Bulltrap catches traders during afternoon session

Shares retreated in the afternoon session on the HCM City Stock Exchange yesterday, creating a bull trap as increasingly cautious investors began to unload shares.

By the end of the trading day, the VN-Index had closed at 447.94 points, a decline of 0.02 per cent from Monday's close after gaining as much as 1 per cent in the morning session.

Driven by the boost is sales, the value of trades rose 25 per cent over Monday's level to over VND1.5 trillion (US$72.7 million), while the volume of trades rose 12 per cent to over 84.4 million shares.

Newly-listed PV Gas (GAS), the market's second-leading share by capitalisation, managed to rise to its ceiling price, gaining 5 per cent, but GAS failed to rescure the Index.

Half of the market's top 30 shares by capitalisation and liquidity lost value, including Vietcombank (VCB), insurer Bao Viet Holdings (BVH) and food processor Masan Group (MSN), all declining by 1.8-2.9 per cent. The VN30 Index accordingly sank by 0.39 per cent to close at 516.86.

Tan Tao Investment Industry (ITA), with 4.5 million shares traded, was the most-active share, finishing up 4 per cent to VND7,900.

On the Ha Noi Stock Exchange, the HNX-Index also lost 0.49 per cent to close at 76.46 points after shares gained during the morning session. Decliners edged advancers by 141-125. Increased selling pushed the trading value up 34 per cent to VND610.2 billion ($29 million) on a volume of 58.7 million shares.

VNDirect Securities (VND) rose in the afternoon to be the most-active share with 4.6 million traded, but slid by 0.8 per cent to a close of VND12,500 per share.

According to FPT Securities Co analysts, yesterday's correction seemed to offset Monday's excessive reaction to the end of the market's eight-day losing streak, a shift that was unconvincing due to the absence of supporting economic news. The Government had yet to approve a reduction in petrol prices while negative credit growth in April continued to suggest economic stagnation, they wrote in a research note.

However, analysts from other firms expected a continued easing of inflation in May and pointed to the successful debut of PetroVietnam Gas (GAS) on Monday as well as the opening of the National Assembly, which was expected to pass a stimulus package for the business community – all likely to support the market in the near future.

Foreign investors were net buyers on both exchnages yesterday, picking up shares worth a combined net of VND93 billion ($4.4 million).

Bourse introduces new index
 
The Ha Noi Stock Exchange yesterday introduced its new price index – the HNX30 – which is expected to come into operation next month.

The HNX30 includes the bourse's 30 best stocks in terms of liquidity and market capitalisation, having a lot in common with the HCM City Stock Exchange's VN30.

With a base point of 100 and base date of January 3, the index is estimated to reach 140 points by now.

The method to establish the HNX30 is similar to that of the VN30. The most important difference is that liquidity is chosen to be the most crucial criterion for selecting stocks tracked by the HNX30.

"It is the most effective factor that supports the market's function of raising funds," said economist Vuong Quan Hoang, a member of the index management board.

New products to follow the development of the HNX30 would be based on liquidity rather than corporate profits or sectorial operation, he said.

To limit the significant impacts of some large-cap shares, the exchange uses a capped ratio of 15 per cent to assure that none of the listed codes has capitalisation ratios exceeding 15 per cent of the total market value.

"According to international practices, the capped ratio is often 10 or 15 per cent, which is suitable for adjusting the market capitalisation ratio of such stocks as the Asia Commercial Bank (ACB)," said exchange deputy general director Nguyen Anh Phong.

Asia Commercial Bank currently accounts for 43.3 per cent of the value of the HNX30.

The movement of the HNX-Index is almost the same as that of the bank. The HNX30 is expected to more precisely reflect the common trend of the market.

However, Sai Gon-Ha Noi Fund Management Co's head of economic analysis and research Nguyen Viet Duc was worried that the new index would be forgotten the way the VN30 was.

"Earlier this year, the introduction of the VN30 attracted the interests of many investors but they then began to ignore it," he said.

As there was no promotion towards foreign investors, they were still forming their portfolios based on the VN-Index, he said.

Duc advocated the use of stock index futures by which investors would not have to change their portfolios but just buy or sell futures. He said it would both reduce short-term risks for funds and maintain long-term growth potential for the stocks.

"When such derivatives are born, benchmark indices will fluctuate less."

However, Hoang predicted the exchange should kick off more promotion programmes to make investors thoroughly understand index investment.

"Derivatives are what investors are looking for to reduce risks," he said.

Deputy head of the State Securities Commission's fund management division Nguyen Thanh Long said: "The new index will become an effective source of investment information, promptly reflecting actual operation of enterprises while functioning as a forecast."

