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BUSINESS IN BRIEF 15/9

 BIDV to fund three power projects in Vietnam; Two firms licensed to import gold; Automobile industry facing challenges ahead; VNA check-in upgrade affects airports

Property investors race to give home credits

While budget home buyers are able to access bank credits with an interest rate of just 6% per annum, developers of commercial condo projects have also sped up sales, launching home credit programs with lending rates as attractive as of that for low-cost home projects.

Since the Government’s VND30-trillion home loan program announcement many property investors have cooperated with commercial banks to launch home loan programs with low interest rates. Of which, some firms even have given borrowers a lending rate of 0%.

HDBank since June has introduced preferential programs for customers of Dragon Hill Residence and Suites project in HCMC’s Nha Be District. Clients will take out loans with a term of 20 years and credit limit of 70% of the contract value.

In the high-class segment, Phu My Hung Corporation will launch the sale of Happy Valley project on September 15 given financial support of some banks. Homebuyers will enjoy a fixed lending rate of 8% per annum over 30 months.

The enterprise has plans to offer 192 condos with payment schedules divided into 15 stages. Initially, Bank of China and Vietnam International Bank (VIB) will provide loans for homebuyers while Phu My Hung is negotiating to call for more banks to join the program.

Concerning this model, the branch director of a commercial bank said that this is just a way for banks to attract customers. Noteworthy, with current mobilization rates of 8-8.5% per annum currently, it is impossible for banks to give lending rates below these levels.

At a reputable bank, the difference between mobilization and lending rates is around three percentage points. If deposit rates for tenors from 12 months are 8-8.5%, lending rate must be at least 11% per annum, the banker said.

Lenders without large term-less deposits from economic organizations can manage to provide low lending rates for customers in the first year but will have to revise the lending rates following deposit rates in the following years. Therefore, homebuyers should consider conditions of home loan contracts carefully before signing, he added.

In fact, many local homebuyers have had to consider choosing either low-cost homes or commercial homes given attractive policies of commercial project investors.

While budget home buyers will enjoy a fixed lending rate of 6% per annum over 10 years, many investors have reduced lending rates of home loans to equal to that of budget homes while the period of fixed lending rate has been extended.

Besides, budget home customers will have to face prolix administrative procedures such as proof of income for bank debt payments and verification of the current home situation. Meanwhile, investors of commercial projects have offered simple and flexible procedures to offer better customer services.

Coca-Cola Vietnam seeks IT solutions to better services

Coca-Cola Vietnam has recently organized the Global CIO Summit in HCMC to discuss current and future mobile technology trends to explore market access solutions for enterprises in Vietnam.

The event, which took place at InterContinental Hotel, was attended by representatives of the Ministry of Information and Communications and leaders of global giants such as Coca-Cola, Microsoft, Nokia, IBM and Nielsen.

Nguyen Thanh Tuyen, deputy head of the Information Technology (IT) Department under the Ministry of Information and Communications, said IT is one of the most important factors for the nation’s development. The Government will continue investment in IT development and application, manpower training, and IT infrastructure development in a move to turn Vietnam into an industrialized economy by 2020.

Mobility has become a strong tendency in the country, especially among the youth, as a large number of smartphones has been consumed. Speaking at the summit, Javier Polit, chief information officer of the Bottling Investments Group of the Coca-Cola Company, said that through discussions with partners, Coca-Cola wanted to learn about consumer trends in Vietnam and elsewhere in the region.

In the coming time, the company wants to secure capability in carrying out effective and suitable technology solutions and provide best services for the Vietnam market, Polit said.

An alliance of large companies during the event shared many suggested mobile solutions, consumer research and contributed ideas to IT and mobility standard improvement in Vietnam where the number of mobile phone subscribers is already higher than the nation’s population. The businesses said that the Government’s assistance in information provision and policy adjustment would be able to facilitate the development.

They believed that in the near future, programmers will supply apps for Vietnamese users instead of giving outsource coding service just as what most programmers and software firms are doing at the moment.

At the conference, Nokia and Microsoft announced a strategic partnership with Coca-Cola. In the coming time, Coca-Cola customers will be the first to use applications of Microsoft’s Windows Phone and Nokia’s smartphones Lumina.

Although Android and iOS have been doing better than Windows Phone, Microsoft is a multinational with offices around the world and Nokia has a long history of operations in Vietnam. Therefore, they are seen as the right partners of Coca-Cola at present.

What the company wants to obtain in Vietnam is integration and application of latest technologies, Polit said, and the most important thing is to improve IT standards for potential staff of the group and students in the country.

Tuyen said that enterprises in Vietnam are encouraged to apply IT and boost cooperation to better business results. He hoped that the Government would understand capability and orientation of each enterprise so that the Government can provide suitable assistance and cooperation.

Eager Japanese investors await improved policies

Vietnam is missing opportunities to lure more Japanese investments due to numerous  hurdles, several business people insisted.

