Interest rates top concerns among industry

 

Excessive loan interest rates that have hit production and import of luxury goods were the biggest concerns expressed at a tele-conference between industry and the Ministry of Trade and Industry early this week.

 

Minister Vu Huy Hoang, who chaired the meeting held to discuss difficulties plaguing the economy, noted the sluggish growth in the steel industry and blamed it on low demand.

 

Garment exports in May saw a 35 per cent increase in value year-on-year, but profits dipped, deputy managing director of the Viet Nam Textile Group (Vinatex) Nguyen Tien Truong said.

 

Cotton and fabric prices had skyrocketed by 260 and 44 per cent respectively, he said.

 

"Garment exporters need large loans to buy materials for production, and so they can only afford to stock inputs for one month because of the high interest rates," he said.

 

The HCM City Department of Industry and Trade also complained about the high interest rates and input costs that have almost brought production by leading manufacturers to a halt.

 

Food companies are not making large purchases of rice from farmers despite the Government's recommendation due to the credit squeeze, according to the Southern Food Company. They are instead waiting for rice prices to drop to make purchases.

 

Many borrowers had switched to loans in dollars since they could not afford the interest rates on dong loans, the company said, adding, however, it was difficult to get dollar loans.

 

Hoang said the ministry would continue to dissuade import of unnecessary items to rein in the trade deficit which has reached US$6.6 billion, or 19 per cent of total imports, in the first five months.

 

He expressed satisfaction at the new measures the ministry imposed this month to control imports of cars, alcohol, cosmetics and mobile phones, saying they were needed both the long and short terms and did not breach the country's WTO commitments.

 

Viet Nam imported on average 30,000 cars of nine seats or less every year at a cost of $1billion, he said. Thus, the ministry's move against imports of such cars only affected 30,000 users a year, he said.

 

Seafood exports expected to hit US$8 bil by 2020

 

Vietnam is forecast to earn a turnover of US$8 billion from exporting aquatic products in the next 10 years, according to the Ministry of Agriculture and Rural Development (MARD).

 

This is part of a draft programme to export seafood products till 2015 with a vision for 2020.

 

Deputy Minister of Agriculture and Rural Development Vu Van Tam said that the greatest challenge to the seafood export programme is how to associate export processing with material production, promote trade activities and control the quality of seafood products.

 

From now until 2020, the seafood sector will take the lead in the process of industrializing and modernizing agriculture, rural areas and farmers. The sector will get access to advanced and modern technologies and promote its trademarks in the domestic and international markets.

 

The European Union, Japan and the US will continue to be Vietnam’s leading export markets, making up 60-65 percent of its total export earnings.

 

Apart from potential markets such as Eastern Europe, ASEAN, Southern Europe, the Middle East and South America, Vietnam will continue to develop single markets such as China, Hong Kong, the Republic of Korea and Australia. 

 

Highway project opened to investors

 

Domestic investors will be allowed to participate in constructing the 57.8-km Ben Luc- Long Thanh expressway project, according to the Viet Nam Expressway Investment and Development Corporation (VEC).

 

Under the agreement with the Japan International Cooperation Agency (JICA), domestic investors can become main contractors for bridge and approach road construction.

 

VEC has received loan commitments of up to US$1.27 billion for the construction of the $1.6 billion - project from the Asian Development Bank (ADB) and JICA, Dau Tu (Vietnam Investment Review) reported.

 

In May, VEC and ADB signed a loan agreement worth $636 million for the project.

 

A loan agreement worth $634.8 million from JICA will be signed in September.

 

The loan from ADB will be used to build the project's west and east sections, and the loan from JICA will be used to build the project's middle section. The cost of land clearance and relocation of affected households and other works, which is worth $336.9 million, will be taken from the State budget.

 

The Ben Luc – Long Thanh expressway will depart from the connecting point between HCM City – Trung Luong expressway and the HCM City Ring Road No 3 and end at the connection point with Bien Hoa – Vung Tau expressway in Dong Nai Province's Long Thanh District.

 

The expressway, which allows a speed of 120km per hour, will have eight lanes and run through Ben Luc and Can Giuoc districts in Long An Province, Binh Chanh, Nha Be and Can Gio districts in HCM City, and Nhon Trach and Long Thanh districts in Dong Nai Province.

