Fiscal sustainability under discussion

Leading foreign and domestic experts are gathering for the Vietnam Finance 2012 conference and expo in Hanoi to discuss measures for fiscal sustainability and medium-term expenditure framework.   

During the two-day event, which opened at the Sheraton hotel on September 20, delegates will focus their discussions on improving budget allocation methods, estimates, and budget planning.

Under the theme of “Strengthening fiscal sustainability through a Medium-term Expenditure Framework and Modern Technology Solutions,” the conference is expected to provide recommendations for implementing modern technologies into office buildings and completing a new database system that has been designed to strengthen the government’s budget management and improve public administration services.

The aim of Vietnam Finance 2012 is to promote the use of modern technology in forecasting and build national financial planning with the development of e-financial services.

Financial reform is a high priority on the agenda for the national program on public administration that covers the economic development period 2011-2020.

Fiscal sustainability has drawn the attention of many nations, especially following the 2008 economic crisis. As well as rising challenges to the stability of revenues, expenditure has tended to escalate during the recent implementation of new social welfare, education, and health care policies. It is also the concern of international financial institutions such as the IMF and World Bank.

According to economic specialists, the aim of fiscal reforms is to manage public expenditure and state revenue to balance and stabilise the budget. As a result, a tight interconnection between the legal framework in fiscal policies and citizen-government partnership is needed.

Following the success of eight similar conferences and expos, Vietnam Finance 2012 aims to create the close link between financial institutions and businesses to boost IT application in the financial sector and develop e-financial services.

An exhibition will also be held as part of the conference to provide a venue for leading technology companies such as Oracle, Schneider Electrics and Fast to introduce modern technology applications and solutions that improve the effectiveness of forecasting and planning financial policies.

The annual event is held jointly by the Ministry of Finance and the International Data Group (IDG) in Vietnam.

Interbank short-term interest rates take a tumble

Interest rates in the interbank market fell significantly in the week from September 10-14 over the preceding week, according to the State Bank of Viet Nam.

The average interest rate in Vietnamese dong for overnight and three-week term loans decreased by 0.05 and 0.41 per cent, respectively. During the week, interest rates on a three-month term went down by 3.11 per cent to 8.89 per cent per year.

In the interbank market for foreign currencies, liquidity has remained stable. Interest rates for three-month and one-month terms dropped by 0.36 per cent and 0.37 per cent, respectively.

According to credit institutions, total transaction volumes in the dong in the interbank market reached about VND17.8 trillion (US$857.4 million) a day on average, with short-term transactions accounting for 78 per cent of the total.

Meanwhile, short-term transactions in the greenback equaled 68 per cent of the total transaction value in the US dollar.

According to the central bank, credit institutions offered a lending interest rate of between 10-13 per cent per year to the agriculture and supporting industry sectors, small- and medium-sized enterprises and exporters, and 12-15 per cent a year to other production and trading sectors.

Lending interest rates in the US dollar remained stable, with short-term lending interest rates staying at 5-7 per cent a year and 6-8 per cent a year for medium and long-term loans.

Inflation skyrockets in cities

Inflation continued to heat up in the nation's two largest cities in September, driven by soaring fuel and back-to-school costs, according to statistics offices in the two cities.

The Ha Noi Statistics Office reported that inflation in the past month rose a sharp 2.47 per cent over the previous month. Inflation in the capital city in the first nine months of this year has risen by a cumulative 9.24 per cent compared to the same period last year.

Among 11 classes of goods used to calculate the consumer price index (CPI), the prices of 10 of them rose last month, led by school fees and educational costs, up over 34 per cent, followed by fuel and transportation costs, up 3.67 per cent. Higher petroleum prices also drove up housing and utility costs by 2.16 per cent.

The first nine months of this year saw marginal price deflation in April, June and July, but inflation reignited in August, posting a one-month increase of 0.59 per cent. New September figures reflect the fast rate of price increase since April 2011.

Inflation in HCM City in September rose by a slightly less neck-snapping 1.21 per cent, marking the first increase in the city's CPI in the past six months, according to the HCM City Statistics Office.

The city's September inflation increased by 4.63 per cent compared to the same month last year.

Higher prices in the southern metropolis were also driven by education and fuel costs. School costs in the city shot up by 6.77 per cent, while transportation costs rose 4.12 per cent following three recent increases in retail petrol prices.

