Vietnam Air slashes fares for certain domestic flights

Vietnam Airlines on Wednesday unveiled two promotion programs that allow passengers to enjoy fare discounts of up to 46% compared to normal rates for certain domestic routes, particularly the north-south service.

The national flagship carrier said passengers would be able to book single fares from VND1.55 million (around US$75) for its HCMC-Hanoi flights and VND1 million (some US$48) for the HCMC-Danang services. These discount fares apply to the airline’s flights between now and October 27 except those during the upcoming National Day holiday and on days of peak air travel.   

For families, Vietnam Airlines offers adult passengers a free single ticket for children aged under 12 years on the same flight when they purchase an economy-class ticket. The airline said this product targeted groups of adults and children passengers traveling together.

However, the carrier noted that passengers were allowed to benefit from either discount fares or the ‘buy one for adults, get one free for children’ product as the carrier did last year for the two promotion programs.

Vietnam Airlines is also working with travel companies on a demand-stimulus program to offer the latter an average fare discount of 40% over normal fares when they make bookings for their groups of guests to travel from HCMC to Hanoi, Danang, Phu Quoc and other tourist destinations. This program lasts until the end of 2012.

Big C wants to join city’s price stabilization program

Big C supermarket chain has registered to join the price stabilization program in HCMC with pork and a number of goods bearing its own brands available on shelves.

According to Le Ngoc Dao, deputy director of the city’s Department of Industry and Trade, Big C has sent its registration form to the department, saying it wants to take part in the program with pork and Wow-labeled products as its own brand at its stores citywide. The French-invested supermarket says it will not receive soft loans which are designed to support participating firms in the program.

At the request of the local government, on Wednesday inspectors in charge of the price stabilization program had a fact-finding trip to the pork and eBon ham processing workshop of Big C to check the products’ quality. After the trip, the inspectors will submit the result to the city’s leaders for the final conclusion.

Duong Thi Quynh Trang, Public Relations manager of Big C, said her supermarket buys pork from D&F Food Processing Factory under Dong Nai Industrial Food Corporation, San Miguel Pure Foods Company (Vietnam) in Binh Duong Province and the supplier Hoang Thy in Dong Nai Province. Besides, the supermarket has commodities bearing its brands produced by other local partners.

Drought hits summer crop
 
A drought has affected nearly 50,000ha of crops nationwide, says Dang Duy Hien of the General Department of Irrigation under the Ministry of Agriculture and Rural Development.

Low water levels of rivers have caused a water shortage for irrigation in the central provinces. In the central-northern provinces, the average river water level is sufficient at 2-2.5m.

However the irrigation channels across Bac Ninh, Hung Yen and Hai Duong provinces are flowing slow because of construction work on the Bac Hung Hai irrigation and drainage system.

Saline intrusions to the water and soil of the Cuu Long (Mekong) Delta provinces of Soc Trang, Bac Lieu and Ca Mau have forced farmers to stop pumping water.

To prevent people from having to buy water at exorbitant prices from private water providers, the Ministry of Agriculture and Rural Development has urged local authorities to operate their water pumping stations at full capacity or to provide water-tanks for people in remote, downstream areas during the dry season.

For areas of high salinity, local authorities need to fix salt prevention sluice gates to prevent saline saturation of the fields, the ministry said.

Investors slow to partner State
 
When looking at Decision 71 on regulations for pilot investment under the form of Public-Private Partnerships in Viet Nam, investors found it difficult to join, said the United Kingdom's PPP Solutions Limited director, David Wright.

At a workshop on sharing experiences in PPP development and design of financial mechanisms in Viet Nam held yesterday by the Finance Ministry and British Embassy, he said that the country needed to draft and pass PPP laws and rules in accordance with international practices as soon as possible.

To ensure PPP work in Viet Nam, besides political and senior official commitment, the Government needed effective legal and institutional structures, he said.

In Decision 71, the PPP Unit under the Ministry of Planning and Investment (MPI) receives PPP project proposals from localities and feasibility study reports, and recommends those suitable for Government approval.

Project preparation was not only the responsibility of the MPI but also various State ministries and agencies, he said, urging the need to simplify the process and delegate decisions to appropriate levels.

