PM: Better conditions needed to attract investment

Prime Minister Nguyen Tan Dung has asked ministries, branches and localities to create favourable conditions to attract investment, especially foreign invested and high-tech projects.

The Government leader made the request at the cabinet’s April meeting that opened in Hanoi on April 26 to review socio-economic development during the first four months of the year, and discuss measures for the following months.

He asked for better trade promotion, local market development and export market expansion.

It is necessary to consistently pursue the 2013 socio-economic targets, strengthen macro-economic stabilisation measures, control inflation and provide capital for prioritised sectors to ease difficulties in production and trading, the PM said.

Dung said that better observation and more drastic measures are needed in the restructuring of public investment, state-owned enterprises and the banking sector.

He also requested ministries, branches and localities to take measures to ensure traffic safety, reduce congestion and the number of accidents. Meanwhile, they should be active in the prevention of blue-ear disease, avian influenza H5N1 and H7N9, and implement measures to protect national sovereignty and ensure national defence, political security and social order.

At the meeting, cabinet members said that the April Consumer Price Index increased by 0.02 percent against the previous month, the lowest April level for four years.

Interest rates fell, helping business and production, and the national foreign currency reserve increased remarkably.

Meanwhile, export value was estimated at 39.46 billion USD, a year-on-year rise of 16.9 percent. Social security has been ensured and improving people’s living conditions have been improved.

The cabinet members also pointed to shortcomings, including in processing and manufacturing, which have been hit hard by high input costs, low purchasing power and slow sale.

It is necessary to remove barriers, create conditions to promote production and business to maintain growth, and develop agriculture and industry, they stressed

Petrol price down 310 dong a liter

The retail petrol price in Vietnam slightly reduces 310 dong a liter today ($1 = VND21,800), making it a total decrease of 1,200 dong a liter this month after three times of adjustment.

Petrolimex and PVOil, the two firms accounting for largest shares in the retail fuel market in Vietnam, announced today that they lower 310 dong per liter of petrol, 100 dong a liter of kerosene and FO oil.

This is the third time this month the fuel prices in Vietnam were lowered. In total, the petrol price downs 1,200 a liter, 650 dong a liter of DO oil, and 750 dong a liter for kerosene.

So, the petrol price of A92 petrol is now sold at VND23,330 a liter; kerosene VND21,300; DO oil VND21,250; and FO oil VND18,750.

Soon earlier, the Ministry of Finance issued an instruction to ask local fuel trading firms in Vietnam to cut the fuel prices no sooner than 4:30pm today.

Besides, the ministry also announced that it will increase 2 percent in the import tax of fuel. In details, the import tax for petrol goes up to 16 percent, diesel 12 percent, kerosene and mazut oil with 14 percent.

Asset management company set for launch

The government will approve a decree to set up a national asset management company to boost the resolution of bad debts according to a local official.

Minister and Chairman of the Government Office Vu Duc Dam said the Vietnam Asset Management Company (VAMC) was only one of many measures to deal with bad debts in the current context. Before the company is established, the State Bank of Vietnam (SBV) and commercial banks had made efforts to settle their bad debts.

However, the minister said each bank had to form their own hedge funds under the State Bank of Vietnam’s instruction.

The VAMC, under the SBV’s management will help banks and enterprises to deal with their bad debts quickly. The VAMC is supposed to play an important role in controlling bad debts which is the main culprit for weak liquidity in the banking system.

The company has received the Politburo’s in-principle approval. The government discussed the roadmap to establishing the company at a meeting last month, but until now nothing seems to have happened.

By the end of February this year, Vietnam’s bad debt rate reduced to 6pct against 8pct of 2012.

Agricultural products need protection after FTA

Signing the Free Trade Agreement (FTA) between the European Union (EU) and Vietnam will create opportunities for exported Vietnamese agricultural products in the EU market.

The EU will not only reduce its taxes on these goods but also accept responsibility for protecting the reputations of famous Vietnamese agricultural produce brands.

The European Commission (EC) in Vietnam recently organised a workshop on Geographical Indication (GI) and the prospects for protecting Vietnamese agricultural products in the EU.

Ambassador Franz Jessen said the EU is one of Vietnam’s most important trade partners. Vietnam’s total EU export revenue has hit US$13 billion, making it the only regional grouping to boast an export turnover increase last year.

Negotiations for the EU-Vietnam FTA look destined for success. After it is signed, most Vietnamese agricultural products will only face taxes ranging from zero to five percent. The ratification of the GI agreement will deliver many benefits to the Vietnamese agricultural industry.

