Construction tempo slows down

Both civil and industrial construction projects remain stagnant for now and in the coming months in line with the economic slowdown despite prices of building materials have fallen, an industry source said.

Pham Sy Liem, vice president of Vietnam Federation of Civil Engineering Association, told the Daily on Monday that the construction tempo was predicted to remain flat in upcoming months due to many macro-economic reasons. These include downsizing public investments, credit tightening and high interest rates.      

“As the economy encounters problems, public investment has fallen and the real estate market declined. Thus, the construction industry’s biggest customers are in trouble, prompting a decline in construction in the near future,” Liem said.

To remedy the situation, Liem said, two things need to be done. One is to increase State investment in infrastructure development to create jobs and stimulate consumption of building materials to prevent impacts on other industries.          

The other solution is to consider loosening the credit policy for high-demand property projects, as the property sector is viewed as the economic thermometer.

Contractors in HCMC said civil construction in the year’s first half had decreased by 40% year on year.

Pham Dieu, director of the construction company Kien Minh Cong in Tan Phu District, said if the lending interest rate remained high, enterprises and people would face difficulties accessing loans, and construction would be drearier to this year’s end.

Dieu said his company’s workers were underemployed now due to the lack of construction projects, whereas there were many civil building projects this period last year.
 
High-end apartments to shrink in size

Looking at the current market trend, high-end apartment projects are facing more challenges in finding buyers given local property market difficulties as well as prices of high-end apartments going beyond many buyers’ budgets.

Developers in the segment, though, are not getting too downhearted and have created different ways to get their sales moving in a bid to quickly clear their stocks for investment return.

Besides offering incentives and using different pricing policies to draw buyers’ attention, some developers have decided to redesign their condo projects into smaller apartments to tailor buyers’ demand in the current market.

The market boom of 2007 made many developers active in HCMC and they ignored market research or surveying on what kind of housing products were suitable to the majority of buyers.

The feverish market offered developers a great chance of selling whatever they promised to build. However, those golden days are long gone with the market seeing many large and small condo projects under construction in the city.

Abundant supply has created tougher competition, and the current credit crunch has caused a significant impact on sales. So, many developers have made some adjustments to their products, including making apartments smaller in the hope of finding buyers.

Tran Xuan Dai Thang, general director of Alinco Company, a consultant and design company, told the Daily that some developers with high-end projects are going to accept losses in some areas rather than keeping current designs with huge apartments which are lying empty.

Thang said many developers realized that pricey, large apartments were out of most people’s price range.

She declined to give specifics but said that in four of the 10 condo projects that the company is designing are going to readjust apartment sizes, from the current 100 square meters to 70-80 square meters. Among these projects is a development with some 1,500 units in HCMC’s District 7.

Market difficulties are forcing developers to come up with unique ways to attract buyers to their projects. Flexible payments, a supporting interest rate and lucky draws with expensive prizes like cars are among incentives that some developers offer to lure buyers.

For example, Him Lam Land is trying to lure buyers to its Him Lam Riverside which has 314 apartments underway in HCMC’s District 7.

Under a sales program, 20 apartments will serve as serviced units with a guarantee that owners will earn from US$1,000 to US$1,500 per month within two years from the date of receiving their apartments.

Binh Thien An Real Estate Joint Stock Company (BTA) has designed a sales program for its Diamond Island Sky Resort project which is underway in District 2.

After drawing attention in the market with its million-dollar apartments, the company will launch smaller apartments from 82-110 square meters with prices ranging from US$270,000 to US$450,000 per unit, targeting individuals and young families.

Unlike other projects, BTA plans to continue to increase its apartments’ selling prices for the fourth time given the soaring price of building materials this year.

Explaining why BTA decided to increase selling prices at a time when many developers are trying to reduce prices to boost sales, Dang Hong Phong, sales and marketing director for the company, said the move aims to offset the soaring price of building materials as well as ensuring the investment value for buyers who have bought apartments in the project.

Thang of Alinco Company projected that the trend of redesigning would increase in the future as the market has seen many projects slow down and construction delays with buyers still showing a wait-and-see attitude hoping housing prices go down even further.

The Ministry of Transport plans to forward the draft regulations to the Government for consideration and approval in the fourth quarter of this year.

Hai Phong licenses foreign projects

An existing 304 foreign invested projects, with capital of US$4.62 billion, remain valid in Hai Phong City.

The city has licensed 11 new projects, with capital of $39.6 million, in the first half of this year as well as 11 other projects with additional investment capital of $246 million.

