Ministry mulls amending fuel trading law

The Ministry of Finance has sought permission from the government to amend Decree No 84 on the management of the fuel trading activities, in a bid to increase the transparency of wholesalers’ financial states, and reducing disadvantages for consumers.

The adjustments focus on changing the cost price calculation, commission granting, and the deduction for the price stabilization fund, in a way that matches the real market development, the ministry said.

It demanded that the ‘fixed profit’ be removed from the fuel cost price calculation, to increase the transparency of the losses and profitable states of the fuel wholesalers.

Currently, a set profit of VND300 is allowed to be included in fuel retail prices, which means wholesalers will always enjoy at least VND300 in profits on every liter of fuel, regardless of the selling prices.

While fuel retail prices are currently adjusted based on the average import prices within 30 days, the ministry said it is seeking to cut the period down to 10 days, to make sure domestic prices will not lag behind world trend.

In the regard to the fuel price stabilization fund, the ministry demanded that the fund be kept in the state treasury, rather than being put in the hands of wholesalers as the current regulation.

This is to avoid the fund from being misused by the fuel companies, the ministry explained.

Economic woes weaken uptrend

Stock indices advanced last week on the strength of three recovering sessions. On the HCM City Stock Exchange, the VN-Index gained 2.17 per cent over the previous Friday's close to end the week at 416.98 points, while on the Ha Noi Stock Exchange, the HNX-Index also added 3.5 per cent to close at 70.58 points.

The average daily value of trades fell slightly in HCM City to VND536 billion (US$25.5 million) but edged up in Ha Noi by 3.3 per cent to VND293.4 billion ($13.9 million).

Last week, the Ha Noi exchange rolled out the HNX30 Index, tracking the 30 leading shares on the northern bourse in terms of market capitalisation and liquidity. The HNX30 closed on Friday at 134.53 points, an increase of 5.6 per cent from its starting point.

In HCM City, the VN30 Index, which tracks the southern exchange's top shares, rose by 0.35 per cent during the week to conclude Friday's trades at 492.36 points.

Bottom-feeding gradually appeared towards the final sessions of the week, and investors gravitated towards such stocks as real estate developer Sacomreal (SCR), financial conglomerate Ocean Group (OGC) and Southern Rubber Industry Co (CSM). In Friday trading in HCM City, around 450 stocks posted gains, with nearly 200 codes rising to their ceiling prices.

"The VN-Index is flickering in a short-term uptrend," said FPT Securities Co analyst Le Thi Bich Hang, adding that the Index might face some troubles as it approached 430-435 points.

Against this generally upward trend, foreign investors remained cautious. They were net sellers in HCM City last week by a margin of VND101 billion ($4.8 million), although they were buyers in Ha Noi by a modest margin of just VND700 million ($33,000).

Some positive signs impacting markets last week included declining deposit and lending rates and higher expectations for credit growth. With inflation continuing to recede, Hang predicted, "deposit rates could be reduced again, shifting cash from deposits to securities."

Customs data also saw the country generate a trade surplus in June totalling $360 million, bringing the nation's trade deficit in the first six months of the year down to $160 million.

None of this economic information was significant enough to boost the market, said Maritime Bank Securities Co analyst Tran Quoc Hoan. Meanwhile, the European debt crisis continued to have a clearer impact on Asian economies, with growth rates in the region slowing and forecast for the region revised negatively.

Securities firms along with investors were also still hoping for a major change in credit for the real estate and manufacturing sectors, Hoan added.

According to the State Bank of Viet Nam's banking inspection and supervision division, bad debt in the commercial banking system as of March 31 had climbed to over VND202 trillion ($9.6 billion), or 8.6 per cent of total outstanding loans.

The lower credit quality was caused by declining financial capacity of enterprises, the business operations of which depended heavily on bank financing, as well as weak risk management practices among credit institutions.

"The market is still facing some declines before reaching a notable rally next month," Hoan predicted, recommending that investors sell in earlier sessions this week if the market did not see dramatically increasing prices or trading volume. "Money should be kept until a more obvious speculative opportunity appears."

RoK, Japan import Vietnamese rice again

The Vietnam Food Association (VFA) reported that the Republic of Korea (RoK) and Japan have both started to import Vietnamese rice again.     

Vietnam had shipped rice to these two demanding markets for a while, but halted consignments due to quality requirements, according to Nguyen Van Tien, director of An Giang import-export company.

Japan has resumed importing rice from Vietnam because the price of Vietnamese rice is lower than Thailand’s.

Japan is expected to import 600,000 tonnes of high-quality rice by the end of the year, and food safety and hygiene is the primary criterion it has set for exporters.

VFA President Truong Thanh Phong suggested that agricultural localities zone off special areas to grow high-quality varieties for export to these markets which have a big demand for high grade rice.

The past six months have been a difficult time for Vietnamese rice exporters. In the first quarter, they nearly lost out their African market to Indian businesses for low grade rice. However, in the second quarter, Vietnam promoted exporting high grade rice to the African market and the outlook now seems to be more optimistic.

The domestic price of rice in China is also higher than in Vietnam, so Vietnamese businesses still have opportunities to ship rice to this market. China has signed contracts to import 1.2 million tonnes from Vietnam since the beginning of this year. Of the total, 900,000 tonnes have been delivered

By the end of June, Vietnam had exported 3.45 million tonnes of rice, down 12.76 percent against the same period last year.

Japan wants to establish a financial firm in HCM City

 Ho Chi Minh City and Japan should set up a finance joint venture with assistance from the Japan Bank for International Cooperation (JBIC).
    
The suggestion was made by Tadashi Maeda, managing director of Tokyo-based Global Infrastructure Finance Group, at a meeting with leaders of HCM City People’s Committee on July 12.

Tadashi Maeda said the joint venture will provide investment consultancy services and call on international investors to invest in the city.

The two sides discussed JBIC’s incentive loans for infrastructure projects in HCM City and agreed to speed up the implementation of ongoing projects.

HCM City Mayor Le Hoang Quan expressed thanks for Japan’s valuable assistance, saying it has greatly contributed to the development of Vietnam in general and HCM City in particular.

Bad debts make up 8.6 percent of money owned

The country’s bad debt ratio has amounted to VND202 trillion ( US$9.6 billion), accounting for 8.6 percent of the total outstanding credit, said Nguyen Huu Nghia, acting head inspector of the State Bank of Vietnam (SBV).    

Speaking at a press meeting in Hanoi on July 12, Nghia said reports from credit institutions showed that by the end of May, the bad debt ratio was VND117 trillion(US$ 5.5 billion), accounting for 4.47 percent of the total outstanding credit while SBV’s results revealed the sum of $9.6 billion by the end of March.

He reported that the bad debts were mainly in industrial production and construction areas, as these have been seriously affected by the economic downturn.

Outstanding loans in the real estate sector by the end of May were VND197 trillion (US$0.38 billion) while its bad debt was 12 trillion (US$571.4 million). Outstanding loans in the stock market by the end of May were US$571.4 million with bad debts accounting for 4.1 percent of the total.

The SBV also said bad debts which had high possibility of losing capital accounted for 40 percent of the total. However, these debts were protected by risk prevention funds and mortgaged assets.

He affirmed that SBV is researching how to establish a debt trading company but had yet to submit it to the Prime Minister as it had not been necessary to use VND100 trillion (US$4.8 billion) to buy the bad debt.

Ha added that the company, if established, would have to use several financial tools to resolve the bad debt.

Some banks announced on July 11, they will be cutting interest rates on existing loans from as high as 19 percent down to 15 percent, starting from July 15. The move follows a guideline issued by the State Banks of Vietnam aimed at helping struggling businesses.

Vietinbank affirmed that it will slash rates to 15 percent per year and even offered firms loans for working capital at 11-12 percent.

“We will increase access to capital for priority sectors including agriculture, export, small and medium sized enterprises and supporting industries,” said Pham Huy Hung, chairman of Vietinbank

Vietinbank is implementing a programme to provide enterprises with loans to purchase rice for temporary stock with preferential loans at 10-11,5 percent.

The Saigon-Hanoi Bank (SHB) also lowered its annual interest rates for all previous loans to 15 percent.

Nguyen Van Le, director general of SHB, said that even before the SBV’s directive, the bank had reduced rates to 15-16 percent for about 5,500 loans and restructured debts for customers with total outstanding loans of VND8.5 trillion (US$404.8 billion).

Loans with rates higher than 15 percent still accounted for one-third of SHB’s total outstanding loans, however, Le said that his bank will trim the rates of all loans to 15 percent immediately.

Agribank has taken a step further by lowering rates to 13-15 percent for its customers. It also said that for clients in financial difficulties, it will look at making further interest cuts and continue providing loans for new feasible projects.

Also on the day, Sai Gon Thuong Tin Bank (Sacombank) unveiled a low interest rate programme for corporate borrowers.

It has earmarked VND2 trillion (US$96 million) for lending at 13 percent.

Another US$50million will be earmarked in the US dollar for import-export firms at rates starting at 4.5 percent.

Vietnam-India trade hits US$1.85 bln in six months

Two-way trade between Vietnam and India achieved US$1.85 billion in the first half of this year, according to the Vietnam General Department of Customs.     

Notably, bilateral trade deficit fell 45 percent compared to the same period last year to US$335 million.