Tran Ngoc Phuc, president of Metran Company Limited (Metran), a maker of medical equipment and machines, told VIR that it took his firm over six months to obtain an investment certificate for a Metran project in the southern province of Binh Duong “due to bureaucratic hurdles”.

“It usually takes six days to get a certificate in Japan,” he said.

Japanese External Trade Organization’s (JETRO) newly-appointed chief representative in Vietnam, Atsusuke Kawada, told VIR that the difficulty in obtaining investment certificates was among many obstructions facing Japanese enterprises seeking to do business in Vietnam.

He said the difficulties also included slow site clearance, poor transport infrastructure, duplication of many papers needed under the e-customs system and overtime work restrictions that affected enterprises’ performance.

Hirota Nakanishi, assistant director of Tokyo-based ASEAN-Japan Centre’s Trade and Investment Division, said slow site clearance had deterred Japan’s Oshima Shipbuilding’s $182 million shipyard project in the central province of Khanh Hoa’s Cam Ranh city. The project was licenced in March 2012, scheduled to commence during 2012-2013, and projected to be operational by 2017.

Nakanishi added that steelmaker Koberuco’s possible steel production project in the central province of Thanh Hoa had been licenced for several years. However the project is static due to slow site clearance, despite the Japanese side has urged local authorities many times.

“These two delayed projects are among many facing the same fate,” Nakanishi said. “Vietnam is missing opportunities to bring in more Japanese investments, while many other regional nations are doing their best to attract Japanese investments.”

According to the Tokyo-based ASEAN-Japan Centre, Japanese investments into Vietnam amounted to only 9 per cent ($95 billion) of Japan’s total investment into ASEAN member states during 1995-2012.

Japan’s ASEAN investments were 18, 11 and 10 per cent respectively for Indonesia ($196 billion), Malaysia ($113 billion) and the Philippines ($106 billion). The rate was 22 and 30 per cent for Singapore ($237 billion) and Thailand ($314 billion).

Hirokazu Yamaoka, JETRO’s former chief representative in Vietnam, said that since early this year, Japanese investments in China declined significantly for many reasons.

“Japanese enterprises are pouring investments into Southeast Asia including Vietnam. But they are strongly considering the different investment incentives offered by these nations,” Yamaoka said, adding that Japan remained among the top foreign investors in Vietnam, but Japanese enterprises were not satisfied with the country’s supporting industries.

JETRO’s recent survey of more than 8,000 Japanese enterprises operating in Asian countries showed that only 27.9 per cent of Japanese enterprises in Vietnam could source locally-made components. While the percentages in Indonesia, Thailand and China were much higher, at 43, 53 and 60 per cent, respectively.

“Vietnam should know what is the most important to its industrial development strategy now and then have good selections of investors. I think the country should now focus on luring high technologies which are a very strong point of Japanese enterprises. This mindset has been applied successfully by Singapore,” Nakanishi said.

SSC forces GPFund to suspend operations

The Global Petroleum Fund Management Corporation (GPFund) was forced to suspend operations two years after starting on September 6, 2013, following Decision No.548 by the State Securities Commission of Viet Nam (SSC).

The GPFund was responsible for publicising its operation suspension and must follow laws and regulations during the two-year business postponement.

In the previous year, the group was alerted to operation control because of not satisfactorily meeting financial security regulations.

At the moment, GPFund has not published its business results for the first six months of this year. However, according to the 2012 audit result, total assets for the corporation was VND7.7 billion (US$366,666).

The company has a charter capital of VND25 billion ($1.19 million) but its cumulative losses reached VND22.3 billion ($1.06 million). In 2012 alone, GPFund lost more than VND2 billion ($95,238).

The corporation, which commenced operations in 2008, focuses on doing research and providing diversified services for investors as well as connecting the supply and the demand in the financial market.

LNT & Partners lands another ‘magic circle’ of attorney

Continuing its string of successful partner recruitment, LNT & Partners (“LNT”) today announced the appointment of Bui Ngoc Hong as its corporate law partner.

Hong was previously a Senior Associate at Allen & Overy Vietnam. His addition increases the total number of partners at LNT to eight.

Hong, fluent in Vietnamese and English and is able to converse in Japanese as a result of his time studying in Japan, holds an LL.M. from Japan’s Nagoya University. His practice covers corporate and commercial legal matters..

With his expertise and deep practical experience, Hong is frequently invited to speak at many conferences and seminars especially on contracts, M&A, foreign investment, among other topics.

He is also an active contributor to many distinguished publications such as “Foreign Investment in Vietnam 2012- Take these before you drive in” published in the In-house Handbook of Asian Mena Counsel; and “M&A Regulatory Roundups” Chapter 7 of Vietnam M&A Study Report of Stoxplus 2012.

On this occasion, LNT’s managing partner Hoang Quyen said: “We are thrilled to have someone of Hong’s caliber join us. He has established a long and distinguished track record as an accomplished corporate attorney. With Hong’s addition to the partnership, LNT will greatly enhance our ability to more effectively serve our clients.”