Many foreign businesses use counterfeits to exploit the reputation of Vietnamese agricultural brands already popular in the EU.

Ratifying the FTA will encourage producers possessing GI in Vietnam to register for the direct protection of their traditional products in the EU, making international promotional significantly easier.

Tran Huu Nam, Deputy Head of Vietnam’s National Office of Intellectual Property, said Vietnam’s geological, climactic, and cultivation idiosyncrasies create many agricultural products that would benefit from GI.

So far, Vietnam has granted GI to 35 agricultural products, three of which are protected overseas. Statistics suggest almost 1,000 products could be eligible and suitable for GI.

EC Department of Agriculture and Food Representative Laurent Lourdais, explained the EU’s three GI-related systems currently in operation. They are Protected Designation of Origin (PDO), the Protected Geographical Indication (PGI), and the Traditional Specialty Guarantee (TSG).

Farm produce bearing GI certification are sold at twice the price of those without. Consumers are also protected from unwittingly purchasing counterfeits.

The EU has extended its GI protection to 14 foreign agricultural products, including some from China (10 products), Colombia (one), India (one), Thailand (one), and Vietnam (one).

Once the Vietnam-EU FTA enters into effect, the procedure for registering Vietnamese goods for this production will become radically simpler.

Some Vietnamese specialties—such as Chu Se pepper, Buon Ma Thuot coffee, Shan Tuyet tea, Binh Thuan green dragon fruit, and Phan Thiet fish sauce—are internationally renowned and need the EU’s anti-fraud protection.

As both the EU and Vietnam have long agricultural histories encompassing numerous traditional farming methods, farm produce GI certification is especially important for socioeconomic development in rural areas.

WB approves credit for Da Nang's sustainable development

The World Bank (WB) Board of Directors has approved US$202.5 million in credit to support sustainable development in the central city of Da Nang.

The credit is being provided under the Da Nang Sustainable City Development Project to help improve the city's drainage systems and arterial roads, upgrade the public transport system and enhance the city government's urban management capacity.

World Bank Country Director for Vietnam Victoria Kwakwa said she hopes that the project will create a good model for a "green city" and sustainable urban development to inspire similar development in other cities across Vietnam . She added that the strong leadership and close monitoring of the Da Nang People's Committee will ensure the project's smooth implementation so Da Nang residents can enjoy the advanced infrastructure of a sustainable city.

Da Nang is Vietnam 's fourth largest city and is widely regarded as a being well-planned and well governed, with a higher quality of infrastructure compared to other cities in the country. Municipal leaders have committed to developing Da Nang into a "green" city by 2025, with an emphasis on high-tech industries and tourism

CPI edges up on food price fall

The consumer price index (CPI) inched up just 0.02 per cent in April against the previous month, the lowest monthly rise in the past decade, according to the General Statistics Office (GSO).

With April's modest change included, CPI in the first four months of the year is 2.41 per cent higher than the figure recorded last December.

The director of the GSO's Consumer Price Index Department, Nguyen Duc Thang, attributed the low CPI rise to a price reduction of food and foodstuff – a group which accounts for about 40 per cent of the CPI figures - by 0.91 per cent.

Thang forecast that price of food would continue to decline next month due to an abundant supply following a bumper winter-spring crop in southern provinces and a rice export price decline of US$10-15 per tonne.

He added that low consumption demand in the domestic market due to the continued economic hardships was another cause of the CPI figures.

During the month, the price of health-care services made the highest jump, rising 4.51 per cent following the Government's decision to change the pricing system for health-care services in Hai Phong city and the provinces of Nam Dinh, Binh Dinh and Tay Ninh.

Despite the petrol price declining twice this month, the cost of transport still surged 1.2 per cent as the fall fell below the rise of VND1,430 per litre made by petrol retailers in late March.

Otherwise, prices remained fairly stable. Despite the CPI slowdown being good news for some, economists were concerned about the trend as it is a result of the gloomy economic outlook.

Economist Ngo Tri Long said that while the slowdown reflected a price reduction of commodities and was a positive sign to consumers, it also showed that local producers were facing high stockpiles and people were low on disposable income and confidence.

The CPI fall was due to an imbalance of supply and demand, Long added, warning that the economy could become stagnant if no effective policies were taken.

RoK becomes Vietnam’s major car supplier

Vietnam imported 3,518 completely-built-units(CBU) from the Republic of Korea in the first quarter of the year, accounting for more than 50 percent of the country’s CBU car imports.

VAMA proposes lower registration fee amid slow sales

Though the figure represents a year-on-year decrease of 1.1 percent, the RoK was Vietnam’s largest car supplier in the reviewed period, according to the Vietnam Automobile Manufacture’s Association (VAMA).