Of the 23 types of goods Vietnam exports to India, 14 have recorded high growth in volume, including rubber, computers, electronic products, chemicals, and cell phones.

Agricultural products also continue to show increased export volumes.

Vietnam imports 33 items from India, of which 17 reported considerable growth. The value of imported maize increased 88 percent to US$192 million.

Cattle feed imports showed a sharp decrease to only US$172.2 million, down 48 percent against the same period in 2011.

Vietnamese cocoa receives global quality certificate

Cocoa products from the southern province of Ba Ria-Vung Tau have been granted a second UTZ Certificate recognizing their global standard quality.
    
The UTZ Certificate certifies agricultural products that meet international quality standards and other requirements such as Good Agricultural Practices (GAP), environmental protection, social security and traceable origins.

This represents an important milestone for increasing the value of Vietnamese farm products and will help improve farmers’ incomes and promote sustainable agricultural development.

More than 700 households in Tan Thanh and Chau Duc districts of Ba Ria-Vung Tau province with hundreds of hectares under cocoa cultivation are currently registered for the UTZ certification.

Because of the UTZ standards, local cocoa growers are protecting the environment, limiting the use of toxic chemicals and earning more from their increased-value products. They have also been provided with knowledge and technical assistance from experts.

Joint VN-Thai committee examines trade ties

The first session of the Vietnam-Thailand Joint Committee on Trade Cooperation got underway in Hanoi on July 12.

During their session, the committee assessed two-way trade ties and measures to strengthen cooperation on a bilateral basis, as part of ASEAN cooperation frameworks while supporting each other at international economic forums.

A consensus was reached on a number of areas of cooperation, including trade policy, trade and investment promotions, agricultural cooperation and closer links between both private sectors.

They also agreed to step up the exchange of market information, increase trade visits to promote trade and encourage closer cooperation and connectivity between the business communities of both countries.

According to Minister of Industry and Trade Vu Huy Hoang, Thailand is Vietnam ’s second largest trading and investment partner while Vietnam is Thailand ’s fourth largest partner.

In 2011, two-way trade between both countries reached $8.8 billion, up by 20.5 percent against the previous year. In the first five months of this year, the figure was $3.8 billion, a year on year increase of only 2.1 percent.

Vietnam mainly imports petrol, plastics, machinery, various kinds of equipment, cars and parts from Thailand while it exports steel and agricultural and aquatic products to Thailand .

To date, Thai companies have invested around $6.7 billion in 257 projects across Vietnam.

Central bank says bad debt 8.6 pct at end-March

This file photo shows a bank's employee counting local bank notes, the dong, in Hanoi, in 2011.

Vietnam's bad debt rose to 8.6 percent of total loans in the banking system at the end of March, doubling the previously published figures, as businesses faced many difficulties in a slowing economy, the central bank said on Thursday.

The value of the bad debt amounted to 202 trillion dong (US$9.69 billion), the State Bank of Vietnam said in a statement, citing investigative results by its inspectors.

The central bank estimates were far higher than those it had issued earlier based on banks' estimates, which had put the ratio of bad debts to outstanding loans at 4.47 percent at the end of May.

The ratio and the value of non-performing loans in Vietnam's banking system have been fraught with uncertainty, with several different figures so far this year.

Governor Nguyen Van Binh had been previously reported as saying non-performing loans had risen to 10 percent from 6 percent of total loans, without giving a timeframe for the figure.

Non-performing loans stood at 3.07 percent at the end of last year, the central bank said.

The central bank said that by the end of March, 84 percent of non-performing loans were mortgage-based and the value of the mortgages was equivalent to 135 percent of the bad debts.

Lenders had set aside provisions worth 67.3 trillion dong ($3.23 billion), or 57.2 percent of the bad debt value, by the end of May to deal with the debts, the statement said.

The reason for the large gap between the central bank inspectorate's figures and banks' data was that lenders tended to report bad debt at a lower ratio, it said.

"Several banks did not comply with the regulations about debt classification, recording non-performing loans below the actual figure to reduce their provisions," the statement said.

This is the first time Vietnam's central bank acknowledged the actual non-performing loans were higher than previously reported figures.

Analysts have said Vietnam banking system's real bad debt ratio could be two to three times the official figure while Fitch Ratings has put it at 13 percent.

Vietnam recorded an average credit growth at 26.56 percent a year in the 2008-2011 period while non-performing loans expanded at an average 51 percent a year, the central bank said.

Bad debt rose swiftly in the past few years due to the economic instability, high inventories, rapid credit expansion, risk management weakness and poor supervision of lenders, the statement said.

The central bank unveiled banking reforms in March that envisaged the sale of mortgaged bad debts to the Finance Ministry's Debt and Asset Trading Co and would allow banks to convert loans into stakes in borrowers' firms.

The government will consider buying property projects which were used as the mortgages for loans and use them for social welfare purposes and state agencies' use, the plan said.

The central bank also aims to establish a national asset management firm to speed up resolution of bad debts, state media has reported. ($1=20,850 dong)

SHB’s credit outlook downgraded on HBB’s acquisition

Moody’s Investors Service Inc has downgraded the credit outlook of Sai Gon-Hanoi Commercial Joint Stock Bank (SHB) due to its recent acquisition of Hanoi Building Commercial Joint Stock Bank (Habubank).

SHB’s credit rating has still been maintained at B2 for deposit and issuer ratings and E+ for its standalone bank financial strength rating.

Moody’s said the rating reflects its view on the merged entity’s plan on tackling and making provisions for bad debts particularly those incurred by the troubled Vietnam Shipping Industry Group (Vinashin) following SHB’s recent merger with of Habubank, coded HBB.

The rating agency said its downgrade decision also came from said the negligible amount of cash for the acquisition that would be carried out by a share swap agreement, and the funding improvement of the combined entity observed as yet.

It also reckoned further possible downgrades in the time to come on uncertainties associated with the merger with HBB in terms of the post-merger entity’s asset quality and profitability.

Though the current ratings incorporate, to some extent, the likely degree of deterioration of SHB’s financial figures and business environment, assessment of actual post-merger financial health would require a monitoring period of between 12 months and 18 months.

Moody’s said the credit outlook was negative primarily due to the weak credit profile of HBB, larger scale of the deal compared to SHB’s which would place pressures on credit quality of this bank and ultimately the merged one.

SHB saw non-performing loan ratio as of end-2011 staying at 2.2 percent compared with its partner’s rate of 4.4 percent which could jump to 16.7 percent with loans to Vinashin included.
However, the merged bank’s risk exposure to bad debts could be partly mitigated by making full provisions over a five-year period, said Moody’s.

Notably, all of this giant’s loans have been secured against collateral, part of which could be recovered in 6-12 months to come.

However, it remains unknown whether the merged entity will be able to generate sufficient net income for 2012 to cover the potential worst scenario provisions of around VND1.8 trillion including provisions for Vinashin’s debts (amortized over five years), and other distressed loans.

Also, what concerns this rating agency is Habubank’s poorer profitability compared to SHB’s with the net income-to-average risk weighted assets ratio of less than 1 percent versus 2.3 percent of SHB.

Since the deal will be carried out through a share swap agreement, SHB will issue 405 million new shares at par value of VND10, 000 per share totaling Tier 1 capital of VND4.05 trillion.

The combined Tier 1 capital ratio of the merged bank is estimated to be around 13.3 percent that is very much similar to SHB’s end-2011 rate of 13.2 percent.

Additionally, Moody’s revealed much lower liquidity ratio of Habubank versus SHB’s with the former’s loan-to-deposit ratio of 120 percent and the latter’s 84 percent in the end of 2011.

However, the above ratios are likely to drop to 90 percent for Habubank and 75 percent for SHB on slower credit growth.

Rapid growth of convenience food stores in HCMC

After the success of its first convenience food store at the Phan Van Tri apartment building in District 5, Saigon Co-op has expanded to 44 more food stores. Now many convenience food stores owned by other investors have sprung up throughout Ho Chi Minh City.
           
These convenience food stores provide green, clean, fresh and high-quality food for working housewives who are too busy at work and have to also manage a household.

Saigon Trading Group (SATRA) has opened 10 convenience food stores and the Vissan food processing company owns a chain of 87 mini supermarkets.

Additionally, many convenience food stores and showrooms of businesses likely Phu An Sinh, CP and Sagrifood are popping up all over the city.

Vietnam's retail market holds many opportunities for both foreign and domestic investors. Shop & Go is the leading foreign retail business with nearly 70 convenience stores. Circle K invested in 30 stores and Family Mart opened eight mini supermarkets.

Guardian Life Care Private Limited, a retail chain of health and wellness stores has just appeared and become a competitor of Medicare stores, a leading health and beauty products retailer in the city.

Japanese convenience store operator Ministop, a member of AEON Group has cooperated with G7 Service and Trading Joint Stock Company, known as G7Mart under Vietnam’s Trung Nguyen Group to open hundreds of stores in Vietnam.

Japan’s FamilyMart signed a strategic cooperation agreement with Phu Thai distribution group to open 300 stores from now until 2015.

According to Nguyen Thanh Nhan, deputy director general of Saigon Co-op, the concept of convenience stores has developed suddenly because it does not need a large area or capital investment and is easily accessible to consumers in every nook and corner of the city.

Businesses should invest in the logistics of distribution and provide commodities, as looking for the right premise is also not easy, Mr.Nhan added.

