Vietnam has fastest-growing middle class in SEA

Vietnam has been cited as having the fastest-growing middle class in the Southeast Asian region, according to the latest survey conducted by the Boston Consulting Group (BCG).

The middle class is expected to rise to 33 million by 2020, almost triple the 12 million in 2012, and average per capita income is projected to increase by US$3,400 each year.

The BCG survey also shows that Vietnamese customers are the most optimistic in the world with more than 90% believing their living conditions are higher than their parents and that the quality of life will continue to rise.

Additionally, despite short term global economic problems, 70% said Vietnam’s economy is improving and stated they intend to increase their purchases in the future.

Vietnam has become an attractive destination for foreign investors in recent years. Samsung was licensed to build a US$1.2 billion factory while Nestle recently inaugurated its US$240 million processing factory to serve Southeast Asia market.

Retail giants, like McDonald’s, KFC, Starbucks, Pizza Hut or Burger King also penetrated the Vietnamese market.

Companies investing in Vietnam have opportunities to brand their trademarks and get on a pathway to economic growth. However, they can only gain success if they master an understanding of customers and their demands, cautioned Douglas Jackson, BCG Vietnam managing director.

Gold prices drop to three-week low amid global slump

Local gold prices yesterday fell to a three-week low of VND35 million (US$1,653) per tael, following the slightly downtrend of spot gold in the world market at $1,249 an ounce.

From north to south, SJC gold was down VND50,000 per tael ($2.3) to end at VND34.98-35 million ($1,653). One tael is equivalent to 1.2 ounces. On Monday, the local gold lost VND200,000 ($9.4) per tael.

Meanwhile on the kitco.com trading floor, gold was selling at $1,249.60 per ounce. Reuters said investors were reluctant to take big positions in bullion a week ahead of a US Federal Reserve policy meeting, when it could announce another cut to its bond-buying stimulus.

Local gold plunged 28 per cent in 2013, ending a 12-year bull run, tarnishing the metal's appeal as a hedge against inflation.

The fall in local gold prices was due to the State Bank of Viet Nam's efforts, including gold auctions. The central bank sold 1.82 million taels (69.9 tonnes) of gold bars through 76 auctions in 2013. The attempt was to cut local gold prices to VND34.6-34.7 million (US$1,633) per tael at the end of 2013, down VND12 million ($566.57) per tael, or 24 per cent over the 2012 year-end.

Part of the auction sales went to credit institutions to help close outstanding gold deposits. Another part of the sales was sold to gold firms to meet the market demand.

They will continue the sales this year in an attempt to further stabilise the domestic market and address imbalances between supply and demand. Observers assumed that local gold would keep losing its value this year.

Nguyen Tri Hieu, a gold expert, told Investment newspaper that "in the medium-to-long term, local gold would follow the downtrend of world gold. Many investors have left this metal, which I see as a wise move because there are no signs of a recovery this year."

The US dollar traded at VND21,140-21,150 in the black market, while commercial banks quoted the dollar at VND21,070-21,110, down VND5-10 over Monday.

VietJet Air receives new Airbus A320-200

Low-cost airline VietJet Air has received a new Airbus A320-200 to meet the increasing consumer demand during the upcoming Lunar New Year (Tet) holiday.

Desmond Lin, business development director of VietJet Air, said purchasing the new aircraft enables the budget carrier to add more than 10,000 seats a week to its flight schedule.

This is part of VietJet Air’s fleet expansion plan.

VietJet Air is currently operating on 16 domestic and foreign routes, and it plans new routes connecting popular Asian economic and tourist destinations in Taiwan, the Republic of Korea, Singapore and Japan.

Vietnam agriculture to be spotlighted at WEF

Agriculture Minister Cao Duc Phat is scheduled to deliver a keynote speech at the World Economic Forum (WEF) 2014 in Davos, Switzerland, this week.

A Food and Agriculture Organisation (FAO) report shows agricultural production needs to be boosted to feed the increasing global population estimated at nearly 10 billion by 2050.

Rural workforce is downsizing as a consequence of rapid urbanisation, posing a great threat to agriculture. In addition, the global food system is beset by serious challenges and risks: more volatile production and prices, high hunger and poverty levels, and unsustainable farming practices.

The 2010 World Economic Forum on East Asia in HCM City put forward the initiative “A New Vision for Agriculture”, aiming to build a new farming model that yields high output and improve farmer livelihoods.

Agriculture restructuring is a must to ensure national food security, improve product quality and increase farmer incomes

The initiative has been undertaken in Vietnam, Indonesia and Myanmar (in Asia) in partnership with 250 stakeholders.

Vietnam lives off agricultural production, with rice, coffee, rubber, tea, pepper, fruits, aquatic products and husbandry being key products. In 2012 agriculture contributed 21.5% of the country’s GDP, 20.8% of total export earnings, and nearly 50% of the workforce.