VAMA reported that total CBU imports fell 4.29 percent in the first quarter to over 7,000 units, but the import value increased by 0.5 percent to US$137.27 million.

In March alone, Vietnam purchased nearly 2,468 units, up 64.8 percent over the previous month with the import value reaching nearly US$48 million, up 33.9 percent.

Total auto sales hit 8,390 units in March, up 97 percent against February’s figure. The positive sign encouraged automobile manufacturers to launch new products to cater to customer tastes and rev up the domestic auto market.

Australia, Vietnam foster trade and energy cooperation

Vietnam and Australia have agreed to support the trade promotion agencies- VIETRADE and AUSTRADE in encouraging effective and sustainable cooperation between the two countries.

The agreement was reached at a meeting between Vietnamese Minister of Industry and Trade Vu Huy Hoang and Australian Minister for Trade and Competitiveness Craig Emerson during Mr. Hoang’s visit to Australia from April 22-28.

The two ministers compared notes on bilateral cooperation in trade and industry, as well as hygiene, quarantine, and transferring seafood processing technology. They also examined ways to take advantage of the incentives offered under the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA).

Vietnam suggested that Australia support the Seafood Importers Association’s proposal to open a quality control office in Vietnam in order to facilitate the country’s exports to Australia.

The two sides also pledged to make all-out efforts to boost the Trans-Pacific Partnership Agreement (TPP) and Regional Comprehensive Economic Partnership (RCEP) negotiations between ASEAN member countries and their partners.

Australia will consider and give official opinions on continuing its technical assistance to Vietnam through the Austrian Agency for International Development (AusAID) in the post-WTO period.

In response to Vietnam’s proposal to increase energy cooperation, Australia supports extending the Memorandum of Understanding (MoU) on energy cooperation until 2016

Minster Hoang worked with a number of Australian ministries on cooperating in oil and gas exploration and exploitation, energy conservation, and importing and exporting coal, and witnessed the signing of MoUs and long-term coal supply contracts between Vietnamese and Austrian groups.

During his visit, Minister Hoang also met with the governors of Queensland and New South Wales to discuss expanding trade and energy cooperation.

Vietnam is world No. 4 in instant noodle consumption

Consuming more than 5.1 billion packets of instant noodles in 2012 earned the country fourth place in the global instant noodle consumption rankings.

China, Indonesia and Japan are the world’s top three consumers of instant noodles.

China tops the list with 44 billion packets, followed by Indonesia (14.1 billion) and Japan (5.4 billion).

According to the World Instant Noodles Association in Osaka, Japan, 101.4 billion packets of instant noodles are consumed worldwide every year.

Instant noodles were invented by Japanese businessman Momofuku Ando, who also founded the Nissin Foods Holdings Company in 1958.

Ho Chi Minh City investment flourishes

Despite the ongoing domestic and global economic woes, investment in Ho Chi Minh City has shown positive signs of foreign direct investment (FDI) re-growth in the first few months of this year.

In late March, the HCM City People’s Committee granted an investment license to Sanofi Vietnam One Member Company, Ltd., under the Sanofi Aventis Group.

The company invested US$75 million to build a factory and research centre for pharmaceuticals, cosmetics and food supplements in HCM City Hi-Tech Park. This is Sanofi Vietnam’s third factory with the largest amount of investment.

A company representative said the most important factor for choosing the site for its factory was the high quality of human resources in HCM City. The company also received active support from the city in finalizing necessary procedures and improving transport infrastructure.

Hoang Lan Anh, Sanofi Vietnam Communications Director, noted that HCM City’s current policy to attract investment provides maximum support for foreign businesses to enter Vietnam, establish production and contribute to the country’s economic development.

Apart from central agency policies, HCM City Hi-Tech Park also offers many incentives to attract more investment to the city, she said.

Not a few foreign companies have also decided to invest in the city in the first few months of 2013.

As of March, 78 new FDI projects were licensed for operation in the city with total investment capital of nearly US$160 million, up 109 percent over last year’s same period, and there are still 26 adjustable expansion projects invested with over US$175 million.

Overall, the number of new projects has dropped but total investment capital has risen and adjustable capital increased much more than during the same period last year.

This shows signs of FDI re-growth which help investors regain their trust in the production and business environment in the city.

HCM City authorities and departments have recently made considerable efforts to boost the city’s investment environment by gradually improving transport infrastructure to reduce congestion and overload, providing facilities at industrial areas and export processing zones to welcome investors and focusing o education, training to increase high quality human resources.