LNT & Partners is a full-service independently ranked law firm headquartered in Vietnam with offices in Ho Chi Minh City, Hanoi, Hong Kong and San Francisco.

The firm is among Vietnam’s most prominent, representing a wide range of multinational and domestic clients, including Fortune Global 500 companies as well as well-known Vietnamese listed companies, on a variety of business and investment matters.

BIDV to fund three power projects in Vietnam

BIDV has agreed to provide VND1 trillion (US$47 million) of funding to the National Power Transmission Corporation for the construction of three national power projects.

The projects include a 200kV Bao Thang substation in Lao Cai province, a 500/220kV Duyen Hai station in Tra Vinh province and a 200kV Duyen Hai – Tra Vinh transmission line which are part of a national electricity development strategy approved by the Prime Minister earlier this year.

The Bao Thang substation is designed to connect power plants to industrial consumers in Lao Cao while the other two projects are intended to transmit electricity from the Duyen Hai thermal power plants to the national power grid.

Speaking at the loan signing ceremony on September 10, BIDV Chairman Phan Duc Tu said that BIDV funding would help NPC speed up their projects to serve national socio-economic development purposes.

Trade barriers-effective tools for protecting businesses, customers

Vietnam has not yet learned how to use trade barriers and import quality restrictions in the way other countries pursue policies to protect their domestic markets.

Vu Van Dien—Vice Director of the General Department of Standards, Measurement, and Quality (GDSMQ)—believes the technical deficiencies in the quality of Vietnamese goods puts them at an international disadvantage. The GDSMQ recently reported that as of July 2013, only 43 percent of Vietnam’s nearly 7,000 technical and product quality standards are roughly in line with their regional and international equivalents.

Vietnam has made some impressive strides in the past five years since joining the World Trade Organisation (WTO). But for lack of technical trade barriers not a few domestic businesses still find it difficult to compete with imported agricultural products which are sold at cheaper prices than theirs.

The Business Research and Support Centre says approximately 80–90 percent of products at supermarkets are processed from Vietnamese raw materials by multinational companies. Small and medium-sized domestic enterprises are almost unable to gain access to supermarket supply chains.

Multinational companies with huge budgets, highly qualified human resources, and professional marketing skills continue to get the upper hand.

As a point of fact, only 10–15 percent of rural customers use Vietnamese products. Chinese products bearing Vietnamese brand names are on sale everywhere in the countryside.

The Southern Rubber Company (Casumina)’s products are much appreciated the on the international market but beaten out by cheaper similar ones imported into Vietnam.

Some experts warn that Vietnam’s failure to build long-term technical barriers in line with WTO regulations will put domestic businesses at a disadvantage to compete with their partners in ASEAN.

Do Duc Chi from the Ministry of Planning and Investment says technical barriers are what Vietnam needs to put in place during its economic integration process.

They require all imported products to meet and protect the important interests of human health, security and environment conditions.

While many other countries have invested much time and effort in building technical barriers, Vietnam has done little to protect its domestic businesses and customers.

Pham Binh An, Director of the WTO Integration Support Centre in HCM City, also insists that Vietnam should perfect its technical standards on par with international norms.

Automobile industry facing challenges ahead

Vietnam’s automobile industry is beset by relatively low rates of domestication and scattered designs.

It has yet to meet the domestic consumer demand that has continued to increase over the past two decades. Its focus on assembly has prevented it from developing a complete manufacturing plant.

Nguyen Manh Quan, Head of the Ministry of Industry and Trade’s (MoIT) Heavy Industry Department, says domestication ratios remain at 7–10 percent for cars and 35-40 percent for trucks. Most Vietnamese manufacturing chains can only operate at half their potential capacity.

Quan says automobiles made in Vietnam are disproportionately expensive, 20 percent higher than comparable models in overseas markets. Local consumers naturally choose the cheaper foreign imports.

Vietnam’s ASEAN Free Trade Area (AFTA) membership roadmap will gradually reduce automobile import tarrifs to 0 percent between now and 2018. This means the domestic industry will have to gain a leg up on international competition.

In the first place, Quan says, it will have to overcome the shortcomings such as poor management, weak support industry, incomplete legislation and regulation, and lack of policy incentives, to attract sufficient investment.

Vietnam’s transport infrastructure remains underdeveloped, and car owners are subject to three different taxes and five fees. Against this backdrop, local auto manufacturers will have to tailor their product ranges to fit in with the current stage of development.

Vietnam Tax Consultants’ Association Chairwoman Nguyen Thi Cuc says domestically assembled cars are burdened with special consumption and value added taxes of 10 percent which are driving car production costs up but auto sales down.

Vietnam Engine and Agricultural Machinery Corporation (VEAM) General Director Lam Chi Quang says car manufacturing must become more of a domestic industry to create employment, promote technology transfer, develop human resources, and reduce the trade deficit.

