Europe to channel investment into Vietnam

Investors are retrieving their capital from Greece, Italy and Spain and other European Union countries to be channelled into Vietnam this year, said Radio the Voice of Russia on March 14.

Experts said Vietnam’s socio-political stability is an important decisive factor for investors. The country’s poverty rate fell from 58 percent in the early 1990s to 9.5 percent in 2010. In addition, Vietnam jumped 16 steps to rank 61st in the 2010 Legatum Prosperity Index Table Ranking of the London-based Legatum Institute.

According to a Bloomberg News forecast, in future, Vietnam’s economic development prospects will be ranked third in Asia after China and India.

In the meantime, Seekingalpha website said Vietnam has recently captured the attention of investors because of its sizeable population of 90 million and its rapidly growing middle class. Because Vietnam’s population is young – more than half the country is under 30 — this market-socialist nation is likely to benefit from a demographic dividend.

Going forward, Vietnam’s inexpensive labor force will continue to be attractive to foreign multinationals looking for an alternative to China’s rising costs.

Another potentially profitable field for investment is real estate. According to the latest survey released by the Association of Foreign Investors in Real Estate (AFIRE), Vietnam ranked as the fourth most attractive emerging market for real estate investment in 2011 behind China, India and Brazil.

Slower inflation boosts shares

National stocks rallied after monthly inflation rates for Ha Noi and HCM City were announced. Inflation inched up 0.19 per cent in the capital and 0.12 per cent in HCM City.

"These are lower rates compared to the first two months of the year and the lowest for 19 months," said Hoa Binh Securities Co analyst Vu Thai Ha.

On the HCM City Stock Exchange, the VN-Index rose by 0.5 per cent to 440.29 points while the VN30 increased by more than 0.8 per cent, reaching 501.29 points.

Market value totalled nearly VND992.5 billion (US$47.2 million), 7.9 per cent higher than Monday's level. The volume of trades fetched more than 62.7 million shares.

Of the 10 leading shares by capitalisation, only Sacombank (STB) and insurer Bao Viet Holdings (BVH) tumbled during yesterday morning's trade. However, the number increased to four stocks at the end of the session, adding software developer FPT (FTP) and food processor Masan (MSN).

Bao Viet continued to bottom out while technology investment firm Sacom (SAM) was the most heavily traded stock in HCM City with around 3.8 million shares changing hands. It retreated by 1.8 per cent.

On the Ha Noi Stock Exchange, the HNX-Index added more than 2 per cent, reaching 74.39 points.

The value of trades edged up by 5.6 per cent compared to the previous day's level, to VND797 billion ($38 million) on a volume of 78.3 million shares.

With 11.2 million shares exchanged, Habubank (HBB) returned as the most active code nationwide.

"On a technical perspective, the medium-term trend of rising stocks has been re-established," Ha said. With yesterday's session, doubts over a rally were removed and replaced by a new confidence.

"However, trading volume did not show significant improvement, proving that new flows of money were facing difficulties entering the market," he added.

Ha also suggested investors to increase stocks in their portfolios.

Proposed income tax amendment not beneficial to taxpayers: lawyers

While there are as many as four options for the income tax law amendment, the Ministry of Finance has chosen the proposal that is least beneficial to taxpayers to include in the draft on the new income tax law.

The ministry has recently recommended that the income tax threshold be lifted to VND6 million (US$288) a month from the current VND4 million, which has been criticized by taxpayers as too low.

The new tax law is expected to take effect as of January 1, 2014.

Earlier, the Ministry of Finance had four options to choose from in order to increase the threshold to a higher rate, three of which have been eliminated in the draft bill.

In the first solution, the deduction for the taxpayer would be adjusted in accordance with the GDP per capita, and the rate would be changed by the National Assembly Standing Committee.

The current deduction of VND4 million was established in 2007, which was around 2.5 times the expected GDP per capita in 2009-2010, and the deduction for dependents was 40 percent of the rate for taxpayer.

Hence, with per capita income expected to be US$1,811 - $1,843 in 2014, or VND44 million a year, the deduction for taxpayer should be VND9 million a month, and the dependent VND3.6 million a month, far higher than the VND6-million rate proposed in the draft bill.

Under the second option, the threshold would be adjusted based on the increase of the basic wage in the non-productive sector. The current VND4-million deduction is six times higher than the basic wage in 2007.

So, with the basic wage expected to amount to VND1.775 million a month in 2014, the deduction rate for taxpayers should be VND10.5 million a month, and the rate for dependents VND4.2 million a month.

