Reforms needed to stamp out corruption

With more than 100,000 businesses now operating in the city, administrative reforms must be carried out more thoroughly to prevent corruption, Le Minh Tri, HCM City People's Committee deputy chairman, told a recent online governmental meeting.

Since 2001, HCM City has developed several models that have been replicated around the country, including offering better services to businesses, one-stop service for basic administrative procedures, and cooperative activities among agencies in construction, real estate and business establishment admin procedures.

"Every initiative aims at the best service for city residents and businesses," Tri said.

The city has also opened dialogue regularly for information exchange between agencies and businesses.

According to Tri, dialogue has helped the city to better understand the obstacles to businesses and develop proper solutions promptly.

Regular dialogue has also served as a channel for city authorities to receive feedback about their reform activities.

The application of information technology in several administrative services has helped reform as well.

Residents and businesses can access and perform procedures online instead of arriving at offices of the agencies, Tri said.

He said achievements in administrative reform would be maintained and improved at all agencies during the 2011-20 period.

According to Tri's report, reform has improved the business environment, resulting in an increase of 17.1 per cent in the number of newly registered businesses and an increase of 11 per cent in the city's GDP every year.

Exporters urged to exploit EU, US markets

Domestic exporters are looking to increase investments in new segments in the US and European markets following the earthquake in Japan, which leads to a reduction in imports to the country.

Experts said exporters needed to be aware of new regulations that have been passed in the US and the EU.

General secretary of the Viet Nam Textile and Apparel Association (Vitas) Le Van Dao said that besides quality and price, the EU market this year would also import goods more selectively. Products imported into the EU must comply with the EU's regulations concerning environmental protection and social responsibility.

According to Vitas, EU consumers this year tend to focus on knitted fabric products, which have had an annual average growth rate of 2 per cent in the EU market during the past few years. Each year, the European market consumes roughly 120 billion euros (US$173.28 billion) worth of products, accounting for 45 per cent of global consumption. Germany, Britain, France, Italy and Spain account for 74 per cent of the EU's total consumption volume.

Vitas said that the EU would likely purchase roughly 38.1 billion euros ($55 billion) worth of lingerie and underwear from Viet Nam.

Nguyen Hoai Nam, deputy general secretary of the Viet Nam Association of Seafood Exporters and Producers, said seafood demand in the European market this year had also changed significantly. The market's consumption demand for canned, processed and frozen seafood with recognised trademarks would increase significantly in European countries.

Nam said exporters should focus on selling processed products like hygienic fresh seafood that is easy to cook.

They should also focus on adolescent consumers who prefer instant, processed and canned seafood, he said.

However, Nam said, exporters would have to meet the provisions concerning products origins, which is required by the European authorities.

With respect to the US, experts said that the market had also reported significant changes, which might make it difficult for Vietnamese exporters to increase exports to the market this year.

Director of the Ministry of Industry and Trade's US Market Department Nguyen Duy Khien said that a slow economic recovery, high unemployment rates and a likely declining purchasing power in the US could be troublesome for Vietnamese exporters.

He said it would not be easy to export to the US because of the fierce competition between domestic and imported products. The US currently applies stricter policies that were introduced in the Farm Bill and the Lacey Act concerning seafood and wood imports.

Exporters needed to have long-term strategies, which promote a diverse range of goods, said Khien.

Viet Nam exports equipment to the medical and IT sectors, but the exports account for only 0.001 per cent of the US market share. The figures for electric circuits, and parts and components for automobiles and motorcycles account for 0.003 per cent and 0.16 per cent of the country's market share, respectively.

Experts also suggested that exporters seek out new market segments this year through the Vietnamese business community in the US because there were more than 1.3 million Vietnamese people living in the US. The overseas Vietnamese prefer food items from Viet Nam; however, most of them buy products from China, Thailand and Korea.

The domestic exporters should increase trade co-operation with the overseas Vietnamese businesses, who would be able to work as distributors and help advertise Vietnamese goods in the US, said Khien.  

Making it easier for investors

The Ministry of Finance is drafting circulars to simplify policies and procedures relating to agricultural projects that have been frustrating investors, a report said yesterday.

The Dau Tu (Investment Review) newspaper cited Hoang Van Phuc, deputy manager of the agricultural division under the Finance Ministry's Business Finance Department, as saying current polices and procedures made the implementation of agricultural projects complicated and costly.

