Gov’t to buy real-estate projects to unclog capital flow

The solutions to unclog nonmarketable capital as stated in Government Project No 254 should quickly be implemented to facilitate the process of cutting lending interest rates, urged Associate Professor and Doctor Tran Hoang Ngan in a talk with Tuoi Tre.

Dr Ngan, who is a member of the National Council for Finance-Monetary Policy Consultancy, said earlier this month that the government approved project no 254 to restructure credit institutions in the 20110-2015 period, with the first stage of the process focusing on increasing the commercial banks’ health.

To this end, Ngan said, bad debts should be handled, and the government should repurchase certain real estate projects to serve social security purposes.

“Once the unmarketable investments sunk in the properties are released, they will return to monetary circulation, and create a new source of capital for banks to offer as loans without the need to increase deposit interest rates to attract lenders,” he explained.

Ngan said the solution suits the current economic situation, when even high deposit interest rates have not kept mobilized capital from slumping.

“Deposit rates have remained high in the first two months of this year, but deposits have still dropped,” he said.

“We have kept on ensuring high interests for depositors, and have to pay a price for this: the exorbitant lending interest rates.”

Ngan said money circulation should be increased to create more capital.

“Businesses borrow bank loans for production, and deposit their profits, and borrow again for expanded production.

“That is how money creates money without a heavy reliance on deposits mobilized from the public,” he elaborated.

He said certain measures should be implemented to release the capital sunk in the frozen real estate market so that the money can return to normal circulation.

Regarding which real estate projects are to be purchased, and where the government will source capital for buying bed debts, Ngan said this is an inter-ministerial task.

“The Ministry of Construction may be expected to develop the standards for the to-be-bought projects, which should be those whose functions can be amended to suit social welfare programs,” he said.

“For instance, the government can repurchase certain apartments suitable for functioning as dormitories, or accommodation for residents whose houses have been relocated.”

The process should be strictly implemented to ensure the targets of unfreezing the market and assisting businesses to overcome financial difficulties.

As for the capital sources, Ngan said government bonds or ODA (Official Development Assistance) funds can be taken into consideration.

For example, instead of using agovernment bond to build a new student dormitory, the money can be used to buy a real estate project with a similar function, he said.

“Similarly, ODA funds can also be used to buy housing projects to provide resettlement for residences, rather than setting up a new one.”

Market value decreases on both bourses

Shares retained yesterday's rally. However, the increasing rate was slower and the VN-Index even lost ground during some minutes of this morning's session.

On the HCM City Stock Exchange, the benchmark index added nearly 0.3 per cent to 442.99 points. The VN30 tracking the exchange's 30 best stocks remained essentially unchanged at 502.81 points.

Market value reached over VND1 trillion (US$47.6 million) – only one third of yesterday's whole session. The volume of trades fetched 70.1 million shares.

Among major blue chips, Vietinbank (CTG), property developers Vincom (VIC) and Hoang Anh Gia Lai (HAG), steelmaker Hoa Phat (HPG), Sacombank (STB) and Vietcombank (VCB) all retreated.

Military Bank (MBB) claimed the highest trading in HCM City with 4.8 million shares exchanged, followed by Sai Gon Securities Inc (SSI) with 4.2 million.

On the Ha Noi Stock Exchange, the HNX-Index marched some 1.2 per cent higher, finishing the morning at 73.03 points.

Gainers largely outnumbered losers by 216-47 points.

With a trading value of VND826 billion ($39.3 million), the northern bourse saw a 44.2 per cent decline over yesterday's session.

Kim Long Securities Co (KLS) surpassed Habubank (HBB) to become the most active code with more than 12.2 million shares changing hands.

The market will resume at 1.00 pm.

France remains a good market for apparel exporters

Local apparel exporters still have a great chance of tapping the French market despite tough competition and global economic woes, foreign experts said at a seminar in HCMC late last week.

Foreign garment exporters have been facing fierce competition to secure a market share in France and the European Union, said Jo Bueters of French retailer Casino Group which is operating the Big C supermarket chain in Vietnam.

China is considered the strongest competitor, with total apparel exports to France amounting to 5 billion euros last year.

Meanwhile, Vietnam only ranks 12th with much lower export revenue: only 250 million euros.

China’s success is attributed to its extensive production networks in countries in close proximity to the EU like Tunisia and Morocco.

The network helps China shorten the route to the EU, which means Chinese products arrive at target markets faster than products from other Asian suppliers, Jo Bueters said.