Most investments have been made in the Nomura and Dinh Vu Industrial Zones. Remaining industrial zones have proved less attractive to investors due to insufficient infrastructure, incomplete sea and river port systems and inadequate electricity and water supplies.

Cement maker wants price rise

The Ha Tien 1 Cement JSC has called on the Price Management Department of the Ministry of Finance to raise the sales price of PC40 cement to VND150,000 per tonne (US$7.14), an increase of VND7,500 per 50kg bag.

If approved, the third price adjustment of the year will lead to an accumulated increase of VND600,000 (($28.57) per tonne.

During recent times, cement output has declined by 20 per cent due to a cooling construction market.

Nation moves up in innovation

Viet Nam has been ranked 51st among 125 economies in the Global Innovation Index (GII) 2011, jumping 20 places from its 71st position in 2010.

According to the GII 2011 Report, jointly launched by the World Intellectual Property Organisation (WIPO) and the Business School for the World (INSEAD), Switzerland held first place in the rankings, followed by Sweden and Singapore.

Malaysia led the Southeast Asian region ranked 31st position while Thailand came second in 48th position. The Intellectual Property Department said that the GII 2011 covered 125 economies worldwide based on technological innovation results.

The index aims to emphasise the role of technological innovation activities, considered integral to economic growth, job creation and the improvement of economic, industrial and business competitiveness.

Green Park Tower under way

Knight Frank and Constrexim-HOD (the Constrexim Housing Investment and Development JSC), yesterday officially launched their Green Park Tower project, a real estate highlight in the west of Ha Noi.

With a total investment of VND900 billion, the Green Park Tower will feature two 25-storey towers consisting of nearly 400 residential units, retail outlets and services centres.

Binh Duong attracts 16 projects

The Industrial Zones Management Board reported that the southern province of Binh Duong has licensed 16 new projects in the first half of the year, with a total registered capital of US$46.7 million.

Combined with the province's 24 existing projects, Binh Duong has increased its additional investment capital of $61.5 million.

The province now has 28 industrial zones and is home to 1,113 foreign and domestic investment projects, with a total registered capital of $5.8 billion.

BNP Paribas buys into Orient Bank

The State Bank of Viet Nam has allowed the Orient Commercial Joint Stock Bank (OCB) to sell a 20 per cent stake to France's BNP Paribas bank.

BNP Paribas has become OCB's strategic shareholder after it acquired a 10 per cent stake of this bank in 1997.

OCB was founded in HCM City in 1996. It now has a total charter capital of VND3.14 trillion.

BNP Paribas is among the world's 15 largest banks..

Best annual reports honoured

The Hau Giang Pharmaceutical Company (DHG) and PetroVietnam Drilling and Well Services Corp (PVD) won special awards yesterday at the Fourth Annual Report Contest designed to promote professionalism and transparency among firms listed on stock exchanges in the country.

The 37 winning reports were selected from 650 companies.

Builder targets $180m in revenues

The Song Hong Corp, operating in construction, aims to earn VND3.7 trillion (US$179.6 million) as part of current year revenues, an increase of 42.3 per cent over last year.

The corporation hopes to make VND121 billion in gross profit, tripling last year's figure, the gross profit of its parent company rising to VND64.14 billion, dividends of which would be paid at 12 per cent.

The corporation also plans to issue 11.75 million worth of shares on the Ha Noi Stock Exchange in order to increase its charter capital to VND387.5 billion from VND270 million.

Horizontal Securities sells stake to Citibank

Horizontal Securities Co will be selling a 9.9-per-cent stake (594,000 shares) to Citibank as part of a plan to increase its capital from VND45 billion (US$2.2 million) to VND60 billion via the issue of 1.5 million shares.

The remaining 906,000 shares have been bought up by its parent company, the Horizontal Capital Group.

The securities company marked four years of loss, its equity having stood at only VND8.8 billion during last year.

Trade promotion to receive State support
 
The Ministry of Finance has issued a circular to provide guidance on giving financial support for businesses under a programme to promote national trade. The circular takes effect on August 1.

Under the circular, any business that promotes Vietnamese products and well-known tourist attractions in foreign publications will receive financial support equal to 70 per cent of the total cost.

Any business that invites foreign media to Viet Nam to write stories or do TV reports to promote the country's exports will receive the same percentage of support for the total cost of each finished media product.

The same proportion of support will also be offered to businesses to hire foreign and local experts for consultancy to increase the quality of products, develop exports and better integrate into foreign markets.

If businesses participate in trade fairs overseas, they will receive 100 per cent of the cost. Maximum support must not exceed VND200 million (US$9,700) per business.

