Exports face numerous challenges

Although Vietnam has tried to maintain export growth, there are some negative signs in the world market, which will affect its business operations.

According to a recent report by the Ministry of Industry and Trade, export earnings in the first seven months of this year rose by 19 percent to US$62.93 billion against the same period last year, mainly thanks to the foreign-invested sector.

The report said June exports were up only 2 percent against May, but export revenue in July experienced a month-on-month decrease of 2.9 percent.

There is growing concern among domestic businesses as export orders seem to be shrinking.

They claimed with production costs rising, they find it ever more difficult to make a bargain in negotiations which often take at least one or two months.

Made-in-Vietnam products are facing the risk of trade protection laws used by other countries. Statistics recently announced by the WTO indicate that protectionism in the world’s 20 largest economies has not decreased over the past seven years.

Since last October, G20 countries have introduced 124 new trade protection measures such as increasing taxes, which affects about 1.1 percent of exports to G20 nations, or 0.9 percent of the world’s total exports.

The Trade Defence Board under the MoIT Competition Authority says that importing countries applied 339 trade restrictions in 2011, many of which are likely to distort trade.

Head of the Trade Defence Board Nguyen Chi Mai says defence measures which used to be applied by developed countries only have now become a common tool in developing nations.

India, the US, and EU are the world’s leading users of anti-dumping measures, she notes.

Instead of introducing administrative sanctions against trade fraud as they did before, the EU and US are applying new punitive measures, including imprisonment.

To help businesses through a hard time, the State bank of Vietnam has asked commercial banks to slash interest rates on loans and restructure old debts.

On their part, businesses also have to work out their own plans to get out of the woods.

Tran Xuan Hai, Deputy Director General of the MoIT Import-Export Department, says if they are well-prepared, domestic businesses will be able to grasp new opportunities in the near future. He proposes that they strengthen cooperation to make the best use of all available commercial channels.

According to economist Pham Chi Lan, domestic businesses should take the initiative to seek new markets for their products instead of waiting for assistance from the government.

They should gear the measures up for both new challenges and opportunities, she says, adding that it is crucial to take advantage of Vietnam's free trade agreements (FTA) with other nations.

The wise orientation and vision of business leaders are also important factors in promoting exports in the long run, she says.

DWS Vietnam Fund pours US$10 million into VTC Online

Investment company DWS Vietnam Fund Limited has invested US$10 million in multimedia service provider VTC Online in one of the biggest technology deals in Vietnam, announced VTC Online.

Under the agreement, VTC Online will spend the funds on strategic areas including the social networking site Go.vn, video game development and distribution, and multimedia and educational content production.

Founded in 2008, VTC Online has become a leading game distributor and has played a significant role in popularising electronic games in Vietnam. It has also exported Vietnamese-made video games to ten countries in Europe and Latin America.

In addition, VTC Online is currently operating the social networking site Go.vn, which boasts approximately 13.5 million registered users so far, and the online payment service VTC eBank.

Since its launch in 2006, the DWS Vietnam Fund has invested in a diversified portfolio of securities in Vietnam with 48.7% of its investment in listed shares and 31.9% in unlisted shares.

The DWS Vietnam Fund has chosen VTC Online as the first unlisted technology firm for investment and is the second fund to pour money into the technology firm after IDG Ventures Vietnam.

This move has increased the ratio of VTC Online’s shares owned by institutional investors to over 60%.

VTC Online plans to list its shares on the stock market for the first time in 2015.

US$1.8 billion to shorten Hanoi-Ho Chi Minh City railway
 
By 2020, it will have cost almost US$1.8 billion to shorten the travelling time by train from Hanoi to Ho Chi Minh City, down from 28 hours to 25 hours 24 minutes, said a team of specialist advisors from Japan’s International Co-operation Agency (JICA).

At a meeting of the steering committee for the priority express railway network in Hanoi on August 14, the Japanese experts proposed upgrading the current North-South railway line to allow passenger trains to travel at 90km per hour and freight trains at 60km per hour. This would permit the number of trains using the route to rise from 32 to 50 per day.

For sections of the line that present problem, they proposed building twin lines and widening the radius of bends on the railway from 100m at present to 800m to allow trains to travel at a maximum speed of 120km per hour.

