VN a top rapid growth market

Viet Nam is expected to be among the top three rapid growth markets in the Asia-Pacific region next year, according to Ernst&Young's quarterly Rapid Growth Markets (RGM) Forecast released last week.

The forecast stated that Asia-Pacific RGM star performers next year are expected to be India (+8.5 per cent), mainland China and Hong Kong (+8.6 per cent) and Viet Nam (+7.1 per cent).

RGMs are expected to grow collectively at 5.3 per cent this year, bouncing back to 6.3 per cent in 2013.

After gaining last year's growth of 5.9 per cent - slightly better than expected given the budget cuts and interest rate rises made necessary by above target inflation - the forecast said there will be little change for Viet Nam this year, as European markets stay weak in the first half of the year and continued inflation slows relaxation of monetary policy.

The country's exports rose more strongly than forecast last year but rapid import growth meant that devaluation of the Vietnamese dong did more to prolong inflation than to narrow the trade gap. This will strengthen official determination to slow the depreciation of the dong in 2012-13. An ongoing requirement to expand foreign reserves in line with import needs will also restrain the speed at which interest rates can fall.

"The central bank is working toward more targeted credit growth curbs and better restraints on borrowing for speculative investment," the forecast stated.

According to the forecast, although Viet Nam's growth should recover above the medium-term target of 6.5 per cent as the EU crisis abates, risks to near-term growth remain mostly on the downside. The weakness of the dong could return if progress on reducing inflation and the trade and fiscal deficits is less than forecast, and regional security concerns could also hit investor confidence.

The forecast also said that companies alert to rising cost factors in China could very usefully look at Viet Nam, Mexico and African countries as alternative producers of low-cost manufacturing. A 12 per cent annual rise in wage costs in China's coastal cities will gradually make itself felt elsewhere in the country.

Gerard Dalbosco, managing partner, Markets, Asia Pacific at Ernst&Young, said growth prospects in the RGMs remain strong but in positioning themselves, companies may have to examine a greater number of variables than in the past, encompassing transport, information and communication technology infrastructure.

Additional considerations include wages and other production costs, trade liberalisation policies, currencies management, technology transfers, investment and manufacturing partnerships, merger and acquisition opportunities, the quality of financial services and government procurement policies.

The quarterly Ernst&Young Rapid-Growth Markets Forecast, which is co-produced with Oxford Economics, aims to fulfil the need for practical and accessible economic forecasts and insights on the development of 25 rapid-growth countries around the world.

Vietnam’s forex reserves at nearly $17 billion: ADB

Vietnam’s forex reserves are estimated at some $17 billion, exceeding the pre-crisis rate of 2008, said the Asian Development Bank (ADB) in a recent meeting.

As of the end of the first quarter, the reserve had risen by around 25 percent over late 2011 following the active move of the central bank to buy foreign currency, according to the ADB.

The reserve rose by $3.5 billion compared to the rate the ADB announced in mid-2011 said Dominic Mellor, an ADB expert at a press conference to announce the economic outlook 2012 report in Hanoi.

Specifically, by the end of 2011, foreign currency reserves were equivalent to the pre-economic crisis rate.

Mr. Mellor said he believed the reserves had climbed from $13.8 billion at the end of last year. The State Bank of Vietnam (SBV) does not publish forex reserves on a regular basis, according to AFP.

The Vietnamese dong has been stable so far this year, with the mid-point rate set daily by the central bank at VND20,828 per dollar, unchanged since late December, following a lower-than-expected trade deficit in 2011 of $9.5 billion, AFP reported.

However, Vietnam’s improved forex reserves are equivalent to only about two months of imports, a relatively "fragile" level that may cause difficulties when the country faces unfavorable international conditions.

Another risk for Vietnam is a slow GDP growth rate, with a projected rate of only 5.5-5.7 percent in 2012, lower than the Government's expectations of about 6 percent, the ADB also mentioned in the report.

Thus, within a year, the organization has twice lowered Vietnam's growth rate outlook for a total of 1 - 1.2 percent. The forecast for 2013 given in this report was at 6.2 percent.

Regarding the causes for the adjustment, the ADB said that Vietnam may suffer negative effects from unfavorable conditions in consumption, both domestically and internationally.

Local hurdles may be caused by economic constraints, and workers’ incomes have not kept up with inflation rates.

As for inflation, the ADB expert expressed that he was heartened by the achievements that Vietnam has made in recent years and added that this year's CPI rate could be in the single digits.

However, as this year comes amidst unstable food and fuel supplies globally, the agency said that the restriction of inflation in Vietnam may face many challenges.