Moreover, effective and efficient funding and financing mechanisms were needed because any PPP contractor, mostly in infrastructure projects, wanted to get enough money back from service users and the Government to recover costs, repay loans and make a return on their investments.

But Decision 71 said that State contributions should not exceed 30 per cent of project values unless there are exceptional cases. The private sector must comprise equity capital accounting for 21 per cent of project value and loan capital accounting for 49 per cent of project value, but the Government would not guarantee bank loans.

Wright said that only a very small number of projects would require less that 30 per cent of State support to make them commercially viable, therefore, the regulation would only address a small proportion of the infrastructure gap.

Deputy Finance Minister Tran Xuan Ha said that pilot PPP project implementation showed insufficient contributions from the State and the private sector, and a lack of co-ordination between the two. He also confirmed the key role of PPP projects, especially in the private sector, to develop infrastructure over the next ten years.

MPI's Foreign Investment Department deputy head Dang Xuan Quang said that the ministry had upgraded the inter-ministerial PPP Unit to a PPP Office that would play an administrative role to develop PPP projects.

He also suggested PPP support funds including one so-called Viability Gap Fund (VGF) that would offer loans for projects with partial credit from commercial banks. State contributions in the form of capital, tax incentives and fee policies would ensure projects were viable, he said.

Director of the Ha Noi Investment Development Fund To Thi Hanh said that regulations on PPP projects were far too general, confusing agencies and investors.

" Investor equity accounting for 21 per cent of a project's value is too much, so it's difficult to find investment," she said, adding that they were also struggling to access bank loans with competitive interest rates that would last the duration of the projects.

Ministry delays plan for property market
 
The Ministry of Construction (MoC) has proposed to delay the submission of a development plan on foreign direct investment for the real estate industry to the Government until August at the Prime Minister's request.

So far, the ministry said, some ministries and 18 cities and provinces had not yet sent in reports on developing FDI for the property industry, including the ministries of Justice, Finance, Planning and Investment, the State Bank of Viet Nam, Ha Noi and HCM City.

Therefore, the ministry could not complete the plan on improving investment quality, State management, efficiency and orientation of foreign direct investment to the real estate industry by 2020 and submit the plan to the Prime Minister in May as required.

Additionally, in January, the ministry sent an official letter to 350 enterprises, asking each to report on implementation of their foreign invested projects in the property industry. However, the ministry has received feedback from only 54 firms.

The Ministry of Planning and Investment (MPI) said that FDI for the property industry this year was expected to reduce against previous years. During 2008-10, FDI accounted for 34 per cent of the total amount poured into Viet Nam, but accounting for only 5.8 per cent in 2011.

In 2010, the country attracted US$6.84 billion in foreign investment to the real estate industry, accounting for 36.8 per cent of total FDI while last year, the nation lured $845.6 million to industry, the MPI said.

However, this year is expected to see an increase in FDI to the property industry because during the first four months of the year, the industry attracted $1.57 billion, of which, $1.2 billion was pumped into the Binh Duong New City project in southern Binh Duong Province.

FDI would reach the property industry via the merger and acquisition (M&A) of real estate projects that experienced financial resource difficulties, experts said.

The wave of M&As in the property market was expected to develop in the coming time because of difficulties in liquidity face by construction firms, according to property service provider CBRE Viet Nam.

For property sellers, current prices were at a low rate, but for investors or buyers, such figures would be a good chance for them to purchase property at real prices, CBRE Viet Nam said.

Such factors would boost the volume of FDI to the property industry this year, CBRE Viet Nam Managing Director Marc Townsend told Vietnam Investment Review.

SP Setia Bhd, one of the largest property firms in Malaysia, has sought investment opportunities in Viet Nam's real estate market, Alex Loh, head of SP Setia Representative Office in Viet Nam, also told the paper.

Many property investors, especially those in the domestic market, who had great difficulty in financial resources, have sought partners to develop projects, he said.

The property market has different development periods, said Loh, adding that now, it faced difficulties in capital and trading activities, but in the long term, would still be considered a potential investment destination.

