Private equity investors still keen on Vietnam

Vietnam remains an attractive destination for private equity investors, even in the current “challenging” global economic environment, according to a survey by consulting firm Grant Thornton Vietnam.

The “Private Equity-Vietnam Investment Environment and Outlook" survey on 200 foreign businesses with private equity investments in Vietnam found most respondents held favorable views about investing in Vietnam.

Of the investors that took part in the Quarter 4 survey, 76 percent said they considered Vietnam a more attractive investment destination than any other country. Only 20 percent of respondents said Vietnam was less attractive than other countries.

Of the survey respondents with investments in more than one country, 59 percent said they planned to increase their investment in Vietnam over next 12 months. Only 9 percent said they planned to reduce investment in Vietnam.

The survey found 65 percent of the surveyed businesses had a positive view of economic conditions in Vietnam over the next 12 months while 4 percent were negative. The remaining 31 percent held a neutral view.

“Recent economic data, particularly rising inflation and likely continued devaluation of the Vietnam dong, has provided some investors with reasons to be less confident about the Vietnamese economy,” said Trinh Kim Dung, advisory services manager of Grant Thornton Vietnam.

“However, the fundamentals for growth remain, and most investors sit on the positive side of the fence,” she added.
Vietnam’s economy is expected to grow 6.7 percent this year.

It grew at 5.3 percent in 2009, slower than the 6.2 percent posted in 2008.

Grant Thornton Vietnam is a member of the Grant Thornton International Ltd, an organization of independently owned and managed accounting and consulting firms. It started operating in Vietnam in 1993.

Giant complex comes up to par

The massive $2 billion Hoang Dong Lang Son golf course and hotel complex has announced the first phase of its sale plan.

Within the project’s first sales phase, 48 out of 240 high-class semi-detached houses will be offered to public, distributed via the sole sales agent Netreal Vietnam Real Estate Brokerage.

According to Netreal Vietnam’s chairman Vu Hoai Vu, all the semi-detached houses' superstructure have been fully completed and some $1 billion had been disbursed so far, Vu added.

“The semi-detached blocks included in the project target high-income consumers with about VND50 million ($2,500) to VDN100 million ($5,000) in their monthly income or have idle cash flows of VND1 billion ($50,000) per year,” said Vu.

The huge project, developed by Lang Son International Joint Stock Company, is described as the first casino city in Vietnam with work starting in 2010.

The project will be completed in 2012, in which 240 semi-detached houses are completed in 2011’s second quarter, 192 additional ones and 100 villas will be finished in 2012’s fourth quarter. In 2012, three hotel buildings will go into operation.

The investor Lang Son International’s 51 per cent stake is held by Taiwan’s Kai Cheih International Investment, that is also investing in a series of entertainment complex projects for foreigners living and working in Vietnam.

They are hotel and entertainment complex in northern Quang Ninh province and high-class apartment blocks in West Lake in Hanoi.

Ipad screen maker looks at Bac Giang

Taiwan’s Wintek Corporation is looking for an investment certificate to develop its $150 million plant in northern Bac Giang province to make touch screens for Apple’s Ipads and Iphones.

According to an officer at Bac Giang’s Industrial Zones Management Authority, Wintek is working with Vietnam’s Ministry of Science and Technology to draw up a proposal to enjoy incentives for foreign firms investing in high-tech fields.

“The investor wants incentives for a hi-tech project like other peers and it has not yet submitted an investment certificate application to the authority,” the officer said.

Wintek’s plant, the first of its kind in Vietnam, is expected to be up and running in 2011.

The firm, a high-tech developer and is one of the only two manufacturers in the world to make touch screens for Ipads, last week signed a land leasing contract with Saigon Bac Giang Industrial Zone Joint Stock Company to lease 60 hectares for its plant in Quang Chau Industrial Zone.