Among other commodities, rice saw a notable one-month increase in price, averaging 1.03 per cent.

VN ponders tax revenues

The nation is seeking to strengthen fiscal sustainability by developing a medium-term expenditure framework and modern technological solutions to improve the quality of budgetary planning, according to presentations made at the ninth Viet Nam Conference and Exhibition held by the Ministry of Finance and the International Data Group (IDG Viet Nam) yesterday in Ha Noi.

Fiscal stability required tight management of Government expenses and revenues to avoid economic shocks, said experts at the conference.

Sustainability has become a great concern for Viet Nam since running a budget deficit has become commonplace over the past 20 years, even in times of rapid economic expansion and growing tax revenues, said National Institute for Finance director Vu Nhu Thang.

The efficiency of budgeting for expenditures also remained low, Thang said, and revenue collections depended mainly on "non-recurrent" items such as oil and land use fees. Revenue from import duties were also going to continue to fall as the country fulfilled its commitments on tariff reductions under WTO commitments and other free trade agreements.

The challenge was therefore how the country could maintain revenue collections sufficient to sustain expenditure levels at about 30 per cent of GDP, high compared with neighbouring countries, Thang said.

Fiscal policies needed to project forward for a period of three-to-five years in line with analyses and forecasts for economic growth, commented Su Dinh Thanh from HCM City University of Economics.

Statistics from the World Bank have shown that most countries around the world applied medium-term expenditure frameworks of 5-10 years in managing their budgets, Thanh added.

Tax policy also needed to be reformed to develop a comprehensive and sustainable regime in line with international standards that would ensure sufficient long-term revenues for the State budget, he said.

Measures for applying modern technology for record-keeping to support Government budget management were also discussed at the conference.

Duong Quoc Cuong from FPT Information Systems said that there was no co-ordinated system or connection among different localities and budget centres.

"A national public finance information system is critical to help ensure the efficiency of State budget management, together with a medium-term expenditure framework," Cuong said.

Pham Cong Minh, deputy director of the Ministry of Finance's Department of Financial Information and Statistics, said that challenges to the development of such a system would be how to collect data adequately and create easy access to users.

The two-day conference wraps up today with a further discussion of technological solutions. The Minister of Finance has set a target of furnishing 100 per cent of financial units at the provincial level with e-portals by 2015.

Coffee trade needs frothing up

The Vietnamese coffee industry should boost co-operation between and among producers, processors and traders to strengthen its prestige in the world market, experts say.

Speaking at a conference on coffee industry management organised by the Ministry of Agriculture and Rural Development in the Central Highlands province of Dak Lak on Wednesday, they called for the establishment of a coffee council as well as associations for coffee producers' and small-scale coffee traders.

These measures have been successfully applied in other countries and would benefit Viet Nam as well, they said.

They have helped reduce weaknesses in small-scale coffee production, the conference heard.

In addition, the council and association would facilitate the transfer of advanced technology among producers to produce and store high-quality coffee.

Tran Thi Quynh Chi, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) said that it was very necessary and important to set up these associations as they would assist farmers in protecting their rights.

They would also be able to control and manage production activities of coffee co-operatives at lower levels, she said.

Agreeing with Chi, Vu Kim Hanh, chairwoman of the Viet Nam High Quality Goods Production Enterprises'Association stressed that an organisation connecting small coffee traders would assist them in finding new markets.

Moreover, through these organisations, these traders would have opportunities to share experiences and knowledge on legal and financial issues, she said.

Coffee plantations and gardens have transformed the Tay Nguyen (Central Highlands) region in the last few decades, raising the living standards of many households.

This year, the industry targets a record export volume of 1.6 million tonnes.

Although coffee cultivation has high potential, it has not been developed in a proper way, according to conference delegates.

Most of the production in the Central Highlands has been small-scale, with 90 per cent of farms under 2ha and 90 per cent of harvested coffee processed poorly.

Most of the exported coffee from Viet Nam is raw material without trademarks, so the industry is missing out on value-added prices.

In the first half of this year, the country shipped abroad more than 1 million tonnes of coffee worth US$2.2 billion.

Viet Nam is currently the largest coffee exporter in the world.

French companies on hunt for VN business ventures

A delegation of five French companies will travel to Viet Nam next week to explore business opportunities in port infrastructure and logistics, according to the French Trade Office, Ubifrance.

The four-day trip, starting from Monday, aimed to gain a better understanding of Vietnamese policies, major projects and modalities for providers and on behalf of foreign investors, Ubifrance said.

Can Tho rice exports enjoy significant gains

The southern city of Can Tho has already fetched US$261 million from shipping rice abroad this year, up 4 per cent over the same period last year.

The city has so far shipped 615,000 tonnes thanks to a combination of strong promotion, gaining footholds in the African and Asian markets and heavy investment in the production chain to improve rice quality.-

Northern agricultural fair crops up in Lao Cai

Seeds of investment are being sown at the agricultural fair taking place in northern Lao Cai Province, which has attracted nearly 200 Vietnamese and Chinese businesses.

The five-day event, being held at the Kim Thanh Industry-Trade Zone, is showcasing the finest northern products across 360 stands. It's an excellent opportunity for northern provinces to advertise their trade potential and attract investors to agriculture, forestry, and eco-tourism ventures.

Air Mekong starts early Tet holiday ticket sell-off

Mekong Aviation JSC (Air Mekong) has announced it has started selling tickets for the forthcoming Tet (Lunar NewYear) holiday in order to meet the increasing demand for flights.

The carrier is offering flights from Ha Noi to HCM City, Da Lat; non-stop flights from Ha Noi to Con Dao and Phu Quoc; flights between HCM City and Phu Quoc, Pleiku, Quy Nhon, Con Dao, as well as flights between Buon Ma Thuot and Vinh.

See-ing is believing for Ca Mau seafood exports

As of early this month, the southernmost province of Ca Mau had exported 50,000 tonnes of processed seafood, earning an export turnover of US$560 million, according to the Ca Mau Association for Seafood Exporters and Producers.

The encouraging results could be attributed to the province's efforts to improve its management capacity and ensure adequate financial and raw material resources, as well as better food hygiene, the association said.-

Quang Ngai heads call for monthly progress reports

The People's Committee of the central coastal Quang Ngai Province has asked relevant departments and sectors to submit monthly progress reports on four key projects in the province.

The report must also include current barriers that have slowed down the implementation of these projects, which would enable the committee to draw up timely solutions, it said.

These four projects were an industrial, urban and service complex, being financed by Viet Nam-Singapore Industrial Park Joint Venture Co, the Taiwanese invested – Guang Lian Dung Quat steel factory, and My Tra-My Khe and Bau Giang – Cau Moi roads.

Taxes in Viet Nam top regional figures

While economists and enterprises complain about the increasing burden of taxes and fees, financial officials claim that they are at a regional average level.

The Viet Nam 2012 macro-economic report released by the National Assembly's Economic Committee said that State budget revenue from taxes and fees from 2007-11 accounted for 26.3 per cent of the Gross Domestic Product (GDP).

This was far higher than those recorded in other countries. The figure in China was only 17.3 per cent, Thailand and Malaysia, around 15.5 per cent, and India, 7.8 per cent.

Vietnamese taxpayers have to pay higher personal-income taxes than their counterparts in China and Thailand, although their incomes are much lower, the report, sponsored by the United Nations Development Program (UNDP) in Viet Nam, claims.

Most local businesses have to pay a fixed corporate income tariff of 25 per cent, while the duties imposed in other countries range between two and 30 per cent.

In fact, amid the downturn of the economy, the burden of taxes and fees is hitting enterprises and households harder than ever.

Nguyen Khanh Toan, chief of the Viet Nam Automobile Transport Association's Secretariat, said that transport firms were burdened with at least 13 types of taxes and fees, such as corporate income tax, environment protection tax and, road tolls.

They does not include a road maintenance fee, which is due to be introduced at the beginning of next year.

Under current regulations, the distance between two road toll stations must be 70km, but in some areas, they are only 10 to 20km apart.

The association asked the Ministry of Finance to consider cutting some kinds of tax to help transport companies and benefit consumers, but the ministry did not respond, VATA chairman Nguyen Manh Hung said.

According to the Viet Nam Association of Seafood Exporters and Processors (VASEP), seafood companies have to pay from VND5 million ($238) to VND10 million ($476) for one container to be quality-checked before exported.

VASEP general secretary Truong Dinh Hoe said this was unnecessary. Instead of checking every batch of goods, authorities could inspect on production lines, which would help reduce costs and speed operations.

However, the Ministry of Finance does not seem to agree.

In a recent government meeting, Deputy Minister Vu Thi Mai said that since 2003, Viet Nam had removed 340 types of fee, and the comparison between Viet Nam and other countries should be on the same basis.

She said tax revenues in other countries did not include collections from crude oil and land-use tax as in Viet Nam.

Besides, other countries only calculated their central budget incomes, but Viet Nam included the incomes of both central and local budgets, she added.

Therefore, Viet Nam's tax-revenue-to-GDP ratio over the past 20 years should be between 12 and 14 per cent, which could be considered "average" compared to the world, the deputy minister said.

Le Dang Doanh, former director of the Central Institute of Economic Management (CIEM), said such a high tax and fee framework proved the Government was spending too much.

"Looking at the ratio, we can assess the efficiency of the Government's works. If it spends in an inefficient way, it will harm economic growth," he said.

Pham The Anh, one of the report's authors, said sources of tax and fee collection mainly came from value-added tax, corporate income tax, import-export tax and special consumption tax imposed on imported goods.

The contribution of import-export taxes and a special consumption tax imposed on imported goods had increased from 10 per cent of total tax revenue in 2006 to 14.5 per cent in 2010.

The dependence on this source of collection would probably make the country's budget deficit more serious in coming years when tax cuts were implemented in line with WTO commitments.

Doanh said taxes and fees were the main source of the State budget collection, but increases did not always expand the State budget.

He said high levels of taxes and fees would encourage taxpayers to seek ways to evade them, causing losses to the State budget and overall price rises.

The report said price transferring enabled companies to evade tax in the foreign-invested (FDI) sector. "High duties have forced FDI businesses to transfer their profits to other countries to enjoy lower rates," the report said.

The State should study and impose optimal tariffs and fees to get the highest revenue while still encouraging enterprises to be more productive.

According to CIEM deputy director Vo Tri Thanh, corporate income tax should be reduced by 5 per cent to 20 per cent – the average level of the region – to stimulate enterprises. Besides, value-added tax should be slashed from 10 to 7 or 8 per cent.

Pham The Anh said reducing the budget deficit through raising tariffs was not a sustainable policy. The increase in State budget collection was only realised by raising tax regulation compliance and preventing smuggling.

US expertise to benefit VN aviation sector

Aviation experts from Viet Nam and the US discussed ways to strengthen co-operation in several areas including airport security and application of advanced technologies at a conference held in HCM City yesterday.

Addressing the conference, Deputy Minister of Transport Pham Quy Tieu said aviation and airport security would be a crucial task to ensure sustainable development of the sector.

The Civil Aviation Administration of Viet Nam is currently implementing a project to improve capacity in aviation security management with assistance from the US Federal Aviation Administration, the conference heard.

The co-operation was initiated by Vietnamese Ministry of Transport and the US Embassy in Viet Nam, with the first conference on the topic being held in Ha Noi in May.

Vietnamese aviation has been growing strongly in recent years. "Viet Nam's civil aviation sector has great potential for development," said Tieu.

It has eight international airports and 12 domestic airports; and the sector expects to have the capacity to deal with 50 million passengers a year soon, he added.

It has 46 airline carriers operating flights from Viet Nam to many countries and territories in the world apart from 40 domestic routes.

At the conference yesterday, the Federal Aviation Administration shared with their Vietnamese counterparts information on best practices in airport security as well as the latest technological trends in airport operation and security.

The conference also discussed how the US Trade and Development Agency could assist Viet Nam in its aviation projects.

The US Consulate in HCM City, co-organiser of the conference, said the discussion would provide the foundation for stronger co-operation between the two sides.

Growth of the aviation industry could enhance economic development, said Le Thanh An, US consul general in HCM City.

The US aviation sector also co-operated with their counterparts in India and China, the conference heard.

 Asia-Pacific region eyes fisheries
 
Representatives of the Asia Pacific Fishery Commission's member countries gathered yesterday in Da Nang to discuss ways to develop regional fisheries in a sustainable manner.

Over the next two days, participants will discuss the management and governance of fisheries and aquaculture in Asia-Pacific.

"The session will focus on how to improve assessments of fisheries resources, adaptation and mitigation measures for climate change, and improving livelihoods for fishing communities," said Simon Funge Smith from the Food and Agriculture Organisation of the United Nations' regional office for Asia and the Pacific.

"We'll find a way to support coastal area fishermen in coping with climate change as well as mitigating the use of driftnets and catching small fish for foodstuff power," he said.

Smith added the session was being held to help local administrations build plans and policies on fishing grounds, coastline fishing in appropriate seasons, and illegal fishing activities.

"The session will be a chance for Viet Nam to gain experience from member countries and improve the management of fisheries and aquaculture," said Nguyen Huy Dien, a representative from the Ministry of Agriculture and Rural Development.

"There are not strong enough sanctions in place to tackle illegal fishing or appropriate policies on fishing management. We hope that the country will finalise strict policies to protect fish resources and aquaculture soon," he said.

Viet Nam has joined the top 20 countries in terms of fisheries in recent years and become the sixth largest exporter of seafood. The sector employed five million people last year.

The country's fisheries sector produced a total of 5.3 million tonnes of seafood and aquaculture last year, earning US$6.1 billion and becoming one of the country's top three export industries.

According to a report from the commission, Asia and the Pacific are the most important regions for fish production in the world. Fisheries production in Asia and the Pacific reached 48.7 million tonnes in 2010, representing over half of world production, valued at $48.3 billion. At the same time, the Asia and the Pacific region produced 53.1 million tonnes of farmed aquaculture products (excluding aquatic plants), representing 89 per cent of global aquaculture production worth some US$95.2 billion.

Deputy chairman of the Da Nang People's Committee Vo Duy Khuong said the central city, which has a 90km coastline and fishing grounds of 15,000sq.km, had a fleet of 2,300 fishing vessels.

Animal feed price hike in sight

Given rising input materials prices, animal feed prices are forecast to pick up by an average VND200 per kilo in early October and will remain high in the next 12 months.

As such, in less than three months, animal feed prices will have been raised twice. In late July, prices increased by some VND300 per kilo.

Pham Duc Binh, vice president of the Vietnam Animal Feed Association, explained outputs of soybean, corn and wheat in the U.S. and Russia had declined due to droughts. Moreover, China is boosting livestock farming, pushing up prices of feed materials.

Because of chicken and pork price drops, many livestock farmers have abandoned their farms or scaled down their herds. As a result, animal feed producers see their sales falling 20-50% year-on-year.

“A number of animal feed factories in Dong Nai have gone bust, while in the Mekong Delta, many feed production plants also face the same situation,” Binh said.

He said most of these factories ran into losses due to poor anticipation. They did not have hedge plans to buy materials when prices were still low, which have been done by the feed production companies that are still operational.

“As animal feed materials were predicted to mark up, several companies bought a large volume of corn and soybean when their prices were low, so even though sales go down, they do not incur losses,” Binh said.

According to the Ministry of Agriculture and Rural Development, locally-produced rice bran was sold at VND7,200 per kilo in August, up 7.8% against July, while mixed feed prices increased by some 2%.

* Imported wheat is currently priced at US$380 per ton, surging more than US$100 against the price in June, dealing a hard blow to local confectionery and animal feed producers.

The current price is close to the high level of US$420 per ton during the food crisis in 2008, said Nguyen Phuong Thanh, representative of Sao Xanh Co. Ltd., a wheat importer in Dong Nai.

“Wheat price is now high and volatile, so businesses have reduced imports to wait for new developments,” Thanh told the Daily.

Wheat is just an item in the basket of food commodities whose prices have been rising due to unfavorable weather conditions. Food price hikes not only impact businesses in the livestock sector, but also hit confectionery maker.

Given higher wheat price, wheat flour also marks up 30-50%. A cake producer in HCMC said his company is producing perfunctorily and closely following price fluctuations.

Wheat imports in August amounted to 205,000 tons, worth US$66 million, taking the total imports in eight months to nearly two million tons, equivalent to US$584 million, rising more than 22% in volume and 8.1% in value.

In the first eight months of 2012, Vietnam spent about US$1.48 billion importing animal feeds and their materials.

Car imports hit record low

Vietnam’s car imports have dropped to a record low in 43 months.    

Last August saw only 1,869 cars worth US$46.6 million imported, down 8.1 percent in volume and 11.2 percent in value against the previous month.

According to the General Department of Vietnam Customs, the Republic of Korea took the lead with its total sale of 636 units (worth a total of US$12.2 million), followed by Thailand (459 units), China (249 units), the US (155 units) and Indonesia (125 units).

In the first eight months of this year, car imports fell by 56.6 percent to 17,902 units and by 50 percent to US$386 million while the value of car spare parts also went down by 26 percent to US$967 million.

Nearly US$1 billion FDI invested in Hanoi

The capital city of Hanoi has attracted 231 foreign direct investment (FDI) projects, with a total capitalization of US$919 million over the past nine months.
    
Of these, 190 were newly licensed with an initial amount of US$493.5 million and 49 with an additional amount of US$506.1 million.

The Hanoi Statistics Office said most projects were of small scale and just concentrated in the service sector.

In general, the total amount of development investment in Hanoi has so far reached nearly VND146,081 billion (US$7 billion), up 12.9 percent from a year earlier, of which VND42,470 billion (US$2 billion) came from the state budget, up 11.5 percent over the same period.

French businesses eye seaport and logistical services in Vietnam

A delegation of five French businesses will visit Vietnam from September 24-27 to seek investment opportunities in the area of seaport and logistical services.
    
The delegation includes Bolloré Group, port operator and investor; Egis International, engineering consultancy for international development projects; Freyssinet, specialist in construction and structure repair; Vinci Construction Grands Projets, world leader in concessions and construction; and WFS, operator of passenger harbours.

They will travel to Hanoi, Haiphong, Ho Chi Minh City and Ba Ria-Vung Tau, and have working sessions with the Ministry of Transport and Vietnam’s major ship owners and port operators.

The mission aims to have a better understanding of Vietnam’s policies for foreign investment in seaport construction and logistical services and to develop the partnership between French and Vietnamese companies in a sustainable manner.

Sea transport is vital for import and export activities as Vietnam has its coastline stretching as long as 3,300 km.

In recent years, cargo handling through Vietnamese seaports has increased considerably, especially after the first deep-water seaport was inaugurated in southern Vietnam. Similar projects are getting off the ground soon.

US businesses seek investment opportunities in Vinh Phuc

A delegation of US officials and businesses paid a working visit to northern Vinh Phuc province on September 20 to explore investment environment in the province
    
The province’s leaders briefed the guests on local socio-economic situation, strengths and development orientations and pledged to create favorable conditions for them to invest in the fields of hi-tech industry and car manufacturing.

The US delegation headed by Sherman Katz, a Senior Advisor to the Centre for the Study of the Presidency and Congress, also made a fact-finding tour of the South Dam Vac urban area, Piaggio Vietnam limited company and Ba Thien industrial park in Vinh Phuc.

Vietnam businesses remain highly optimistic: global report

Two-thirds of businesses in Vietnam have adopted a stronger focus towards the domestic market since the global financial crisis broke out, a new report says.

The latest Grant Thornton International Business Report (IBR), which surveyed over 11,500 businesses in 40 economies around the world, including 200 Vietnamese businesses, focuses on the experience of businesses and their expectations for the next 12 months.

The report found domestic businesses are optimistic about the economy over the next 12 months, although less so than in 2010.

Business expectations for revenue remain high, at 91 percent while the Asia-Pacific business average is much lower at 53 percent.

Ninety percent of local businesses expect to increase profits in 2012, well above the Asia Pacific average of 37 percent.

The cost of finance, around 59 percent, was cited as the most pressing constraint on expansion by Vietnamese businesses this year, significantly higher than the Asia-Pacific business average of 31 percent.

A shortage of orders/reduced demand is also a significant worry for 50 percent of local businesses.

Around 19 percent of Vietnamese businesses believe that lenders are unsupportive of their business, far higher than the average across the Asia-Pacific region as a whole, only 4 percent, the report found.

It predicted that in 2013-2016, a more helpful global environment can see the country hit an average growth rate of 7.3 percent per year, assuming the government and central bank can get a handle on inflation.

Remittances from Vietnamese overseas are expected to remain robust in the medium term, boosting private consumption, the report said.

Vietnam, Japan strengthen ties in space technology

A seminar was held in Hanoi on September 20 with a focus on boosting space cooperation between Vietnam and Japan.    

Dr. Pham Anh Tuan, Director of the Vietnam National Satellite Center (VNSC) under event-host, the Vietnam Academy of Science and Technology (VAST), highlighted the beneficial cooperation between the two countries in the field of space technology, especially at the VNSC’s new headquarters in Hanoi.

He spoke highly of bilateral space cooperation, saying this will open up new opportunities for science development in both countries, particularly in high technology.

Covering nearly 9 hectares in Hoa Lac Hi-tech Park, the new research facilities are expected to be completed in 2020 at an estimated cost of US$700 million, mostly sourced from the Japanese Government.

The main functions of STI are to research the basic issues in space science and technology, research and develop small earth-observation satellites, plan and carry out independent programs on space technology and new applications for remote sensing, GIS and GPS to monitor natural resources, the environment and disaster management.

Vietnam’s banking sector needs to deal with interest groups

Bad debts are at the core of the Vietnamese banking sector’s restructuring, but the biggest difficulty facing this process will be dealing with interest groups, said a local senior economist.
 
According to Economist Dr. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management (CIEM), to date, Vietnam has not worked out a specific solution to settling bad debts. Some experts suggested that banks and businesses should tackle the problem together; however, it is a very complicated issue which needs the Government’s intervention.

Bad debts are related to many big state-owned groups, therefore, agencies which are in charge of dealing with the problem must have sufficient power and be closely supervised to avoid losses, Thanh said.

“I hope that the settlement of bad debts will start in the second half of next year,” he said at a conference on challenges for the national economy during the restructuring process.

Sharing the same opinion, Dr. Nguyen Duc Thanh, Director of Vietnam Centre for Economics and Policy Research (VEPR), said bad debts were the decisive factor in banking restructuring, but no specific model had been suggested. Meanwhile, local policymakers remain too blasé about the problem, thinking that it’s a simple matter.

Dr. Thanh also pointed out that that loose credit policies were among the causes of the country’s high bad debt ratio. Through private relationships, many companies can get bank loans or credit.

“If bad debts are not resolved, businesses will continue facing high lending interest rate from banks despite lower deposit interest rates and the national economy will fall in to a trap.” he warned.

“It will take Vietnam between three and five years to deal with the problem,” he forecasts.

Vietnamese producers struggle to stay competitive    

Intermediary costs are among reasons prices of many Vietnamese products have remained high, affecting their competitiveness, said Vu Thi Hau, Deputy Director of Fivimart supermarket chain.

“Big local producers often select first and second-tier distributors to get their products to market instead of distributing themselves. This increases the cost of the products and forces us to sell at higher prices,” she explained.

She added that advertising costs are also driving up prices, noting that it costs around VND70 million (USD3,333) for a 30-second television advertisement. She said that in some cases enormous advertising budgets have inflated the price of products to three times what they otherwise would be.

Due to these higher prices many Vietnamese producers are finding it difficult to compete with their Chinese counterparts.

Hau suggested that the Ministry of Industry and Trade prioritise advertisements for Vietnamese products by applying lower fees for Vietnamese companies while raising those for importers.

According to Vice Chairwoman and General Secretary of the Vietnam Retailers’ Association Dinh Thi My Loan, in reality the amount of Vietnamese products at supermarkets has increased, but at the big, more modern trade centres such as Vincom, Diamond Plaza or Parkson there are still very few domestically made goods.

Big supermarkets and trade centres often require stricter standards for products, particularly for food. Many Vietnamese producers find it difficult to meet these standards, she said.

“If Vietnamese producers are not able to make better designed products for lower prices, they just won't be able to compete, no matter what type of promotions or discounts they offer," she added.

She pointed out that Vietnam population of roughly 90 million, 70 million of whom could be considered consumers. If 20% of the consumers spent VND100 thousand (USD4.76) each on Vietnamese products every month, Vietnamese companies earn VND1.4 trillion (USD66.6 million).

Le Viet Nga, Deputy Head of the Ministry of Industry and Trade's Domestic Market Department, said up to 80% of Vietnamese products have improved their designs, but not enough to keep up with imports. Also, the quality of fruit and other food found in supermarkets leaves room for improvement, Nga added.

O Mon 1 Power plant kicks-off unit 2

The construction of O Mon Power Plant’s unit 2 started last week in Mekong Delta’s Can Tho city.

O Mon 1 Thermal Power Plant, comprising two units, is one among nine power plants financed by Japan International Cooperation Agency.

Following the successful completion of unit 1 of the power plant in 2009, the construction of unit 2, funded by the ODA Loan amounting to JPY 27,547 million started.

Located in Can Tho city, an economic centre of Mekong Delta, O Mon 1 Power Plant plays an important role in ensuring the stable power supply to the current 62 industrial parks as well as other socio-economic activities in this third largest industrial center of Vietnam.

Under this project, one unit of 330 megawatt oil and gas fired O Mon Thermal Power Plant will be constructed by the Consortium of Sojitz Corporation (Japan) and Daelim Industrial Co., Ltd. (Korea) under the supervision of Japanese Consultant Tokyo Electric Power Service Company.

It is expected that after its completion in 2015, the capacity of O Mon 1 will increase twice to 660MW to promptly respond to the power shortage in the region.

At the ground-breaking ceremony, Yukio Ishida of JICA liaison office in Ho Chi Minh City, believed that upon completion, O Mon 1 Thermal Power Plant would help to improve the power supply in the Mekong Delta region and Vietnam.

The power sector holds an important position in JICA’s overall assistance to Vietnam. So far, the total loan amount provided by JICA has reached JPY454 billion financing the power plants with total capacity of 4,400MW.
 
Corolla Fukushima to invest in Danang

Corolla Fukushima company of the Ishida Taiseisha Inc plans to seek an investment opportunity in the central city of Danang, president of Corolla Fukushima Ryoya Sato has said.

Danang People’s Committee Vice-chairman Nguyen Ngoc Tuan and representatives of the Corolla Fukushima and Dentsu Media Vietnam companies

The company, which operates in car making, real estate and tourism, paid a visit to the city on September 18.

It sought the possibility of building a car making plant in the city since its plant in Fukushima has yet to recover from the 9.0 earthquake and subsequent tsunami last March.

Loss making firms to face delisting

Listed enterprises having incurred losses in three years in a row will be forced to delist stocks so that the quality of the local stock exchanges can be maintained, said Vu Bang, chairman of the State Securities Commission (SSC).

This year, some 15 enterprises have been forced to delist from the two local exchanges with over a half leaving the playground due to losses. Some enterprises applied for delisting due to private reasons while others infringed rules on information proclamation.

Bang said the quality of products on the stock market will be influenced if ailing companies are still allowed to continue trading.

Currently, there are several companies having losses exceeding equity or having posted up losses in three consecutive years. They will face delisting orders from the stock watchdog.

“If enterprises incur losses in several years but are afraid that delisting will influence investors’ interests, they can apply to list on the UPCoM, the market for unlisted public companies,” Bang added.

Under the Decree 58/2012/ND-CP, enterprises having demand to list from September 15 must have at least two years operating as joint stock companies by the time they ask for permission to list. They must have a return on equity (ROE) ratio of at least 5% in the latest year and have been profitable in the two proceeding years.

Hochiminh Stock Exchange requires applicants to have minimum charter capital of VND120 billion while the minimum chartered capital of listed firms on the Hanoi Stock Exchange is VND30 billion.

However, SSC recently has approved listing of Spilit Stone Company and VNECO4 Electricity Construction Company, which are capitalized at only VND25 billion and VND10.2 billion respectively, on the northern bourse.

South Korean firms eye wind power in Vietnam

Some South Korean renewable energy firms are exploring wind power potentials and investment regulations in Vietnam to introduce their wind power technologies into this potential market, according to Korea Electric Power Corporation (Kepco).

Won Young-jin from Kepco told the Daily on Wednesday that there were 20 South Korean enterprises attending the international exhibition on electrical technologies Elenex Vietnam 2012 in HCMC’s District 7. Among these firms, five enterprises specializing in renewable energy want to introduce technologies and seek Vietnamese partners to deploy renewable energy projects, especially wind power, he said.

“Kepco is currently cooperating with China and the U.S. to carry out wind power projects. We are willing to develop wind power projects in Vietnam’s coastal provinces in the coming time,” said Won.

In addition to wind power, Kepco is also in talks with Vietnam on construction of a nuclear power project.

Kepco won an EPCM (engineering, procurement, construction and management) package of a huge nuclear power project in the United Arab Emirates in late 2009. Seeing potentials for renewable energy in Vietnam, Kepco really wants to share the nuclear power technology with Vietnamese power companies, according to Won.

Elenex Vietnam 2012 opened on Wednesday in HCMC with the participation of 200 enterprises from 22 countries and territories. The three-day expo also includes conferences on voltage inverters, energy management and power transmission and distribution.