Insurance brokerage industry falls short of potential

 

The insurance brokerage industry is underdeveloped and the number of companies operating in the field remains below potential, says the Ministry of Finance's Insurance Supervision Administration.

 

Six domestic and four foreign-invested companies are operating in the field, according to administration statistics, with the foreign firms gobbling up 84.5 per cent of market share for brokerage services.

 

Total revenues from insurance premiums last year were estimated to have reached about VND30.6 trillion (US$1.4 billion), up 20.3 per cent over 2009, with VND17 trillion ($809 million) coming from the non-life sector and VND13.6 trillion ($651 million) from life insurance. Total brokerage fees and commissions reached nearly VND1.6 trillion ($75 million) on these premiums, an increase of 18.6 per cent over 2009.

 

Brokerage services were most commonly utilised in liability insurance (73 per cent), personal accident and health insurance (34 per cent), property insurance (27 per cent), and general liability insurance (10 per cent).

 

Aon Viet Nam Ltd Co CEO Vu My Lan said current insurance brokerage operations in Viet Nam did not reflect the growth of the insurance market. Brokers in Viet Nam needed a breakthrough to affirm their roles and fully exploit the potential of the market.

 

Viet Nam Insurance Association general secretary Phung Dac Loc said the insured were generally not fully aware of the role of the insurance broker, with many small- and medium-sized businesses tending to make direct contact with insurance companies and fearful of cumbersome procedures.

 

Most brokerages, meanwhile, did not comply with regulations in Ministry of Finance Circular No 156/2007/TT-BTC, including a failure to develop and maintain training and professional standards of staff, said Loc. More generally, brokerages frequently operated with inadequate capital investment, he added.

 

He urged State agencies to issue more specific regulations to establish standards and ensure fair competition in the insurance brokerage industry, as well as proper regulatory oversight.

 

To promote the proper operation of insurance brokerage companies, the Ministry of Finance was currently applying strict fines on companies that commit acts of unfair competition in computing brokerage commissions.

Petrol subsidy up to offset oil prices

 

In an effort to stabilise domestic fuel prices, the Ministry of Finance will compensate petrol dealers for losses incurred during the current fluctuation in world oil prices.

 

Under a ministry decision taking effect today, petrol distributors and dealers will receive an additional VND600 per litre in subsidies, increasing the total subsidy per litre to VND1,600.

 

Dealers have been receiving VND1,200 per litre from the fuel price stabilisation fund for petrol or kerosene, VND1,000 per litre of diesel, and VND700/kg for fuel oil sold.

 

But, according to leading petroleum distributor Petrolimex, importers and dealers are still suffering losses of VND800-900 per litre of petrol.

 

In the past few days, wholesale prices of A92 petrol have surged to around US$101.85 per barrel, while kerosene and diesel prices have hit $105.35 and $105.55, respectively.

 

To further control prices, the ministry yesterday cut the import tax on refined petroleum products to zero, director of the ministry's Department of Pricing Management Nguyen Tien Thoa told Viet Nam News.

 

Due to heavy subsidies and favourable tax policies, domestic petrol prices have increased only 2.8 per cent since early 2010, compared to nearly 30 per cent on the global market.

 

"Part of the subsidies have been paid by consumers via the fuel price stabilisation fund, while the rest was offset by import tax adjustment," said Deputy Minister of Finance Tran Van Hieu.

 

Consumers pay VND300 per litre of petrol towards replenishing the price stabilisation fund. Meanwhile, import taxes on petroleum products have already been cut twice in recent months, lowering the tax on imported petrol from 20 per cent to 6 per cent and the tax on diesel from 15 per cent to 2 per cent.

 

At a meeting on Thursday, the ministries of Finance and of Industry and Trade ordered petroleum distributors to provide sufficient fuel supplies to meet domestic demand. The Ministry of Industry and Trade also asked the companies to compute the amount of fuel which would be required for all of 2011.

 

The Prime Minister has also requested the State Bank of Viet Nam ensure sufficient supplies of foreign currency for fuel importers.

 

The Ministry of Finance, meanwhile, warned against fuel speculation and smuggling.

