Foreigners pay premium for large stakes

Domestic investors have been caught off guard by recent moves by foreign strategic investors to buy stakes in Vietnamese enterprises at above-market prices.

Last week, Singapore-based Streetcar Investment Holdings, a subsidiary of leading global spirits maker Diageo, offered to buy another million shares in Ha Noi Liquor Joint Stock Co (Halico) at a price of VND213,600 (US$10.40) per share.

Since Halico shares are traded on the over-the-counter (OTC) market at around VND100,000 ($4.85) a share, the sky-high price offered by Diageo made many market insiders wonder whether this was not merely a purely financial investment but preparation for a furture takeover.

Diageo had purchased about 5 million shares of Halico from VinaCapital Viet Nam Opportunity Fund Ltd at a similar price back in January, representing a 23.6-per-cent stake in the company. With the new deal, Diageo would raise its holdings in Halico to 30 per cent, enabling them to participate in Halico's board of directors and influence company management.

A director of a Ha Noi-based securities company who requested anonymity said it was too soon to confirm a takeover and that, moreover, it was no easy matter to take over a large State-owned company like Halico.

However, since it cost foreign firms a lot of time and money to establish distribution networks in Viet Nam, a partnership with Halico, a longstanding local company with a great market share, was a solid strategy in itself for penetrating the Vietnamese market, he said.

"The deal is expected to benefit both companies," he added, noting Halico management also believed Diageo could help take the company to greater heights.

Besides the Halico deal, Oman Investment Fund paid $42.4 million in April to buy a 12.6-per-cent stake in PetroVietnam Insurance (PVI), equivalent to over VND40,000 ($2) a share – double the price of PVI shares on the stock market.

June car sales plunge

Sales of locally-assembled cars in June fell 25% year-on-year, and 1% compared to the previous month to nearly 9,300 units, according to the Vietnam Automobile Manufacturers’ Association (VAMA).

Last month, sales of commercial vehicles dipped 32% against June 2010 to just over 3,350 units while sales of sport utility vehicles (SUV) and multi-purpose vehicles (MPV) were down 40% to nearly 1,390 units, and passenger cars down 1% to more than 2,870 units.

Carmakers said the poor business last month was due to the impact of high interest rates and economic difficulties. Banks have also limited credits for car buyers.

Toyota Vietnam (TMV) last month only sold around 1,920 units, down 34% year-on-year.

TMW alongside other Toyota affiliates in the Asia and Oceania region saw its production sharply contracting as spare parts supply from its parent firm in Japan was seriously impacted by March’s natural disasters. TMV mainly imports car engines from Japan.

However, overall sales in the first six months of this year increased 4% compared to the same period last year, from nearly 50,800 to nearly 52,590 units, of which sales of SUV/MPV cars increased by 4% and passenger cars were up by 25.8%, while commercial cars sales fell by 9% to nearly 23,650 units.

Vietnamese carmaker Truong Hai Auto Joint Stock Company (Thaco) held the market lead with sales amounting to more than 15,480 units, up 39%, followed by TMV with nearly 13,570 units, down 4%, GM Daewoo with 4,830 units, up 10%, Vinaxuki with more than 3,900 units, down 21%, Ford Vietnam with 3,590 units, up 34%, Vinamotor with over 2,590 units, down 57%, Visuco (Suzuki) with more than 1,980 units, up 33%, Honda Vietnam with nearly 1,500 units, up 28% and Mercedes-Benz Vietnam with 1,253 units, up 2%.

Carmakers and importers said it was difficult to do business due to the new restrictive policies, including a recent decision by the Government to increase registration fees for cars of nine seats or below to 10-20%, from the current 10-15% with effect from September 1 this year.
 
Osaka urged to invest in Viet Nam

A member of the Vietnamese Politburo has proposed Japan's city of Osaka to develop support policies for Japanese businesses to expand their operations and increase investment in Viet Nam.

Truong Tan Sang, who is also standing member of the Secretariat of the Communist Party of Viet Nam Central Committee, made the suggestion while receiving the Mayor of Osaka, Kunio Hiramatsu, in Ha Noi on Saturday.

In addition, Osaka should boost technology transfers and expand co-operation in education, science, human resources, people-to-people exchanges, cultural exchanges and tourism with Vietnamese localities, he said.

Sang spoke highly of the dynamic socio-economic and cultural development in Osaka, one of Japan's important trade, industrial and seaport centres in general and the Kansai region in particular.

He applauded the expanded co-operation between Osaka and HCM City, saying that the acceleration of ties between localities played an important role in deepening the Viet Nam-Japan relationship.

Mayor Hiramatsu affirmed that the relationship between Osaka and HCM City had developed fruitfully, especially in politics, economics, culture and people-to-people exchanges.

Earlier last week, he pledged to use Osaka's extensive experience in fighting floods, waste water treatment and environmental protection to help HCM City.

Addressing an Osaka-Kansai investment and trade promotion conference held in HCM City, Kunio Hiramatsu said rapid economic development had seen Osaka City become seriously polluted 50 years ago.

The city suffered severe flooding every time the tide was high or it rained heavily because it is situated at lower than the sea level, he said.

"To overcome the situation, we carried out many projects including wastewater treatment systems and comprehensive anti-flooding measures," the mayor said, adding that the efforts have paid off with Osaka becoming one of the greenest cities in the world, attracting a lot of travellers every year.

Thai Van Re, director of the HCM City Department of Planning and Investment, said the city faced many challenges, including water management, waste treatment and environmental pollution.

HCM City experiences a high rate of fresh water loss at nearly 40 per cent, and the supply of water for daily use and for production purposes is shrinking due to climate change impacts, water source pollution and saline intrusion, he said.

The city planned to fully meet its water needs by 2025, and has mapped out plans to control urban flooding, he said.

The city wanted to learn from Osaka's experiences because its terrain is similar to that of the Japanese city, he said.

Last Thursday, the visiting mayor and HCM City deputy standing chairman Nguyen Thanh Tai signed a memorandum of understanding on co-operation in key areas, including environment and water management, for the 2011-15 period.

The Sai Gon Water Supply Corporation (Sawaco) and the Water Supply Department of Osaka have already established ties in water management, he said.

Tai said that although HCM City has mobilised capital from society for socio-economic development, it needed more of it for infrastructure, transport, clean water and environmental sanitation projects.

City cuts capital of nine traffic projects

HCMC’s Department of Transport will cut investment in nine traffic projects to focus on others that can be completed by the end of the year.

Speaking at a meeting last week, Tran Quang Phuong, director of the department, said the city’s government set aside low investment capital for the traffic sector this year. The capital earlier was projected at over VND2.1 trillion, but there is only over VND1.1 trillion left for the rest of the year after advancing VND700 billion and VND350 billion for Phu My Bridge and Nhieu Loc-Thi Nghe environmental sanitation project respectively.  

As a result, many projects like Binh Thai-Go Dua connecting road, Provincial Road 10B in Binh Tan District and southern belt road no. 2 will be delayed.

The department from now to the end of this year will speed up construction of key projects such as Nhieu Loc-Thi Nghe environmental sanitation project, a section from Thu Thiem Tunnel to Provincial Road 25B of the East-West Highway and Go Dua intersection.

Given the capital shortage, the department has suggested local government apply the PPP (public private partnership) form for some traffic projects next year. The department also proposed funds to evacuate families in landslide-prone areas in the rainy reason.
 
Gold dealers cry out against draft regulation
 
Several provisions in a draft decree on gold trading management are uncalled for and do not take their social impacts into account, HCM City Association of Fine Arts, Gold Jewelry and Gemstones said last Friday.

At a meeting organised by the association for collecting opinions on a draft decree prepared by the State Bank of Viet Nam, participants said it reached out too far and covered businesses unrelated to its objectives.

The draft decree on the management of gold trading activities aims to exert tighter control of gold imports and trading of the precious metal in the domestic market.

The draft decree requires gold traders and jewelry makers to obtain at least five certificates or licences – a business registration certificate, a jewelry processing certificate, a gold jewelry trading certificate, a gold ingot import licence, and a gold jewelry export licence.

Under the draft decree, businesses have to apply to the central bank and the bank will verify if their location and facilities merit the granting of all the required licences.

Association members noted that gold jewelry making does not have any negative impact on the nation's monetary policy. Applying the decree on gold management to jewelry businesses is therefore not reasonable.

The association has sent a document to the Governor of the State Bank of Viet Nam asking that jewelry making is excluded from the decree's provisions.

This will make it convenient for goldsmith households to sustain their vocation, the association said. It noted that thousands of households in HCM City were not involved in trading, but engaged in making gold jewelry for enterprises.

The households run small-scale enterprises of 5-10 labourers each that use rudimentary machines, and cannot meet requirements set by the State Bank.

Therefore, enterprises engaged exclusively in making gold jewelry should be required to obtain a business registration certificate from the city or provincial Department of Planning and Investment, but no other certification, the association said.

It also pointed out that the draft decree has not estimated the social impact of curbing the jewelry-making vocation, which is currently facing many difficulties.

If the registration procedures are too complicated, many households will stop or shift to other vocations, and the goldsmiths would lose their jobs. Jewelry making has helped add value, meet local and export demand, create thousands of jobs, and contribute to economic stability, the association said.

The draft decree also requires businesses that export jewelry with gold content of more than 83.3 per cent to apply for a license from the central bank. This regulation will cause difficulties for exporters, the association said.

Under international rules and conventions, businesses use 22K, 18K or 14K gold to make jewelry, it said, suggesting that the regulation be applied to businesses that export jewelry with 24k gold.
 
Power cuts, inflation worry investors

Japanese investors continue to be impressed by Vietnam's investment policies, but are increasingly worried about power shortages and high inflation.

Business representatives from Japan's Aichi Perfecture gathered on last week in Ho Chi Minh City at a seminar to discuss Vietnam's investment climate and ways to improve the efficiency of their operations in Vietnam.

Aichi Perfecture is one of the largest economic and industrial hubs in central Japan. To date, more than 80 companies from Aichi Perfecture have invested in Vietnam, of which 35 are in the south and 45 in the north.

Speaking at the seminar, Do Nhat Hoang, head of the Ministry of Planning and Investment's Foreign Investment Agency, admitted that the electricity shortage would not boost the country's economic development.

"This will prevent Vietnam from reaching industrial-country status by 2020," he said.

However, the Ministry of Industry and Trade (MoIT) has proposed to the government several measures to deal with power shortages, including offering preferential support to investors in the electricity sector.

They will also receive support for site clearance and extensions on payments for bank loans so the electricity projects can be implemented soon.

"For inflation control, the government has made an effort to tightly control the price of consumer goods, and even make compensation to maintain electricity price stability to ensure the best business environment for investors, Aichi investors in particular," Hoang said.

The country has also improved the laws on investment in an effort to attract more foreign investment.

On September 5, the Ministry of Investment and Planning will organise a seminar in Japan on attracting investment for the supporting industry in Vietnam .

Japan is among the biggest investors in Vietnam . It ranks fourth among countries that have FDI in Vietnam, with 1,552 investment projects and total registered capital of $21.36 billion.

In the past six months, 86 new Japanese FDI projects with total investment capital of $303 million have been registered.

Nguyen Hoang Ha from the Vietnam Development Strategy Institute said "Infrastructure is weak and a big barrier in economic development. However, Vietnam has mapped out a strategy on infrastructure development in the southern key economic area by 2020."

Accordingly, a series of railways, waterways and highways will be upgraded or developed.

The seminar was organised by the Aichi Support Desk.

Foreign firms insure their market dominance

The potential export credit insurance market remains a foreigners’ playground, with this product new to local insurance firms.

Of the five insurance firms providing export credit insurance products, Chartis Vietnam Insurance Co. Ltd and QBE Insurance (Vietnam) Co. Ltd are foreign. Notably, those firms dominate the major contracts of Vietnam-based clients.

Local firms Bao Viet Holdings, Bao Minh Insurance JSC and PetroVietnam Holdings, share a small portion of the market.

“Export credit insurance is actually very popular in other nations. However, it remained new in Vietnam,” said Tran Trung Tinh, deputy general director for BIDV Insurance Corp. (BIC).

Christopher Shortell, Chartis’ regional vice president Asia-Pacific, said that several Vietnamese export companies had not acknowledged export credit insurance’s benefit, which significantly challenged insurers. “Actually, insurance has just been developed in Vietnam in the short term,” he added.

According to deputy director for a local insurance firm, the absence of skilled experts and extremely high requirements on information technology were the main obstacles for local insurers.

Developing export credit insurance practically requires the insurance firm a global information network, which stores a huge finance data base of export and import enterprises in several nations, which is necessary for evaluating both the insurer’s clients and clients’ partners.

However, Tinh indicated that the Vietnamese government was going to revise a project piloting export credit insurance, aiming to support domestic export enterprises.

“That insurance product will be developed if the government and insurance firms enhance Vietnamese enterprises’ awareness of its benefits and characteristics,” said Tinh.

Auto makers are in a massive spin

Black clouds are hovering over scores of Vietnam-based automobile makers facing import tax troubles.

The Vietnam Automobile Manufacturers’ Association (VAMA) has sent a document to the ministries of Finance (MoF), Industry and Trade (MoIT) and Science and Technology (MST) proposing the MoF not impose the complete built unit (CBU) rate of 82 per cent on VAMA member companies’ imported parts, if only some parts fail to meet breakdown level requirements in the MST’s Decision 05/2005/ BKHCN.

Decision 05, issued in 2005 to guide the localisation ratio calculation, stipulates automobile parts’ specific breakdown levels. Details on import tax rates are provided in the MoF’s Circular 184/2010/TT-BTC dated November 15, 2010.

The circular stipulates that if at least one part in the imported set of components has a breakdown level lower than that prescribed in Decision 05, the set would be subject to import tax rates applied to CBU. The tax rates for parts and CBUs are 0-27 per cent and 82 per cent, respectively.

“VAMA member companies are serious investors who have invested hundreds of millions of dollars in vehicle manufacturing and assembling in Vietnam for many years. The application of Circular 184 has caused tremendous difficulties to VAMA members. A number of members are facing shutting down production. This is because if we open customs declarations, all imported kits shall be hit with an import duty of 82 per cent,” said VAMA’s chairman Akito Tachibana, who is also Toyota Motor Vietnam’s general director.

In a bid to protect local production and encourage localisation, tax policies have been designed in a way to encourage importing automobile parts rather than sets of parts, and the parts with higher breakdown levels can enjoy lower tax rates.

Authorities required Ford Vietnam to pay tens of billions of dong in tax arrears, after discovering it had made incorrect tax declarations. Some other automobile manufacturers like Toyota Motor Vietnam, South Korean-backed Vidamco and Japan’s Honda Vietnam are also facing accusations of tax evasion.

For example, Hai Duong province’s Customs Agency in April, 2011 discovered that the breakdown level of Ford Vietnam’s imports was lower than that declared. Thus, the tax rate applied to Ford’s imports must be that applied to CBU.

Specifically, based on Ford Vietnam’s four declarations, it had to pay only VND4.83 billion ($233,500) for four consignments of imports in that month. However, the customs agency has later asked the firm to pay VND17.94 billion ($867,000) more.

Ford had to temporarily stop operations for days as it could not open new customs declaration, because if the declaration was opened, all imported kits would be applied import duty of 82 per cent.

Vidamco said it might have to shut down production in the coming days, leaving thousands of employees jobless due to the current legal regulations.

The MST, MoIT and the Ministry of Transport has established a team to examine the breakdown levels of the sets of imported components, to later decide whether Decision 05 should be revised. “Pending the examination results, importers are allowed to continue getting customs clearance with the tax rate in line with what they declared. However, importers have to make written commitments with customs agencies that they will have to obey final conclusions by authorised agencies about imported components,” said MoF Deputy Minister Do Hoang Anh Tuan.

However, Central Institute for Economic Management economist Nguyen Tu Anh said Decision 05 should not be revised as “it has been going well since 2005”. “Automobile makers just want to enjoy lower taxes to benefit themselves via a revised decision. VAMA is strong, which can force ministries to make concessions,” Anh said.

There are accusations that concerned ministries have made many concessions in policies towards automobile assemblers in Vietnam. Some observers even raised questions on policy corruption.

Power outlook set to brighten up

Vietnam’s manufacturers can look forward to more stable power supply in future with two giant coal-fired power plants slated to come online.

The investors of the two plants, both independent foreign power producers, have now completed administrative procedures which green-light their projects’ construction.

Jaks Resources Bhd late last month received an investment certificate for their $2.25 billion coal-fired power plant project in northern Hai Duong province after negotiations stretching over several years.

Jaks Resources will have 15 months to stump up finances for the project and the first turbine will be built during the following 42 months, according to the investment certificate.

The 1,200 megawatt Hai Duong thermoelectricity power plant is the fourth build-operate-transfer (BOT) power project in Vietnam to be fuelled by a foreign independent power investor, following Phu My 3, Phu My 2.2 and Mong Duong 2.

Regarding Mong Duong 2 project in northern Quang Ninh province, Prime Minister Nguyen Tan Dung recently ordered the Ministry of Planning and Investment (MPI) to issue an amended investment certificate given its changed ownership structure. In February, AES Corporation sold 30 per cent of its stake in AES-VCM Mong Duong Power Co. Ltd to South Korea’s Posco Power Corp. A further 19 per cent was offloaded to China Investment Company of China. Vietnam’s state-run Vinacomin already pulled out of the project.

Upon obtaining an adjusted investment certificate, the new joint venture can push ahead with construction of the $1.9 billion project, which was initially scheduled for this month.

Once completed in 2014, those two projects will help ease the severe electricity shortfall in Vietnam.

“Electricity shortage is one of the biggest concerns for foreign investors. The movements on the Hai Duong and Mong Duong 2 projects are really positive signs at this time,” said a source at the MPI.

Electricity consumption is projected to rise rapidly – at a rate of at least 12 per cent annually, or double gross domestic product. Meanwhile, the construction of new power plant capacity in Vietnam is not keeping pace with demand and this is resulting in a shortfall in power supply, especially at times of peak demand.

The situation is particularly serious during the dry season because of the impact on hydroelectric power plants, which make up around 40 per cent of the country’s installed capacity. In 2010, this led to severe power shortages and cuts.

On average, the electricity outage hours for each firm almost doubled from 50 hours in 2009 to 89 hours in 2010, according to a report of the infrastructure working group at Vietnam Business Forum (VBF).

The regular outages have even forced some foreign manufacturers to mull over relocating manufacturing bases to other countries, a report of the committee of Vietnam-Japan Joint Initiative Action Programme says.

While the steps at Hai Duong and Mong Duong 2 power projects will help boost power supply in future, the Electricity Regulatory Authority of Vietnam announced that power supply in the next six months “will be significantly improved compared with the first half of this year” thanks to the stable operation of hydropower plants and new coal-fired power plants.

There were fewer outages in the first half of this year because of the small floods in the northern region over the past months and low power consumption, said an Electricity of Vietnam report. The country’s largest power producer and sole power distributor also said that about 1,700MW was added to national power supply in the first half this year.

Meanwhile, growth of power consumption in the first half of this year was much lower than predicted. The real growth was just 10.31 per cent against a forecast of 18.3 per cent.

In the second half of this year, about 2,000MW will be added to power supply, said the Electricity Regulatory Authority of Vietnam. “Power supply in next six months will be stable unless we have unexpected problems at power plants or a sudden increase in demand,” said the body.

E-mart ready to play the retail game

The retailer, which has 127 stores across its home country and 25 stores in China, late last week signed a joint venture contract with Binh Duong province-based U&I Investment Corporation to jump into Vietnam.

E-mart will be the second Korean retailer to enter Vietnam after Lotte Mart.

Under the $80 million contract, E-mart will contribute 80 per cent of the capital and the rest from U&I.

E-mart is set to open its first convenience store in Hanoi in 2012 and expand its stores in Vietnam to 52 before 2020.

Japanese retailer AEON Co Ltd, well known for it Jusco supermarket chain, also plans to enter Vietnam by 2013. With annual gross revenues of around $15 billion, AEON expects to become one of the three leading retailers in Asia in 10 years, in which Vietnam would become AEON’s fourth foreign market after China, Thailand and Malaysia.

Steven HL Goh, director of Retail Asia Publishing, said that compared to other retail markets in the region, which were already saturated, there were still numerous development opportunities for Vietnam’s retail market.

He noted along with big names such as Hong Kong’s Dairy Farm, Korea’s Lotte and Netherlands’s Guoco Group, which have formed large-scale shopping centres in Vietnam, many world-leading retailers have also carried out investment cooperation programmes to invest in Vietnam.

In late 2010, Japanese company Ministop, which manages a convenience store chain, decided to cooperate with Trung Nguyen Company to open about 500 retail stores in the next five years.

Singaporean brand NTUC FairPrice has signed a cooperation agreement with Saigon Co.op to build a chain of hypermarkets.

A survey conducted in the fourth quarter of 2010 by Grant Thornton Vietnam showed that 70 per cent of correspondents considered retail as a more fascinating and promising investment field than others such as education, real estate and healthcare.

Vietnam’s retail sale and service revenue is predicted to increase to more than $85 billion in 2012.

Firms cool on registration codes

Businesses’ concerns over a lack of flexibility when it comes to registering their business activities have been eased.

According to Ministry of Planning and Investment’s (MPI) Business Registration Department executives, businesses have two options when it comes to registering. They can write down in their enterprise registration certificates that they operate in areas specified in business line level 4 and have the right to trade in any professions specified in that category.

Alternately, they can provide specific business line codes and detail their proposed trading areas in level 4.

This is part of the MPI’s Dispatch 8311/BKH-QLDKKD to help ensure businesses properly abide by state regulations on business line code registration while still respecting enterprises’ habits.

The dispatch, however, regulates that businesses detailing their proposed trading areas can only trade in these specified areas and are obliged to alter registration certificates when they trade in any other areas not earlier specified but still belonging to business line level 4.

Business line classification based on economic sectors is in line with international practices, according to the Business Registration Department.

The department also said making business line brief in the enterprise registration certificates would give companies more flexibility in their operations.

The national business registration information system website and lawyer offices have received many queries on business line code issues. For example, one firm asked why their interpreting service was classified as ‘other professional, scientific and technological activities yet to be mentioned’ under code 7490.

The firm argued that the presence of this code only in the enterprise registration certificate might cause problems with market watchdogs or tax bodies as there was no line referring to interpreting services.

Scores of firms have reportedly found themselves in a similar position.

In fact, excluding some new areas yet to be named in Vietnam’s current economic sector system and which would need further guidance, many businesses want to see enterprise registration certificates setting out their specific trading areas and even their products.

When questioned why they wanted to detail their trading areas in the enterprise registration certificates, companies responded they did so to prevent issues with tax, customs or market watchdog bodies.

Unified application of business line code registration in business line category 4 is then important when it comes to helping businesses take initiative in operations and underpins the building of a comprehensive business information system. However, this unification requires a great deal of effort, not only the business community but also from relevant state management agencies.

Apartment market still grapples with weak demand

Foreign real estate services providers in Viet Nam agreed that the market of apartment for sale in HCM City continues to experience difficulty because of weak demand in the second quarter.

Demand is currently being restricted by the availability of mortgages, especially from Vietnamese lenders.

This underlying demand is expected to be unleashed as interest rates are reduced to more practical levels, according to Nicholas Holt, Knight Frank Viet Nam's market research deputy director.

Many potential buyers are hesitating or adopting a "wait and see" approach, due to difficulties accessing finance and to expectations of future price movements, according to Holt.

"The tighter monetary policy has lowered home buyers' affordability, thus lower-priced apartments are seeing the most transactions," said Truong An Duong, head of Savills Viet Nam's HCM City's market research division.

Holt, however, noted that demand was strongest in the affordable segment, with well designed, smaller units in the range of US$35,000 to $60,000 attracting strong interest.

Fewer buyers could complete all cash transactions, while mortgage loans were proving even less popular than ever before.

Thus, tremendous pressure is being placed on developers to offer big discounts or flexible payment terms, according to Adam Bury, CBRE's senior manager for research and consulting.

CBRE's statistics showed decreases of the average asking price across apartment segments on the secondary market.

For luxury-grade apartments, it fell to less than $4,500 per square metre in this year's second quarter, from a high of $5,000 in 2007. It fell to around $1,900 from $2,300 respectively for high-end apartments.

There were small changes in the mid-end and affordable apartments.

During the second quarter, six apartment projects entered the primary market in HCM City, a significant drop from 14 new projects during the previous quarter, according to Savills Viet Nam.

Car transport ships to be built for Norway

A contract to build two ships to carry 6,900 cars each was signed yesterday between the purchaser, Norway's Blystad Group, and Viet Nam Shipbuilding Industry Group (VINASHIN) and the Nam Trieu Shipping Industry Corporation.

The 16-deck vessels, designed by the Finland's DeltaMarin Group, will be built with high tempered steel and equipped with modern facilities that satisfy international marine conventions.

They measure 200m long by 32.26m high, with a waterline of 10m and a speed of 20.5 sea miles per hour.

The first vessel is expected to be completed by October 2013.

High demand, low supply cause of high agriculture product prices

An unsatisfied demand for some agriculture foodstuffs was the main reason for increased prices, said Minister of Agriculture and Rural Development Cao Duc Phat yesterday

He told a meeting to discuss methods of stabilising agriculture foodstuff prices that domestic demand had reached a peak while the supply was still low.

Meanwhile, imports of many agriculture foodstuffs had reduced.

Explaining the reason for pork prices to double, deputy head of the Livestock Breeding Department Nguyen Xuan Duong said the input prices, such as feed and vet bills, had climbed.

Meanwhile, he said, bank interest rates were high so that no farm dared to borrow to feed their pigs, leading to the short supply.

As for vegetable, participants at the meeting agreed that bad weather conditions had a strong impact on prices.

Head of the Planting Department Pham Dong Quang said that storms last month reduced the vegetable yield.

The volume of fruit and vegetables imported from China had dropped by 10 per cent.