In addition, stock indices would also convey investor expectations on businesses, helping watchdogs issue relevant policies.

Besides the criteria of high liquidity and market capitalisation, stocks to be included in the index's calculating basket must be listed on the bourse for at least six months without warning from management agencies.

The 30 shares will also be revised every six months.

Technological development funds beyond firms’ reach

Though having a total registered capital of VND50 billion (US$2.4 million), which insiders say is too low given the demand of 14,000 businesses, the Ho Chi Minh City fund for technological and scientific development has only disbursed VND25 billion over its first five years of operation.

Do Thanh Technology Corporation is among the very few fortunate borrowers that have been able to access loans.

In September 2009 it was approved for a loan worth VND3.3 billion, or 70 percent of the total capital needed for its project to set up a new production line. The company has now nearly completely cleared the debt.

Not so lucky, the Handa Co Ltd, an essential oil manufacturer, was approved to borrow VND4.7 billion from the fund in January 8, yet the company has yet to receive the money.

Meanwhile, despite an application for loan submitted early this year, Huynh Van Hai, director of the Bao Long Food Technology Production Co, is still unable to access the VND2-billion loan he needs for a plan to upgrade the company’s technology.

The company can afford VND8 billion of the VND10-billion plan, and it expects to cover the remaining from the special loan at interest rate of only 7 percent a year, as offered by Ho Chi Minh City’s master plan to enhance production technologies of firms operating around the city, the director said.

“Though it may take five or ten more years, I’m determined to access this source of capital,” said Hai, who however ended up borrowing from banks for his project.

“It’s not difficult to compose the loan application, but businesses always face troubles when it comes to disbursement,” said Dothanhtech CEO Le Quang Hiep.

The financial institutions in the fund do not care much about the scientific aspects of the project, he said.

“What they care about is only whether they can quickly recoup investment.”

Huynh Luu Thanh Giang, a specialist in technology management under the municipal Department of Science and Technology, said that since loans granted from the fund are non-collateral, borrowers are required to meet strict standards for accessibility.

“They are requested to prove their projects’ effectiveness, and their ability to repay loans,” said Giang.

As borrowers of the fund are usually small, newly-established businesses, it is not easy for them to meet the requirement of having good growth for three consecutive years, she elaborated.

“Therefore, it usually takes at least six months to evaluate the loan applications, before they are transferred to the HCMC Financial Investment Corporation for disbursement,” she explained.

Meanwhile, Phan Minh Tan, the department’s director, and chairman of the management board of the HCMC Fund for Scientific and Technological Development, admitted to the strict conditions for borrowers.

However, he added that there is no other choice.

“Giving loans for no collateral means taking a high risk for the fund,” he said.

“In fact we have been unable to recoup investments from some borrowers, who were in a tough spot due to market difficulties."

New prospects for Sino-Vietnam economic cooperation

China considers Vietnam as a market of great potential, and an important economic bridge between China and ASEAN, according to an official.    

Vietnam has abundant natural resources, a large workforce, an increasingly better investment climate, and a beautiful landscape, said Ma Mingqiang, Secretary General of the ASEAN-China Centre based in Beijing.

Ma remarked that over 100 of 500 largest global businesses have invested in Vietnam and Chinese enterprises should avail themselves of current good opportunities to increase its investment in the Southeast Asian country.

The statement was made by Ma at the opening ceremony of the Vietnam-China forum for economic, trade, investment and tourism cooperation jointly held by the Vietnamese embassy and the ASEAN-China Centre in Beijing on May 21.

Participants in the event included Vietnamese Deputy Foreign Minister Nguyen Thanh Son, Ambassador Nguyen Van Tho, and President of the China-ASEAN Friendship Association Gu Xiulian.

Bilateral trade turnover between Vietnam and China hit nearly US$40 billion in 2011, an increase of more than 30 percent from the same period last year, said Mr Son.

China invested in over 820 projects in Vietnam in 2011 with a total registered capital of US$4.2 billion to rank 14th among countries and territories investing in the country.

China is also Vietnam’s largest tourism market. In 2012, Vietnam received more than 1.4 million Chinese tourists.

Both countries are participating in many interregional cooperation initiatives, such as the one on two corridors and one economic belt.

More trade promotions needed on Dutch market

Vietnam’s businesses need to promote trade and marketing to make their brand names familiar to consumers in the Netherlands.
    
According to the Import and Export Department at the Ministry of Industry and Trade, the value of Vietnamese exports to the Netherlands rose by 60 percent to reach US$2.15 billion in 2011, compared to US$1.33 billion in 2009.

In the first quarter of 2012, Vietnam posted an export value of US$512.85 million, an increase of 8.28 percent over the same period last year. The country’s major exports to the Netherlands included footwear, garments, cashew nuts, pepper, coffee, seafood, vegetables, furniture and wooden products.

12 out of 23 export categories reached an export value of over US$10 million, with computers topping the list, then electronics and electronic spare parts, which accounted for 17.7 percent of the total export revenue.

French businesses to join Banking Vietnam 2012

Five leading French businesses, including Cassiopae, KMB Partners, M2M, Mootwin and SAB, will take part in the upcoming Banking Vietnam 2012 Conference & Exhibition.    

Featuring the theme “Technology transformation towards effective banking governance & high quality services for banking sector”, the conference and expo will take place in Hanoi from May 22-24

French firms’ participation in Banking Vietnam 2012 showed their keen interest in Vietnam’s banking sector.

They are the only foreign ones at the event to introduce their latest banking solutions and modern banking services.

French businesses are scheduled to meet with Vietnamese information and technology (IT) companies to seek cooperation opportunities.

Hanoi CPI up 0.16 percent in May

Hanoi’s Consumer Price Index (CPI) in May increased by 0.16 percent against April and by 7.8 percent over the same month of last year, according to a report from the Hanoi Statistics Office.
   
The post and telecommunications group remained unchanged while other groups saw wild fluctuations, the report says.

Housing, electricity, water, fuel, and construction materials declined by 0.24-1.03 percent, while tobacco, textiles and garment, hats, shoes, and home appliances climbed up.

The reasons cited by economic experts included an increase in petrol and oil prices in late April and a rise in minimum wage level as of May 1. The long holiday in late April and early May also contributed to the rising CPI of goods and services related to culture, entertainment, and tourism.

Another reason was the falling prices of food and vegetables as well as restaurant services due to a stable supply from the markets.

The May index for gold prices decreased by 1.76 percent from April but rose 11.82 percent against the same month of last year.

Pepper exports to see substantial growth

Vietnam’s pepper exports are predicted to earn US$850-900 million by the end of 2012, according to the Vietnam Pepper Association (VPA).     

Eleven years ago, the country exported only 50,000 tonnes of pepper worth US$90 million. But in 2011 the figure reached 120,000 tonnes, up 120 percent in volume while the value gained US$693 million, up 665 percent.

Currently, Vietnam tops other pepper exporters in the world, making up about 50 percent of global pepper output. Vietnamese pepper is present in 80 countries and territories and occupies a big market share in America, Europe, Asia and the Middle East.

VPA said Vietnam’s average annual pepper output has risen from 3-5 tonnes per hectare in 2001 to 5-7 tonnes per hectare in 2011, while other exporters such as India and Indonesia only yield 0.2-0.3 tonnes per hectare, Malaysia and Brazil 1-2 tonnes per hectare.

The VPA has increased its members from 34 in 2001 to 105 in 2011 with Chu Se pepper (in Gia Lai province) becoming a famous trade name in the world market.

Malaysia keen on investment in Bac Ninh

Malaysian Ambassador to Vietnam Dato Azmil Mohd Zabidi led a Malaysian business delegation to explore investment opportunities in the northern province of Bac Ninh on May 21.   

Chairman of the Bac Ninh People’s Committee Nguyen Nhan Chien thanked foreign businesses including those from Malaysia for their significant contributions to the province’s industrial growth.

He said he hopes the delegation’s visit will consolidate the relationship between Vietnam and Malaysia and between Malaysian and Bac Ninh businesses, as well as creating a new Malaysian investment influx in the province.

The Malaysian Ambassador highlighted Bac Ninh’s investment environment and its abundant labour force.

Malaysian businessmen said they want to explore the investment environment and have a long-term investment plan in the province.

Deposit interest rates may fall to 9% by year's end
 
Deposit interest rates offered by commercial banks are likely to come down to between 9 and 10 per cent per annum by the year end, says Nguyen Van Binh, governor of the State Bank of Viet Nam.

Binh was quoted by Sai Gon Giai Phong (Liberated Sai Gon) newspaper as saying the central bank had previously slashed deposit interest rates according to the level of inflation in the country.

This year, it was expected that inflation would be brought down to below 10 per cent. If it reached 8 or 8.5 per cent, the deposit interest rate would be brought down 9 or 10 per cent, he said.

Early this year, the central bank had set a target of trying to cut the deposit interest rate by one point per quarter if the country's marco economic environment was favourable, the governor said.

"However, we are likely to have conditions to cut the deposit interest rate more quickly than predicted thanks to recent marco economic developments, particularly with regard to inflation," Binh said.

He also said that the deposit interest rate should not be slashed under 9 or 10 per cent because this level was reasonable since it would still ensure the position of Vietnamese dong and therefore ensure the stability of the foreign exchange market.

With the deposit interest rate of 9 or 10 per cent per annum, depositing dong at banks would continue to be an attractive investment channel if compared with other options like gold, foreign currencies and real estate, Binh said.

He said a 1.71 per cent decrease in credit growth in the first four months was easy to understand in the context of curbing inflation.

In previous years, credit growth had stood at very high levels, with an average increase of 34 per cent over the last 5 years, and 29 per cent over the last 10 years. However, this year's credit growth would be controlled at between 14 and 17 per cent to continue reigning in inflation and stabilising the marco economy.

Binh said that the central bank would closely watch the marco economy and initiate measures to help enterprises access bank loans at reasonable interest rates in order to help them maintain and develop their trading and production activities.

Economic crisis hits Q2 export orders
 
Domestic exporters are experiencing reduced orders for this year's second quarter because of the economic crisis in the export markets, experts have said.

Pho Nam Phuong, director of the HCM City Investment and Trade Promotion Centre, said that domestic exporters normally signed export contracts at the end of the previous year for full orders by the end of this third quarter.

Since the end of 2011, however, almost all local exporters had struggled to secure export orders, Phuong said.

Pham Xuan Hong, deputy chairman of the Viet Nam Textile and Apparel Association (Vitas), said export orders for the textile and apparel industry in the second quarter fell by 10-15 per cent against the same period last year.

In the first quarter, exports of textile and apparel fell by 30 per cent to the EU and 16 per cent to Japan, Hong said, adding that some enterprises had returned to the domestic market but they were not very successful there.

According to the Viet Nam Leather and Footwear Association (Lefaso), few enterprises from the sector had signed export contracts for the second quarter.

The number of export orders for the second quarter had also reduced by 20-30 per cent in comparison with the same period of last year, Lefaso said.

The reduction in export orders was due to the difficult economic climate in the export markets and also the increasing demand for higher quality and eco-friendly products in the EU, the US and Japan, said the Trade Promotion Department under the Ministry of Industry and Trade.

Diep Thanh Kiet, Lefaso deputy chairman, said demand in the Europe used to account for 50 per cent of all leather and footwear exports from Viet Nam, but orders had dropped due to the economic crisis.

Therefore, the industry planned to look for new export markets, including Australia, Russia, and certain South American and North African countries, Kiet said.

Meanwhile, the Investment and Trade Promotion Centre would open an export forum on May 18 in HCM City for foreign trade officers, economic experts and industry representatives to discuss ways to help the exporters overcome the existing difficulties, Phuong said.

GCF funds Mekong Delta firms

Denmark's Global Competitiveness Facility for Vietnamese Enterprises (GCF) has provided grants of VND15 billion (US$720,000) to five businesses in the Mekong Delta this year.

They include VND3 billion to Thuy Son Investment JSC for an afforestation project under which 500 local families would plant keo lai (a hybrid between acacia mangium and acacia aunculiformis) trees on 1,500ha along the Ca Mau coast, Chiem Thang, advisor to GCF, said on Thursday.

Thuy Son will buy all the trees once they grow at VND850,000 per tonne and grind them into pulp for export to countries like China, Denmark, and South Korea.

Thuy Son is expected to export over 1,000 tonnes of pulp a year.

As a grant facility of the Danish International Development Agency, GCF aims to enhance the competitiveness of non-public Vietnamese businesses in export-oriented business sectors in targeted provinces through better access to relevant business services and exposure to innovative business models.

By 2013 GCF will provide VND216 billion ($10.3 million) to 50-60 non-State companies in Nghe An, Thanh Hoa, Khanh Hoa, Phu Yen, Dak Lak, Lam Dong, and An Giang Provinces and Can Tho city.

In the period 2006 - 2010, GCF also granted VND135 billion (nearly $6.5 million) to 52 local enterprises in Ha Tay, Nghe An, Khanh Hoa and Lam Dong provinces, generating 6,396 jobs for local people.

Rule to limit foreign currency loans

Individuals, along with co-operatives and other economic institutions which are not enterprises, would no longer be allowed to borrow from foreign sources under the provisions of a draft regulation newly released by the State Bank of Viet Nam.

The State Bank said it was consulting with Prime Minister Nguyen Tan Dung, along with relevant agencies and institutions, about the proposed regulation, which was intended to replace current Ordinance on Foreign Currency passed in 2006.

Under the draft ordinance, an individual needing to mobilise foreign financial resources to carry out an investment project would have to set up an enterprise and borrow in accordance with current laws and regulations.

The restriction would be aimed at enabling the State to maintain stricter controls over foreign exchange, State Bank Governor Nguyen Van Binh said in a statement sent to the Prime Minister. It would help gradually limit the use of foreign currency domestically and lure foreign currency sources out of general circulation and into the nation's credit institutions, he said.

The draft would also stipulate that, within Vietnamese territory, every contract or agreement related to payments, transactions, and setting and quotation of prices must be conducted in the domestic currency, except for specific exceptions approved by the State Bank.

An increased incidence of contracts and agreements with their terms set in foreign currencies have had a negative impact on the Government's monetary and exchange rate policies and interfered with its anti-dollarisation target, the central bank said.

New plant makes power converters

A electronic power converter manufacturing facility that incorporates renewable energy design features was inaugurated in the southern province of Binh Duong yesterday.

Located in the province's My Phuoc Industrial Park No 3, the 11,600 sq.m factory has manufacturing, assembling, engineering and testing facilities as well as administrative offices of the XP Power Viet Nam Co Ltd.

It was delivered on a turnkey basis by Singapore-based Boustead Projects Pte Ltd, a wholly owned subsidiary of the of SGX-listed Boustead Singapore Limited.

With renewable energy design features including a solar panel array system to significantly enhance energy efficiency and generate electricity, the XP Power Facility is set to be the first building in Viet Nam to be awarded the Green Mark Gold Plus award by the Building and Construction Authority (BCA) of Singapore.

The objective of the BCA Green Mark Scheme is to incorporate best practices in environmental design and construction, as well as encourage the adoption of green building technologies.

Buildings are rated according to various innovative green features that promote better performance, including energy efficiency, waste treatment, environmental protection and indoor environmental quality.

Yap Chee Tiong, General Manager of XP Power (Kunshan) Ltd, said the company has invested some US$8.5 million in the first stage of the Viet Nam facility and $2 to $3 million would be added in the second stage, beginning next year.

Italian entrepreneurs explore VN prospects

The biggest incoming delegation of around 50 Italian entrepreneurs, in particular small-and-medium sized enterprises (SMEs), will come for the first time to Viet Nam to understand the investment and market opportunities at the "Enterprise Partnerships for Development" workshop held in HCM City on Thursday.

The event is aimed to provide an opportunity to Italian entrepreneurs to understand the potential of Viet Nam as a market and investment destination, and to start exploring concrete opportunities of business partnerships through direct and tailored meetings with selected Vietnamese industries and institutions in the textile and clothing, footwear and leather products, and furniture sectors.

Participants will be provided with an overview of the Vietnamese economy and business opportunities for foreign investors who wish to expand their business in one of the most promising emerging markets in the South Asia.

Focused bilateral meetings and factory visits will also be organised at the forum, according to the profile and interests of visiting companies thanks to the in-depth knowledge of specific manufacturing sectors acquired by the United Nations Industrial Development Organisation (UNIDO).

The workshop is under the framework of the cooperation project "SME Cluster Development", entirely funded by the Government of Italy and implemented in Viet Nam by UNIDO, with the Vietnamese Ministry of Planning and Investment as a national counterpart.

The project aims to support the development of SMEs in Viet Nam and broaden the image of Italian SMEs through the promotion of trade, production and technical cooperation agreements between enterprises from both countries.

A specific focus is given to disseminating Vietnamese experiences and best practices of Italian "industrial districts", and to promoting institutional agreements among Italian and Vietnamese industry associations, educational institutions, technical and service centres.

Major food processor eyes feed company

Food processor Hung Vuong Co (HVG), on the 30 top shares on the HCM City Stock Exchange tracked by the VN30 Index, will acquire a majority interest in Viet Thang Feed Co (VTF), HVG chairman and general director Duong Ngoc Minh has told the publication Dau tu Chung khoan (Securities Investment).

The acquisition would help HVG reach greater self-sufficiency in all steps of its operations, Minh said.

"We will gain an advantage in all ranges of our business, from food supply to processing and export," he said. "We will also be the source of foreign currency for Viet Thang Feed to import materials."

Exchange rates have significantly affected VTF's operations, with the company importing materials worth around US$50-60 million annually, he noted.

The takeover would be carried out by purchasing three million VTF shares at an anticipated price of no less than VND20,000 per share. In addition to HVG, Viet Phu Foods and Fish Co is also eyeing a potential purchase of three million VTF shares.

VTF closed yesterday at its ceiling price of VND25,600 per share, a significant decline from the VND30,500 at which it was trading earlier this month.

New plant makes power converters

A electronic power converter manufacturing facility that incorporates renewable energy design features was inaugurated in the southern province of Binh Duong yesterday.

Located in the province's My Phuoc Industrial Park No 3, the 11,600 sq.m factory has manufacturing, assembling, engineering and testing facilities as well as administrative offices of the XP Power Viet Nam Co Ltd.

It was delivered on a turnkey basis by Singapore-based Boustead Projects Pte Ltd, a wholly owned subsidiary of the of SGX-listed Boustead Singapore Limited.

With renewable energy design features including a solar panel array system to significantly enhance energy efficiency and generate electricity, the XP Power Facility is set to be the first building in Viet Nam to be awarded the Green Mark Gold Plus award by the Building and Construction Authority (BCA) of Singapore.

The objective of the BCA Green Mark Scheme is to incorporate best practices in environmental design and construction, as well as encourage the adoption of green building technologies.

Buildings are rated according to various innovative green features that promote better performance, including energy efficiency, waste treatment, environmental protection and indoor environmental quality.

Yap Chee Tiong, General Manager of XP Power (Kunshan) Ltd, said the company has invested some US$8.5 million in the first stage of the Viet Nam facility and $2 to $3 million would be added in the second stage, beginning next year.

Opportunities and challenges from old condos

Old condos that need dismantling and building anew are on target of property developers given their prime locations and available infrastructure, but site clearance and compensation are posing great challenges for investors.

Renovation of old apartment buildings has been brought forward by the authorities of big cities like Hanoi and HCMC for the past couple of years in a bid to bring a new face to urban areas and ensure safety for residents in deteriorating structures.

According to the Ministry of Construction, there are over three million square meters of condos developed before 1991 nationwide, where 100,000 households are living, including 200 crumbling apartment blocks in Hanoi and HCMC.

Specifically, there are around 100 old apartment buildings in HCMC, with several degraded ones that only meet 40-50% of the quality standards and even could collapse at any time. Therefore, the city has set a plan to replace the expired buildings, mostly in districts 1, 3, 5, 10 and Binh Thanh.

To accelerate the program to renovate old apartment buildings, the Government in 2007 issued a resolution with supporting policies for investors. One year later, HCMC released a decision on assisting investors in compensation and resettlement for households living in the run-down apartments.

In particular, investors using non-state capital will enjoy land use fee and land rental exemptions, and receive tax incentives and preferential loans from housing development investment funds.

In the scheme for the HCMC property market development currently deployed by the municipal construction department, the demand for replacing deteriorated condo buildings is said to be increasing in the next five years when the city continues to relocate, dismantle and build anew 30 old apartment buildings, with the floor space of some 361,000 square meters.

Theoretically, investors will enjoy the advantages offered by the State when investing in the land plots with old apartment buildings. Moreover, they will gain benefits from the ideal locations of these buildings, such as technical infrastructure like traffic, power and water, and social infrastructure like schools and hospitals.

However, investors in old condo renovation projects find it far from a simple task as reality shows that such projects are moving at a slow pace.

Site clearance is a big headache for investors as it is such a great challenge to persuade residents in degraded condos to relocate.

A senior executive from a real estate company said her firm is entering a tough battle to negotiate site clearance compensation for a project to rebuild the apartment section of a land plot covering 4,000 square meters in Tan Binh District.

Apart from some villas, the land plot consists of a four-storey apartment building developed before 1975, which has severely deteriorated. Around 60 households are living in the building, with some apartments only covering 15-20 square meters each.

The renovation project will turn the apartment building into an 18-story building with six floors for commercial use and the remainder for residential purpose with high-grade condos. The project was originally expected to get going this August but the developer is forced to delay execution until next year since the compensation unit prices have yet to be approved by the district authority.

In comparison with urban development projects, old condo renovation projects are under greater pressure because the projects will be revoked if they fail to get going one year after the investors are awarded the projects. In addition, investors are responsible for any incident occurring during the process of site clearance and compensation, said the source.

Compensation is a complicated problem at an apartment building complex on Co Giang Street in HCMC’s District 1. After four years, the complaints about compensation prices have yet to be satisfactorily resolved, whereas the building is currently at risk of collapse.

The building complex comprises four five-story apartment blocks and two rows of street houses, where a total of 885 households are living. The municipal authority had called for urgent relocation prior to April 30 last year in order to dismantle the four apartment blocks.

A new apartment building with commercial space named Pavilon Square will be developed in place of the old one. The project worth some VND1.3 trillion will be invested by Dat Viet Company.

European firms keep cautious eyes on business outlook

Although some local experts drum up positive economic signs recently, European businesses continue to be cautious about the overall economic outlook in Vietnam as found in the latest survey of the European Chamber of Commerce in Vietnam (EuroCham).

Last week, EuroCham publicized its business climate index for the second quarter of 2012 after surveying its member companies in April and May, with 44% of the respondents active in services, 28% in manufacturing, 20% in trading and the rest in other sectors. The result was that the index inched down three points to 53 compared to the first quarter.

EuroCham Chairman Preben Hjortlund said that the continuing low level of the index at 53 points indicated ongoing concerns and uncertainty in the business community.

“While there are some encouraging signs, the overall business sentiment is stagnating at a relatively low level,” Hjortlund commented on the survey.

Results of the seventh quarterly EuroCham Business Climate Index showed an unpromising business situation, as 29% of the respondents assessed their current business as ‘not good’ compared to 19% in the first quarter of 2012. On top of that no respondent described their current situation as ‘excellent’.

Little optimism in business outlook was easily recognized in the survey, as only 38% and 36% of the respondents stated a ‘good’ and ‘neutral’ outlook respectively, lower than the 51% of respondents that had a positive business outlook this time last year. In the newest survey, some 26% of respondents had a pessimistic outlook for their business in the next six months.

European companies expressed mixed attitude towards investment plans. When asked about their investment plans this year, 38% said they were looking to expand their investments in Vietnam, up two percentage points over the previous survey but still much lower than 59% in the same period last year.

“This shows a continuation of the trend that businesses are getting more cautious about investing,” EuroCham said. EuroCham had more results to prove as 28% of businesses in the survey said they were looking to reduce their overall investment in Vietnam, up from 24% last quarter.

“This result is the continuation of a downward shift in confidence to invest in Vietnam. While the majority of companies are looking to maintain and increase their investments in the country, it is worrying that nearly a third of companies in this survey are considering a reduction of their investments here,” EuroCham noted.

However, the survey has positive results related to revenue and inflation. Up to 58% expected revenue increases in the medium term, or higher than 47% in the first quarter.

“Overall, this represents an upward trend in the outlook on revenue/orders for the last two quarters. This trend has yet to have an effect on recruitment plans with the majority (46%) of companies wanting to maintain their current level of staff,” EuroCham said.

There is also a rise in the confidence of European businesses in the Government’s measures to tame inflation. However, 57% of respondents still ticked inflation as a major concern or even threat to their business operations in Vietnam.

As for the macro-economic problems in Vietnam, 45% of respondents opted for ‘stabilization and improvement’ of the current situation, up 10% from last quarter. EuroCham said this was an increase in confidence.

EuroCham said further progress on a Vietnam - EU Free Trade Agreement (FTA) would underpin an increase in business confidence and “lay the foundations for future investment increases from Europe.”

It’s not all bad news in Vietnam

Behind the bad news in Vietnam’s economy lie opportunities, Kenneth Atkinson emphasized at a business luncheon in HCMC last week. The managing partner of Grant Thornton Vietnam said there were opportunities in a growing economy like Vietnam.

“It’s not all bad news in Vietnam,” Atkinson told the Daily after the event held by the Malaysia Business Chamber in Vietnam (MBC) for representatives of domestic and foreign-invested businesses in HCMC last Friday. “The challenges were opportunities in disguise,” he said.

Atkinson assumed Vietnam’s growth rate for the next year or two years would be less than the historical 7-8%, but there was no reason why it would not rise after that provided the Government continued with a strong economic restructuring program to help ensure more efficient use of resources.

Currently, negatives centered to a real estate sector crippled by high interest rates and oversupply, the need to urgently address the restructuring of the state-owned and banking sectors, small businesses closing, and slowing consumer spending.

The audience raised questions about the issue of small businesses having to close in Vietnam at the MBC luncheon. Atkinson said a large number of people in Vietnam thought it was easy to set up a business and make money which is generally true in a booming economy, but only well managed businesses with proper goals and objectives will weather tough times and survive in the long term.

Figures of the Ministry of Finance supported Atkinson as its report showed up to 65% of the 10,350 businesses that were disbanded, went bankrupt and stopped operation in the first quarter of this year were those that had been set up for only one or two years.

Atkinson said the shutdown of businesses posed challenges in the short term but would help ensure that Vietnam developed a strong private sector.

The audience also voiced some questions linked to the Government’s ability to resolve issues and maintain the right policies and not be influenced by interest groups.

Atkinson said the positive news was that the issues that were of grave concern early last year such as inflation, currency stability, high interest rates and the country’s low foreign exchange reserves were largely under control and heading in the right direction.

“Inflation has fallen quicker than forecast to close to 10%, the currency has been quite stable, interest rates are on the decline, and the country’s FX reserves are improving dramatically,” Atkinson said. “Export growth is still positive and some sectors are doing well.”

Atkinson said most of the macro-economic concerns were eased but there remained the old concerns about transparency, the legal environment, and economic restructuring.

He said there was a long way to go to drive economic restructuring, transparency and accountability, and the speed of which would be determined by the Government.

“I think current concerns focus more on the ability of the Government to follow through with its commitment to economic restructuring, particularly State-owned enterprises, the banking sector and public investment,” Atkinson said.

He noted no economy in the world had developed without setbacks or recessions and “Vietnam will continue to see ups and downs but my glass is certainly half full.”

Local banks learn “people strategy” from foreign counterparts   

From April 2007, the banking industry of Vietnam has turned to a new phase when the nation joined fully WTO and more international financial institutions came to explore opportunities to become strategic shareholders at local banks. Foreign banks find ways to partner with local banks through investment funds for multi purposes. Beside financial benefits, these foreign partners also aim at penetrating into the local distribution network which they hardly build overnight. They even compete with their own local partners by opening their wholly-owned foreign bank branches. With these two legs, it was believed that, back in 5 years time, the foreign banks are likely to surpass their local partners one day.

In fact, since the first 2 wholly owned foreign banks, HSBC and Standard Chartered, were licensed in 2008, the worry above seems not to happen. The reason being that local banks have their own strengths in distribution network, established individual customer base and good relationship with enterprises, all of which are still constraints to the foreign banks.

The “marriage”: financial benefit or people strategy?

Apart from the “broken marriages” between ANZ and Sacombank or the unfeasible engagement between Dong A Bank and Citi Bank, all others “marriages” grow so well up to now such as Standard Chartered and ACB, SeABank and Societe Generale, VIB and Commonwealth Bank, Techcombank and HSBC, ….Beside leveraging on technical support in product making from foreign experts, capacity building and management know-how, local banks in these “marriages” are also active in deploying advanced people management model learned from their foreign counterparts.

An example of this is ACB applying Personal Financial Consultant model which is modified from Standard Chartered version. This bank even advertise this model in front of their premises as a selling point. In this model, sales staff are trained to provide personalized customer relationship, being empowered to take full care of customer account and other financial needs.

Another example is at SeABank where the local management is very open in placing senior experts of Societe Generale in many top positions from risk management to product division. It is also due to the support from Societe Generale that SeABank joined the 2 world leading card organizations, Visa and Master, faster than expected. The fact SeABank appointed senior French experts in their top management board shows that local banks are very “marketing savvy”.  Despite of constraints in language communication or in cultural life, these foreign experts prove to “socialize” so well.

It is not an easy task that the local bank management decides to engage deeply the participation of foreign expert in their management. The two examples above show that local banks are strong enough to lead their team with such constraints or differences in an increasingly competitive environment. What was believed 5 years ago may not be true with the fact that local banks gain more and more advantages from their foreign partners and that they are on the right track. Determination in this people strategy at local banks is therefore valuable and worth the investment.

VietJetAir expands service in central Vietnam

VietJetAir began its daily service between Hanoi and the central coastal city of Nha Trang over the weekend, or more than two weeks after the low-cost carrier commenced daily flights to Danang.

Desmond Lin, business development director of VietJetAir, said the airline would bring vacationers to Nha Trang, which is one of Vietnam’s most desirable holiday destinations and home to one of the most beautiful bays in the world when launching the daily service.

“This route is also another stepping stone for our expansion plans to offer travelers more quality, cost effective flights to more destinations at the most convenient times. In the next few days, we will also put the Hanoi– Danang route into operation to further realize this commitment,” Lin said.

The private carrier VietJetAir will fly between Hanoi and Danang from May 24 to connect the capital city and the commercial hub of central Vietnam.

VietJetAir now operates a fleet of three new Airbus A320 aircraft for daily flights between HCMC and Hanoi, HCMC and Danang, and now Hanoi and Nha Trang. The airline plans international flights to Southeast Asia and Northeast Asia early next year.

VietJetAir operated its maiden service between HCMC and Hanoi in December 2011. The carrier aims at transporting some 700,000 passengers this year.