Policy-makers and auto manufacturers need to find a solution to both tax adjustment and market expansion issues in the next five years.

Truong Hai Auto Deputy General Director Pham Van Tai emphasizes the need to meet international standards by improving the design and quality of car production.

MoIT Industrial Policy and Strategy Institute Chief Duong Dinh Giam says the Government should offer more incentives for domestic businesses to cooperate with foreign investors in producing accessories and spare parts for the automobile industry.

Ford Vietnam Director General Jesus Metelo Arias, who is the incumbent Chairman of the Vietnam Automobile Manufacturers Association (VAMA), proposes the industry’s strategic zoning vision towards 2030 should ensure stable growth, improve market forecasts, and build a supply chain as part of the global distribution network.

He says no automobile manufacturer can produce every kind of spare part and accessory, and both investors and suppliers need suitable policies to be put in place for them to expand production and market share.

More chances for jasmine rice exports to Africa

Prices of rice products exported to Africa are increasing as African importers are seeking to buy Vietnamese jasmine rice whose prices are more competitive than Thai rice of the same kind.

In a recent report on rice exports to Africa, the Department for Africa, Western and South Asia Markets under the Ministry of Industry and Trade noted this was a good chance for Vietnamese traders to boost rice exports to Africa.

With a combined population of more than one billion people, the rice demand in Africa is rising as the markets there are adopting an appetite for rice compared to other traditional cereal products, said Hoang Duc Nhuan, director of the department.

Besides, as the urbanization rate in Africa has grown rapidly in recent years, consumers in African urban areas are inclined to prefer rice to other traditional food items.

In particular, as incomes of Africans have improved steadily, rice prices are no longer too high for the majority of African people, leading to the popular presence of rice in their meals on a daily basis. African countries with the highest annual per capita rice consumption are Guinea Bissau with 112 kilos, Sierra Leon 88.6 kilos, Guinea 73 kilos  and Gabon 72 kilos.

The biggest rice importers in Africa are Nigeria, Senegal, Ghana, South Africa, and Tanzania among others, with Nigeria alone making up 30% of the total rice volume imported by the region.

A sharp rise in jasmine rice demand is recorded in South Africa and Nigeria while other African nations mainly import broken rice with lower quality and prices.

Vietnam’s rice exports to Africa totaled over one million tons worth US$441.2 million in the first seven months of the year, showing a slight pickup compared to the same period in 2012 and a foreseeable increase from now to the year’s end, the department reports.

Vietnam sees adequate fertilizer supply from 2015

The local fertilizer industry is expected to secure supply for agricultural production from 2015 thanks to investments in fertilizer production plants between 2011 and 2020.

Speaking at a seminar in Can Tho City on Tuesday, Ho Thi Kim Thoa, Deputy Minister of Industry and Trade, said that local enterprises could meet 80% of fertilizer demand in the country this year with total output of around eight million tons.

Although the nation still relies on imports of Diammonium phosphate (DAP), SA and potassium fertilizer, local firms basically have sufficient supplies for other types and even export urea fertilizer, said Vo Van Quyen, head of the domestic market department.

The DAP fertilizer plant no. 1 is operating in Haiphong City with the capacity of 330,000 tons a year. By launching the DAP fertilizer plant no. 2 with the same annual output into use in Lao Cai Province in 2014, local enterprises will have adequate DAP fertilizer supply.

In 2015, local enterprises will be able to meet 100% of demand for urea, phosphate and NPK fertilizer, 70-80% of DAP and 30% of SA. However, as SA has low nitrogen content, it can be replaced by urea, Quyen said.

Securing adequate fertilizer supply will help stabilize market prices and prevent risks from import policies of other countries, especially China – which accounts for around 80% of fertilizer imports of Vietnam.

For instance, during the winter-spring crop in the Mekong Delta, China usually tries to limit fertilizer exports by raising export tariffs, thus increasing fertilizer prices in Vietnam.

However, domestic fertilizer supply has increased over the past two years, especially the urea supply, fertilizer prices have been stabilized during the winter-spring crop, according to a report of the Ministry of Industry and Trade.

Meanwhile, Nguyen Van Tuynh from the Market Monitoring Bureau said that fake and substandard fertilizer remains a problem.

In the first six months of 2013, market monitors uncovered 258 cases and confiscated over 705,000 kilos of fake and sub-standard fertilizer with a total value of over VND1.9 billion.

Big C spends big on store manager training

The French-Vietnamese Center for Management Education (CFVG) and the supermarket chain Big C on Tuesday struck a deal to organize a Mini MBA program at a cost of some VND4.7 billion.

Under the deal, 16 learners from HCMC, Hanoi, Khanh Hoa, Dong Nai, Nam Dinh, Ninh Binh and Phu Tho selected from 338 applicants will attend the one-year program at CFVG centers in Hanoi and HCMC. Academic training will be provided at CFVG centers while internship will be at Big C supermarkets.

