Quang Ninh pulls the plug on 5 projects

Quang Ninh Province authorities have decided to withdraw the licenses issued for five projects due to unseemly delays, violations, and requests from investors.

Quang Hai Venture Co has sought cancelation of its US$1.1-million rubber processing and export project as has Hoang Que 1 of its ceramic factory.

VIT Hung Thang Ltd Co lost the license for its $10 million international hotel project while VIT Co To Ltd Co lost its $5 million due to violation of license terms.

Steelmakers face falling demand

The steel industry has been an unexpected casualty of the sluggish real estate market, as new construction has slowed to a trickle. The Government austerity plan under Resolution 11 has also called for a halt to non-essential State-funded building projects.

"The steel industry is strongly interrelated with the real estate sector," said Viet Nam Steel Association chairman Pham Chi Cuong. "Along with demand for steel, demand for other building materials such as cement and bricks has also dropped."

Foreign direct investment in the real estate sector in the first six months of the year totalled just US$275 million in new registered capital and $30 million of additional capital added to existing projects, the lowest level of foreign investment in the sector in five years, said Phan Huu Thang, former director of the Ministry of Planning and Investment's Foreign Investment Agency.

Meanwhile, steel production capacity is abundant and the industry has large inventories. Steelmakers earlier this month reported stockpiles as high as 500,000 tonnes. Overall production rose by 16.76 per cent in the first half of the year, compared to the same period a year ago, while consumption fell nearly 4 per cent.

"The decline in demand will be even more severe this month," Cuong predicted.

"I believe that the situation in the steel industry will last at least until the end of the third quarter," commented Saigon Securities Inc analyst Do Viet Khoa. "After that, the industry might see better times if interest rates and the real estate sector improve."

High interest costs of 20-22 per cent have also pushed up financing costs and added to the price structures of the steel industry.

The costs of raw materials have risen dramatically, reducing the profit margin of a domestic steel industry already dealing with falling demand. The price of pig iron in the Asian region, for instance, is now at its highest level in about two years.

Many steelmakers have had to cut production or prices in the face of the oversupply and falling demand. "Our company has had to cut production by 50 per cent," said Pomina Steel Co general director Do Duy Thai.

Retail prices have been trimmed by an average of VND100,000-200,000 per tonne in a bid to boost consumption, Cuong said, adding, "Companies cannot continue to reduce prices, or else they will not be able to revive when business becomes unprofitable."

Many steelmakers therefore continue to produce structural steelwork, steel piles and alloys at rates twice actual demand. At the same time, Viet Nam continues to import about five tonnes per year of steel plate, hot-rolled steel and stainless steel.

"The majority of Vietnamese steel producers do not have the capability to refine steel from ore," Cuong said. "They often use semi-finished steel to roll into finished steel products."

Steel companies are facing the pressure of improving technology. By 2017, there will be no more subsidy for the industry, competition will be harsher.

The new Government, including leaders of the banking and construction sectors, has promised to issue new policies to help the steel industry.

To encourage exports of these products, the Ministry of Finance recently accepted a proposal from the Viet Nam Steel Association to waive the export tax on steel.

Cuong said that as the ministry's decision had come into practice for only two weeks, there were not any clear signals of improvement in steel exports.

"However, the exemption steel imports from the tax is intended to address the imbalance between domestic supply and demand, enhance profits for producers and reduce the nation's trade deficit," said Cuong.

Vietnamese steel prices continued to be competitive internationally, and the quality of products was competitive with other big exporters like China and South Korea, he said, noting that Viet Nam had a longstanding trade in steel with the US, the EU and the Middle East, making steel a consistent foreign currency earner.

Fortis to buy 65 pct stake in Vietnam hospital chain for $64 mln

Fortis Healthcare International, the Singapore-based holding company of India's billionaire Singh brothers, said on Wednesday it will buy a 65 percent stake in Vietnam's Hoan My Medical Corp for US$64 million.

Hoan My is one of Vietnam's largest private healthcare groups with 700 beds across five hospitals. It will open a new 200-bed tertiary care hospital in Ho Chi Minh City by November 2011.

Fortis Healthcare International has been on an acquisition spree since it was set up about a year ago, and now owns clinics and hospitals in several Asian countries including Australia, Hong Kong and Singapore.

The Singapore-based firm is held directly by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, who are the main shareholders of India-listed Fortis Healthcare.

1 percent inflation forecast for August

Consumer price index is likely to rise by around 1 percent in August, the Ministry of Finance said, bringing inflation for the year to date to around 16 percent and 23 percent year-on-year.

It is down from 1.17 percent in July and 1.09 percent in June.

It would be difficult to contain it below the targeted 17 percent for the full year, Nguyen Tien Thoa, the director of the ministry's Price Management Department, admitted, explaining there were both domestic and international economic factors that could affect prices through the rest of the year.

The government needed to draw up a roadmap for overall prices increases to avoid shocks, he said.

It would be difficult to reduce inflation quickly since the current situation was the result of inherent economic shortcomings that had been several years in the making, he added.

The new Minister of Finance, Vuong Dinh Hue, said last week that his first priority would be to work closely with the State Bank of Vietnam to implement the tight monetary policies to curb inflation.

Vietnam has a plentiful rice supply thanks to the abundant summer-autumn crop in southern provinces, the Price Management Department said.

The increasingly ample stocks in the context of flat demand are expected to bring about stability and perhaps even reduce rice prices.

But the department warned about possible food supply and demand issues, particularly of fresh food, fruits, and vegetables in affected areas in the event of floods and unexpected weather conditions.

Food supply has been hit by blue-ear disease which has persisted for many months, taking a toll on pork supply and reducing pig numbers by 3.7 percent. The unavailability of bank loans to breeders and the surge in feed prices could further drive up food prices.

Low yields and the severe weather recently have hit vegetable supply, pushing up prices.

"The supply of fresh meat, fruits and vegetables is likely to decline this month, pushing prices up," the ministry warned in a statement last Thursday.

It promised to improve monitoring of prices to take timely action against violations of regulations.

Timely and accurate market and price forecasts would also be made to help relevant agencies stockpile goods and stabilize the market, it said.

Export taxes would be considered on food and food products, especially those that are in short supply in the country, it added.

Food accounts for around 40 percent of the basket of commodities making up the consumer price index.

Other factors that are expected to bring pressure on domestic prices are the lackluster global economy, the euro-zone public debt crisis, gloomy American and Japanese outlook, and volatility in prices of essential commodities.

Import prices of several goods rose in July -- cotton was up 0.4 percent, petrol (4.4 percent), flour (3 percent), clinker (10 percent), and paper (9.9 percent).

Property faces a taxing issue

In light of the Ministry of Finance’s Circular 113/2011/TT-BTC dated August 4, 2011 starting from September 19, 2011 property transfers will be taxed.

Accordingly, the tax rate will be 25 per cent of transfer incomes for individuals having legitimate land use rights, housing and apartment ownership certificates which involve with land, housing and apartment transfers.

If the transfer value is lower than the value regulated by provincial-level people’s committees for registration fees calculation or there are not lawful documents about property original prices the tax rate will be 2 per cent of the transfer value.

According to Vietnam Real Estate Association general secretary Nguyen Van Minh, sliding property transactions came from tightened credit or policy impacts besides to the Personal Income Tax Law implications.

“Taxing property transfers will put new pressures on the market,” said Minh.

Minh argued state management agencies wanted all property transactions taking place in property trading centres to ensure information transparency and effective enforcement of tax policies. On that basis, 25 per cent tax rate would truly reflect market essence.

Sacomreal deputy general director Bui Tien Thang assumed it would be more reasonable if taxpayers had the right to choose what payment options they want, 25 per cent of the profit or 2 per cent of transaction value.

“This will help prevent losses to state coffers and create a bona fide business climate to investors and businesses,” Thang said.

The director of a land and housing trading firm warned ill-performed supervision and management system would lead to people slashing tax payments, like hiding the property’s original value to enjoy 2 per cent tax on transaction value.

According to Hoa Phat Land general director Pham Trung Ha the 25 per cent tax on transfer incomes would be high to investors as in many transactions buyers have to pay an additional amount to intermediaries so that it would be hard to define the original and transfer value differences.

Property experts propose imposing a 2 per cent tax on transaction values to bolster tax payments.

Reforming and simplifying rules, paperwork can boost production

Administrative procedure reform should be a key priority, attendants where told at the launch of the Programme for Enhancing Regulatory Quality (PERQ) in Ha Noi yesterday.

The programme, prepared two years ago, is expected to promote a model regulatory management system in Viet Nam by providing government agencies, the National Assembly, citizens and businesses with the sources they needed to analyse and improve the quality of policies and legal documents.

In an effort to improve regulatory quality, the Ministry of Planning and Investment's Central Institute for Economic Management (CIEM) and the US Agency for International Development's Viet Nam Competitiveness Initiative (USAID/VNCI) jointly developed PERQ aimed at helping decision makers eliminate regulations that impose unnecessary costs on the community, impede innovation and stifle competitiveness.

"PERQ aims to support the Government towards a simpler, faster and better regulatory system that benefits policy-makers, businesses and citizens," said Michael Foster, acting USAID mission director in Viet Nam.

The director said PERQ provided resources to build the capacity of public and private stockholders in analysing economic policy options that positively impact businesses, industries and daily life.

"PERQ will also provide support necessary for the successful implementation of regulatory impact assessment (RIA), a quality control process by which the feasibility and effectiveness of proposed legislation are rigorously analysed and reviewed before they are approved and put into effect," he added.

PERQ will support relevant agencies in building policies to analyse capacity including organising events, training courses and documents, providing advice on building laws and regulations through RIA reports and international experience in improving institutions.

Speaking at the ceremony, head of CIEM Nguyen Dinh Cung said that the demand for improving policy quality has been urgent to the country's business environment and its economy.

Cung added that one of the most important tasks for the Government was to restructure the economy, stabilise the macro economy and promote economic quality.

He said that the Government had implemented three breakthroughs in completing a socialist-oriented market econ-omy, improving the quality of both institutions and the business environment.

"Administrative procedure reform has been a part of institution policy as a means of improving people's lives," said the head of the Department of Administrative Procedure Control Ngo Hai Phan.

"Implementation of administrative reform could have active effects on socio-economic development."

Phan said more than 3,000 administrative procedures have been simplified at the central level while the number was 3,000 at local levels, saving the country VND30 trillion (US$1.5 billion) per year.

"The reform would continue being one of the Government's main targets," he added.

Tran Huu Huynh, deputy general secretary of the Viet Nam Chamber of Commerce and Industry, said improving the quality of policies to create transparency could enhance trust in the Government, increase the effectiveness of resource utilisation, reduce additional costs and create equality among enterprises.

"If we gain one point in transparency, we will get a 13 per cent increase in the number of businesses per 1,000 people and 17 per cent added to the average income per capita," Huynh said.

He proposed adequate investment for reform to achieve suitable progress.

"Transparency could serve sustainable development in Viet Nam," he added.

A recent survey conducted by CIEM and USAID/VNCI showed that 43 per cent of government officials had received training in conducting RIA and that over 90 per cent would like to receive further instruction.

As a decision making tool, RIA provides objective assessment and evidence on the positive and negative effects of drafts or existing regulations.

PERQ features a combined outreach strategy of facilitation, training events, workshops, a people-to-people ambassador scheme and an online resource at www.perq.vn and www.ria.net.vn.

Exporters told to comply with new US safety laws
 
Domestic businesses should be fully aware of provisions contained in the US Consumer Product Safety Improvement Act (CPSIA) to avoid product safety violations when exporting to the market, officials said yesterday.

Addressing a seminar in HCM City, Nguyen The Hung, deputy director of the Viet Nam Chamber of Commerce and Industry in HCM City, said the US has become Viet Nam's largest export market, accounting for more than 20 per cent of the country's total export value.

Bilateral trade between the two countries has increased strongly in the past 10 years, he said.

Viet Nam's main export items to the US market include garments and textiles, footwear and wood products.

"The USA is a market with potential for Vietnamese manufacturers and exporters but also a challenging one," he said.

Domestic businesses therefore must continue to improve production and raise product quality and produce more competitive products. They should also keep a close eye on changes in the US market's requirements, he said.

Signed in 2008, the CPSIA imposed new requirements on consumer products, mainly for children, including apparel, shoes, personal care products and toys, said Jeffrey Hilsgen, regional director of the US Consumer Product Safety Commission (CPSC).

It set new acceptable levels of several substances including lead content in accessible components, paint and surface coatings and phthalates in plastic products as well as requiring tracking labels to make tracing a product origin easy, he said.

It also required all products exported to the US to have third party certification at CPSC-accepted laboratories to ensure that they meet requirements for product safety, he added.

In Viet Nam, the Quality Assurance and Testing Center 3 was in the list of accredited testing laboratories of CPSC, he said.

Apparel producers should think of air flow issues when designing and make products for children, he said, adding that drawstrings in the hood and neck area, or toggles, knot and other attachments at free ends of waist or bottom drawstrings were banned in the US market.

According to an amendment to the CPSIA passed by the US Congress recently, the lead limit in children's products was set to decrease from 300ppm to 100ppm, starting from August 14, he said.

Richard W.O'Brien, director of the Office of International Programmes and Intergovernmental Affairs, said when producing apparel for children, producers must use different kind of materials including cotton, zippers, and buttons. He said producers must require suppliers to provide materials without containing banned chemical and metal.

He also advised local consumer product producers to read the CPSC's handbook for manufacturing safer consumer products, which provides guidance for industry in answering safety-related questions.

Participants at the seminar complained that it took a lot of time to get the testing done, so sometimes, to ensure timely delivery, they had to ship their goods by air, considerably increasing costs.

Richard promised that CPSC would find solutions to the problems.

HCM City bourse to extend trading hours in February

The HCM City Stock Exchange plans to extend its trading time, starting in February of next year.

The opening and closing time will be 9am and 2.30pm instead of 8.30am and 11am. Matching orders and negotiations will be conducted from the opening minutes until 11.30am.

The market will then be off for one hour and a half, when securities firms are not allowed to make transactions. It will enter a period of continuous order-matching until 4pm. The next 15 minutes will be for call auction, while negotiations will take place for the rest of the time.

PVX to increase stake in construction affiliate

PetroVietnam Construction Co (PVX) has announced it intends to buy a 30 per cent stake in PetroVietnam – Nghe An Construction Co (PVA), according to its restructuring plan for its affiliates.

This will be conducted in the third quarter through the purchase of shares on the stock exchange or between shareholders, or by increasing PVX's capital in PVA. PVX sold the entire stake it held in PVA last year.

Shipping company offers buying options

The Viet Nam Ocean Shipping Co (VOS) offered more than 3 million buying options of Maritime Bank's shares at a starting price of VND100 per option. Maritime Bank is issuing additional shares to increase its capital from VND5 trillion (US$242.7 million) to VND7 trillion ($339.8 million). – VNS

With each option, investors will be able to buy one share worth VND12,000. They can register a minimum amount of 100 options, while the maximum cannot exceed the number of offered options. The deadline for payment is August 29.

Investor group wants to slash bank numbers

The Viet Nam Association of Financial Investors (VAFI) has proposed that the State Bank of Viet Nam slash the number of commercial banks by 15 to 20 per cent via merger, acquisition or dissolution, saying that the system has too many banks of low financial capacity and inadequate operating standards.

In a comprehensive set of proposals about the nation's banking system sent on Tuesday to newly-appointed Minister of Finance Vuong Dinh Hue and State Bank Governor Nguyen Van Binh, VAFI also said that the central bank should put a freeze on the establishment of new insurance and gold trading enterprises, as the large numbers of these were also tending to undermine the security of the nation's banking system and currency.

VAFI also urged the State Bank to increase the obligatory US dollar reserve ratio imposed on commercial banks, limit deposit interest rates offered on US dollar deposits to no more than 1 per cent per year, and limit the number of borrowers eligible to seek bank loans in foreign currencies.

At the same time, VAFI called on the State Bank and Ministry of Finance to create policy incentives to lure idle cash from citizens into banks and the stock market, while discouraging the flow of cash into gold, foreign currencies and real estate – investments which undermined the strength of the national currency.

Gold export and import quotas needed to be removed in order for the domestic gold market to operate more effectively, VAFI said.

VAFI further proposed that the central bank increase the foreign ownership limit on commercial banks from 10 per cent of a bank's charter capital to 35 per cent.

VAFI general secretary Nguyen Hoaøøng Hai also said that the central bank needed to consider policies aimed at lowering lending interest rates, currently averaging a whopping 20-25 per cent per year.

"A lending interest rate of 12 per cent per year would be more reasonable as it would help encourage GDP growth while lower the State budget and trade deficits, stabilising the forex market, managing inflation, developing the domestic securities market and hastening the restructuring of State-owned enterprises," Hai said.

VN Post gains control of public postal service

The Prime Minister has assigned the Viet Nam Post Corporation (VN Post) to control the public postal network.

Under the PM's decision, VN Post will be responsible for providing postal services both domestically and internationally.

VN Post will also participate in organising the Universal Postal Union (UPU) and the Asia-Pacific Postal Union (APP).

Giant aircraft hanger planned for HCM City

The Viet Nam Machinery Erection Corporation (Lilama) and its affiliate, the Lilama 45.1 JSC, plan to install a 1,000 tonne pre-stressed arch frame at a wide-body aircraft maintenance workshop.

The arch frame is a plane steel structure, 105m in width, 150m in length and 30m in height.

Lilama will undertake all processes of the project including design, manufacturing and installation.

Covering an area of 13,800 sq.m at the Tan Son Nhat International Airport in HCM City, the hanger will be the most modern aircraft maintenance establishment in Viet Nam.

PVC completes tallest building in Mekong Delta

The PetroVietnam Urban Development JSC (PVC) has completed construction on the roof of the 18-storey Bac Lieu Tower in downtown Bac Lieu City.

The building covers an area of 17,000 sq.m and is set to be the tallest tower in the Cuu Long Delta, with a total investment of more than VND319 billion ($15.6 million). The project is planned to reach completion by September 2, 2011.

Food prices add to inflation woes

Monetary factors were not the only reasons for domestic food and foodstuff prices skyrocketing, a seminar recently heard.

At the seminar, based on effectively combining macroeconomic policies to curb inflation held and in Ha Noi on Tuesday, representatives were told that Vietnamese food and foodstuff had experienced significant increases in price, much higher than in neighbouring countries, during the past few months.

Nguyen Thi Kim Thanh, director of the Institute of Banking Strategy, said that the food and foodstuff consumer price index (CPI) of regional countries had also increased, but at a much lower rate compared to Viet Nam.

The Chinese index had increased by only 11.7 per cent, the Malaysian index by 10.5 per cent, the Thai index by 8.4 per cent and the Indian index by 9 per cent.

Though Viet Nam had managed a trade surplus through food and foodstuff exports, commodity prices have tripled to 30.15 per cent compared to other countries, Thanh said.

While a Government Resolution, issued in February and based on curbing inflation, has had some impact on the domestic market, several challenges still needed review and solution.

Seminar participants said that it was necessary to restrain credit growth to under 20 per cent and 16 per cent for the general and non-production sectors respectively, as set out at the beginning of the year. How to reduce bank interest rates and tighten credit policies would remain up for discussion however.

Nguyen Thi Loan, a lecturer at the HCM City Banking University, said that a shortage of commercial bank liquidity coupled with high interest rates (which have caused higher production costs) have contributed to high inflation.

Tighter credit policies aimed at curbing inflation have caused several small banks to struggle in attracting deposits. As a result, some banks have faced fierce competition in luring deposits from customers, causing interest rates to soar dramatically.

Nguyen Thi Mui, a representative from the Viet Nam JS Commercial Bank for Industry and Trade (Vietinbank), said that the central bank should be more flexible in pumping or extracting money into and from circulation, using monetary policy instruments on the inter-bank and open market operations markets.

A representative from Dragon Capital said that during the first six months of the year, the economy experienced excessive borrowing costs and low money supply, reducing the growth of total retail sales to zero (after deducting inflation), and that the situation could well get worse.

It was agreed that the State Bank of Viet Nam (SBV) should raise obligatory reserves regarding US dollar against Vietnamese dong in order to adjust banking credit structures.

Nguyen Thi Thanh Huong, from the SBV, suggested that the interest rate ceiling should be removed seeing as it was only an administrative tool and costly to manage.

Several obstacles causing high interest rates have included poor corporate governance at commercial banks, especially in risk and liquidity management, an ineffective inter-bank market and extremely tightened monetary polices.

To solve such problems, experts said that trade deficit control and foreign currency management measures should be implemented along with effective monetary policies. Relevant bodies have to better review and adjust market structures, especially in terms of food and foodstuff, as one of the most important factors causing inflation.

Poor supervisory mechanisms, inefficient breeding structures and distribution systems have been attributed to the high CPI of food and foodstuff, experts added.

Market only suited to long-term investments

The nation's stock market is currently undergoing its most difficult time and investments through this channel are suitable to long-term and value-oriented investors, said Saigon Securities Inc's (SSI) chairman Nguyen Duy Hung at the conference on stock investment strategy held by the company yesterday in Ha Noi.

"It's inadvisable to borrow money to invest in securities now as the market provides little opportunity for speculation," Hung said.

The benchmark VN-Index in HCM City, if excluding the influences of large caps such as insurer Bao Viet Holdings (BVH), food producer Masan Group (MSN) and property developer Vincom (VIC), lost 30 per cent from the beginning of the year, while the HNX-Index in Ha Noi declined 50 per cent, according to SSI.

He said the biggest problem now was not the index slide, but a very low market volume and value and increasing investors' pessimism.

"The story of inflation is still hot and shows no sign of being under control. The reasons have not comprehensively been recognised and resolved," Hung said.

He said that the global economy's uncertainties, particularly from the US, would negatively affect the domestic stock market, meanwhile Viet Nam's market competitiveness declined, further reducing its ability to attract capital overseas.

"However, if investors see securities investment as one way of restoring money value in the long term, the stock market is still attractive," Hung said.

Nguyen Duc Hung Linh, director of SSI's Investment Advisory Division, said inflation development until the end of the year would be greatly affected by rising food prices and predicted the annual inflation could reach 18-20 per cent.

However, Linh also agreed that now was the time for value-oriented investments, with many shares decreasing to their record low. "Investors still could invest in companies as long-term and strategic shareholders."

Son La hydro plant switches on soon

The third 400MW turbine at Son La Hydroelectric Power Plant in Son La Province and the second 80MW turbine at An Khe Hydroelectric Power Plant in central Phu Yen Province are expected to plug into the national grid this month.

The Electricity of Viet Nam (EVN) has said the country's daily additional charge would be nearly 315kWh with maximum capacity of 16,000MW. The capacity was forecast to ensure that demands for electricity would be met to avoid power cuts.

EVN plans to use hydroelectric power plants for power generation, flood prevention and water irrigation next year.

PV