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Any firms and organizations that promote made-in-Vietnam goods, industries and tourist spots abroad would be supported on the advertisement cost, according to overseas prices.
The same support will be given to advertising campaigns stimulating Vietnam’s export, conducted by foreign media agencies invited to Vietnam, according to the circular effective from the beginning of August.
Firms or organizations that consult local and foreign experts on developing domestic products, Vietnam’s export or help firms go deeper into foreign markets will also supported with consultancy cost.
Businesses attending exhibitions overseas will be given the entire cost, but not more than VND200 million (US$9,700), on site rent, design, decoration, invitation cards and reception, the circular said.
The circular is a part of the national trade promotion program.
Thailand expands investment in Vietnam
A seminar on promoting trade ties between Vietnam and Thailand was held in Ho Chi Minh City on June 30 by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the Thai Ministry of Industry.
Surasith Bungbhisand, Deputy Director of the Thai Department of Industrial Promotion, noted that the trade ties between Vietnam and Thailand have grown steadily over the years.
He said Thailand currently has 250 projects operating in Vietnam with a total capitalisation of US$5.8 billion, and is one of the top ten countries of most investment into Vietnam.
Vietnam has political stability and great economic potential for many Thai groups such as Tipco, Amata and Siam Cement Group to expand investment in Vietnam, he said.
Two-way trade turnover between the two countries in 2010 reached about US$7.5 billion, up 21 percent against the previous year with Vietnam’s exports to Thailand rising 10 percent to US$1.2 billion.
Nguyen The Hung, a representative from the VCCI, said the business circles of the two countries are keen to boost cooperation in many fields. Many Vietnamese businesses are opening representative offices in Thailand to seek investment opportunties and cooperation partners.
GDP increased by 5.57 percent in six months
The country’s GDP increased by 5.57 percent in the first half of this year compared to the same period last year, including 5.43 percent in the first quarter and 5.67 percent in the second quarter.
The figures were released at a meeting in Hanoi on June 29 to review socio-economic developments in the first half of this year.
The National Statistics Office announced that the socio-economic situation was still at a disadvantage on account of rising inflation rate. However, thanks to the Government’s strict instructions on containing inflation, stabilising macroeconomy and ensuring social welfare and business performance, the country continued to record some positive socio-economic achievements.
The agro-forestry and seafood sector rose 2.08 percent, industry and construction (6.49 percent), services (6.12 percent), and industrial production (9.7 percent).
Social investment in the past six months was estimated at VND409.7 trillion, up 5 percent compared to the same period last year while foreign direct investment (FDI) reached US$5.3 million, down 1.9 percent from a year earlier.
Exports hit US$42.3 billion, up 30.3 percent and imports rose 25.8 percent to US$49 billion.
The consumer price index (CPI) in June increased by 1.09 percent compared to May, of which food and restaurant services hit a record high.
Do Thuc, Head of the GSO said that despite some significant achievements in the first six months, the national economy is still faced with a number of difficulties, and challenges such as high inflation and increasing prices of input materials.
Italy seeks bigger share in machinery market
Eleven Italian businesses operating in machinery manufacturing will display their products at the Machine Tools and Metal Exhibition-Conference in Ho Chi Minh City from July 5-8.
They will come to Vietnam on a fact-finding tour organised by the Italian Trade Commission (ICE) in Ho Chi Minh City and the Association of Italian Manufacturers of Machine and Tool (UNIMU).
ICE Head Marco Saladini said Italian machinery products make up 4 percent in the Vietnamese market and the figure has stayed stable over the past three years.
According to ICE, Vietnam is one of the fast-growing markets in Asia. Its imports of Italian machines and tools increased by 350 percent in 2010.
The two countries’ trade ties have been strengthened over the years. In 2010, Italian exports to Vietnam rose by 21.2 percent to EUR548 million while Vietnamese exports to Italy were EUR890 million, up 26.8 percent, ICE said.
Bac Kan promotes agro-forestry investment
The People’s Committee of northern Bac Kan province launched the Agro-Forestry Promotion and Investment Fund (APIF) at an investment promotion conference on June 29, aiming to encourage public-private partnership in the fields of agro-forestry and tourism.