The Hi-tech Park in District 9 was designed specifically for high-tech enterprises and it is now operating effectively, making it a desirable destination for technology investment in Vietnam.

The Hi-tech Park’s sixty three projects with total capitalization of US$2 billion have been granted licenses to establish business, three of which, worth nearly US$50 million, have been added since the beginning of this year.

HCM City Hi-tech Park Management Board Deputy Director Le Bich Loan said, "Our investment strategy is focused on open, international standard infrastructure to meet the needs of high-tech enterprises.”

To further improve its competitiveness and attract more investors to the city in the near future, HCM City will continue improving its investment environment and capital management, particularly for FDI; prioritize attracting new investment and large-scale projects; and apply modern and environmentally friendly technology.

It also aims to promote the efficient use of natural resources and limit the number of non-manufacturing investment projects not associated with processing.

The HCM City Planning and Investment Department Director Thai Van Re underlinied the need to remove cumbersome administrative procedures and deal with other problems that may arise after investment licenses or business registrations are granted to both domestic and foreign enterprises.

Business tax exemptions and payment extensions and social order is also a priority for attracting new investment, he noted.

The influx of investment, in the first few months of this year, especially from foreign sources, indicates the reforms to the city’s incentives, policies and mechanisms have been effective which has paved the way for the city to attract more investment towards achieving its socio-economic targets.

Ha Tinh's socio-economic development plan announced

The central province of Ha Tinh announced a master plan on socio-economic development for the province into 2020, with a vision to 2050, at a conference on April 27.

Chairman of the provincial People’s Committee Vo Kim Cu said that the master plan was based on the prospects of Ha Tinh’s competitive sectors, namely steel manufacturing; agriculture, forestry and fishery industries; trade, transport and logistics; textiles and garments; construction; education and training; information and communication.

Accordingly, by 2020, the province aims to have an annual economic growth rate of 18.4 percent; industrial, service and agricultural sectors will account for 54.7 percent, 32.2 percent and 13.1 percent of the province’s economy respectively; and the number of poor households will fall by 3-4 percent per annum.

At the event, Deputy Prime Minister Nguyen Xuan Phuc stressed that Ha Tinh needs to continue promoting its potential and this master plan to businesses and regional countries, in order to attract investment in priority sectors.

The province should also improve the quality of its human resources to serve economic zones and large projects’ demands, he added.

On the occasion, Ha Tinh presented certificates of investment to six businesses, including four foreign investors from Japan, the Republic of Korea, Hong Kong and Taiwan (China). The investors pledge to pour more than VND55.4 trillion (US$2.6 billion) in the province.

Since 2011, 301 new projects, worth more than VND346 trillion (US$16.5 billion), have been licensed to operate in Ha Tinh. Among them there are 48 foreign projects with total registered capital of VND218 trillion (US$10.4 billion), including those run by such giants as Formosa (Taiwan, China), Samsung (the RoK) and Mitsubishi (Japan).

Footwear exports see abundant orders

Several Vietnamese footwear businesses have been speeding up production to meet the sudden demand in exports since early this year.
Shoes being packed for export at a company in Binh Duong Province (Photo: SGGP)

Truong Thi Thuy Lien, director of Lien Phat Shoe Company in Binh Duong Province, said in 2012 the shoe industry met with a lot of difficulties due to fall in purchasing power in the EU market.

However, since the first quarter of the year, orders have increased from old customers. Besides, orders have also been placed by new customers from Germany and England.

The company now has to recruit more workers to meet production demand, said Lien.

Nguyen Chi Trung, director of Gia Dinh Shoe Company in Ho Chi Minh City, said there are more orders now than there were during the same period last year.

Besides orders from old customers in the EU market, there are also orders from the US and Japan. The company has had to speed up production to meet this demand.

This good fortune can be attributed in part to commercial agreements like the Free Trade Agreement between Vietnam and EU (FTA) and the Trans Pacific Partnership (TPP), still under negotiation.

When FTA takes effect by 2015, import tariff on several kinds of footwear exported to the EU will slash to zero percent.

According to the Vietnam Leather and Footwear Association (Lefaso), TPP will bring many opportunities for Vietnamese businesses to expand their market. The current import tariff of 14.3 percent to the US market will fall to only zero percent when this agreement takes effect.

Vietnam is now the second largest footwear export country after China, for the EU and US markets.

Lefaso expects that footwear exports will reach US$8 billion this year, an increase of about 10 percent over last year.