Moreover, the abnormal weather patterns in France have led to the imbalance of supplies and demands for clothing products, resulting in snowballing inventories at garment retailers.

For example, winter clothing is in short supply there but summer products are awash at retailers.

On top of that, French people’s incomes have dropped considerably due to the global economic doldrums and they are forced to tighten their purse string to stay prepared for tough times ahead.

But Jo Bueters said the demand of French consumers for fashion items remained strong as they only refrained from buying luxurious items.

She said French people had keen interest in promotional programs. Half of the total volume of consumed clothes in France is discounted products.

Alice Baey, global purchasing director of Casino, advised Vietnamese exporters to pay attention to business ethics and social responsibility.

These factors have been significantly affecting French consumers’ behaviors, she said.

The French textile and garment market is full of challenges but it doesn’t mean there is no opportunity left for exporters from other countries, Baey affirmed, citing the strong growth of the fashion segment of young people as an example.

The most important thing is that Vietnamese suppliers should update market information and be flexible to survive instead of being left behind other rivals, she said.

The local textile and garment industry is finding its export target of US$19 billion this year increasingly difficult to achieve as import orders from major customers, especially in Europe and the United States, are dropping.

Many enterprises at a meeting said 2012 would be a tough year. Several well-known textile firms are likely to face a reduction in orders.

Phan Thi Hue, chairman of Thanh Cong Garment-Textile Joint Stock Company, said the prospect of the second half of the year might not be as hopeful as predicted.

Orders from European partners are declining, while the situation is not so optimistic in the US market either, she said.

According to the General Customs Office, Vietnam’s textile and garment export turnover reached over US$1 billion in January 2012, dropping 17.1 percent compared to the preceding month and 12.2 percent year-on-year.

Exports to major markets such as the US, the European Union and Japan declined 12.3 percent, 21.2 percent and 7.7 percent respectively.

However, the industry last year still obtained an export turnover of $15.6 billion, an increase of 40 percent compared to 2010.
 
High-yield corn turns out to be seedless

Farmers may be happy when they can reap greater profits from seedless lemon, grapefruit or watermelon, but seedless corn is certainly the last thing they want to have in their crops.

As excited as they were about a new kind of corn with high productivity two months ago, many farmers in Trang Bang District of the southern province of Tay Ninh are now dispirited as the stubborn maize still refuses to produce any seeds.

Vo Van Khanh, a farmer from Loc Hung Commune, said two months ago Bioseed Vietnam Co Ltd supplied him and several other households with a new corn variety, B265, which was said to be a high-yield product.

The parties inked a contract in which Bioseed promised to supply seeds and technical assistance for farmers to grow the new corn, while farmers, for their part, are required to sell all of their harvest to the company.

“The corn shows no abnormal signs during the crop,” said Khanh.

“But no sooner had the harvest approached than farmers learned that the corn has very few seeds, and some even have none -- only pulp and husk.”

Khanh said his family used to pocket around VND150 million ($US7,200) every year from his 2-hectare crop with the old seeds.

“But I have incurred huge losses with this year’s crop, with more than 80 percent of the corn having only a dozen seeds each,” he lamented.

Sharing Khanh’s fate is Truong Van Dao, most of whose 1.2-hectare of corn crop produce a modest seed rate.

“I only hope to be able to recoup the investment for this crop,” he sighed.

Some 20 hectares of corn crop in the neighboring commune of Gia Binh are also in no better condition.

Meanwhile, Dang Van Vinh, director of production at Bioseed Vietnam, said the company will issue policies to support farmers damaged by its new variety.

“Weather is the main cause for the low yield,” claimed Vinh.

However, local farmers said there was nothing wrong with the weather this year.

Crops with the old seeds are still producing high yields, they said.

Meanwhile in the southern province of Dong Nai, corn farmers are in misery thanks to an herbicide.

Two months ago, farmers in the Song Ray Commune of Cam My District had their crops sprayed with the Atra annong 800 Wp weedkiller, produced by Long An-based An Nong Co Ltd.

While the product has long been used without any abnormal side effects, this time it was found to prevent most of the crop from growing, farmers said.

According to the commune’s people’s committee, 83 local households have used Atra annong 800 Wp on their crops, and the total damaged areas cover around 19.3 hectares.

Following complaints from farmers, An Nong Co Ltd has tested the product again in the witness of the Dong Nai Plant Protection Agency, and no better results are observed.