However, to cut the travelling time from Hanoi to Ho Chi Minh City to 15 hours 36 minutes, it will cost around US$14.5 billion.

The experts added that the demand for travelling by train will triple by 2030, after they had researched the Hanoi-Vinh and Ho Chi Minh City-Nha Trang express railways.

The two routes will be economically feasible with a repayment rate of 12% until 2030, but will need an initial investment of US$21.4 billion.

They also proposed building a 40km track from Ngoc Hoi to Phu Ly and a 30km line from Thu Thiem to Long Thanh on a trial basis.

Proposal to charge electricity regulatory fee rejected

The National Assembly Committee for Science, Technology and Environment, on Tuesday rejected the Government’s proposal at the 10th session of the NA Standing Committee, to charge an electricity regulatory fee, saying it was under State management and hence must be ensured by the State.

The NA Standing Committee session discussed three draft projects to amend the law for mitigation of natural disasters, cooperative law and electricity law.

Phan Xuan Dung, chairman of the Permanent Committee for Science, Technology and Environment, said that electricity regulatory fees should not be charged, as it is under the State management and should be paid by the State Budget.

Phung Quoc Hien, chairman of the NA Committee for Finance and Budget, said that the electricity regulatory fee will place more financial burden on consumers, and questioned where the fee money would be utilised.

Nguyen Sinh Hung, NA chairman, also disagreed with the proposal to collect electricity regulatory fee, saying it should not be put forward at this time as the power industry was not fully competitive in Vietnam.

Diamond land that doesn’t shine

Land is considered the jewel of Danang but cannot shine. Much of it has been assigned to financially incapable investors. This has caused the degradation of Danang’s landscapes and certainly the local authorities have been blamed for it.

A groundbreaking ceremony was held with fanfare by Vien Dong Vietnam at the end of July 2009 for the two highest towers in Central Vietnam after the authorities in Danang issued a construction license 14 months earlier. The investor promised to get the project completed by the end of 2012. But now the 11,170-square-meter location for the 220-meter-high, 48-story towers remains deserted.

Vien Dong Meridian Towers with total floor space of 245,000 square meters costs US$180 million and consists of a high-end shopping mall, an international conference center, a trading floor, a four-star hotel, a luxury apartment building and grade-A offices.

This projects lies on a “diamond land,” beyond even “golden land,” as it lies in the “heart of the heart” of Danang – 84 Hung Vuong Street, at the intersection of Hung Vuong, Nguyen Chi Thanh and Yen Bai streets.

It’s not only the Vien Dong Meridian Towers. Two other projects on the “diamond land” started nearby just a few years ago have shown no signs of activity. The first area of the Danang Center project, 7,878 square meters at 8 Phan Chu Trinh, borders on three streets – Hung Vuong, Nguyen Chi Thanh and Yen Bai. The project includes a shopping mall, a five-star hotel 35 stories high, and a 27-floor top-grade apartment building, all funded by Vu Chau Long Real Estate Company with a pledge of US$125 million (VND2,600 billion).

The Danang Center project got underway in March 2008, and the investor made it known that it would be completed by end-2011. However, only rusted steel is seen at the foundation pit.

Diagonally opposite to the Trung Vuong Theater near Hung Vuong Street is another languishing construction project on the “diamond land,” the Golden Square of Dong A Joint Stock Real Estate Company. The project lies on 10,664 square meters facing the four streets Pham Hong Thai, Yen Bai and Nguyen Chi Thanh. According to plans, the project is to feature three high-rise towers, from 21 to 36 floors, a shopping mall, an office building, and a hotel and luxury apartment building. The investor has made it known that total capital amounts to about VND1,500 billion.

Work on Golden Square began in mid-January 2008, but concrete has been poured only on the ground floor and two upper levels.

All of those projects got off the ground in the real estate bubbles in Danang. But the economic crisis sent real estate prices crashing. The population of Danang is less than one million people and a majority of them have no need for luxury apartments or villas. Buyers – usually from major cities like Hanoi and HCMC – intend to speculate. When these people do not have enough money to buy, then the project investors are unable to sell their products. As such they lack sufficient capital to complete their projects.

Work on Golden Square started in early 2008 but only a model apartment has now been built, and concrete has been poured for the first and second floors.

It is worth pointing out that the people of Danang must have sacrificed their land to make room for those projects.

At the beginning of May 2008, licenses were granted to the investors of Vien Dong Meridian Towers to build the towers, a public park and a parking structure in front of Vien Dong. The parking structure would have three levels with an accompanying commercial center and a total area of 21,834 square meters, 14 meters deep, on Hung Vuong Street bordering Nguyen Thai Hoc Street to the rear. This place is a rare park in the city’s center that the people have come to call the “Flower Garden.”

The authorities in Danang removed the facilities of the Danang Joint Stock Book Company along with the business kiosks of 13 families, as well as leveling the city’s Center of Culture and Sports and dismantling the “Quang Nam Danang Brave Resilience” memorial to make room for the project. And the Flower Garden has disappeared (though it would be restored in future) to clear the way for the underground parking facility.

With respect to Danang Center, the people of Danang gave up a library on the land it occupies so that the Vu Chau Long Company could build a high rise. But now, the tower is not in sight.

The Dong A Joint Stock Real Estate Company broke ground for the Golden Square project in January 2008 and it was predicted that it would be completed in two years. However, just as with the other sites mentioned above, it has made little, if no, progress.

This “diamond land” was assigned by Danang City to the Dong A Joint Stock Real Estate Company for a very low price – less than VND10 million per square meter when the then market price was over VND30 million per square meter. The understanding is that the land was sold at that price in order to create favorable conditions for the investor to quickly construct a complex with a commercial center to advance Danang’s position as a leading city in central Vietnam.

Danang’s development has been fast but not with the noise, mess and traffic jams of HCMC and Hanoi. It is considered the most desirable city to live in. Its infrastructure is well coordinated. Every area, every street is regulated with regard to architectural style and construction so that new building projects will not have negative effects on general urban planning.

Danang still has many beautiful streets. Nguyen Tat Thanh is one such street, running northward along the beach from Bach Dang Street to the bottom of Hai Van Pass. And there is Pham Van Dong Street, which goes from the foot of the rotating bridge over the Han River directly to My Khe Beach; September 2 Street runs from Cam Le District connecting with Bach Dang Street. And there is the breathtaking Son Tra-Dien Ngoc coastal road leading to Hoi An.

Having not only its streets, the bridge spanning the Han River is also a success of Danang’s leaders. Recently completed are the Cam Le, Hoa Xuan, Thuan Phuoc and Tuyen Son bridges. Rong Bridge (under construction) and the Nguyen Van Troi-Tran Thi Ly Bridge (being dismantled for rebuilding) will have a sight-seeing tower and will be the first suspension bridge in Vietnam with one face standing up straight and a steep, leaning pier.

The citizens of Danang can still be proud of the city’s “Five Don’t Haves, Three Haves” program:  No hungry households, no illiteracy, no begging on the street, no drug addicts and no thieves and promotion of home ownership, employment and a cultured way of life.

To achieve these successes, both the authorities and people of Danang have had to make relentless efforts. In mid-March 2011, the leaders of the city agreed to reclaim the land for the Vien Dong Meridian and Danang Center projects, but the agreement has yet to be put into action. At the end of February this year, Nguyen Ba Thanh, Secretary of the Communist Party Committee of Danang, said regarding projects that have languished for five years that he would call the project investors to account.  They will have to sign pledges to resume work on their projects next year and if not, their land will be reclaimed by the city authorities.

Thanh also stated that any reclaimed projects will be auctioned off. If there are no bidders, the price will be lowered until a new buyer is found – only then will the original investor be compensated for the land.

Diamond land should be reserved for those who really have the ability and capital. Leaders of Danang should take prudence in considering projects in the city center such as a project to transform Chi Lang Stadium into a commercial establishment.

One wonders whether Danang’s economy is strong enough to absorb a new project when there are already several shopping malls, supermarkets, luxury apartments and resorts. Assuming that the project is completed, who will use it? To whom will they sell? Or perhaps this is just a way to increase GDP as Le Dang Doanh, an economics expert, has stated:  “Danang survives primarily on land sales. And as specified in a decision by the 20th Danang Party Congress at the end of September 2010, they must ‘build up Danang so that it becomes an industrialized city before 2020.’”