In the third solution, the deduction for taxpayers would be adjusted in line with the spiral price.

Specifically, the threshold would be lifted to VND6 million a month, applicable from January 1, 2009 to December 31, 2011, without the price spiral by 2014. The Standing Committee will then adjust the rate when the price spiral exceeds 20 percent.

The Ministry of Finance has chosen to present this solution in its draft bill, to report to the government and collect feedback from ministries and agencies.

But the proposal is only based on the price spiral in 2011, rather than 2014, and does not mention the role of the NA Standing Committee in adjusting the deduction rate.

Finally, the last unused option suggests that all of the current rates remain unchanged, but the annual income for a person to be considered a dependant should be adjusted from the current VND500,000.

Lawyer Tran Xoa of the Minh Dang Quang law firm said the second solution is the most beneficial to taxpayers, since it can go in line with price volatiles, while also ensuring that the law will not be repeatedly amended.

The solution also has a legal framework based on the government’s decision to adjust the basic wage, said Xoa.

“Moreover, this will receive a huge consensus from the society, which is the top target a tax policy should be aimed at,” he said.

Meanwhile, the option to adjust the income tax threshold in accordance with the price spiral, or the GDP per capita, is not convenient, since it will be hard to update the price fluctuations with the basic wage, he added.

“The NA Standing Committee will have to adjust the rates on a regular basis, since prices constantly fluctuate,” he explained.

“As for the last solution, the Ministry of Finance also acknowledged that it is not feasible since it will not be accepted by the society.”

The lawyer added that the income tax threshold should be 8 to 10 times higher than the basic wage, rather than 6 times as suggested, thanks to the economic upheavals.

Meanwhile, lawyer Duong Cong Binh urged that the NA takes action since the finance ministry’s draft bill is unreasonable.

Binh said the current three-year-old tax law has become outdated, creating disadvantages for taxpayers, especially low-income earners.

“Lawmakers should protect the low-income makers,” he said.

Japanese firm Zeon to build plant

The management board of the Hai Phong Economic Zone has granted an investment certificate to Japanese-invested Zeon Manufacturing Ltd Vietnam Company to build a facility in the VSIP Hai Phong Township and Industrial Park Complex.

This is the second foreign direct investment project that has been granted an investment certificate in Vietnam - Singapore Industrial Park (VSIP) Hai Phong. It has a total registered capital of US$25 million and a charter capital of $13.75 million.

The company will begin constructing the plant in April and complete it by the end of this year. It will have a trial production period from January to March 2013 and will officially begin production in April 2013.

The factory will produce a wide range of metal products and equipment including medical instruments, telecom products and electronic items.

VN should have independent central bank

Vietnam needs to set up an independent central bank to deploy monetary policies to stabilize prices and curb inflation, experts of the International Monetary Fund (IMF) have said.

The central bank as it is now needs more specific and independent tasks, said IMF senior economist Rina Bhattacharya at a seminar about policy challenges of Vietnam as the country is becoming a middle-income economy.

The seminar was held by IMF and the State Bank of Vietnam (SBV) in Hanoi this week.

“We find that the central bank has been pursuing multiple objectives that sometimes contradict one another,” Bhattacharya told the seminar.

She cited Section 1, Article 4 of the 2010 State Bank Law that says the central bank’s functions are to stabilize the domestic currency value, ensure the security and efficiency of the banking system as well as the payment system, and contribute to the socio-economic development with socialism orientation.

She said tackling inflation is not the sole objective of SBV, and sometimes the central bank was even obliged to help bolster economic growth. “This denotes a problem in macro-economic management in Vietnam,” she said.

Moreover, she said, Vietnam’s monetary policy lacks transparency and predictability, leaving a negative impact on interest rates, growth and inflation.

In addition, although the real interest rate tool has great effect on core inflation in Vietnam, it has yet to be fully utilized to fight inflation which is now the highest among developing countries in Asia.

IMF remarked that inflation reached its peak of 20.3 percent in the third quarter last year due to the loosened monetary policy. “Vietnam should aim at price stabilization and inflation curbing as the main targets,” Bhattacharya said.

SBV deputy governor Le Minh Hung did not mention the establishment of an independent central bank when delivering his speech at the seminar.

He said SBV would carry out its monetary policy based on targeted inflation in order to further stabilize the macro-economy and restrain inflation.

The deputy governor said SBV would closely follow market changes and macro-economic situations to regulate interest rates and forex rates in order to improve the efficiency and effectiveness of the monetary policy.