Coal shortage may affect power sector: Vinacomin

Vinacomin, or the Vietnam National Coal and Mineral Industries Corporation, said in a conference held by the General Department of Energy yesterday that it cannot afford the coal supply for the power sector, adding that the country may face power shortages in 2015 due to a short supply of coal.

According to the Vietnam Energy Association (VEA), thermal-power plants fueled by coal account for nearly 50 percent of the country’s total number of power plants.

This means that the power supply is heavily reliant on coal supply, which is, however, most likely to face a shortage in the future.

In addition to the Electricity Group of Vietnam (EVN), PetroVietnam, the country’s largest gas supplier, is also planning to set up four more thermal-power plants, according to VEA Chairman Tran Viet Ngai.

While Vietnam has long relied on hydropower and thus used to suffer regular power cuts due to water shortages, it is now likely that there will be a new reason for cuts by 2015 -- a coal shortage, experts said at the conference.

Nguyen Canh Nam, Vinacomin’s assistant chairman, said Vietnam is expected to face a shortfall of 7.7 million tons of coal in 2015. That figure will rise to 60 million in 2020, and 100 million tons in 2025.

“With Vinacomin’s current capacity standing at only 40 million tons a year, we can only meet one third of total demand,” said Nam.

While a thermal-power plant is required to ensure supply of only the type of coal that its plant is designed to be fueled from for 20 – 25 years, PVN has so far signed a contract with suppliers for only 10 years, said PVN deputy CEO Nguyen Quoc Khanh.

“It’s a big challenge to ensure a 20 year coal supply.”

Meanwhile, Doctor Nguyen Thanh Son, CEO of Song Hong Energy Co, a Vinacomin subsidiary, expressed his disagreement with the view that Vietnam still has large coal reserves.

“Some experts say the Red River coal basin has 200 billion tons in reserves, but this is groundless optimism.

“Our calculations show that the real figure is only 10 billion tons,” said Son.

For his part, Luong Nguyen Khoa Truong, an official from PVN, said it is inevitable that Vietnam will have to import energy.

“But we shouldn’t import energy that pollutes like coal,” he said.

Truong suggested importing liquefied natural gas, or LNG, as this causes less pollution, despite its higher price.

“Vietnam is located near many LNG export centers such as Indonesia and Malaysia, so we should sign importing contract with them as soon as possible,” he urged.

European businesses in VN ‘still wary'

Business confidence and outlook among European businesses in Viet Nam has remained consistently near "neutral" for the third straight quarter, a quarterly survey by EuroCham shows.

The EuroCham Business Climate Index for April/May 2012 to be released today fell by three points to 53.

European businesses that took part in the survey continued to be cautious about their business outlook and in assessing their current situation as well as the overall economic outlook in Viet Nam.

Of them, 44 per cent are in the services industry, 28 per cent in manufacturing, 20 per cent in trading, and the rest in others.

There was a 10 percentage point increase to 29 per cent in respondents assessing their current business situation as "not good". It had been only 12 per cent a year ago.

The percentage of companies describing their current business situation as "good" was 34 per cent, unchanged from the last survey but down from 50 per cent a year ago.

No respondents described the current situation as "excellent".

Asked about their expected number of orders and revenues in the medium term, the answers were mixed – 58 per cent expected an increase in revenues, a solid increase from last quarter when it was 47 per cent.

The number of businesses expecting revenues to fall remained unchanged at 22 per cent. Only 18 per cent expected revenues to remain constant, down from 27 per cent.

Overall, this represents an upward trend in the outlook on orders and revenues.

But it has yet to have an effect on recruitment plans with 46 per cent of companies wanting to maintain their current level of staff.

Only a third wanted to increase their staff, a 7 per cent fall from last quarter, while 19 per cent were planning to lay off employees, up from 14 per cent last quarter.

The signs of optimism in business outlook seen in the last survey remained largely unchanged, with 38 per cent saying "good" and 36 per cent remaining "neutral".

This was almost unchanged from the last quarter, but is put into perspective by the 51 per cent of respondents who had a positive outlook this time last year.

Twenty-six per cent had a pessimistic outlook.

The results are still not decidedly positive and little is seen in the form of recovery of business outlook. It is worrying that 62 per cent assessed their outlook as either "neutral" or negative.

When asked about their investment plans for 2012, many respondents continued to be cautious: 34 per cent wanted to maintain their level of investments and 38 per cent were looking to increase them.

In the last survey only 36 per cent had wanted to increase their investments, but the number had been 59 per cent last year.

This shows a continuation of the trend that businesses are getting more cautious about investing.

From 24 per cent last quarter, the proportion of businesses looking to reduce their overall investment in the country rose to 28 per cent.

Though majority of companies are looking to maintain or increase their investments in the country, it is worrying that nearly a third of companies are considering a reduction.

The estimate for the expected depreciation in the dong was 5.63 per cent, down from 8.33 per cent last quarter, hinting at confidence in the Government's measures to curb inflation.

But 57 per cent still saw inflation as a major concern or even threat to their business operations in Viet Nam, slightly less than the 61 per cent last time.

When asked about the difficult economic situation in Viet Nam, 45 per cent expected "stabilisation and improvement" of the current situation (up 10 per cent from last quarter).

Though it points towards an increase in confidence, 55 per cent of respondents still expected the overall economic situation to deteriorate further.

Following the recent completion of the scoping exercise and impending start of formal negotiations for a EU-Viet Nam free trade agreement, respondents were asked what this would mean for their business.

A majority (51 per cent) expected a positive impact on their business, 29 per cent saw no impact, and 16 per cent were unsure what an FTA would mean for them.

Though pointing towards a positive sentiment, it also underlined the need to clarify what exactly a free trade agreement would include and how it would impact European businesses in Viet Nam.

When asked what parts of a free trade agreement would be most important for their business, the two most common answers were "elimination of import tariffs" (56 per cent) and "enhancing trade in services" (51 per cent).

This was followed by "tackling non-tariff barriers (34 per cent) " and reaching "agreement on intellectual-property rights" (27 per cent).

EuroCham chairman Preben Hjortlund said: "The continuing low level of the EuroCham Business Climate Index at 53 points shows ongoing concerns and uncertainty in the business community and amongst investors.

"While there are some encouraging signs, the overall business sentiment is stagnating at a relatively low level."

His business grouping's executive director Paul Jewell said: "The continuing low level of EuroCham's [index] can be explained by slow progress on many of the issues that were addressed in our Whitebook, coupled with some new issues that are eroding confidence in the business environment in Viet Nam: Macroeconomic uncertainties, high rates of inflation, corruption and administrative burdens continue.

"European investors are increasingly looking for alternative investment destinations in ASEAN. Therefore Viet Nam has to increase its efforts to remain competitive in the region.

"Tangible progress towards an EU-Viet Nam free trade agreement will be a step in the right direction and help restore investor confidence."

Construction ministry plans office space auction

The Ministry of Construction said it would auction the land use rights to its current 13,000sq.m including three office areas at 37 Le Dai Hanh Street in Hai Ba Trung District.

The ministry calculated that the construction of low-storey building density would be less than 45 per cent. The remaining areas would be used for public works.

Earlier, the Prime Minister approved the construction of a new ministry office in West Lake under a build and transfer model while its current office would make room for low-storey houses. The initiative is expected to improve traffic in the street and surrounding areas.-

Two new projects approved in Da Nang

The Da Nang City People's Committee has approved planning for two new complex areas including housing, commerce, services and high-rise hotels.

The first one includes a 40-storey hotel, three 40-50 storey buildings and 4-6 storey commercial houses invested in by the Dien An Khang JSC in Son Tra District's Phuoc My Ward.

The second project with a 36 storey hotel and two 40 storey buildings will be located in the district's An Hai Bac Ward and receive investment from Hoang Van Phuc Company.

Nhat Tan-Noi Bai route may become model

The Prime Minister has asked the Ha Noi People's Committee to implement planning of the road connecting Nhat Tan Bridge to Noi Bai International Airport to become a modern and model road of the city's gateway.

He also allowed the city to develop land, finance and investment policies as well as choose investors and mobilise capital resources to accelerate the project's progress and effectiveness.

The 12.1km road starting from the Nam Hong intersection to National Highway 12 and the North Thang Long-Noi Bai intersection is expected to become operational by 2014 together with Nhat Tan Bridge and Noi Bai Airport's T2 Station.-

Access to Thai Nguyen lake resort proposed

The Viet Bac SVA Real Estate Company has put forward VND97 trillion (US$4.6 billion) to build roads and the Dan – Nui Coc Lake Urban Area in northern Thai Nguyen Province.

The build-transfer project will include a 13 km road connecting the Nui Coc Lake Tourism Area and Thai Nguyen City and 262 road through Doc Lim and Cong River.

In addition, the project will develop a real estate complex, resort, entertainment area, gold course and pagoda around Nui Coc Lake.

Importers reap profits as world gas prices fall

Petroleum importers have made a windfall profit of VND700-800 (US$0.033-0.038) per litre of oil over the past month as world oil price falls have not been fully reflected in retail prices.

Meanwhile, some distributors have increase commissions to retailers to nearly VND1,000 per litre in a scramble for market share.

World oil prices have been falling since November to record lows recently, Associated Press reported. Crude plunged about 13 per cent from $106 per barrel (or $0.67 per litre) two weeks ago because of expectations Europe's debt crisis would slow the global economy and reduce demand for fuel.

Investors were also closely watching the US economy, which had shown signs of uneven growth in recent months, AP reported. The US Government said on Wednesday that crude inventories rose again last week to their highest since 1990.

Energy trader and consultant Ritterbusch and Associates said in a report: "The oil market remains highly sensitive to any negative macroeconomic news, particularly with stockpiles at 22-year highs."

An anonymous representative of SaigonPetro Co Ltd told Dien dan Kinh te Viet Nam (Viet Nam Economic Forum) newspaper said that ministries of Finance and Industry and Trade had decided to raise the import tariffs of petrol products from zero to 2-3 per cent and reduce the retail prices of oil products by VND300-500 on May 9.

Prices of RON 92 petrol had gone down to VND23,300 ($1.11), diesel to VND21,600, kerosene to VND21,400 and mazut to VND19,200.

Large importers like Petrolimex, PVOil and SaigonPetro have to make choice: either increase commissions or accept lower market share.

With the downturn of oil prices, it was expected that ministries would consider lowering the local retail price yet again, said experts. No notice period was required to lower prices.

Gov’t to have more fiscal maneuverability in 2012

Vietnamese fiscal and monetary policies will likely be more maneuverable in 2012, as the country’s macroeconomic situation is stabilizing, said an economist who is also a member of the National Assembly’s Economics Committee.

The remaining difficulties for 2012 include how the government can offer enough liquidity for the economy at an affordable rate so that it can growth steadily, said Dr. Tran Du Lich, a member of the National Advisory Council on Financial and Monetary Policy.

The money pumping must be adequate and monitored strictly so that it will not set off another round of inflation in the coming years, said Lich, director of the Ho Chi Minh City Institute for Economic Research, at a recent forum.

“Inflation in 2012 will not exceed 10 percent, and in my view, it will stand at 9 percent at most. Without future money pumping, it may be as low as around 5-6 percent for 2012”, he said at the "Macroeconomic and the Stock Market in 2012" event held by Kim Eng Vietnam Securities Co.

The main difficulty for Vietnam this year is far different from that of 2011, namely the vicious circle of high-rise inflation, which peaked at about 23 percent in August, and the devaluation of Vietnam dong.

Such economic constraints, resulting in Resolution 11, limited the maneuverability of both fiscal and financial policies in 2011.

At the start of 2011, amid the feasible return of high inflation that had already dampened business sentiments in the previous year, the State Bank of Vietnam devalued the dong by 8.5 percent in February. The government had to issue Resolution 11 – the tightening fiscal and monetary policies – to prevent the dong from falling further.

But regarding the 2012 macroeconomic picture, as inflation is cooling down and the national foreign exchange reserve is improving due to the decreasing trade deficit, there will be no further devaluation of the dong, he said.

But the problem now is liquidity for the economy, since nearly 29 percent of businesses had ceased operations as of April 30, 2012, Lich said.

The liquidity constraint of the economy was caused by the same shortage in the banking system in 2011.

By the end of 2011, total lending with real estate collaterals at Vietnamese commercial banks accounted for 53 percent of total outstanding credit, equivalent to $70 billion.

With the amount of the mortgaged properties, this is the direct cause of the liquidity shortage of commercial banks.

"Trade deficit reduction in Q1/2012 is a positive economic indicator to many, but in my view, it is a worrisome signal. When many enterprises stopped production, they stopped importing raw materials, thus reducing the trade gap.”

“It is not a miracle caused by operational measures of the Ministry of Industry and Trade. However, the reduction in exports and imports has facilitated the stability of the Vietnamese currency," Lich said.

According to Dr. Lich, the processing industry grew by as little as 4.3 percent in the first four months of this year, but now the growth rate seems to be improving.

In terms of gross domestic product (GDP) growth, Vietnam has seen the lowest domestic product increase since 2009 in Q1/2012; with total consumption and retail value of the local market increasing by only 3.1 percent, compared to the previous rate of over 10 percent, excluding inflation.

According to the latest report from the Ministry of Planning and Investment, as of early April inventories had increased very strongly.

Specifically, the amount of unsold stocks are on a rise over the same period last year, including 63.4 percent in chemical fertilizer, 41.2 percent in cement, 38.9 percent in mopeds and motorcycles, 35.6 percent in garment-textile, 102 percent in plastic products, 101 percent in metals, and 94.8 percent in processed fruit and vegetables.

“With such a rise in inventories, nobody dares to produce more," Lich said.

As of last month, the total number of registered business enterprises was 647,600, but only about 463,800 businesses are still operational. Thus, the number of active enterprises accounted for only 71.6 percent of registered enterprises.

Among the remaining 29.4 percent, 82,000 have been dissolved, 16,000 have stopped working for tax returns, and 85,800 are left without any understanding of what real estate is theirs.

Under this situation, enterprises are classified into three types.

The first are the most healthy ones, the most wanted group for lending, but they will not borrow; while the second group, though still operational, found that more lending will bring them no profits, so they also limits their borrowings.

In this context, bad debt is very high and increasing, especially in the weak banks. So, there are good banks with surpluses, but they are doing nothing but buying government bonds at an interest rate of about 11.5 percent a year to maintain liquidity capacity.

“Therefore, I had suggested in late 2011 that the Government warm up the real estate and securities markets.”

If Vietnam’s GDP growth doesn’t recover by the end of the coming quarter, the national economy will probably fall into stagflation, the combination of stagnation and inflation.

If this were to happen the 6 to 6.5 percent growth target set this year by the Government will be difficult to achieve.

But if easing monetary policies by increasing the money supply is so drastic as to stimulate growth, the inflation risk will come back in 2013.

So, finding an adequate money supply for a 5.5 percent GDP growth is the most sustainable scenario, he said.

If the average interest rate of 10 percent is a real positive for depositors, Lich said the depositing interest rates will decrease gradually to 10 percent a year so that lending rate will be about 13 percent a year.

Auto sales plunge in April

Total car sales dropped sharply last month, beating industry expectations about imminent market recovery following satisfactory results in March.

April sales reached nearly 7,000 units, declining 24 per cent over March and 46 per cent over the same period last year, reported the Viet Nam Automobile Manufacturers' Association (VAMA).

Of the number, 2,394 passenger cars and 4,588 trucks were sold, down 26 and 22 per cent, respectively, compared to March's levels.

CKD (completely knocked down) sales reached 5,504 units, down 24 per cent month-on-month, while CBU (completely built unit) volumes tumbled 23 per cent.

Eighteen VAMA members alone last month sold over 6,000 vehicles, declining 20 per cent over the previous month and 37 per cent over the year.

Almost all carmakers, including Truong Hai, Toyota, Mercedes-Benz, Honda, GM, Ford, Mitshubishi, Isuzu and VMC, witnessed the downtrend. Many were seeing their sales slashed by half and even by more than two-thirds from the figures of the same period last year.

At a VAMA meeting earlier this year, its members predicted total car sales to range between 130,000 and 140,000 vehicles in 2012. Now they expected this year's total sales to reach only about 100,000 units, a decrease of 27.5 per cent over last year, the association said.

VAMA Secretary Pham Duy Hung said the automotive industry was in an alerting situation.

"Extremely high inventories are forcing most manufacturers and assemblers to take strong measures to reduce their production," he said. "Dealer networks are facing cash issues and high inventories in particular."

Hung noted that, compared to the same period last year, the industry had seen a slump of about 21,300 vehicles in the first four months of this year.

He attributed the decline to "extremely high" bank lending interest rates of 18-20 per cent, tightened lending conditions and "too high" registration fees, which were currently 15-20 per cent in Ha Noi and HCM City.

"The ‘to be implemented' annual fee set to limit personal vehicle usage is unaffordable to most customers," he said. "This new fee has frozen demand and the market will decline until the fee is cancelled by the Government."

Ford Viet Nam General Director Laurent Charpentier told local press that, although the Ministry of Transport had decided not to immediately levy any fees to restrict circulation of personal vehicles, especially personal cars, consumers were still concerned about possible fees they might have to pay if owning a car.

This was one of the major reasons that made the car market sluggish from the beginning of the year, he said.

Economists said the consumer price index edging up only slightly by 0.05 per cent last month proved that consumers were tightening expenditure. Families were prioritising essential goods and cars were now among products that many had excluded from their spending lists.

Petrol price hikes and high taxes were making demand for cars reduce even more sharply, they said.

According to a recent survey conducted by online newspaper Dan tri (People's Knowledge) on how some new fees proposed by the Government recently affected buying decisions, 52 per cent of those polled said they would not buy a car and 23 per cent said they would consider it carefully.

Vietnam Economic Forum's online publication Vef.vn reported that many firms including GM and Ford Viet Nam now had their inventories mounting to thousands of vehicles as a result of unsalable cars, and this, together with capital shortages and high interest rates, was causing them utmost difficulties.

Car dealers were continuously offering discounts to cope with the situation, it wrote, with Mercedes-Benz recently having to cut prices for its SUV models by VND331 million-959 million (US$15,900-46,100) per unit.

Excluding Toyota, almost all other firms were said to have temporarily extended work schedules, dismissed certain numbers of workers or given employees more days off. Many of the VAMA members' 60,000 labourers were said to be involved in these moves.

Hung said that, with an average passenger car price of VND500 million ($24,000) per unit, the State budget was estimated to have lost a tax revenue of VND6 trillion ($290 million) within the first four months of the year.

Business forum help boost stronger VN-EU trade ties

The Vietnam-EU Business Forum was held in Ho Chi Minh City on May 18 to discuss ways to raise bilateral trade ties to a higher level.  

The annual event was co-organised by the EU Delegation to Vietnam and the Vietnam Chamber of Commerce and Industry (VCCI) to promote mutual understanding between the business communities, especially as Vietnam and the EU are negotiating their Free Trade Agreement (FTA), which will have remarkable effects on businesses once it is signed.

The FTA negotiations will last about three years before all commercial issues are settled, and the agreement is expected to benefit trade and investment between the two sides.

Vietnamese businesses should grasp useful information to effectively tap the EU market, with 27 member countries and more than 500 million people.

This lucrative market accounts for 17 percent of total Vietnamese export revenue. It main imports are footwear, seafood and agricultural products.

In the 2011-2013 period, Vietnam enjoys the Generalized System of Preferences (GSP) for 25 percent of its total export value to the EU.

However, Vietnamese goods exported to the EU still face huge challenges of technical barriers. In some sectors, Vietnamese products gain limited access to the market and cannot be sold to EU governments.

Forum discusses export opportunities and prospects

Many economic experts, trade counselors, export-import promotion agencies and businesses gathered at an export forum in Ho Chi Minh City on May 18 to devise measures to help businesses boost exports.

Participants analysed Vietnam’s economic status and opportunities and challenges for the export sector, and proposed support solutions for businesses based on the national export orientation from now to 2015.

The forum’s six discussion sessions focussed six major export markets of the US, Japan, China, the EU, the Republic of Korea and ASEAN to help businesses access information, policies and experiences when dealing with these markets.