To enhance sales and distribution of Vietnamese products to border countries, the ministry will offer 100 per cent of the cost, including the cost for leasing premises, designing and setting up booths and installing electricity and water supply, among other requirements.

Maximum support for this activity must not exceed VND100 million ($4,900) per period of sales.

Steel consumption slumps in June

The Viet Nam Steel Association (VSA) has reported a June slump in both steel production and consumption due to a Government cut in expenditure.

According to the association, domestic steel makers produced only 330,000 tonnes of steel, a month-on-month decrease of 24.6 per cent,There are now more efforts to bring things to a conclusion and avoid an armed struggle for Tripoli, which would be very messy," while sales reached only 270,000 tonnes, declining 30.7 per cent in comparison with May.

High interest rates had strongly affected real-estate markets, the association said, adding that many construction projects had been delayed, investment in the property market remaining low.

Due to the slump in production and sales, the total stockpile of steel during June was 430,000 tonnes, an increase of 6.9 per cent over May with steel ingot volumes standing at 590,000 tonnes, the largest stockpiles of steel ever.

Recent steel prices, between VND15.6 million (US$750) and VND16.2 million ($780) per tonne, have been on the decline as the prices for pig iron and scrap steel plummet worldwide, steel makers additionally cutting prices in order to compete with cheap steel imported from China and Southeast Asia.

The Ministry of Industry and Trade has predicted that there would be no big changes in steel prices during coming months, as prices on the world market continue to rise.

Delays likely in office building projects

0ffice building projects scheduled to enter the market from 2013 onward show signs of delay in HCM City, according to a property service consultant.

Chris Currie, associate director for office services of the real estate services provider CBRE Viet Nam, said projects including SJC Tower and BIDV Tower, both in the downtown area, showed no signs of construction on the site.

Meanwhile, only test piling was underway for the Sai Gon Centre Phase 2 and basements in progress for the Vietcombank tower.

Almost 541,000 square metres of office space of grade A and B were planned to enter the market in 2013.

Work on projects scheduled for 2012, which may reach a total of 299,000sq.m., is going ahead, according to Currie.

He cited the Time Square complex with around 9,000 sq.m. of office space, which had its topping off in June. Completion was expected in 2012's first quarter.

Another project, the M&C Tower, will have its topping off in August and completion will be in the second quarter next year. It will offer 50,000sq.m for office space.

This year, there will be no Grade A office project put in operation, but around 188,000sq.m of Grade B will become available, according to CBRE's statistics.

Currently, Grade A office buildings have an average occupancy rate of 95 per cent, except the newly put-in-use Bitexco Financial Tower and Vincom Tower. The rate for Diamond Plaza and Me Linh Point Tower are 100 per cent each.

Currie, however, said the market in the first six months was slower than the same period in 2010, with absorption falling to almost 68,000sq.m from 130,000sq.m respectively.

There are more than 1.7 million square metres in stock, and landlords are offering incentives including some rent-free periods and free parking charges, among others.

Lao Bao trade zone gets a master plan
 
The central province of Quang Tri has announced a master plan to upgrade Lao Bao special trade and economic zone on the Viet Nam-Laos border area by 2025 to include a residential urban area.

Deputy head of the zone's management board Nguyen Van Binh said the plan had been approved by Prime Minister Nguyen Tan Dung.

Binh told Viet Nam News that the zone was expected to contribute 32 per cent of the province's total production value by 2020 and around 67 per cent of commerce and services.

The special zone will be advertised to attract official development assistance (ODA) and businesses to develop its infrastructure.

The zone has already attracted 360 enterprises, accounting for 40 per cent of those in the province.

"More than 50 projects have received a total investment of US$200 million, already providing 3,500 direct jobs for local people and 3,000 indirectly," Binh said.

The zone's total trade turnover of $245 million ranked the first among border gates in Viet Nam. Industrial production last year was valued at VND430 billion ($20.9 million), accounting for 40 per cent of that in the province.

"The area had no factories before the zone was established. Industrial production value has increased yearly 17 per cent since 2008," Binh said.

He added the establishment of the zone had also helped improve Huong Hoa District's socio-economic development.

"The district's growth rate has been 17 per cent annually, which is one of highest among mountainous districts. Yearly average income increased from VND17 million ($829) in 2001 to VND55 million ($2,680) last year."

The special zone covers an area of more than 15,800 square metres and includes two towns, Lao Bao and Khe Sanh, and Huong Hoa District's five communes of Tan Thanh, Tan Lap, Tan Lien, Tan Hop and Tan Long.

It is also within a strategic area for national defence and security.

It will be divided into four main parts, including the 1,700ha Lao Bao Town focusing on developing trade, export-import services and construction materials.