The ADB is also particularly concerned with the difficulties faced by enterprises, especially private ones, in the current climate, as they are badly affected by the tightening of credit after a period of rapid growth.

The organization also found no significant return of foreign investors to the manufacturing sector.

The ADB also recommended that the State Bank of Vietnam raise the credit growth ceiling from 14 percent to 18 percent to offer more abundant resources for the economy.

However, the interest rate issue should be carefully processed.

Speaking at the press conference, ADB national director Tomoyuki Kimura said the main message of the bank in this report is the recommendation that Vietnam should not "drop the rate too fast" in order to avoid interest rate risk on short-term macroeconomic circumstances.

SBV should also take drastic moves to ensure the safety of the banking system as the top target and try to develop a system of diversified financial institutions.

Finally, the ADB added that Vietnam should continue to enhance transparency and expand positive information about the reform process in order to create trust among the people as well as investors.

Creditors lodge demand asking Bianfishco to declare bankruptcy

Many farmer creditors of debt-ridden Bianfishco Wednesday lodged a demand to the Can Tho City’s People’s Court, asking it to initiate bankruptcy proceedings with the company.

“As an unsecured creditor, I demand that the people’s court initiate the proceedings with Bianfishco, and clarify the individual responsibility of Pham Thi Dieu Hien, its former CEO,” said Nguyen Van Chien, whom Bianfishco owes more than VND7 billion.

Lawyer Nguyen Thi Hong Ngan, who represents the 22 creditors, said calling for the initiation of bankruptcy proceedings is a solution to help the farmers have their debts cleared.

However, the court turned down their demand while saying that the case is being handled by the municipal People’s Committee.

On April 12, the farmers continued to call on the people’s court to initiate the process.

In response to the demand, Judge Le Kim Ban, head of the economic court, said her institution will consider whether or not there is ground to start bankruptcy proceedings with Bianfishco.
 
“In case the court officially handles the case, it will notify the company, create lists of debtors and creditors, and hold a creditor meeting,” said Ban.
 
“During the process of the above procedures, should Bianfishco still fail to revitalize its business, the economic court will begin to liquidate the company’s assets to settle its debt.”
 
The beleaguered seafood company was found to have outstanding debt of VND1.54 trillion ($73.9 million) to nine banks, a credit institution, and a number of farmers on fish purchases.
 
On April 6, the inspectorate team formed by the municipal government also found that Bianfishco is indebted to 10 other individuals and businesses for an additional debt of VND27.7 billion (US$1.32 million).
 
Meanwhile, a source said on Thursday that Tran Van Tri, the husband of the former CEO Hien, has obtained the letter of authorization from his wife to officially transfer the CEO chair to him.
 
The letter was reportedly sent from the US, and was notarized by a notary called SonVo.
 
The Vietnamese Embassy in the US also confirmed that the letter was signed by Vietnamese counselor Nguyen Hong Ha on April 3, according to the source.
 
However, “the Can Tho People’s Committee has yet to receive such information,” chairman Nguyen Thanh Son told Tuoi Tre via a telephone conversation.
 
Earlier Hien had reportedly left for the US to receive medical treatment for breast and liver cancer.

Ministry stops produce exports
 
The Ministry of Agriculture and Rural Development has frozen exports of 15 varieties of fruit and vegetable to the European Union following complaints by the block that some Vietnamese goods were infected with insects and worms.

Nguyen Xuan Hong, director of the ministry's Plant Protection Department, announced the move at a press conference in Ha Noi earlier this week.

Among the exported vegetables that have been temporarily suspended are chilli, basil and coriander.

The European Commission's Directorate General for Health and Consumers announced last year that products of 50 Vietnamese fruit and vegetable firms exported to the EU hadn't met quality standards and that some were infected with worms.

The commission told Viet Nam that if there were five more batches of Vietnamese goods exported to the EU between January 5, 2012 and January 15, 2013 were found to be substandard, the bloc would consider halting imports of fruit and vegetables from Viet Nam.

Hong said his department asked 160 Vietnamese fruit and vegetable exporters to ensure the quality of their goods was up to scratch last August. Despite the request, three batches of fruit and vegetables exported to the EU this year have been found to be substandard.

As a result, he said there was a high likelihood Vietnamese goods would be denied entry to the EU and so suspended exports.

Hong said the worms, bacteria and insects found in the exported goods were not found in the EU but were common in Viet Nam.

He said the plant protection department had established an urgent inspection team to check the country's fruit and vegetable storage facilities and the quality of agricultural exports.

He said that from now on, all fruit and vegetable exports to the EU would have to be authorised by the department. The department is also drafting a circular setting out the necessary hygiene controls for fruit and vegetables destined for the EU.