However, the sector is faced with challenges arising from climate change, excessive use of water resources, and high levels of greenhouse emissions.

A European Chamber of Commerce (EuroCham) white book reveals the agricultural ratio to GDP dropped from 46.3% in 1988 to 22% in 2012, and the rural workforce proportion also fell from 67% in 1997 to 47.5% in 2011.

In his 2014 New Year message, Prime Minister Nguyen Tan Dung raised concerns about the agricultural sector’s weaknesses, including an annual decreasing growth rate, uncoordinated links, and low productivity in the context of global fierce competition.

He stressed the need to accelerate agriculture restructuring and technological application, with farmers forming the core.

The government has approved a 10-year agriculture development strategy, encouraging the engagement of private businesses.

The agricultural sector has established six working groups on seafood, coffee, fruit and vegetables, tea, soybean and maize, as well as support solutions, to realise the WEF initiative.

Vietnam has gained encouraging results after undertaking the initiative for the past three years. Coffee yield rose 10%, consumed water amount decreased 14%, gas emissions dropped 54%, and tea export output rose threefold.

In his New Year address, the PM affirmed the government will introduce policies to increase the application of scientific and technological advances, especially biological and information technology, in agricultural production and management, helping accelerate agricultural industrialisation and rural modernisation.

New cooperation models will be established between farmers and businesses to create value chains, from production to consumption, and attract more investment in to agricultural production, trading and services.  

A Government decree, effective as of February 10, 2014, will encourage businesses to invest in agricultural production and rural development. Investors will enjoy many incentives including land rent reductions or exemptions.   

Trade activities aim for 10% growth

Vietnam has set its sights on an import-export growth of 10% year-on-year in 2014, with a particular focus on reducing the trade deficit.

“This is a big target, it means that the country has to earn US$147 billion while keeping the trade deficit at 6%, around US$9 billion,” Deputy Minister of Industry and Trade Tran Tuan Anh said in a recent exclusive interview with the Vietnam News Agency.

To realise the target, the ministry will increase trade promotion overseas with a view to boosting key Vietnamese export items.

Vietnam has 22 hard foreign currency earners such as seafood, wooden items, electronics, processed industry and transport, with export revenues of US$1 billion each year.

According to the Deputy Minister, Vietnam’s major export items, including agricultural products, clothing and footwear, are set to benefit from favourable conditions introduced by the Trans-Pacific Partnership (TPP) agreement which is expected to be concluded this year.

This is a big opportunity to increase the market share of the products and raise added value and quality, creating sustainable development with partners, he said.

2013 was a busy year for import and export activities. The country registered a year-on-year export growth rate of 15.4% to US$132.2 billion, for 5.4% higher than the plan set by the National Assembly.

In addition, the trade deficit was kept under control, marking the second consecutive year the country had maintained a positive trade balance.

Last year, Vietnam gained a trade surplus of US$863 million, creating positive changes in the management of import and export activities as well as the capacity of the economy, businesses, products and services.

Hanoi aims for 2.8 million foreign arrivals in 2014

Hanoi is aiming to welcome 15 million domestic tourists and 2.8 million international visitors during 2014.

To fulfill the target—more than 10% higher than 2013 arrivals - the capital city will expand tourism promotion in emerging markets including the Republic of Korea, China, Japan, Poland, Germany, and France.

Hanoi has already planned a Hanoi Craft Village Tourism Festival, Vietnam-Hanoi International Tourism Fair, and new varieties of heritage and resort tours in an effort to stimulate visitor demand.

Hanoi, one of Asia’s most popular destinations, wants the tourism sector to function as an economic vanguard.

It aims to welcome 3.2 million foreign arrivals and 20 million local tourists by 2020.

Tourism revenue is expected to exceed VND43,000 billion by 2020.

Apparel exports to US forecast to surge

If the Trans-Pacific Partnership (TPP) agreement is realised soon, Vietnam’s textile-garment exports to the US could hit around US$10 billion this year, with the number set to double by 2020.

Vietnam earned US$8.6 billion from shipping such products to the US market in 2013, a year-on-year increase of 14.2%, according to the Vietnam Textile and Apparel Association (VITAS).

During the period, the sector’s export value (excluding US$600 million earned from apparel material) reached nearly US$20 billion, up around 17% against 2012, with yarn fibre and clothing shipments estimated at US$2.13 billion and US$17.89 billion respectively.

Textile-garment exports currently account for over one third of the country’s total export to the US (valued at US$25 billion).

The industry has increased its market share in the US, securing second place with about 9%.

The EU and the RoK have been two other major export markets for the sector, with 17% of Vietnamese textile and garment exports to the EU and about 7% to the RoK.

The Vietnam Garment and Textile Corporation (Vinatex), a leading player, has been pouring huge sum into developing the supply chain, aiming to utilise 70% of domestic materials for apparel production and export this year, said its Deputy General Director Le Tien Truong.

