipping companies have stopped operating container ships from East Asia to the US due to low demand, others continue to operate, but even they ignore Cai Mep.

Some said it was just a normal move to cut losses and they would return to Cai Mep when the world economy, especially the US and Europe, recovers.

Many shipping firms have reported losses of hundreds of millions dollars in the first half of this year.

In Vietnam, with exports growing slower than expected, shipping firms have been forced to cut rates to compete.

Charges to Europe and the US have fallen by 60 percent and 40 percent respectively.

Without bulk carriers coming to its ports, Vietnam’s exports now have to be routed through Singapore and Hong Kong, adding to exporters’ costs and transit times.

Vietnamese producers are also suffering due to piling up of unsold stocks.

Figures from more than 450 businesses listed on the stock market show that the value of their unsold stocks in the first half surged to VND130 trillion (US$6.25), up 32 percent year-on-year.

The unsold inventory index of the processing and manufacturing sectors as of August 1 increased by 17.8 percent.

Bed, furniture, non-alcoholic beverages, footwear, clothing, and motorbikes topped the index, the General Statistics Office said.

Nghe An to focus on foreign investment

Central Nghe An Province will prioritise attracting more foreign direct investment to step up socio-economic development, according to provincial People's Committee chairman Ho Duc Phoc.

During an investment promotion conference held late last week, the chairman highlighted the province's geographic and transport advantages as well as its economic achievements over the past few years, saying that it was eager to welcome foreign investors.

The provincial administration was set to carefully select investment projects, focused on the quality and financial capacity of investors, said committee vice chairman Thai Van Hang.

During the next four years, top priority would be given to projects related to infrastructure, construction, agricultural technology, trade and tourism in areas including the Dong Nam Economic Zone, Cua Lo Town, Hoang Mai-Dong Hoi Industrial Zone and the province's southern part, Hang said.

Investors attending the event, agreeing that there were still untapped investment opportunities in Nghe An Province, suggested the province foster administrative procedure reform to better its investment climate.

To date, the province has managed to attract 332 projects (23 foreign-invested), valued at a combined VND107 trillion (US$5.11 billion).

Mazut oil imports won't be tax-exempt, says Deputy PM

Deputy Prime Minister Vu Van Ninh has denied a proposal, valued at US$5.6 million, based on tax free mazut oil imports by the Hiep Phuoc Power Company, following an Electricity of Viet Nam request.

Ninh's desicion came after the Ministry of Finance urged the Government to reject tax incentives as required by EVN to help it deal with $5.6 million worth of debt owed to the Hiep Phuoc Power Company.

According to the Ministry of Finance, the Hiep Phuoc Power Company imports mazut oil for electricity production purposes at its plants, the oil not being for sale on the domestic market which necessitates its taxation.

The Ministry of Finance added that, as tax exemptions would only be allowed in cases of extreme necessity, the Hiep Phuoc Power Company would still have to pay a tax of VND300 per kilo for imported mazut oil.

EVN additionally owes the Viet Nam National Oil and Gas Group an amount of $400 million, equivalent to nearly VND8.2 trillion.

Hiep Phuoc imports mazut oil to produce electricity, which it sells to EVN. The $5.6 million, which the latter owes the former, includes taxes on petroleum imports claimed by customs, excluding value added tax (VAT).

According to EVN, it has continued receiving debt claims from the Hiep Phuoc Power Company, charges not mentioned in EVN's proposal to raise electricity prices during March this year, meaning it would not have enough finances to repay its debts.

EVN, which owes the Hiep Phuoc Power Company an extra $41 million, has said that its present financial difficulties had forced it to call on the Government for a tax break.

New rules for firms in fuel trade

Starting from Octorber 21, domestic merchants providing petrol to manufacturers at open economic and cross-border industrial zones will be subject to temporary import and re-export laws, according to the Ministry of Finance (MoF).

As part of the new policies, fuel-trading activities between licensed traders and producers will be required to operate in accordance with General Department of Customs procedures.

Fuel, temporarily imported, but not as yet re-exported, will be made available on the domestic market after paying the full import tax.With regards to petrol for re-export, when dealing in jet gasoline, traders must submit or show registered customs declarations, stock issued dockets, invoices and copies of gasoline quantums for domestic routes in case of international flights via domestic routes.

Trade with Cambodia booms

Trade between Cambodia and Viet Nam grew strongly in the first eight months, according to statistics from the Cambodian Ministry of Commerce.

Cambodia's exports to Viet Nam were worth US$105.2 million, an increase of 116 per cent year-on-year, and its imports topped $976 million, a 43-per-cent rise.

Cambodia's main imports included foodstuff, machinery, apparel, petrol, and other consumer goods. It exported rice, latex, dried cassava, and maize.

New $110m shopping mall to open

The Crescent Mall, a new shopping centre covering 45,000 square metres in the Phu My Hung area in HCM City's District 7 will open in November this year.

The property developer Phu My Hung Corp invested US$110 million in the development, which has six levels of retail floors and three basements.

Seminars to look at labour market

Mercer, the leading global provider of human resource services and its associate, Talentnet Corporation, will hold seminars next month to share results of their Viet Nam Total Remuneration Survey in HCM City and Ha Noi.

The seminars, to be organised in HCM City on Octorber 6 and in Ha Noi on October 7, will provide participants with up-to-date information about major issues and changes in compensation and benefits in the labour market in 2011.

They will also provide essential data on pay differences by function, pay differences by location, labour demand, labour growth, and compensation mix for each level of staff.

South Korea opens trade office

The Korea International Trade Association (KITA) last week inaugurated its representative office in HCM City, aiming to further develop economic co-operation between Viet Nam and South Korea.

The office will also help expand trade co-operation between South Korea and the Greater Mekong Sub-region countries such as Cambodia, Laos, Myanmar and Thailand.

Addressing the opening ceremony, KITA Chairman Sa Kong-il said that Viet Nam's strong economic growth over the past five years and a population of almost 100 million people would offer potential for market development.

Hong Sung-hae, head representative of KITA in HCM City said, that Viet Nam was an important production market, adding that if Mekong economic resource development projects were carried out effectively, there would be many new Korean businesses investing in Viet Nam's projects.

Forum to help small businesses

The Leadership and Management Science Research Institute in collaboration with HRLink.vn will organise the People Development in Enterprises Forum on September 17 to help small- and medium-sized businesses map out human resource strategies.

New human resource strategies were necessary in the context of high inflation and adjusted salary policy from the Government, the organisers said.

The forum will focus on how to improve human resources quality for the 2011-20 period.

Handico readies share auction

Handico Financial Co (Hafic) plans to auction 7 million shares, equivalent to 20 per cent of its charter capital, on the Ha Noi Stock Exchange in October.

It represents Ha Noi Housing Development and Investment Corp (Handico)'s State capital.

The shares starting price will be VND11,500 (US$0.55) each.

Ha Noi-based Hafic has a charter capital of VND350 billion ($16.8 million). It operates mainly in capital mobilisation and lending activities.

Vinaconex sells stake in VCS

Construction company Vinaconex (VCG) earlier this month sold 5.3 million shares in its subsidiary Vinaconex Advanced Compound Stone Co (VCS), reducing its holdings from 22 per cent to just 5 per cent.

Vinaconex also withdrew capital from a number of subsidiaries and affiliates, including Cam Pha Cement Joint Stock Co and Vinaconex Co No 21 (V21).

VCG shares on Friday declined 2 per cent on the Ha Noi exchange to VND14,500 (US$0.7). Meanwhile, VCS shares closed unchanged at VND24,900 ($1.2).

Debt fund to divest from REE

The Viet Nam Debt Fund plans to divest from Refrigeration Electrical Engineering Corp (REE), selling more than 1 million shares, or a 0.45 per cent stake, in two months, starting tomorrow.

Dominic Scriven, Dragon Capital Fund's director, is a Viet Nam Debt Fund and REE board member.

PV