It also quoted Pham Manh Hien, general director of the Viet Nam Forest Corporation, as saying several policies were impractical. For instance, the tardy issuance of land-use right certificates for forest growers hindered agricultural businesses from investing in reforestation, he said.

The report noted that during the last three years, the Government had issued many policies to ease capital shortage and other difficulties faced by agricultural businesses in order to promote investment in the sector.

In particular, the Government had provided guarantees for small and medium enterprises in the sector to access loans from commercial banks, the report said.

Urbanisation pushes national real estate market to new levels

The real estate market continued to have high potential due to the nation's rapid rate of urbanisation and steadily increasing demand, Tran Ngoc Chinh, chairman of the Viet Nam Association of Urban Planning and Development, said at a the conference on the property and real estate financing market held in Ha Noi last Saturday by the association and the Dat Xanh Group.

Viet Nam had reached a 31-per-cent urbanisation rate with 756 urban areas and 70 million square metres of new housing coming on the market every month, he said.

The property market had been recovering from its doldrums at the end of 2010, said Nguyen Manh Ha, head of the Ministry of Construction's housing department.

The supply of low-income housing had increased, and the State had issued regulations to increase the transparency of the property market and create more favourable conditions for real estate investors, he said.

However, Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, said the development of the real estate market in Ha Noi had lagged behind other locales nationwide, including Hai Phong, Da Nang, Binh Duong, Dong Nai and HCM City.

The supply of property in Ha Noi was likely to catch up with demand over the next 10 years, Nghia said. Many people nationwide with good financial conditions wanted to buy an apartment or house for their children to study and live in the capital city, due to the city's good living standards, he added.

However, former minister of trade Truong Dinh Tuyen said development of the domestic real estate market was unsustainable due to tightening capital and credit available for real estate projects.

Authorities also needed to carefully evaluate proposed property projects before granting a licence and closely monitor construction progress to avoid creating an imbalance between supply and demand in segments on the real estate market, Tuyen said.

IPOs hinge on poor market conditions

At recent shareholders meetings, which involved several banks and financial institutions, several groups approved plans to list shares on the national stock exchange.

However, most of the participants said the implementation of the plan would hinge on the development of the stock market and the economy.

DongA Bank planned to list shares on the HCM City Stock Exchange (HOSE) two years ago, but has yet to follow through. At its shareholders meeting last month, the bank decided to resume its listing plan, saying it would list shares during the last quarter of this year.

Tran Phuong Binh, DongA Bank's general director, said the bank could not implement its plan during the past two years because of the unfavourable state of the Vietnamese stock market. He said during the final months of last year, several bank shares nearly dropped to their face value, VND10,000 (US$0.48) per share.

Binh said the bank wanted to increase its charter capital from VND4.5 trillion ($215.3 million) to VND6 trillion ($287.1 million) before introducing its shares on the official exchange.

TrustBank intended to list shares on the HOSE last year, but also failed to do so until now. Its chairman Hoang Van Toan said the bank would implement its listing plan soon, but to ensure shareholders' rights the bank would choose a suitable timetable.

Toan said the bank would sell a portion of its stakes to a strategic foreign partner before listing shares on the market.

Other small banks including Military Bank and Western Bank were also unable to list their shares on the market despite their listings had been approvel by the authorities.

"We asked for our shareholders' permission to continue the listing preparation and will choose the appropriate time to list our shares," said Cao Thi Thuy Nga, deputy general director of Military Bank.

Currently, six banks are listing shares on both national stock exchanges.

Many banks expect to list their shares by the end of this year, but analysts forecast that the market would not recover in the near future, which might stall their plans.

Businesses manage to survive capital shortage 

Some businesses managed to survive from the shortage of capitals, which was caused by high lending interest rates by various ways. 

Le Thi Phuong Dung, director of Mai Hoa Trading and Service Ltd., said her company curbed the capital shortage problem by asking customers to pay instantly for every purchase orders.

“Earlier, customers used to pay in advance for big orders and negotiate to pay the rest in a certain period. We had to borrow money from banks to cover those big debts, which can affect our production,” Hoa said.

“However, with the surging lending rate this year, we had to opt for instant cash payment for each purchase to make sure that we always have enough capitals for the production,” she said.

“This is just a temporary measure as most customers certainly find it inconvenient.” Hoa told Dau Tu Tai Chinh Newspaper.

Some businesses said they placed orders with lower quantities in an effort to help each other have enough capitals for production.

Le Van Tri, deputy general director of the tire maker Casumina, said “the firm spent a lot money to maintain a large inventory in previous years. The stores have been freed up since last year in order to save money for production.”

Tri added his company is now focusing on improving quality and reducing input costs by changing product designs.

Despite the increasing material costs this year, some businesses opted for reducing their return rate, instead of raising their product prices.

“Instead of raising the selling price, we increased our output as we are willing to reduce return rate. The return rate will likely to decline, but the sales will move up,” said Dang Chi Hung, director of the kitchenware producer Kim Hang.

Hung also added that the firm was focusing on expanding to rural areas, which have an “unexpected strong consumption” and foraying into new foreign markets including ASEAN countries and Africa.

The fan maker Asia followed a similar pattern, keeping its retail price unchanged in spite of the 10-15 percent increase in material prices early this year.

“We are trying not to raise our price as the demand on the retail market remains low. Raising the retail prices now will make the sales plummet,” said the fan producer’s chairman Vu Dinh Phuong.

Economist Le Tham Duong warned that businesses should set up risk management plans before seeking capitals from long-term loans.

Than Y Nam, financial manager of the Saigon Industrial Corporation, recommended credit organizations should prioritize providing loans for businesses in productive sectors.

Construction of 1st int'l transshipment port remains sluggish

Nearly two years after work was started, the construction of Van Phong international transshipment port in the central Khanh Hoa Province has stalled due to slow construction progress.

Vietnam’s first international transshipment port project, due to undergo four stages of construction, was mainly financed by Vietnam National Shipping Lines (Vinalines) in Van Ninh District.

Under the plan, the $3.6 billion project is to be completed by 2020. With 42 wharfs, measuring 12.5 km in length and covering 750ha, the port will boast an annual capacity of 200 million tons of goods and receive container ships with a tonnage of up to 18,000 TEU.

During the starting phase, the construction contractor, a joint venture of the Korea-based SK Engineering & Construction Corp and Vietnam Waterway Construction Co, will set up VND6 trillion basic infrastructures including shipping channel, roadwork and storage covering 42ha of land.

By the end of the first-phase, which is expected to complete in October this year, the port with a designed capacity of 710,000 TEU per year can accommodate 9,000 TEU container ships.

But at present just a few dozen steel stakes have been laid in the wharf building areas offshore, while a huge pile of hundreds of steel stakes are left rusting under ragged coverings. On the vast construction site, there was not a single worker in sight.

Representatives of Vinalines said the construction was suspended in June 2010 to re-examine the geological features of the site since the exploration drilling had failed to take account of the geological complexity of the areas.

Except for a few temporary structures set up to serve the construction work, contractors have only installed 97 out of 1.729 stakes for the foundation, all of which had an excess length of 2-10m protruding above the water surface. With each meter of a steel stake costing nearly VND10 million, this is a huge waste, said Vinalines’ representative.

As a result, the project is being suspended for design changes to shorten the length of the stakes. An official at the port project said construction work is also often slowed down during with last four months of the year due to strong winds.

The project has lagged behind schedule considerably and it is not yet known when construction work will resume, since “all parties concerned are negotiating and discussing solutions.”

Talking with Tuoi Tre, Nguyen Ngoc Quy, director of the project management board, said the project was initially designed for 9,000 TEU ships, but to avoid becoming outdated due to the rapid growth of the maritime and shipping industries in the region, the company had requested that it is expanded to accommodate 12,000-15,000 TEU ships.

Difficulties also come from disagreement over the design of the storage area and the embankment protection system, because the designer asked for costly sand that is not available locally.

The biggest challenge, however, is capital shortage since the project is mostly funded by loans and the lending cost for such a big project is becoming more expensive for Vinalines these days, Quy said.

However, Hoang Dinh Phi, deputy manager of Van Phong Economic Zone, told Tuoi Tre a different story. Geological complexity, according to him, is the most thorny issue since Vinalines had pledged they would provide sufficient capital for the project.

"We plan to complete construction of one wharf first to put the port into operation, and then we will continue with the second one,” Quy said. But he has no idea when the construction will be able to resume.

According to some analysts, the port project plays a key role in shaping and developing Van Phong Economic Zone. Since it has fallen behind schedule, investors have become more cautious in disbursing more money in the area.

This has acted as a drag on all other developmental aspects of the economic zone, Phi said.

Bike makers free-wheeling it in Vietnam

Some foreign-invested motorcycle manufacturers are looking to expand footprints in Vietnam through scaling up production.

Japan-backed Honda Vietnam (HVN) plans to expand its second factory in northern Vinh Phuc province to reach a total annual production capacity of two million motorcycles from the current 1.5 million motorcycles in the second half of 2011.

The $70 million factory expansion plan would be completed in mid 2011 with some 2,000 new workers being employed, bringing the total number of HVN workers to around 8,000.

Besides HVN, Italy-backed Piaggio Vietnam also decided on growing its presence in the Vietnamese market.

Accordingly, the firm intended to triple its production from 100,000 to 300,000 scooters in mid 2012 with an estimated investment of $40 million, bringing its total Vietnam-based investment to $70 million. The firm also attempts to employ more labourers to achieve the target of having a 1,000-stronmg in the Vietnam-based workforce by 2012.

Since getting its Vietnam-based factory going online in June 2009, Piaggio Vietnam had been operating effectively with a stable year-on-year growth, according to the firm’s general director Costantino Sambuy. Thereby, the firm’s leadership decided to boost production in Vietnam and turn the country into a launching pad to amplify its influences in Asia.

Honda Vietnam and Piaggio Vietnam are also two firms which have made constant efforts for customer satisfaction through enabling product upgrade and network expansion plans.

For example, in 2007 HVN for the first time launched into the Vietnamese market automatic-gear Air Blade motorcycle model which was later subject to annual upgrades to meet customers’ volatile tastes. Consequently, sales figures of this motorcycle line rapidly rose with 950,000 vehicles being sold since its dawn in 2007.

As planned, HVN is set to churn out about 30,000 Air Blade motorcycles per month in 2011 which may be later increased to 40,000 units per month on the heels of its factory expansion plan.

As with Piaggio Vietnam, from the inception up to now the company sold out 87,000 scooters. Amid its incessant efforts into network expansion, the firm now operates an extensive network of 90 showrooms across the country, more than double compared to in 2006 when it only had 40 showrooms.

FTA would allow Euro trade ties to flourish

European Union foreign direct investment in Vietnam is expected to jump  if a free trade agreement becomes a reality.

Vietnam and the European Union (EU) last year agreed to conduct the negotiations for a free trade agreement (FTA). This is a new milestone in the relations between the two parties since the signature of the first framework agreement in 1995.

Hans Farnhammer, head of Economic Cooperation and Governance Division at Delegation of the EU to Vietnam, said EU’s investors were awaiting the FTA to increase investments to Vietnam to target ASEAN and other countries like Japan, China and India.

“Vietnam will be a hub for investors to set up production facilities to penetrate into ASEAN and other Asian markets,” said Farnhammer.

Automotive, electronics and high technology, machinery, processed foods, pharmaceuticals, financial, telecom, maritime, and distribution were the key sectors that EU’s investors would be interested in Vietnam.

Till early March 2011, the EU has had 1,079 direct investment projects operating in Vietnam with a registered capital of $16.1 billion. Of which manufacturing sector has 433 projects with a capital of $3.5 billion, the remaining projects belong to service sectors.

“I believe EU investments to Vietnam will increase due to the EU-Vietnam FTA,” said Nguyen Van Toan, vice chairman at Vietnam Association of Foreign Invested Enterprises.

He said EU’s investment to Vietnam was not proportional with its enterprises’ technologies and financial capacity.

In the past years, EU’s investors mainly focused investments in EU member countries, said Toan.

But EU member countries are eyeing ASEAN, including Vietnam as a potential market. The evidence is that EU had an option for conducting negotiations of FTA with ASEAN. However, due to non-economic reasons, EU had to stop it and shifted to a new approach that is to negotiate FTA with each ASEAN country, in which Singapore and Vietnam are its first selection.

Although the two parties have not set out a framework for negotiations, analysts said EU investors would not only benefit from tax reduction and exemption when exporting production to Vietnam, but also benefit from other FTAs that Vietnam signed with other countries and associations like ASEAN Free Trade Agreement, ASEAN-China Free Trade Agreement, ASEAN-Korea Free Trade Agreement, ASEAN-Japan Free Trade Agreement and Vietnam-Japan Comprehensive Economic Partnership Agreement.

Toan said EU’s investors would make Vietnam a hub for ASEAN because of the country’s political and social stability. Furthermore, Vietnam had a favourable geographical position with a system of sea ports and a road network that had been being upgrade to connect with other countries in the region.