HCM City invests just VND4.5 tril. in science, technology

HCMC’s total investment in science and technology research from 2011 to 2013 was pretty small, at around VND4.5 trillion mainly dependent on the State budget.

More investment is needed from businesses to help unleash the science-technology potential which could help boost economic growth.

A recent report on the 2011-2013 activities of the city’s Department of Science and Technology indicates that the State budget spent around VND2.44 trillion, accounting for 56% of the total value, while other capital sources totaled some VND2 trillion, or 46%.

According to Phan Minh Tan, director of the department, the city’s science and technology potential is still limited given its modest investment and heavy reliance on the State budget. Besides, the city still lacks mechanisms and policies for encouraging the commercialization of research results, he explained.

In South Korea, as much as 70% of the budget set aside for investing in science and technology is contributed by enterprises, with the balance funded by the State, according to the department.

Science and technology directly contributes about 0.3% to the city’s gross domestic product growth on average, the municipal Department of Statistics reports.

In fact, Tan’s department carried out 270 research projects costing VND90 billion from 2011 to 2013. However, the number of research projects having results applied directly to management, production and business accounts for only 30% while the number of projects considered as supportive knowledge for scientists and policy-making represents 24%. Around 24% of research is still being deployed and has yet to be applied while 14% is still on paper.

Vietcombank, Mizuho cut deals to be cashiers for Aeon

Japan’s retail group Aeon signed cooperation agreements with Vietcombank and Mizuho Bank in HCMC on Monday to use cash collection and checking services from the lenders.

When Aeon launches its shopping center into operation, the two banks will take charge of cash collection and checking at transaction counters, helping the retailer better sales management and avoid losses.

Truong Thi Thuy Nga, deputy general director of Vietcombank, said that the service is designed for Aeon Vietnam, meeting demands of the modern shopping center.

Yasuo Nishitohge, general director of Aeon Vietnam, said that besides the relationship with Japan’s Mizuho Bank, the group believes that Vietcombank’s financial services will help it ensure security during cash collection and transport.

Aeon Mall will be inaugurated in HCMC’s Tan Phu District on January 1, 2014. Invested with around US$100 million, the shopping center will feature around 3,000 products, including Japanese products, Vietnamese high-quality goods and those from other countries.

Kinh Do continues boosting M&A activity

Kinh Do Corporation (KDC) will continue boosting merger and acquisition (M&A) activity to boost investments in companies in the confectionery and foodstuff industries besides developing its business overseas, Tran Le Nguyen, general director of KDC, said at a function celebrating the 20th birthday of his firm on Monday.

During two decades of operation, KDC has been associated with numerous M&A transactions and joint venture and cooperation deals inside and outside the country for further development.

In its next development strategy, KDC will continue embarking on M&A activity to reduce investment time and utilize available resources to develop its core business as well as expanding the foodstuff industry in the near future, Nguyen said.

M&A activity has helped KDC achieve more successes than failures, according to Nguyen. Besides expanding its business scale, KDC has also diversified its lines of products through M&A transactions which partly helps the company avoid relying on the seasonal factor when doing business.

To speed up sale growth, in addition to traditional products, KDC will continue to look for investment chances in a number of other industries in line with its strategy “Food and Flavor”. The strategy aims to expand KDC’s product lines to serve essential demands of local consumers and increase the presence of the company’s products at home.

The products that KDC is expanding production are instant noodle, cooking oil and sauce among other foodstuff items.

KDC’s expansion strategy in near term is to cooperate with strategic partners for processing products bearing its brand rather than building its own plants. The firm is expected to introduce instant noodle and cooking oil products to the market early next year, Nguyen informed.

Besides diversifying products in the core business industry, targeting global markets is considered as an important strategic step for KDC to accelerate its sale growth in the near future. To bolster business on international markets, KDC now is negotiating with foreign companies to launch items overseas and making plans to construct factories abroad.

From a small manufacturing facility 20 years ago with 70 workers only, KDC has become a corporation with five subsidiaries and four plants specializing in confectionery, ice cream and dairy products. It is expected to enjoy total sales of over VND5 trillion and a profit of an estimated VND600 billion in 2013.

In celebration of its 20th birthday, KDC was given the second grade Labor Medal by the State President while Tran Kim Thanh and Tran Le Nguyen as the firm’s two founders were given the third grade Labor Medals. On this occasion, KDC has donated a total sum of VND2 billion to social organizations.

Green building materials remain unpopular: architects

All buildings of nine floors or above are required to use unbaked construction materials at a maximum of 30% in the 2013-2015 period and 50% after 2015 as per a new rule, but architects said this can hardly translate into reality as green materials are not yet popular.

Le Quang Linh, director of Phong Cach Moi Construction and Designing Company, told the Daily last week that in the process of designing construction works, many home owners appeared to lack information about light materials, so they did not want to use them.

Moreover, there are more masons used to baked bricks than workers skillful at using unbaked bricks, he added.