The 1,340ha Khe Sanh Town will focus on trade and tourism services, agricultural and mechanical production.

An area along National Highway 9 will be used for a border gate, industrial parks, warehouses, vocational training schools, cultural, medical and administrative centres, residential areas and parks. An ecological area for forestry development and eco-tourism will also be developed.

The master plan also maps out development for infrastructure of transport, drainage, waste treatment and solutions to reduce bad effects on the environment.

It also outlines the building of a vocational training school for ethnic people.

Prices rise despite stabilisation effort
 
The HCM City Department of Finance has approved a request by food company Vissan, which participates in the city's price stabilisation programme, to increase the price of pork by 5-10 per cent beginning last Friday.

The price of pork sides has since increased from VNÐ89,000 to VNÐ95,000 a kg and that of pork thighs, from VND84,000 to VND88,000 a kg.

In mid-June, Vissan had petitioned the department to allow it to increase the price of some kinds of pork by 10-15 per cent because the cost of live pigs sold in the market was higher than the stabilised price fixed earlier.

Vissan said it was suffering a loss of nearly VND10,000 a kg on pork products because it was selling them at VND82,000-89,000 a kg while market prices had gone up to VND100,000 a kg.

Over the past month, the department had also approved price increases for eggs from VND27,000 per 10 eggs to VND32,500 per 10 eggs.

Participating firms attributed the increase in egg prices to the scarcity of supply from poultry farms because traders were buying more eggs to sell to China for the coming Mid-Autumn Festival.

Nguyen Quoc Chien, head of the department's Price Division, said these approvals of price increase were based on the City People's Committee's regulations on conditions to increase the price of price-stabilised goods.

Under the regulations, the price of price-stabilised goods will be allowed to increase when the input cost of price-stabilised goods have increased at least by 15 per cent and the adjusted price of price-stabilised goods is 10 per cent lower than market prices.

The price hike of several price-stabilised goods following the increase in market prices shows that several participating companies have not been able to maintain the rates promised under the price stabilisation programme, the Thoi Nay newspaper reported.

It said this was because several participating firms had not secured enough supply of goods by investing in production, and had to depend on suppliers. It was also difficult for them to stabilise prices when their suppliers also increased their prices, the newspaper reported.

Vinh Thanh Dat Food Company, for instance, sells about 4 million eggs under the programme every month, but it has not invested in a poultry farm to produce them. It purchases them from poultry farms in the Cuu Long (Mekong) Delta.

Ba Huan Company now supplies about a million eggs a month. Of this, 20 per cent are produced in the company's poultry farms and the remaining bought from other poultry farms.

Ba Huan advances money to several poultry farms and contracts to buy their eggs, but farmers insist on selling at market prices anyway, making things difficult for it.

Speaking at a meeting held last month to review results of the price stabilisation programme this year, Le Ngoc Dao, deputy director of the Department of Industry and Trade, told participating firms to actively invest in increasing the production of essential goods so they could fulfil their commitments under the programme.

VN, Singapore review progress

The seventh Viet Nam-Singapore Ministerial Meeting on Economic Connectivity, presided over by Vietnamese Minister of Planning and Investment Vo Hong Phuc and Singaporean Minister of Industry and Trade Lim Hong Kiang, was held here yesterday.

Attending the meeting were representatives of ministries, sectors and localities in both nations involved in co-operative activities in the six fields of the Viet Nam-Singapore Agreement on Economic Connectivity (VSAEC), plus major groups and companies in Singapore co-operating with Viet Nam on selected projects.

The two sides informed each other about developments in the past eight months. They also spoke on measures to strengthen economic co-operation.

Viet Nam encouraged Singaporean businesses to invest in the country, aiming to foster equal and mutually beneficial relations.

Signed in 2005, VSAEC focuses on finance, education and training, transport, information technology and communications – and investment, trade and services.

The Ministerial Meeting on Economic Connectivity is organised annually to review the implementation of plans and decide on those for the future.

US lowers dumping duties on tra

The US Department of Commerce has completed its seventh period of review and reached a final decision on reducing anti-dumping duties on Vietnamese tra fish filets, according to the Viet Nam Association of Seafood Exporters and Producers (VASEP).

For the period under review between August 1, 2009, and February 15, 2010, the tax rate was reduced from 2.11 per cent to zero per cent for two companies, Thien Ma Import Export Ltd Co (Thimaco) and the Multinational Investment and Development Joint Stock Co (IDI).

For the sixth period of review, covering August 1, 2008, through July 31, 2009, the tax rate was slashed from 2.44-4.22 per cent to zero per cent for three companies: Vinh Hoan, Vinh Quang and CL-Fish. It was cut to 0.02 per cent for Agifish, ESS LLC and South Vina.

