BUSINESS IN BRIEF 19/5
Plastic sector targets export growth
Viet Nam's plastics exports were expected to increase between 13.5 and 16.5 per cent this year, thanks to efforts by domestic producers to improve product quality.
Over the past three months, plastics exports had experienced a year-on-year rise of 19 per cent to approximately US$485 million, the Viet Nam Plastic Association said.
It noted that Japan remained the country's largest importer of plastic products, importing goods worth over $121 million and accounting for 25 per cent of Viet Nam's total plastic exports. It was followed by the US which made up $58 million, or 12 per cent, of the total export turnover.
During the reviewed period, exports of Viet Nam's plastics products to such markets such as Germany, Netherlands and UK also saw encouraging values at $27 million, $25.4 million and $25.2 million, respectively.
Domestic plastic producers were facing tough competition from other countries in the region, especially when Viet Nam was deeply integrating into the global economy, the Association Chairman Ho Duc Lam said.
Lam encouraged firms to continue investing in technology innovation, improving product quality and designs as well as regularly updating with global market trends.
They would then be better equipped to meet the demands of customers, he added.
Moreover, businesses needed to focus on environment-friendly and safe products for sustainable growth in exports, he said, calling for closer links between the firms in exploiting and conquering export outlets.
According to the association's statistics, in 2013, the export turnover from plastic products was above $1.8 billion, surging 13.3 per cent against a year ago.
Last year, up to 20 plastic products were shipped to foreign markets, and six of these products generated a turnover of more than $100 million each.
In particular, the exports of plastic bags, films and garbage bags generated a turnover of over $150 million last year. Plastic bag exports posted an increase of 27 per cent in 2013 over the previous year, while the growth in exports of plastic decorative products was 26.4 per cent.
Vietnam attends APEC Trade Ministerial Meeting
A Vietnamese delegation led by Minister of Trade and Industry Vu Huy Hoang on May 17 attended the opening of the 20th Asia-Pacific Economic Cooperation (APEC) Ministers Responsible for Trade (MRT-20) in Qingdao, China.
On the agenda for the two-day meeting are matters pertaining to the implementation of APEC priorities in 2014 and preparations for the 22nd APEC summit to be held in Beijing, China this coming November.
On the occasion, Hoang illuminated Vietnam’s priorities under the APEC cooperation framework of, addressing matters relating to reducing impediments to business activity including supply chain connectivity, capital allocation for small-and medium-sized enterprises (SMEs) and investment in infrastructure development.
On the sidelines of the meeting, Hoang met with Chinese Minister of Commerce, Gao Hucheng on May 16, informing him that China’s placement of the mobile oil rig Ocean-981 in Vietnam’s exclusive economic zone was a severe violation of the country’s sovereignty. It is also a clear and unequivocal violation of international law and the 1982 United Nations Convention on the Law of the Sea (UNCLOS), especially the 2002 ASEAN-China Declaration on the Conduct of Parties in the East Sea (DOC) he said, and specifically requested China remove the oil rig from the waters of Vietnam.
He mentioned that in recent times, a significant number of Vietnamese workers at the sites of foreign-invested projects have vehemently expressed their opposition and outrage at China’s East Sea violation, causing social disorder and property losses.
Most Vietnamese, however, have reacted in a rational and restrained manner keeping their conduct within the constraints of decency and due respect for the law, he noted.
At the meeting, the two ministers expressed their desires to strengthen economic, trade and investment cooperation for the mutual benefit of both nations.
Vietnam will actively participate in and contribute to the success of the 20th MRT meeting, Hoang affirmed.
Minister Hoang also met on the sidelines with United States Trade Representative (USTR) Michael Froman in addition to Korean Republic Minister of Trade, Industry and Energy Sang Jick and leaders of the American Independent Business Alliance (AMIBA).
Equitisation gains momentum
The Ministry of Construction will complete equitisation of all its enterprises next year.
Prime Minister Nguyen Tan Dung had accepted plans offered in a joint proposal from the ministry and the Ministry of Finance.
Accordingly, Dung required the construction ministry to submit equitisation plans for the Viet Nam Machinery Erection Corporation and the Construction Machinery Corporation by the end of the year.
He also agreed to equitise the Da River Corporation and the Housing and Urban Development Corporation by the end of next year.
The three corporations together with the Urban and Industrial Zone Development Investment Corporation will be responsible for equitising their subsidiaries and their parent companies.
The PM has also asked the construction ministry to advise its State-owned enterprises to accelerate equitisation plans.
The ministry manages 16 corporations. Last year, it was instructed to equitise five corporations.
Minister of Construction Trinh Dinh Dung has also approved equitisation plans for five corporations this year and five next year.
The ministry will have no State-owned enterprises by the end of next year.
Four of the ministry's corporations have made initial public offerings. However, the State still holds a controlling stake in the corporations. It will sell a stake in the firms to reduce controlling rights when the market improves.
Dang Van Long, head of the ministry's Business Management Department, said that after equitisation, the role of the State, managers and labourers would improve.
VN shrimp exports to US jump in Q1
Vietnamese shrimp exports to the US registered impressive growth in the first quarter of this year due to zero tax and competitive pricing.
In the first quarter of this year, export value of local shrimp products to the US doubled to US$293.4 million against the same period last year, the Viet Nam Association of Seafood Exporters and Producers (VASEP) said.
The increase was due to poor supply from Thailand, which is one of the leading shrimp suppliers to the US, said the association. The shrimp industry in Thailand has not yet recovered after disease struck shrimps in the recent past, thus helping Viet Nam take over as a large supplier of shrimps to the US market.
Additionally, shrimp traders in Viet Nam and the US have increased their trading volume of shrimp products to the US because the anti-dumping tax was zero for shrimps and prawns after the seventh period of review, it said.
According to the US Department of Agriculture, in the first two months of this year, shrimp imports surged 139 per cent in volume and 74 per cent in value from Viet Nam while it reduced 46 per cent in volume and 17 per cent in value from Thailand, reported the Bao Cong thuong (Trade & Industry) newspaper.
The association also said shrimp exports from Viet Nam to other key markets had also registered strong growth in the first three months of this year.
Therefore, the export value of shrimps saw a year-on-year increase of 87.9 per cent to $798.1 million, in the first quarter of this year.
VASEP said that last year total shrimp exports reached $3 billion and many farmers registered huge profits from growing shrimps for export.
This year, the rise in export of shrimps is expected to continue and the area of developing shrimps, especially the white-leg variety, would also increase, the association said.
This year, the total export value of shrimps is expected to reach $3.5 billion, it said. To achieve the target, the state, enterprises and farmers should plan for reasonable development of prawns and white-leg shrimps, control disease and improve quality of seeds and products for export.
Phu Quoc island approves another 200 projects
Some 194 investment projects, mainly in tourism, have been granted licences on Phu Quoc Island in the southern province of Kien Giang from 2011 to now, according to the Phu Quoc Island Development Investment Board.
The projects will be built on an area of 4,214 ha with a total investment capital of VND101 trillion (US$ 4.7 billion). Of the 194 projects, 13 projects worth VND4.2 trillion have been completed and are operational, with 16 projects worth VND7 trillion under construction. The remainder of the projects are being finalising investment procedures.
Kien Giang Vice Chairman, Nguyen Thanh Nghi said that enterprises can enjoy many investment incentives that will be applied for the first time, such as preferential policies on land, corporate income tax, high-income earner tax and import taxes.
The island is expected to become a centre of tourism, science and technology in Viet Nam and Southeast Asia.
Power supply to keep up with demand: official
Director of the Electricity Regulatory Department under the Ministry of Industry and Trade’s (MoIT) Dang Huy Cuong has claimed that Vietnam will not suffer from power shortages this year, the Vietnam Investment Review (VIR) reported.
He ensured with the VIR that enterprises and the public will be supplied with sufficient electricity for production and living, adding that the MoIT had carefully calculated power demand and the power industry’s capacity this year.
“From now until the end of the year, there will be additional 1,800-1,900 megawatts supplied to the national grid, because many new power projects will be put into operation,” Cuong was quoted as saying.
The Pleiku-My Phuoc- Cau Bong 550kV transmission line was integrated into the national power grid earlier this month. Run by the Vietnam National Power Transmission Corporation, the line passes through five provinces: Gia Lai, Dak Lak and Dak Nong in the Central Highlands, and Binh Phuoc and Binh Duong in the south.
“The operation of this line is very important for transmitting power to the southern region which has frequently been hit by power shortages. It will also allow the import of electricity from Laos, and connect the power grids of Vietnam, Laos and Cambodia after 2015,” said state-run Electricity of Vietnam’s (EVN) National Power Transmission Corporation’s Vice General Director Tran Quoc Lam.
Last month, the second 42 megawatt turbine of Song Bac hydroelectricity plant in Ha Giang province was also put into operation.
Businesses have continuously lodged complaints with the government and local authorities in recent years, claiming that power cuts have had a detrimental effect on Vietnam’s investment climate.
Late last month, Deputy Prime Minister Hoang Trung Hai ordered the power industry to find ways to supply sufficient electricity for the public and enterprises this year, against a backdrop of a looming energy shortfall.
Hai said construction of the 1.244MW Vinh Tan 2 thermal power plant in Binh Thuan province, and Tra Vinh province’s 1.245MW Duyen Hai 1 and 1.200MW Duyen Hai 2 thermal power plants, and the 220 kV Dak Nong-Phuoc Long-Binh Long transmission line running through Dak Nong and Binh Phuoc provinces must be accelerated.
EVN claimed the Vinh Tan 2, Duyen Hai 1, 600MW Nghi Son 1 thermal power plant in Thanh Hoa province, and 1,200MW Hai Phong 2 thermal power plant would be put into operation this year.
Some 5.8 billion USD would be invested by EVN into building five new power projects with total capacity of 2,555MW, including Thai Binh, Vinh Tan 4, the expanded Duyen Hai 3 thermal power project, and the expanded Thac Mo and Da Nhim hydropower projects.
According to the MoIT, in this year’s first four months, Vietnam produced nearly 42 billion kWh, up 10.28 percent year-on-year. This would meet local power demands, the ministry claimed.
In April, Vietnam produced 11.42 billion kWh, up 12.83 percent year-on-year, with power for construction growing 12.37 percent, power for trade and hotels and restaurants increasing 4.73 percent, and power for agro-forestry-aquatic production climbing 7.78 percent, against the same period last year.
Figures for April revealed that 35.6 percent of power was generated by hydropower projects, 34 percent by gas turbines, 27.7 percent by coal-fired thermal power projects and the rest was from other sources.
Preparations for Long Thanh airport project underway
The Japanese Airport Consultants (JAC) has been urged to update and complete studies on the Long Thanh International Airport project in southern Dong Nai province for the National Assembly’s approval.
The request was made by Vice Chairman of the Dong Nai provincial People’s Committee Tran Van Vinh during a working session with the JAC in Dong Nai on May 14.
JAC representatives said that the Japanese Government takes interest in the project because it is relating to the use of Japan’s official development assistant (ODA), adding that Japanese relevant agencies discussed the provision of investment capital to the project in April.
Japanese consultants also focused on auxiliary facilities such as transport system, waste liquid treatment, water supply and drainage, electricity, telecoms and other services, they said.
Vinh, meanwhile, said the Long Thanh airport project was added in the province’s master plan. Dong Nai will undertake site clearance, compensation and resettlement for residents in the project area. Total cost for the work is estimated at 20 trillion VND (940 million USD).
Dong Nai has made plans for two resettlement areas which cover 280 hectares each. The province also mapped out a project area of 21,000 hectares surrounding the airport, while the Transport Ministry has been carrying out the construction of transport system connecting the airport to road, railway and waterway.
Samsung looks to boost investment in Vietnam
The Republic of Korea’s giant Samsung is considering expanding its investment in Vietnam in the fields of telecom infrastructure, airport construction, mobile phones and spare parts.
The group said on May 14 that the total volume of its mobile equipment produced in Vietnam will make up a half of its global supply.
It will focus on improving the quality of products and personnel competence in the coming time.
Entering Vietnam in 1995, Samsung is running two mobile-phone factories in the north of the country, namely the Samsung Electronics Vietnam (SEV) in Bac Ninh and the Samsung Electronics Vietnam Thai Nguyen (SEVT).
US abolishes anti-dumping tax for one Vietnamese seafood business
The US Department of Commerce has scrapped a US$0.03 per kilogram anti-dumping tax on tra fish products exported to that country by Vietnam’s Vinh Hoan Company.
The department announced its decision following a review (POR9) of anti-dumping duties on tra fish fillet imported from Vietnam between August 1, 2011, and July 31, 2012.
The antidumping tax on Hung Vuong Company’s products remains unchanged at $1.2 per kilogram.
The rate for voluntary respondents was increased to $1.2 from $0.42.
Other businesses still pay $2.11 per kilogram.
HCM City to hold 2 annual consumer fairs to spur growth
Two major fairs will be held annually in Ho Chi Minh City to promote consumption and shopping to spur economic growth.
The Departments of Industry and Trade and Culture, Sports and Tourism announced May 15 that there would be a sales promotion fair from August 28 to September 3 to draw the attention of local and foreign shoppers to high–quality goods at reasonable prices.
The other fair will be held from December 17 to January 1, with business showcasing new products under the campaign exhorting people to use locally made products.
The two expos will be supported by public funding.
Firms invited to showcase clean-tech solutions
Vietnamese startups and small- and medium-sized enterprises (SMEs) in the clean energy and climate technology sectors are invited to submit their business ideas to a contest organised by the Vietnam Climate Innovation Centre.
Local climate technology innovations and solutions would enable Vietnam to adapt to climate change, reduce emissions, meet energy needs, boost productivity, maintain competitiveness, and minimise dependence on imported fossil fuel.
In anticipation of the launch of the Vietnam Climate Innovation Center (Vietnam CIC) in the second half of 2014, the World Bank Group has partnered with the Asian Development Bank to organise a Proof of Concept (PoC) competition to identify emerging entrepreneurs who could become future collaborators with the Vietnam CIC.
Successful applicants in the competition will be eligible for grant funding of up to VND1 billion to develop, launch and/or scale up a product or a service. They will also have preferred access to the Vietnam CIC program and its full range of advisory services (training, mentorship, facilities and access to finance).
Successful applicants will also have the opportunity to showcase their innovative concepts at the official Vietnam CIC launch and related media events.
Through its programmes, activities and financing, the Vietnam CIC and its network of partners will provide a regionally driven approach to solving climate, energy and resource challenges, and will support economic development through job creation.
The Vietnam CIC is supported by the UK Department for International Development (DFID) and the Australian Department of Foreign Affairs and Trade (DFAT).
SHB, Tan Hoang Minh team up to offer home loans
Saigon-Hanoi Commercial Bank (SHB) has signed a cooperation agreement with Tan Hoang Minh Group to provide home loans for customers of D’. le Pont D’or project in Hanoi City’s Dong Da District.
SHB will offer homebuyers a fixed interest rate of 8.68% per annum in the first 12 months, in which Tan Hoang Minh will cover a rate of 3.68% per annum. Therefore, clients will have to pay a fixed interest rate of 5% in the first 12 months and the rate will be revised three months in the following years.
The lender also clinched a comprehensive cooperation deal with Urban Infrastructure Development Investment Corporation (UDIC) last week. In the coming time, SHB will give preferential home loans for UDIC’s customers who buy apartments at the high-rise commercial and condo complex in Hai Ba Trung District.
Fake products worry foreign hi-tech firms
Representatives of foreign hi-tech companies have expressed concerns over fake products on the domestic market.
Nguyen Khanh Binh, general director of Schréder Vietnam under Belgium group Schréder, told the Daily on the sidelines of exhibitions on photo, broadcasting, lighting and imaging technology in HCMC last week that the company had found many lighting devices similar to Schréder products on the local market and these copycats had cut into the company’s revenue.
Binh said most of those fake products were made and distributed by domestic enterprises, which imported parts from China for local assembly and then used Schréder brand for their counterfeits.
Coping with such copycats is a big headache for the firm, he said.
Representative of a renowned cellphone firm at the exhibitions confirmed the availability of many fake products bearing this firm’s brand on the market. There are always copies of the new products the company launches in Vietnam and most of them are imported from China.
Despite the counterfeits, most of the foreign firms agreed the local market is holding high growth potential for high-tech products as Vietnam is one of the fast-growing markets in Southeast Asia.
HCM City urges faster divestment from non-core operations
The HCMC government has told leaders of State-owned enterprises (SOEs) under its helm to boost divestment from their non-core operations in 2014-2015, with the target for this year set at nearly VND1.5 trillion.
Last year, 14 SOEs in the city withdrew their investments from non-core sectors with a combined value of around VND30 billion. The process has been moving at a snail’s pace as the SOE restructuring scheme was just approved late last year.
However, the city will speed up the process in 2014 and 2015, and SOEs are requested to divest from the fields of banking, securities, insurance, real estate and investment funds.
For instance, Saigontourist in the next two years will have to take back VND157 billion it has poured into Saigon Real Estate M&C Joint Stock Company, VND27 billion in Eximland Company, VND40 billion in Jetstar Pacific Airlines and nearly VND12 billion in Saigon Medical Investment Joint Stock Company.
Meanwhile, Ben Thanh Company will have to withdraw VND246 billion from banking and real estate sectors this year. Saigon Trading Group, or Satra, will have to take back its investments in non-core sectors with a total value of VND507 billion, including VND406 billion in the banking sector, over VND24 billion in securities, VND32 billion in investment funds and VND45 billion in the real estate sector.
According to the city government, SOEs, especially unlisted enterprises, and the firms that have yet to trade shares on the UPCoM, a market for unlisted public companies, have had difficulty finding partners for share transfers.
Given the city’s scheme, 15 SOEs will go public this year and 15 others next year.
From 2014 to 2015, the city has plans to dissolve seven firms, order nine to be dissolved, sell five and restructure four.
Trade ministry denies being civil plaintiff in Vifon case
The Ministry of Industry and Trade has again denied its role as a civil plaintiff in the Vietnam Food Industries Joint Stock Company (Vifon) graft case.
At an appeals hearing that the Supreme People’s Court in HCMC opened on May 13, the jury said the ministry refused to appear as the plaintiff as it confirmed the case had not caused any losses for the State.
At the first-instance court in November last year, the HCMC People’s Court identified the ministry as a plaintiff but the ministry said no to this. An official of the ministry did show up at the hearing in his capacity as a representative of a competent agency to observe the case and report it to leaders of the ministry.
However, the appeals court shared the first-instance court’s view that the ministry’s refusal as a victim was groundless as investigators had determined the State faced asset losses as stated in the indictment. Furthermore, when the embezzlement case arose, Vifon was still a state-owned enterprise so the lower court’s verdict that identified the ministry as a victim was accurate.
Before the appeals hearing started, as the ministry confirmed there had been no damage to the State, defendant Nguyen Bi, 65, former chairman and former general director of Vifon, and another defendant, Nguyen Thanh Huyen, 59, former deputy general director of Vifon, and their accomplices appealed against their sentences and asked for leniency.
According to the lower court verdict announced on November 27, 2013, from 2002 to 2006, Huyen abused her power during Vifon’s equitization process to order her subordinates to falsify payment bills and money recipients so that she could appropriate nearly VND10 billion of Vifon and then took over the company when it was still a state-owned firm.
After the company was equitized, Huyen continued using the tricks to tell her accounting staff to intentionally falsify documents to embezzle VND3.5 billion from shareholders.
Huyen claimed that she had given all the money to Bi but the later said he just took around VND2.3 billion and that Huyen had to take full responsibility for the remaining sum she took.
Bi is defined as an accomplice in the case as he signed all the false bills, making it easy for Huyen to appropriate the money. He also asked Huyen to illegally transfer US$290,000 from Vifon’s reward fund to seven leaders while the sum was for the whole staff of the company at the time.
At the first-instance trial, the HCMC People’s Court sentenced Huyen to 30 years in jail for her embezzlement and abuse of trust to appropriate State assets, and Bi to 22 years in prison for asset appropriation and intentional violations of State regulations on economic management causing serious consequences.
The other three defendants, including the former accountant and cashier of Vifon, were handed down 7-8-year prison terms for intentionally violating the State regulations on economic management causing serious consequences.
The appeals court is set to last eight days.
Vietnamese goods to be promoted in Europe
The Ministry of Industry and Trade will continue holding week-long events at supermarkets in Germany and France from next month to introduce Vietnamese products to European consumers.
The promotions of Vietnamese products will take place at Metro supermarket chain in Berlin, Germany at the end of June and at France’s Casino group, the owner of Big C supermarket chain, in September, said Dang Hoang Hai, head of the European Market Department under the Ministry of Industry and Trade.
Hai told the Vietnam-European Union (EU) annual conference in HCMC yesterday that
Vietnamese companies were encouraged to participate in the promotion program by displaying their products at the supermarkets. They will meet and discuss business opportunities with representatives of those supermarkets.
Hai said the idea of promoting Vietnamese products at foreign supermarkets had been translated into reality for three to four years and there existed a governmental-level project to help Vietnamese companies sell their products directly to supermarkets in the EU and other markets.
In recent years, there have been a number of promotion weeks for Vietnamese products at some big supermarket chains in Europe.
He told the Daily that many Vietnamese firms had been able to ship their products to supermarkets in the EU, including Casino store chain, and clothing accounted for a majority. However, he said the ministry had not known exactly revenues of Vietnamese firms from those supermarkets.
To Ngoc Ngoi, general director of (VinaFor Saigon JSC, advised local enterprises to have contacts in charge of buying their goods because different groups of items at the supermarkets were managed by different people.
Therefore, the Government needs to support Vietnamese firms to make contact with the right persons responsible for purchasing at supermarkets.
Last year, VinaFor Saigon earned around US$2 million from selling indoor and outdoor furniture to three supermarkets in Europe, including Rusta in Sweden and Tchibo in Germany.
However, Ngoi said it was not easy to sell goods directly to supermarkets in foreign markets. “Enterprises must go through different contacts to exchange information and work with supermarkets before they accept to import their products,” Ngoi said.
Ngoi also insisted the products bound for Europe must meet quality requirements of the EU.
He noted local companies would learn customers’ demand and goods criteria in the countries where their partnership supermarkets are located, but would have to face challenges in relation to price negotiations and in-bulk supplies.Demand for Chinese products falls sharply
Local demand for goods imports from China, especially farm produce, has tumbled at major markets and supermarkets in HCMC due to consumers being aware of goods quality and hygiene.
The sharp fall in local demand has led to reduced imports of vegetables from the neighboring country. Traders at Thu Duc Agricultural Wholesale Market estimated the volume of Chinese produce at this market in Thu Duc District had halved compared to a month ago.
They said Chinese vegetables, including carrot, potato, garlic and broccoli, accounted for 250 tons of 2,800-3,000 tons available for daily trading at the market previously but had now plunged to 100-150 tons.
The demand for Chinese fruits is also down. Traders at the market reported high stocks due to weak demand, said Nguyen Thanh Ha, deputy director of Thu Duc Market.
Traders at other markers in HCMC have also complained about declining sales of Chinese foods, foodstuffs and consumer items as many local consumers have walked away from Chinese products for fear that these products contain harmful substances.
“I assume that sales of Chinese products will decrease dramatically on the Vietnamese market,” Ha said.
Nguyen Thi Hong, a retailer at Ben Thanh Market in District 1, shared Ha’s view, saying she saw decreasing demand for Chinese garlic and Shiitake mushroom available at her stall.
“Customers always prefer domestic products to Chinese items if they have alternatives that suit their pockets,” Hong said.
The management of Pham Van Hai Market in Tan Binh District said despite the absence of specific updates, it had learned that the volume of Chinese products at this market had fallen strongly as retailers had suspended or reduced their imports from China due to shrinking demand for goods from the neighboring country.
Supermarkets have also cut supplies of Chinese products and added Vietnamese goods to their counters.
Ho Quoc Nguyen, external director of Big C supermarket chain, said 95% of the products at this chain were produced in Vietnam.
Enterprises spend little on technology
Vietnamese enterprises have earmarked only 0.2-0.3% of their revenues for new technology compared to the rates of 5% in India and 10% in South Korea although they have known the importance of investments in this area.
Speaking at a seminar on technological application, Duong Minh Tam, deputy head of Saigon Hi-tech Park’s management board, said that slow technological improvement and investments resulted in low productivity at local enterprises. The labor productivity in China, Thailand and Singapore was 1.7, 3.6 and 39 times higher than that of Vietnam respectively, he added.
According to Tam, the number of enterprises spending on modern equipment accounted for a mere 10% while up to 52% of enterprises use outdated technology.
Deputy Minister of Science and Technology Tran Van Tung, said for years enterprises had preferred spending on stocks and real estate to technology.
Tung said that Vietnam had 100 recognized scientific and technological enterprises whose annual revenue is around VND60 billion each.
However, experts said the number of scientific and technological enterprises in Vietnam remained modest.
These enterprises’ main activities are to sell the products manufactured from commercialized studies and to perform scientific and technological duties.
Tam said that even in HCMC – the country’s economic hub, there were only 14 scientific and technological enterprises, which are poorly compared to the hundreds of thousands of enterprises operating here.
G-bond yields seen lower
Government bond yields are expected to keep going down while local banks with big amounts of surplus capital will continue investing in G-bonds.
On Tuesday, the winning coupons of two-year government bonds issued by the State Treasury stood at a seven-year low of 5.58% per annum. Meanwhile, those of three and five-year bonds dropped to record lows of 6.07% and 7.1% per annum respectively.
Normally, banks purchase G-bonds to earn the difference between deposit rates and G-bond yields and to wait for bond prices to increase.
The first goal does not make sense now as deposit rates are higher than bond yields. However, lenders have rushed to purchase bonds as they are not compelled to make risk provisions for bond investment.
Foreign investors, meanwhile, have increased G-bond sales due to falling yields. They have net sold VND2.2 trillion worth of bonds since early this year, according to the Hanoi Stock Exchange.
Foreigners now hold around 5% of total bonds on the market, banks hold 80% and the remainder belongs to insurers, finance companies and funds.
A foreign bond investment organization said the bondholder structure is not sustainable as when banks make a move with bonds, others will follow suit. Besides, banks often hold bonds until they fall due and trade bonds on the open market. They rarely transact bonds on the secondary market, so the local bond market has low liquidity.
Some foreign organizations find it hard to inject around US$500 million into Vietnamese bonds due to an undersupply.
Vietnamese bond yields are now equivalent to those of the Philippines and Indonesia but almost double Singapore’s and Malaysia’s. G-bonds remain attractive to foreign investors who make short-term investments at around six months.
Foreigners usually take profits after holding bonds for six months and reaching a profit of 3% during the period. They do not hold bonds for a long term due to exchange rate risk.
It is difficult to provide exchange rate insurance for options or forwards contracts as Vietnamese banks charge high interest rates and fees for the contracts.
Many organizations expected that bond yields would keep inching down as the nation’s consumer price index in the Jan-Apr period grew only 0.88% against late last year and 4.8% from the same period of 2013. One-year bond yields may drop to 4% per annum while the two-year tenor may be 5% per annum.
Six banks finance local firms
A representative of Sacombank signs credit contracts with enterprises based in HCMC’s Cu Chi District on May 15 as part of a bank-business finance connectivity program arranged by the city government. Six banks – Agribank, Vietinbank, DongABank, Sacombank, ACB and MHB – on May 15 agreed to lend nearly VND429 billion to 22 enterprises and individuals in the district on May 15. - Photo: Courtesy of Sacombank
Rohto-Mentholatum opens second plant in Binh Duong
Rohto-Mentholatum (Vietnam) Co., Ltd held an opening ceremony on Monday for its second production plant at Vietnam-Singapore Industrial Park in the southern province of Binh Duong.
Built on more than 21,000 square meters, the new US$15-million facility turns out skincare products to meet increasing demands of local and overseas customers.
With the second plant in place, Rohto-Mentholatum has raised its total investments in Vietnam to US$33 million.
The company set foot in the Vietnamese market in 1996 and commissioned the first plant in Binh Duong Province three years later to produce V. Rohto eye drops, Acnes acne sealing gel, OXY skinscare products, Sunplay sunscreen lotion and LipIce lipsticks.
F&B ingredients expo to open next week
The Food Ingredients Vietnam (Fi Vietnam) exhibition will kick off at the Saigon Exhibition & Convention Center (SECC) in HCMC’s District 7 on May 21.
The organizer, Thailand-based UBM Asia which is a leading exhibition organizer in Asia, said around 150 food and beverage additives and ingredients from different parts of the world would participate in the three-day event featuring food and beverage additives and ingredients from many nations.
The highlight of Fi Vietnam 2014 is to showcase special ingredients, flavoring and chemical substances and additives used for producing foods and beverages. This, according to the organizer, will help visitors to the exhibition easily meet potential suppliers and partners.
Rungphech Chitanuwat, business development director of UBM Asia, said a number of seminars on additives in food and beverages would also be held as part of the exhibition.
“We will hold a seminar on safe use of additives for food and beverage production to provide information about trends and market prospects of the ingredient industry,” she said.
Chitanuwat also said Vietnam had been chosen for the exhibition this year as the country’s food and beverage market was growing fast and expected to become a major market for foods and beverages in the region.
Over 300 firms to join city’s sale promotion fairs
More than 300 enterprises will showcase their products at 500 booths at major sale and consumption promotion events in HCMC in August and December respectively, heard a meeting on May 15.
According to the center for business consulting and support under the HCMC Department of Industry and Trade, the participating enterprises in the two fairs are active in different fields ranging from consumer goods, electronics, apparel, cosmetics and pharmaceutical to banking and travel services.
The fairs are aimed to boost consumption of locally-made products among Vietnamese and shopping demand of citizens and visitors for reasonable items as well as support producers and the country’s economic growth.
During the events, consumers will be given environmentally-friendly shopping bags and advice on how to identify fake products.
Hoang Tho Vuong, director of the center, said organizers of the events would issue a shopping guide that provides consumers with information about enterprises and products for the events.
As part of the city’s 2014 trade promotion program, the big sale fair is scheduled for August 28-September 3 while the consumption promotion fair is set for December 27-January 1 at Phu Tho Stadium in HCMC’s District 11.
Haiphong Port raises VND238 billion from IPO
Haiphong Port Company Limited sold 46% of its shares in an initial public offering (IPO) on May 14 with a combined value of VND238.65 billion.
According to the Hanoi Stock Exchange, 78 individual and corporate investors acquried 11.51% of 37.6 million shares on offer.
The highest and lowest bids were VND17,000 and VND13,500 per share respectively but the average price was VND13,507.
The IPO found no foreign investors. Haiphong Port’s offered share price is also much lower than that of other listed port operating companies like Dong Nai and Tan Cang.
Prior to the IPO, Haiphong Port announced the Vietnam Bank for Industry and Trade (VietinBank) as its strategic partner but this will depend on the Government’s resolution on debt and asset settlement for Vietnam National Shipping Lines (Vinalines).
VietinBank has proposed converting the debt that Vinalines owes to it into shares at the ports under Vinalines, including Haiphong Port. Therefore, VietinBank, Vinalines and Haiphong Port are now waiting for the Government resolution and the central bank’s guidance to legalize this.
Haiphong Port is one of the nine seaports under Vinalines required to launch IPOs this year as part of restructuring plans for Vinalines and Haiphong Port to help improve seaport business performance of the holding company. Vinalines still earns profit from this segment but faces tough competition.
SBV to get tough on card payment surcharges
The State Bank of Vietnam (SBV) has announced to take bold measures to facilitate non-cash payments in the country and will impose heavy fines on stores, entertainment areas and restaurants imposing surcharges on card payments.
The central bank in a statement released yesterday said that it has added the new rule to a draft decree stipulating administrative fines in the monetary and banking sector. The agency will impose fines VND30-50 million on price discrimination against card users and the violators will be forced to surrender incomes from this violation to the State.
This is part of the central bank’s move to beef up non-cash payments in the country. For operators of points of sale (POS) terminals violating the rule, they will have their contracts with payment banks terminated and have to compensate for any losses incurred.
Payment banks are regulated to stop the contract with violating POS operators for one year. The duration may be increased to three to five years if the POS operators are found to repeat the infringement.
The central bank is joining hands with card switching companies and member banks to build a single intra-network fee for domestic card payment services to encourage cardholders to transact more via POS.
International card issuing organizations such as Visa and MasterCard have also monitored surcharge collections for card payments to take sanctions against violators.
As of May 2013, the nation had over 14,100 automated teller machines (ATM) and more than 100,150 POS terminals, 39.3 million domestic cards and 3.6 million cards for international payments.
Local banks have opened over 48 million accounts, a strong rise from the 100,000 accounts in 2000 and five million in 2005.
Banks’ profit growth unsustainable
Major indicators of the banking sector such as assets quality and equity improved in the first quarter of this year but lenders still found it hard to sustain profit growth.
Statistics of the State Bank of Vietnam (SBV) showed that total assets of the banking system added nearly 1% between January and March, equity 0.64% and chartered capital around 1%. However, the capital adequacy ratio (CAR) had dropped to 13.24% as of March 31 from 13.37% a year earlier.
The ratio of short-term capital used for medium- and long-term lending increased from 16.51% to 18.03% but the loan-to-deposit ratio (LDR) declined from 86.22% to 83.64% in the period.
Last week, local banks announced mixed business results in the first quarter of 2014. The Bank for Investment and Development of Vietnam (BIDV) reported positive growth, obtaining over VND1.9 trillion in pre-tax profit, rising 28.6% against the same period last year, while its net profit surged 34.8% to over VND1.5 trillion.
Techcombank attained VND673 billion in consolidated pre-tax profit, a 69% increase from the same period last year. The lender reported profit of VND878 billion in all of 2013.
Vietnam International Bank (VIB) posted up pre-tax profit at VND52 billion in the January-March period, excluding government bond reserves.
DongABank, meanwhile, saw its net profit tumble 57.6% year-on-year to nearly VND88 billion. Sacombank’s gross profit also dropped 19.2% to VND889 billion and Asia Commercial Bank (ACB) reported an after-tax profit of VND250 billion, down 18.6% year-on-year.
Eximbank estimated its pre-tax profit at VND441 billion in the period while that of PGBank was VND51.3 billion.
National Citizen Bank, formerly Nam Viet Bank, gained a modest pre-tax profit of VND3.15 billion compared to VND21.8 billion in the same period of last year.
Major banks Vietcombank and VietinBank have yet to announce their business results in the first quarter.
Notably, many banks have seen their health declining despite steady total asset pickups.