 

First direct container service from Vietnam to Northern Europe launched 

 

The first direct container ship service to Northern Europe docked at the Cai Mep International Terminal on January 15 opening an opportunity for customers in Vietnam for speedier transport of cargo to Northern Europe.

 

The Tan Cang – Cai Mep International Terminal Company Ltd (TCIT), a joint venture between Saigon Newport Company of Vietnam, Mitsui O.S.K Lines (MOL) of Japan, Hanjin Shipping Co. of South Korea and Wan Hai Lines of Taiwan (China), organized a welcoming ceremony.

 

The New World Alliance (TNWA), which includes Mitsui OSK Lines (MOL), APL and Hyundai Merchant Marine (HMM), created a new route by adding Vietnam to their JEX service in December 2010.

 

The port route of the revamped JEX service will cover: Kobe, Nagoya, Shimizu, Tokyo, Hong Kong, Yantian, Cai Mep, Singapore, Rotterdam, Hamburg, Le Havre, Jeddah, Singapore, Yantian, Hong Kong and back to Kobe.

 

The Tan Cang – Cai Mep deep-water seaport in the southern province of Ba Ria - Vung Tau has three ports with a total length of 890 meters, 60 hectares of freight yard area and a loading capacity of 1.8 million TEUs.

 

Kobelco finds a new home

 

The billion-dollar steel facility development, Kobelco Iron Nugget Vietnam is set to relocate to a more convenient base .

 

The agreement signed by Deputy Prime Minister Hoang Trung Hai will allow the leading Japanese steel maker Kobe Steel to move its project from Hoang Mai Industrial Park to Dong Hoi Industrial Park in central Nghe An province’s Quynh Luu district.

 

On March 31, 2010, Kobe Steel received an investment certificate to develop the steel facility, which would produce and market 2.4 million tonnes of iron nuggets per year. Kobe Steel also said production at this plant would use the next-generation ITmk3® iron-making process that it developed.

 

One month later, Kobe Steel signed a $44 million contract with Petro Vietnam V.I.P Investment Joint Stock Company (PVCOM) to rent 40 hectares of land in Hoang Mai Industrial Park and planned to start building its facility in July, 2010.

 

Kobe Steel said it would use iron ore from the Thach Khe mine for its facility. However, the company said Thach Khe’s iron ore also contained a lot of zinc, which makes it difficult to use in blast furnaces.

 

The ITmk3® Process will enable Vietnam to make effective use of its mineral resources, and the use of relatively inexpensive raw materials will help improve the profitability of the project, said Kobe Steel.

 

PetroVietnam awarded in top firms list

 

The Viet Nam Report Joint Stock Company (Viet Nam Report) officially announced the top 500 Vietnamese companies of 2010 (VNR500).

 

The winners were presented with awards in HCM City last Saturday.

 

The Viet Nam National Oil and Gas Group (PetroVietnam) topped the list of five largest State-owned enterprises, followed by the Viet Nam National Petroleum Corporation (Petrolimex), the Electricity of Viet Nam (EVN), the Viet Nam Posts and Telecommunications Group (VNPT) and the Viet Nam National Coal and Mineral Industries Holding Corporation Ltd (Vinacomin).

 

The top five largest private businesses included the Sai Gon Gold and Silver ACB-SJC Joint Stock Company, the Corporation for Financing and Promoting Technologies (FPT), the Asia Commercial Joint Stock Bank (ACB), the Viet Nam Dairy Products JSC (Vinamilk) and the DOJI Gold and Gem Group.

 

On the occasion, about 400 leaders from the selected businesses attended the forum "Large businesses and their leading role".

 

The VNR500 Forum 2011 also drew the participation of leading experts from inside and outside of the country, including Prof Stephen M Walt from Harvard University and Alex Malley, CEO of the Australian Association of Certified Practising Accountants (CPA Australia).

 

According to participants at the forum, large businesses should not only focus on business operations but also have an important and active leading role in addressing social issues such as education, health, and diplomacy.