The group needs around VND5 trillion (US$235 million) in loan to expand and reform technology to develop the local textile-garment industry when joining the TPP, he added.

Banks urged to lower interest rates

The State Bank of Vietnam (SBV) recently instructed credit institutions to continue to ease access to loans for enterprises by lowering interest rates, in a bid to assist struggling businesses and guarantee efficient bank operations this year.

The central bank said an overall lending growth rate of 12-14%, and total money supply expansion of 16-18%, will foster production and business activities, support economic growth and help curb inflation this year.

According to Government portal chinhphu.vn, the SBV has urged the institutions to cut costs and ensure financial safety, and it will intensify supervision of the monetary market for banking system security.

It will take measures to facilitate co-operatives and households to borrow money more easily, while ensuring flexible policies to support prioritised sectors (agriculture and rural areas, support industries, small- and medium-sized enterprises, and exports).

It will maintain "reasonable" policy interest rates, including the refinancing rates, to assist home buyers and deal with bad debts in the property market. Debt trading through the Vietnam Asset Management Company will be sped up.

SBV will also tightly control foreign currency and gold markets to maintain the value of the Vietnamese dong and exchange rate stability, and improve national foreign exchange reserves as well as the international payment balance.

Japanese bank supports Dong Nai’s investment promotion

Japan’s Tokyo Mitsubishi UFJ Bank will help the southern province of Dong Nai in investment promotion, focusing on exchanging information and organising seminars and meetings with Japanese investors.

Their cooperation plans were re-established during a January 20 working session between Mai Van Nhon, Deputy Head of the provincial Industrial Parks Management Board, and Hideki Nakamura, Managing Director of the bank’s Global Business Division.

The two sides agreed to exchange information on policies and laws, as well as investment proposals.

Together they will promote activities reflecting the close relations between Dong Nai and Japan in general and the bank in particular.

Nhon expressed his wish that in addition to industrial investment, the Japanese side will pay attention to hi-tech agricultural projects licensed by the Vietnamese Government.

The two sides plan to jointly hold a seminar with Japanese investors this November.

At present, Dong Nai has over 1,360 licensed foreign investment projects with a combined registered capital of US$23.6 billion. Of the total, 167 projects worth US$3.1 billion are invested by Japanese businesses, ranking them fourth among 40 countries and territories injecting money into the locality.

Positive sign of FDI attraction in Binh Duong

The southern province of Binh Duong attracted US$300 million of foreign direct investment (FDI) in the first 20 days of this year alone, three times higher than that of the same period last year.

According to Le Thanh Cung, Chairman of the Binh Duong People’s Committee, the province is on track to fulfill its target of luring US$1 billion in FDI for the whole year.

Notably, the Kraft Vina paper company added US$150 million to its business expansion plan in 2014. Its first US$180 million paper factory was put into operation in 2010.

Cung said the province has established a new 300 ha industrial park as an effort to stand ready for the Trans-Pacific Partnership (TPP) which is expected to be signed this year.

It has also approved the planning of the construction of 15 others, raising the total number of industrial parks to 33 by 2020 from 28 currently, he said.

Considering FDI as a major source for industrial development, Binh Duong has focused on bettering partnership with foreign investors by supporting them in solving all obstacles and creating good conditions for them to implement their projects, said Cung.  

The official added that the locality has also paid much attention to stepping up administrative reforms, while developing infrastructure system and human resources to attract more FDI.

Despite economic difficulties in 2013, Binh Duong lured over US$1.3 billion in FDI, including US$800 million poured in 125 newly-licenced projects.

To date, the province has hosted 2,209 FDI projects capitalized at US$18.72 billion, mainly in industrial production, trade, services, urban development, high-tech, electronics, accessories and auto spare parts.

Tra fish farming to be standardized

Vietnam will farm, process and export Tra (Pangasius) fish in an entirely sustainable and environmentally friendly manner, in line with international law, said a senior fisheries official.

Pham Anh Tuan, deputy general director of the Vietnam Directorate of Fisheries, told a January 20 seminar in Can Tho city that Vietnam will establish an exemplary farming model and a training centre under an EU-funded project on a sustainable Pangasius supply chain (SUPA).

SUPA representatives said the project will help almost all enterprises in the Tra fish production chain develop new products and modern technologies, establish business links, operate an online forum to share information, and promote transparency relating to the origin of products in a bid to achieve sustainable targets.

SUPA was launched in April 2013 in the Mekong River Delta which is Vietnam’s largest Tra fish producer. It aims to benefit at least 70% of Tra fish producers and processors and 30% of feed producers.  

Vietnam currently provides more than 90% of the world’s Tra fish export output and hundreds of local people in the Mekong River Delta region live off Tra fish farming and processing. It earns a staggering US$1.8 billion from exporting this fish every year.