After graduation, the trainees can be recruited as managers or deputy managers at Big C supermarkets.

ILA announces new development strategy

ILA Vietnam on Tuesday announced a series of new activities with an aim to build a network of modern English language centers and expand operation in Vietnam.

Speaking at a press briefing held on Tuesday, CEO of ILA Vietnam Tran Xuan Dzu said the ‘We Care & Share’ program consisted of ten activities marking its 15th anniversary in Vietnam.

The program needing a total cost of US$2-3 million will create a professional environment of foreign language education.

ILA is a foreign-invested education and training company that has operated in Vietnam since 2000. It enrolled over 35,000 learners at 13 centers last year.

ILA plans to open 15 more centers nationwide in the next two years.

Dzu said that ILA had made careful preparations, from human resources to quality management system, for its development plan. Therefore, even with a strong expansion, ILA will still be able to manage its quality.

ILA currently has around 1,000 employees, with some 300 native speakers of English and a high number of teaching assistants.

South Korea CSR wins new friends

Korean businesses are the first foreign community in Vietnam to conduct CSR programmes as part of a collective master plan which started in 2012.

Weekly columns in VIR and Dau tu newspapers with support from the Korean Embassy have received numerous requests from readers for long-term coverage. The programmes have the support of Industrial Bank of Korea (IBK), Posco, PTV, Vina Korea, Shinhanbank, Asiana Airlines, and K Mart.

“Our employees are thrilled to be taking part in improving the lives of less-fortunate Vietnamese and are proud of IBK and the rest of the community’s efforts in Vietnam,” said chief representative of the IBK Oh Chang Suk. Throughout its time in Vietnam, the IBK has engaged in a series of CSR activities such as building houses in Long An province, raising funds to build a Korean school in Ho Chi Minh City, donating $72,000 for the construction of three classrooms at a kindergarten in Phu Tho province, and building and expanding a $163,500 vocational training centre in Hanoi.

Sharing in this spirit is Shinhan Bank. Twenty years of business in Vietnam has made banking executive Hong Man Ki aware of the importance of not only focusing on money. “Korean businesses entering Vietnam should have warm hearts and true love, which is the true foundation of our countries’ relations,” Ki said while awarding dozens of scholarships to top students at a dilapidated school in Nghe An province. He also donated funds to renovate the school.

While Kumho’s Asiana Airlines is known as one of the best in the world, in Vietnam it is known for its brick-by-brick commitment to CSR. The company built 40 gratitude houses for needy families in Ben Tre province, supports cultural activities, and awards scholarships to Vietnamese students. “We earn profits here, and part of those profits belong to the Vietnamese people, and we are going to try and distribute them to those that need them most,” said Park Sam Koo, chairman of Kumho.

Leading steel maker Posco has engaged in a different style of CSR, by recruiting residents in areas around its factories, giving them a stable income and building gratitude houses. According to a company leader, Posco views CSR as cultivating relationships with local communities.

Also paying close attention to CSR is Minh Han Trading Company Limited, the owner of the K-Mart supermarket chain. The company’s staff is familiar with working to improve the lives of disadvantaged people in Vietnam. They visited and befriended orphans carrying HIV at a youth home in Ba Vi district, near Hanoi. “We are energetic about our real work, and equally so about our work helping people,” said director Hoang Thuy Linh.

Phu Thanh Viet Trading and Development Ltd. (PTV) is a Korean-backed business that was honoured in 2012 by the Ministry of Planning and Investment for its contributions to community development. It has hosted training courses for labourers, funded extra-curricular programs in several schools, and tended to underprivileged children who suffer from disabilities and helped them integrate into society.

“Korean firms’ CSR activities are not momentary or unique, in the future we will do our utmost to handle these activities more constantly and on a deeper scale with Vietnamese localities,” the former Korean ambassador to Vietnam Ha Chan Ho said.

“We do not see our country’s CSR efforts as unique or short-term, and in the future we understand our responsibilities to our host country and will continue to carry them out happily and energetically,” he said.

VNA check-in upgrade affects airports

Vietnam Airlines said the upgrade of its check-in systems Sunday caused some glitches at its counters at 12 domestic and international airports.

Le Truong Giang, spokesman for the airline, said the check-in system upgrade including web check-in and aircraft load control system took place from 1 a.m. to 7 a.m. on Sunday.

Airports having check-in procedures affected by this undertaking are Noi Bai, Danang and Tan Son Nhat (Vietnam), Phnom Penh and Siem Reap (Cambodia), Vientiane (Laos), Soekarno Hatta (Indonesia), Changi (Singapore), Kuala Lumpur (Malaysia), Incheon and Gimhae (South Korea) and Narita (Japan).

According to the airline, the conversion of the check-in system from ACSI (Airport Check in System International) to SSCI (Sabre Sonic Check-in) is aimed at meeting the increasing demand of passengers and keeping pace with global air carriers.