Nguyen Van Ky, general secretary of the Viet Nam Fruit & Vegetables Association, said enterprises needed to tightly supervise every stage of production.

"It's necessary to have thorough and long-term solutions for production phases in order to insure the prestige of domestic fruit and vegetable products is maintained," he said.

Viet Nam last year exported US$628 million worth of fruit and vegetables, up nearly 50 per cent against the previous year, the ministry said.

The country was among the top five nations in the world in terms of fruit and vegetable production last year.

Vietnamese diplomat asks US firms for support

Vietnam’s Ambassador to the US, Nguyen Quoc Cuong, has called on American firms to support Vietnam in gaining the US’s grant of the Generalised System of Preferences (GSP) and recognition for its market economy.

At a talks with representatives of about 50 US firms in Washington on April 11, Ambassador Cuong said that any support will help increase cooperation between the two countries as well as speed up negotiations on the Trans-Pacific Partnership (TPP) agreement.

He urged the American business association to lobby the US Congress and the administration to recognise the benefits of Vietnam being in the TPP negotiations, particularly in the garments and footwear sectors.

The Vietnamese diplomat stressed that the TPP agreement is extremely important for its member countries, including the US and Vietnam , when taking into account the strong development and the level of liberalisation of trade in the Asia-Pacific region.

He asked US firms to continue to invest and trade with Vietnam and pointed out that the US is Vietnam ’s largest trading partner and bilateral economic cooperation has made gains in recent time.

Calman Cohen, a representative for the US business association at the talks, spoke of Vietnam’s economic development and confirmed his association’s support for Vietnam during the TPP negotiations process.

Fuel stations in Hue shut down en mass

Many filling stations in Huong Thuy Town of the central province of Thua Thien – Hue have remained closed while displaying “run out of petrol” banners over the last few days.

“We have decided to stop selling petrol at the stations under our chain to cut losses,” said Pham Truong Nguyen Phuong, deputy director of Huong Thuy SJC, which manages the said filling stations.

Import prices of oil and petrol commodities remain high, Petrolimex said, citing latest figures as saying that A92 gasoline in Singapore, Vietnam’s main source of petroleum, on Tuesday cost US$132.7 a barrel.

The average import price for A92 gasoline in March was $134.48 a barrel, up by 4.55 percent compared to a month earlier.

The high import price has forced local wholesalers to cut commissions for their dealers. Commissions now range from VND360 to VND400 a liter to general dealers getting the fuel at the wholesalers’ depots.

This means other fuel retailers can receive only VND100-200 on every liter of gasoline. The rate for those in rural areas is even lower, only VND50 a liter.

VN eyes Latin America market

Viet Nam has set a export target of US$6 billion for the Latin American market by 2015, and between $12 billion and 15 billion by 2020, according to the Ministry of Industry and Trade (MoIT).

The MoIT estimates that this year the country's export value would be $700 million in each of the Brazilian and Mexican markets.

In addition to the 10 traditional markets in Latin America, the ministry also plans to expand Viet Nam's export activities to 23 other markets in the region, with export value in each market averaging $204.4 million.

Viet Nam's market share in the Latin American market is still modest, accounting for only 0.18 per cent of the region's total import value.

The country's traditional importers in the Latin American region include Brazil, which last year imported $597.7 million, Mexico, which imported $589.7 million, Panama, with import value of $227.4 million, Argentina, with $148.8 million, Chile, with $118.1 million, and Columbia, with $106 million.

Viet Nam's major exports in the Latin American market are footwear, with export value of $630.8 million in 2011, fishery products, with value of $253.7 million, apparel products, with value of $185.9 million and catfish, $254.2 million.

Nguyen Duy Khien, head of the American Market Department, said Vietnamese exporters still faced some disadvantages in the market, including language barriers, lack of market information, expensive transport costs and trade protection barriers.

Very few Vietnamese businessmen can use Latin America's main languages, including Spanish and Portuguese.

Both Vietnamese and Latin American businesses often do not have up-to-date market information.

Due to geographical conditions, transport costs are too expensive for Vietnamese enterprises' payment ability.

To realise these new targets, the MoIT has developed new measures that would help Vietnamese commodities cover the entire Latin American market.

Khien said that local companies must work together and expand their market share in traditional markets in the Latin American region.

Exporters should diversify by introducing new products such as building materials, porcelain, mechanical engineering products, high technology and high value-added consumer goods.

Khien explained that some newly emerging economies in the Latin American region were in a great need of commodities, materials and machines to serve consumers.