The Ministry of Construction’s Circular 09/2012/TT-BXD requiring the use of unbaked materials for construction works took effect from January 15, 2013. In urban areas of grade three and over, all new buildings must use unbaked materials from January 15 this year. In other areas the percentage is at least 50% but must be raised to 100% in 2015.

However, the use of baked construction materials, particularly bricks, remains popular.

According to Linh, it is tough to talk consumers into using light, unbaked and energy-efficient materials as they have not been provided with sufficient information about the long-term positive impact of a green home or building, especially energy saving.

“This is a tough issue. Some say they will not import and produce green materials until demand is high enough. Others say they will only train their masons to use such eco-friendly materials when they are available. This is a vicious circle,” Linh said.

The Government has approved a program to develop unbaked building materials in Vietnam, with a goal of replacing 30-40% of baked bricks to reduce emissions from old-fashioned brick kilns.

According to another architect in HCMC, some office buildings have started to use light materials like gypsum walls. However, it will take time to see big construction projects use those light materials as high-rise buildings prefer concrete and steel.

A reason for this is light materials are quite expensive and hard to be found while there is a shortage of workers good at using green materials, he added.

The HCMC government has also assigned the Department of Construction to draft regulations on management and development of building materials, including unbaked ones. The use of unbaked materials is inevitable as it can restrict the exploitation of clay from agricultural land, make use of industrial scrap, save baking costs, protect the environment and cut construction time.

In a document sent to the Ministry of Construction last week, the HCMC government said it had ended clay brick production at 305 traditional kilns in Thu Duc District, Districts 2 and 9. Saigon Brick and Tile Joint Stock Company producing bricks by tunnel kilns in District 9 has also been moved.

Meanwhile, Long Binh Construction Trading Production Joint Stock Company using Hoffman kilns in District 9 has stopped operation.

Metro Line 2 project to need more land

The current design of Metro Line 2 in HCMC is no longer suitable as it cannot ensure sufficient land for terminals and stations, so the city will need to adjust the design by clearing more land.

The HCMC Management Authority for Urban Railways said in a report sent to the city government that the construction of this metro line, which will pass through districts 1, 3, 10, 12, Tan Binh and Tan Phu, would lead to 347 households and 33 organizations being cleared to requisition 33,600 square meters of land.

According to the consultancy, the project will require big ventilation towers at entrances and exits.

Regarding Tao Dan Park station, the current width of the road in the area is 16.6 meters but it is planned for being widened to 35 meters in future, so the design should be adjusted to make sure the entrances and exits of the station would be located on the sidewalks of the expanded street.

Besides, while building this metro line, there should be parking spaces for buses, autos, motorcycles and pedestrians. As a result, site clearance should be expanded to make room for those purposes.

According to the HCMC Management Authority for Urban Railways, districts have measured land sites and evaluated properties of those affected by the project and are preparing to submit their compensation plans to the city government.

Around 2,900 employees working for 285 facilities and stores will be affected by the construction of Metro Line No. 2.

As planned, work on the metro line will start next year and the line could be put into pilot operation in late 2017.

With nearly 20 kilometers in length, the line will start at Thu Thiem New Urban Area in District 2 and end at Tay Ninh Bus Station. The project’s first phase will cover 11 kilometers, from Ben Thanh to Tham Luong.

The Ben Thanh-Tham Luong section will start at Ben Thanh Market terminal in District 1, go underground 9.3 kilometers before being elevated in Tan Phu District, pass through an underground gate of 0.2 kilometer and then go elevated for 0.8 kilometer to enter station No. 11.

The project will cost a total of US$1.37 billion, with the Asian Development Bank (ADB) lending US$540 million, the German Reconstruction Bank (KfW) US$313 million and the European Investment Bank (EIB) US$195 million. The remainder will be sourced from Vietnam.

MIGA promises guarantees for Vietnam infrastructure projects

The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, has said it will provide guarantees for Vietnam to develop a lot of projects, especially those involving infrastructure.

Michel Wormser, vice president and chief operating officer of MIGA, was speaking about this forthcoming assistance for the country at his meeting late last week with Vietnam’s Deputy Minister of Planning and Investment Nguyen The Phuong, the Ministry of Planning and Investment said on its website.

MIGA is finalizing procedures for financial guarantees for two major infrastructure development projects in Vietnam – an expressway linking Hanoi and Haiphong and National Highway 20 connecting Dong Nai and Lam Dong provinces.

The financial guarantees for the two projects will amount to US$1 billion, which Wormser said is significant with regard to MIGA’s annual guarantees. With MIGA guarantees secured, Vietnam can benefit from lower borrowing costs.

He said these two important projects would mark a cooperative relationship between Vietnam and MIGA.

Deputy Minister Phuong said he appreciated MIGA guarantees for Vietnam to gain access to international loans at lower interest rates. The country would need an estimated US$40 billion from now to 2020 to finance infrastructure projects, he noted.

He said the nation would need MIGA guarantees for a slew of projects, especially those relating to airports, energy, and water drainage and supply.