Compal Electronics’ $500 million laptop project in northern Vinh Phuc province enjoyed rich incentives for its hi-tech project such as 10 per cent of corporate income tax (CIT) for the project’s lifespan in Vietnam while the current CIT for Vietnam-based enterprises is 28 per cent. Additionally, Compal enjoys 10 years’ CIT exemption.

Together with Compal’s project, Foxconn, the world’s largest electronic outsourcing manufacturer, has asked Vinh Phuc People’s Committee to extend the construction deadline for its $200 million mobile phone factory in the province till the end of 2011’s second quarter, according to the provincial Industrial Zones Management Authority.

World Bank case brings benefits

Siemens AG last week announced a $500,000 package for Vietnam’s integrity and transparency in business initiative.

The Vietnam Chamber of Commerce and Industry’s (VCCI) Integrity and Transparency in Business Initiative for Vietnam (ITBI) is among more than 30 initiatives from over 20 countries that have been selected by Siemens in an initial tranche of $40 million out of an overall $100 million integrity initiative to promote clear markets committed by Siemens with the World Bank on July 2, 2009.

The German firm and the World Bank agreed on a comprehensive settlement last year following the company’s acknowledged past misconduct in its global business and a World Bank investigation into corruption in a Siemens subsidiary’s project in Russia several years ago.

Under the commitment made by Siemens, the German firm will pay $100 million over the next 15 years to support global efforts to fight fraud and corruption. Siemens will provide funds to organisations and projects aimed at combating corruption through collective action, training and education.

The World Bank will have audit rights over the use of these funds and veto rights over the selection by Siemens of anti-corruption groups or programmes receiving funds.

Erdal Elver, president and CEO of Siemens Vietnam, said the company looked to contribute in different areas to the development of Vietnam, which it considered an important market for the German firm.

“It is important for us to join in projects to support initiatives in that area of integrity, transparency and anti-corruption to be able to create a fair market condition in the country, not only for Siemens but also for other players,” Elver said.

The Vietnam’s ITBI aims at bringing companies operating in the country together to work towards improving integrity and transparency of the way business is conducted. Awareness raising, promotion of dialogues among multi-stakeholders and training are the key activities to ensure the sustainable improvement of transparency and integrity of doing business in Vietnam.

The initiative is implemented by VCCI in collaboration with relevant Vietnamese agencies and businesses with technical support of international organisations including the Transparency International and International Business Leaders Forum. The initiative is supported by embassies of Sweden and the United Kingdom in Hanoi and a group of businesses during 2009-2012.

“Anti-corruption is a very long journey for Vietnam. A period of three years is not enough, but we have to go along with support from the community,” said Nguyen Quang Vinh, director general of the VCCI’s Office for Business Sustainable Development.

“The initiative forms a dynamic partnership among businesses, governments, civil society organisations and international organisations for improvement of business standards that has significant influence on the fight against corruption in Vietnam,” Vinh said.

Posco displays a steely resolve

“In 2009, the country’s steel demand was more than 11.7 million tonnes, a half of which was satisfied by local suppliers”

Posco last week broke ground on its second stainless steel plant in Vietnam.

The $130 million plant is invested by Posco Vietnam Stainless Steel (Posco VST), a subsidiary of the Pohang-based Posco company, one of the world’s largest steel makers.

Located in the Nhon Trach 1 Industrial Park in southern Dong Nai province, the plant will be capable of producing 150,000 tonnes of stainless steel a year and will help increase Posco VST’s overall capacity to 235,000 tonnes of stainless steel per annum.

The first Posco VST stainless steel plant, also located in the Nhon Trach 1 Industrial Park, is capable of producing 85,000 tonnes a year, up from 30,000 tonnes last year. The plant was originally built by the Vietnam’s Asia Stainless Corp., which was acquired by Posco VST in mid 2009. It was the first stainless steel plant in Vietnam.

The Posco VST’s second plant is projected to be commissioned in February 2012, producing mostly cold-rolled stainless steel plate and coil. It will make Posco VST become the biggest stainless steel manufacturer in Vietnam.

About a half of the plant’s output will be sold in the domestic market and the remainder exported to other countries in Asia, European Union and America.

The decision to raise its Vietnam-based manufacturing scale came after Posco stopped pursuing a plan to acquire the Thainox Stainless Plc, Southeast Asia’s largest stainless steel producer, by the middle of this year due to political instability in Thailand. According to Posco VST, the expansion in stainless steel manufacturing would help boost the company’s competitiveness and sale in the Vietnamese and Asian markets in the future.

Vietnam Steel Association (VSA) chairman Pham Chi Cuong said market for stainless steel producers remained huge as there were very few players in this segment in Vietnam so far.

“In 2009, the country’s steel demand was more than 11.7 million tonnes, a half of which was satisfied by local suppliers. The remaining half including steel plate, hot rolled steel, stainless steel and shape steel was imported from overseas because of the lack of local suppliers,” Cuong said.

Posco has forecasted that demand for steel in Vietnam would rise about 8.7 per cent per year until 2020.

In May 2010, Posco SS-Vina, another subsidiary of Posco, also received an investment licence for the building of a shape steel manufacturing plan in the Phu My 2 Industrial Park in southern Ba Ria-Vung Tau province. The plant has an overall investment capital of more than $620 million and is capable to produce one million tonnes of steel per annum.

Posco is also operating another $1.1 billion cold and hot rolled steel plant in Ba Ria-Vung Tau.

Powered up to beat electricity woes

State-run Electricity of Vietnam will kick-off the construction of the country’s third largest Lai Chau hydropower plant this week to ensure more stable electricity supplies.

The 1,200 megawatt Lai Chau plant is located in northern mountainous Lai Chau province’s Muong Te district and in the highest step of the Da River’s escalading hydropower system, above the 2,400MW Son La plant in the middle and the 1,920MW Hoa Binh plant downstream.

According to EVN, the new plant will supply some 4.7 billion kWh of electricity a year to the national grid, a significant amount for the country where demand is growing fast, at 13-15 per cent annually.

The Lai Chau project, which has a total investment capital of VND32.5 trillion ($1.675 billion), got the government’s approval this year after getting the nod from the National Assembly late last year.

The first Lai Chau plant’s generation unit is scheduled to be commissioned in 2016 while the whole project will fully operate a year later.

Beside preparations for the Lai Chau project, EVN will also put the first turbine of the Son La plant, the biggest hydropower project in the country, into operation in the next several days.

The plant’s reservoir had been filled with about 190 metres of water till last week, 15m higher than the dead level and sufficient to run the first turbine, which will be able to supply some 10 million kWh of powerper day.

The other three turbines of the 2,400MW Son La plant are scheduled to become operational in April, August and December next year.

The project will have six turbines to provide more than 10 billion kWh to the national grid when completed in 2015.

Apart from above mentioned projects, the state-run group has also planned to put into operation the first turbines of two other hydropower plants of Song Tranh 2 in central Quang Nam province and the Dong Nai 3 in the Central Highlands in December 2010, which will also help add more supply to Vietnam in the following months.

Vietnam is anticipated to continue facing another severe dry season during January and June, 2011.

EVN anticipated that the country would lack between 842 million and 1.4 billion kWh in the next six dry-season months.

Water reservoirs of hydropower projects across the country such as Dong Nai, Se San, Ham Thuan-Da Mi, Yaly and Hoa Binh have been reporting their water at 5-30m lower than required levels.

Hydropower plants are supplying more than 30 per cent of power for the country. The remainder comes from local thermal power plants and imported power from other countries, largely from China.

The country bought around five billion kWh of power from China in the first 11 months of the year. EVN produced 54 billion kWh and bought nearly 30 billion kWh from other local producers in the meantime.

Trade deficit hits $12 billon this year

Vietnam’s trade deficit is estimated to reach $12 billion in 2010, equivalent to 16.9 per cent of the country’s total export turnover, the Ministry of Industry and Trade has reported.

According to the ministry, exports might reach $70.8 billion and imports, $82.8 billion.

The export turnover is an increase of 24 per cent over the last year and 17 per cent compared to the year’s target, while the import turnover hits a rise of 18.4 per cent, as compared with 2009.

The positive export turnover is mainly due to higher export prices and extra volume.

The average export price has surged sharply this year, pushing the export turnover by $3.4 billion.

Meanwhile, the rise in export volume has helped the turnover to increase by $10.3 billion.

Local enterprises have gradually switched from exporting raw materials to exporting industrial and processed products, which have a high added value.

The ministry attributed the increase in import turnover to increasing import prices.

The ministry forecast that import and export turnovers will rise by over 10 per cent in 2011, and the trade deficit will be about $14 billion.

Chinese in $300mil power deal

The Export-Import Bank of China signed yesterday an agreement with the Vietnamese Ministry of Finance to provide $300 million in financing for the Vinh Tan Power Plant 2 in central Binh Thuan province.

Electricity of Vietnam (EVN) planned to invest about VND23.4 trillion ($1.17 billion) into the coal-fired plant, which will have a capacity of 1,200MW and an area of 397ha.

The EVN started construction of its second plant in Vinh Tan in August. The first of the plant's two turbines is expected to be operational in December 2013 with the second to follow in June 2014.

At the ground-breaking ceremony in August, Deputy Prime Minister Hoang Trung Hai said the Vinh Tan 2 project would go a long way to easing the country's power shortage.

It would also supply industrial and economic zones in the province. Coal-fired plants would help minimise the national electricity grid's dependence on hydroelectric plants.

Ministry sets out to stabilise petrol prices through end of 2011's first quarter

The Ministry of Industry and Trade on December 16 held a meeting with local petrol traders to ensure petrol supply and price stability.

The measures are being taken to ensure the supply and price remain stable through the first quarter of 2011.

According to the ministry’s Import-Export Department, local petrol traders have so far imported 70 per cent of the minimum import quota. The petrol consumption in 2010 has by now been 8 per cent higher than 2009.

However, some trading companies, including Military Petroleum Company, Maritime Petroleum Company and Mekong Petroleum Company have changed their import plans to avoid losses. This is creating difficulties for others, especially Vietnam National Petroleum Corporation (Petrolimex).

Vice-director of Vietnam National Petroleum Corporation, Dam Thi Huyen, said that enterprises should equally join in the market to avoid a supply shortage.

Huyen revealed that the north had five agents managed by Petrolimex while the south had 11 agents. The pressure on Petrolimex over diesel oil supply is high. This month the company is seeing an increase in market demand by 20 - 30 per cent compared to recent months.

Due to losses, some companies have also reduced commissions for agents, causing some petrol stations to stop or reduce their sale volume and wait for the price to go up.

Meanwhile, deputy chief of the ministry’s Market Management Department, Vo Van Quyen, confirmed that no enterprise was facing a supply shortage and that they had closed petrol stations just to wait for higher prices.

"We have sent official dispatches to the Market Management Department in Hanoi and Ho Chi Minh City asking them to investigate and tackle this problem. They are instructed to strictly punish speculation cases, even to revoke their business licences,” Quyen said.

Addressing the conference, Deputy Minister of Industry and Trade, Nguyen Cam Tu, reaffirmed the prime ministerial directive to keep petrol prices stable until the end of the Tet Festival. The ministry has asked petrol trading companies to follow import plans, guarantee enough supply and ensure operation.

The ministry also asked PetroVietnam to ensure that Dung Quat oil refinery will operate at its highest capacity from now to the end of the first quarter in 2011.

At present, to stablise the petrol market, as well as reduce difficulties for trading companies, the ministry will ask the prime minister and the Ministry of Finance to cut down petrol import tax.

The ministry will also negotiate with the State Bank of Vietnam to guarantee enough foreign currency sources for local importers.

PV