He also said there was a need to further promote the provision of information on Vietnamese enterprises and Vietnamese products for Latin American enterprises.

Overseas Vietnamese in Latin American countries should be encouraged to participate in advertising Vietnamese goods in the Latin American market.

Authorised agencies should create opportunities for Vietnamese enterprises to access updated information on the Latin American market as well as its development potential.

TV shopping firm sells poor-quality goods

Hundreds of customers who have bought products from the Huu Lac Co Ltd through its New Shopping TV shopping program, which is aired on several local channels, flocked to the company’s headquarters on Wednesday to return the goods and ask for refunds.

The customers have frequented the company since earlier this week, but it has repeatedly refused to receive them, said several customers standing in front of the Huu Lac headquarters on Khuong Viet Street, in Ho Chi Minh City’s Tan Phu District.

Most of them have bought mobile phones worth around VND2 million each, and tablets (VND3 million), after watching New Shopping’s infomercials on local TV channels such as Binh Duong, Long An, Dong Nai, and cable TV stations HCTV in HCMC and HiTV in Hanoi.

“My phone fails to detect the inserted SIM card, runs out of battery after just two hours, and ended up being out of order,” said Do Du Hoa from Dong Nai, who bought a L137k cell phone, which allegedly features a touch-screen, music player, and Wi-Fi connection.

After ending their resistance to customers, a company representative eventually showed up in the afternoon to refund people who had been waiting since early in the morning.

However, as of 4pm, around 20 people were still waiting to get their money back.

On the same day, the Market Management Team 2A, under the municipal namesake agency, found some of the company’s products as violating regulations on goods labeling, following a raid into their stock.

Most of the electronic products originated in China, Tuoi Tre observed.

Some of the goods were confiscated.

HCMC utility plans to raise water rates

The Saigon Water Supply Corporation is preparing a plan to increase water rates for 2014-2018 as a solution for the financial imbalance that makes it difficult to implement its development projects that intended to help expand its capacity to provide a clean water supply.

Sawaco deputy general director Bach Vu Hai made the statement at yesterday’s meeting with the city People’s Council’s Economic and Budgetary Committee to review the utility’s provision of clean water to the city.

The imbalance results from the fact that the current low water prices bring in revenue that is not enough to cover expenses on loans that are needed to fund the firms’ development projects, Hai said.

According to the firm’s business plan, this year Sawaco will raise the rate of households to be provided with clean water to 87 percent from last year’s 86 percent, and lower the water loss rate during distribution to 37 percent from 38.2 percent in 2011, Hai said.

In 2015, the firm will ensure access to clean water for 92 percent of the city’s total number of households and reduce the water loss rate to 32 percent. In 2025, 100 percent of residents will have clean water for use, Hai said.

To this end, the utility has set up a number of projects to install 1,400 km of new pipelines and upgrade a series of water plants to increase the water supply capacity from the current 1.5 million cubic meters to 2.4 cubic meters per day in 2015.

The total investment needed for these projects during the next three years is estimated at VND12.74 billion (US$612.5 million), of which only 40 percent will come from the firms’ capital and the city’s budget, while the rest will have to be provided by loans.

With an investment structure of which 60 percent is loans, an increase in water production costs is inevitable, since all actual costs must be included in the firm’s operating expenses, Tran Dinh Phu, Sawaco’s general director said.

Meanwhile, the current water prices, which range from VND4,800 to VND15,000 ($0.72) per cubic meter depending on the type of users and consumption level, is still low and not enough for the firm to balance expenses and revenue, putting its development projects at risk, Phu said.

The prices will be applied under the city’s roadmap for increasing water prices only in the 2010-2013 period, with every 10 percent rise in prices to be applied every three years, while the firm’s projects will have to last until 2015 or longer, Phu explained.

He also pointed out that the firm’s average selling price of water is now only VND7,500 per cubic meter, far lower than the allowable ceiling price of VND18,000 under regulations of the ministries of Finance and Construction.

Therefore, Sawaco will submit to the city People’s Committee a new plan for water prices for the 2014-2018 period for consideration, Phu said.

He also noted that the city has adopted a policy to call for private investment in developing the city’s water supply, but very few investors are interested in the policy since with such low water prices in place it is hard to ensure their investment’s profitability and return of capital.

Pham Van Dong, head of the city People’s Council’s Economic and Budgetary Committee, said he would report the firm’s proposals to the Council for consideration.

Export firms to get credit insurance aid

The Ministry of Finance will aid domestic businesses with 20 per cent export credit insurance premiums based on staples such as agricultural products, fisheries, garments, footwear, electronics and woodwork.