 

Nearly half of the companies in the VNR500 are State-owned enterprises. Foreign-invested and private companies accounted for 23.8 per cent and 31.2 per cent, respectively.

 

The proportion of private companies on the VNR500 has increased yearly, accounting for 24 per cent of the enterprises listed in 2008 and 30 per cent in 2009.

 

The Viet Nam Report ranks companies according to independent criteria, including the enterprises benefits, total assets and number of employees.

 

VNR500 is independently surveyed by Viet Nam Report with support and guidance from domestic and foreign experts, which is headed by Associate Dean of Harvard's Business School John Quelch. The organising board said it based the rankings on the Forbes 500 list and on international standards.

 

The database was sourced from total assets, turnover, profit, growth rate and employee figures that were compiled by the General Statistics Office and surveys.

 

Site clearance holds back Tata Steel’s project

 

Tata Steel will have to fork out for resettlement and site clearance if it wants to pursue its mega steel manufacturing project in central Ha Tinh province.

 

A senior official of the Ministry of Planning and Investment (MPI) last week reaffirmed that Vietnamese authorities would find difficulty to cover the costs of clearance at the site where Tata Steel – one of the global leading steel makers – proposed to build a $5 billion steel manufacturing project.

 

“The cost is equivalent to the state budget of one province. At present, local authorities will find difficulty to cover the site clearance compensation,” said the official.

 

The message, presented at a meeting with Tata Steel representative, once again expressed the Vietnamese government’s instructions that Tata Steel and its local partners, including Vietnam Steel Corporation and Vietnam Cement Industries Corporation, would seek ways to pay the costs associated with resettlement and site clearance of the project site.

 

In Tata Steel’s plan, the project which will cover 725 hectares in Vung Ang Economic Zone in central Ha Tinh province, will produce 4.6 million tonnes of steel per year. Vung Ang Economic Zone Management Authority initially estimated the cost for site clearance was about VND2 trillion (around $100 million).

 

In an interview with VIR last year, Indronil Sengupta, chief executive of Tata Steel’s South East Asia projects, said the cost of resettlement and site clearance works would increase the project’s risk in the eyes of financing institutions.

 

During the meeting with the MPI officials last week, Sengupta admitted that site clearance issue was holding back the project. But he added Tata Steel and its local partners were trying to resolve the outstanding issues and gain an investment certificate for the project.

 

Apart from site clearance, Tata Steel also needs to resolve eight other outstanding issues if it wants to make progress of its steel project in Ha Tinh. Those include questions relating to water supply, environmental issues, the project’s progress, the supply of raw materials, agreements by foreign partners to arrange capital for local partners and tax law application.

 

Tata Steel initially proposed the Ha Tinh project in May 2007, when it signed a memorandum of understanding with Vietnam Steel Corporation to develop the project.

 

A year later, a joint venture agreement was signed between Tata Steel, Vietnam Steel Corporation and Vietnam Cement Industries Corporation, in which the foreign partner committed to holding a 65 per cent stake.

 

The joint venture’s first application dossiers for an investment certificate were submitted to the Vung Ang Economic Zone in August, 2008.

 

Canon thrives thanks to printers

 

Japanese office equipment maker Canon Vietnam is on track for high export profits this year, despite concerns over Vietnam’s high inflation and exchange rate risks.

 

Sachio Kageyama, general director of Canon Vietnam, said the company had experienced a very good 2010 after the serious global crisis of 2009. The company estimated its export earnings for 2010 at $1.5 billion, a rise of more than 20 per cent on 2009 figures.

 

“The recent successful and profitable business of Canon Vietnam is highly appreciated by our mother company. We are setting higher export targets for this year. Export turnover in 2011 is expected to grow 25 per cent year-on-year,” said Kageyama, adding that Canon Vietnam was recognised as Vietnam’s third largest individual exporter.

 

“We forecasted that the growth in global demand for ink-jet printers would remain stable in the next few years,” he said

 

Despite the economic recession, the laser printer market has continued to grow and Canon remains dominant in Vietnam.

 

Canon’s latest statistics show the market share for its printers in Vietnam was 90 per cent in 2009.