Spain-Vietnam trade sharply increases

Two-way trade between Vietnam and Spain hit more than EUR1.65 billion in the first nine months of 2013, a year-on-year increase of 13.6%.

Of the total, Vietnamese exports rose 9.8% to EUR1.468 billion and its imports soared 21% to EUR182.7 million, according to Spain Customs statistics.

Vietnam mainly ships machinery, electric and electronic appliances, footwear and accessories, garments, coffee, mechanical equipment, seafood, handbags, purses, cases, and rubber to this South European nation.

It imports seafood, chemicals, mechanical equipment, plastics, dying substances, tanned hide, electrical equipment, animal feed, and pharmaceuticals.

Two-way trade hit a record high of EUR2.3 billion in 2012 for the first time, up 19.4% over the previous year.

JICA helps promote PPP model in Binh Duong

Japan International Cooperation Agency (JICA) representatives on January 20 worked with Binh Duong province on the Public-Private Partnership (PPP) model to carry out JICA-funded projects in the locality.

Oyama Tomohide, in charge of providing loans in the form of Private Sector Investment Finance (PSIF), said JICA is negotiating with relevant ministries and agencies to reach a common consensus on the PPP model to realize its funded in Vietnam.

In Binh Duong, he said JICA will continue to support water supply and drainage projects under the PSIF sponsoring being carried out by the Binh Duong Water Supply Sewerage Environment Limited Company (Biwase).

Tran Thanh Liem, vice chairman of the provincial People’s Committee, voiced his support for JICA’s PPP negotiation plan and expressed hope the Japanese agency will provide technical assistance and human resource training before these projects get off the ground.

VBL sponsors water resource security research

Four research projects on water resource security received total funding of VND530 million from Vietnam Brewery Limited (VBL) at a ceremony held at HCMC University of Technical Education on Thursday.

The four projects were selected from 24 entries based on their practicality and feasibility. They involve Tinh Tam lake improvement (Hue University), treatment of wastewater from cattle slaughtering and processing, application of new technology to control water leakage (HCMC University of Technology), and studying impacts of climate change and land use on hydrology in Cua Can-Phu Quoc (Can Tho University).

VBL also granted 22 young talent scholarships worth VND15 million each to students of environment in southern provinces with outstanding academic performance.

Smartphone sales growth strong

Sales of smartphones on the domestic market grew strongly last year, especially in December, said industry players.

Ngo Nguyen Kha, managing director of MobiiStar, cited figures from market researcher GfK to put the amount of mobile phones sold in 2013 at 17 million units, with smartphones accounting for 40% at seven million units.

Kha said “smartphones accounted for 40% of the sales volume but 80% of the market value last year.”

He did not give the specific growth rate for the whole 2013, but said sales in June 2013 more than doubled the year-earlier figure, from over 192,000 units to 484,000 units. Last December, the sales figure jumped to 800,000 units, almost doubling the figure six months earlier, he said.

“This is stunning growth, and smartphones have become the most attractive segment,” he said, attributing the steep rise to the trend of people preferring smart phones to feature phones,” he said and predicted the growth trend would continue this year.

Nguyen Quang Minh, general director of Q-Mobile, said the rapid expansion of the smartphone segment would offer good opportunities for manufacturers and retailers despite the stiff competition in this segment.

Minh said those manufacturers of phones with nice designs, good configurations, and affordable prices would win in the race.

Manufacturers and retailers say that smartphones priced between VND1.5 million and VND5 million a unit sell better on the domestic market.

Property firms ask for removal of policy bottlenecks

Real estate companies in HCMC at a roundtable meeting on Monday with the leaders of Vietnam’s National Financial Supervisory Committee (NFSC) expressed their worries over the property industry and proposed solutions to remove shortcomings of related policies to prop up the struggling market.

Land usage fee is one of the nine matters discussed the most at the meeting on financial and credit policies for the realty industry in 2014 organized by the HCMC Real Estate Association (HoREA) and NFSC on Monday.

Actually, this is not a new problem because after its launch in 2009, many seminars on the issue have been organized but no agreeable outcomes have been found as expected.

Nguyen Viet Tao, director of NVT Real Estate Company, noted that Decree 69 had driven property companies to the verge of bankruptcy as land usage fee they have to pay was subject to market levels, meaning they have to buy land twice, one from the land user and the second from the State.

“We do not ask for money. What we need is a transparent mechanism,” Tao insisted.

Similarly, Binh Dan Real Estate Company after three years of struggling with the land usage fee payment has become inactive because of financial constraints. The firm said it was willing to transfer the whole project to the State and that it was seeking approval to convert the project into a budget housing scheme but had received no response accordingly.

Nguyen Xuan Quang, chairman of Nam Long Investment Corporation, complained that Decree 69 was putting huge financial pressure on local companies. In addition, when starting a property project, the investor cannot know for sure the amount of land usage fee it has to pay.