 

Tran Xuan Sanh, chairman of VEC's Board Members Council, said bidding procedures to select contractors for the project would be held at the end of this year and construction of the project would begin early next year.

 

Vietnam’s biggest oil platform installed

 

The installation of topsides for Vietnam’s biggest-ever oil rig has been completed at the sites of Moc Tinh gas field off the southern province of Ba Ria-Vung Tau.

 

The Moc Tinh oil rig is invested by the Bien Dong Petroleum Operating Company (Bien Dong POC), a subsidiary of the state-run Vietnam Oil and Gas Group (PetroVietnam).

 

The Moc Tinh platform together with the Hai Thach platform, another investment of the Bien Dong POC, is expected to supply two billion cu.m of gas per year and between 15,000 and 20,000 barrels of condensate per day.

 

Moc Tinh gas field, located at block 5.3 in the Nam Con Son basin, offshore southern Vietnam , has estimated reserves of 0.5 trillion cubic feet (tcf) of gas and 9.59 million barrels of condensate.

 

ADB supports Mekong corridor project

 

Initial implementation of the technical aid package in preparation for the ADB-funded project on corridor towns development along the Greater Mekong Sub-region, CTDP, was reported at a seminar in in the central province of Quang Tri on June 8.

 

The CTDP was designed to turn transport corridors into synchronous economic corridors through upgrading priority infrastructure.

 

The technical aid package will prepare for later investment in proposed priority infrastructure and build management capacity for corridor towns.

 

Vietnam’s corridor towns benefiting from the project include Dong Ha city and Lao Bao town in Quang Tri, and Moc Bai town in the southwestern province of Tay Ninh , which are located on a strategic position for the local economic development.

 

Quang Tri is the gateway of the East-West Economic Corridor while Tay Ninh is the gateway of the GMS southern economic corridor, said Nguyen Quan Chinh, Vice Chairman of the Quang Tri People’s Committee, CTDP management board in Vietnam .

 

The seminar evaluated the socio-economic situation, important development issues and challenges in the selected corridor towns, as well as earlier activities.

 

Priority infrastructure sub-projects were also selected in preparation for the larger-scale project.

 

In the past, with the support of the Government, ministries, sectors and international organisations, especially the Asian Development Bank (ADB), provincial authorities have made every effort to lure investment into the three transport corridors, aiming to turn them into economic trade corridors.

 

Mumbai seminar promotes Vietnam-India trade

 

A seminar on bilateral trade between Vietnam and India has been held in the Indian city of Mumbai.

 

Jointly organised by the Vietnamese Embassy and Vietnam Trade Office in India, the India-Vietnam Chamber of Commerce and Industry (IVCCI) and the Indian Entrepreneurs Office, the event drew the participation of almost 200 entrepreneurs from the two countries.

 

Addressing the event, Vietnamese Ambassador to India, Nguyen Thanh Tan said he hoped the signed ASEAN-India Free Trade Agreement and India’s recognition of Vietnam’s full market economy would open up new chances to promote the comprehensive cooperation for the benefit of the two peoples.

 

He affirmed that the recent friendly visits between high-ranking Vietnamese and Indian Party, State, government and legislative leaders reflected the importance of the two countries’ strategic partnership.

 

President of IVCCI, G.D. Agarwal spoke highly of the dynamic development of Vietnam’s economy as well as the great potential for bilateral cooperation. He also said the Vietnamese market opens up many opportunities for Indian investors.

 

At the event, delegates learned about Vietnam’s economy, to highlight cooperation opportunities in this Southeast Asian market, and stressed the necessity of promptly opening a direct air route between the two countries.

 

Two-way trade in the first four months of this year reached over US$1.262 billion, a year-on-year rise of 42 percent. The two countries plan to raise bilateral trade to US$5 billion by 2015.

 

Public finance reforms contribute to socioeconomic development

 

The Ministry of Finance has held a 2011 mid-term meeting on the partnership between the ministry and donors in the field of public finance management.

 

The meeting on June 6 aimed to provide a venue for donors, beneficiaries, and project managers to review the progress of the projects in this field and seek measures to remove barriers to them.