Other companies would continue to be charged at a rate of 63.38 per cent as per the fifth period of review.

VASEP attributed the revision in rates to the Department of Commerce (DOC) decision to shift the country it used for comparison from the Philippines to Bangladesh.

Last month, the price of tra fish fell by VND3,000-5,000/kg despite rising production costs, according to the association. After rising to VND29,000/kg in April, wholesale prices were now as low as VND24,000/kg, causing sizeable losses to breeders, said VASEP.

To keep prices from falling further and protect the interests of breeders, tra exporters had agreed to maintain floor prices in the second half of the year, said the head of VASEP's Freshwater Fish Committee, Duong Ngoc Minh.

The move followed a June 20 meeting among the 25 leading exporters and the fish breeding associations of An Giang and Dong Thap provinces in which they had agreed to buy fish weighing up to 850g at a price of at least VND26,000/kg, he said.

Viet Nam expected to export 300,000 tonnes of tra fish for the first half of this year, earning $800 million, VASEP said. Exports were expected to increase an estimated 4.7 per cent in volume and 24.7 per cent in value.

Tight credit puts pinch on property market

High interest rates and tighter credit are lowering the liquidity of real estate and pushing a number of housing developers into bankruptcy, according to experts at a seminar held in Ha Noi last week by the Viet Nam National Real Estate Association.

Tran Kim Chung of the Central Institute for Economic Management said that after three years in the doldrums, the nation's real estate market was badly in need of capital to recover and continue developing.

In order to curb inflation and stabilise the economy, the Government has ordered commercial banks to tighten credit for the real estate market and other non-manufacturing purposes. Last week, banks were required to show that such loans were less than 22 per cent of their total outstanding loans, a figure that they would be required to reduce to 16 per cent by the end of the year.

Because of this requirement, an estimated VND10 trillion (US$477 million) has been diverted from lending to the real estate sector.

Deputy Minister of Construction Nguyen Tran Nam also said that by tightening the real estate sector's access to credit, banks were increasing the likelihood that real estate developers would default on earlier loans. Projects were likely to become stagnant as developers were unable to work without access to financing, and many of these would likely be high-end residential projects that depend on bank financing being available to potential buyers.

Therefore, developers have complained that the market for their projects has dried up and that many were facing default on existing bank loans. Nam suggested that policies be more flexible to prevent this and ease the crunch on the real estate market.

Minister of Construction Nguyen Hong Quan has sent a letter to the State Bank of Viet Nam seeking more favourable conditions for the market. The letter suggests that the central bank adjust the proportion of loans appropriate to each industry's legitimate needs instead of placing a moratorium on all non-productive sectors.

Outstanding loans to the real estate sector totalled VND222 trillion ($21 billion) at the beginning of last month, according to the SBV.

Robusta export market frozen
 
The price of Robusta coffee beans fell to VND50,600 (US$2.4) per kilo in the Central Highlands of Viet Nam, VND600 under its quotation on last Friday.

The fall came in line with the lower price at the close of London's Robusta futures market on the last trading day last week.

London's futures market for robusta coffee rose sharply early last week following rumours about frost in the southern part of Brazil, the biggest coffee producer in the world.

The forecasts later downgraded the intensity of the chilly weather there and led coffee prices to lose $26 on futures markets of London for robusta last Friday, but up $153 per tonne for the week.

"The current coffee price in the local market, equivalent to $2,462 per tonne, does not encourage exports. It's too far from the level that can match the bids of foreign buyers," said Tran Quang Sang, a coffee exporter from HCM City.

The FOB (free on board) price of Vietnamese robusta coffee Grade 2, with 5 per cent black and broken, was quoted at minus $50-40 per tonne, discounted to the level of the trading month of the futures market, or about $2,420 per tonne compared with the closing price of London's terminal market.

Last Friday, it was $2,472 basis for September 2011. In London terminal market, robusta coffee is traded for deliveries for six months, in January, March, May, July, September and November. Beginning last Friday, September 2011 became the main trading month for coffee forward contracts.

The local market was very high due to narrow inventory of about 100,000 tonnes.

"Though frost intensity in Brazil has been downgraded by weather forecasters, the high price of robusta coffee in the local market is freezing export activities," Sang said.

Viet Nam, the world's second largest coffee producer and exporter behind Brazil, produces mainly robusta coffee, which is often used for blending.

During the first six months of this year, the country exported 913,000 tonnes of coffee beans, earning $2 billion in turnover, according to the Ministry of Agriculture and Rural Development.