Vietnam Airlines said previously that although it had prepared resources and backup plans, there might be some inconveniences for passengers.

Early last month, the system of Vietnam Airlines failed, resulting in 19 flights being delayed and nearly 3,000 passengers being affected.

Intellectual property a hindrance in TPP negotiations

Although 19 Trans-Pacific Partnership (TPP) negotiation rounds have completed, many experts said that the intellectual property issue has yet to make improvements and remains an obstacle during the TPP negotiation process.

Pham Duy Nghia, head of the law faculty of the University of Economics, recently told the Daily that the U.S. has applied high standards of intellectual property right it has obtained during trade partnership negotiations with South Korea.

Meanwhile, Vietnam is still struggling with standards of the World Trade Organization (WTO) and the Trade-Related Aspects of Intellectual Property Rights (TRIPS). Standards at a higher level are referred to by experts as TRIPS+.

The standards have caused big challenges for developing countries, raising objections from TPP negotiation teams and business communities of the nations, especially Vietnam.

Last August, Vu Tien Loc, president of the Vietnam Chamber of Commerce and Industry (VCCI), wrote a letter to Ambassador Ron Kirk, who was the U.S. Trade Representative at that time, to express his concerns over the Intellectual Properties Chapter in TPP.

“This TPP could impose challenges that might not be overcome and thus cause adverse and terrible impacts on a considerable and fragile part of Vietnam’s population… The current Intellectual Properties Chapter Draft in TPP will, thus, be the main factor undermining quality of life, limiting incomes of poor people, aggravate social gaps and instability,” according to the letter.

The letter quoted a report of the World Health Organization (WHO) that said in Vietnam, patients actually pay 46.58 times the international reference prices for innovator brands and 11.41 times for the lowest priced generics, while Vietnam has just “graduated” from the low-income country.

Too-high-priced medicines are the main reason leading to too-low percentage of access-to-medicine in Vietnam, with only 20% in general and 13% for maternal-child medicines. If the current Intellectual Properties Chapter Draft is passed, all chances for reducing medicine prices in Vietnam shall be killed, and the situation shall thus be worse, the letter said.

In case proposals of the U.S. are passed, Vietnam will probably apply compulsory licensing to cope with the problem, Pham Phi Anh, deputy head of the National Office of Intellectual Property, said in a recent seminar in HCMC.

It means that in case community benefits are threatened, the State may force pharmaceutical enterprises to grant licenses so that the nation may produce medicines with lower prices.

Agricultural insurance development stagnant

The Government’s pilot agricultural insurance program in 20 cities and provinces will end in June, 2014, but the model may not become a helpful channel for farmers after the pilot period due to concerns over frauds.

Speaking to the Daily on the sidelines of the seminar in HCMC on Monday on the development of the non-life insurance market, Phung Dac Loc, general secretary of the Association of Vietnam Insurers, said that insurance firms would not join the market given high risks and many loopholes. Dishonest customers may falsify proofs for illegal gains from the insurance fund.

Over the past time, many insurance enterprises have declined to compensate for farming households due to suspicion over frauds. Therefore, disputes between the two sides have occurred, Loc said.

Each year, around 10% of insurance files are suspected by insurers, of which traffic accident insurance makes up a high ratio. The insurance industry generates revenue of VND22 trillion each year while compensation reaches VND11 trillion.

Backbone highway upgrade being accelerated

The Ministry of Transport on Monday started a project to upgrade a section of National Highway 1A in Khanh Hoa Province stretching 67km, with a total cost of VND4.59 trillion, or roughly US$225 million financed by the Government bond.

The Khanh Hoa section will be expanded to four lanes for autos and two mixed lanes for both autos and motorcycles, allowing for a max speed of 80km an hour.

One day earlier, construction also started on the section through Phu Yen Province of the highway.

The ministry said many other sections of the north-south highway will get facelift soon, financed by both the Government bond and private funds under the build-operate-transfer investment format.

The mammoth project to upgrade National Highway 1A is divided into 37 sub-projects, including 17 sub-projects developed under the BOT format with combined length of 562km and total invested capital of VND42.5 trillion. All these sub-projects have started construction.

Meanwhile, there are also 17 sub-projects financed by revenue from Government bond issues at a total cost of VND47.8 trillion for upgrading 678km of the highway.

Of the remaining sub-projects, one with a length of 25km is financed with a loan of VND4.2 trillion from the Asian Development Bank, and two others stretching a combined 60km are being done by contractors using funds advanced from the State Budget.

Deputy Minister of Transport Truong Tan Vien said that while pending approval from the National Assembly for extra issuances of Government bonds to finance

the costly projects, contractors having been using their own capital for the construction. The Government will reimburse the funds for the contractors, including the interest sums based on the bond coupons.

Therefore, work on the highway is being accelerated, Vien said.

Under a plan by the ministry, the upgrade and expansion of the national highway from Hanoi to the Mekong Delta city of Can Tho should be completed by the end of 2016. The highway upon completion will have six traffic lanes and a hard road divider to minimize traffic accidents.