IMF’s suggestion about setting up an independent central bank is not new. The organization made the same recommendation in the late 1990s and the model has been discussed in Vietnam in several occasions.

At the Vietnam economic forum held by The Economist Magazine early this year, Deputy Prime Minister Hoang Trung Hai said the Government was considering whether to establish an independent central bank.

Local businesses to face tough year

The Vietnam Chamber of Commerce and Industry’s Vietnam Business Annual Report 2011 predicts 2012 will be another tough year for local enterprises because of troubles of the world’s economy.

The slowdown of economic growth and tightened spending policies of the U.S. and European countries will result in shrinking demand for imports, which will adversely affect Vietnam’s exports.

Due to the Eurozone debt crisis, European lenders are seeking to reduce credits for Asia, which currently stand at US$1.5 trillion. If so, Asian economies in general and Vietnam in particular will suffer.

52 percent of enterprises surveyed said they would maintain their business scale in 2012 given many unfavorable factors.

15 percent of the respondents said they would scale down their businesses and 31 percent said they would expand businesses.

The report points out 4 reasons for rising production and business costs that cause several troubles for enterprises. They are difficulties in bank loan access, a surge in input costs, shortage of highly skilled workers and the slow process of land allocation and site clearance.

“The fact that revenues and selling prices tend to increase while profits stay low shows that enterprises are not only impacted by material prices but also heavily dependent on banking credit sources with sky-high interest rates,” the report says.

According to the report, 76 percent of the respondents are borrowing with the annual rates of over 18 percent – 19 percent. Only 9 percent considered such lending rates reasonable.

High lending rates discourage enterprises from furthering their investment for long-term development. Instead, they choose to invest in short-term deals or speculate in high-risk projects.

The report says enterprises appreciate the efforts of the Government in macro-economic management, but these efforts have failed to bear fruits.

For instance, the policies on adjusting power, fuel prices and interest rates are considered to badly affect production and business activities.

Pham Thi Thu Hang, general secretary of VCCI, said capital use of small enterprises is less efficient than medium and large firms.

She said this could be the reason why banks were not keen on lending to small and medium-sized enterprises.

This makes it necessary for the Government to help small and medium businesses access bank loans as well as improve their capital use efficiency.

According to the report, as of last year’s end, there were over 622,900 enterprises nationwide, in which 79,014 went bust.

77,500 businesses were newly established in 2011, but more than 7,600 of them soon suspended operations.

In terms of business environment, Vietnam dropped to the 98th position among 183 economies worldwide last year, down 8 ranks against 2010, according to the World Bank’s 2012 business environment report.

Laos permits Vietnam to search for minerals

The Laotian government has signed a contract with Vietnam’s Global South Joint Stock Company, allowing the firm to look for minerals in Laos.

Under the contract, operations will be permitted in a 24 square kilometres area of Xangthong district, near Vientiane City.

Global South company pledged to use modern state of the art equipment and a team of highly experienced specialists during their operations.

The company will also do its best to be environmentally friendly and provide jobs for as many local people as possible.

To mark the occasion, the Vietnamese company donated 40,000 USD to build five houses for Laotian war veterans.

Exports to Mexico increase sharply

In January, Vietnam’s exports to Mexico hit over US$97.4 million, a year-on-year rise of 41 percent, reported the Commercial Office of the Vietnamese Embassy in Mexico.

At the same time, its imports from the second largest Latin American economy decreased by 22 percent to more than US$4 million.

Mexico’s ministries, importers and exporters are planning to promote trade and develop action plans aimed at balancing bilateral trade this year and in the following years.

Vietnam exports to Mexico mainly seafood, footwear, garments, printers, wood products, and sport equipment.

It imported from the Latin American economy chemical substances, pharmaceuticals, electronic spare parts, iron and steel, plastics, cotton and fish powder. In 2012, Mexico is to export fresh fruit to Vietnam, especially grapes.

In 2011, two-way trade turnover between Vietnam and Mexico achieved US$1.037 billion, ranking second in Latin America after Brazil.

European capital to flow into Vietnam

Investors are withdrawing their capital from Greece, Italy, Spain and other EU countries and pouring it into Vietnam this year, reports Radio Voice of Russia.

Experts say investors are choosing Vietnam for its political and social stability, as well as the decline in its poverty rate from 58 percent of the population in the 1990s to only 9.5 percent in 2010.

International financial experts also noted the many breakthroughs Vietnam has made in the past decade. Bloomberg predicts that Vietnam could be the third best investment economy in Asia, after China and India.