Addressing a conference on export credit insurance in HCM City on Tuesday, Deputy Director of the ministry's Insurance Management and Supervision Department Pham Dinh Trong said that the country currently had seven insurers providing export credit insurance, however, the ministry would allow all local insurers to provide such products with the number of exporters having surged significantly.

Besides supporting insurers in installing software and building up import databases, the ministry will also help them design export credit insurance products and train staff.

Trong said the ministry targeted having export goods worth US$2 billion insured this year, up from last year's $100 million. The ministry also expected goods worth 3 per cent of the country's total export revenue using the services in the coming years.

However, he admitted it would not be easy meeting such targets as the insurance was not popular among domestic exporters.

Trong said the insurance boosted national exports and helped local firms reduce the risk of loss, however, despite advantages, local businesses remained unwilling to opt for it.

He said exporters worried that insurance costs would push up operation expenses and reduce profit margins, especially in the context of current rising freight costs.

Analysts warned that Vietnamese exporters faced a high risk of loss from the international payment term, which have seen foreign customers transfer money only after receiving shipments.

Therefore, buying export credit insurance was necessary even though it reduced profit margins, they stressed.

Supply chain growth to up competitiveness

Officials at a seminar yesterday in HCM City underscored the urgent need for supply chain development in several sectors, including electronics, textiles and garments, electronics, leather shoes, and automobile and motorbike manufacturing.

At the seminar organised by the Ministry of Industry and Trade (MoIT) and the Multilateral Trade Assistance Project III (EU-Viet Nam MUTRAP III), Le Trieu Dung, deputy director general of the MoIT's Multilateral Trade Policy Department, said there was a need to improve the supply chain to increase added value for major export industries.

Having a better supply chain would also help negotiations in the upcoming free trade agreement (FTA) talks between Viet Nam and the EU. It would also be important for the FTAs already signed with China, Korea, Japan, New Zealand and India.

Truong Thi Chi Binh, director of Institute for Industry Policy and Strategy's Supporting Industry Enterprise Development Centre, said a good supply chain was especially needed in the auto and motorbike sector because it had seen more added value than other sectors.

"In the manufacturing sector, 90-95 per cent of added value is from the supply chain (including raw materials, research, design and manufacturing), and the support industry. Assembly for finished products only accounts for 5-10 per cent in the value chain."

When Vietnamese businesses supply products to a multinational corporation, these products will enter into a global supply chain.

"However, to meet the demands of multinational corporations, Vietnamese enterprises are advised that supply be based not only on price and quality but also production capacity in a long term," she said.

Support industries are critically important for Viet Nam to participate in the global value chain.

Like developed countries such as the US, Germany and Japan, Viet Nam needs to develop an automobile sector that can generate increased value added throughout the supply chain.

The supply chain in the manufacturing sector remains weak, partly caused by heavily reliance on foreign imports of raw materials.

For instance, the rate of local raw materials in the manufacturing sector is only about 10 per cent.

Every month, about 5,000 units of Innova automobiles are produced in Indonesia, but only 1,300 are made in Viet Nam. The price of Indonesia-sourced Innova automobiles is $4,000 less than that in Viet Nam.

Viet Nam imports more raw materials from Asean countries than Indonesia, plus there is a higher logistics fee and tax in Viet Nam, increasing the sale price.

This has lowered the competitiveness of the local automobile sector.

Viet Nam was urged to learn from experiences in Thailand and Malaysia in developing the auto and electronics sector.

For instance, Thailand offers preferential policies for locally sourced component production, while Malaysia develops zones for electronic components production.

The Vietnamese government also should pay more attention to attracting foreign-invested small- and medium-sized enterprises to meet the demand for local supply.

The Government also needs to offer financial preferential treatment to help the development of the support industry.

Dang Phuong Dung, general secretary of Viet Nam Textile and Apparel Association, said the textile and garment sector faced heavy dependence on imported raw materials.

Machines, chemical substances and dye are also mostly imported, leading to a supply chain that is not effective. There is also a lack of linkages in the distribution and retail network.

Currently, Viet Nam needs about 400,000 tonnes of cotton every year, but domestic supply can meet only 3,000 tonnes (0.75 per cent) of demand.

"Even though export turnover is high, added value would be small if there is not an effective supply chain," she noted.

Dung suggested that the Government could boost export turnover by providing financial support for a raw materials trading center and more help to the support industry.

Nguyen Thi Tong, vice chairwoman cum general secretary of Viet Nam Leather and Footwear Association, said an improved supply chain would allow companies to deal with challenges related to production, suppliers, retail, inventory, sales, product check and delivery and warehouse operation, among others.