Two firms licensed to import gold

Phu Nhuan Jewelry Company (PNJ) and Agribank Jewelry Company have got licenses to import gold as material to produce jewelries.

The licenses were issued after the two companies had applications to the central State Bank of Vietnam (SBV) An SBV official said enterprises wanting to import gold would have to register and the central bank would consider quotas for them from time to time.

The volume of the imported gold approved was rather small, with each firm importing only dozens of kilograms of gold.

Dinh Nho Bang, vice chairman of the Vietnam Gold Traders Association, said the gold volume needed to make jewelries is smaller than five tons each year. Bang said the number of firms qualified to import gold material is small.

Currently, PNJ is the only one in Vietnam to process and export jewelries.

Nguyen Ngoc Trong, sales director of PNJ, said that the license for gold import was very important as it helped PNJ reduce the production cost, making it easier for the firm when exporting jewelries. PNJ has had many export orders over the past time but its competitiveness is weaker than foreign rivals due to high prices, he added.

Meanwhile, according to Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, after gold material is imported, the branch will inspect to see whether the firms use imported gold to make jewelries or not.

The central bank will issue guidance this week, enabling gold firms to get access to bank loans instead of being prohibited by Circular 33/2011.TT-NHNN.

Homebuyers’ loans on the rise

The number of borrowers applying for home loans has been rising in HCMC following recent lending rate reductions by many banks citywide.

Local banks last year provided home loans at annual rates of up to 15-16% upon high deposit rates but they have now cut the lending rates to only about 12-13% annually. Besides, numerous lenders have introduced promotional programs offering an annual zero lending rate for the first month or low rates for the first few months, at 6-8% per annum.

The director of a branch of SeaBank informed that local housing demand had been surging in recent times, especially from State workers, which was ascribed to housing price falls and lending rate contractions at local banks. Customers who have been working for over 10 years look for homes priced at some VND2 billion each while those with more than three years work experience target properties worth no more than VND1.2 billion a unit.

“Rising housing demand, interest rate falls and reasonable housing prices are the favorable conditions for increased lending in the segment,” the director remarked.

“Housing demand among locals is real. Only projects with construction incomplete or legal problems are suffering from the frozen trading situation. I have been approving about three to five home loan applications per week recently while no documents for home loans were submitted on a weekly basis a few months ago,” he said.

HDBank, one local bank having credit cooperation programs with many housing projects to offer low-interest loans to homebuyers, has also designed soft loans for those wanting to buy or repair homes. It sets an annual lending rate of 0% for the first month and fixed rates for the remaining months in the first year.

According to Le Thanh Trung, deputy general director of HDBank, the preferential lending programs of his bank have attracted scores of customers, leading to strong growth in its home credit segment. Realty-related loans post the highest proportion among individual credit products at HDBank as recorded at the start of the month. In particular, the disbursement to the property segment represents up to 43% of total volume disbursed by the lender, with home loans making up 30% of the total value.

Phan Huy Khang, general director of Sacombank, meanwhile reported that total loan balances to individual homebuyers at his bank were about VND1 trillion, which marked up around 4-5% compared to the start of the year. The average rate that Sacombank sets aside for credits is 12% per annum. The lender is also providing loans to homebuyers in coordination with some housing developers at the moment.

As the preferential lending programs of local banks are just effective for the first year while most contracts on home loans are longer term for more than five years, customers are advised to consider other conditions in the contracts such as rate adjustments or fines for loan payments ahead of the schedule.

According to the State Bank of Vietnam, middle- and long-term lending rates at local banks now range between 11.8% and 13% annually. With home loan contracts, lenders usually adjust lending rates yearly based on the 12-month deposit rate plus a margin of 3-4 percentage points.

PVCombank to sell bad debts to VAMC

PVCombank, which will be formed by the merger of PetroVietnam Finance Corporation (PVFC) and Western Bank next month, expects to sell bad debts to Vietnam Asset Management Company (VAMC).

According to the shareholders’ meeting in Hanoi City on Sunday, procedures for the inauguration of PVCombank are being finalized. The new lender is expected to begin operation in October.

PVCombank has chartered capital of VND9 trillion and total assets of over VND100 trillion. The bank projects to increase its chartered capital to VND12 trillion in 2015 to secure development and safety ratios.

Merging an ailing bank and a financial organization with poor business results, PVCombank has plans to focus on bad debt handling. The lender has set up low profit targets between 2013 and 2015 given difficulties on the market and increasing expenses for merging and operation restructuring.

According to leaders of PVCombank, the bank will continue to reschedule loans of customers that have feasible business projects and meet requirements of debt restructuring. It will also conduct debt handling solutions, take over more mortgaged assets, or set up risk reserve funds.

Like other credit institutions, PVCombank has plans to sell bad debts to VAMC and increase total outstanding loans through credit development. This is its basic orientation to reduce bad debt ratio in the 2014-2015 period.