The company has thus compensated farmers, though at a rate they said is lower than the real damages.

State agencies to inspect debt-burden seafood firm

The authorities of the Mekong Delta city of Can Tho have established an interdisciplinary team comprising of municipal state agencies to inspect the financial situation of Binh An Fish Joint Stock Co (Bianfishco).

The management board of the city’s industrial parks and processing zones has also been asked to join the team.

Since the company has borrowed money from many banks including those basing outside the city, the Can Tho branch of the State Bank of Vietnam cannot get the details of the debts Bianfishco owes them.

Huynh Van Tuan, head of the workers’ unions of the city’s industrial parks and processing zones, said the company has yet paid the February wages for their workers. Around 1,800 workers of Bianfishco has been asked to stop working until Monday.

Tran Van Tri, acting general director of the company, said the move is to restructure the firm’s operational mechanism.

The lawsuit over the debt Binhanfishco has yet repaid to farmers for catfish purchase is expected to be heard next Friday.

Tri has just been appointed as the acting general director to replace his wife, Pham Thi Dieu Hien, who has flied to Singapore for a cancer treatment, bringing with her some $20,000.

Social Insurance of Can Tho said the number of employees that the company had registered for social insurance so far was only 843 people.

From July 2011, Bianfishco owes over VND2.9 billion of insurance debt. The social insurance agency has received no reply from the company after informing, and received no representative from the company for the debt settlement.

According to the management board of Can Tho’s industrial parks and processing zones, the number of workers in Bianfishco, depending on working season, ranged from 1,500 - 2,000 people, not as many as 4,000 workers as announced by Tri in the recent press conference.

Thanh Nien newspaper has also found that the property o Cao Thang Street, declared by Tri that Bianfishco was selling, is an old apartment building of which Hien had bought only 4 out of 45 apartments there.

According to the audited financial statements dated to December 31, 2010 by the auditing company Deloitte, total liabilities of Bianfishco was more than VND1.39 trillion ($66.8 million), including VND1.22 trillion short-term debts and over VND171 billion long-term debts.

According to figures in the financial statements, the interests that the company had to pay as of 2010 was around VND78 billion.

In 2011, although the remaining amount of cash was drying off, the company continued to pour money into ineffective investment projects. Consequently, the company could not reduced by 30 percent of total bank loans as targeted, and thus the debt situation was worsening.

Lawyer Nguyen Truong Thanh, as authorized representatives of the plaintiff Nguyen Van Lien and Pham Thi Mai in the coming lawsuit has recently proposed O Mon District People's Court to apply provisional measures to prohibit Tran Van Tri from going abroad until the debt is resolved.

TPP talks to be hammered out this year

Negotiations over the Trans-Pacific Partnership (TPP) are likely to be completed this year if all the concerned parties remain committed and flexible, said Deputy Trade Minister Tran Quoc Khanh.

He gave the information on March 9 after the end of the 11th round of TPP talks, which involved nearly 500 negotiators meeting in Melbourne , Australia .

This was the first round of negotiations to be held this year, looking to finalise the agreement as set forth at the APEC Summit in Honolulu , Hawaii , last November. Vietnam was one of the nine countries involved in the 11 th round of TPP talks, which included the US, New Zealand, Singapore, Malaysia, Peru, Chile, Brunei and Australia.

Deputy Minister Khanh, who is also Head of Vietnam’s delegation at the TPP talks, said this round saw significant progress during discussions on goods and services as well as investments for small and medium-sized enterprises.

The Vietnamese official said that apart from taking part in multilateral discussions during the 10-day talks, the Vietnamese delegation held bilateral talks with the US on opening up the US market to Vietnamese industrial commodities, including textiles and garments, and agricultural products.

He added that the Vietnamese Government welcomed the interests of Japan , Canada and Mexico in TPP talks. At present, these countries are undergoing consulting with other TPP countries and the concerned TPP economic ministers will decide on any new members once the consultation process is completed.

The next round of TPP talks is scheduled to be held in the US in May and several negotiators will meet in late March or early April to discuss ongoing differences over existing issues.

Transporters urge for reduction of highway fee

The fee of up to VND100,000 (US$4.8) proposed for vehicles using the National Highway 1 section that runs parallel to the HCMC - Trung Luong expressway is too high and should be cut down, goods transporters in HCMC said.

The Vietnam Road General Department has proposed to the transport and finance ministries to apply the fee, with the lowest rate for vehicles with fewer than 12 seats, trucks with less than 2 tons, and buses, and the highest rate for trucks of 18 tons or higher and 40-foot container trucks.