Vinacas says to import 200,000 tons of raw cashew

In the coming time, local businesses need to import an additional 200,000 tons of raw cashew to process, said the Vietnam Cashew Association (Vinacas). Therefore, the total volume of raw cashew imports in 2012 is estimated at 357,000 tons.

According to Vinacas, in the first seven months of 2012, enterprises imported nearly 157,000 tons of raw cashew, with an average import price of VND21,700 per kilo.

Vinacas forecast from now to the year’s end, the export prices of cashew would increase given the higher demand of the world, mostly the U.S. and China, so local cashew exporters need more materials.

As the Chinese National Day and the wedding and festive season in India are coming soon, cashew nut consumption will pick up, pushing up cashew prices, according to Vinacas.

However, cashew price forecasts are not always correct. At this time last year, Vinacas predicted cashew export prices would rise in the final months of 2011, but in fact they did not rise but fall.

Given the global price fluctuations, seven out of the ten cashew exporters that the Daily contacted said they were not so optimistic about prices rising again in the last months due to the difficulties in overseas markets, especially Europe.

In early 2012, Vinacas set a goal to export 150,000 tons of cashew nuts this year, bringing in US$1.5 billion.

Local exporters in trouble on China’s import limits

The fact that China has stopped buying many kinds of goods from Vietnam has pushed local exporters into a tailspin.

Speaking with the Daily, Phi Ngoc Chung, director of Trung Thanh Co., Ltd. which specializes in exporting agro-products to China, said his firm’s shipments bound for the neighboring market have completely been suspended for almost one month.

“Chinese importers sent us the notice on the import suspension but they have given no clear explanations for the decision,” Chung stressed.

Chinese partners told Chung’s company their import suspension is due to a sharp plunge in demands for the products in their country but local exporters deemed such an explanation unreasonable.

Chung complained he has received no responses from the foreign partners as well as from relevant authorities of the nations regarding the halted trading, adding export volumes of his enterprise to China plummeted nearly by half versus the year-ago period in Jan-Jun.

According to Tran Van Bac, deputy general director of Saigon Trading Group (Satra), the volumes his company had shipped to China had fallen over the past time as well.

“There are so many risks when doing business with the Chinese market and this is the reason why Satra since the year’s beginning has minimized exports to the market and has shifted to others instead,” Bac said.

The import limits by China are forecast to adversely affect local firms trading with the Chinese, especially local traders along the country’s border gates.

Vietnam’s key products exported to China include crude and semi-processed products like cereal, rubber, farm produce and aquatic products. Figures of the General Department of Customs showed that Vietnam had imported over US$13 billion worth of commodities from China in the year’s first half while exported only more than US$6.1 billion worth in the same period.

MGM Grand Ho Tram offers over 2,000 jobs

MGM Grand Ho Tram is putting up a career day in at the Rex Hotel in HCMC this Saturday in a move to look for more than 2,000 employees for the resort that will be up and running early next year in Ba Ria-Vung Tau Province.

Qualified applicants can find different jobs available in sales, front office, conference, entertainment, accounting, housekeeping, information technology, security and other positions for the project’s departments based in HCMC and at its site in Ba Ria-Vung Tau.

The applicants will be able to submit their qualifications and be interviewed at the career event for their positions. There will also be sessions where existing MGM team members will share their experiences within the company with potential future colleagues to ensure they understand about the MGM Grand Ho Tram team.

John Shigley, president and chief operating officer of MGM Grand Ho Tram, said in a statement released on Tuesday, “As we edge ever closer to our opening early next year, we are now setting about ramping up our team, with over 2,000 jobs available at our new Ho Tram home.”

The career day is one of the MGM Grand Ho Tram’s mass recruitment that will take place in HCMC, Vung Tau City as well other locations in Ba Ria-Vung Tau, where the resort is based. Management of the company will also visit almost 20 universities, colleges and academic institutions nationwide to look for the talent to form its founding team.

The two-hotel-wing MGM Grand Ho Tram is part of the US$4.2 billion Ho Tram Strip project in the southern province. The first wing of the resort in operation in early 2013 will feature 541 luxury rooms and suites.