PVFC and Western Bank have reported debts of groups three to five at nearly VND2.3 trillion, or 4.7% of total outstanding loans. The figure is expected to decrease to around VND2.2 trillion, or 4.2% of total outstanding loans by the end of 2013.

Given regulations of the central bank, banks with bad debt ratio over 3% must sell debts to VAMC.

One of the largest bad debts of the new bank is the overdue inter-bank deposit of nearly VND1.2 trillion at Ficombank, the former SCB, Tin Nghia Bank and TrustBank. PVCombank will also have to handle debts of over VND1.8 trillion borrowed by Vinashin and Vinalines.

Earlier, Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, said that Nam Viet Bank (Navibank) and Asia Commercial Bank (ACB) also have plans to sell parts of their bad debts to VAMC.

A leader of Navibank told the Daily that the bank will sell debts to VAMC but the board of directors has yet to decide how much debt will be sold.

Meanwhile, ACB general director Do Minh Toan told local media that ACB would sell VND1.5 trillion worth of bad debts. However, like Navibank, ACB has yet to set up a specific plan for bad debt sales.

Minh said banks are just expressing their intentions to sell debts to VAMC as there is no guideline circular for VAMC operations right now. Therefore, the enterprise cannot buy debts from banks at present.

However, some banks do not wish to sell debts to VAMC. According to the chairman of a large commercial bank in the city, the bank currently has no demand for selling debts.

After selling debts to VAMC, the bank still has to handle the debts while it has no demands to take out refinancing loans, the banker said.

Meanwhile, Vietnam Asset Management Company (VAMC) will only use special bonds to buy debts with the book value of outstanding principle from at least VND3 billion in case the borrower is an organization or VND1 billion if the borrower is an individual.

This is one of conditions of the draft circular on bad debt trading and handling. The enterprise will use special bonds to buy debts that occurred during activities such as credit granting, lending, discount, financial leasing, factoring and others as regulated by the central bank.

Foreign airlines called to exploit Vietnam’s airports

The Vietnamese aviation market will stay open to foreign carriers and closely connected with the regional and international aviation sector.

The message was extended by the Civil Aviation Authority of Vietnam (CAAV) to representatives from 51 international airlines participating in the September 10 aviation promotion conference in Ho Chi Minh City.

The conference aims to attract more foreign airlines to operate flights to the five international airports of Phu Bai in central Hue city, Cam Ranh in central Khanh Hoa province, Lien Khuong in the Central Highlands province of Lam Dong, and Can Tho and Phu Quoc in Kien Giang province.

During the conference, authorities from CAAV and the five localities where the airports are located briefed participants on the markets and aviation development policies in each locality, while calling on the foreign airlines to increase flights to the destinations.

They emphasised strong commitments to support the foreign carriers by providing space, labour, convenient procedures to open representative offices, passenger buses, infrastructure and service improvement and promotion.

According to CAAV, the exploitation of the five airports has yet to match their capacity as well as the tourism potential of the localities.

Currently, only three airlines (Vietnam Airlines, Vietjet Air and Jetstar Pacific) operate flights at these airports.

In 2012, Lien Khuong airport, with a passenger capacity of 1.5-2 million per year, received only 388,000 passengers, while Can Tho and Phu Quoc airports, designed to welcome 3 million passengers each year, saw only 199,000 and 493,000 arrivals, respectively.

Currently, 51 foreign airlines are operating 68 air routes from 22 countries and territories to Vietnam. The domestic market is dominated by four Vietnamese carriers with 41 routes from Hanoi, Da Nang city and Ho Chi Minh City to 18 airports.

In 2012, the Vietnamese aviation sector received 310,000 flights carrying 37.5 million passengers and 650,000 tonnes of cargo.-

Banks offer preferential credit to HCM City borrowers

Ten banks took part in a ceremony in Ho Chi Minh City to lend to 44 businesses and two households in two districts at preferential interest rates.

Sacombank, Vietinbank, Vietcombank, BIDV, Agribank, DongA Bank, ACB, HDBank, MHB, and ABBank signed credit contracts worth nearly 1.5 trillion VND (71.4 million USD) with targeted borrowers. Of which, Sacombank provided 60 billion VND (2.86 million USD) for five businesses and two households with interest rate from 8 percent per year.

Since the beginning of this year, Sacombank implemented 25 preferential packages worth 28.9 trillion VND (1.37 billion USD) and 105 million USD to support businesses and individuals following the policy of the Government and the State Bank of Vietnam.

Besides, to support businesses which join market stabilisation programmes in 2013 and Lunar New Year 2014, Sacombank will set aside 200 billion VND (9.5 million USD) with preferential interest rate of minimum 6 percent per year.

The ceremony was attended by officials from the State Bank's city branch, the Department of Industry and Trade, and the People's Committee of Binh Tan and Binh Chanh districts.

The programme has been implemented in other districts earlier.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

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