Le Minh Duc, director of the Department of Agriculture and Rural Development in Long An Province, said on April 27 that dragon fruit farmers are now reaping huge benefits from cultivating the fruit.
Farmers hang light-bulbs over dragon fruitplants to stimulate early flowering (Photo: Ministry of Industry and Trade website)

One hectare of dragon fruit cultivation brings in VND400-500 million (US$19,221-24,026); as a result, more farmers have expanded land area to cultivate the fruit.

On the downside, 80 percent of the volume is consumed by the Chinese market, which remains unstable and risky.

The Mekong Delta provinces of Long An and Tien Giang have the most farm land under dragon fruit cultivation--with over 5,000 hectares.

Recently, farmers reaped huge profits after they used light-bulbs hung over the plants to stimulate early flowering.

Leaders of both the above provinces have however asked farmers not to widen farm land to grow more dragon fruit but to focus on higher yield, quality and steady prices to increase competition as well as profits, and simultaneously search for new markets rather than rely so much on the Chinese market.

The provinces have now decided to allow only those households whose farm land has electricity to artificially stimulate dragon plants to bear out-of-season fruits.

Rental property market challenged by recession

Despite being at the busiest trading area in Hanoi, many people living in the Old Quarter's streets are finding it hard to lease out their houses, even at much lower prices.

Illustrative photo. Many people living in the Old Quarter's streets of Hanoi are finding it hard to lease out their houses, even at much lower prices

According to the owners, many kinds of business are being threatened by the on-going economic downturn.

On Tran Hung Dao Street, a 180 square metre house is being offered at VND200 million per month (USD9,500). Another VND400 square metre house in Hang Bong Street is leased at VND400 million while owner of a 700 square metres villa on Nguyen Du Street nearby is offering the villa at only VND480 million a month.

Average and small houses on streets near city centre such as Hang Dao or Hang Ngang can fetch the most handsome price at around VND200 million a month.

For example, residents of a house on Hang Dao Street have to pay USD7,000 per month for their use of 40 square metres and USD5,000 for the same floor area on Hang Duong Street.

Due to the high rental fees, many businesses have abandoned the Old Quarter in order to save money.

Trung Hieu, a resident in Ton Dan Street in Hoan Kiem District said he leased his villa for a non-government organisation at USD22,000 per month for two years. After they returned the villa, he has not been able to find another customer.

"The ad to rent the villa has been up for months now, I even lowered the price by USD3,000 but no one has bothered to call," he said.

Hang, a house owner on Hai Ba Trung Street also in the same situation, she said, "Though I lowered the rental fee from USD2,500 to USD1,800 but I still can't find customer. Business has been tougher than ever."

According to her, house owners on this street are being forced to lower prices or lose out. Moreover, the money they would lose if they fail to lease the house for several months is much higher than any reduction.

Pham Thanh Hung, vice head of Cengroup, a real estate consultant company in Vietnam, confirmed that the rental market is in deep slump and the house owners would need to lower the fees much more to please their customers.

Financial restructuring fails to show results

Despite one year of plans for economic restructuring, Vietnam's economy continues to face challenges in efforts towards recovery.

Efforts to lighten industrial inventory, eliminate bad debt and lower corporate income taxes and value-added taxes and to reduce interest rates for loans in the real-estate market are only temporary solutions, said Dr. Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM).

He added that such measures are not much different than those taken in 2011.

In his opinion, because the reforms were aimed at enterprises in selected industries, they do not add up to a viable fix for the entire economy, and may cause harm because they enable companies to operate inefficiently.

"So far the approach to settling bad debt has focused on the banking sector instead on the companies which owe the money. As a result, they will still find it difficult to take out loans to resume business activities," said Dr. Cung.

Dr. To Anh Duong, from the Vietnam Institute of Economics, agreed, saying that after one year, the restructuring policy has proved not to be comprehensive enough, while the banking system is looking at a continued liquidity crisis.

"Exactly how much that needs to be spent on restructuring the financial system remains unclear, but it will inevitably be a very large amount. The burden will ultimately lie on the State Bank of Vietnam to provide the capital, but at the same time not even the Ministry of Finance has estimates," Dr. Duong pointed out.

Tighter control over state-owned enterprises

Dr. Tran Du Lich said that the investment in non-core investments made by state-owned enterprises over the past few years has proven to be a huge waste.

He added that the government should no longer offer credit guarantees for state-owned enterprises. This, he said, would force them to apply for loans from commercial banks and adhere to the free market system. All state-owned enterprises should be required to have their portfolios listed publicly, just as listed private companies", he said.

He also suggested that a ministry-level agency be set up under direction of the National Assembly to manage and monitor state capital.

VNS/VOV/SGGP/dtinews