 

Participants also mentioned some issues like updating information on the progress of public finance reform in general, policy dialogue, and other discussions relating to donors.

 

A report at the meeting show that in the first half of the year, many international donors paid attention to the signing of new ODA programmes and projects to provide additional funding for public finance reform.

 

The Ministry of Finance already disbursed an estimated amount of US$15 million in the first five months of 2011.

 

Province to expand coconut cultivation areas

 

The southern province of Ben Tre plans to increase coconut cultivation by 3,000-5,000 hectares, a provincial official said at a conference held here this week.

 

The coconut was the most useful tree in the world since all parts of the coconut palms and nuts could be used, providing materials for many industries, including the processing industry and tourism, said Phan Van Khong, director of Ben Tre Agricultural Promotion Centre.

 

The country has about 147,210ha under coconut cultivation, yielding 818,000 fruits a year. The coconut mainly grows in 13 Mekong River Delta provinces, which accounts for 75 per cent of the country's total coconut output.

 

With more than 50,000ha under coconuts, Ben Tre Province has the largest planted area of coconuts in Viet Nam and is often called the "land of the coconut".

 

Many coconut processing establishments are also based in the province, including copra processing and drying factories and small establishments producing coconut candy, caramel and jelly.

 

The price of coconut fruit this year increased 3 to 4 times compared to five years ago to VND80,000-VND90,000 for every 12 fresh coconuts and VND150,000 for every 12 coconuts used for processing.

 

At current prices, profits from coconut cultivation had doubled profits from a rice plantation, Khong said.

 

He said Viet Nam had great potential for coconut plantation, production and processing.

 

Coconuts could grow on all kinds of soil while fruits were less suitable, so most of Ben Tre's brackish zones were used for coconuts, he said, adding that coconuts could grow with other crops (intercropping), including cocoa, banana and pomelo.

 

He said intercropping cocoa with coconuts resulted in higher profits for the farmers than monoculture of coconuts.

 

In the next few years, the province would increase the area of intercropping cocoa with coconuts from the current of 7,000ha to 15,000ha.

 

Khong also advised farmers to focus more attention on caring for the tree as putting fertiliser, watering to raise the tree's output.

 

A coconut tree in Viet Nam has an annual average output of 36-37 fruits, equaling the average output in other countries.

 

Coconuts in the Mekong Delta have a higher yield than in other regions in Viet Nam, to 48-50 fruits a tree a year.

 

"The output can increase to 100 fruits per year if the tree gets enough water and fertiliser, as well as measures to prevent and control diseases on trees," Khong said.

 

Le Van Tuoi, an outstanding farmer in Giong Trom District, agreed with Khong, saying that coconuts also required nursing like other fruit trees to improve their output.

 

With higher prices of coconuts in recent years, the income of coconut-producing households also increased very quickly across the entire country, greatly contributing to improve the income of poor households, said Vo Van Long, deputy chairman of the Viet Nam Coconut Association.

 

The coconut sector had created many jobs for the local people in Ben Tre, especially for the poor who participated in all activities in the supply chain, he said.

 

"The price of coconut is expected to remain high since consumption of fresh coconut and coconut-based products as coconut oil, copra and desiccated coconut is projected to increase steadily over time, both in domestic and global markets."

 

Phan Thi Thu Suong, deputy director of Ben Tre Province's Department of Agriculture and Rural Development, said currently many coconut processing establishments faced significant shortages of raw coconuts for processing because many businesses from China came to the province to buy the nut.

 

Long said Ben Tre and Tra Vinh last year earned about US$100 million from exports of fresh coconut and coconut-based products each.

 

However, exports of coconut-based with high value-added products accounted for a modest rate, and the country as well as the province should encourage businesses to apply advanced technology in production to produce more higher value-added products, he said.

 

Delegates at the conference agreed that, in the wake of climate change, coconut trees would become more common and popular since they were more adaptable to climate change than other trees.

 

They also suggested that the Government devise a zoning plan for coconut cultivation and call on farmers to strictly follow the plan to ensure sustainable development of the industry.

 

Co-organised by the National Agricultural Extension Centre, Ben Tre Department of Agriculture and Rural Development and the Ben Tre Agricultural Promotion Centre, more than 300 agricultural experts and farmers from18 provinces attended the conference.

 

Nation to comply with Halal requirements

 

Strict compliance with Halal requirements in production and packaging would increase the popularity of Vietnamese exports to the estimated 1.83 billion Muslims worldwide, experts have said.

 

Mohammed Omar, lead auditor of the Halal Certification Agency Viet Nam (HCA Viet Nam), said the global Halal market, with products made under the requirements of the Muslim community, had a total value of US$2.77 trillion.

 

"Halal certification is a global scheme for product or services. It is an independent process to verify halal and haram ingredients and purity conditions required to meet Qur'an and Shariah standards," said Omar.

 

Halal (permitted) and haram (prohibited) are Arabic universal terms applied to all facts of life and commerce. Shariah is defined as a legal framework under Islamic Law.

 

"Halal products are the ones verified to have only halal ingredients on it, thus ensuring pure conditions during production," said Omar.

 

Speaking at a workshop held yesterday in HCM City by the EU-Viet Nam Multi-bilateral Trade Assistance Project (MUTRAP III) and the Ministry of Industry and Trade, experts said raising exporters' awareness of Halal standards was crucial for market penetration.

 

Omar said that many people did not understand the meaning of Halal products.

 

"Muslims don't eat pork. But Halal products are not just non-pork products; they must also meet the hygienic and safety requirements of the Muslim community," said Ahmad Shanizam, trade counselor at the Consulate General of Malaysia in HCM City.

 

Shanizam encouraged Vietnamese businesses to understand Halal requirements to enhance exports to the Muslim market, which includes Indonesia and Malaysia in ASEAN, Saudi Arabia, Kuwait, and even the US and the UK.

 

"Malaysians would love to travel to Viet Nam to shop if products here met Halal requirements," he said, adding that Muslims represent 60 per cent Malaysia's population.

 

According to Shanizam, the Halal market in Malaysia exists in many sectors, including food, cosmetics, leather, Islamic finance, media and logistics.

 

Tran Xuan Giap of the HCA Viet Nam said the Halal requirements, represented by the ICI-IHIA Halal Standard DIHAS 0070-2011, included those on the food processing industry, product development steps, procurement, reception and storage, raw ingredients, personal and staff hygiene, and packaging.

 

Businesses in need of Halal certification are encouraged to submit a Halal application to HCA Viet Nam.

 

The process required an adequacy audit, on-site audit, Halal certificate issuance and surveillance audits before products were sealed with Halal logos for products, Giap said.

 

HCA Viet Nam is one among 111 recognised Halal organisations worldwide.

 

A representative from the ministry's Department of Asia-Pacific Market encouraged Vietnamese businesses to be aware of Halal requirements because some countries misuse these as a trade barrier, which is a violation of World Trade Organisation (WTO) commitments and free-trade agreements.

 

Jetstar Pacific owes $8.7 mln fuel debt

 

Budget carrier Jetstar Pacific owes VND180 billion (US$8.7 million) to fuel supplier Vietnam Air Petrol Company, the latter’s CEO Tran Huu Phuc said at a press conference yesterday.

 

Vinapco had said June 1 it would continue to supply jet fuel to Jetstar Pacific and extend the payment deadline until August if it was guaranteed by a bank or its majority stake holder, the State Capital Investment Corporation, which owns a 70 percent stake.

 

But with Jetstar Pacific not responding to the offer, the supplier has asked the carrier to pay an advance of VND3.6 billion ($180,000) daily for fuel from June 5.

 

After its fuel-supply contract with Jetstar Pacific ended May 31, Vinapco reported about the airline’s debt to the Civil Aviation Administration of Vietnam, the Ministry of Finance, the Vietnam Competition Authority, and its parent Vietnam Airlines.

 

But none them have suggested a solution yet.

 

Firms choose mergers over restructuring risking takeover

 

A recent trend has surfaced where many Vietnamese firms have begun to merge with larger ones or buy out others in order to enlarge their business to solve financial problems instead of restructuring their company, something experts warn could cause foreign takeovers.

 

Vu Dinh Phuong, the founder of the Vietnam Fan JSC, which specializes in electronic fans, recently sold 65 percent of his company to the French SEB Group for a reasonable price, instead of selling 80 percent to a Chinese firm, which said it would agree to any cost he demanded.

 

“When we told them [the Chinese firm] that we wanted to sell 40 percent of our stake, they refused, saying that they wanted to purchase 80 percent,” he said. “That’s when I knew they wanted to take over our company, and did not want to cooperate with us to expand our Asia Vina brand name to the world. So we rejected their offer.”

 

Phuong said some foreign firms are willing to buy a company, but what they really want is to sell it for profit once it has been developed, not to cooperate with the owners to develop it.

 

Vietnam Fan decided to cooperate with SEB Group because the two parties shared the same ambitions.

 

“We want Asia Vina fans to spread into worldwide markets, while SEB wants to choose a qualified firm to help them develop the Asian market,” Phuong said. “Our product quality is good enough to compete with those from Thailand and China, and we need their international network and valuable trade promotion experience.”

 

Mai Hanh Co Ltd, an average size cooking gas distributor in Ho Chi Minh City, recently purchased the whole stake of Tan Hai Viet, another distributor that is twice its size.

 

Earlier, Mai Hanh had taken over the Nguyen Hiep distributor. With these two transactions, Mai Hanh has become one of the biggest cooking gas distributors in Ho Chi Minh City.

 

Tran Thanh Thuc, CEO of Mai Hanh, said his company could not profit in the cooking gas industry if it was still operating as a small business.

 

“Once my company is bigger, it will be able to attract good personnel to help its development,” he said.

 

Although mergers and acquisitions have become a common trend in domestic firms in order to boost their business development, most of the small domestic businesses are not very knowledgeable about the process, which may lead to their company being taken over by foreign firms that want to enter the Vietnamese market.

 

“The domestic firms must make up their mind whether they want a short-term solution, which is to call for capital to solve financial problem, or a long-term one, which is to prepare for the restructuring of the firm before they come to the [mergers and acquisitions] solution,” Nguyen Trung Kien, CEO of TNK Capital Partners, said.

 

Industry hurt by glut of Chinese machinery, equipment

 

Despite their bad quality, the number of machinery and equipment imported from China is increasing. Faced with no tax, these cheap products are flooding the market and crippling the domestic industry in Vietnam, which has to pay high taxes for its imported components.

 

Tran Tien Dung, an employee of a Ho Chi Minh City-based logistic firm, said the orders his firm has received to transport machinery and equipment from China this year have doubled over last year.

 

“Cheap price is the main reason why Vietnamese firms prefer Chinese machinery to domestic ones or those from the US, EU and Japan markets,” he explained.

 

Import turnover of Chinese machinery in the first quarter this year has climbed from US$1.074 billion in 2009 to $1.595 billion, according to statistics released by the General Department of Vietnam Customs.

 

T.H., who runs a machinery store in Nguyen Thai Binh Street, Tan Binh District, said a complete set of Japanese machinery that employs 10 garment workers would cost VND100 million ($5,000), compared to just VND54 million ($2,700) for a Chinese counterpart system.

 

“You get what you pay for. The Japanese machines cost twice as much but they can last 10 years. The Chinese machinery may start having problems after just 3 years,” he said.

According to some machinery stores, the Chinese manufacturers are willing to produce machines and equipment at any price that suits the Vietnamese firms’ demand.

 

These cheap machines are neither durable nor environment-friendly. Worse, they consume a lot of power, they added.

 

Do Phuoc Tong, head of the Association of Mechanical Industry of Tan Phu District, said Vietnam’s domestic mechanical firms could manufacture the same machinery and equipment currently imported from China, but the unreasonably high tariffs have made them less competitive in the market.

 

At present, many imported machinery and equipment enjoy a zero percent tax rate, while the imported components necessary for the manufacture of such machinery are taxed 15 to 20 percent.

 

“This tax policy has caused great difficulty to the domestic manufacturers,” he said.

 

New push to boost rural areas, says PM

 

Building a new rural model is an urgent mission and a strategic policy for the sustainable development of Viet Nam, said Prime Minister Nguyen Tan Dung at the launching ceremony for the Central Council for Emulation and Awards in the capital yesterday.

 

During the ceremony, the Prime Minister launched new emulation movements calling all people to build a new rural model.

 

In his address, PM Dung highlighted the important role of agriculture, farmers and rural areas which had made significant contributions to the nation's construction and defence and stabilised national socio-economic development.

 

Agriculture played an important role in the national food security strategy, he said.

 

In recent decades, the Party and State have paid strong attention and issued proper policies to develop agriculture and rural areas. In the last 10 years, the country has achieved the annual agricultural growth rate of 3.6 per cent.

 

In 2008, the Government chose 11 communes nationwide to participate in a national pilot programme to build new rural areas. Many provinces and cities have built new rural areas and achieved significant results, including improved infrastructure, new farming production models and higher incomes.

 

About 70 per cent of the Vietnamese population earns their living from agriculture, accounting for 20 per cent of the annual gross domestic product and 30 per cent of the export turnover.

 

Despite this, development of the agriculture sector was not considered completely sustainable due to its low competitiveness. A shift in the economic mechanism and renewal of the agricultural production model had been implemented slowly and the ratio of poor households was still high, particularly in remote and mountainous areas, the Prime Minister said.

 

He also asked relevant agencies to implement the National Target Programme on Building New Rural Areas to 2020 in order to establish a developed agriculture sector which meet new rural standards in 20 per cent of communes by 2015 and 50 per cent by 2020.

 

PM Dung ordered the Viet Nam Fatherland Front, sectors and localities to respond to the emulation movement to build new rural areas as well as the emulation movement to learn from and follow the moral example of President Ho Chi Minh which was successfully achieved by all Vietnamese.

 

All ministries, sectors, relevant agencies and People's Committees in cities and provinces should develop a plan and detailed measures focused on implementation of the National Target Programme on Building A New Rural Area, Dung said.

 

At the ceremony, the Vice Chairwoman of the Central Council for Emulation and Rewards, Tran Thi Ha, presented a report reviewing emulation and reward activities in 2010.

 

Dong Nai budgets $1.4b to boost infrastructure, living standards

 

Dong Nai Province near HCM City will spend VND28.56 trillion (US$1.4 billion) to upgrade infrastructure and improve living standards in rural areas by 2015, its People's Committee has said.

 

It is part of the National Target Programme on Building New Rural Areas to develop disadvantaged areas across the country.

 

Three-fifths of the amount will come from the provincial government, and the rest from businesses and individuals.

 

The programme seeks to asphalt all village roads, strengthen irrigation systems in 61 communes, and supply electricity to all households in 115 communes.

 

The improvements will enable the province to increase the per capita income by 50 per cent over 2010.

 

Xuan Loc District has been selected as a model for the rest of the province. Here, authorities have encouraged farmers to switch to crops in demand, like red-flesh dragonfruit, to ensure sustainable incomes and placed more focus on industry and traditional handicrafts.

 

The district also plans to expand farming of lucrative produce like clean vegetables and mangoes grown to GAP (Good Agricultural Practices) standards.

 

The use of efficient irrigation systems will be expanded to cover more land under pepper.

 

The province has earmarked VND27 billion ($1,3 million) for developing infrastructure, education, and health care in the communes, and has received another VND20 billion ($972,000) from the central Government.

 

Jelly sales slump on toxin fears

 

The Ho Chi Minh-based New Choice Food Company has withdrawn more than 3600 containers of taro-flavored fruit jelly from around Vietnam after the Ministry of Health found the product to contain DEHP, a toxic plasticizer.

 

The substance was identified as being in an ingredient the company imported from Taiwan at the beginning of this year.

 

Prolonged exposure to DEHP causes testicular defects, fertility problems, and toxicity in kidneys.

 

Supermarket chains like Sai Gon Coopmart, Big C, Maximart, and Metro have announced they will also stop selling the company’s other flavors like coconut, strawberry and orange favor.

 

Other companies’ products will however be sold normally.

 

The discovery of DEHP immediately hit sales of jelly products in most traditional markets in HCMC such as Binh Tay, Ba Chieu, and An Dong.

 

Though summer is the peak sales time, demand for fruit jelly and agar -- used as a gelling agent – has fallen by 70 percent.

 

Some companies have begun to test their product for the toxin.

 

Recently other Taiwanese products sold in Ho Chi Minh City, including candy, bottled water, vitamin tablets, and others, were also discovered to contain DEHP.