The fund will provide financial assistance from US$30,000 to US$100,000 for investment initiatives taken by private investors which meet requirements of APIF.
In special cases, this assistance can reach up to US$250,000. The fund is part of the Pro Poor Partnerships for Agro-Forestry Development project (3PAD) which has received US$2 million from the International Fund for Agricultural Development (IFAD) and technological support by the Netherlands Development Organisation.
Ly Thai Hai, Deputy Chairman of the provincial People’s Committee and Director of Planning and Investment Department, affirmed that investment in agro-forestry and tourism would contribute to the sustainable poverty reduction in remote areas and ethnic minority region.
Atsuko Toda, Director of 3PAD project in Vietnam, said that the fund will help investors reduce costs and risks when investing in the poor province.
Firms struggle to survive soaring interest rates
With lending interest rates remaining sky-high, especially for the production sector, enterprises find it hard to access loans and maintain profits.
The current lending interest rates are still higher than 23 percent per year, while enterprises say the suitable rates for them to continue production must be around 17 percent.
Truong Thi Thuy Lien, director of the Binh Duong-based Lien Phat Footwear Corporation, said a bank had proposed an interest rate of 24 percent per year for the VND5 billion (US$250,000) loan she wanted to borrow to build a new workshop.
Lien Phat has given up due to this high rate, as the firm’s profits are not enough to cover the interests, she lamented.
Nguyen Thi Thuy Dung, director of Binh Nam Corporation in HCMC, said her firm is struggling against the interest rate of 20.5 percent, which doubled over last year.
“The high interest rates have forced enterprises to hike their product price, but the markets would understandably not accept those who keep on hiking prices,” she said.
High interest rates are also battering other firms in the fields of agricultural, forestry and seafood.
Hoang Manh Binh, director of cashew nut exporter Viet Son Corporation, said his firm had borrowed at the interest rate of 22 percent.
The high interest rates plus the two-fold price hike in raw cashew nuts have dramatically reduced profits, he said.
Nguyen Thai Hoc, chairman of the Vietnam Cashew Association, said the banks’ tightening credit and the skyrocketing interest rates had reduced the cashew production by 30 percent year-on-year.
Seafood firms are also forced to hike their frozen shrimp prices due to high interest rates.
The domestic frozen shrimp price is now higher by $1–1.5 than neighboring countries, which is a big disadvantage for domestic firms to compete with ASEAN rivals.
Analysts said although the State Bank of Vietnam - the country’s central bank - had requested for a gradual reduction in lending rates, commercial banks would not follow suit any time soon.
Economic expert Bui Kien Thanh explained that as the central bank was too careful in regulating capital for the market, banks have to mobilize deposits at high rates, which, as in a vicious circle, made them unable to reduce lending interest rates.
Lending interest rates would go down if the central bank loosens its monetary policies, he added.
Central bank to cut forex position
The central bank is consulting relevant authorities over a draft circular that would bring down the foreign exchange position of local credit institutions and foreign bank branches in the country to 20% from the current 30%.
The current regulation requires banks to hold an amount of foreign currency equivalent to a maximum of 30% of their equity at the end of each trading day. This rule has been in place since 2002 when banks’ equity was small.
However, banks have pushed up their equity in recent years, meaning they can now hold far bigger amounts of foreign currency.
The rule may backfire under the present economic conditions as any undersupply of U.S. dollar funds on the market will lead banks to hold on to their big amounts of dollars as was seen early this year.
Experts have in some occasions suggested revising down the forex holdings by banks. In late April, the Prime Minister asked the central bank to propose a new regulation that would slash the forex position of banks as a measure to tame the forex market that occasionally ran wild in the recent past.
The draft suggests foreign bank branches with equity of US$25 million or less be allowed to hold around US$5 million at the end of each day.
A deputy general director of a joint-stock bank said that if the forex position was narrowed down, it would have partial impact on banks’ profits as it would restrict their forex trading activity.
Meanwhile, the foreign exchange director of a foreign bank said that given the current stable forex market, narrowing the forex position would not have much impact on banks since banks tended not to hold huge dollar funds.
However, in long term, it will affect banks’ profits when the forex market becomes volatile, this banker said.
Vietnam VIB plans gross profit up 76 pct y/y in 2011
Vietnam International Bank (VIB), 15 percent owned by Commonwealth Bank of Australia, expects its gross profit to jump 76 percent this year to nearly VND1.85 trillion (US$90 million).
VIB, the ninth-largest partly private bank by assets, also planned to raise its total assets this year by 38 percent to VND129.5 trillion, it said in a statement on Wednesday after a shareholder meeting on Tuesday approved the bank's targets for 2011.
Last year, its total assets rose 65.7 percent from 2009 to VND93.83 trillion, and loans increased 52.6 percent, well above the 27.65 percent expansion in the whole banking system, VIB said in an undated report released to shareholders before Tuesday's meeting.
VIB has projected lending growth to slow to 20 percent this year, on par with the government's target for the whole banking sector as it aimed to curb inflation.
Commonwealth Bank of Australia will raise its stake in VIB to 20 percent early this year, the ceiling for a foreign strategic investor in a domestic bank, pending government approval, VIB has said.
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Vietnam still mired in economic woes in H2
The Government has identified rising consumer prices, exorbitant interest rates and trade deficit as the three key problems from which the Vietnamese economy will continue to reel in the rest of the year.
A report delivered by the Ministry of Finance at the final session in HCMC last Friday of the National Assembly Economic Committee says consumer prices have in the year to date risen 13.3% from late last year and 16.8% from a year ago.
Minister of Planning and Investment Vo Hong Phuc told the online newspaper VnExpress that the Government was resolute to curb the consumer price index at 15% in all of this year, meaning prices could only pick up within 2% in the last half of the year.
This is an impossible mission, he said, adding researchers at the ministry had given out their most optimistic CPI forecasts of 17-18% this year because prices are still under pressure from the continued rise in world prices and the exchange rate.
He noted his ministry would request the Government at its next meeting to adjust up the CPI to 17-18%, a range which is still fine given the current tough economic conditions.
The exchange rate has been kept stable for a long time but in recent times it has got more volatile and the U.S. dollar is expected to leap further against the Vietnamese dong toward the end of the year, Phuc said.
Prohibitively high interest rates have made inroads into the performance of the economy, he said. The Government and central bank are still applying a 14% cap on savings deposit rates but the increasingly strong competition for funds to improve liquidity has forced banks to negotiate with their customers to offer a higher deposit rate for the local currency, an average of 18.6% a year, according to the Ministry of Planning and Investment report.
The report says this has led lending rates to rocket to 16-19% for loans for farm producers, rural areas and exporters while the popular rates applicable to borrowers in the manufacturing and trade sectors range from 18% to 21% and to those in non-productive sectors from 20% to 25%.
The normal spread between banks’ borrowing and lending rates is 3% a year, says the report.
Meanwhile, the Ministry of Finance said some banks had offered deposit rates of 19-20% and charged 23-25% on some consumer loans.
In reality, deposit rates are often higher than 17% a year for amounts above VND300 million and banks apply a lending rate of 20% or above, plus tough contract terms.
The trade deficit will remain a great challenge for the economy. The National Assembly approved a trade gap equivalent to 18% of export revenue while the Government wanted it at 16%.
However, Minister Phuc said, the figure in the first six months of the year has already exceeded 18%, thus threatening the country’s Balance of Payments, foreign reserves, and macro economic balances.
The competitiveness of the economy is low, he said, so the local market is overwhelmed with foreign goods. With supporting industries in bad shape, local producers have had to import materials and parts from other countries for local processing, resulting in low added value, he said.
CTC in deal with consortium for land reclamation in Can Gio
Can Gio Tourist City Corporation (CTC) on Monday signed a contract with Dai Phu Gia-South Construction consortium to start construction of waterworks and land filling in the first phase of an urban-tourism project underway in HCMC’s outlying district of Can Gio.
The VND1,060 billion construction tender package, signed at the Sheraton Saigon in downtown HCMC on Monday, will allow the consortium to fill some seven million cubic meters of sand to reclaim 151 hectares of sea surface for the development of the Saigon SunBay project.
The consortium has six partners including two local partners, Dai Phu Gia and Phu Thinh Construction and Investment corporations, two Singaporean companies, South Construction and ATC Projects Pte Ltd, a Korean partner Anjeong Development Co., and a joint Vietnam-Korea company 69 Any Construction Corp.
Speaking at the signing ceremony, Nguyen Huu Tho, board chairman of CTC, described the waterworks and land filling as an integral piece of work, paving the way for the next stages of the project’s development.
The Saigon SunBay project covers some 600 hectares in Long Hoa Commune, with 400 hectares of land and 200 hectares of sea surface for reclamation. It is described as the country’s most modern sea tourism and urban development project.
Some US$1.4 billion will be set aside to develop the project, 50 kilometers from the city center. It is designed for main sections including HeartBay, LifeBay, EcoBay and BlueBay with facilities such as a hotel, resort, commercial center, entertainment service, luxury villas and apartments.
When in place, the sea tourism and urban development project will be home to some 31,000 people and become a destination for travelers.
A representative of the consortium said the first phase construction would take 18 months.
As scheduled, the Saigon SunBay project will finish infrastructure development by 2015 and the entire project will be up and running by 2018.
The project is developed by Can Gio Tourist City Corporation whose main shareholders are Saigontourist Holding Company, Saigon Invest Group and the HCMC Party Committee’s Financial Administration Board.
Kumho Asiana Plaza turns retail space to food space
The Kumho Asia Plaza will start construction of a new food emporium- Kumho Link on the area of the old retail space soon this month after approval from the Ministry of Construction.
The intention for the refurbishment was announced by two main investors: Kumho Asiana Plaza Saigon Company and management firm Colliers International Vietnam in April this year.
The new food and beverage area will have more than 20 domestic and overseas brands from Korea, Japan, Thailand and the US providing service ranging from fast food outlets, coffee shops and food court.
World-famous chef Bobby Chinn has leased 390 square meters to set up his signature restaurant at the Kumho Link.
The Kumho Asiana Plaza, located 39 Le Duan, District 1 – one of the “gold” locations in Ho Chi Minh city, comprises a 21-storage five-star hotel, A-grade office, apartment and entertainment area.
The site completed construction and started operation in late 2009.
Steel consumption slows down, price drops in June
Domestic steel consumption for this June has fallen by 30 percent to 270,000 tons against last month, said the Vietnam Steel Association (VSA).
The VSA said steel consumption for the first quarter of 2011 has risen by 40 to 50 percent compared to the same period of 2010 despite low demand in the construction industry.
However, from the end of May until now, the amount of steel sold as well as its prices has been decreasing steadily.
Currently, one ton of domestically-produced steel (VAT excluded) is priced at about US$780 to US$810.
The price decrease in construction steel is due to a decrease in the price of steel ingots in the world market as well as competition from steel imported from China and other ASEAN countries.
Moreover, a cut in public investment as per to the recent government policy also serves to reduce the steel demand for construction.
Ministry sets method for calculating export rice price
The Ministry of Finance has asked rice exporters to apply new methods to calculate the rice price for export contracts as from August 8 in order to help balance benefits for both farmers and traders, a task previously mandated to the Vietnam Food Association (VFA).
The floor price under the new method will be calculated by adding to the average prime cost for each type of rice the expected profit and payable taxes under Vietnam’s prevalent laws, the ministry said in a circular issued on June 17.
A factor for reference in setting the floor price is the current global market price.
The ministry has entrusted VFA, which clubs together more than 80 leading rice exporters, to take the key role in establishing the floor price and submit it as well as report it to the Ministry of Finance and Ministry of Industry and Trade.
According to the circular, coded 89/2011/TT-BTC, the association before the harvest of each rice crop must announce the approved price floor as the basis for rice traders to do transactions. The floor price at any given time must ensure “an acceptable profit” for farmers.
The circular is an important document guiding the implementation of Decree 109 issued by the Government on rice trading that will take effect in October this year.
Prior to this circular, VFA took charge of establishing the floor export price on a monthly basis as guidance for rice traders to negotiate prices with foreign buyers. The association suddenly stopped announcing the floor price in March.
The country in the year’s first half has exported nearly four million tons of rice, earning nearly US$2 billion, according the agriculture ministry. The rice price in the first five months of this year averaged out at US$492 per ton, down by a slight 5% over the same period last year.
Local rice traders this year to date, however, have signed contracts to export five million tons of rice, said Pham Van Bay, vice chairman of VFA.
Bay told assembled reporters on the sidelines of a fisheries exhibition in HCMC on Tuesday that the association had plans to start stocking one million tons of rice from early July, equivalent to two million tons of paddy. The plan is aimed to buoy up the rice price in the Mekong Delta, which has been sliding over recent weeks.
According to VFA, the paddy price in the Mekong Delta as of last weekend hovered around VND5,500-VND5,800 a kilo, while the price of rice was between VND8,650 and VND9,250 a kilo.
New landlords have to be more flexible with tenants
Flexibility is seen as the key element for new landlords to consider if they want to woo tenants to set up in their office buildings after a slow market in the last six months, said an executive officer of CB Richard Ellis Vietnam (CBRE).
Chris Currie, associate director of office services for CBRE, said on Tuesday that rent was part of a negotiation process between landlords and tenants and that the market was witnessing a trend that landlords have to offer incentives and flexible terms to lure tenants to their facilities, especially new players.
Rent-free periods, a longer fit-out period, free parking, payment terms and security deposits are what landlords are offering when dealing with their potential tenants, according to the associate director.
Some landlords, instead of cutting rent, offset a significant amount of fit-out cost for tenants by offering some months upfront rent free. Besides, the form of stepped rent, which means rent will increase yearly starting from a lower rent to the negotiated one, is another way that new landlords use to woo tenants in a market with abundant supply.
Currie said the market for office space during the first half of this year has slowed compared with the same period last year. Demand in the market comes from education, insurance, bank and industrial offshoot sectors.
The HCMC office market recorded that the absorption decreased significantly to 67,700 square meters from January-June while the market saw 130,300 square meters taken up in the same period last year.
According to CBRE, the office stock in HCMC is around 1.75 million square meters, with nine grade A buildings offering 300,000 square meters, 42 grade B facilities providing 697,500 square meters and 219 grade C supplying 745,800 square meters.
The market recorded the average office rent at US$40 per square meter for grade A, US$30 for grade B and US$20 for grade C facilities.
Vacancy rate across the market is around 17.6%. However, some existing grade A buildings such as Sun Wah Tower, Metropolitan, Diamond Plaza, Saigon Center and Kumho Asiana are enjoying an occupancy of over 95%. Meanwhile, some new players such as Bitexco Financial Tower and Vincom Center have filled 30% and 35% respectively since those facilities have been put into service.
Currie cited the company’s researched figures, saying that there will be 298,500 square meters of grade A and B office spaces to enter the market next year as some projects such as Times Square and M&C Tower in downtown are scheduled for completion by the first quarter of next year.
Construction ministry calls for property market lifeline
The Ministry of Construction has written to the State Bank of Vietnam calling for a flexible credit policy favoring homebuyers.
The ministry said real estate credit was being tightened but this should apply flexibly depending on borrowing purposes, a VnExpress report says.
Tightening credit and lower loan ratios are suggested to apply on investments such as constructing an urban complex or office building, starting a new property project and building houses for sale. Credit for land-use right acquisition and site clearance compensation are also recommended to be limited.
The move was made in the wake of a regulation issued by the central bank requiring commercial banks to reduce the ratio of real estate credit in their outstanding loans to less than 22% by Thursday and below 16% by the end of this year.
Nguyen Van Giau, governor of the central bank, told VnExpress that he would consider the regulation on property loans. However, in the short-term, property credit should be tightened as scheduled.
The real estate market has become sluggish in most segments since the end of April and some experts in the industry are worried that the situation will be more serious if real estate loans continue to be squeezed.
Osaka business looks for local partners
More than 40 local enterprises worked with 10 companies from Japan’s Osaka during their face-to-face business matching sessions held in HCMC last Friday by the HCMC Investment and Trade Promotion Center (ITPC).
The Japanese companies including Kinki Osaka Bank wanted to export their wares to Vietnam and also search for local partners to develop investment projects here in the country.
According to ITPC, both sides could cooperate in various fields such as banking, printing, software, electrical engineering, plastic products, industrial electronics and automation, and trading.
Six banks struggle to lower non-productive sector loans
Six of 17 banks in HCMC are struggling to slash credits for non-productive sectors to 22% of their total outstanding loans as the clock is ticking to the June 30 deadline, said the central bank’s HCMC branch director Ho Huu Hanh.
Hanh said those banks had been trying to reduce the proportion of non-manufacturing sector credits, but they looked unable to take back real estate loans before maturity while loans for stock investments were not easy to retrieve due to the gloomy securities market. He, however, declined to reveal the names of the six banks.
Banks have been rushing to take back their loans for non-manufacturing sectors and have stopped extending new loans so as to bring down the proportion to 22% by June 30 and 16% by December 31 this year as ordered by the central bank. Nevertheless, it is not easy for the lenders that lent big to the real estate sector in previous years.
The general director of a bank based in District 1 said that the proportion for non-productive sectors at his bank would still be 31% by end-June and would not be less than 28% at the end of this year although it had tried to redeem as many loans as it could. Many customers have refused to repay loans prior to maturity, he explained.
Another solution is to dilute such loans by mobilizing more funds, but it is difficult to attract deposits at the moment. Therefore, “it is certain that the bank cannot increase loans for manufacturing sectors to reduce the proportion of credits for non-manufacturing customers,” he said.
Many banks complained the central bank asked them to lower the proportion of loans for non-manufacturing sectors in short notice.
However, Governor Nguyen Van Giau brushed aside the complaints in a recent press briefing, stressing that in 2009-2010 the central bank had issued four instructions asking banks to restrict credits for non-productive sectors, especially for the real estate and stock sectors.
Recent inspections by the central bank even showed that some banks ignored the warnings by extending more loans to such sectors, Giau said.
Those banks failing to reduce the non-manufacturing credit ratio to 22% by June 30 and 16% by December 31 will have their required reserve ratio doubled and cannot expand their networks until end-2012.
As of June 10, according to the central bank, 23 banks had non-manufacturing credit proportions ranging from 22% to 50%, with 18 of them stuck in a range of 31%-37%.
The whole banking system’s outstanding loans for non-manufacturing sectors at that time had decreased by 9.46% from late last year to 16.92% of total outstanding loans. Of this, real estate loans were VND222 trillion compared to VND235 trillion in late 2010.
VN issues VND6.8 tril. in T-bonds
The Hanoi Stock Exchange (HNX) organized a tender for Treasury bonds last week, with the total value on offer reaching VND7 trillion.
The bonds come with three different terms: two year (VND2.5 trillion), three year (VND2.5 trillion) and five year (VND2 trillion).
The two year bond had nine participants, with the lowest interest rate of 11.9% and the highest of 13%. There was VND2.3 trillion worth of bonds sold with a 12.4% interest rate. This was the second time this year that the State Treasury had issued a two year bond.
Regarding the three year bond, there were 14 participants with the lowest interest rate of 11.8% and the highest of 13.2%. VND2.5 trillion was successfully mobilized with a 12.3% interest rate.
The five year bond attracted 10 participants with the lowest interest rate of 11.8% and the highest of 13.5%. VND2 trillion was raised for this kind of bond with a 12.1% interest rate.
Closing this tender, HNX mobilized VND6.8 trillion, equivalent to 97.26% of the offer, with the interest rate ranging from 12.1 to 12.4% per year, lower than the interest rate mobilized in the June 16 tender.
The State Treasury has in the year to date mobilized VND34 trillion in bonds in HNX, with the highest interest rate of 13.3% per year and the lowest of 11% per year.
Vo Hong Phuc, Minister of Planning and Investment, said the total value of bonds planned for issuance this year is VND45 trillion, down VND11 trillion from last year.
Eight SOEs in city fail to make divestments as told
Eight large-scale State-owned enterprises in HCMC have failed to divest their excessive investments from non-core business sectors although the deadline to do so has passed for three months now, said the city’s Department of Finance.
The eight enterprises under the city government’s jurisdiction have either invested sums bigger than their charter capital in non-core businesses, or have invested in two companies in the same finance-related sectors, all whistled by the Ministry of Finance.
The HCMC Department of Finance in a report presented at a meeting convened in the city on Monday made it clear that these SOEs had thus breached regulations in Circular 117/2010/TT-BTC issued by the Finance Ministry last August.
According to the report, four of them had invested sums exceeding their charter capital in non-core businesses. They are Saigon Transportation Mechanical Corporation, Ben Thanh Corporation, Cho Lon Import Export and Investment Corporation, and Saigon Jewelry Company (SJC).
Meanwhile, six had invested in two companies in a single sector of either banking or securities or insurance, a practice warned by the Finance Ministry to avoid conflicts of interest.
The Finance Department said that by end-May, those corporations had not finished divesting capital from such investments because shares prices on the stock market had strongly decreased that could lead to losses for those investments.
The Finance Ministry’s circular regulates that State-owned corporations must use at least 70% of capital to invest in their core businesses. The total investment outside the cores comprising short and long terms cannot exceed a corporation’s chartered capital.
For those SOEs investing in banking, insurance, and securities sectors, State-owned corporations cannot invest in two companies in each sector, according to the circular.
In addition, the Government’s Decree 09/2009/ND-CP issued in February 2009 says State-owned companies having excessive investment outside core businesses must complete divestment within two years. As the decree took effect on March 25, 2009, the deadline for completing such divestments is March 2011.
The HCMC government has sought some relent for its SOEs.
In late March, the city government sent a document asking the Finance Ministry to extend the deadline for State-owned corporations to divest investments, but the ministry rejected the proposal, and asked that State-owned companies in the city obey the regulations.
Also according to the Finance Department’s report, which compiles figures from 89 out of 107 State-owned corporations in the city, SOEs made financial investments totaling VND3.58 trillion in equitized enterprises. However, the estimated value of their investment by May 31 was VND5.06 trillion.
Meanwhile, their overall investments made in all kinds of businesses totaled VND5.72 trillion, but the estimated value by May 31 shrank a little to VND5.68 trillion.
Financial statements from these 89 State-owned corporations also show that their total revenue by late May was VND62.55 trillion, equivalent to 39% the whole year’s plan, while their pre-tax profits amounted to VND2.83 trillion, attaining 45.6% of the 2011 plan, according to the Finance Department.
There are 15 State-owned companies incurring cumulative losses. Several of them have plans of selling stakes, merging with others, or going public in the coming time.
The total equities of the 89 enterprises above by late May were VND35.7 trillion, increasing 11% from the same period last year. The average return on equity ratio in the first five months this year was 7.88%.
Ba Ria-Vung Tau cancels out 11 inactive projects
Authorities of the southern province of Ba Ria-Vung Tau have revoked 11 domestic and foreign investment projects in this year’s first half due to long delays or ineffective operations.
The provincial Department of Planning and Investment said five foreign direct investment (FDI) projects with total registered capital of US$42 million have lost their investment certificates. They comprise Corsair Marine Co., Ltd. with capital of US$20 million, Charm Industrial Co., Ltd. with US$10 million, S&P Vietnam Co., Ltd. with US$6 million, Cantech Vina Co., Ltd. with US$4.9 million, and a branch of Full Power Co. with US$1 million.
The department is also fielding suggestions from other departments before petitioning the provincial government to revoke the investment certificate of IDICO, the investor of the foot-dragging Tam Phuoc 2 Industrial Zone project.
The tough stance by the provincial government sends a clear message of make-it or break-it to investors, and also help boost disbursements, especially among foreign-invested projects.
In fact, foreign direct investment (FDI) disbursements in the first six months of this year are forecast to amount to US$570 million, up 9.8% year-on-year.
Besides, in the first half of the year, the province also either revoked investment licenses or withdrew its approvals in principle for six domestic investors including Phu Hoa resort project by ADP Phu Hoa Joint Stock Co., a resort and villas project by Phuoc Long Enterprise, and an industrial zone project by An Trung Construction Joint Stock Co.
According to the department, it is reconsidering other slow-moving projects before proposing the provincial government to withdraw their licenses.
The department will work with the investors of these delayed projects and if the investors fail to prove they can move forward with their projects, all of these projects will be done away within the rest of the year.
In the first six months of this year, the province licensed 12 FDI projects worth more than US$468 million.
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