Since this fee is as much as 75 percent of the fee applied for the Trung Luong expressway and 1.5 times higher than the average fee of most routes, many cargo transporters in HCMC have voiced their discontent.

Nguyen Van Dung, Chairman of Saigon Transport and Tourism Service Corporation in Binh Thanh District, said the proposed fee was too expensive for most passenger transport firms.

This fee will be a new burden to those firms who have already been suffering rising fuel prices and higher taxes, Dung said.

“I think concerned agencies should consult public opinions before imposing any fee,” he said. “Besides, considering the government is carrying out policies to stabilize prices, such a high fee isn’t advisable.”

Thai Van Chung, general secretary of the HCMC Goods Transporters’ Association, said, “I don’t know on what basis this fee was developed. Why isn’t it based on Circular 90 of the Ministry of Finance?”

Chung said his association had already asked competent agencies to cut the fee for the Trung Luong expressway by half. Like the expressway fee, this highway fee is simply too high, he said.

“In my opinion, traffic fees must be fixed reasonably for the sake of economic development,” he said.

Meanwhile, Nguyen Van Tu, director of Tu Huong Transport and Forwarding Co. Ltd. in Binh Thanh District, said the highway fee should be around 50 percent of the expressway way.

“Too high a fee would negatively affect transport companies that are struggling with many difficulties to survive and develop,” Tu said.

Tran Van Son, deputy director of Hung Loc Thinh Transport Company, agreed. He said fees would help finance highway upgrading, but they must also be affordable.

Meanwhile, the Vietnam Road General Department said that the highway fee had been set following a proposal by Cuu Long Transport Infrastructure Management Investment and Development Corporation which are collecting fees on the Trung Luong expressway in order to balance the volume of traffic on the highway and the expressway.

Since a fee of VND1,000-8,000 ($0.38) per km was imposed on the expressway on February 25, too many vehicles have been switching to the highway.

Businesses need to raise competitiveness

Policy makers and businesses must keep abreast of the latest developments in the global economy to ensure local enterprises are competitive, said Vu Khoan, former Deputy Prime Minister, at a conference in Hanoi on March 9.

"The world is changing. If we don't change, we will lag behind," he told the seminar, which was looking at how the business environment has changed since the country joined the World Trade Organisation (WTO) five years ago.

Khoan said the current global financial crisis has resulted in profound changes in countries' economic models, particularly regarding external affairs.

"There will be significant obstacles when it comes to strategies aimed at high export growth. Countries are now tending to focus on meeting their domestic demand; but I haven't seen any sign that we are adjusting our policies yet," he said.

The global trade liberalisation trend is being gradually replaced by regional trade liberalisation activities, while financial and monetary systems and production structures are also experiencing great changes, Khoan added.

This situation has forced countries to think about issues such as which currency should be used for payment in the future and how to shift to a green economy.

He noted that while many countries are focusing on developing a green economy, Vietnam is still consuming large volumes of materials that pollute the environment such as iron, steel and cement.

With regard to the competitive capacity of local firms, Khoan said: "They are now much more competitive than they were in the past, but they are still failing to meet expectations. However, we shouldn't be impatient about that, the matter can't be resolved overnight."

He said it is difficult to boost a firm's competitiveness while Vietnam is having to deal with major challenges such as inflation, restructuring and integration.

Stabilising the macro-level conditions, especially financial and monetary, should therefore be a priority, Khoan said.

Luong Van Tu, former Deputy Minister of Trade, said local companies will face stiffer competition as the country nears the final phase of its commitments to the WTO and the ASEAN Community.

To boost competitiveness, he suggested, the country should improve its legislative framework and infrastructure systems; while firms should enhance production, technology and management skills, as well as their products and service and the quality of their human resources.

Doan Duy Khuong, vice chairman of the Vietnam Chamber of Commerce and Industry, said that despite significant improvements in the local business and investment environments in recent years, many enterprises are still concerned about authorities' support services in specific areas such as land use and fees.

Cao Sy Kiem, chairman of the Vietnam Association of small- and medium-sized enterprises, emphasised the need to simplify administrative procedures to help companies reduce costs and take advantage of market opportunities.

"An important matter now is how to help small- and medium-sized enterprises access bank loans more easily," said Nguyen Mai, former Deputy Chairman of the State Committee for Cooperation and Investment.