Wormser called for Vietnam to organize competitive tenders for infrastructure projects, improve the transparency of projects, boost the efficiency of projects and guarantee benefits for international investors.

MIGA, he noted, wants to guarantee as many projects as possible, particularly in the infrastructure sector and that it would work closely with the World Bank to harmonize assistance for the country.

MIGA’s mission is to promote foreign direct investment into developing countries to help foster economic growth, reduce poverty, and improve people’s lives.

Trung Thuy to develop new properties in Hanoi, HCMC

Trung Thuy Group is preparing to develop one more The Lancaster building in Hanoi worth VND600 billion and a convention-apartment project in HCMC worth VND800 billion next year.

Duong Thanh Thuy, chairwoman of Trung Thuy Group, said the second The Lancaster building in Hanoi will be located at 343-345 Doi Can Street and supply around 120 high-end apartments and other service facilities. Meanwhile, the project in HCMC will cover over 4,600 square meters at 430 Nguyen Tat Thanh Street in District 4 and consist of some 210 apartments, space for conventions and wedding parties.

“It is expected that after two years of construction the project in HCMC will be operational. The one in Hanoi will be finished after that,” Thuy said.

Similar to the first The Lancaster building in Hanoi which opened early this month with 296 apartments, Trung Thuy Group will continue to apply the combined model of selling apartments and providing management services.

“Despite difficulties of the property market, good projects that are close to the city center and have full services like ours are still attractive to customers. We have applied the model for The Lancaster Hanoi and have seen good sales,” she said.

Trung Thuy Group is active in the sectors of property, tourism services and healthcare. The firm is the owner of The Lancaster buildings in HCMC and Hanoi as well as many spas and rest stops nationwide.

VFA, provinces team up for rice production

The Vietnam Food Association (VFA) and 13 provincial departments of agriculture and rural development singed a memorandum of understanding (MoU) on Monday to cooperate in rice production and consumption.

The most important content of the MoU is that related sides of the rice supply chain including the agricultural departments, VFA and the Department of Crop Production will join hands for rice production and exports as requested by the Government.

Speaking at the MoU signing ceremony, Pham Van Du, deputy head of the Department of Crop Production, said that related sides are required to build up high-quality rice production areas for exports. The areas will cover from 500 to 1,000 hectares each following demands of enterprises.

Besides, it is important to define rice types for each material area at the orders of rice exporting companies, Du said.

VFA will represent rice exporters to supply input materials, and place orders with farmers to grow one to two rice types in each region for exports. VFA will also purchase all rice output at market prices, organize the trader system and build up rice brands.

The Department of Crop Production will check production process and coordinate with other sides to define rice types for each material area.

Initially, there will be 13 material areas in 13 localities in the Mekong Delta.

TPP will buoy up Vietnam’s rice trade

Exports to the Americas make up less than 10% of Vietnam’s rice trade in January-November but the situation will change markedly once the Trans-Pacific Partnership (TPP) agreement is concluded next year, said the Vietnam Food Association (VFA).

As per a recent report on the 11-month rice export released by VFA, the American market buys 7.02% of Vietnam’s commercial rice volume, but this amount showed a 37.66% growth year on year, with bigger demands from the U.S., Haiti, Mexico and Chile. Vietnam’s rice exports to the Americas so far have been done through government-to-government contracts, mainly targeting the Cuban market.

It is probable that in the near future Vietnamese rice will expand its presence in the American market, especially in the U.S., due to competitive prices under TPP, according to VFA. At present, five American countries are continuing TPP negotiations, namely the U.S., Canada, Chile, Peru and Mexico.

The director of a rice exporting company ascribed the strong export growth albeit modest to the fact that Vietnamese rice has recently beaten Thai rice that used to dominate the American market. Mexico, Brazil and the U.S. have mainly favored 5% broken rice with higher requirements on the rice quality and packing criteria compared to several Asian and African markets, the source said.

Duong Ngoc Minh, chairman of Hung Vuong Seafood Joint Stock Company which has just supplied agro-products to many retail outlets stateside, informed that high-grade white rice from Vietnam is being favored by many Asian restaurants there compared to Thai and U.S. rice. High-grade white rice is sold to these restaurants for up to US$1,000 a ton while the average export price of Vietnamese 5% broken rice only hovers around US$420 a ton, Minh noted.

Besides, local rice exporters also pin high hope on Japan, which will likely import much rice from Vietnam as that country is also in TPP negotiations.

VFA suggests the Government prepare conditions for local rice exporters to penetrate the U.S. and Japan after finishing TPP negotiations.

VFA expects rice export volume this year to fall to the lowest level in the last three years. This year’s rice exports are projected to decline by 1.12 million tons or 14.5% from 2012 while the January-November average export rice price tumbled 14.53% year-on-year.

The fall is attributed to lower demands from traditional markets in Southeast Asia in the year’s second half. Indonesia says no to rice imports while the Philippines and Malaysia reduce the rice import strongly, leading to Vietnam’s rice exports plunging constantly in the second half of the year.