Pho Nam Phuong, director of the Ho Chi Minh City Trade and Investment Promotion Centre, said this year the city promotes trade activities targeting seven key markets, namely the US, Japan, the EU, China and neighbouring countries such as Laos, Cambodia and Myanmar. The city will also organize meetings between domestic businesses and foreign partners.

Regional conference promotes EWEC cooperation

The Deputy Foreign Ministerial Conference on the East-West Economic Corridor (EWEC) opened in Dong Ha City, Quang Tri province on May 18.

Present at the conference were deputy foreign ministers and provincial leaders from Laos, Vietnam and Thailand, and representatives from the Asia Development Bank (ADB), the Japanese Embassy in Hanoi, the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA).

Participants discussed developments and challenges in implementing the Greater Mekong Subregion (GMS) Cross Border Transportation Agreement, policies and measures to facilitate EWEC operations. They underscored the need to strengthen friendship and cooperation for strong development of EWEC.

Vietnamese Deputy Foreign Minister Ho Xuan Son said the participation of EWEC’s development partners, including the Japanese Embassy, ADB, JBIC and JICA, demonstrates their active role and long-term commitment to promoting EWEC development in the future.

The conference approved a joint declaration affirming that after a decade of development, EWEC has achieved many infrastructure targets. EWEC’s strategy and action plan adopted in 2009 has brought about significant results as many tourism, environmental and social infrastructure projects have been completed or underway.

But participants agreed that despite achievements, EWEC has failed to bring about the expected benefits. Limited investment in production and services and obstacles for transporting goods and people along the corridor remain. They pointed out difficulties that need to be dealt with in the fields of infrastructure, legal framework, transport, and cumbersome procedures at border gates and customs.

The conference also called on development partners and the private sector to closely coordinate with EWEC countries in developing EWEC and coping with current difficulties and challenges.

To strengthen coordination among EWEC countries, the conference agreed that three countries will take turns holding the annual event and establish a cooperative dialogue mechanism among Thailand’s Mucdaha province, Laos’ Savanakhet province and Vietnam’s Quang Tri province. Their first meeting will be held late this year in Mucdahan.

BIDV raises chartered capital to Laos-Vietnam Bank

The Bank for Investment and Development of Vietnam (BIDV) will contribute US$21 million from its chartered capital and reserve fund to lift the chartered capital of Laos-Vietnam Joint Venture Bank (LVB) to US$70 million.

BIDV’s proposal to raise chartered capital has been adopted by the State Bank of Vietnam (SBV) which functions as representative of the State’s capital ownership at BIDV.

BIDV’s capital contribution is required to ensure the maintaining of safe limits in banking activities in accordance with current law.

The SBV has asked BIDV to finalize legal procedures related to its overseas investment in compliance with Vietnamese laws and report to the SBV on implementation results after accomplishing the capital contribution to the LVB.

Vietnam, Israel promote agricultural cooperation

Vietnam hopes Israel will support the business communities of the two countries in increasing agricultural cooperation, especially in technology transfer.    

Minister of Agriculture and Rural Development Cao Duc Phat made the proposal while holding talks with his Israeli counterpart Orit Noked, Israeli Minister of Industry, Trade and Labour Shalom Simhon and others in Tel Aviv on May 15-16.

Vietnam is interested in developing crop seedlings, and raising dairy cows and poultry, as well as in watering, post-harvest preservation and product processing technologies, Phat said.

He also proposed that the Israeli Government increase the number of students and expand training programmes for Vietnamese students at its agriculture research institutes.

For their part, Israeli officials highly appreciated Minister Cao Duc Phat’s visit, taking place when the two countries have made new steps towards developing their relationship further following the visit to Vietnam by President Shimon Perez in November 2011.

They confirmed that the Government of Israel wants to strengthen cooperation with Vietnam in all fields, particularly trade, agriculture, science and technology, education and training.

After their talks, Phat and Noked signed an agreement on veterinary cooperation.

While visiting Israel, Phat participated in the 18th International Agricultural Exhibition (AGRITECH) and met with leaders of some leading Israeli businesses in cultivation, irrigation and breeding fields, including Afimilk, Green 2000, NaanDanJane and the Aspasyan group.