Vietnam is among the top 10 dynamically developing countries in the world. Not long ago, the country's annual GDP was growing by 8 percent and, despite the current global economic meltdown, it is maintaining GDP growth of 6.8 percent while progressing steadily along its road to industrialization.

Seekingalpha website believes Vietnam is attracting global investors based on its future population of 90 million and a rapidly expanding middle class. In addition, the country is benefiting from the fact that more than half of its population is under 30 years old.

Given the increasing costs of doing business in China, Vietnam's cheap and abundant labour force is another advantage that makes it an appealing new option for multinational companies.

Vietnam now has 135 industrial and export processing zones with many attractive tax incentives for investors from the US, Europe and Asia.

Many Thai enterprises have expanded their company branches in Vietnam in anticipation of the country becoming a major trade and investment centre in the ASEAN region by 2015.

Experts also consider tourism infrastructure in Vietnam as a lucrative investment market which is predicted to attract more than US$12 billion in FDI in the next decade.

Vietinbank prepares overseas bond issuance

The Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) is planning a series of road shows in major foreign markets to prepare for issuing overseas bonds.
 
The road shows will introduce this investment opportunity and will begin on March 19, travelling to Singapore, Hong Kong and London, as well as Boston, New York, Los Angeles and San Francisco in the US.

Deputy Director of Vietinbank Le Duc Tho said the bank will meet potential investors through the road shows, then fix the price of the bonds and issue an appropriate volume.   

The issuance of overseas bonds aims to mobilize mid-and-long term capital resources to meet the demand for business capital in Vietnam, develop new projects and upgrade Vietinbank’s status in the global financial market.

Sugar exports to be monitored closely

The Government has not banned the export of sugar via international and main border gates, but it will closely control the exports via auxiliary border gates, an official of the Ministry of Industry and Trade (MoIT) has said.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said sugar was one of the essential goods that needed a balanced supply and demand to stabilise the market. Therefore, exports through auxiliary border gates and border gates located outside key economic zones would be tightly managed under existing trade policies.

Last year, the Government permitted the export of sugar via auxiliary border gates and after seven months, the exports reached 200,000 tonnes.

As a consequence, by the end of last year domestic producers felt a high demand on sugar but lacked sugar for production.

According to the MoIT's Import and Export Department, the ministry would work with the Ministry of Agriculture and Rural Development (MARD) to have a reasonable management system for sugar trading based on market development and the domestic balance between supply and demand. In this way, producers and traders would see more favourable conditions on sugar and sugarcane.

MARD said this year, total supply of sugar was expected to reach 1.57 million tonnes, 250,000 tonnes higher than last year. The domestic demand is estimated to stand at 1.4 million tonnes. The smuggled volume of sugar into Viet Nam is also predicted to be high, causing sugar factories to have a huge inventory.

Therefore, MARD proposed the MoIT permit exports of 100,000-150,000 tonnes of sugar to help the factories collect capital for production.

The import and export department said the problem was not in permitting exports or not. The importance lies in a good forecast of supply and demand to make reasonable decisions for stabilising the domestic sugar market.

The sugar industry should have efficient management measures to ensure the interests of all farmers and consumers as well as businesses, the department said.

A new Japanese story unfolds

Japanese property developers are flocking to Vietnam hot on the heels of their manufacturing counterparts.

Neil MacGregor, deputy managing director of Savills Vietnam, said: “Japanese investors tend to follow in each other’s footsteps. For example, the initial wave of manufacturers is now attracting supporting industries and those investors require office space, so developers are looking for opportunities to build office buildings, the expatriates require housing and so forth.”

He cited Japanese investors Sojitz, Daiwa House and Kobelco Eco-Solutions in the Long Duc Industrial Zone in Dong Nai province, who were catering to the wave of Japanese manufacturing firms. The $100 million industrial park, which started construction recently, is expected to attract 100 to 150 Japanese manufacturing enterprises after completion.

Tokyu Corporation is also cooperating with Becamex Group to develop a new $1.2 billion urban area in Binh Duong province which is home to many Japanese small and medium manufacturers.

Ho Van Nien, vice chairman of Ba Ria-Vung Tau People’s Committee, told VIR that many investors from Japan’s Kansai and Kawasaki areas were coming to the province and had expressed their willingness to develop industrial parks to attract more Japanese firms working in supporting industries, logistics, tourism and education.

In the north, Haiphong is planning to cooperate with Japanese-backed Forval Corporation to develop a supporting industrial park. Marc Townsend, managing director of CBRE, said that setting up property projects for the working and living demands of Japanese manufacturers was only one of the reasons explaining the rush of Japanese investors to Vietnam’s realty market.

Townsend said Japanese investors wanted to invest as much as possible now because of the strength of the Yen and low borrowing interest rate of around 2-4 per cent, per year on offer at most Japanese banks.

“They [Japanese investors] love Vietnam’s realty market, which offers rare opportunities to acquire realty projects at cheap prices from developers who are suffering from huge pressure because of bank debts or from a lack of money to continue constructing their projects,” said Townsend.

MacGregor said that Japanese investors were looking for assets where they could minimise their risk and this normally required a controlling stake in the development, or possibly 100 per cent ownership.

“They [Japanese investors] are looking to maximise the effectiveness of their experience and, in the case of office developments, to cater to the high demands of Japanese tenants in terms of quality and building management. Other investors may seek scale through purchasing stakes in Vietnamese developers,” added MacGregor.

He said Japanese investors were seeking domestic companies or property projects that allowed them to access the Vietnam growth story. Typical examples are the retail and residential sectors where they could take full advantage of the young demographics and with the interrelated shift in the spending patterns and living habits of this young and dynamic population.

It was also important that these local companies showed a high level of transparency and good corporate governance.

Vietnam to manufacture unmanned aerial vehicle

The Vietnam Aerospace Association (VASA) is cooperating with a number of foreign partners, including Russia’s Irkut Engineering Company, to manufacture unmanned aerial vehicle (UAV).

VASA will consider these partners carefully before signing contracts, its President Prof. Nguyen Duc Cuong told Tuoi Tre (Youth) newspaper on March 19.

Prof. Cuong noted that VASA is scheduled to produce small-sized UAV of less than 100kg for remote surveillance, including early detecting illegal forest exploitation and forest fires, as well as monitoring the national power transmission grid in mountain areas.

UAVs are also used to combat smuggling at sea and along borders, protect exclusive economic zones, and support the search and rescue work, Cuong added.

VBA helps raise Vietnam’s profile in Russia

The Vietnam Business Association (VBA) in Russia held its sixth congress in Moscow on March 18 to review its 2008-2011 term and develop plans for 2012-2015.

VBA President Tran Dang Chung said that in the previous term, the association completed its organizational structure by increasing its membership to 47 from 36 in 2008 and establishing six divisions, including two in charge of foreign affairs, investment promotion and business assistance.

The VBA supported Vietnamese delegations in surveying the Russian market, seeking partners, providing information on business environment in Russia, and organizing conferences to promote Vietnamese exports in this market.

The association also advertised Vietnamese products and services on its website and signed some agreements with Russian partners in order to support businesses.

In the 2012-2015 term, the VBA will continue to support information sharing, strengthen solidarity and develop the community in Russia.

At the congress, Vietnamese Ambassador to Russia Pham Xuan Son acknowledged the association’s efforts in expanding its operations in Russia along with the fine development of the strategic and comprehensive cooperation partnership between Vietnam and Russia.

He expressed his belief that the VBA will make a greater contribution to the Vietnamese community in Russia, as well to Vietnam.

The new leadership of the association was voted with Tran Dang Chung re-elected as President.

Japan’s United Investments plans open-ended bond fund

Japan’s United Investments is teaming up with Military Bank member company MBCapital to create Vietnam’s first open-ended bond fund.

United Investments, which manages about US$1.8 billion globally, is a member of Japan Asia Group.

The Tokyo-based firm will invest in the fund and have a co-ordinating role, Warit Kathong, said vice president of United Investments.

The fund, due to debut in the middle of this year, will focus on fixed-income assets including government and corporate bonds.

With Vietnam’s equity market now among the best-performing in Asia and with the rosy long-term economic perspective, MBCapital’s portfolio manager Ngo Long Giang said he expects the firm’s Japanese partner will shift from investing in bonds in other Asian countries like Malaysia, the Philippines and Indonesia to Vietnam.

MBCapital and United Investments hope to attract investors by giving new investment access to local bond funds and provide stable returns.

United Investments runs two funds investing in Vietnam with MBCapital. Its Vietnam-based Japan Asia Fund focuses on small-and medium-sized enterprises and their Japan-based Vietnam Dream Fund focuses on medium and large listed enterprises.

Int’l trade fair attracts 500 booths

Domestic and foreign businesses will showcase their consumer goods, handicrafts, farm produce and processed food on around 500 booths at an international exhibition and trade fair (VietPo 2012) in Hanoi from April 11-15.

At a press briefing in the capital on March 19, the Vietnam Cooperatives Alliance said that VietPo 2012, which falls within the framework of the National Trade Promotion Programme, will attract businesses from China, the Republic of Korea, Cambodia, Singapore, Thailand, Malaysia, and Pakistan, as well as host Vietnam.

Participating businesses will also display agricultural machinery and equipment, beverages, fashions, cosmetics, gemstones and jewelry, interior decorations, tourism services, advertising technology and trade promotions.

The expo offers a good opportunity for domestic and foreign enterprises and cooperative alliances to promote their trademarks, introduce new products and exchange experiences.

Vietnam-France forum focuses on planning suburban areas

Vietnam is urbanizing faster than any other country in Southeast Asia with the number of urban residents increasing from 19 percent (11.8 million) in 1986 to 30.5 percent (26.3 million) in 2010, according to the World Bank (WB).

The 9th France-Vietnam Economic and Financial Forum on “Sustainable Development of Suburban Areas in Vietnam” opened in Hanoi on March 19 in the presence of Deputy Prime Minster Hoang Trung Hai and French ambassador to Vietnam, Jean Francois Girault.

In his speech, Deputy PM Hai said the practical theme of the forum is one of the top concerns of urban administrations in developing countries, including Vietnam.

Urbanization is a trend and an objective criteria for defining which nations fall into the categories of “developed” and “developing” countries, said Mr Hai.

There are currently 755 urban areas in Vietnam including the two major ones - Hanoi and HCM City. Like other developing countries, peripheral areas in Vietnam are facing challenges due to the high urban population along with poor technical and social infrastructure, which fails to meet transportation demands for both passengers and goods. In addition to urbanization, the waste and inefficient use of land has reduced agricultural areas, causing the disappearance of traditional craft villages and widening the gap in the quality of life between urban and outlying areas.

As a nation that experienced rapid urbanization in the 1950s and 1960s, the France has been successful in establishing institutional measures to develop both urban and rural areas sustainably and harmoniously.

Vietnam hopes to learn from France’s hands-on experiences in order to devise solutions, management mechanisms and policies for developing sustainable suburban areas, said Deputy PM Hai.

The ongoing forum will wrap up on March 20.

Rice exports to China surge

The price of rice has increased by US$15-20 per tonne after many Chinese businesses flocked to the Mekong River Delta to buy rice.

The price of five percent broken rice now stands at US$435-440 per tonne against US$425 per tonne the week before. Although the Chinese market has a great demand for rice, Vietnamese businesses have not signed many big rice export contracts for fear that they will suffer losses when local rice prices keep increasing.

In March, Vietnam is due to sell 450,000 tonnes of rice to China under contract, double the figure from two months earlier combined altogether.

However, the price of Vietnamese five percent broken rice is still much lower than the current price of rice in the Chinese market (US$500 per tonne).

According to economists, these positive signs in the rice market are attributed to the Government’s policy to buy one million tonnes of rice for reserves. Recently, 88 businesses under the Vietnam Food Association purchased rice for reserves, prompting foreign businesses, including those from China, to buy Vietnamese rice.

Farmers in the Mekong River Delta are currently harvesting their winter-spring rice crop. Dried rice is being sold at VND5,600-5,700 per kilo and long grain at VND5,800-5,900 per kilo, while five percent broken rice has increased by VND300 per kilo compared to a week earlier.

Garment exports to EU drop sharply

Vietnam’s garment exports to the EU market have fallen by 25-35 percent since the beginning of 2012, according to the Vietnam Textiles Association.

This is primarily attributed to the EU debt crisis that has forced consumers to tighten their belts. EU importers are currently shifting their orders from Vietnam to Cambodia, Laos and Bangladesh to avoid paying the 10 percent import tax as Vietnam is no longer enjoys the Most Favoured Nation tariff of zero percent.

In addition, Vietnam’s small- and medium-sized enterprises still find it difficult to meet the corporate social responsibility standards set by EU importers.

To meet the set target this year, the Ministry of Industry and Trade has warned garment businesses to take measures to reduce dependence on outsourcing orders and focus on raising exports under the FOB (forward operating base) and ODM (original design manufacture) models. It should also increase the use of domestic materials and promote training to develop a highly skilled workforce.

Japanese-invested IZ underway in Dong Nai

Construction of the Long Duc Industrial Zone with an initial cost of VND467 billion started in Long Thanh district of southern Dong Nai province on March 19.

Addressing the ground-breaking ceremony, the General Director of the Long Duc Investment Ltd. Co., Atsushi Uehara, said that the 282-ha IZ will attract investment from Japanese businesses and will contribute to increasing the foreign investment influx in Vietnam and the country’s export revenues.

The Head of the Economic Zones Management Department under the Ministry of Planning and Investment, Vu Dai Thang, emphasized the importance of building the Long Duc IZ, adding that Dong Nai’s investment environment is attractive to foreign businesses.

Meanwhile, Chairman of the Dong Nai People’s Committee Dinh Quoc Thai pledged to assist foreign investors, especially those from Japan. He said he hopes the IZ will attract Japanese hi-tech and support industry businesses.

The zone is expected to be inaugurated in August, 2013.

Vietnam - Chile trade exchange hit a record high

Two-way trade exchange between Vietnam and Chile reached nearly US$487 million in 2011, up more than 50 percent compared to the previous year.

According to statistics from the Export Promotion Bureau (ProChile), Vietnam’s exports to Chile rose by 42.84 percent to more than US$149 million and its imports from the country by 47.89 percent to US$337 million.

Vietnam mainly exported footwear, fish, coffee, T-shirts, jackets, printers and fabric while it imported bronze, wooden products, seafood, scrap iron and steel, red wine and grapes.

Two-way trade exchange stood at just US$2.59 million in 1993 and rose to US$18.81 million in 2000 and US$329.2 million in 2010, up 17 times in ten years.

ProChile said that bilateral trade in January 2012 already reached US$88.9 million, up 3.3 times from a year earlier.

In an interview granted to Vietnam News Agency correspondent on President Sebastian Pinera’s upcoming visit to Vietnam from March 21-25, Chilean ambassador to Hanoi, Fernando Urrutia said that two-way trade exchange will increase to US$1 billion in the near future.

Before the Chilean President’s visit to Vietnam, the Chilean Parliament has approved the Free Trade Agreement with Vietnam, he said.

Local firms acquire foreign-owned subsidiaries in Vietnam

Vietnamese company CT Group has spent $24 million to acquire a 95 percent stake in the Korean-invested GS Cu Chi Development GSCD Co, a subsidiary of the Korean GS Engineering & Construction Corp.

With the acquisition, CT Group is now the new investor of a 200-hectare golf course in Ho Chi Minh City’s Cu Chi District. The $42.5 million project has obtained an investment license from the government of Vietnam.

CT Group said it would hold a ceremony to officially mark the event and launch the golf course in the next quarter.

It also pledged to speed up projects currently being implemented by GSCD, and said there are no plans to implement any new projects in Hanoi.

CT Group is the largest multidisciplinary group in Vietnam, consisting of 36 member companies operating in real estate, luxury retailing, construction, financial investment, food - entertainment - healthcare - education, plantations, mining and tourism operation.

In a related story Hanoi Hanel Co has acquired 100 percent stake in the Daewoo Hotel, according to Dien Dan Doanh Nghiep newspaper.

Daewoo Hotel, located at the western gateway of Hanoi and adjacent to Thu Le Park, was built in 2006 with an area of 29,500m2.

It has 411 rooms, including 168 superior rooms and 168 deluxe rooms with an area of 48m2 each overlooking the city.

The Daewoo Hotel became one of the 312 leading luxury hotel in the world in April 1997. Several world state leaders, including former U.S. President Bill Clinton, stayed at this hotel while visiting Vietnam.

After being awarded the title of Vietnam’s Best All-round Hotel by readers of The Guide magazine, the Hanoi Daewoo Hotel received its latest award, an Architectural Award for "Vietnam’s TOP 20 Building Designs", in 2008.

It is a member of Worldhotels, an exclusive collection of the world's most unique independent hotels. Under the banner "Unique Hotels for Unique People", Worldhotels now has almost 500 affiliate properties in more than 250 destinations and 65 countries worldwide.

In the context of the global economic crisis, many enterprises have chosen merger and acquisition (M&A) as their main solution to avoid the risk of bankruptcy.

Most of the recent M&A deals in Vietnam have been carried out by foreign firms buying into local companies.

Recently, Japanese Unicharm Corp acquired 95 percent of local diaper maker Diana Co; Daio Paper Corp and the Bridgehead fund under the Development Bank of Japan (DBJ) owns a 38 percent share of JSC Saigon Paper; and Jollibee Foods Corp. reached an agreement with Viet Thai International (VTI) to acquire the majority stake of Highland coffee businesses in Vietnam.

Despite the U-turn made by cooking gas prices on the global market, Vietnamese suppliers have again bemoaned of losses. But are they really incurring losses, given their myriad of methods to manipulate domestic prices?

Domestic cooking gas prices have soared in accordance with their global counterparts in early February and March. But figures obtained by Tuoi Tre show that most of the products marketed during that period of exorbitant prices have been previously imported at far lower prices.

Specifically, domestic cooking gas prices rose by VND42,000 (US$2) a 12-kg cylinder as of the beginning of February, when global prices surged by $145 a ton. On March 3, when global prices gained by more than $180 a ton, local suppliers immediately posted a price hike of VND52,000 a 12-kg cylinder.

However, the imported products with such high prices had yet to arrive in Vietnam at that time, and what were really sold to consumers were imports from January, and even last December, when prices stood at a low rate.

Moreover, many gas suppliers also reduced their imports when global prices skyrocketed.

In February, when the CIF (Cost, Insurance and Freight) price for cooking gas shipped to Vietnam fetched $1,078 a ton, local gas companies only imported around 19,000 tons, a 73.3 percent decline compared to a month earlier, when the CIF price was only $927 a ton.

Hence, if those products imported in January were sold in February, local suppliers could pocket a profit of VND42,000 on every 12-kg cylinder, thanks to the importing price difference between the two months.

Gas companies can also reap bigger profits by selling products that are domestically sourced from the Dinh Co and Dung Quat gas processing plants at global prices.

Since suppliers do not have to cover the expense worth nearly $100 a ton for transport and insurance costs for the domestically processed gas, the difference will go directly to their pockets.

Moreover, Tuoi Tre has found that a large amount of cooking gas circulated in the first quarter of this year had been bought since September 2011, at only $827 a ton.

Specifically, around 105,000 tons of gas sourced from the Dinh Co plant was sold by a subsidiary of PV Gas to local businesses at the time.

When these products were sold in the first months of this year, when prices were around $1,078 a ton, local gas suppliers reaped a huge difference of as much as $200 a ton.

With cooking gas prices determined at the beginning of each month, it is certain that suppliers can earn profits by selling the unsold stock of the previous month, an industry insider said.

Since global cooking prices fluctuate in a stable and predictable method, any local suppliers with good analysis can store up their products to reap profits, he said.

“Reality shows that local suppliers anticipated the rising trend of prices in February and March, so they increased imports in January,” he elaborated.

According to the Ministry of Industry and Trade, the Dinh Co and Dung Quat plants currently process around 640,000 tons of gas a year, accounting for more than 50 percent of demand.

But those domestically sourced products fail to prevent domestic prices from rising, since they are sold at global prices, analysts said.

Selling domestic gas at global prices only benefits suppliers, rather than stabilizing the market, they said.

The government should make use of the domestic supply to assist consumers when prices soar, a representative of the Vietnam Cooking Gas Association said.

“It is also necessary to set up a gas stockpile to help stabilize the market when it gets volatile,” he added.

Urbanization brings more pressure to suburbanites

The living quality of suburbanites in Vietnam has continued to decline due to the urbanization process, including the expansion of cities, population increases, pollution, the migration of laborers and loss of agricultural land for construction projects.

Experts attending the 9th Vietnam-France Finance and Economic Forum held yesterday in Hanoi all agreed with the point.

While addressing the meeting, Vietnam’s Deputy Prime Minister Hoang Trung Hai cited the increase in the rate of Vietnam’s urban population, which has risen from 19 percent, or 11.8 million people, in 1986, to 30.5 percent, or 26.3 million people, in 2010.

The World Bank assessed that Vietnam is the nation with the fastest urbanization rate in Southeast Asia, according to the Vietnam News Agency.

Thus, urban areas in Vietnam are facing a number of challenges such as rapid population growth, wastefulness in land use and a loss of traditional craft villages, Hai said.

Though people living in suburban areas have received non-agricultural benefits from the urbanization process, they have encountered other growing challenges such as gambling, drug addiction and prostitution due to the gap in living conditions between people in and outside the city.

After selecting two villages for study, Phu Dien and Gia Minh in Hanoi’s Tu Liem District, Ph.D Nguyen Van Suu from Hanoi National University announced his research results that the localities have lost over three quarters of agricultural land. In addition, local irrigation networks have been damaged and locals can only grow vegetables.

Suburbanites have been left with little cultivable land and have been forced to find other economic opportunities such as building rooms for rent or running small groceries.