Current state of FDI leaves much to desire

A survey of the Vietnam Provincial Competitiveness Index finds that the quality of foreign direct investment is low with such characteristics as limited spillover effects and low value production.

One of the much-mentioned benefits of FDI attraction is the spillover of technology and management experience via trade and labor relations between foreign-invested firms and their local partners and workers.

But the spillover effect of FDI businesses in Vietnam is inconsiderable, according to a survey of the Vietnam Provincial Competitiveness Index (PCI-FDI).

The survey shows that just a few of these companies have bought commodities and intermediate services from local counterparts.

The loose connection between FDI and domestic enterprises along with the popularity of 100 percent foreign-invested model has engendered few intangible benefits for Vietnam regarding technology and management skill transfer.

It seems that the operational model of the majority of FDI companies is only limited to import-assembly-export activities.

For a country suffering capital shortage and having abundant labor like Vietnam, the benefits from FDI turn out to short-term.

And the role of FDI in contributing to turning Vietnam into a dynamic and creative economy with sustainable development remains modest.

Local investment promotion agencies have emphasized low labor cost and political stability in Vietnam as the basic advantages when introducing the nation’s potential.

But the PCI-FDI survey shows that all FDI businesses highly value 4 factors: low labor cost, political stability, workforce quality and tax and land incentives.

They do not care about, or even like, factors that ensure the sustainability of the business environment such as investor protection, contract implementation guarantee, intellectual property right protection or anti-corruption.

This is a short-term and precarious business thinking that is popular among small and flexible business models, the survey says.

Such businesses have little interest in intellectual property right protection since they only focus on producing low value products like footwear and garment to provide to markets outside Vietnam.

According to the survey, over the past few years, FDI attraction policies have only concentrated on the quantity rather than the quality of FDI projects, reflecting the country’s desire to swiftly exploit redundant human and natural resources at home.

Making use of the decentralized management allowed by the Government, localities have given numerous incentives on taxes and land to attract FDI capital.

They have aimed at FDI in the hope of utilizing the local workforce, increasing budget revenue and improving incomes of local residents.

Provincial authorities tend to favor FDI enterprises, according to nearly 30% of domestic private firms surveyed, suggesting that the race to attract foreign investors among provinces via similar incentives would bring in no significant achievement for each of them.

This means incentives alone are not strong enough to win investors. On the other hand, current incentives are just attractive to low-tech manufacturers relying on cutting input cost to survive.

These firms can create jobs for local people but salaries are generally very low, even lower than the level paid by local businesses.

To attract high quality FDI projects, Vietnam needs to train a skilled labor force, establish a dynamic, creative and high-level local business community and improve the environment, mechanism and infrastructure in line with international standards.

Such factors will create more favorable conditions for investment and business activities of multinational groups.

A high quality workforce is always considered the prerequisite to attract investment into high value-added production areas.

Intel had surveyed human resources in several provinces before deciding on investment in Vietnam. It finally chose HCMC as its destination because the city meets its requirement on the largest number and the best quality of information technology employees, the survey says.

The presence of a local business community with strong production capacity is a crucial factor to attract foreign investment. A large number of Japanese businesses who plan to build plants in Vietnam were disappointed with the results of their surveys, saying they had found no suitable component suppliers here.

In fact, local private companies have found it impossible to access capital, land and technology and this remains their biggest challenge.

The Government should speed up programs designed to strengthen production capacity and renovate technology of small and medium-sized enterprises so that they can be strong enough to become suppliers of FDI customers.

Improving the environment and mechanism is a sustainable and long-term solution to attract all types of investment.

A favorable investment environment coupled with simple procedures, less barriers and stable policies will make investors feel secure to do business as well as help them reduce costs and risks.

Vietnam still has a lot of restrictions relating to foreign investment in some industries such as retail and banking-finance sectors. Such barriers are no longer appropriate to the present situation and benefits of the whole country, so they should be removed to welcome more FDI capital, the survey suggests.

Another solution is to accelerate the progress of signing bilateral trade and multilateral agreements to get more FDI capital.

The nation has been in the process of negotiating the Trans-Pacific Partnership (TPP) and in the near future will get involved in a free trade agreement with the European Union.

The 2 deals will pave the way for a wave of strong investment into Vietnam from partners that are strong in advanced technology like the US, Japan and the EU.
 
Manufacturers record sharp decline in production

Manufacturing industries including textile, garment, fertilizer, paper, steel, leather and footwear suffered a sharp decline in production in January-February compared to the same period last year, the Ministry of Industry and Trade has said.

Textile production dropped 8.2 percent year-on-year, sport shoes 5.4 percent and paper 4.3 percent.

Notably, fertilizer production in the first two months fell by a staggering 54.5 percent.

According to the Domestic Market Department under the trade ministry, the total flow of goods and services in February amounted to VND186.5 trillion, dropping 3.8 percent compared to January.

This shows that consumer demand is dwindling, pushing up inventories.

“While inflation isn’t showing any clear sign of waning, domestic consumption has slackened. This is a tough macro-economic situation,” an official of the market department said at a ministry conference in Hanoi earlier this week.

“Normally, the total flow of goods and services surge in line with inflation and consumer price index (CPI), but now they go in an opposite direction. This is a big question for the
Government and ministries regarding macro-economic management.”

According to this official, enterprises are finding it hard to seek capital. Many in paper and cement industries are also struggling with rising inventories and higher prices of gas and coal.

These factors will continue to leave a huge impact on the manufacturing sector in March and thereafter.

The trade ministry said export orders for the textile and garment industry in 2012 had been unstable and might shrink.

Exports to Vietnam’s traditional markets have declined, though apparel exports to China have been on the rise.

Meanwhile, leather footwear production is still choppy due to this industry’s heavy dependence on external factors such as capital, materials, technology and markets.

Most products are exported via a third party as direct sale remains limited.

For its part, the leather-shoe industry has been running short of labor since the end of the Lunar New Year holiday in late January.

While export is in trouble, import spending in the first 2 months of the year is estimated at US$15.9 billion, a year-on-year increase of 11.8 percent.

The import bill of local businesses reached $7.7 billion, down 6.4 percent, whereas the figure for foreign-invested enterprises rose 36.8 percent compared to the same period last year to $8.2 billion.

This shows it is domestic enterprises that have absorbed the impact of the monetary tightening policy by cutting imports of equipment and materials as a result of soaring production, management and financial costs.

Meanwhile, foreign-invested enterprises were still in good shape.

The country’s January-February export revenue soared 24.85 percent year-on-year to $15.3 billion, with the FDI sector’s exports, excluding crude oil, accounting for $8.6 billion, or a hefty increase of 49 percent year-on-year.

FDI projects help develop VN tourism

FDI projects have made a positive contribution to the development of Vietnam’s tourist industry since 2000, according to an initial report released by the Japanese International Cooperation Agency (JICA).

These projects focus on developing tourism and human resources in a sustainable manner, reduce poverty and protect both the environment and local cultures.

Vietnam’s National Administration of Tourism has received the majority of FDI funding and is currently operating 15 projects.

However, the agency pointed out that the tourist industry needs to take immediate action to end time-consuming licensing procedures and improve the competence of project managers as well as building on the success of previous projects.

In the near future, the sector will soon draw up plans to call for more investment as well as managing and regulating projects in a more effective manner, complying with the national tourism development strategy for 2020.

AusAID, World Bank confirm support

The Australian Agency for International Development (AusAID) and the World Bank have confirmed their commitment to support Vietnam's long-term socio-economic development in a recently signed strategic partnership agreement for the next five years.

Under this partnership, AusAID will provide the World Bank with AU$58 million (US$61.7 million) for the bank's investment and advisory programme to support Vietnam.

The partnership aims to foster an enabling environment for improved economic competitiveness, increased environmental sustainability, and broadened access to economic and social opportunity.

An agreement for US$97 million in additional funding for the third rural transport project was also signed on March 9 between the State Bank of Vietnam and the World Bank.

The project aims to increase the number of communities connected to new and improved all weather roads; improve rural road conditions through better management and maintenance; and improve institutional effectiveness to plan, implement and maintain improvements in rural transportation.

The additional financing comes from the International Development Association, the World Bank's funding resource for low income countries.

The improved transport system is expected to benefit up to five million people in all 32 participating provinces in central and northern Vietnam, including 14 mountainous provinces.

To date, the project has rehabilitated about 2,100 km of roads and completed the maintenance of approximately 13,000 km of district roads and bridges.

Also on March 9, the Asian Development Bank and the State Bank of Vietnam signed loan agreements worth US$180 million to help the country improve irrigation and urban infrastructure.

The first agreement is to develop irrigation infrastructure and management of water resources and services in the northern Chu and southern Ma river basins in central Thanh Hoa province.

The second involves improving urban infrastructure and municipal services in the northern economic centres of Viet Tri Town in Phu Tho province, Hung Yen province and Dong Dang town in Lang Son province.

PM pushes World Bank-funded project

Prime Minister Nguyen Tan Dung has asked relevant ministries, sectors and local governments to hasten the implementation of the Government's information and communications technology development project.

With a total budget of approximately US$107 million, including a preferential loan of nearly $87.9 million from the World Bank, the project is an important part of the Government's strategy to develop e-government services.

The project aims to increase access to information about policies, services and administrative procedures and improve the efficiency and transparency of Government agencies, provide better public services and more effectively cope with corruption.

It was also expected to encourage businesses to participate more actively in utilising new information technologies.

So far, however, the project, along with eight others financed by the World Bank, is still experiencing sluggish capital disbursement. As originally planned, the bank loan will have been 100 percent disbursed by 2010.

During a meeting earlier this week with representatives from the World Bank, Deputy Minister of Information and Communications Nguyen Minh Hong said that the ministry will order relevant sectors to work closely with the bank's supervising team to review barriers and propose punitive measures to accelerate the project's implementation.

The project is now expected to be completed by June 2013.

The scope of the project includes a strategic plan to modernise and increase the capacity of the General Statistics Office (GSO) to provide timely and reliable data on poverty and socio-economic development, as well as accelerating e-government development in the major regional cities of Hanoi, Da Nang and HCM City.

Taxpayers blast income tax law amendment

The raising of the income tax threshold may not be good news when taxpayers have to wait for as long as two years, given the current raging inflation.

The Ministry of Finance has recently announced a draft law on personal income tax collection, in which it recommends that the tax threshold be lifted to VND6 million (US$288) a month from the current VND4 million.

The bill, however, simply fails to please taxpayers, since it will not come into effect until 2014, which means two more years to go with the current rising inflation.

The increased threshold, from VND4 million to VND6 million, is just to make up for the upcoming inflation, rather than an actual rise, said lawyer Truong Thanh Duc from the Banking Association.

“It is not a right move to delay the new law’s application until 2014, as the finance ministry itself has admitted that consumers are suffering from soaring prices,” he said.

“The law should be put into use as soon as possible, with next year being the best choice.”

Sharing Duc’s view, Doctor Ly Phuong Duyen from the Finance Institute said the income threshold of VND6 million a month is not adequate considering the currently rising inflation.

Duc also demanded that the income tax ladder consist of only five levels, rather than six as the draft bill suggested.

Under current tax law, there are seven tax income levels. The first level includes those whose average monthly income is between VND1 million and VND5 million. Tax rate for this level is 5 percent. The tax rate increases progressively from 5 percent to 30 percent in each higher level.

The last level levies the maximum tax rate of 35 percent on any taxable income that exceeds VND80 million.

“The new tax ladder as proposed by the Ministry of Finance does not change much from the current one,” said Duc.

“The second tax level should be adjusted to include taxpayers whose average monthly income is between VND6 million and VND20 million, rather than the VND6 million – VND11 million range as proposed by the draft.”

Meanwhile, Nguyen Thi Thin, deputy chairwoman of the Vietnam Tax Consultancy Association, suggested that tax rate in level 2 be slashed to 2 percent to 3 percent, from the current 5 percent, to encourage taxpayers.

“With lower tax rates, taxpayers will not be under pressure to find ways to evade payments,” she said.

Central economic zone provides numerous jobs

Ninety-seven investment projects in Nghe An South-east Economic Zone in the central province of Nghe An, with a total investment of more than US$1,977 million, have provided jobs to almost 7,400 labourers.

According to Phan Xuan Hoa, Vice Head of the Zone Management Board, the board is completing procedures to license three new foreign projects in the near future.

They will be an Indian project with a total investment of $25 million, a project of the Republic of Korea valued at $25 million and a Thailand project worth $40 million.

Nghe An South-east Economic Zone plays an important role in socio-economic development in the province and the province is actively coordinating with concerned agencies and branches to surmount limitations, in order to attract more investment projects.

To achieve the target, the province has paid attention to land clearance and infrastructural development, aiming to create a favourable environment for investors.

New training centre for VN coffee producers

The first training centre for Vietnamese coffee producers has been inaugurated in Bao Loc district of Central Highlands Lam Dong province.

The centre was jointly established by the International Finance Corporation, a member of the World Bank Group, and Atlantic Commodities Vietnam Ltd, a subsidiary of ECOM Agro-industrial Corporation under their 2010 agreement to assist Vietnam’s coffee sector.

It aims to help farmer households meet international certification standards and improve the sustainability and productivity of crops, while increasing earnings and social and environmental standards.

IFC Regional Director for Vietnam, Cambodia, Laos and Thailand, Simon Andrews said IFC and ECOM share the same concerns over enhancing connectivity between coffee farmer households and the global supply chain, to develop Vietnam’s coffee sector.

Vietnam is a major world coffee producer, he said, adding that long-term cooperation between IFC and ECOM will help Vietnamese coffee growers achieve sustainable coffee cultivation and increase productivity and coffee quality.

General Director of Atlantic Commodities Vietnam Ltd Jean-Christopher Mani said the centre not only benefits farmers but also strengthens long-term connectivity between ECOM and farmers and brings better control of coffee quality.

The centre aims to target 4,000 farmer households during the first three years of operation, to help them qualify for sustainable coffee certification.

Experts urge better urban planning, managerment

Experts say Vietnam needs to improve its urban planning and management to cope with severe traffic jams.

Speaking of the chronic issue on the sidelines of the Vietnam-Japan Urban Development seminar in Hanoi recently, Yoshio Wada, head of the department for economic infrastructure and urban and regional development of Japan, suggested developing satellite cities around core urban areas to ease traffic pressure on big cities.

According to data released at the seminar, after 25 years of reform, Vietnam now has over 760 urban areas, with an urbanization ratio of over 31 percent. The number will surge to 870 by 2015 under a national master plan on urban development.

However, multiple shortcomings have emerged from the fast urbanization process, such as lax management, slow infrastructure development, low investment efficiency and regular flooding and traffic congestion in big cities.

Phan Thi My Linh, head of urban development at the Ministry of Construction, said rapid urban development had outpaced the management capability of local authorities.

She said quality had been neglected in urban planning, classification, expansion and upgrading processes. Financial constraints have also affected urban infrastructure development.

Given the rise in the number of urban areas, traffic jams and accidents have become the biggest concern.

The proportion of land reserved for road development currently accounts for 13 percent of the urban area, compared with the normal ratio range of 20 percent -25 percent, and space for static traffic makes up a mere 1 percent while the standard requirement is 3 percent - 3.5 percent.

Public transportation is considered a solution but Wada said the most important solution was to scale down the burdens of big cities like Hanoi.

He said as urbanization was intensifying, infrastructure connectivity was getting more important than ever.

Vietnam thus should pay attention to developing infrastructure to ensure living standards of citizens.

Dean A. Cira, the World Bank’s lead specialist and urban sector coordinator, said new urban development projects targeting iconic luxury properties rather than based on an urban development strategy that weighs market needs should be restricted to ensure sustainability of urban development.

Vietnam’s two biggest cities, Hanoi and HCMC, will need to prioritize road and infrastructure improvement, he said.

According to Japanese officials, proper urban development must be based on 3 factors: capital, technology and management.

The Japan International Cooperation Agency (JICA) expressed its willingness to assist Vietnam in terms of technology and management.

HCMC buildings lack parking space.

In a separate development, the HCMC People’s Council held a meeting on traffic safety last week in which delegates discussed the lack of parking space at tall buildings, sidewalks and on the streets in HCMC.

According Director Tran Quang Phuong of the HCMC Transport Department, up until last April there had been 79 high-rise buildings constructed in the city’s downtown area, with total floor space of over 76,800 square meters.

Only 14 buildings, or 17 percent, have sufficient parking space, while 59 buildings, or 74 percent, don’t not have enough space for parking, and 6 buildings, or 7.6 percent, have no parking areas.

Due to the lack of parking space, many buildings have their cars parked on the sidewalks and on the streets, causing traffic congestion.

To solve this problem, Phuong said his department would propose to the city to force building developers to prepare sufficient space that can meet 80 percent of parking demands, as well as consult the department about traffic circulation before licensing new constructions.

Regarding street parking, Phuong said HCMC had called for investment in car parking projects to satisfy the rising number of private vehicles but investors have shown little interest.

HCMC thus currently allows parking on certain streets. However, last October, the city withdrew licenses of 6 street parking zones because of serious gridlock.

As for the development of underground car parking space, 2 projects at Le Van Tam Park and Trong Dong Outdoor Theater cannot get off the ground because of cumbersome procedures.