According to Quang, no businesses in the industry are strong enough to develop new realty projects if they have to pay site-clearance compensation and land usage fee.

Truong Van Phuoc, vice chairman of NFSC, suggested that the problems of the policies on the real estate and housing market must be reconsidered, especially the way of setting land prices.

Speaking with the participating companies, Vu Viet Ngoan, chairman of NFSC, promised to record all the matters of the realty market to report to the Government to seek solutions in the near future.

Zamil Steel opens new office

Zamil Steel Vietnam, a member under Saudi Arabia’s Zamil Steel, has opened its new office on level 14 of Keangnam Landmark72 Tower in Hanoi.

The office covering an area of 1,700 square meters is designed with the green office model which is friendly to the environment.

Present in Vietnam since 1997, Zamil Steel Vietnam is one of the leading enterprises producing and supplying prefabricated steel buildings. Its three major products are pre-engineered steel buildings, structural steel and Maxseam roofing systems.

Zamil Steel currently has two factories, one in Hanoi and the other in Dong Nai Province.

Low interest rate not the key to unlock realty market

The central State Bank of Vietnam last week issued a decision offering a new subsidized interest rate of only 5% a year for buyers of budget homes and developers of low-cost condos for such people.

However, many involved in the low-cost housing program said the low interest rate, despite goods news for homebuyers, is not the crucial factor to buoy up the dreary property market as long as the supply side issue is not addressed.

As per the new decision effective from last Thursday, the lending rate is cut by one percentage point from the previous 6% a year to only 5%, far lower than the deposit rate of over 7% now. The central bank with this move expects to speed up disbursement of the budget-housing program worth VND30 trillion as the package has until now been only 2% disbursed after as many months.

As of end-November, according to the central bank, only VND1.56 trillion of soft loans had been committed by banks joining the program, including 1,246 homebuyers and ten housing developers. However, only VND478 billion had been disbursed, including VND176 billion for housing enterprises.

A deputy director of a real estate company said the decision to lower the lending rate to 5% is a positive signal for the realty market, as it helps lessen the financial pressure on homebuyers as well as on developers of housing products eligible for the program (condos measured less than 70 square meters and priced at below VND15 million per square meter).

However, he said, the biggest hindrances now are complicated procedures for both homebuyers and developers wanting to access loans. In addition, the scarcity of condos meeting the criteria set out by authorities makes the interest cut less significant.

“The bottleneck now is not the interest rate at 6% or 5%, but the short supply. Homebuyers do not have choices on the market,” the source said.

He said it is very complicated and time-consuming to convert a commercial housing project into a budget scheme. It takes seven or eight months for a housing developer to get approval for splitting their large-size condos into smaller ones to meet the criteria, which is very discouraging and slows the disbursement rate, he said.

Pham The Nguyen, an executive at the Bank for Investment and Development of Vietnam (BIDV) designated as a key lender for the budget housing program, said the interest rate cut could hardly help speed up the disbursement.

“The key problem is the short supply. Authorities should support developers to increase supplies of budget homes so as to accelerate the VND30-trillion package,” Nguyen said.

The HCMC Real Estate Association has repeatedly proposed authorities to allow developers of half-done commercial condo building projects meeting criteria on budget housing to take out soft loans from the VND30-trillion package. If the proposal is approved, the supply will rise strongly while inventories in the property industry will be addressed.

Until now, only a few developers of apartment projects have gained approval to convert their commercial condo buildings into budget housing ones. Most of these projects will not have products for sales in the next one or two years.

Insurer Bao Viet takes the lead for capital size

Bao Viet Life Insurance Corporation has got approval from the Ministry of Finance to spur its chartered capital from VND1.5 trillion to VND2 trillion, making it the biggest life insurance company in the country in terms of capital size.

The capital injection aims to improve the enterprise’s financial capability and competitiveness and meet its increasing business demands. The move will also help the enterprise launch new products to meet various demands of customers.

Last year, the insurer obtained a 22% growth rate in new business premiums compared to 2012.

The enterprise now has a network of 60 member enterprises, over 300 customer service points, 1,500 staff and nearly 36,000 agents. Over the past 17 years, the enterprise has reached over five million customers.

VDSC: Banking stocks make least rally in 2013

Statistics of Viet Dragon Securities Company (VDSC) show that banking stocks posted up the least growth rate last year on the stock market with just 3%.

Meanwhile, sectors such as home utilities, oil and gas, public facilities and healthcare and food reported the strongest growth. Individual and home utilities led the way on 86%, followed by oil and gas with 78% and tourism and entertainment 77%.

2013 saw a clear divergence among stocks, of which enterprises with good fundamentals won the day. Last year also saw a record number of delisted stocks with 37 firms leaving the playground while only 13 firms debuted on both bourses, VDSC said.