Twelve countries are currently pursuing TPP negotiations so far. They comprise New Zealand, Brunei, Chile, Singapore, Australia, Peru, the U.S., Malaysia, Vietnam, Canada, Mexico and Japan. The negotiations will continue into next year instead of ending at the end of this year as earlier planned.

Prices of some products rise before Tet

The Lunar New Year holiday is still one month and a half away but prices of some products favored in the holiday has risen although the demand of such products does not increase.

According to many beer sellers in HCMC, the prices of some beer products have gone up by VND10,000-20,000 per carton to VND380,000-385,000 for Heineken beer, VND290,000-295,000 for Tiger and VND295,000-300,000 for Saigon Special.

The owner of a big grocery store on Tran Xuan Soan Street in HCMC’s District 7 said that beer prices normally rose in the lead to the Lunar New Year holiday. As the supply is limited, beer agents are asking for higher prices, she added.

Meanwhile, Vietnam Brewery Limited, producer of Heineken and Tiger beer, said at a working session with the HCMC Department of Industry and Trade that it had increased the beer supply for the coming holiday by 20% and that there is no signs of short supply. However, the firm cannot control the retail price of beer on the market.

Another commodity with fluctuating price over the past time is beef. At many markets in HCMC, the beef price has increased by 3-7% in the past two weeks.

A trader at Tan Thuan Market in District 7 said that there was no specific reason for the price hike as the price always increased before the Lunar New Year holiday.

Contrary to beer and beef, the prices of most other commodities are quite stable or have even dropped.

Some goods distributors told the Daily that the prices of commodities like confectioneries and processed food products were maintained. Some products see a slight price increase of only 2-3%.

Distributors have prepared a large amount of commodities to meet the buying demand of consumers in the holiday. Besides, producers have coordinated with distributors to conduct many promotion programs with many activities such as direct discounts, gifts and lucky draws.

The purchasing power in the coming holiday is forecast to rise only slightly as consumers tighten spending. Maintaining the selling prices and offering many promotions are aimed at stimulating spending of consumers.

Experts: Japanese firms still disburse in industrial sector

Although Japanese investors have implemented many foreign direct investment (FDI) projects in service, finance and banking sectors, they are still pouring capital into the industrial sector, said economic expert Tran Van Tho from Tokyo’s Waseda University.

Looking at investment structure, Japanese enterprises are shifting to service industries. But that fact is not completely right in terms of absolute quantity, Tho told the Daily via email.

According to the Ministry of Planning and Investment, Japan is the biggest investor in Vietnam with over 3,100 projects worth US$34.5 billion. Of which, there are nearly 1,200 projects in the manufacturing and processing industry, making up over 84% of total investment capital.

Between January and November, Japan continued to take the lead in terms of FDI capital inflows with nearly US$5.7 billion.

Tho said there have been many difficulties in helping Vietnam develop its supporting industries. However, there have been two main improvements recently. Firstly, Vietnam has released specific policies to assist businesses in the sector. Second, Japanese small and medium-sized enterprises (SMEs) have boosted investment in Vietnam in recent years.

Lastly, Japan is also the first nation to give assistance to Vietnam in building up an industrialization strategy until 2020, focusing on the six industries of electronics,  agriculture equipment, farm produce and seafood processing, shipbuilding, environment and energy-saving.

The strategy was approved by the Government in July. The Central Institute for Economic Management, a co-composing agency, will release an action plan of five sectors (excluding shipbuilding) this month to begin the strategy early next year.

Although more Japanese investors are knocking on the door, Tran Dinh Thien, director of the Vietnam Institute of Economics, told the Daily that Japanese firms have slowed down in recent times. Therefore, they may lose some opportunities to South Korean investors.

Meanwhile, Tho said that South Korean firms such as Samsung and LG have set up large-scale projects in Vietnam. However, Japanese firms have invested in various sectors and more SMEs have eyed the industrial sector.

Dinh Van Phuoc, former general director of Tsubaki Yamakyu Chain Company, said that the Japanese have never been slow-paced.

Japanese are cautious. As Japanese enterprises want to make long-term investment in Vietnam, they have to consider their business carefully, Phuoc said.

Vietnam is not a big market to Japanese firms. They just choose Vietnam as a production base to export to other countries. They have more options besides Vietnam, he said.

Ba Ria-Vung Tau Province and Haiphong City have been selected to develop specialized industrial parks to lure investment from Japanese enterprises.

Trade is basically balanced, says minister

This year’s trade deficit is estimated at some US$500 million, or only 0.38% of the export turnover and trade therefore is basically balanced, according to Minister of Industry and Trade Vu Huy Hoang.

The minister on Monday had a meeting with minister counselors and commercial counselors of Vietnam’s trade offices in foreign countries. A series of meetings is scheduled to take place in many localities from now towards the year-end.

According to the minister, this year’s exports encounter many difficulties, exporting prices of many products decline, and markets for many types of products buy less. However, many major exporting products such as garment, footwear, wood and wood products, electronic products and components record high turnovers.

The export of processed products tends to rise. Besides, Vietnam’s products have been present in nearly 200 countries and territories.

The total estimated export turnover is around US$132.5 billion, up 16.5% from last year. Meanwhile, trade deficit accounts for 0.38% of the export turnover, which is far lower than the permitted level set by the National Assembly at 8%.

The Ministry of Industry and Trade targets to achieve an export growth rate of 10% next year. To boost exports, the ministry will restrict production and exports of products of low added value but focus on producing products friendly to the environment and energy-efficient.

The ministry will seek to maintain trade deficit at 6% of export value or lower, encourage high-tech imports, and boost development of supporting industries and industries which can replace imports.

SCIC withdrawal stimulates markets

The State Capital Investment Corporation’s capital divestment process is expected to stimulate the stock market and attract more foreign capital in the near future.

Tran Thang Long, head of research at Bao Viet Securities Company, said SCIC’s divestment process would have a positive effect on the stock market in both the short and long-term.

“It meets demands from foreign investors to participate more deeply in the Vietnamese stock market and underlines the Vietnamese government’s commitment to a sharp decrease in state involvement in non-essential sectors,” said Long.

According to the State Capital Investment Corporation’s (SCIC) restructuring plan recently approved by the government, the SCIC would reduce its ownership ratios in 376 companies including major players such as Vinaconex, Bao Viet Holdings, FPT, Traphaco, Binh Minh Plastics and Tien Phong Plastics.

The plan aims to redistribute state capital into key industries and help enhance the financial efficiency of the country’s state-owned enterprises through 2015.

However, he said that despite SCIC’s divestment plans, there remained little room in FPT, Binh Minh Plastics, and Tien Phong Plastics for foreign investors and therefore, the market would have to wait for the government to approve the draft decision to raise foreign ownership in listed companies to work in tandem with SCIC’s capital withdrawal.

The State Securities Commission recently submitted a draft decision to the prime minister governing foreign ownership limits in listed companies. If passed, the decision would allow foreign investors to own up to a 60 per cent stake in listed companies, although this would still require approval from the prime minister. The draft decision would replace Decision 55, passed in April 2009, which puts a 49 per cent cap on both individual and institutional investor ownership in public or listed companies, investment funds, and securities and fund management companies.

Long added that SCIC’s divestment list included firms that boasted good performances on the HoSE and HNX, and therefore it was likely that SCIC’s capital withdrawal would be carried out through an agreement transaction method to avoid a huge flood of stocks appearing in the market.

Meanwhile, Pham Ngoc Bich, head of institutional clients at Saigon Securities, said another positive effect of SCIC’s capital withdrawal was that it would open up a large amount of good quality shares.

He added that many of the shares that the SCIC currently holds had not been traded, so the withdrawal would help boost market liquidity.

Under the restructuring plan, the SCIC would continue to maintain long-term investment in Vinamilk, FPT Telecom, Hau Giang Pharmaceuticals, and the Vietnam National Reinsurance Corporation (Vinare). SCIC will also retain a 100 per cent stake in SCIC Investment, An Giang Quarry and Processing Company, and Vinaconex Investment and Mineral Trading Company. SCIC will also retain a controlling stake in Dien Bien Services, Tourism and Trading Company, and Lai Chau Mineral Company following equitisation.

By 2015, SCIC’s charter capital would be raised to VND50 trillion ($2.38 billion) from its current VND5 trillion ($238 million).

Metro hawks domestic fruit and veg overseas

Global wholesaler Metro Cash & Carry is stepping up efforts to increase the visibility of made-in-Vietnam agricultural products in overseas markets.

“The first 23-tonne batch of Vietnamese dragon fruits that reached Shanghai earlier this month signalled the great potential for fruit and vegetable exports from Vietnam to China and other countries,” said Do Kim Dung, fresh and frozen sourcing manager, Metro Singapore Trading Office.

Metro Cash & Carry Vietnam, Metro Singapore Trading Office and ministries in Vietnam have joined efforts to enhance Vietnamese exports via the Metro network.

“This is the first trial order with Red Dragon, a Vietnamese company,” said Dung. “The volume of this order is small but we hope it will grow in the next few years.”

According to Dung, Metro is currently sourcing qualified Vietnamese suppliers who can provide diverse agricultural products such as garlic, ginger, passion fruit, star fruit, rambutan, white and green asparagus and strawberries.

In 2013, Metro purchased more than $6 million worth of food produced in Vietnam directly from Vietnamese suppliers which was distributed to its stores around the globe. Key products were seafood and fruits.

Next year Metro is planning to source $12 million in goods from Vietnam.

“Vietnam has great potential and perfect conditions to produce quality products such as seafood, fruits and vegetables,” said Metro Cash & Carry Vietnam’s managing director Philippe Bacac.

“Instead of importing uncontrolled and untraceable agricultural products from other countries, Vietnam should invest more in modernising the sector and improving the competency of various stakeholders in the supply chains,” he said.

Entering Vietnam in 2002, Metro Cash & Carry Vietnam now possesses 19 stores nationwide. The company has invested heavily in developing cold chains and sustainable supply chains in the country to ensure hygiene and food safety from farm to fork.

With good agricultural practice training provided to over 20,000 farmers and fishermen and other public-private partnership initiatives supporting the agricultural sector, Metro has played an important role in local economic development.

The company won two top prizes for sustainable supply chains at the Vietnam Supply Chain Congress in 2011 and 2012.

Foreign footwear companies eager for TPP

Foreign invested enterprises in the footwear sector are likely to rejoice after the Trans-Pacific Partnership (TPP) goes into effect, planned for next year.

In only the four months from June to September, Korea’s Chang Shin Vietnam, producing Nike sports shoes, started work on two projects valued at $12 million to expand production in southern province of Dong Nai.

The company’s general director Jin Woo Bang said, “With its advantages in material, workforce, high production capacity, and product quality, our global partner Nike group decided to shift massive volume production from Indonesia and China to Vietnam in 2014, and this is likely to further increase in the ensuing years.”

Another Korean-owned firm Tae Kwang Vina Industrial Limited, based in Bien Hoa II industrial park in Dong Nai, also invested into upping its production to maximise TPP benefits.

“Foreign businesses are the most likely to benefit from the TPP, as they have strong advantages in scope, governance, and support from their parent companies and global business partners,” said Nguyen Thi Thanh Xuan, general secretary of the Vietnam Leather and Footwear Association (Lefaso).

The export ratio of foreign producers has risen considerably in the last three years, from 65 per cent of the footwear sector’s total export value to 77 per cent currently.

Like the textile-garment industry, footwear mainly imports materials from markets such as China and Taiwan.

In 2012 footwear material imports exceeded $3 billion, mostly committed by domestic companies, whereas the localisation rate of foreign enterprises was around 80 per cent.

Footwear is a sector that will see several benefits from the TPP, one of which is a zero per cent tax rate, but to qualify businesses need to source materials locally or import from TPP member countries.

According to an executive of Vinh Binh Footwear based in Dong Nai province’s Trang Bom district, the sector’s imports primarily come from China, Korea, or India, which are not TPP members.

“If Vietnam shifted to importing from TPP members like Mexico or Brazil, then production costs would rise and we would be less competitive against foreign rivals,” said the Vinh Binh source.

This forecast was acknowledged by Xuan from Lefaso who said, “Domestic firms are strong in number but small in size, whereas global importers only set their sights on major suppliers with cutting-edge technology and modern production facilities. Foreign enterprises are nearly certain to be their first choice.”

Tunnel project takes steps to ensure success

Efforts are being scaled up to ensure the construction of Vietnam’s biggest road tunnel project.

Project developer Deo Ca Investment JSC just convened a special meeting of all stakeholders in the projects to set clear financial policies for contractors handling construction under the build-operate-transfer (BOT) model.

According to Deo Ca Investment JSC’s general director Ho Minh Hoang, the developer will advance 45 per cent of the maximum contract value to contractors, a record high level aimed at pushing progress.

“Contractors were also told that they needed to set aside 10 per cent of the total tender package to return to the developer as risk provisioning or rewarding contractors who meet targets and with high quality standards. In contrast, they were warned that if they violate their contracts, however small, they will be penalised, or even replaced,” said Hoang.

Hoang confirmed that the project was completely transparent to ensure there are no hurdles to its execution.

Regarding the progress of the project, by December 15, any contractors failing to provide the materials and manpower needed to kick-off the bidding package on opening the tunnel’s northern gate before December 20 would face being replaced, said a source from the developer.

Opening the tunnels northern and southern gates is a complex part of the project that will play a decisive role in its progress. The project also faced difficulties with site clearance and the lack of service roads, which caused several delays.

“The northern temporary service road is now complete and the southern road is in progress and will be completed before the New Year. The power system will also be complete by the end of the year. Financial policies were made clear to contractors to ensure they act capably and responsibly. Delays are unacceptable,” said Hoang.

Hoang said the bid package for the opening of the tunnel gates was a test for the developer in selecting capable contractors to execute the core of the project – internal construction.

In respect to the project’s financial policies, general director Tang Van Chuc at Lung Lo Construction Corporation, leading the consortium on building the tunnel’s southern section said he thought it was perfect for contractors.

“We are now poised for kick-off,” said Vu Van Hung, general director of Tranimexco, leading the consortium on building the tunnel’s northern section.

AmCham urges more facilitation for commerce

Mark G. Gillin, chair of HCMC Chapter of the American Chamber of Commerce in Vietnam (AmCham Vietnam), has stressed that policies should facilitate commerce rather than restrict it to enable Vietnam to make full use of the more opportunities arising from the country’s growing ties with the U.S.

“We do believe strongly that it does need to be a fundamental change in how Vietnam’s policy looks at commerce. We believe that… the policy toward business should be more and more enabling rather than regulating it,” Gillin said.

Gillin insisted on the fundamental change in an interview with the Daily after he listened to U.S. Secretary of State John Kerry’s speech about expanding relations between the U.S. and Vietnam over the past decades, at the American Center in HCMC last Saturday.

Gillin said that AmCham was optimistic about the future relationship between the two nations, whose two-way trade soared 50 times since their normalization of relations in 1995 as mentioned by the U.S. Secretary of State in his speech.

Herb Cochran, executive director of the HCMC Chapter of AmCham Vietnam, said that bilateral trade between the U.S. and Vietnam was projected to gain a healthy double-digit growth this year to US$28.7 billion despite the continuing difficult domestic and international economic environment.

“Trade between Vietnam and the U.S. continues to grow steadily. We expect that this year it will reach US$28.7 billion, an increase of 15.3% over the US$23.7 billion in 2012,” Cochran said in an emailed interview with the Daily.

Cochran clarified the projection was based on data from the U.S. Department of Commerce from January to September this year. “Most noticeably, U.S. imports of apparel from Vietnam may reach US$8.5 billion, a double-digit increase over the US$7.7 billion in 2012. In addition, Vietnam’s exports of higher-added- value products from ‘modern manufacturing’ FDI are increasing sharply,” he noted.

Of the US$28.7 billion two-way trade this year, Vietnam’s exports to the U.S. rise by 16.7% year-on-year to US$23.7 billion, and imports from the U.S. about US$5 billion, up 8.7% over the previous year.

The growth of Vietnam’s textile and apparel, footwear, furniture and other consumer goods to the U.S. is forecast to rise, partly because of the increased FDI investments in textiles and apparel supporting industries in anticipation of the Trans-Pacific Partnership (TPP). This is a trade pact that Vietnam and the U.S. are negotiating with 10 other nations.

According to Cochran, companies from South Korea, Japan, Hong Kong and China have announced more than US$1 billion of investment in Vietnam in apparel, textiles, and footwear in anticipation of the TPP and also because the business environment in China was no longer so favorable for FDI in these key industries.

Cochran quoted sources as saying that TPP would change the apparel sourcing landscape drastically and Vietnam could have a 35% share of the U.S. apparel import market. “That is US$35 billion compared with US$7.7 billion in 2012,” he said.

Cochran said the bilateral trade between the U.S. and Vietnam was put at US$32.1 billion in 2014.

Allowed listing of banks looks to be a complex but opportunity-charged challenge

Efforts are underway to ensure the healthy performance of banks.

The State Securities Commission and the State Bank of Vietnam (SBV) recently decided to push forward the listing of public commercial banks.

Senior banking expert Nguyen Tri Hieu said the listing of banks would be effective in increasing transparency.

In doing so, besides the requirement to release quarterly financial statements, banks will be obligated to announce unexpected shifts in performance and disclose information at the request of management authorities. Bank operations will be under the oversight of investors and the public.

According to veteran economist Bui Kien Thanh, if banks submit their financial information and ownership structures on bourses, it will improve transparency and pave the way for the SBV to gradually lessen the current entangled cross-holding situation between banks.

In fact, transparency is a major reason banks are hesitant to list.

At this time, apart from eight listed banks meeting information requirements, many banks have yet to deliver their information as per regulations. Some banks have even failed to submit any information at all since their incorporation.

“It is perilous for shareholding banks to keep their operations secret, as nobody knows where their money flows into or from. In the coming time, the SBV needs to introduce more explicit regulations governing banks’ financial transparency, whether they are listed or not,” said a source from a Vietnam-based foreign investment fund.

Numerous banks such as Maritime, Southern and NamA released plans to list years ago, but they have been delayed due to the banks claiming “unfavourable market conditions”.

According to economists, apart from market and information transparency factors, another reason banks cannot list was considerable bad debts.

Pursuant to an SBV circular guiding listing procedures, to enter a bourse banks need to satisfy several requirements such as having a chartered capital of at least VND3 trillion ($142 million), generating profits over the previous two years, and bad debts of less than 3 per cent of total outstanding loans in the two quarters running up to their listing.

Banks also need to unflinchingly follow capital adequacy regulations, as well as those on debt classification, provisioning, internal auditing, and control systems.

Meeting these stringent requirements is likely to be a strain on banks given the current context.

Banks scrambling to rectify bad debts

After offloading part of their bad debts to the state-owned Vietnam Asset Management Company, banks are scaling up efforts to keep bad debts at manageable levels.

For example, Saigon Commercial Joint Stock Bank (SCB), after selling VND5 trillion ($238 million) to the Vietnam Asset Management Company (VAMC), has had its hands full managing its bad debt policies under the guidance of the state group.

According to SCB’s acting general director Vo Tan Hoang Van, the VAMC is putting its trust in SCB to handle bad debts through measures such as postponing due dates, selling debts, or recouping capital through collateral.

Similarly, Southern Bank executives said after selling VND200 billion ($9.5 million) in bad debts to the VAMC in late October, it has cooperated with the state body to restructure other bad debts with the goal of bringing its rate of these liabilities to below 5 per cent by the end of the year.

Saigon-Hanoi Bank (SHB) sold more than VND400 billion ($19 million) in bad debts to the VAMC in October and another VND1 trillion ($47 million) in November. Its goal is also to bring its bad debts to below 5 per cent by year end.

“Our bank is working with the VAMC to develop credit ratings for customers and restructure our business. Businesses with bad debts, but with feasible production-business plans will have their debts rescheduled and will be allowed to continue borrowing,” said the bank’s general director Nguyen Van Le.

The move showcase banks’ tremendous efforts to clear bad debts before the State Bank’s circular on debt classification comes into force on June 1, 2014.

The circular reportedly contains stringent requirements on classifying debts and provisioning against loans, and as such, banks from small to big want to sell off their bad debts to the VAMC.

State giant Vietcombank and BIDV each sold around $47 million in bad debts to the VAMC. Agribank sold $81 million and is contemplating selling a total of $476 million by the end of the year.

According to VAMC executives, over 20 credit institutions have requested to sell a combined value of $1.9 billion in bad debts to the VAMC, which has said it will make purchases on a selective basis.

Former chairman of the National Financial Supervisory Commission Le Xuan Nghia said this year the banking system would strive to tackle about 30 per cent, $4.7 billion, of total bad debts. The banking system’s bad debts are expected to go down to 3-3.5 per cent by the end of 2014.

HCM City to host 2nd MRC Summit next April

The second Mekong River Commission (MRC) Summit will be held in early April 2014 in Ho Chi Minh City, the commission announced December 12.

The second summit will be the most important MRC event next year as the heads of the National Mekong Committees of Cambodia, Laos, Thailand and Vietnam will revisit their commitments made at the first summit in 2010 on a number of key issues facing the Mekong Basin and the MRC.

They will also agree on the best ways to address commitments, said the MRC, which is an inter-governmental body set up by the four countries in 1995 to promote and coordinate sustainable management and development of water and related resources.

The heads will discuss, among other key priority areas, the best ways the commission can promote its effectiveness and ownership by the member countries through 2030 and refresh regional cooperation in the trans-boundary management of water and related resources ahead of the establishment of an ASEAN economic community by 2015.

The MRC Summit is convened every four years with the first in Thailand’s Hua Hin district, bringing together regional political leaders and a range of experts in the field of water resources management to address current challenges and opportunities facing the Mekong Basin.

The first summit served to strengthen regional cooperation between the four countries, dialogue partners, and civil society. The prime ministers of the three nations were in attendance.

Corporate responsibility needs a boost

Vietnamese enterprises have failed to implement effective corporate social responsibility projects in a strategic way to create long-term social benefits and improve their reputations, a study revealed on December 6.

The study was jointly conducted by the Centre for Community Support and Development Studies (CECODES), the Asia Foundation and the Vietnam Chamber of Commerce and Industry (VCCI).

Of the 516 Vietnamese enterprises surveyed in Hanoi, Da Nang and Ho Chi Minh City last year, more than 390 understood their social responsibility and invested 113 billion VND (5.3 million USD) and 19,500 man hours.

However, for many, giving is an ad-hoc, short-term activity.

Dang Hoang Giang of the CECODES said that in western countries, corporate responsibility is a way to bolster the reputation of enterprises, but this thinking seems to be absent among Vietnamese firms.

"Giving is not considered a part of business," Giang said. "Many enterprises do it randomly, such as supporting flood victims or distributing New Year's gifts to the poor."

He cited the HCM City-based Hoa Sen Group as an example. In May, the group brought Nick Vicijic, an Australian disabled motivational speaker, to Vietnam. The event was widely publicised across the country and put the company in the media spotlight. However, according to the group's representative, it was totally unplanned.

Many activities were also half-hearted, he said.

According to the study, only 15 percent of enterprises conducted social responsibility projects to enhance their reputation and image, while the rest said they had no business agenda.

They also failed to evaluate the results of their contributions, and as a result, few had sustainable plans in place. One third of the enterprises surveyed did not have corporate responsibility plans for next year.

According to Giang, non-governmental organizations (NGOs) should work with enterprises to plan and implement strategic corporate responsibility initiatives. However, only 9 percent of businesses said they had cooperated with NGOs because they were unsure of their roles or trustworthiness.

Pham Chi Lan, former vice chairwoman of the VCCI, said the practice of giving among enterprises is unpopular because some doubt their cash will reach those it was intended for. Others worried about the media and public opinion, wanted their contributions to remain anonymous.

She said to boost social responsibility efforts the State should form a policy to incorporate it into business activities. Reports on corporate social responsibility should also be made available to help connect enterprises and those who need help.-

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