MGM Grand Ho Tram represents the first of five 5-star resorts at the Ho Tram Strip, which is being developed by Asian Coast Development (Canada) Ltd. (ACDL) under its wholly owned Vietnamese subsidiary Ho Tram Project Company Limited (HTP). MGM Hospitality is appointed by HTP under a management agreement which sees it function as the operator of the first of these resorts.

ACDL began work on phase one of the Ho Tram Strip project in May 2008. However, this stage was hit by the global financial turbulence before it was put back on track in October 2010, which leads to the delayed opening in early 2013 instead of the previous schedule in 2011.

The Ho Tram development comprises of 1,100 luxury rooms, suites and villas, convention space, entertainment areas, nine restaurants, one spa, three outdoor swimming pools, a beach club, four bars and lounges, a retail shopping area, and a golf course designed by golf legend Greg Norman.

KPMG highlights the way forward

A conference "Global Trends- Opportunities and Challenges" was held by KPMG and VIR at Hanoi’s Sofitel Legend Metropole hotel on August 14.

The conference is a part of KPMG International's global chairman Michael J. Andrew's visit to Vietnam this week aimed at the Vietnamese government, international organisations in Vietnam and business community to highlight investment opportunities and prospects in Vietnam.

Speaking at the conference, Andrew said global economy was extremely different place than it was 100 days ago with loss of confidence and greater uncertainty.

"There are four risks causing uncertainty – the Eurozone crisis, the US political gridlock, extent of slowdown in China and tensions in Middle East. And Vietnam is not immune from the risk and uncertainty being experienced in the world," he said.

Andrew also pointed out 10 global trends happening which were West/East, North/South, change in trade patterns, competition for liquidity, business models global, growth and austerity, closed economies, business reputation and business ethics, corporate governance, energy and technology.

While Western economies were weighed down and could not be worked through quickly, international investors trended to seek for investment opportunities in Asian and other developing markets

"How governments can catch this chance was to build confidence with policies that promote investment through open and transparent market," he said.

Also in his visit, Andrew had a meeting with Vietnam's Deputy Prime Minister Vu Van Ninh.

Ninh briefed Andrew on Vietnam’s economic-financial development, saying that during this year and several years to come, the government would pursue its targets of curbing inflation and maintaining macro-economic stability and appropriate growth, which would serve sustainable development in the following years.

In the meeting, KPMG as the largest professional services provider in Vietnam, also emphasized its efforts to contribute in Vietnam's economic development and integration in the global and regional economies.

Andrew who was assigned as KPMG International's global chairman in 2011stressed Vietnam’s potential in South East Asia, saying that KPMG continued committing its long-term presence, renewing technology and improving the quality of human resources to providing its leading audit, tax and advisory services to Vietnamese firms as well as foreign investors.

Warrick Cleine, CEO of KPMG Vietnam, said: "KPMG has been working with many Vietnam's leading companies including foreign and domestic invested ones. The visit of KPMG International's global chairman in Vietnam showed our commitment to provide international-standard services to our customers."

KPMG International is one of global networks of professional service firms providing audit, tax and advisory services. It operates in 152 countries with more than 145,000 people working in its member firms around the world.

KPMG Vietnam was established in 1994.

Plant to be a central attraction

Y My Medium Density Fiberboard Company kicked-off a density fiberboard factory project in central Thua Thien-Hue province’s Phu Bai Industrial Park.

Phan Quang Vinh, vice head of Thua Thien Hue Industrial Park Management Authority, said: “The $56 million Medium Density Fiberboard (MDF) factory project was started work last week in Thua Thien-Hua province’s Phu Bai Industrial Park.”

Licenced in December, 2011, the new facility will have a designed capacity of 240,000 cubic metres per year. The first phase’s capacity will be 120,000 cubic metres, the second phase 120,000 cubic metres and located on 10 hectares. Construction will start within one year.

“Its products will be exported and domestically consumed. Once coming in to operation, it will employ 400 local workers and contribute in the local budget,” said Vinh.

Y My Medium Density Fiberboard, developer of this project, said it would use natural forest resources in Hue province and some neighbouring provinces.

The company at the same time planed to restore natural forest resources by afforesting.

Y My Medium Density Fiberboard, a subsidiary of Bien Hoa, Dong Nai province-based Y My Ceramic Tiles Corporation manufacturing ceramic products with advanced technology from Italy to export to Cuba, Thailand, Cambodia and Iraq.

More freewheeling car import rules on the table

Loosened car import regulations are on the table to help auto firms.

The ministries of Industry and Trade (MoIT) and Finance (MoF) are reportedly considering loosening the conditions levied on import of under-nine seat brand-new cars regulated in MoIT’s Circular 20 dated May 12, 2011 through abolishing the requirement demanding importers to show authorised papers from genuine car manufacturers’ importers and distributors.

Circular 20, effective from June 26, 2011, stipulates additional procedures for imported cars from nine seats or less.

This means commercial auto importers, currently struggling to survive by shifting into used car trading or acting as agents for some Chinese car brands, will have a chance to turn back to their conventional auto import business.

The MoIT recently took action to ease car importers’ burdens. It has allowed firms to continue importing cars in volumes and types as stated in contracts in three months if they signed import contracts and already paid deposits before the date Circular 20 came into force.

Industry experts pointed out two reasons why the move should be taken.

The first point is to enrich car supply sources in the face of dwindling car assembling and manufacture in the domestic market against rising completely built unit (CBU) imports, and to tackle sharply declining state budget caused by falling auto and parts import with associated tax contributions.

A representative from an auto reporting the second largest under-nine seat brand-new car revenue in the domestic market which has got an authorised certificate from a South Korea auto firm said after Circular 20 took effect the company spent a big chunk of money into upgrading and expanding its agent network. Thereby, loosening car import regulations would disadvantage some firms due to costly investments compared to car salons and showrooms with lower investments.

“Firms could not set their minds at ease if state policies change constantly,” said the representative.

When issuing Circular 20, the MoIT said the move was to shield consumer interests, reduce trade gaps and ensure road traffic safety.

That was why the MoIT compelled Hung Long Company, which imported a total of 62 Lexus cars not having authorised paper from genuine car manufacturer, to re-export its second shipment of 16 car units and pay VND40 million ($1,900) administrative penalty.

Hung Long Company director Nguyen Ba Hoc said auto sector’s policy change explained why firms wanted to import instead of injecting into auto manufacture.

Imports of completely built car units came to nearly 16,000 units in the first seven months of 2012 valued at $335 million, shedding 58 in volume and 44 per cent in value on-year.

With current 78 per cent import duty levied on brand-new CBU cars with nine seats or less plus 45-55 per cent excide tax depending on car cylinder capacity declining auto import cast a big dent to state budget.

City wants more FDI capital for high-tech sector

Although Ho Chi Minh City has attracted some renowned international groups into software and information technology (IT) sectors in recent times, foreign direct investment (FDI) attraction into the city’s high-tech industry is still not as lucrative as expected.

Speaking at a meeting with senior managing directors of global MBA programme of the University of Southern California on Monday, Ho Chi Minh City vice chairman Le Manh Ha said this is a big concern in FDI attraction now.

In comparison with other localities, the city has more advantages such as high-quality human resources and ready-made production workshops at high-tech and software zones. These facilities are built to lure FDI capital into IT and software projects.

Richard Drobnick, who led the delegation of 30 directors of global MBA programme from many countries, said that its members have various interests in investing in Vietnam in general and Ho Chi Minh City in particular.

The directors at the meeting with the city’s leaders learnt about solutions for traffic infrastructure and manpower issues of the city. The delegates also sought information about the city’s incentives to encourage Vietnamese students and people overseas to work for the country.

The delegation also asked for information on living conditions in Ho Chi Minh City such as housing, healthcare and education. They also shared experience on attracting high-quality manpower with local authorities.

Ha Long City cooperates with China’s Zhuhai City

President of the People’s Committee of Ha Long City Dao Xuan Dan and Mayor of Zhuhai City in Guangdong province (China) He Ningka signed a Memorandum of Understanding (MoU) on enhancing cooperative ties between authorities of the two cities on August 15.

This activity formed part of a working visit of Quang Ninh’s delegation, led by Standing Vice Secretary of the municipal Party Committee Do Thi Hoang, to Guangdong province, starting on August 13.

Under the MoU, Ha Long and Zhuhai will develop cooperation and exchange activities in respect of relevant law of the two countries as well as the principles of equality and mutual benefits, and the comprehensive strategic cooperative partnership between Vietnam and China .

Leaders of both sides will often exchange views to boost friendship and cooperation between the two localities, giving priority to the fields of trade, investment, culture, sports, tourism, education-training, and science-technology.-

Refinery incentives hinder fuel import tax cuts

National flag-carrier Vietnam Airlines and Jetstar Pacific have recently called on the Ministry of Finance to reduce the import duties slapped on airline gasoline, a proposal that was later turned down due to an incentive policy granted to the country’s oil refineries.

Under special treatment approved by the finance ministry, Nghi Son Refinery, the second planned oil refinery in Vietnam, will be allowed to sell its fuel and gas commodities at import prices, even though the products are locally produced.

Moreover, wholesale prices of the refinery’s products are also allowed to include the import tariffs of the equivalent fuel, oil and gas products.

Specifically, fuel commodities produced by Thanh Son Refinery will be sold at the import price plus a 7 percent import duty, while the respective tax rates for petrochemical commodities and liquefied petroleum gas are 3 and 5 percent. The incentive will be valid for ten years starting in 2013, when the refinery is scheduled to become operational.

What’s most important about this policy is that, if the import duties slapped on fuel products are lower than the said rates, the government will earmark money to make up for the disparity.

Hence, any proposal to reduce fuel import duties has to be carefully considered as the government will lose money on the lowered tax rates.

After Binh Son refinery managed to receive the incentive before it has become operational, Dung Quat Oil Refinery also jumped in and asked for similar special treatment.

The finance ministry gave the request a go-ahead, according to the refinery’s operator, the Binh Son Refining and Petrochemical Co (BSR).

“In case fuel import taxes are reduced, PetroVietnam is required to buy Dung Quat products at the incentive prices [import price plus taxes],” BSR CEO Nguyen Hoai Giang told Tuoi Tre.

In receiving the airline fuel tax cut proposal from the two carriers, the Ministry of Finance frankly responded that the duties cannot be slashed due to the incentives granted to the refineries.

“The ministry has to consider if the state budget is capable of making up for the price disparity once import duties are slashed,” commented Doctor Vu Dinh Anh, former deputy head of the Market and Price Research Institute.

The ministry promised to assist the airliners in “a different way,” but still asserted that by all means, the fuel import tariffs will not be reduced to lower than 7 percent, so that the government will not have to open its pocket to recoup for the refineries.

Doctor Le Dang Doanh, former member of the Prime Minister's research board, said incentives are necessary to boost the investment in refineries in Vietnam, but the special treatment should balance with social interest.

The economic expert refused to comment on the gains and losses of the refinery incentives, but expressed concern that it will be more difficult for import duties of not only airline gasoline, but A92 gasoline and other oil products, to be cut in the future.

Bringing Vietnamese goods to rural areas programme

To hold sway over the domestic market, Vietnamese companies must develop a long-term strategy to improve the quality of their products while maintaining reasonable prices and their prestige.  

In recent times, the “bringing Vietnamese products to rural areas” programme has made significant contributions to developing the domestic market and promoting the “Vietnamese people using Vietnamese products” campaign.

Through many programmes launched by departments of industry and trade, trade promotion agencies and associations across the country, rural people are now familiar with a wide range of products with Vietnamese trademarks which are sold 5-10 percent lower than normal market prices.

Nguyen Thi Xuyen, from Can Thanh town, Ho Chi Minh City, says farmers are very happy with the programme as they can now access high quality goods at reasonable prices.

Most businesses are set to expand their distribution networks rather than just increasing their turnover.

Dinh Thi Hien from Chau Thanh district, Tien Giang province, says she likes Vietnamese products as they are of good design and high quality. “I think Vietnamese people will stick with the use of home-made products,” she adds. “This explains why 80 percent of all items on display at rural fairs are of Vietnamese origin.”

For many businesses, participating in such fairs will not only help them clear their inventories in the short run, but also build trust in the long run.

Vinamilk Public Relations Manager Bui Thi Huong, says preference for home-made products like Vinamilk has led to a 40 percent increase in the company’s productivity and turnover.

No businesses deny the rural market is, but how to corner it is another matter. Many have realized the need to link distribution networks between cities, provinces, and regions, even between remote and mountainous districts, in addition to improving the quality of their products, diversifying samples and lowering prices to meet customer tastes and demand.

Nguyen Thi Thanh Huyen, Director General of Garment Corporation 10, proposes expanding the concept of “giving priority to the use of Vietnamese products”.

She argues that domestic customers should stick with the use of home-made products and businesses on their part should improve the quality of their products and services.

Since the first trade fair in March 2010, the Vietnam's Business Studies and Assistance Centre (BSA) has organised more than 80 similar fairs to bring Vietnamese goods to rural customers across the country.

The centre’s director Vu Kim Hanh says the programme has supported many businesses in delivering their products directly to the hands of customers and improving their trademark reputation.

20-yr-old beverage brand to be acquired by foreign firm

Local consumers will soon say goodbye to Tribeco, a well-known beverage brand name over the last 20 years, as the company is no longer able to withstand its loss-stricken operation, and is set to dissolve and be acquired by a foreign company.

The dissolution announcement of Tribeco, or the Saigon Beverage JSC, took the beverage market by surprise as the company has two experienced major shareholders, Taiwan’s Uni-President and Kinh Do JSC (KDC).

Still, it has been operating with losses for over the last three to four years, and last year saw an enormous VND92.45 billion loss due to overrun in expenses and a restructuring of the the distribution chain. The loss also cost its equity VND26 billion, according to Saigon Tiep Thi newspaper.

Tribeco, delisted from the stock market last April, is expected to incur another loss of VND140 billion this year.

KDC, six years after joining in steering the Tribeco wheel, ended up withdrawing all of its members from the beverage drink’s board of directors after a shareholder meeting held late last June, when Uni-President Vietnam, which holds a 43.56 percent stake, placed its members in every seat on the board.

The Ho Chi Minh City-based Tribeco Co is also called Tribeco Saigon, to distinguish it from Tribeco Binh Duong and Tribeco Mien Bac, in which a 36 percent and 80 percent stake is held by the former, respectively.

Tribeco Saigon is mainly in charge of sales and distribution, while the Binh Duong facility takes care of purchase, research and development, logistics and production-related activities, according to a former Tribeco official who recently resigned from the company.

“But Tribeco Binh Duong and Mien Bac both failed to yield positive business results, driving Tribeco to losses and debts instead,” the official said on condition of anonymity.
Tribeco Saigon later sold out its shares in Tribeco Binh Duong to Uni-President Vietnam, and is now completing procedures to dissolve.

Dissolving Tribeco Saigon and only keeping Tribeco Binh Duong is seen as a clever move of Uni-President Vietnam, as it is more efficient than restructuring the whole company, Saigon Tiep Thi said.

The Tribeco brand name will no longer exist on the market, instead the company’s products will be sold under the Tribeco Binh Duong brand name, managed by Uni-President Vietnam, a 100 percent foreign-invested company.

Businesses discuss healthier financial control

Immediate and long-term strategies on building sustainable financial structures were examined at a seminar held in Ho Chi Minh City by the Investment Bridge Magazine.

At the seminar, business leaders, bankers and economic experts agreed that over the past decade, loosening credit and easier lending policies have made businesses dependent on bank loans.

As a result, the corporate finance structure has not been strong enough to cope with economic difficulties.

Nguyen Xuan Thanh, Director of Public Policy of the Fulbright Economics Programme, pointed out the shortcomings of the structure which, he said, have led to the risk of bankruptcy and use of a financial black market, now worth trillions of VND.

Nguyen Nam Son, member of the board of directors of Thien Viet Stock Company, highlighted the spread of investment in the real estate market.

He suggested real estate companies restructure their management and focus their finances on core business.

Economic experts also introduced safe solutions to help businesses withdraw from real estate to minimise losses.

Japan’s energy firm opens subsidiary in Vietnam

Japan’s energy firm Idemitsu Kosan Ltd, Co. has established a subsidiary in Vietnam for production and sales of lubricant oil for motorbikes, meeting the growing demand of this product.

The company announced on August 16 that it has invested about US$23.3 million in Idemitsu Lube Vietnam Co., which is located in the northern port city of Haiphong. The plant, to be built on a six-hectare area, is expected to start operation in January 2014.

The company aims to sell around 20,000 kilolitres of lubricant oil in 2015, with an expected total turnover of US$35 million.