Saigon Co-op plans to open 150 stores by 2015. Vissan and SatraFoods expect to develop their stores into supermarkets providing diversified goods.

Ministry optimistic with export turnover of first six months

According to the Ministry of Industry and Trade, the country’s export turnover reached US$53 billion in the first six months of the year, showing a year-on-year increase of 22.2 percent and a 48.5 percent increase in this year’s target.

Export turnover hit US$8.85 billion per month in the first six months, up by $1.6 billion over last year.

Among the commodities, export of agricultural products declined by US$900 million and the growth rate of textile and garments touched 8.7 percent.

This year’s export turnover can reach US$109.5 billion in the last six months, the ministry said.

According to a survey on the Business Confidence Index (BCI) by the Vietnam World Vest Base Financial Intelligence Services Company Limited (WVB FISL), 71.43 percent of the surveyed enterprises said Vietnam’s economy will fare better in the next 12 months; only 3.09 percent of businesses seemed anxious for the economy in 2012.

Experts say many firms unaware of risk management

Experts from State and corporate organizations are of the opinion that many local enterprises have not fully attended to risk management and this makes them vulnerable to negative impact of business environment changes and economic uncertainties.

A number of listed and securities companies had seen a sharp reduction in profit and had struggled with liquidity as their risk management was not effective, said Nguyen Doan Hung, vice chairman of State Securities Commission.

Hung told a function held by Ernst & Young Vietnam Limited in HCMC on Monday for introduction of an enterprise risk management book that Vietnam’s economy was facing a host of difficulties and enterprises were among the first suffering from economic slowdown.

Tran Dinh Cuong, country managing partner of Ernst & Young Vietnam Limited, told the Daily that almost none of the local businesses had worked out an overall risk management framework though a number of leading enterprises in the country had risk management approaches for their certain areas.

A survey conducted by Ernst & Young among companies in finance, real estate and construction, consumer’s products, agriculture and other sectors from May till mid-June this year shows that more than half of respondents admitted that they had not had an official risk management mechanism.

However, the survey indicated that up to 78% of respondents said they had plans to improve their risk management approaches in the next two years as they had recognized benefits of this.

Respondents also pointed out the Government’s regulations and policies, competition and market; personnel administration and business efficiency; changes to interest rate, foreign exchange between Vietnam dong and U.S. dollar and inflation; credit and liquidity as among the top contributors to their business risk.

Respondents also named the risk linked to business strategy as top concern in the coming years. This strategy involves merger and acquisition as well as business opportunities due to market changes.

Banks to give city firms preferential loans

BIDV, Vietcombank, Vietinbank and Agribank will provide over VND92 billion worth of loans with preferential interest rates of 12-13% per year to 11 small and medium enterprises (SME) in HCMC’s Tan Binh District.

This is the content of credit support contracts signed on Monday at the ceremony held by the HCMC government and the central bank’s HCMC branch.

Nguyen Hoang Minh, deputy director of the central bank’s branch in HCMC, said this was one of the first steps in a series of activities to connect the HCMC-based SMEs and lenders in order to remove difficulties for enterprises. After Tan Binh District, Phu Nhuan District will be the next to receive credit support, he added.

The statistics of the central bank’s HCMC branch show that over VND20 trillion was disbursed to some 4,200 enterprises in June, with lending rates of 12-12.5% per annum.

HCMC vice chairwoman Nguyen Thi Hong said the city would continue to take measures to help enterprises access bank loans in the rest of the year. She asked enterprises in need of loans to contact professional associations, where their names will be listed and sent to the HCMC Department of Industry and Trade, before transferred to commercial banks.

However, Hong stressed enterprises must operate properly and try to timely repay their debts so that they will not become bad debts, affecting the operations of banks.

Meanwhile, Minh said the central bank’s branch would urge lenders in HCMC to restructure old debts as it was requested that interest rates for old loans must be brought down to below 15% before July 15.

Credit growth remains negative in city

Contrary to the positive growth trend of the national credits, the Jan-Jun credit growth in HCMC stands at minus 0.04%, showing the poor capital absorption capacity of businesses in the Southern Key Economic Zone.

This was revealed at a meeting between HCMC leaders and representatives of 16 banks last weekend.

A press release of the central bank last Saturday shows that the system’s credits had inched up slightly. As of end-June, credits grew 0.76% against late 2011, or 1.4% with investment capital balance in corporate bonds and treasury notes included.

According to the meeting, bad debts are rising in HCMC. Several banks see their profits dwindling and many bank’s branches have reported losses.

Both banks and enterprises remain cautious with bad debts.

However, the good news is capital is flowing into businesses, albeit slowly. The outstanding loans for production and business accounted for 85% of the total outstanding loans in the city in the first six months.

Notably, small and medium enterprises made up the largest portion of those provided with credit capital. The total number of businesses receiving Vietnam dong loans with preferential interest rates was over 4,200.

Some HCMC-based banks directly signed preferential credit contracts with small and medium businesses.

A banker in HCMC said small and medium enterprises ran into the most troubles. They do not have enough assets to secure loans, and even if they do, their assets are of low liquidity and low market values and very difficult to transfer.

In addition, their financial statements are not audited; financial data are not transparent and healthy enough, while evidences for borrowing purposes are insufficient. Most small and medium businesses do not receive guarantees from credit guarantee funds.

In its press release, the central bank said the chance of credit expansion in the coming time was small. The banking system is basically secure, but capital balance has not improved, while bad debts are picking up and some institutions still breach the regulated capital adequate ratio.

“Capital balance is still unstable as medium- and long-term loans still account for 42% of the total credits, same as the end of 2011, while most capital is mobilized from short-term deposits.

“As of end-May, as reported by the credit institutions, the total bad debts of the whole system accounted for 4.47% of the total outstanding loans of the economy (versus 3.07% at end-2011).”

“Dong lending rates have been cut but still stay at high, especially the proportion of high-interest loans remains large,” said the press release of the central bank.

The central bank requested commercial banks to closely supervise the operations of their corporate clients to timely propose measures on currency and credit. In addition, they are asked to coordinate with borrowers to review and assess repayment capacity of the latter, and then revise repayment schedules, offer interest exemption or reduction, and give out new loans to pay back old debts.

The central bank also required lenders to work with ministerial agencies and industry associations to seek solutions to handle inventory, remove difficulties for businesses and promote production and consumption.

A report of Vietcombank Securities Co. (VCBS) said: “We think interest rate reduction and credit growth will continue and become clearer from the end of the third quarter, as the banking system expects to inject VND50 trillion per month in the last six months to boost economic growth. Although credit growth has shown more optimistic signs, the bad debt ratio will likely surge further in the coming time.”

Craft products development in Quang Nam

The UNESCO office in Hanoi in collaboration with Quang Nam Province’s authorities have organized a seminar to kick off the project ‘Supporting hallmark craft products development at the world cultural heritages’ planned for the 2012-2013 period.

At the seminar, related sides and UNESCO agreed on the main activities of the project and methods to develop craft products and heritage tourism at Hoi An and My Son.

The seminar also introduced craft products of the five local craft villages chosen for the project. Requiring US$100,000 investment, the project has been sponsored by the South Korean trust fund since February this year via the UNESCO office. It also aims to help local management authorities set up a database on the craft industry in the province, especially in Hoi An City and Duy Xuyen and Dien Ban districts.

The project has attracted the participation of many members of the Quang Nam Province Tourism Association in craft products distribution. Meanwhile, the non-profit organization Craft Link is in charge of technical issues of the scheme.

SMEs may get $58 million in aid
 
About US$58.3 million will be spent supporting small-and medium-sized enterprises (SMEs) between 2011-15, according to a plan expected to get Prime Minister Nguyen Tan Dung's approval later this month.

Funding for the plan made by the Viet Nam Chamber of Commerce and Industry and the Ministry of Planning and Investment will come from the State Budget, local budgets and official development assistance (ODA).

The 2011-15 SME development plan targets 350,000 new SMEs established during the period, generating 3.5-4 million new jobs.

Also according to the plan, the country will have 600,000 SMEs by the end of 2015, a 30 per cent increase against the current number of 460,000.

The export value of the sector will account for one fourth of the country's total, and SMEs are expected to make up two fifths of Viet Nam's gross domestic product (GDP).

Addressing a workshop yesterday organised by the chamber, the ministry and the International Labour Organisation, the chamber's secretary general, Pham Thi Thu Hang, said these targets were "not big goals" and the ongoing credit crunch had been taken into account.

However, she raised concerns over the resources to support SMEs because "our support mechanism has by chance mainly focused on big companies".

Many representatives from SMEs at the workshop complained that they had to pay bank interest rates of 15-17 per cent per year, while the State Bank of Viet Nam has already reduced the maximum rate to 12 per cent.

Apart from difficulties in accessing capital, SMEs in Viet Nam also used out of date technologies and an unskilled workforce, according to the VCCI SMEs Support Centre deputy director, Le Thi Thu Thuy.

Hang said support measures for SMEs were much different from large companies because their difficulties were mainly traced back to their small scale. Continued reform of the business environment and administrative procedures would be a must to help SMEs access resources at a minimal cost.

"A big enterprise has enough resources in terms of workforce, technology and financial capacity to access resources, which allows them to move fast and make huge breakthroughs," said Hang. "But SMEs lack everything, so we need to improve our policies to support their development."

Local media last week reported that some loss-making SMEs and those on the verge of bankruptcy even had to pay bribes just to shut down, a story Hang described as "showing the problematic nature of the country's business environment".

Nguyen Hoa Cuong, deputy director general of the MPI's Enterprise Development Agency, said investment in science and technology played a leading role in supporting SMEs.

A number of Government policies would be amended by the end of next year to help SMEs upgrade and adopt new technology to improve business efficiency and reduce environmental pollution.

Land policies should also be improved in favour of smaller enterprises. According to the head of the VCCI, Viet Nam had yet to issue any land policies for SMEs. Some 70 per cent of these enterprises used their owners' land in residential areas for production, which had a bad impact on the environment, she said.

Representing the International Labour Organisation in Ha Noi at the workshop, Maria Luisa Rodriguez said SMEs had a great potential for contributing to economic growth and job creation.

"The SMEs contribute not only to economic growth but also to social development thanks to the development of its communities," she said.

While the national SMEs development plan is awaiting a green light, more than ten cities and provinces across the country have already approved their own plans to support SMEs in the same period (2011-15), and many others are going to finish this important blueprint.

Following their introduction in Viet Nam about two decades ago, the country's SMEs have developed rapidly. The number of these enterprises increased at the rate of about 22 per cent a year between 2006 and 2010, when a total of 370,000 new SMEs and 2.7 million new jobs recorded.

About 95 per cent of enterprises in Viet Nam are small-sized with less than 200 employees, and 2 per cent are medium-sized with between 200 and 300 workers.

Slight increase in business optimism

Vietnamese businesses have had higher hopes for national economic recovery as the Business Confidence Index (BCI) reflected an increase of 7 points in the second quarter against the previous one.

The survey was carried out among 154 leading businesses operating in core business activities at all large, medium and small scales across Viet Nam from June 15 to July 7, said Viet Nam World Vest Base (WVB) Financial Intelligence Services Limited Company.

According to the WVB Viet Nam, 44 per cent of surveyed businesses said Viet Nam's overall economic panorama had shown better signs while 36 per cent saw Viet Nam's economic conditions having remained the same. Only 20 per cent of businesses said Viet Nam's economic conditions had worsened since a year ago.

Predicting Viet Nam's economic situation in the next 12 months, 71 per cent of businesses expressed a positive view, while only 3 per cent worried about Viet Nam's economic future. 25 per cent of surveyed businesses saw their profits remaining the same and only 4.5 per cent of businesses said their economic profits would face the risk of loss next year.

As a result, 51 per cent of questioned businesses would maintain their workforce, 35 per cent planned to recruit more employees, and 14 per cent of businesses said they would cut down their labour force in the time to come.

The majority of businesses defined credit loan procedures and tax policy as their biggest challenges for the time being. Besides these, the fake good issue sparked great concern among businesses as it has damaged the quality of goods and their reputations.

Most businesses in the survey agreed that the best solution to tackle difficulties was to demand the stimulation of goods consumption and services. As a result, banks have to cut down lending interest rates, debt restructuring and improve accessible capital for businesses.

Hundreds lose billions in online pyramid scheme   

A company in Binh Duong Province was prosecuted for setting up an online commercial transaction market to cheat hundreds of people, appropriating billions of VND.

After hearing of a job in Binh Duong Province, Truong Thi Huong, 23, living in Nghe An Province applied for a job in D.H.P Company with an initial salary of VND5 million (USD240) per month.

When Huong met the director of the company, she was introduced of an online commercial market project with registered capital of VND10 billion (USD479 million).

The director had set up a website located in the famous online commercial transaction platform Gobay.com. He said his company would work as a bridge to connect producers and customers.

To become a staff member of D.H.P, Huong had to pay VND2.8 million (USD134) as a deposit in advance to set up her own online shop. The director promised if she wanted to leave her job, she would be paid back the VND2.7 million (USD129). They asked for VND100,000 (USD5) to make a staff card for her.

“If you can introduce other staff to the company, you will receive VND600,000 (USD29) per person as commission. If that person decides to set up an online shop worth VND6 million (USD287), then you will receive VND1.5 million (USD72)”, the director said.

He also promised that the company would give her a multifunction ATM card, a shopping card with a discount of 20% for every item she buys, a travel card with a 100% discount for a once a month visit to Dalat. If she received a best salesperson award three times, she would be given VND16 million (USD765) to buy a laptop. If she managed to win the award eight times, the company would give her VND50 million (USD2,390) to buy motorcycle and if 12 times, she would be loaned VND500 million (USD23,900) at 0% interest rate to buy an apartment.

Huong immediately paid VND2.8 million (USD134) to set up her online shop. From February to July, the only job she carried out was to persuade other people join the company. She introduced 20 people to the company.

She also set up four online shops and paid another VND20 million (USD956) to be a shareholder in the company, but she has yet to receive a salary.

The 20 people she ‘hired’ convinced other 28 people to join.

Another case like Huong is Lam Van Hop, who persuaded 14 people join the company with him. Le Van Quy was the biggest cases with 50 people.

On the morning of July 9, dozens of the company’s staff deposited letters of denunciation to Thuan An Commune’s Police Station. That afternoon, the local police began to summon people involved with the company.

Lieutenant-colonel Vo Van Hong said, “Local people still have little knowledge of trading laws and online commercial transactions, so they become easy prey for cheats."

An official of Binh Duong Province’s Department of Industry and Trade said that D.H.P Company showed all the signs of fraudulent behaviour.

Stated-owned groups to divest from non-core investments by 2015
    
The Government officially fixed the deadline for state-owned corporations and groups’ non-core withdrawal on July 9. This is considered an important step towards the restructuring of State-owned enterprises, particularly those that have invested in the risky sectors such real estate, banking, finance and insurance.

State-owned corporations and groups have been requested to withdraw from their non-core investments before 2015.  

The corporations and groups this will apply to have been required to design restructuring plans which include divestment from their non-core activities. They have also been required to withdraw from investments in joint ventures and associated companies which are not related to their main areas of business. Those organisations involved in these risky ventures are required to promptly submit their plans for consideration. Organisations involved in less risky investments will be allowed to divest in a more gradual way.

Ministries and provincial people’s committees have been assigned to consider, approve or deny the capital removal plans after receiving permission from the Ministry of Finance.

The Ministry of Finance has been asked to send supervisors to State-owned corporations and groups to check their use of State capital and their capital withdrawal processes during their restructuring.

According to a report by the Party Committee for Central Businesses Bloc, currently 21 out of 31 State-owned corporations and groups have expanded to non-core business areas, using a total of VND22.6 trillion (USD1 billion). Among those, Song Da Holdings invested VND6.94 trillion (USD330.47 million), PetroVietnam around VND5.4 trillion (USD257 million) and EVN with nearly VND2.1 trillion (USD100 million).

However, most of the groups said that their non-core investments helped to ensure that they maintain an acceptable rate of 30% lower than their charter capital. The non-core investments of PetroVietam account for 3.76% of its charter capital, while the rate is 2.8% for EVN.

Vinacomin recently decided to withdraw from its non-core investments, which equal VND115.8 billion (USD5.5 million). The four companies from which they divested were Vietnam National aviation insurance Company, BIDV Expressway Development Company, Hai Ha Economic Zone Development and Investment Company and Long Thanh Development and Investment Joint Stock Company.

Da Nang seeks more US investment   

At a conference in Houston city, Texas , Chien introduced Da Nang ’s investment incentives with priority given to high-tech sectors that are of US companies’ strength.

Da Nang hopes to see more US companies to invest in the city in the coming time, especially in its information technology park, Chien said.

The Da Nang official also met with Houston ’s Mayor Annis Parker, during which the two sides discussed cooperative opportunities between the two cities.

They signed a letter of intent with the hope that the two localities will soon strike up a twinning relationship.

Houston is the US fourth largest city with a population of more than 2.1 million and a GDP of nearly 400 billion USD per year.

Apart from Texas, the Vietnamese delegation also toured California , San Francisco , Washington and New York.

More domestic flights to meet public demand   

The national flag carrier Vietnam Airlines plans to increase its flights on 16 domestic routes from July to August 5, announced the carrier on July 12.

On peak days, the airline will operate 68 flights from or to Da Nang, 28 flights from or to Nha Trang, 20 from or to Phu Quoc and 16 to Da Lat. Over the summer season the Hanoi - Da Nang route will have 210 extra flights laid on.

Budget carriers Jetstar Pacific and Air Mekong are also adding more flights from HCM City and Hanoi to tourist destinations around the country, meeting the surge in demand for air travel, particularly on weekends.

Jetstar Pacific announced on July 12 that it will operate 48 extra flights to Da Nang from the country’s two major cities in July, the peak month in the holiday season, with the additional services running from Thursdays through to Sundays.

With these extra flights, Jetstar Pacific will now have five daily flights between HCM City and Da Nang , one more than its normal schedule. The frequency of the Hanoi to Da Nang flights will double to twice daily.

Air Mekong has increased its weekly flights between Hanoi and Phu Quoc to 10 and between HCM City and Con Dao to 12. It will now also operate three flights daily from HCM City to Phu Quoc.

PM allows EVN to offset previous losses
    
Prime Minister Nguyen Tan Dung has asked the Electricity of Vietnam (EVN) to adhere to a recently approved plan through 2015 that would make the group profitable.

EVN will be allowed to offset losses from previous years by increasing prices until 2013. The company will also be allowed to include losses due to the disparity in currency exchange rates until 2015.

EVN claimed that by the end of 2011 they had lost over VND10 trillion (USD476 million) in its power business and VND15 trillion (USD714.2 million) due to exchange rate disparity. The group also also saw a power loss rate of 9-10% per year.

With the PM’s permission, VND10 trillion of these losses will be included in the group’s power prices between 2012 and 2013.

According to the plan, electricity prices will gradually be increased and, in 2013, prices will become market-based. EVN will have the responsibility of providing electricity to all communes and 98% of rural households in the country.

They were also urged to put 42 turbines in 20 power projects into operation, with a total capacity of 11,600 MW between 2012 and 2015. Plans for 14 power plants are already underway with a combined capacity of 12,410 MW, which should come into operation between 2016 and 2020.

EVN will also continue upgrading rural power grids, particularly in mountainous areas and on islands.

During a recent online meeting held on the Government’s website, Deputy General Director of EVN, Duong Quang Thanh said that the group plans to invest over VND500 trillion (USD23.8 billion), VND315 trillion of which has already been secured.

SBV to ease banking system crisis  

An official from the State Bank of Vietnam said that they will not need VND100 trillion (USD4.8 billion) to deal with the bad debts at local banks.

Nguyen Huu Nghia, head of banking inspection and supervision at SBV, said at the meeting to address bad debts on held on July 12, that they have not yet decided on the establishment of a bad debt trading company and have not yet officially reported to the Prime Minister. "But we will not need VND100 trillion in capital." he said.

If the company is established, SBV will use financial instruments such as stocks, bonds, short-term loans deal with the problems. The value of bad debts may be VND100 trillion, but the money can be acquired through other various means at better rates.

In answer to the question as to why there has been such an increase in the ratio of bad debt, Nghia said that one of the reasons is that the credit institutions attempted to achieve high growth without sufficient risk mitigation, especially commercial banks that changed from rural to urban markets.

Many credit institutions made risky investments in sectors such as real estate, and when the market went into a slump, bad debts soared, he said, adding that the regulatory process has not been thorough enough.

To clear bad debts and prevent the same situation from occurring in the future, the SBV has asked banks to restructure loans to borrowers, extend repayment deadlines and lower interest rates to make it possible for the loans to be repaid.

The SBV will review and classify debts and adjust banking regulations to be more in line with international regulations as well as the economic realities of the country.

Millions of pre-paid subscribers face risk of information re-registration  

Millions of pre-paid mobile phone subscribers belonging to the Viettel, MobiFone and VinaPhone networks in HCM City may have to re-register their personal information.
 
The Ministry of Information and Communications has transferred the personal information of five million pre-paid subscribers to the Ho Chi Minh City Police who will be checking to see if the information submitted is correct. Those who are found to have supplied incorrect information will be required to re-register. The work will be carried out by the police over three months.

Checks have already been carried on pre-paid subscribers of Viettel, MobiFone and VinaPhone in Hanoi and Danang which found that around 1.3 million or 25% of all those checked had provided inaccurate personal information.

A representative from a large mobile phone operator said that getting subscribers in Hanoi and Danang to re-register had been difficult. Despite being urged many times and even threatened with disconnection, they still ignored the requests. As a result, many of them are ready to stop using the service.

Last September, Vice Chairman of the municipal People’s Committee Le Manh Ha instructed mobile operators to use technical measures to control their pre-paid subscribers’ information.

The Ministry of Information and Communications started checking subscribers’ personal information in 2010, but the work has been carried out very slowly.

Major-general Nguyen Cong Son, Deputy Head of Vietnam’s General Police Department for Administrative Management for Social Order and Safety, said that criminals use pre-paid SIMs for illegal activities such as harassment and stealing telecommunication charges.

The ministry will tighten control over personal information of subscribers by introducing identification cards issued by the Hanoi Police, before expanding the scheme to Danang and HCM City.

FDI inflow falls but services sector defies trend

The services industry has become the most attractive sector for foreign direct investment (FDI) into HCM City, accounting for 50 per cent of total inflow in the first six months of this year.

"FDI intake is increasing for the services and processing industries while decreasing in real estate and construction. This movement is in line with economic development trend of the city," deputy director of the municipal Planning and Investment Department, Lu Thanh Phong, was quoted as saying by the Dau Tu (Viet Nam Investment Review) newspaper.

According to the department, 33.8 per cent of FDI registered in the first six months - or US$83.8 million) - has gone into medical and social assistance, while processing and manufacturing industries have attracted 32 per cent.

The automobile and motorbike industries received 18.6 per cent into their wholesale, retail and maintenance services industry.

While there has been a sharp increase in additional capital inflow for existing FDI projects, there has been a significant decrease in new FDI projects, the department said.

Since early this year, the registered capital for new projects was just $248 million, equal to just 14.4 per cent for the same period last year, but 50 projects have wanted to expand their capital by $495 million, 127 per cent of last year's figures for the corresponding period.

The additional FDI inflow into existing projects is aimed to strengthen production and open new business, the department said.

For instance, Singaporean Viet Nam Brewery Limited (VBL), producers of the Tiger and Heineken beer brands, South Korean Lotte Viet Nam and Japan's Sankyu Viet Nam increased their capital by $68.1 million, $25 million and $ 9.5 million respectively.

Overall, FDI inflow is expected to reduce significantly this year, especially into real estate and hi-tech industries. A weak supporting industry and low quality of human resources are said to be factors in reduced investment in the hi-tech sector.

Online tax payment plan faces difficulties

The Ministry of Finance expected 190,000-200,000 enterprises nationwide to declare taxes electronically by the end of this year, but obstacles were making it hard for this target to be reached.

Deputy Minister of Finance Do Hoang Anh Tuan said at a meeting in Ha Noi late last week, specifying that only about 118,000 firms had declared taxes online by June 30.

The electronic format would help firms to save costs since it enabled them to submit their tax returns at any time without having to go to tax agencies while avoiding troublesome administrative procedures, he said.

Companies were required to submit tax declarations at least 12 times a year, he noted.

According to Tuan, the online procedures were very simple as they only required a firm to have internet access, an email and a certificate granted by an authorised service provider to use a digital signature.

The prices of T-VAN, an electronic tax declaration service, averaged VND1.5 million (US$72) per year in 2011 and had fallen by half with the increasing number of service providers.

However, many firms were showing little enthusiasm for the method, alleging that they had inadequate IT infrastructure and software, according to Tuan.

"But I think the more important reason is that accountants, for their own personal reasons, don't want to do this online," he told Dau tu (Vietnam Investment Review).

Accounting staff in the majority of small-and medium-sized enterprises (SMEs) had inadequate professional knowledge and IT skills, while some even wanted to declare taxes directly so that they could trick their companies out of money, he told the newspaper.

Tuan said in order to encourage enterprises declare taxes online, besides raising their awareness and providing them with guidance and assistance, it was necessary for authorities to build laws governing the issue.

Wood export target set too high
 
Viet Nam saw an increase in the value of wood products exported for the first half of this year, but commentators don't expect the nation will hit its target of US$4.6 billion exports for this year.

The Ministry of Agriculture and Rural Development said the nation had a year-on-year increase of 25.9 per cent in export value of wood products to $2.3 billion.

During the first six months of this year, the export value of Vietnamese wood products surged by 35.3 per cent to China, 32.3 per cent to the US and 25.5 per cent to Japan against the same period last year.

However, Viet Nam's wood product exporters still faced many difficulties, including impacts of the world economic downturn, technical barriers in import nations, high input costs and low competitive ability, said the ministry.

This year, demand on wood products in the EU market – accounting for 44 per cent of total wood imports in the world market – was expected to drop due to the economic downturn.

Vietnamese wood products exported to the US and EU must meet strict regulations on origin of wood and products.

Therefore, to gain the yearly target, exporters must look for new markets in the Asia Pacific, Middle East, Africa and South America where demands for the products remained high, the ministry said. Meanwhile, exporters said they expected ministries to come up with solutions to rising input costs or they would lose their customers.

Securities affiliates may cause volatility

The excessive capital support that commercial banks extend to their securities affiliates poses high risks to the stability of the nation's financial markets, said the State Securities Commission, following audits it conducted late last year of such bank-affiliated brokerages as Agribank Securities Co, Vietinbank Securities Co and BIDV Securities Co.

Agribank Securities Co posed some of the greatest risks, auditors found, although commission vice chairman Nguyen Doan Hung declined to disclose the extent to which Agribank was propping up its affiliate. However, Hung told the online news website VnExpress.net that funding was primarily provided through brokerage services and bond trading.

While the financial support received from affiliated banks by Vietinbank Securities Co and BIDV Securities Co were less significant, banks injecting capital into their securities arms had become a common situation on the market, Hung said.

"Securities companies currently have a total combined equity of about VND36 trillion (US$1.7 billion) and their total assets are estimated at VND100 trillion [$4.76 billion]," he said. "If their capital rotations are not monitored, it will be very risky."

The monitoring of capital flows between the monetary, securities and insurance markets is of current concern to financial watchdogs internationally, and the issue was discussed at the conference of the International Organization of Securities Commissions (IOSCO) held in China in May.

In Viet Nam, the commission and the Ministry of Finance have already proposed to the Government that they require banks to withdraw financial support and reduce the scope of assistance in the future, Hung said.

To strengthen its supervision of securities companies, the commission has this month put Circular No 226 into effect, classifying brokerages in three groups as good, medium or subject to special control based on half-year or whole year financial statements. Seven firms are currently under special control, including Rubber Securities Co, VinaSecurities, Ha Noi Securities Co, Truong Son Securities Co, Da Nang Securities Co, Mekong Securities Co and Viet Nam Industry and Commercial Securities Co.

GDP growth signals positive outlook for City's economy
 
The HCM City economy is bouncing back, although the GDP growth rate during the first half of the year was reported at roughly 8 per cent, a lower rate than the same period last year.

Speaking during the opening ceremony of the HCM City People's Council, at the eighth term's fifth meeting session yesterday, Hua Ngoc Thuan, deputy chairman of the HCM City People's Committee, noted that the previous quarters had seen improvement in the growth rate.

In the first quarter, the GDP growth was 7.4 per cent, and the rate increased to 8.8 per cent in the second quarter. Service, industry and construction sectors were the areas with the highest achievements.

The city leader said that purchasing power would continue to increase in the near future, as total revenue from service and commodity sales was nearly VND261 trillion (US$12.5 billion).

However, the socio-economic situation in the city still faces many challenges as unemployment has increased. Securities and real estate sectors have not shown real signs of recovery.

During the three-day meeting ending on July 13, the city's lawmakers and leaders will discuss other problems, including parking fees, healthcare services and administration reform.

City leaders will hold a question and answer session with lawmakers today and tomorrow.

Declining CPI raises concerns
 
The unexpected decline in the Consumer Price Index (CPI) last month may lead to more financial market volatility, according to some participants at a conference held in the capital city yesterday.

The meeting, reviewed market and price fluctuations during the first half of the year and discussed concerns over continued financial market instability during the rest of the year.

Economist Ngo Tri Long, formerly from the Ministry of Finance's Institute for Price and Market Research, said the decline was due to economic difficulties, a fall in production, high inventories and low purchasing power but not due to cost reductions.

Nguyen Duc Thang, director of the General Statistics Office's Price Statistics Department, said he believed the decline in CPI was the result of Resolution 11's success in curbing inflation and stabilising the economy.

Nguyen Minh Phong, head of the Ha Noi Institute for Socio-Economic Development's Economic Research Division, said this was the first time in the last 20 years that demand had reduced to such a low level in some sectors. He said stagnancy in the real estate market had affected other business activities, causing a fall in incomes.

The decline was due to a shortage of capital among businesses despite the Government pumping VND300 trillion (US$14.42 billion) into the market, Phong said.

Vu Vinh Phu, chairman of the Ha Noi Supermarket Association, said decreasing demand was the main reason for the deflation. Turnover of the city's supermarkets reduced by 10 to 20 per cent despite promotional campaigns. He said this was also despite 70 per cent of people's incomes being devoted to spending on food and foodstuffs.

Phu said market prices were higher than people's purchasing power even though the CPI had declined.

Prices were higher than 2-3 years ago even though the cost of many items fell slightly in May and June, he added, blaming distributors on driving prices even higher with excessive charges.

Sharing the same outlook, professor Tran Xuan Ha said the real profits were being made by distributors and not producers or consumers.

Economists proposed that the key solution to resolve the issue was to focus on output, releasing inventory and increasing purchasing power.

They also warned about signs of inflation in the second half of the year as prices for water and electricity have steadily increased.

Nguyen Loc An, deputy director of the Ministry of Industry and Trade's Domestic Market Department, said purchasing power in the last six months of the year would improve. Prices of some items would also increase slightly.

Experts forecast the CPI this year would be 6-7 per cent, while this month it would continue to fall.

Ngo Tri Long said the country has been successful in curbing inflation for the short-term as average inflation in the 2007-11 period was still at 13 per cent.

However, Nguyen Duc Thang said concerns over deflation were premature. Solutions such as restructuring business administration and better market control would be more successful than a short-term focus on monetary policies.

The Finance Ministry would instruct transport businesses to list fares in line with falling petrol prices. It would also enhance checks on items listed in the price stabilisation fund.

Statistics from the GSO showed that in the first half of the year, average CPI increased 0.24 per cent each month, a slower rate than for previous years.

Advertising cost cap comes under fire
 
Experts and enterprises are renewing the call for removing the cap on the tax deductibility of advertising under the Law on Corporate Income Tax, arguing that the limitation is hindering business development in Viet Nam.

The point was raised again yesterday at a workshop held by the Viet Nam Chamber of Commerce and Industry and the Association of Vietnamese Retailers in Ha Noi.

The cap on deductible advertising costs has been in effect for 13 years, allowing enterprises to only deduct the costs of advertising if it is under 10 per cent of the enterprise's total input costs. (For newly-established enterprises, advertising expenses could amount to as much as 15 per cent of total expenses for their first three years.)

According to a survey on the impacts of the cap conducted by the Academy of Finance's Institute of Economy and Finance, 31 per cent of 300 surveyed enterprises in Ha Noi, Da Nang and HCM City said their business were badly affected by the restriction. Most were foreign-invested or large enterprises operating in banking, food and beverage, cosmetics and electronics industries.

Thirty-four per cent said there should be no limit on the deductibility of advertising costs, while the rest said some limit was needed but at a rate of more than 10 per cent of input cost.

The enterprise community has voiced their concerns over the cap consistently over the past decade.

"However, no sound responses from the Government have been received to date, which is disappointing," said Association of Vietnamese Retailers vice president Dinh Thi My Loan.

Experts at the workshop agreed that the draft amendment of the Law on Corporate Income Tax slated for passage in 2013 should eliminate the limit on advertising costs.

Quach Duc Phap from the Viet Nam Association of Financial Investors (VAFI) said that the restriction of advertising costs aimed at preventing enterprises from inflating advertising expenses as a means to evade taxation and a protecting domestic small- and medium-sized enterprises from better-funded foreign rivals.

In fact, Phap said, it seemed to run counter to expectations, with the regulated ratio for advertising costs simply preventing enterprises from using the resources needed to develop their images or brands.

Loan emphasised the significant roles of advertising and promotion to the retail industry, saying that they helped increase competitiveness and build brands, which in turn benefited consumers.

"Since advertising cost limit cannot be abolished immediately, the ratio of deductible advertising expenses should be increased from the current 10 per cent to 20 per cent, a change that should be applied right now, this year," Loan proposed.

While State tax revenues might be reduced at first, said lawyer Vu Xuan Tien from Ha Noi Bar Association, "this is only a short-term damage. When enterprises are allowed to spend more in advertising, their market will be expanded and their turnover increased and they would pay more in taxes in the future."

Economic expert Nguyen Minh Phong said that enterprises should have the rights to decide their level of advertising expenses for themselves. The Government should intervene only in ensuring the transparency and honesty in advertising and promotion and fair competition for the sake of consumers.

A cap on the tax deductibility of advertising costs is applied in only two countries in the world, Viet Nam and China. The ratio in China is set at 15 per cent of the enterprises' yearly revenues, not as a percentage of much smaller input costs as in Viet Nam.

Nation lags behind in theme parks
 
Viet Nam had many advantages to develop entertainment real estate but the country hadn't done enough to promote this potential, Viet Nam National Administration of Tourism official Pham Trung Luong said at a recent conference in HCM City.

A population of nearly 90 million together with long coast lines, diversified culture and beauty were major advantages, he said.

Well-known entertainment complexes having been built in the country include Dam Sen and Suoi Tien in HCM City, Thuy Cung in Nha Trang, Dai Nam in Binh Duong and Thien Duong Bao Son in Ha Noi.

Property experts said these complexes had initially succeeded in combining landscapes, traditional values and some modern entertainment technologies to meet visitors' demand.

But they said the parks still proved unattractive as they were trying to provide multiple services without targeting specific visitors.

"The majority of entertainment complexes in Viet Nam fail to show their own character; they lack authentic local products and many service models are copied from other places," Luong said.

Experts said that although tourism projects had been strongly developed over the last few years, few projects provided entertainment services.

According to the Ministry of Planning and Investment, during 1998-2008, the country lured 431 foreign direct investment projects involved in tourism with a total capital of US$18.6 billion, but most of them concentrated on hotel and resort development.

The fact was attributed to a lack of specific policies for entertainment property development, and the Government had assigned the ministry to study such policies.

Luong said current entertainment parks were located mainly in northern and southern areas of the country, while the central region with great potential — especially nice beaches — was being ignored.

In order to promote this region's potential, more skilled human resources and adequate infrastructure were needed, he said, noting that only Da Nang and Cam Ranh international airports weren't enough to meet demand here.

Luong said the Administration of Tourism had worked out a plan for over 40 potential tourism complexes nation-wide, which would receive preferential policies for attracting investment and developing infrastructure.

US-based Goddard Group chairman Gary Goddard told local press that Viet Nam could build entertainment parks for specific subjects such as history, education, science, ecology, ocean or agriculture. He said his company intended to visit several localities in Viet Nam to survey the potential.

Commercial sector needs long-term strategy

A long-term development strategy was needed to spur the local commercial sector and to help businesses to overcome difficulties in the context of economic turmoil, said industry insiders.

Domestic business performance had seen many unusual developments with the cost of essential goods remaining high and low purchasing power that had caused rising inventory levels that were creating difficulties for businesses, said Deputy Minister of Industry and Trade Ho Thi Kim Thoa.

In a seminar organised by the Ministry of Industry and Trade late last week, participants outlined suggestions to ease difficulties for local trade development by rezoning the industry sector, industrial parks, key industries and support industries.

Businesses were asked to tackle the difficulties and obstacles facing them. They were also required to enhance training and to promote trade activities while selecting projects with state-of-the-art technology and large investment.

Le Hong Thang, director of the Ha Noi Department for Industry and Trade, said to develop commercial infrastructure facilities in Ha Noi, the State should study and issue comprehensive policies to provide legal corridors for the development of modern supermarkets and trade centres.

Truong Minh Thanh, deputy director general of the Ha Noi Trade Corporation (Hapro), said city authorities and agencies should offer incentives and minimise administrative procedures to assist businesses.

Deputy director of Hai Phong Department for Industry and Trade Nguyen Binh Minh said inspecting and handling fake and poor quality products while enhancing co-ordination between concerned agencies in the fight against trade fraud helped stabilise the local market and generate a healthy business climate.

In the first half this year, despite difficulties including high inflation and lending interest rates, business performance continued to grow.

According to reports from these cities, Hai Phong took the lead with an increase of 6.4 per cent followed by HCM City which was up by 5.4 per cent. Industrial production in Ha Noi rose by 4.8 per cent and in Da Nang it was up by 4.9 per cent.

The circulation of retail goods in these five cities was estimated to have reached VND515 trillion (US$24.5 billion) or a 23 per cent year-on-year increase

Also in the first six months, total export turnover in these cities reached nearly $21 billion, a year-on-year increase of 10.4 per cent.

Banks expect modest credit growth
 
The banking sector has set a target of reaching credit growth of between 8 and 10 per cent by the year-end, with a monthly average of 1.5 or 1.7 per cent, according to Dau Tu newspaper.

To realise these goals, senior experts have said that bad debts need to be treated in different ways in order to allow more new loans into the market.

They suggested three ways to do so, including refinancing loans for credit expansion, setting up a national-debt purchasing and selling company, and nationalising weak banks.

The CEOs of some commercial banks said that the central bank should lift the current 3 per cent safe threshold because this regulation had allowed banks to clean their records instead of issuing transparent reports and focusing on bad-debt treatment.

Le Duc Thuy, member of the National Monetary and Financial Advisory Council, said that banks should give financial support to highly feasible projects, particularly those with long and medium terms.

The banks that have stable financial potential and plentiful liquidity should actively participate in the debt-purchasing and buying market, according to Thuy.

For the banks, Nguyen Phuoc Thanh, general director of Vietcombank, suggested that the Government accelerate capital disbursement for projects that use capital from the State budget.

In the first six months of the year, only 30 per cent of the total capital planned to be invested in State-budget projects was disbursed, Thanh said.

The central bank should loosen investment-related regulations related to banks, according to Pham Huy Hung, chairman of Vietinbank.

Currently, banks are allowed to invest a maximum of 15 per cent of their legal capital into projects.

If the central bank lifted this regulation, banks would be able to inject more money into effective projects because their legal capital is still quite low.

Dr. Le Xuan Nghia, former chairman of the National Financial Supervisory Commission, said that the credit growth rate should be kept under 1.5 per cent per month, or between 6 and 8 per cent per year until the year-end.

Too much money pumped into the economy would not be absorbed fully, which could increase inflation, according to Nghia.

Major differences in credit growth in months or quarters in the year would also create a possibility of high inflation to return in following months, he said.

Thuy said that he did not have great expectation for a high credit growth rate at the year-end, even when the Government made great efforts in increasing lending because the financial situation of enterprises and banks had not yet improved.

The banks'credit activities are not expected to grow strongly for the rest of the year, as the Government predicted.

But it would be very harmful if high credit growth occurred, said Thuy.

Local traders buy Indonesian coffee for export

Many coffee exporters have decided to skip local supply and switch to Indonesian coffee to ensure timely delivery, while local coffee growers are still waiting for higher prices.

Several coffee processors and exporters told the Daily that such a decision is inevitable, saying if they did not do so, they would incur a loss of US$40 with each ton of coffee.

“The crop is over, there is not much coffee inventory left, yet farmers tend to hoard their products to wait for high prices. This makes local prices US$21-per-ton higher than export prices, then how can we compete?”

“On the other hand, Indonesia supply is abundant and cheap,” explained Pham Ngoc Bang, deputy director of Dakman Coffee Joint Venture Co.

“Farmers have lost confidence in traders and processors. They now harvest and process on their own, then stockpile their products waiting for good prices, resulting in dwindling supply,” said Nguyen Nam Hai, general director of Vietnam Superintendence and Inspection Company of Coffee and Agricultural Products for Export and Import Co. Ltd.

Hai expressed his concern over this situation, especially when farmers’ awareness is still limited. “They keep the products themselves rather than making deposits, but they do not know the right time to sell at good prices,” he said.

Doan Van Ha, head of the coffee trade department under Hanoi Trade Corporation, said exporters with long-term contracts would face the most difficulties.

“When they signed contracts, local coffee prices were still low, but now they have to buy at higher prices for delivery on schedule,” Ha stressed.

To deal with this problem, a number of sustainable solutions, albeit not new, are brought forward. In particular, it is necessary to mend the ties between businesses and farmers, but in an “extensive” way.

“Coffee exporters can develop stable material zones in many ways, such as growing coffee by themselves, or hiring farmers to do so, or both. In terms of management, it is a must to have agricultural planning and process coffee in accordance with the international standards. Farmers are free to quote prices and select buyers,” said Hai.

In the year’s first half, there were times when prices of Vietnamese coffee plunged to a very low level compared to the global prices. This stimulated the demand of Indonesian companies for Vietnamese coffee, leading to a jump in export volume to this country.

In fact, Vietnam Coffee and Cocoa Association calculated that Vietnam shipped as much as 50,000 tons of coffee in this year’s first half.

However, local coffee prices are now higher than the world’s prices and prices of Indonesian products. The situation is reversed and now Vietnamese firms have to buy coffee from Indonesia for export.

4,200 firms net low-interest loans in city

Over 4,200 companies in HCMC have taken out bank loans with low lending rates of 13-15% per annum for a combined value of VND25.24 trillion since the middle of May, according to the HCMC Branch of the State Bank of Vietnam (SBV).

Of the corporate borrowers, small and medium-sized enterprises (SMEs) have been given VND13.98 trillion, the branch’s deputy director Nguyen Hoang Minh told a Q&A session at the city’s People’s Council meeting on Thursday.

According to Minh, many enterprises belonging to the four priority groups have been given financial support, including exporters with VND3.25 trillion, farm producers and processors with VND3.56 trillion and supporting manufacturers with VND4.45 trillion.

Minh announced Sacombank will continue lending to 15 SMEs in dong and U.S. dollar with a credit line of VND2 trillion and US$50 million with an annual lending rate of 13% and 4-5% respectively.

Minh said DongABank from next week will also set aside VND40 billion to finance seven companies with an interest rate of 13% per year, adding other lenders in the city will keep providing soft loans to farmers in the outlying coastal district of Can Gio at the same time.

The city’s credit growth in January-June was much lower year-on-year, at a mere 0.27%, equivalent to the average rate of the whole country as observed by Minh. But he asserted the preferential loans are for target industries and areas only.

He revealed the central bank in the second half of the year will continuously seek ways to remove difficulties of struggling enterprises. For instance, the monetary authority will request commercial banks to restructure old loans for corporate debtors, to cut or exempt lending rates for existing credit contracts and lower the rates to below 15% prior to next Sunday, he clarified.

“Local lenders this week have been slashing lending rates and the ceiling deposit rate while they have capped the lending rate at 13% a year, with borrowers allowed to take out foreign currency loans expanded as well,” he added.

Building materials not oriented as exports

Building materials have recorded a robust export growth rate over the past few years, but the Ministry of Construction in the long run does not encourage manufacturers to boost export, officials said in HCMC on Thursday.

Pham Van Bac, deputy head of the Building Materials Department under the Ministry of Construction, told a seminar here that these materials in the long run should be to meet local demands only.

Bac, however, hailed enterprises at the seminar on tapping the Middle East and African markets organized by the Vietnam Trade Promotion Agency in HCMC on Thursday for their efforts to boost export now.

Given the frozen real estate market, building materials makers are facing huge challenges, so boosting exports is a good way to find outlets for them, he said.

The ministry considered it a good way for them to survive current tough times, but domestic consumption should be given the top priority, he noted.

Explaining the ministry’s stance, Bac said building materials production requires much energy and natural resources, and causes environmental pollution. Due to those drawbacks, several countries limit or even ban the exportation of construction materials in a bid to satisfy their domestic consumption only.

For instance, Thailand currently puts a limit on tile production and imposes the export ban on this kind of construction material.

Furthermore, the costly shipment fees also make exports of such materials less cost-effective, especially to faraway markets like Africa.

However, boosting building materials exports is now imperative as the domestic supply of key building materials has far outpaced the demand, resulting in mounting inventories.

Apart from traditional markets, Bac suggested exporters to look to the new ones such as the Middle East, Africa and Eastern Europe.

Vietnamese building materials producers can grasp more export opportunities opening up in the Middle East and Africa thanks to their booming construction industry, said Ly Quoc Hung, a representative of the Ministry of Industry and Trade.

The Cooperation Council for the Arab States of the Gulf (GCC), for example, plans to spend some US$915 billion on construction projects within two years of 2012-13, with Arab Saudi and the United Arab Emirates alone accounting for 59% of ongoing projects in the Middle East and 75% within GCC, Hung said. Such projects will require huge volumes of imported building materials.

Africa also emerges as a strong importer of building materials, he said.

Nigeria, for example, imports some US$4.2 billion worth of building materials each year, while Algeria imported nearly US$2.3 billion worth of such materials in 2010.

Vietnam last year exported up to US$766 million worth of building materials, up 87% against the previous year’s figure of US$410 million. Cement export posted the biggest increase last year, earning US$319 million compared to only US$97 million in 2010, according to data from Vietnam’s customs at the seminar.

Khanh Hoa spends VND15 billion on sea tourism fair

Khanh Hoa Province will organize the Vietnam International Sea Tourism Fair from June 6 to 8, 2013 at the Diamond Bay Resort in Nha Trang City at a total cost of VND15 billion.

Nguyen Van Thanh, director of the Khanh Hoa Tourism Promotion Center, said the province had submitted a plan for this event to the Ministry of Culture, Sports and Tourism. The fair is expected to feature 250 booths of local and foreign firms and other activities like an investment promotion conference, a familiarization trip for foreign tour operators and the press, and a sea tourism symposium.

The cost of the fair will be sourced from the State budget and corporate sponsorships.

According to Thanh, after many promotion events such as international yacht race and sailing festival, the upcoming fair will further promote sea tourism, a strength of Khanh Hoa.

“The sea is what makes Khanh Hoa attractive to tourists. Along with enterprises’ investment in facilities, we organize many promotion events,” said Thanh.

Khanh Hoa has some 4,500 hotel rooms from three- to five-star grades, mostly in the coastal areas and often full in summer and year-end vacations.

SBV: No worries about bad debts

The State Bank of Vietnam (SBV) said on Thursday the bad debt situation in the banking system is not as bad as feared by the public.

Nguyen Huu Nghia, head of banking inspection and supervision at the SBV, told a press briefing that bad debt in Vietnam is lower than in other regional countries.

There are two elements helping minimize damages caused by bad debts for lenders, he noted. First, the VND67.3 trillion risk provisions in the banking system are equivalent to 57.18% of the total bad debts. Second, most of the bad debts are guaranteed by collateral and they are recoverable.

Nghia cited two figures, one of which is the bad debt ratio, 4.47%, equivalent to VND117 trillion based on the reports by local lenders as of end-May, and the other is 8.6%, or VND202 trillion as recorded by the inspection agency.

Nghia explained the gap between the two figures is due to three reasons: first, the different criteria are used to classify bank loans; second, some credit institutions deliberately lower actual figures; and finally, the different classifications of debts owed by a customer who has credit relationships with multiple banks.

Nghia said the balance of outstanding loans for the real estate sector by end-May had amounted to VND197 trillion, with bad loans put at only VND12 trillion, and outstanding securities loans at nearly VND12 trillion, with bad loans at VND485 billion.

These figures are very small, he asserted.

“Bad debts are mainly in construction and industrial manufacturing areas which have been adversely affected by poor consumption and the stagnant property market,” Nghia said.

Regarding the scheme to set up an asset management companies (AMC), he said, such a project is still under consideration and there is no need to use up to VND100 trillion to tackle bad debts at banks as the central bank will do the job via  financial tools.

Many jobless at Vinashin, Vinalines

The transport industry in the first six months of the year saw nearly 18,500 workers losing their jobs or taking rotating leave due to production being scaled down, with the number of unemployed at Vietnam Shipbuilding Industry Group (Vinashin) and Vietnam National Shipping Lines (Vinalines) accounting for over a half.

Ta Dang Manh, chairman of the Trade Union of the transport industry, said capital shortages plus slow or halted progress of transport projects have made many workers in the industry jobless.

Of the unemployed, Vinashin accounts for up to 7,800 and Vinalines for 2,200. As such, the number of jobless at the two State-owned groups makes up over 50% of the total, Manh told the Daily on the phone on Monday.

Meanwhile, many companies in the industry still owe social insurance premiums to their staff, at up to more than VND386 billion, with the total amount at Vinashin and Vinalines making up 50%, Manh noted.

According to recent statistics by the Ministry of Transport, there are about 15.8% of transport firms in financial distress. Those companies specializing in road and water transport projects and industrial production are increasingly suffering severe job shortages and they have failed to pay salaries and social insurance as a result.

To deal with the situation, Manh said the ministry had suggested the Government advance capital from next year’s State budget to deploy a number of schemes whose construction is being suspended. At the same time, companies in the industry have proactively searched for projects to create jobs for their workers.

New hospital in city to be up and running soon

Hoa Lam-Shangri-La Healthcare LLC will inaugurate Thanh Do Hospital in the hi-tech healthcare park in Ho Chi Minh City’s Binh Chanh district early next year.

The international-standard 320-bed hospital is set for completion in January 2013, and will be operated by Singapore-based healthcare group Parkway Health, said David Yip, deputy general director of Hoa Lam-Shangri-La Healthcare.

This is the 16th hospital managed by Parkway Health across Asia. In order to facilitate the operation of Thanh Do Hospital, Parkway Health has sent 16 Vietnamese doctors to Singapore for training, said Yip.

Vietnam is now in dire need of specialised doctors. Apart from overseas training, Thanh Do will join hands with other hospitals in Ho Chi Minh City in training its staff, Yip said.

The company has chosen FPT IS Company to install hospital management software worth VND19.4 billion in an attempt to guarantee smooth management.

In 2008, the city's authorities issued an investment certificate for the medical care firm to develop a hi-tech healthcare park project in Binh Chanh. The 37.6-hectare project, which includes such facilities as hospital, laboratory, healthcare exhibition center, commercial center, and residential area, is scheduled for completion within a decade.

$16.5 million contract to improve Vietnam's transmission lines

A commercial contract worth $16.5 million on supply of materials and equipment for the Pleiku-Phu Lam 500kV power line upgrading project has been signed between the National Power Transmission Corporation, an arm of the Electricity of Vietnam (EVN NPT), and the General Electric Digital Energy (GE) company of the US.
illustration photo

Under the contract, GE will supply six series capacitor banks to EVN NPT and an on-site supervision service package for installation testing and commissioning.

The project utilises GE's latest fuseless capacitor technology to enable a 100 per cent increase in the current capacity of the existing transmission lines and installed infrastructure.

According to Dang Phan Tuong, chairman of the Board of Management of EVN NPT, the transmission line, which is 500km in length, is the backbone of Vietnam 's north-south power transmission. Increasing the capacity of the line to transmit power to 2,000 from 1,000 ampere plays an important role in ensuring electricity supply to the southern areas.

When it comes into operation in 2013, the project is expected to add approximately 800MW to the capacity of the south, Tuong said.

GE Digital Energy president in Asia Pacific Kenji Uenishi said the stable power infrastructure is vital to supporting economic growth.

He stressed that GE's advanced equipment and services and close partnership with local partners will help Vietnam manage power needs more efficiently, in line with the country’s efforts to enhance its current infrastructure.

This is the second equipment supply contract EVN NPT has signed with GE since 2011. The first worth $11.5 million between the two sides has been completed.

Bosch announces top management changes

The German giant Bosch Group has announced changes at its top management positions in which Dr. Ing Hermann Scholl resigned from the group on June 30, 2012 after a period of 50 years.

Franz Fehrenbach to succeed Scholl and Volkmar Denner to be new chairman of the Bosch board of management effective from July 1, 2012, Bosch said in an announcement.

Changes will also be made at some other positions related to the new business sector Energy and Building Technology, Consumer Goods, effective from January 1, 2013.

Hermann Scholl was made a full member of the board of management in 1975 and chaired the board until 2003. He has been the chairman of the supervisory council since 2003. Scholl joined Robert Bosch Industrietreuhand KG as a shareholder in 1993, becoming a general partner in 1995. Since 2000, he has also been chairman of the shareholders' meeting.

Effective from June 30, 2012 Franz Fehrenbach will step down from the board of management and will join the supervisory council of Robert Bosch GmbH effective from July 1, 2012. At Robert Bosch Industrietreuhand KG, of which he has been a shareholder since 2003, Fehrenbach will in future be a general partner and take over the chair of the shareholders' meeting.

Effective July 1, 2012, Dr. Volkmar Denner (55) has been appointed the new chairman of the Bosch board of management. Effective from July 1, 2012, Denner will also join Robert Bosch Industrietreuhand KG as a shareholder.

At the same time, Dr.-Ing Dirk Hoheisel (53) will join the Bosch board of management. Hoheisel has been with Bosch since 1990 and has held various engineering positions. Hoheisel is currently Executive Vice President Engineering at Chassis Systems Control in Abstatt, near Stuttgart. From July 1, 2012, Hoheisel will be the board of management member responsible for Automotive Electronics and Car Multimedia.