 

In 2009, the Canon LASERSHOT LBP2900 and LBP330 were among Canon’s single function printer best sellers with market shares of 23.2 per cent and 10.7 per cent respectively in terms of units sold.

 

Canon currently holds a 31.2 per cent market share for digital cameras in Vietnam.

 

Canon’s IXUS camera, and Powershot and Lasershot printer brands are all recognised as top performers by the influential market tracker GfK Retail and Technology.

 

However, Kageyama said that Canon Vietnam was concerned about foreign exchange risks and Vietnam’s high inflation.

 

The Vietnamese dong has depreciated against the US dollar while the Japanese yen has appreciated against the US dollar. The dollar-yen exchange rate hit a 15-year low in 2010.

 

“We still depend on materials and components from other countries and the problem for us is that while prices for imported materials and components have risen a lot, the price of output products cannot be raised.

 

“High inflation affects not only workers but also enterprises operating in Vietnam,” he said.

 

According to Vietnam General Statistics Office, the consumer price index (CPI) rise for 2010 far exceeded all prior targets to hit 11.75 per cent. Increases in the index were mostly driven by hikes in food and foodstuffs and housing costs. By comparison, the 2009 CPI rise was a relatively low 6.88 per cent.

 

“In my opinion, to maintain competitiveness against other countries, the governments must find ways to rein in inflation,” Kageyama added

 

Canon employs more than 15,000 people in Vietnam.

 

Floating storage unit announces first oil shipment

 

The Floating Storage and Offloading Unit (FSO) of PetroVietnam Technical Services Corp (PTSC Bach Ho" [FSO-5]) late last week exported its first oil shipment in the southern coastal province of Ba Ria-Vung Tau.

 

This first offloading was witnessed by representatives from Vietsovpetro (VSP), PetroVietnam Technical Services Corporation (PTSC), independent inspectors EIC and other sub-contractors.

 

The sale was finished after 20 hours with a shipment volume of more than 31,855 tonnes with zero impurity basic sediments and water (BS&W) content and 0.02 per cent volume deviation which is within the acceptable range of Vietsovpetro.

 

"The offtake which took place in bad weather conditions has proved the leaders' strong-determination, employees' great efforts and high devotion of PTSC in delivering the project on schedule," said PTSC's general director Nguyen Hung Dung.

 

With modern technologies and advanced functions "PTSC Bach Ho" (FSO-5) is the biggest floating storage and offloading unit built in Viet Nam. It was built to serve the drilling of VSP. It is executed by the Nam Trieu Shipbuilding Industry Corporation.

 

PTSC Bach Ho received its first oil two months ago and spent 60 continuous working days preparing for the first offtake.

 

Investors needed to fund airport take off

 

Thanh Hoa province’s People’s Committee is calling for local and foreign investors to assist in the construction of the province’s civil airport.

 

A master plan on the Thanh Hoa airport was just trumpeted by the committee in conjunction with Ministry of Transport and Vietnam Civil Aviation Administration, under which, VND2.85 trillion ($146 million) would be needed to construct the project’s two phases, with the first (213 hectares) to cost $43.6 million and the second $102.6 million).

 

“We welcome all local and foreign firms to invest in this modern and important project via different forms of investment, including the public-private partnership model,” said vice head of the committee’s administrative division Trinh Ngoc Dung.

 

“Investors can engage in many parts of the project, such as terminals and runways and more. We will create special investment incentives for them,” Dung told VIR.

 

According to the committee, Thanh Hoa is in need of such an airport, which would help boost its socio-economic and tourism development while luring more foreign investors, especially those coming to the province’s Nghi Son Economic Zone in search of investment opportunities.

 

Located in Tinh Gia district’s Hai Ninh commune, 30 kilometres south of Thanh Hoa city and 1.5km east of the National Highway 1A, the project is expected to see its first phase operational in 2020, with air routes to Hanoi’s Gia Lam airport, Haiphong city’s Cat Bi airport, Danang city’s Danang airport and Ho Chi Minh City’s Tan Son Nhat airport. The airport, home to small planes like the ATR72, will be able to transport 250,000 passengers and 10,000 tonnes of cargo per year.

 

The airport’s second phase is set to be constructed after 2020, when other domestic routes, with A320 and A321 airplanes, to Buon Ma Thuot, Dalat and Nha Trang as well as several short international flights are opened, raising the airport’s capacity to 1 million passengers and 20,000 tonnes of cargo each year.

 

Construction of the airport was initiated in 2006 when the Nghi Son Economic Zone was established. Its planning was approved one year ago.

 

“At present, more than half a million Thanh Hoa inhabitants are living in many parts of the country, mainly in the southern region, including Ho Chi Minh City. The airport is expected to help locals to return home quickly,” Dung said.

 

It is also expected that the airport would be developed into an international airport after 2030.

 

Stocks increase on improved market liquidity

 

Shares rallied today on the two national exchanges, with market liquidity remaining brisk.

 

In HCM City, the VN-Index closed up 1.21 per cent from Friday's mark to 495.16.

 

Market value continued solid at VND1 trillion (US$38.5 million) as more than 43.8 million shares changed hands.

 

Gainers outnumbered losers by 147-74.

 

Blue chips continued to perform well. Out of the 10 largest capitalised shares, gainers were Bao Viet Holdings (BVH), Masan Group (MSN), Eximbank (EIB), software producer FPT Corp (FPT), property trader Hoang Anh Gia Lai (HAG), PetroVietnam Finance (PVF) and Sai Gon Securities Inc (SSI).

 

BVH rose VND4,000, its second consecutive day of ceiling gains since last Friday. MSN rose to the ceiling price with an increase of VND3,500, FPT lifted VND1,500 while other blue chips climbed slightly.

 

In Ha Noi, the HNX-Index rose 0.9 per cent to close at 109.02.

 

Trading volume increased by 35 per cent to 34.4 million shares, totalling a value of VND618.1 billion ($24.2 million).

 

About 195 advancers doubled decliners.

 

Big stocks achieved increase in prices, including Asia Commercial Bank (ACB), up VND100; Bao Viet Securities (BVS), up VND800; Kim Long Securities (KLS), up VND600; Tien Phong Plastic (NTP), up VND1,400 and PetroVietnam Insurance (PVI), up VND500.

 

Oman and Vietnam talk business

 

Oman is keen to invest billions of dollars in Vietnam, according to Minister of Commerce and Industry Maqbool bin Ali bin Sultan

 

During his visit to Vietnam last week to attend the Vietnam-Oman Joint Commission, the minister said that Oman abounded in investment capital and wanted to increase investment in Vietnam.

 

Oman’s investors were particularly interested in the finance, banking, tourism, real estate, oil and gas, ship building and thermo-electricity sectors, said Khonji.

 

He said that total investment capital might amount to billions of dollars.

 

“Besides cooperating with Vietnam’s government on petroleum, we also want to work with Vinashin in ship building and with Vinacomin on thermo-electricity projects,” Khonji said

 

“Oman Oil and Gas Company has just inked a $2.3 billion deal with PetroVietnam to build an oil refinery,” he added.

 

Ahmed Salim Al Wahaibi, chief executive officer of Oman Oil Company, said his company was now seeking Vietnamese partners.

 

Wahaibi was just one of 20 leaders from leading companies in Oman who had come to Vietnam in search of investment opportunities.

 

During his visit, bin Sultan and Vietnamese Minister of Planning and Investment Vo Hong Phuc signed off on the Agreement for the Encouragement and Mutual Protection of Joint Investments. The agreement will provide the legal framework for the burgeoning joint investment between the two countries.

 

“We are looking forward to witnessing Omani-Vietnamese joint projects in the fields of oil, gas and energy, and to seeing Vietnamese projects in the Sultanate” Phuc said.

 

Bin Sultan also said Oman wanted to import Vietnamese labourers and that the two governments would negotiate a labour cooperation agreement soon. At present, 70 per cent of labourers in Oman are foreigners.

 

The Vietnam – Oman Joint Commission also saw Vietnam Chamber of Commerce and Industry and OCCI inking an agreement to establish the Vietnam – Oman Joint Business Council, which will include a joint banking commission. The council, which is charged with supporting Omani and Vietnamese enterprises, will operate from this year’s second quarter.

 

In 2008, Vietnam and Oman established the Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income.

 

PV

 

Protecting IP can help attract investment

 

A good intellectual property (IP) system could make a country more attractive to investment, delegates at a meeting of European and Asian organisations heard in Ha Noi yesterday.

 

The meeting between the European Property Office (EPO) and ASEAN IP offices, the sixth of its kind, is being held to further promote the use of patents and intellectual property rights throughout Southeast Asia.

 

Known as the Heads of IP Offices Conference (HIPOC), it was told by the Vietnamese Minister of Science and Technology, Hoang Van Phong, that in recent years, EPO and Viet Nam had exchanged information on patents, the management of inventions, training staff in the field and increasing awareness of intellectual property.

 

"Today, IP has become a powerful tool for socio-economic, cultural and scientific technological development of all nations," he said.

 

"Recognising the importance of IP, ASEAN member states have been continuously strengthening their co-operation on the subject, considering this important for ensuring protection of the manufacturing rights of domestic and foreign entities."

 

Phong said this would create a favourable and reliable environment for attracting foreign direct investment (FDI), enhancing competitiveness and promoting regional and international integration.

 

He added that realising the important role of IP, the Vietnamese Government had paid much attention to its development and improvement.

 

This included the establishment of IP legislation that conformed with international standards set forth in the WTO's TRIPS agreement and other international treaties.

 

"The signing of a new memorandum to upgrade co-operation will resolve issues emerging from both regions and the world," Phong said.

 

EPO president Benoit Battistelli said Viet Nam was a typical example of dynamic development in the ASEAN region, which was helping drive global economic growth.

 

"Patents are an efficient tool for encouraging innovation and enhancing economic development," he said.

 

He added that EPO believed its mission was to work with partner offices in the ASEAN region and elsewhere for the creation of a quality-based patent system at international level.

 

Wim Van Der Eijk, principal director of EPO's Patent Law and International Affairs, said the global patent system faced big challenges, including an increasing number of files that was difficult to access,

 

"It is necessary to establish infrastructure that allows for the greater integration of the global patent system on the basis of work-sharing and mutual trust," he said.

 

Der Eijk added that this would help eliminate duplication of work between offices and enhance the efficiency of patent examinations and guarantee the stability of patent rights.

 

The meeting was attended by leaders and other high-level representatives from ASEAN IPOs, EPO and the World Intellectual Property Office (WIPO).

 

EPO and ASEAN began co-operation in 1990 with the implementation of the first ECAP project.

 

The Heads of IP Offices Conference first met in 2003 and since then has made a significant contribution to enhanced patent co-operation in the region.

 

This year's conference looks at the present state and future direction of EPO-ASEAN relations.

 

In the wake of ASEAN region's integration into the world trade system, ASEAN's IP offices have been receiving a rapidly growing number of patent applications.

 

They yearly handle over 30,000 applications with filings from EPO member states accounting for 30 per cent of the total in 2008.

 

At the same time, there has been a marked rise in the number of European patent applications filed by ASEAN companies, the 334 filings in 2010 bringing the five-year total since 2005 to 1,800.

 

The growing demand for patent protection in combination with the ASEAN member states' objective of creating an ASEAN Economic Community by 2015 has intensified the need for closer IP co-operation between ASEAN's IP offices.

 

EPO, the central patent-granting authority for Europe, receives more than 200,000 applications a year and grants between 50,000 and 60,000 patents in this period.

 

VPBank raises chartered capital to VND4 trillion

 

The Vietnam Prosperity Commercial Joint Stock Bank (VPBank) has increased its chartered capital from VND2.45 trillion to VND4 trillion by issuing shares to existing shareholders.

 

The capital increase aims to help the lender raise its financial capacity, expand its operation network, invest in facilities, technologies, and diversify services.

 

As of the end of 2010, VPBank’s total assets were estimated at nearly VND58 trillion, total capital mobilization at VND24.43 trillion, and outstanding loans at VND25.3 trillion.

 

The Hanoi-headquartered bank on Wednesday opened a new branch in HCMC. The branch at 296 Ba Thang Hai Street in District 10 is the 150th outlet of the bank.

 

Wood exporters decry rising costs

 

Rising cost is to be the biggest concern for wood exporters this year although most said the higher target of wood export revenue at around US$4 billion is quite obtainable.

 

The Vietnam Timber and Forest Product Association (Vifores) has recently estimated wood export would exceed a record high of US$4 billion this year, or a year-on-year increase of 17.4%. Nguyen Ton Quyen, secretary general of Vifores, told the Daily that the higher export target would be within reach as Vietnam’s furniture products are now cheaper than those from China as Vietnam’s direct competitor.

 

“China has been the biggest competitor of Vietnamese wood industry for years. But the situation has changed as the rise of the Chinese currency, the high tariff on export and high labor cost are among reasons that make China’s products less competitive than Vietnam’s,” he said.

 

But the biggest headache now is the rising input costs, industry sources said.

 

Ngo Thi Hong Thu, deputy director of wood processor Truong Thanh Co., said that although the company has received orders equivalent to an estimated 70% of output for the whole year, the biggest challenge now is the cost.

 

“The rising and fast changing input cost have caused many difficulties for the business,” she said.

 

“If the rising prices of materials could earlier be solved by increasing the stock, it is impossible now given the high interest rate charged by banks and fast changes in consumption taste for furniture,” she added.

 

Dien Quang Hiep, general director of Minh Phat 2 as another wood processor, told the Daily that he was worried about the labor shortage and rising materials cost.

 

“The labor shortage is becoming more severe while we are also facing the rising cost of materials asked by suppliers,” he said.

 

According to Hiep, the price of rubber wood as the main material has picked up 50% to 60% compared to last year, while prices of paints and other materials have also increased 20% from last year.

 

A survey recently conducted by the Handicraft and Wood Industry Association of HCMC (HAWA) shows that despite the rising cost, some processors will accept lower selling prices to win orders from foreign importers. Some accept a low profit margin or only break even to maintain customers and keep jobs for workers, the association said.

 

Imported pine wood has become 20% more expensive than last year while transport costs have climbed. In addition, wages and social insurance premiums have jumped, and environmental protection fees will be imposed soon.

 

Nguyen Chien Thang, chairman of HAWA, said wood processors and exporters should seek to raise product quality for better prices rather than pursuing quantitative development as seen in the past. To do so, they will have to invest more in the human resource, he said.

 

Vietnam aims high for energy saving in next five years

 

The Ministry of Industry and Trade has just set a target to save on power consumption by 8% to 10% in the next five years by mainly raising public awareness and encouraging companies to upgrade technologies, an official said.

 

“The ministry is petitioning the Government to approve this high target,” said Nguyen Dinh Hiep, director of the Science and Technology Department of the ministry.

 

Hiep said the high target was built on the success of power savings in the past five year as phase one of the national power saving program, during which the country saved some 4 billion kWh of power, equivalent to 5% of the country’s annual electricity consumption. The target for the second phase from 2011 to 2015 of the national strategic program is one of the vital measures for ensuring energy security for the country, he said.

 

Beside some achievements resulting from the 2006-2010 program, Hiep said, the awareness about energy saving among people and industrial producers was still limited, as power consumption at steel and cement plants remained high.

 

Meanwhile, lending policy for enterprises embracing energy saving solutions is still inadequate.

 

As the country’s demand for electricity is expected to increase 15-17% annually in the coming years, the ministry will implement some key projects to save more power in this second phase with a total budget of US$3 million a year.

 

These projects will focus on spurring public awareness of energy saving, and energy efficiency in the industrial production, construction, and transport sectors.

 

PPI to continue four major property projects this year

 

Pacific Property and Infrastructure Development Joint Stock Co. (PPI) will press on with a plan to develop four residential and office building projects in HCMC and neighboring provinces this year though the market has yet to recover.

 

Pham Duc Tan, board chairman and general director of the company, told a news briefing on Wednesday that PPI still made a profit in the tough year 2010, and therefore it would continue property projects, but with a stronger shift to the more affordable-apartment segment.

 

The company will start the New Year’s business by finishing the foundation of its PPI Tower project in the coming months.

 

Tan said PPI had invested VND313 billion to develop the building along Tan Son Nhat-Binh Loi road at Hiep Binh Chanh Ward in HCMC’s outlying district of Thu Duc. When in place in 2012, the building will provide the market with some 8,000 square meters of office space and 80 apartments.

 

PPI will begin to develop a road system to pave the way for a mix-used property project named Water Garden, also located in Hiep Binh Chanh Ward in Thu Duc District, to get off the ground this year.

 

Tan said the company would arrange some VND1,275 billion to develop this project covering some two hectares along the Saigon River, with a section for apartments, and a section for commercial space and services. The project is scheduled for completion in 2013.

 

Apart from HCMC, PPI will develop projects in the neighboring provinces of Long An and Binh Duong.

 

The property developer will kick off the second phase of Ben Luc urban town project in Long An at a cost of over VND300 billion. The property project will have some 500 lots for row houses and villas and a section for apartment building and a section for commercial center.

 

Besides, PPI will start building public facilities for the new urban town Tuong Binh Hiep in Thu Dau Mot Town in the southern province of Binh Duong this year. The project requires an estimated VND1,350 billion and covers a 97-hectare site in the town, and can accommodate some 17,000 people.

 

Tan said that the company faced tough challenges last year as the local property market remained gloomy, and that some newly-issued regulations expose a lot of difficulties to property developers, including PPI.

 

He also mentioned difficulties relating to the Government’s credit tightening in property investment, choking off the cash flow into the sector. 

 

Despite such hardship, the company’s chairman said PPI earned an after-tax profit of VND41 billion in 2010. Its total revenue of VND435 billion, however, was lower than the target of VND450 billion.

 

Tan revealed the company’s plan, saying PPI’s housing products would target middle-income people so as to capitalize on the market’s liquidity. The company will, for the second phase, issue shares to increase its chartered capital to VND150 billion this year.

 

HAGL, VPBank join forces to support apartment buyers

 

Vietnam Prosperity Bank (VPBank) has signed agreements to provide soft loans for buyers of apartments built by Hoang Anh Gia Lai Group (HAGL) and to sponsor HAGL Football Club.

 

The bank will offer loans valued at up to 70% of apartments of Thanh Binh, stage 2 of Phu Hoang Anh and Incomex projects under construction in HCMC, HAGL chairman Doan Nguyen Duc told the signing ceremony here on Tuesday. The buyer will also enjoy an interest rate four percentage points lower than the common market level.

 

Duc said the buyer needed to place a 30% deposit on the apartments they wanted and did not have to prove their income sources to benefit from the loans with maturity terms up to 15 years. “This is our major program in collaboration with VPBank to provide customers with the most favorable conditions,” he said.

 

HAGL expects to sell over 2,000 out of the total number of 2,300 apartments between the end of quarter 1 or early quarter 2 of this year. Duc said apartments of Thanh Binh Project cost around US$1,250 per square meter and the group would announce apartment prices of the other two projects soon.

 

HAGL posted a pre-tax profit of VND3 trillion in 2010, or VND300 billion higher than the year’s target and up 76% over 2009. Duc said property projects accounted for to more than 50% of the group’s total profit.

 

The profit came from such luxury apartment projects Hoang Anh River View, stage 1 of Phu Hoang Anh, An Tien and other projects in HCMC, Quy Nhon, Danang, Daklak and elsewhere in Vietnam.

 

Duc declined to detail how HAGL and VPBank were able to subsidize interest rates for apartment buyers as well as the agreement value for Hoang Anh Gia Lai Football Club, saying that this was “a business secret.”

 

However, he said VPBank had contracted to be an exclusive sponsor of the club for the V-League season 2011 and would consider extending the agreement period, probably for three years or longer as the two sides had discussed.

 

PV