The total share and bond mobilization hit VND200 trillion, of which share mobilization made up only 10%. The total capitalization of the stock market was VND964 trillion, or 31% of gross domestic product (GDP).

Liquidity was mixed on both bourses. The HCMC market reported average matching volume of 59.3 million shares each day, up 28% against 2012, while the Hanoi market saw 40 million shares, an 11% decrease.

Foreigners turned active on the southern bourse, posting total net buying value of over VND5.5 trillion, a 65.4% surge against 2012.

On both exchanges, total indirect foreign investment capital reached over VND6.8 trillion, up 51% compared to the previous year. Exchange traded funds (ETFs) accounted for 12% of total net buying value.

The broker said that the stock market remains an attractive investment channel this year thanks to foreign room increase draft and establishment of ETFs and real estate investment trusts.

New in-vitro seedling research center opens

The HCMC Department of Agriculture and Rural Development last Saturday inaugurated an in-vitro seedling facility capable of supplying two million seedlings per year.

Duong Hoa Xo, director of the HCMC Biotechnology Center assigned by the agriculture department to operate the new facility, said that apart from conducting biotech researches and multiplying flower seedlings by the in-vitro method, the new facility will also be the venue for preserving precious flower and pharmaceutical plants.

The center is currently preserving 330 different strains of flowers and 90 types of pharmaceutical plants for future crossbreeding to create new high-yield hybrids resistant to pests, Xo said.

Apart from the new facility, the HCMC High-Tech Agriculture Park is another venue in to the city conducting in-vitro researches and multiplying new plants, supplying the market with a huge amount of in-vitro products.

Expert urges rethink of incentives for FDI firms

The Government should adjust incentives for foreign direct investment (FDI) enterprises by abolishing certain preferential policies to secure a fair competition environment for private domestic firms, said economic expert Pham Chi Lan.

Vietnam’s preferential policies have created a playground tilted against domestic enterprises, Lan said.

Local authorities have always given land priority to foreign investors, setting aside land lots at prime sites for FDI enterprises. Some localities have given FDI firms tax exemptions in the first 10 years and 50% tax reduction for the following 10 years.

For bank credit access, it is easier for FDI enterprises to reach loans than domestic firms. Most local enterprises have found these incentives beyond their reach, Lan added.

A report of a research group under Fulbright program shows that among four development pillars of the local economy, only the FDI sector is operating well. Meanwhile,  

State-owned enterprises, private enterprises and family-run businesses are facing huge challenges.

“I think that any economy should rely on internal power to grow up, not that from the outside. Relying on the FDI sector, we have sparkling figures in gross domestic product (GDP), growth and exports. But it is not the core value for the economy,” Lan said.

One day, if Vietnam fails to provide incentives to FDI firms any longer, foreign companies will immediately leave the country for other attractive markets, Lan told enterprises on the sidelines of a seminar in HCMC on Monday.

In fact, FDI investors have mushroomed in Vietnam while there were 60,700 domestic firms stopping operation in 2013, up 12% against the previous year. This picture, to some extent, shows the hardship encountered by local firms.

Despite incentives, many FDI enterprises have been uncovered to undergo transfer pricing to evade taxes. Many enterprises have reported losses over many years while they still have kept expanding their business in the country.

Therefore, the Government should rethink incentives for FDI firms and re-create a fair playground for domestic enterprises, Lan said.

Last year, the FDI sector reported export revenue (including crude oil) of US$88.4 billion out of the country’s total of US$132.2 billion, up 22.4% against 2012. FDI enterprises contributed around 20% of the nation’s GDP.

Coffee business still looks dreary in 2014: Vicofa

Domestic coffee traders and farmers will likely face another year of dreary business with price volatility and falling output, said the general secretary of the Vietnam Coffee and Cocoa Association (Vicofa).

Nguyen Viet Vinh said last year was a tough time for the local coffee industry, as the country shipped abroad just 1.3 million tons of coffee beans worth US$2.7 billion, or sharp falls of 26% and 27% respectively.

Vinh told the Daily that global economic woes have hit the coffee trade, with the higher-grade Arabica coffee price falling to six-year low and Robusta price to four-year low.

The hardship was even more striking for local farmers as the area of aging, low-yield coffee plants has expanded to 30% of the total area under coffee cultivation. This situation has prompted the coffee yield in the last crop to fall 15% compared to the previous crop.

Commenting on the coffee trade outlook in 2014, Vinh said prices would remain volatile despite falling inventories in the world. In Vietnam, the 2013-2014 coffee output is estimated to shrink by an additional 10-15%, he said.

To support the coffee trade, Vicofa has forwarded several petitions to the Government and related central agencies seeking incentives for both farmers and traders.

Vinh said Vicofa has asked the agriculture ministry to help with coffee replanting to replace aging coffee areas by mapping out a national program with the support from the Government and involvement of banks and provincial authorities.

Vicofa has also called for the establishment of the Vietnam Coffee Development Fund with an aim to lend a helping hand in coffee production and export, he said.

In addition, the association has also asked the Government to support a scheme to retain coffee so as to buoy up sagging coffee prices. Subsidized interest rates should be given for the scheme to store 200,000 to 300,000 tons of coffee, he said.

Vietnam Airlines aims for over 16 million passengers

Vietnam Airlines looks to serving more than 16 million passengers this year, up 7.7% over 2013 based on the fact that country’s aviation market gained a momentum for high growth last year.

Pham Ngoc Minh, chief executive officer of Vietnam Airlines Corp., told a meeting with Minister of Transport Dinh La Thang last week that the corporation enjoyed a number of favorable factors last year coupled with more passengers traveled by air within Vietnam.

The Civil Aviation Administration of Vietnam (CAAV) reported that Vietnam’s overall aviation market saw some 29.5 million passengers and 630,000 tons of cargo transported by air last year, a year-on-year increase of 16.7% and 19.6% respectively.

CAAV stressed that of the total number of passengers, the domestic segment registered a strong rise of 19.3% to 14.5 million passengers, which was much higher than a single-digit growth in 2012.

“Vietnam’s aviation market has rebounded strongly with positive results,” CAAV said in its overview report of this market.

At the meeting with the transport minister, Minh said Vietnam Airlines expected to post an average seating capacity of 79% for this year.

CAAV projected a favorable year for airlines and the market in 2014 given the bold expansion steps by domestic carriers, including Jetstar Pacific and VietJetAir, and increasing demand for air travel.

The aviation authority predicted demand for air travel during the upcoming Lunar New Year holiday, which is better known as Tet in Vietnam and begins late this month, would grow 12-15% compared to the same period last year.

Five major power projects to get rolling this year

Vietnam Electricity Group (EVN) will this year start work on five major power projects having a total capacity of 2,555MW, including Thai Binh, Vinh Tan 4, expanded Duyen Hai thermal power projects and expanded Thac Mo and Da Nhim hydropower projects.

In an announcement about power production plan for this year, in addition to the five new projects, EVN will put into operation five other power generators with a combined capacity of 1,656MW. These generators belong to Vinh Tan 2, Haiphong 2, Mong Duong 1 and Duyen Hai 1 thermal power plants and Song Bung 4 hydropower plant.

The operation of new generators and the construction of new power projects will reduce the power supply pressure and avoid power cut in the dry season, especially in the southern region.

The total cost needed by EVN for power projects this year is around VND123.66 trillion, or nearly US$6 billion.

According to EVN, this year it will produce and purchase 140.5 billion kWh, up 9.9% compared to last year’s to meet the increasing power demand. The power volume purchased from China will be some 2.46 billion kWh and the power output transmitted to Cambodia will be maintained at a maximum capacity of 170MW.

Regarding divestment at non-core businesses, EVN has built a road map towards 2015 to sell stakes at seven joint stock companies, including ABBank, An Binh Securities Co., Global Insurance Co., Saigon Vina Land Co., EVN Land Central Co., Vietnam Electricity Investment and Construction Co. and EVN Finance Co.

Last year EVN divested partial stakes at Global Insurance Co. and ABBank with a withdrawn amount of VND278 billion.

Chinese firms seek partnership in central Da Nang

Twelve Chinese businesses operating in construction, mechanics, electronics, finance, and trade visited central Da Nang city on January 7 to seek investment and cooperation opportunities.

At their reception for the investors, the municipal leaders voiced their hope that the two sides’ potential partnership would generate positive outcomes and help further consolidate the friendship between the two countries.

By October, 2013, two-way trade between Vietnam and China hit about 41 billion USD, up 31.7 percent over the same period last year.

Both sides pledged to work together to bring the figure to 60 billion USD by 2015.

China is the biggest trade partner of Vietnam while Vietnam is one of the key partners of China in the Association of Southeast Asian nations.

Banks try to ease ATM overload for Tet

Banks have said they will try to keep a smooth ATM service during the upcoming lunar New Year (Tet) when the demand for cash sharply increases, the Dtinews reported on January 8.

Labourers in industrial zones often line up in front of the ATM machines, hoping that they will not run out of cash or have technical problems. The demand for cash always skyrockets on the approach of the longest and most important annual festival in Vietnam, which will falls by the end of January this year.

Huong, an employee at Hanoi's Bac Thang Long Industrial Park, said last year, her company paid wages later than usual because of slow business. "I stood in line for two hours, but when it was my turn, the money had run out. I tried another machine, but it was also out of cash. The third machine gave me a torn note," she said.

Many ATM machines in Ho Chi Minh City are already overloaded. An employee of a company named Tan Tien said he waited for over 30 minutes at a VietcomBank machine, but the lines were so long that he decided to go home.

Dao Minh Tuan, deputy head of VietcomBank, said they are planning to refill the machines three times a day this year, while the machines at industrial zones will be refilled six to seven times a day. However, he said, due to the holiday traffic, these refills may be delayed at times.

Deputy governor of the State Bank of Vietnam Dao Minh Tu said: "We have asked the industrial zones to pay wages on different days so the ATM machines won't be overloaded. We also asked them to try to pay in cash."

Meanwhile, smaller banks such as Tienphong Bank and OceanBank are confident they can meet customer demand. Tienphong Bank will not even collect service fees for customers using other banks' machines. A representative from the Vietnam Bank Card Association said the busiest time of the day for withdrawals, between January 26 and 28 (December 26-28 on the lunar calendar), is from 5pm-7pm.-

HCM City to hand over 2,000 resettlement condos this year

Nearly 2,000 more resettlement condos in Thu Thiem New Urban Area in HCMC’s District 2 will be handed over to those residents affected by development projects there before June 30, said the city’s government.

Until now, the municipal government has transferred 1,132 apartments to the people, while 1,993 more apartments will be handed over between now and June 30.

As per the city’s resettlement program, up to 12,500 apartments and houses are to be built and transferred to local residents who are affected by urban development schemes in Thu Thiem. The city said that apart from the 3,125 apartments being transferred, authorities are urging developers to complete the remaining 9,135 apartments in 2015.

The 21st Century Company has been told to complete construction of 500-plus apartments in District 2’s Binh Khanh Ward before the end of 2014 and another 500 apartments before March 31, 2015.

The consortium Vietracimex-POSA.C has been told to complete construction of 975 condos before June 30 this year and 595 more condos before September 30.

Fruit tree made into bonsai for Tet

Bonsai growers in Vietnam have become quite imaginative this Tet season, making fruit trees into bonsai.

In recent years, besides the development of popular kinds of bonsai and flowers, bonsai growers have turned fruit trees such as  papaya, guava and mandarin orange trees into bonsai trees worth millions of VND each.

Luu Van Rang, from from Lai Vung District, Dong Thap Province is one of the first households in the Southwestern region of Vietnam to be successful with mandarin orange trees small enough to grow in a pot. Rang can earn hundreds of millions of VND each Tet.

Rang said this year his family has around 200 such trees for sale, valued at VND2.5-3 million each (USD119-142.8).

Many households in Dong Thap Province’s Sa Dec Flower Village, Ben Tre Province’s Cai Mon Flower Village and Can Tho City's Phu Tho Village have also used fruit trees to create bonsai trees, making large profits this time of year.

Nguyen Van Hieu, a bonsai grower from Long Hoa Ward, Can Tho City, said he hopes to sell 20 ornamental papaya pots at between VND700,000 and VND1 million each.

Huynh Van Ut in Ben Tre Province’s Cho Lach Flower Village said he has used thistle and dragon fruit trees for bonsai. It is important for growers to have skills in taking care of the trees,  and to have aesthetic sense to shape the tree well.

Taiwan a promising market for Vietnamese products

Taiwan has become Vietnam’s fifth largest trading partner, according to the most recent press release of the Ministry of Trade and Industry (MoIT)’s Asia-Pacific Market Department.

Taiwan--the fourth largest exporter to Vietnam--plays a pivotal role in shipping Vietnamese products to other markets in the US, Asia and Europe, the MoIT says.

However, on the downside, the significantly lower import of Vietnamese goods into theTaiwanese market, which is ranked 16th among Vietnam’s biggest importers, results in an imbalance in trade turnover.

Over the past two decades, Vietnam’s Taiwanese exports included telephones and spare parts, garments and textiles, agro-forestry-fishery products, machines, footwear, ceramics, computers, and electronics.

The MoIT release states that with a total population of 23 million and a US$474 billion GDP, Taiwan enjoyed an annual economic growth rate of 4.8%.

Currently there are more than 200,000 Vietnamese people living in Taiwan and that will help promote made-in-Vietnam products in the Taiwanese market.

To penetrate the Taiwanese market, the MoIT says, local exporters should pay due attention to ensuring food hygiene and safety, increasing product quality, and grasping up-to-date information on tariff and non-tariff policies.

Major focus should be given to product diversification, export promotion, market expansion and market studies by organizing and participating in domestic and overseas trade fairs.

Vietnam Customs reported that Vietnamese exports to Taiwan achieved a remarkable growth in 2013, earning nearly US$2.08 billion in the first 11 months, equivalent to the previous year‘s figure.

The country’s export earnings from the Taiwanese market were estimated at US$1.84 billion in 2011 and US$2.081 billion in 2012.

MoIT economists forecast Taiwan will continue to be Vietnam’s promising export market in the coming years, especially for three key items – telephones and spare parts, garments and textiles, and seafood.

Vietnamese exports to Taiwan particularly timber products, footwear, porcelains, and ceramics will reap higher revenue, the MoIT concludes.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR