VN30 shares rise above domestic market growth

Stocks tracked by the VN30 outperformed market growth, said Phan Thi Tuong Tam, general director of the HCM City Stock Exchange.

During the past three years, those stocks saw 10.3 per cent growth, while the VN-Index – the benchmark for the entire HCM City market – increased only 3 per cent. Over half of these 30 largest shares rose higher than the market average.

Despite the downturn of the economy and market turmoil, listed firms in the VN30 had relatively high profits this year. Eight of them were among the top 10 companies by profit. Their return on equity (ROE) ratio reached 9.45 per cent compared to the market average of 8.37 per cent.

Tam said that 15 of the 30 blue chips were included in the ASEAN Stars, which tracks the region's 180 large-cap stocks. In addition, the exchange often organised visits to international financial hubs for the companies.

These shares served as "the backbone of the market", said Vu Bang, president of the State Securities Commission.

"With their transparent management, they attracted more foreign investors and contributed to limiting price manipulation," he said.

Bang encouraged large firms to list shares, saying listing would boost companies' management and funding abilities as well as their capacity to attract foreign investors.

The commission implemented many policy changes to increase the quality of listed shares, such as urging higher listing standards and signing bilateral and multilateral partnerships.

However, Bang requested companies be more active in advertising themselves to foreign investors.

FDI wood exporters outstrip lagging domestic companies

The country's wood exports enjoyed an impressive turnover in the first nine months of the year, bringing in US$2.6 billion.

As a result, Viet Nam ranks top in Southeast Asia and second in Asia, after China, in terms of wood product exports.

However, local enterprises were left in the shade by firms backed by foreign direct investment.

According to Customs of Viet Nam figures, wood product exports reached over $305 million in September, outstripping rice and coffee.

Local wood companies are losing out in the competition with FDI enterprises. Of this year's total turnover, FDI enterprises made up $1.67 billion, around 64 per cent, while domestic firms continued to lose ground.

It's been reported that FDI enterprises from Taiwan, the US and UK have been working to full capacity to meet the deluge of orders they've received.

Vo Truong Thanh, general director of Truong Thanh Furniture Corporation - one of the biggest local wood processing businesses - said he had missed out on hundreds of export contracts worth over $50 million as the company lacked the finances to undertake big orders.

In light of the economic downturn, Thanh said he had been unable to take out loans from banks to access the funds.

"The larger financial resources and management capabilities of FDI firms are seen as one of the key reasons for their success," said Thanh. "Their contacts and distribution systems in major markets give them a greater advantage."

In spite of the difficulties, chairman of the Binh Duong Wood Export Association Huynh Quang Thanh still believed there were opportunities as "exports are much better now with more orders from the United States, Japan and Europe".

He felt local enterprises should now update their technology and restructure to be able to process big orders in the future.

Import tariff lines enjoy duty cuts

Viet Nam has reduced import duties to 0-5 per cent on more than 10,000 tariff lines, or 98 per cent of the total, in accordance with the ASEAN Trade in Goods Agreement from 2008.

The figures were made known by Deputy Head of National Committee for International Economic Co-operation Trinh Minh Anh at a seminar on the development of the ASEAN economic community held by the Ha NoiNational University (HNU).

Anh said Viet Nam is one of several ASEAN members to have successfully completed the ASEAN Economic Community (AEC)'s commitments. Other members include Malaysia, the Philippines, Singapore and Thailand.

It's reported that although the form of AEC will strongly affect people living in the bloc's member nations, the awareness of the society and businesses community still remains limited.

A survey made by the ASEAN Secretariat in 2012 revealed that 76 per cent of the surveyed participants had not clearly known about AEC, and only 55 per cent of businesses had understood the basic role of ASEAN.

Director of HNU Pham Hong Son said VietNam had been facing many challenges when taking part in the AEC because its development standard and competitive capacity are lower than some other ASEAN countries.

Domestic businesses also suffer from weaknesses in the country's infrastructure, labour force and mechanisms.

"If Viet Nam solves the above problems by restructuring the economy and renovating the growth model, I believe that the country will be able to take advantage when it integrates into the AEC by 2015," said Son.

In addition, it was stated that Viet Nam needs to push up administrative reform, especially in the fields of trade, service and investment in order to improve the economy's competitiveness as well as make a way for the implementation of trade liberalisation when ASEAN market is formed.

HCM City banks' bad debts still high

Non-performing loans (NPLs) accounted for 5.99 per cent of the total loans of HCM City-based banks in the first nine months of this year, said Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam's HCM City branch.

During a meeting between representatives of HCM City-based banks and the local National Assembly delegation on Monday, Minh said that borrowers of the bad debt were mainly real estate firms, consumer firms and small- and medium-sized firms.

Finance leasing companies had the highest bad debt ratios among credit institutions with bad debts accounting for more than 44 per cent of their total outstanding loans in the first nine months – seven times the ratio of the city's whole finance-banking industry.

Foreign banks had the lowest NPL ratio of 2.93 per cent, according to Minh.

However, experts said that the public should not be concerned about the sky-high bad debt ratios of financial leasing companies, as their assets only accounted for about 4 per cent of the total assets of all credit institutions.

The main clients of these companies are enterprises that need specific equipment, such as that used in construction, textile and garment production and shipbuilding.

A senior executive of Vietcombank's finance leasing company, who declined to be named, said the current legal framework had only loose asset leasing provisions, meaning risk for the companies was high.

Banks in HCM City are expected to sell as much as VND6 trillion (US$272.72 million) worth of bad debts to the Viet Nam Asset Management Company (VAMC) before the end of the year.

Besides SCB and Southern Bank, which sold VND1.3 trillion ($59.09 million) of bad debts to VAMC late last week, other lenders including Vietcombank and Navibank also plan to ease their bad debt burden by selling NPLs to the debt trading firm.

In the first half of this year, 14 commercial banks in the city set aside VND2.3 trillion ($104.54 million) in provision for loan losses and used the provision to tackle nearly VND1 trillion ($45.45 million) of bad loans.

VN vows to assist Chinese investors

Viet Nam was willing to create the most favourable conditions for Chinese enterprises to foster bilateral relations in economy, trade and investment with local partners, PM Nguyen Tan Dung told a meeting yesterday in Ha Noi.

Two-way trade and investment ties, despite experiencing significant achievements in recent years, had failed to match the expectations and potential of the two countries, the PM said.

He suggested that the two business communities should speed up co-operation, especially when Viet Nam was making efforts to conclude several important agreements such as the Free Trade Agreement with the EU and the Trans – Pacific Strategic Economic Partnership Agreement.

These agreements, once effective, would open up huge business opportunities for Vietnamese firms and foreign companies, including Chinese, he said.

During the event, Chinese Premier Li Keqiang spoke highly of relations between the two countries, particularly in trade and investment, adding that China always welcomed Vietnamese investment.

China is now Viet Nam's largest trade partner, while Viet Nam is one of China's most important trade partners within the ASEAN bloc. Bilateral trade is well on track to reaching the target of US$60 billion turnover by 2015.

Vietnamese, Chinese companies build coal-fired power plant

The Vinh Tan 3 Energy Joint Stock Company (VTEC) has teamed up with the Chinese Harbin Electric Company to build the US$1.1 billion Vinh Tan 3 coal-fired thermal power plant in central Binh Thuan Province.

At a contract-signing ceremony in Ha Noi on Monday, Hoang Quoc Vuong, chairman of Viet Nam Electricity (EVN) said the plant will consist of three turbine groups with a capacity of 1,980MW.

The plant will use imported coal to generate over 12 billion kWh a year, which will help ease power shortages in the southern region.

Construction would start in the third quarter of 2014, and the plant's first turbine was expected to go into operation in 2018, he said.

Regulations released for overseas workers

Circular No 21/2013/TT-BLDTBXH ("Circular 21"), regulating the cap of escrow deposits and labour markets that a Service Enterprise can negotiate with Vietnamese workers, was promulgated on 10 October 2013.

According to Circular 21, a Service Enterprise means an enterprise that is licensed for sending Vietnamese worker(s) to work overseas pursuant to the contract(s).

The principles of lodging an escrow deposit are set forth in Circular 21; accordingly, (i) the escrow deposit must be lodged upon the business line and the country where a Vietnamese worker will work, and (ii) the amount of the escrow deposit shall not exceed the highest rate stipulated in Circular 21.

Under Annex 1 of Circular 21, the highest escrow deposit applicable to several labour markets and business lines shall be from US$300 to $3,000, or equal to the price of one-way flight ticket from the host country to Viet Nam.

In case a worker does not lodge the escrow deposit or cannot afford to lodge the escrow deposit, the Service Enterprise may demand certain guarantees in compliance with the Joint Circular No 08/2007/TTLT-BLDTBXH-BTP dated 11 July 2007 of the Ministry of Labour, Invalids and Social Affairs and the Ministry of Justice guiding on the Content and the Liquidation of Guarantee Contracts for contract-based workers employed overseas.

The use of escrow deposit money must comply with the provisions of Joint Circular No 17/2007/TTLT-BLDTBXH-NHNNVN dated 04 September 2007 of the Ministry of Labour, Invalids and Social Affairs and the State Bank of Viet Nam on the management and utilisation of the deposits of enterprises and contract-based Vietnamese workers employed in foreign countries.

The Service Enterprise shall be responsible for reporting periodically or occasionally (if requested) on the implementation, management and use of the escrow deposit paid by Vietnamese workers.

This report must be annually sent to the Department of Overseas Labour – the Ministry of Labour, Invalids and Social Affairs before June 20 and December 20.

Circular 21 shall be effective from 1 December, 2013.

New regulation on social marketing products

From October 20, retail prices of social marketing products must be printed on packaging.

This is provided in the Ministry of Public Health and the Ministry of Finance's Joint Circular No 25/2013/TTLT-BYT-BTC from September 4, stipulating the financial management of social marketing activities for contraceptive devices and products for HIV/AIDS and preventing sexually transmitted diseases.

Retail prices and the subsidies for each product label must suit each period after being appraised by evaluation councils and decided by the Ministry of Health.

The Social Marketing Management Agency must determine prices of aid goods imported without fixed unit prices.

The rate of contributions to the state budget per each social marketing product must not be lower than 30 per cent of its retail price.

Social marketing products that have not been sold as planned will be carried forward to the following year while expired products will be disposed of under the current regulations on disposal and destruction of expired medicines.

First BPO joint venture debuts in Ha Noi

The first business process outsourcing (BPO) joint venture in Southeast Asia, F-AGREX Global, was officially launched on Sunday in Ha Noi.

The venture is a collaboration between AGREX, a Tokyo-based member of IT Holdings (ITHD) of Japan and FPT Software of Viet Nam.

This joint venture has a charter capital of US$2 million, with FPT software holding 51 per cent and remainder owned by the Japanese partner.

Ha Giang to host Viet Nam-China international trade fair

The 2013 Viet Nam-China International Industry and Trade Fair will take place in northern border Ha Giang province from October 25-31.

The event will showcase high quality consumer goods, plus agricultural and industrial products in 570 booths.

It is expected to provide local companies with an excellent opportunity to introduce their products, seek business partners and expand markets.

Seminars on trade and industrial promotions in 28 northern provinces will be held on the sidelines of the fair.

$26m to be pumped into Tra Noc Industrial Zone

The Cuu Long (Mekong) Delta city of Can Tho have recently green lighted four investors to add approximately US$26 million to their projects in the municipal Tra Noc Industrial Zone.

The zone is now home to 183 projects with a combined investment capital of $1.6 billion. Of the total, 168 are already operational, while the remainder are now under construction.

Over the past nine months, zone-based enterprises have posted over $800 million in revenue, with $294 million coming from exports.

Vietnam restructures rubber industry

The increasing global rubber demand in recent years has encouraged Vietnam, the fifth biggest natural rubber producer in the world in 2012, to restructure the industry to increase export value and improve value chain . Report by the Vietnam Economic News.

Vietnam Rubber Group General Director Tran Ngoc Thuan said that to restructure the industry, implementing mergers and acquisitions (M&A) deals with small companies, associating with major brands, reducing crude production and diversifying products to improve added-value and ensure sustainable development were needed.

Thuan also said that the group agreed with the restructuring project of the Ministry of Agriculture and Rural Development. However, in terms of the cultivation sector, the ministry must have appropriate views.

The cultivation sector currently accounts for 72 percent of the GDP of the agricultural sector. Therefore, it needs to confirm the role of businesses involved, especially in the fields of processing and creating a brand, building added-value chain and improving international competitiveness. It is difficult to maintain growth, increase income, eliminate food shortage and reduce poverty for rural households throughout the country when lacking the role of businesses.

In terms of competitive capacity of the rubber industry, Thuan said that Vietnamese rubber stood at top five in terms of area and top five in terms of exports. In addition, rubber production in Vietnam reached 1.75 tonnes of latex per hectare. Management and technology have basically met practical requirements.

High dependence on the Chinese market with 60 percent of exports to this market remains a weakness of Vietnam’s rubber industry. Therefore, promoting the exploitation and expanding the market are needed in the restructuring project.

The government assigned the Vietnam Rubber Group to develop 500,000 hectares of the tree by 2015. However, this goal seems infeasible in the context of current economic difficulties, and needs to be adjusted. The group’s point of view is to improve the quality of varieties, production and added-value chain.

To improve value chain for the industry, implementing M&A deals with small companies and linking to major brands to be able to produce competitive products are needed. In addition, the rubber industry should focus on constructing industrial infrastructure and manufacturing tire.

The group will focus on producing Medium-density fiberboard (MDF) in Quang Tri, Binh Phuoc and Kien Giang provinces. Moreover, research to expand business and production activities in the central region is necessary. The group strives to account for 50 percent of MDF output providing to the domestic market by 2015 and produces wooden boards and bars to diversity products.

Vietnam’s rubber industry strives to reach sales of 150 million VND (7,100 USD) per hectares. To build a brand for Vietnamese rubber, the group has successfully registered “caosuvietnam” brand name in some major markets.

According to Thuan, closely managing available rubber area is also an important point in the restructuring project, helping ensuring the quality of varieties and production.

The industry’s restructuring project only mentioned rubber areas in southeastern region and the Central Highlands. Therefore, Thuan proposed to add the south-central coast, the north-central coast and northern mountainous provinces into the list, adding that the establishment of a management agency on rubber is needed.

Central Highlands aims to harvest 1 mln tonnes of coffee

Provinces in the Central Highlands have set a target of harvesting more than 1 million tonnes of coffee in the 2013-2014 crop.

According to the Central Highlands Steering Committee, the region has almost 552,000 hectares of coffee plants. Dak Lak boasts the largest area with 202,000 ha, which produce 450,000 tonnes of beans.

Vietnam had more than 622,000 ha of coffee with an average yield of 2.35 tonnes per hectare at the end of last year, according to the Ministry of Agriculture and Rural Development.

The country has an estimated 86,000 ha of coffee plants that are more than 20 years old.

In the first six months of this year, Vietnam exported about 91,000 tonnes of coffee.

Last year, the country shipped 1.73 million tonnes, bagging a the total export value of roughly 3.8 billion USD.

Vietnam surpassed Brazil to become the biggest coffee exporter at the beginning of 2012’s third quarter.-

ODA for Vietnam totals 80 billion USD

The official development assistance (ODA) received by Vietnam from 1993 to 2012 amounts to 80 billion USD, the Ministry of Planning and Investment has reported.

The Red River Delta received the highest proportion of the aid, 10.42 billion USD. Meanwhile, the Central Highlands received the least, with 1.36 billion USD.

ODA has helped Vietnam rise from a low-income country to become one of the world’s lower-middle-income economies, the ministry said.

At present, Japan remains the largest bilateral investor in the country, while the World Bank tops multilateral investors.-

KPMG named ‘Best Advisor for Taxation Services Globally, in Asia and Vietnam’

KPMG has been named the ‘Best Advisor for Taxation Services Globally’ at the 2013 Euromoney Real Estate Awards.  

For the ninth consecutive year, Euromoney has surveyed its readers – corporate and financial decision makers in more than 160 countries – to identify the best advisors, developers, and banks in the real estate market on a global, regional and individual country basis.

KPMG has also been awarded the ‘Best Advisor of Real Estate Taxation Services in Asia’ and the ‘Best Advisor of Real Estate Taxation Services’ in China, Japan, India, Vietnam, Korea, New Zealand and Taiwan.

This award marks an important milestone in the development of KPMG in real estate taxation services and further demonstrates KPMG’s commitment to remain as a leading professional advisor services firm in Vietnam.

“All over the world, KPMG's member firms have made long-term commitments to become the leading professional services firm in each market in which they operate. In Vietnam, we have had a role in every major property project or deal in the country, and we intend to stay that way,” said Warrick Cleine, CEO of KPMG in Vietnam and Cambodia said.

ODA assists transport, post, telecom development

The transport and post and telecommunications sectors have led others in attracting the Official Development Assistance (ODA) loans as they have got as much as US$16.47 billion or 23% of total ODA secured by the nation over the past 20 years, according to the Ministry of Planning and Investment.

In the period from 1990-2015, the transport sector has launched 132 projects using a total ODA of US$17 billion. To date, 83 projects worth US$5 billion were completed while 49 projects valued at US$12 billion are underway.

ODA has in recent time helped Viet Nam recover crucial transport projects, contributing significantly to the nation’s economic growth rate.

Scores of life-line transport facilities have been upgraded, such as National Highway1A, Noi Bai International Airport Terminal 2, Nhat Tan Bridge, Ho Chi Minh City – Long Thanh –Dau Giay Expressway, Da Nang-Quang Ngai expressway, Cat Bi international airport, Ha Noi Railway Station and Hai Van Tunnel.

Technical assistance regarding the building of bridges, roads, seaports and airports as well as management skills have been transferred to the Vietnamese side in a bid to enhance the  capacity of the transport construction companies.

Besides large-scale transport projects, transport development projects in rural areas have been financed by the World Bank, Asian Development Bank and Japan International Cooperation Agency. These projects have helped farmers reach new markets.

In 1993-2013, the post and telecommunication sector has carried out 16 ODA-funded projects, of which nine were completed.

In 2010, the Swedish Government spent SEK8.5 million to support the Viet Nam Media Training Centre in providing short-term training courses and seminars in press management in three years.

In the 2004-2007 period, the Republic of Korea (RoK) doled out US$10 million to help Viet Nam build the Viet Nam-RoK Friendship Information Technology College in the central city of Da Nang. In 2012, though the Korea International Cooperation Agency (KOICA), the RoK Government came up with US$6.2 million to finance the upgrade of the college and the provision of training courses.

ODA-funded programs and projects in post and telecommunications have contributed to the sector's efforts to realize successfully its integration and development strategy.

Home buyers show no fears during ‘Ghost’ month

The apartment for sale segment is showing signs of recovery, with a significant increase in the sale of units in Hanoi and Ho Chi Minh City over the same period last year.

Ho Chi Minh City has seen spectacular growth in apartments for sale, with for the first time in the last three years, the number of apartments sold exceeding Hanoi.

Initial statistics from Savills indicated that during the first nine months of the year, real estate developers in Ho Chi Minh City sold more than 4,100 apartments, a 45 per cent rise against the same period last year.

Although lunar July is traditionally an inauspicious period for buyers to spend cash, the majority of units sold this year fell in the third quarter when more than 1,800 apartment units were sold in Ho Chi Minh City.

Savills claimed sales had been very positive in Hanoi with 11 per cent growth on the same period last year despite the superstitions associated with the ‘ghost’ month of July, because real demand existed, and buyers wanted to take the opportunity to secure accommodation at the lowest point of the market.

Indochina Land, the developer of the high-end Indochina Plaza Hanoi, announced they had sold 11 units in lunar July, taking the total number of units sold since the beginning of this year to an impressive 61.

According to CBRE, in the first nine months of this year, around 3,500 units were sold in Hanoi.

Explaining Ho Chi Minh City’s rapid sales, Marc Townsend, managing director of CBRE said that it was because the developers in the south had been more active, launching flexible and attractive promotion campaigns to woo customers.

For example, Phu Long Real Estate Company was offering a raft of incentives to buyers at their Dragon Hills project in Ho Chi Minh City with a price of VND25 million per square metre. Buyers have to pay only 30 per cent in advance, while the remainder can be paid in three years including the first year of interest free payments.

While such offers have been applied by many developers in Ho Chi Minh City to increase sales volumes, developers in the north had been less generous.

Hyundai Hillstate in Hanoi’s Ha Dong district is one of the few projects which allow customers to make a 30 per cent down-payment, while also benefiting from a year of interest free instalments.

However, CBRE noted changes in Hanoi market with more transactions in the high-end segment. High-priced products from $2,000 per square had gone through several quarters of stagnant sales activity, but positive sales in upper-end projects such as Lancaster, Indochina Plaza Hanoi, and especially Royal City were recorded in the third quarter. Another highlight is Hoang Thanh Tower project, which has made over 15 transactions of large units at over $4,100 per square metre since its launch one week ago.

CBRE said the sudden surge in market appetite for high-end products might indicate a few things. Firstly, demand and affordability for high-end products still exists, especially as standards of living continually improve. Secondly, good-value-for-money presents as a key to selling.

Richard Leech, executive director of CBRE in Hanoi said that with the large volume of unsold units, sooner or later, developers in Hanoi would have to follow Ho Chi Minh City with more flexible sales approaches.

Although many developers have stopped or slowed construction, Hanoi witnessed a record high of units completed this year.

Initial figures showed that around 13,000 units were completed in the third quarter, dramatically up on the 8,000 across last year.

While the number of developers in Ho Chi Minh City is larger, in Hanoi despite the number of completed construction projects being fewer, the number of units in each project is greater, leading to the remarkable increase in the number of completed units.

For example, a total of 8,500 units were provided by the Vingroup’s Royal City and the first phase of Times City.

Other large scale projects include Le Van Luong Residentials with 2,000 units, Mandarin Garden with 1,000 units, Mulberry Lanes with 1,500 units, Nam Do Complex with 1,000 units and Hyundai Hillstate with 928 units.

According to Savills, total future supply during 2015 and onward would reach approximately 82,000 units from 100 projects, with the main stocks located in Ha Dong and Tu Liem districts which will occupy 45 per cent of total supply.

SOE share sell-off gets mixed review

Foreign experts and consultants have welcomed the proposal to sell stakes in state-owned projects to private domestic and foreign partners.

The Vietnam Association of Financial Investors (VAFI) recently advised the government to sell additional stakes in well-performing state enterprises and to

off-load more high-street real estate in order to replenish the state budget.

VAFI proposed that Hanoi and Ho Chi Minh City authorities should sell their stakes in outstanding properties located in the city centres, in order to raise finances to invest in infrastructure.

Properties would include shopping centres, big hotels managed by state-owned enterprises or city stakes in joint ventures. City authorities currently hold stakes in the Hanoi’s Daewoo and Metropole, and Ho Chi Minh City’s Rex and Caravelle hotels.

John Sheehan, management consultant from Global Commercial Real Estate based in Hong Kong said that the idea of selling ownership stakes in well known, city centre hotels made complete sense.

“Hotels are best run by hospitality professionals, while reinvesting the money in better public infrastructure would also improve the city for the benefit of all the people and the local economy,” Sheehan told VIR.

However Sheehan suggested the government should however be careful when considering the proposal.

“For me the big issue is to make sure that the hotels are sold in a transparent manner through competitive bidding where the best price is achieved. Involving foreign investors will make sure that the Vietnamese people will achieve the highest price on sale,” he said.

“Best price, highest and best use, which creates additional funds for expenditure in better public facilities, is a win-win for everyone,” he said.

According to VAFI secretary general Nguyen Hoang Hai, the bitter management lessons provided by the Vinashin and Vinalines disasters, in which the state had to pay roughly $7 billion to learn, definitely stand. If the government stonewalls the sales, their asset values would collapse and they will have to make further borrowings to invest in the economy.

Leon Cheneval, associate director, CBRE Vietnam, said cities in general implement plans to fund infrastructure and selling assets is one of several options. Development fees can be charged, as can taxes on well-structured public infrastructure plans, so selling assets is not necessarily the immediate answer or solution.

He said cities could consider relocating some schools, hospitals and ministries from the city centre thereby improving community facilities on what would be less valuable but more accessible land, while utilising prime city centre sites for a combination of public-private development with a strong emphasis on beautifying the city.

Su Ngoc Khuong, associate director of Savills Vietnam’s investment department also said the sale of city stakes in prime properties was only one of many choices that the government could make.

He said although investing into infrastructure was crucial to the development of the cities, it was too early to conclude whether sale of a city stake in prime properties was a good solution or not. More important was how the proceeds from the sale of the assets would contribute to fund-raising and how the funds would be utilised.

“We also have to take into account the fact that those properties have been allocated to state-owned enterprises, and as a result there would have to be some consideration involved at a corporate level. The pros and cons should always be considered in both the medium and long term to determine the best strategy to raise funds for the state budget,” said Khuong.

C&W upbeat on property trends

Vietnam’s real estate market appears to still be enduring a difficult period but there are encouraging signs that suggest the bottom of the market has arrived, said real estate firm Cushman & Wakefield.

“The Vietnamese government has successfully stabilised the macro-economy. However, this must be tempered with a note of caution as a shock rise in inflation could ruin this emerging confidence,” said Jonathan Tizzard, national head of research and valuation at Cushman & Wakefield Vietnam (C&W).

The bottom line of the real estate services firm’s report for the third quarter of 2013 was that they believe the bottom of the market cycle to have arrived. However, C&W Vietnam general manager Chris Brown acknowledged that it was difficult to verify this with certainty.

In the office sector in Ho Chi Minh City, the average asking rent of Grade A decreased by almost 5 per cent quarter-on-quarter, and 7 per cent in comparison with the same period in 2012, to stand at around VND960,000 ($45.6) per square metre per month, according to the report. Grade B rents also continued their downward trend, decreasing by around 1 per cent quarter-on-quarter and by some 8 per cent year-on-year, standing at VND523,000 ($24.8) per square metre per month.

Tizzard commented, “The Ho Chi Minh City office segment has reached the bottom and improvements have already started to show; a busy final quarter in terms of leasing activity is expected, paving the way for a recovery in the office market in 2014. Tenants are urged to secure competitive lease terms before the market turns.”

In the third quarter of 2013, the Hanoi office market saw no new supply entering the market. In comparison with the second quarter, asking rents for both Grade A and B went down by 0.5 per cent and 2 per cent, respectively.

It is forecast that the average rent for all grades is likely to follow a downtrend in the coming time due to high vacancy rates in existing office buildings, said Tizzard.

In the retail sector, the report said about 90 per cent of Hanoi shopping centres were occupied in the third quarter, a 1 per cent fall from the second quarter. Occupancy rates of shopping centres in Ho Chi Minh City decreased by 1 per cent quarter-on-quarter, reaching 85 per cent while remained stable for retail podiums, at 97 per cent.

Tizzard said rents remained unsustainably high in many fringe locations and a correction was needed in order to attract tenants and increase absorption rates. However, the core business district’s retail markets in Hanoi and Ho Chi Minh would keep performing well.

Brown elaborated that world-renowned fashion brands would not leave the core business district due to high rents because they had to maintain their image and presence.

He added his company was working on a deal for a world famous fashion brand to enter Vietnam, but declined to reveal its name, when it would enter or its possible location.

In the industrial sector, the supply of industrial parks (IP) in Hanoi had a total of land lease availability of about 474 hectares, up 3 per cent compared to the second quarter. This third quarter witnessed a slight reduction of 1 per cent in rental rates compared to the second quarter at nearly VND2.25 million per square metre.

In the apartment sector, the report claimed that the oversupply continued in the third quarter. However, developers are exploring new ways of enticing customers and the government remains committed to helping this sector.

The firm said the rest of 2013 and early 2014 was expected to remain a buyers’ market across the residential sector. Given the recent proposed regulations of the Ministry of Construction expanding the right for foreigners to own property in Vietnam, and the increasing credit growth, it is expected the market could warm in the medium term.

Brown added that the beginning of the transferring of non-performing loans to the Vietnam Asset Management Company would boost confidence in the market place.

Expos the convergent point for modern machines

Thousands of machines and equipment of new technology of 500 brands coming from 25 economies are being showcased at the four exhibitions opened on Thursday at Saigon Exhibition and Convention Center in HCMC’s District 7.

What is notable at this year’s exhibitions is the participation of several foreign suppliers of products in supporting industries.

The Business Alliance for Supporting Industry expo consists of over 90 booths of Vietnamese and Japanese enterprises operating in supporting industries like metalworking, electronic components and machinery.

Besides, this is the first time 85 leading Indian engineering enterprises under India’s Engineering Export Promotion Council (EEPC) have arrived to showcase their products at the engineering product expo INDEE Vietnam 2013.

According to chairman of EEPC Anupam Shah, some of these firms have supplied components for automakers like BMW, Toyota and Honda. Enterprises under EEPC also see opportunities and huge potential in the Vietnamese market via this exhibition.

Besides, the metalworking solutions exhibition Metalex Vietnam 2013 and the exhibition Nepcon Vietnam 2013 on testing technology and related electronic branches also attract a high number of foreign exhibitors.

According to Pho Nam Phuong, director of the HCMC Investment and Trade Promotion Center (ITPC), Vietnam is in dire need of supporting industries, as most manufacturers in Vietnam have to import materials and components for production.

Vietnam’s textile-garment and footwear sector exports billions of U.S. dollar worth of products each year but a big proportion of this amount is used to import materials and components, Phuong said.

Similarly, Vietnam has around 210 suppliers of components and accessories for 50 auto manufacturing and assembling enterprises but most of such components and accessories are simple and have low technological content. Therefore, the local auto manufacturing has to import nearly US$2 billion of components a year.  

Taking about this issue, Hirotaka Yasuzumi, managing director of the Japan External Trade Organization (JETRO) in HCMC, said that the poor development of supporting industries in Vietnam has hindered foreign investments, though the country holds big potentials for Japanese companies.

A survey conducted by JETRO shows that local contents for Japanese-invested manufacturers in 2012 accounted for only 28%, while the proportion of supplies from Vietnamese firms was only 12.6%.

The four expos are organized at Saigon Exhibitions and Conventions Ceter in HCMC’s District 7 by Thailand’s Reed Tradex, JETRO and ITPC.

Direct shipping services to U.S., EU to resume

Goods transport directly from the Cai Mep-Thi Vai port complex to the U.S. and the EU will resume next year after a period of interruption.

According to a representative of CMA-CGM Vietnam, each week the line will have two major vessels of 8,000-9,000 TEUs transporting export goods from the port complex to the U.S. from next year’s second quarter and the EU from next September.

The Vietnam Maritime Administration has recently asked CMA-CGM Vietnam to draw up a plan for operating ships from the complex to the U.S. and EU from next year.

According to the representative, the resumption of direct sea transport from Vietnam to the U.S. is now ready. However, shipping demand is normally low from January to March.

CMA-CGM, Maersk Line and MSC are members of the shipping alliance called P3 Network active on Asia-Europe, trans-Pacific and trans-Atlantic routes. With this network, goods transport from Vietnam to other countries can be sped up as enterprises could choose vessels of any member firms of the network.

Since the Cai Mep-Thi Vai port complex started to receive goods in 2009, shipping lines have continuously opened direct sea links between Vietnam and major markets such as the U.S. and the EU.

In the past two years, 15 direct weekly services have been launched. However, as transport volume is not as high as expected, shipping firms have gradually scaled down their services.

Local plastic items hold 90% market share

The amount of household plastic items produced by local enterprises currently accounts for up to 90% domestic market share.

According to the Ministry of Industry and Trade’s report on the plastic sector in January-September, local plastic products had an edge over imports from China, Indonesia and Thailand.

To achieve this, plastic producers have made full use of the campaign encouraging Vietnamese consumers to use Vietnamese goods, provided high-quality products and good after-sale services and regularly participated in fairs to build links with consumers, according to the ministry.

Speaking to the Daily, the director of a plastic company based in HCMC said that such high market share reflected effort of enterprises over the past time.

“We do not have official statistics on the domestic market but plastic household items of local enterprises occupied only 50% of the market share five years ago. But now the market share has increased considerably,” he said.

An advantage of local products is prices that are 20-30% lower than imports of same quality as local producers have invested in new technologies to improve quality.

In the past, many local enterprises paid attention to export markets only, not local consumers. The economic crisis has forced many of them to turn back to the domestic market.

According to Vo Van Duc Tam, director of Cho Lon Plastic, the domestic market remains big. There are more consumers using Vietnamese-made products thanks to a conviction that local products are safer than imports from some countries.

HCM City banks restructure VND100 tril. of bad debt

Banks in HCMC as of September 30 maintained normal status of over VND100 trillion worth of loans that should have been classified as bad debt.

According to the central bank’s HCMC branch, the bank has made the move following the central bank’s Decision 780/QD-NHNN on debt restructuring, helping enterprises avoid overdue interest rate payments and continue taking out bank loans.

Over VND106 trillion worth of debt of over 6,200 borrowers were kept in group 2 in which debt needs special attention, instead of being moved into group 3 of substandard debt. The figure increased 22% against the end of 2012 and accounted for 11% of total outstanding loans.

Adding to bad debt in the city at nearly 6% as of the end of August, the real bad debt ratio is up to 17%.

However, when the central bank’s Circular 02/TT-NHNN with stricter requirements on provisioning against risks and bad debt classification takes effect in June, Decision 780 will end its validity. At that time, all debts will be restructured and classified into the correct groups, sharply boosting the bad debt ratio of the city compared to the current 6%.

According to a report of the central bank’s HCMC branch, rising bad debt has hindered enterprises in reaching loans. Therefore, the branch has suggested the central bank speed up the restructuring of banks and the handling of bad debt at banks.

The branch has also organized many programs to help local enterprises gain access to bank credit. Up to now, the programs have been organized in 24 districts with over VND13 trillion worth of loans provided for 531 enterprises, 68 family-run businesses and one cooperative.

The borrowers have enjoyed short-term lending rates below 9% per annum and medium and long-term rates from 9-12% per annum.

As of September 30, the branch had seen 203 enterprises in the city needing over VND3.4 trillion, of which local banks gave over VND3 trillion worth of loans to 149 enterprises.

Border trade buoys rice prices

A decline in rice exports via official channels has led local enterprises to switch to exporting large volumes of the food staple to China via border trade, fueling an improvement in local rice prices.

The Vietnam Food Association (VFA) has warned against difficulties in rice exports via official channels recently.

There are no official statistics on total rice volume exported to China. However, Lam Anh Tuan, director of Thinh Phat Company in Ben Tre Province, said that the figure may be 500,000 tons or more in the past month.

“This year, the total rice volume exported to China via border trade must be really high,” Tuan said.

According to rice exporting companies in the Mekong Delta, China has had strong rice import demand through border trade while domestic supply is limited. Therefore, rice prices in the country have increased strongly in recent weeks.

Rice prices in the delta have picked up by VND400 per kilo while unhusked rice has marked up by over VND300 a kilo. Meanwhile, the summer-autumn output is running dry while that of the autumn-winter crop is mainly used for domestic consumption, Tuan said.

Duong Van Men, a rice trader in Dong Thap Province, on Thursday told the Daily on the phone that IR 50404 unhusked rice is around VND4,400-4,500 a kilo, up around VND300-350 a kilo against last week.

Many enterprises in Thot Not District in Can Tho City and Sa Dec Township in Dong Thap Province have strongly purchased unmilled rice at VND6,800-6,900 a kilo for IR 50404 rice and VND7,000-7,100 a kilo for long-grain rice, up VND400 a kilo against the previous week, Men said.

Meanwhile, rice exports via official channels continue to decline. In a recent meeting in HCMC, VFA revised down this year’s rice export forecast to seven million tons, down 200,000 tons compared to mid-September and 500,000 tons against the predictions from earlier this year.

Last month, the nation exported only 526,000 tons of rice, or 123,000 tons lower than estimated.

Quoting a report of VFA, Tuan of Thinh Phat Company said that local enterprises registered to export 6.5 million tons of rice as of September 30, up only 100,000 tons against two weeks ago.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR