BUSINESS IN BRIEF 2/4
Local gold price drops to six-week low on global fall
Local gold yesterday fell by 0.3 per cent to reach a six-week low of VND35.38 million (US$1,676) per tael, which was driven by a further drop in global gold prices.
In March, local gold bullion lost 3 per cent or over VND1 million ($47.6) per tael. One tael is equivalent to 1.2 ounces.
In the North, DOJI traded SJC bullions, the state brand and the most prestigious gold brand in the local market, were traded at VND35.38 million (buying) and VND35.43 million (selling), down VND130,000 per tael against Monday's trading. In the South, the prices were VND35.38/35.4 million per tael.
Trading volume and interest margins were getting narrower.
World gold yesterday fell below US$1,280 per ounce and nearly hit a seven-week low as investors chose to pull their money out of bullion backed exchange-traded funds in favour of riskier assets, such as equities.
Gold expert Nguyen Tri Hieu earlier forecast that in the mid-long term this year, local gold will continue to follow a downward trend in line with world gold.
Last year marked the end of a 12-year bullish run of Viet Nam's gold, which plunged 24 per cent year-on-year towards the year end. World gold last year lost 28 per cent.
In another attempt to manage the gold market and prevent smuggling, the State of Viet Nam on Monday ruled that Vietnamese and foreign individuals would be banned from carrying gold bars and gold raw materials when leaving or entering Viet Nam from May 15.
However, the central bank allows the carrying of gold jewellery and fine art made of gold provided the total weight of these objects is not more than 300 grams (10.5 oz). In case travellers bring more than the permitted amount, they must declare it to customs officials.
Tyre exports to Brazil encounter difficulty
Vietnamese tyre exports to Brazil are facing an anti-dumping duty of US$0.59-2.8 per kilo which has posed numerous challenges to the local tyre production sector.
According to the Ministry of Industry and Trade (MoIT)’s Vietnam Competition Authority (VCA), Brazil's Ministry of Development, Industry and Foreign Trade has announced its final decision on an anti-dumping duty imposed on bicycle tyres imported from China, India and Vietnam.
Under the latest decision, tyres exported by Kenda Rubber (Vietnam) Company Ltd have to pay an anti-dumping duty of US$0.59 per kilo, while products of Link Fortune Tyre Tube Company Ltd along with other Vietnamese tyre exporters are subject to a rate of US$2.8 per kilo.
Brazil launched an anti-dumping investigation into imports of bicycle tyres from Vietnam following a request by the Brazilian enterprise Industrial Levorin SA in September 2012.
The product subject to the investigation was classified as item HS: 4011.50.00. This was Brazil’s third investigation on Vietnamese exports in 2012, after rolled steel and automobile tyres.
Brazilian tyre producers claimed that Brazil’s tyre export growth went up dramatically and made a strong negative impact on their production.
Imported Vietnamese tyres accounted for more than 18.5% of the total market in 2011.
The VCA had earlier warned over the risk of anti-dumping lawsuit in Brazil as Vietnam became the second largest exporter of tyres to the South American market in 2011, second only to China, with total revenue of US$3.8 million, or a year-on-year increase of 34%.
At present, the market economy status of both Vietnam and China has not yet been recognized by Brazil.
Recent statistics showed that the average price of tyres imported from India and China hovered around US$3.5/kg and US$1.81/kg, respectively, while those imported from Vietnam was sold at US$2.86/kg in Brazil.
The anti-dumping tax levied on Vietnamese tyres is lower than similar tyres from India and China.
According to the Vietnam Rubber Association, 830 businesses are operating in the industry with major producers- the Saovang Joint-stock Rubber Company (SRC), the Danang Rubber Joint Stock Company (DRC), and the Southern Rubber Industry JSC company (CSM).
Vietnam is considered a lucrative market for tyre exports which has attracted world-renowned producers such as Bridgestone, Michelin, Kimho, Yokohama and Kenda.
Previously, the industry had primarily served domestic consumption, but since 2010 it has enjoyed strong growth and helped Vietnam secure a firm foothold in the overseas marketplace.
So far, Vietnamese tyres have been exported to 137 markets in which Brazil has seen a rising trade turnover with Vietnam in recent years.
Recently, Brazil has applied many preventive measures against imported products that may harm its domestic production.
In addition to the anti-dumping duty on Vietnamese bicycle tyres, Brazil is also conducting another investigation on imported motor tyres.
New PPP law improves quality of public service
Maintaining the balance between public ownership and outright privatization for Public-Private Partnerships (PPP) is the key to delivering quality public services, said ADB Country Director for Vietnam, Tomoyuki Kimura.
Kimura made the remarks at the launch of the Asian Development Outlook 2014 economic publication in Hanoi on April 1, which parallels the main launch of ADB’s flagship publication in Hong Kong, China.
He suggested that Vietnam strengthen its legal framework to encourage more private investment in developing public infrastructure, making the cost of constructing it more affordable and in turn reducing the fees charged for services, especially benefiting the poor.
A longer-term challenge is improving the quality of infrastructure in Vietnam, he emphasised, adding that attracting private investment through the PPP model has many advantages to this end.
It contributes to funding infrastructure projects, gaining access to international expertise as well as access to advanced modernised technology that improves the quality of the physical infrastructure in addition to the quality of services, he said.
Asian Development Outlook 2014 forecasts Vietnam’s GDP growth to rise slightly to 5.6% in 2014, picking up further to 5.8% in 2015.
Inflation is projected to average 6.2% in 2014, assuming reasonably stable food production, moderate policy stimulation, and only slight depreciation of the dong. Inflation is forecast to average 6.6% in 2015 as economic activity picks up.
It advocates financial sector reforms be undertaken including stepped up efforts by State Bank of Vietnam to supervise bank lending, merger and restructuring of some weaker banks, and eased restrictions on foreign investment in domestic banks.
It also acknowledges initiatives regarding the new loan classification and provision standards intended to close the gap with international norms that will come into effect in June 2014 are a positive step for the economy.
Asian Development Outlook 2014 is a flagship publication, which provides assessment of recent economic developments in Asia and the Pacific and medium-term macroeconomic projections for the region.
Conference: ways to better utilise large-scale rice fields
The Ministry of Agriculture and Rural Development has held a conference to gather opinions on the development of large-scale rice fields and links between agricultural production and distribution.
At the event, organised on March 31 in the Mekong Delta province of Dong Thap, representatives of many rice hub provinces like Kien Giang, An Giang, Long An, Dong Thap and Tien Giang proposed that large-scale paddy fields should be suitable to each region and locality, not limited to 300-500 hectares as previously defined.
It is necessary to consider areas that see high rice productivity and quality rice in each locality during the building of large-scale paddy fields, while focusing on increasing the signing of trade agreements between farmers and businesses to shape a competitive rice value chain, they said.
Meanwhile, Deputy Minister of Agriculture and Rural Development Tran Thanh Nam said sales of rice harvested in large-scale paddy fields should be directly agreed by farmers and enterprises, and authorised agencies should help them with the formalities.
For the 2013-2014 winter-spring crop, as many as 65 out of 97 local businesses in Mekong Delta localities have joined the large-scale rice fields and connectivity model with a total area of more than 54,000 hectares and a total output of 356,000 tonnes.
Industrial production up 4.7% in March
Vietnam’s Index of Industrial Production (IIP) in March increased by 4.7% against the same month last year.
According to the General Statistics Office, in the first three months of 2014, the IIP has recorded a year-on-year rise of 5.2%, higher than the rate of 5% in the corresponding period of 2013.
Several industries have seen high growth in the reviewed period, such as textile (20.2%), leather and leather products (19.4%) and ready-made clothes (14%).
The northern port city of Haiphong and the central city of Danang are among the localities seeing the highest IIP increase rates, with 11.3% and 10.5% respectively.
They are followed by Quang Nam province (8.9%), Dong Nai province (7.1%) and Binh Duong province (6.5%).
Meanwhile, decline in industrial production has been seen in Quang Ninh province (3.5%) and Ba Ria-Vung Tau province (1.7%).
HCM City announces GDP growth target of 10%
The country's largest economic hub, HCM City should work harder during the rest months of this year to complete the whole-year GDP growth target of 9.5 to 10 per cent, though the economy has recently proved positive signal.
The city's leaders have placed the target to achieve a GDP growth of 9.5-10 per cent in 2014, 1.5 times higher than the national rate.
During a meeting yesterday to review economic situation of the first quarter, Le Hoang Quan, head of HCM City's People's Committee, commented that the city's economy has been stabilised with GDP growth recorded at 7.7 percent, 1.5 times higher than the national rate.
The consumer price index (CPI) of this month reduce 0.46 percent, the lowest rate in ten years, Quan said, adding that the city tries to suppport the country's target to control inflation rate below six percent.
With recovered economy, the city's State budget income in the first quarter this year is reported at VND60.498 trillion, an increase of 16.7 percent in compared with the same period last year.
"In the first quarter of 2013, city's State budget income was roughly VND53 trillion. The recovered economy leads the increase of State budget income in the city," he said.
However, Quan also warned about the heavy tasks during the rest quarters of this year.
In order to get the GDP development rate of last year at 9.3 percent, the city should achieve GDP growth rate in second quarter at more than 8.1 percent, third quarter, 10.3 percent and the last quarter 10.7 percent.
"This year's GDP growth targeted between 9.5 and 10 percent, so GDP growth rate of the second quarter should be over 9.7 percent. In order to achieve the target, the whole city has to work hard during the the rest nine months," he said.
To achieve that, it is important to accelerate the implementation of a programme to support economic restructuring, improve the business environment, raise the enterprises' competitiveness, according to the chairman.
According to Vo Si, deputy director of HCM City's department of Planning and Investment, 5,194 domestic enterprises were granted investment licenses in the city during the first three months.
Also in the same period of time, 75 foreign direct invested enterprises were authourised in the city, with registered capital of US$690 million, an increase of 11.6 times against the same period last year, Si added.
Despite of the growth of GDP and higher number of new enterprise, the volume of both import and export was reported as reduce in the first quarter. The export value reached $6.3 billion, a reduction of seven percent in compared with the same period last year, according to the department.
Si explained that the export fall of industrial product and crude oil has contributed to the drop of overall export value. Recently, instead of exporting, crude oil has been transferred for being refined in domestic.
The city's chairman requested relevant authourities to conduct a comprehensive evaluation on the export situation in the city for better solutions in the up-coming times.
Meanwhile, the import value during the first quarter reached US$5.4 billion, a reduction of six percent in compared with the same period last year. Most of the imported products are computers, electronic products, milk and products from diary.
With brighter world economy, it's possible for the city to reach the GDP growth target at 9.5 to 10 percent placed by the city's Party Committee, Vo Van Luan, Chief Office of HCM City's People's Committee told local media during a press briefing after the meeting.
However, the biggest challenges for the city to realise the target were the market and capital sources, Luan said.
Related to the development of Thu Thiem New Urban Area, land clearance has been done at 90 per cent. The city is revoke the rest part of land in the area. According to the city, during the first quarter this year, the city has revoked 11 plots of land with total area of 1,300 square metres.
Soursop farming sweetens lives
Over the last several years, many farmers in Tien Giang Province who once grew rice have escaped poverty by switching to soursop cultivation.
Dao Van Dong in the province's Tan Phu Dong District, for example, earned VND75 million (US$3,500) from selling 10 tonnes of soursop in the last harvest.
Dong, who has a 0.5ha soursop orchard in Tan Ninh Hamlet, said his family was no longer poor. The family once raised pigs and grew rice but had earned a low income.
"At that time, my children had to go to other places to work as hired employees," he said.
Similarly, Bui Trung Tin in Tan Phu Commune said he had been earning a yearly income of more than VND100million ($4,700) from his 0.5ha of soursop orchards.
Five years ago, Tinh began intercropping soursop trees on vacant mounds of his paddy field. When his soursop trees begun to bear fruit after three years of planting, he stopped growing rice.
The district is plagued with saline intrusion and acidic soil, and only a few kinds of trees, such as soursop, can grow in the soil.
Located between the mouths of Cua Tieu and Cuu Dai rivers in the Cuu Long (Mekong) Delta, the district now has 540ha of soursop trees.
Nguyen Van Hai, head of the Tan Phu Dong Agriculture and Rural Development Bureau, said more than 400ha of the district's 540ha of soursop have borne fruit, mostly in Tan Thoi, Tan Phu and Phu Thanh communes.
Nguyen Van Thuong, deputy head of the Tan Phu Commune Farmers Association, said soursop, which has a high nutritious value, had been in demand in recent years.
In Tan Phu Commune, which has the largest soursop cultivation area in the district, nearly 600 households grow a total of about 300ha of soursop.
Tan Phu has a soursop co-operative of 50 members and 30ha of soursop under cultivation. The co-operative guarantees buyers for its members.
Local agricultural officials have taught farmers new techniques, including how to grow trees that bear off-season fruits.
Soursop has two peak seasons a year, at the beginning of the rainy season and before Tet (Lunar New Year).
The price of soursop is stable and farmers can earn a profit of VND150 million per ha a year, local officials said.
Hai said the district was implementing a sustainability plan using Vietnamese Good Agriculture Practices (VietGAP).
Mass clam deaths leave farmers in debt
The death of 60 million snout otter clams the key aquaculture product of northern Quang Ninh Province's Van Don District, has devastated the clam farming community.
Caused by the Perkinsus parasite, for which there is no known cure, the massive deaths left hundreds of households facing financial difficulties, said Nguyen Quang Ninh, deputy head of the district's Department of Agriculture and Rural Development. The disease cost 700 households and 20 enterprises more than VND200 billion (US$9.4 million). Many farmers were forced to sell their clam cages –and even homes – to pay off their debts.
Farming of snout otter clams in the district started in 2003. After seven years, the tempting profits from the business raised farming households from 10 to 700.
La Thi Loan, owner of a waste collection business in the district's Cai Rong Township, said her shop had purchased tens of tonnes of cages from local farmers since early last year. More cages were transported to her shop every day, as well as the other two waste collection businesses in the township.
Nguyen Van Tot has worked on aquaculture in the district for years. The director of Van Hoa JSC said tens of thousands of cages were abandoned underwater as the money earned from selling the clams was not enough to pay workers to fish them from the sea.
Nguyen Van Thin, chairman of the Van Don snout otter clam production association, said the clams were once extremely profitable. Farmers had to purchase breeds from different sources, including China, and a district-wide project to build a trademark for the clams and train farmers on career development was approved.
Currently, in the district, only 3,000 hectares of water surface were used to raise the clams, a reduction of 30 per cent compared to the same period of last year. This number was likely to continue declining, he said.
According to Ninh of the district's agriculture department, the provincial authority has agreed to give financial support to affected households, but none has yet received the money.
He said the authority would provide VND200 per breed to those who lost more than 70 per cent of their crops and VND100 per breed to those who lost between 30 and 70 per cent of their crops. However, households must show bills and other necessary papers to receive this support, and many farmers purchase breeds without clear origin, he said.
Viet Nam focuses on managing nano-safety
Viet Nam has taken its first steps towards nano-safety management – a concept still novel but essential, a senior official said at a workshop yesterday.
Experts at the workshop said that initial steps being taken include raising public awareness of nanomaterial risks to human health and environment and formulating a national programme on nano technology development.
Nanotechnology can be widely used in many areas including chemicals, cosmetics, energy, electronics, engineering, food and medicine, they said. However, while it can have beneficial applications in all these areas, it can also have unintended effects that can adversely impact the environment, both within the human body and within the natural ecosystem, they added.
Hoang Duong Tung, deputy director of the Viet Nam Environment Administration (VEA), said nanotechnology was already being applied in many fields in Viet Nam, therefore, focusing on nano safety management was important task.
Nguyen Anh Tuan, from the VEA's Pollution Control Department named several risks that nanomaterials could exert on human health and environment.
He said a nano particle could invade water and soil resources when products using nanotechnology were being transported or used, and this can have unforeseen impacts.
A nano particle can cause DNA damage among human beings as also stunt plant growth, he said.
Nguyen Xuan Phuc, former chairman of Viet Nam Academy of Science and Technology's Institute of Materials Science, said two steps have to be taken to raise public awareness of nano risks to human health and environment.
First, children should, step-by step, be educated on nano-related concepts at schools. Second, mass media have to strengthen dissemination of accurate information, he said.
Families move to avoid floods
More than 800 households living in and around vulnerable areas in the northern province of Yen Bai will be relocated before the flood season, local authorities say.
The season typically occurs from May to December.
Nearly 1,400 local households had been moved to new resettlement areas from 2006 to late last year, Deputy Director Mai Mong Tuan of the provincial Agricultural and Rural Development Department told Viet Nam News.
"Residents have better lives in the new resettlement areas, including those in Luc Yen District's Muong Lai Commune and Van Chan District's Suoi Bu Commune.
"The new zones meet most of the specified criteria on building new rural areas, such as having standard water supply and sewer systems," Tuan said.
The government has supported relocating households with VND10 million (US$476) in cash and 220-350 sq m of land to build homes in the new resettlement areas.
However, local authorities faced many difficulties in mobilising local households to move, Tuan admitted.
"Several households have refused to relocate as the new resettlement areas are far away from their fields and not convenient for cultivation. Moreover, the area of 220-350 square metres is not big enough for them to breed livestock," he said.
Local authorities also lacked money to extend land area in the resettlement areas and to invest in helping residents change their professions, he noted.
Tuan said they would continue to inform and persuade local residents of landslide-threatened areas to move. If necessary, they would be forced to do so to ensure the safety of lives and property, he added.
Power sector needs recharge
Experts called for improving competitiveness to develop the country's power market at a seminar organised last week in Ha Noi by the Viet Nam Energy Association.
While the power generation market is fairly competitive, State-owned Electricity of Viet Nam remains the sole distributor, and demanded a rise in prices to offset rising costs.
The association's chairman, Tran Viet Ngai, accepted the need to increase electricity prices but said it should be based on market forces and that the Government should amend the laws and eliminate the monopoly in the sector.
"If the market is determined top-down like now, it cannot operate healthily," he said.
Other experts said that only when consumers are able to choose the seller would there be a truly competitive market.
A plan drafted by the Ministry of Industry and Trade envisages Viet Nam having a competitive retail power market after 2023.
"We began to create a competitive system for the power market since 2005 but it will be finished only in 2023," said Nguyen Minh Due from Ha Noi Polytechnique University.
"It is too long a period and will have a bad impact since a monopoly still exists and causes great losses to the electricity sector and the economy."
Ngai said that after 10 years of having a competitive power generation market, the country is no closer to meeting the requirements of true competitiveness, namely effectiveness, fairness, and healthy competition.
EVN remains the largest power producer.
Ngai pointed out that while Article 19 of the Power Law stipulates the setting up of an independent electricity regulatory agency, nothing has been done about it yet.
Many delegates said the Government should create a power ministry to help develop with a master plan, development, policy making, and restructuring and equitising the industry.
Duong Quang Thanh, deputy general director of EVN, protested about the fact that the competitiveness policy is only applicable to the power generation market and not to inputs like coal and gas, whose prices are not based on market demand.
Dinh The Phuc deputy head of the Ministry of Industry and Trade's Power Regulation Department, agreed, saying that coal prices for thermal electricity plants had been increased sharply, causing the cost of power production to rise from VND846 per kWh to VND1,168 in the last two years.
Thailand, Viet Nam target $15b in trade
With the ASEAN Economic Community just around the corner, Thailand and Viet Nam can further expand their collaboration and maximise the potential for bilateral trade, Thai officials have said.
Speaking at a conference in HCM City on Thursday, Panpimon Suwannapongse, the Thai Consul General in HCM City, said: "Despite the challenging circumstances during the past few years due to international economic crisis, the economic ties between Viet Nam and Thailand have been robust."
Bilateral trade revenue reached US$9.4 billion last year, a year-on-year increase of 3.6 per cent.
"I am happy to note that in 2013 Thailand was Viet Nam's biggest trade partner in ASEAN," she said.
Regarding investment, Thailand is the ASEAN'S 10th largest investor in Viet Nam with more than 300 projects in operation in the country, she added.
Meanwhile, Vietnamese investors have invested in many projects in Thailand.
Thailand's major products exported to Viet Nam are plastics, petrol, chemicals, automobiles, steel and machines, while Viet Nam exports to Thailand household appliances, steel products, electronics, motorcycles, equipment and frozen seafood.
The two countries have set a target to raise bilateral trade to $15 billion by 2020, she said, adding that, besides boosting investment and trade ties, "one area that Thailand and Viet Nam should not overlook is the exhibition industry in which business sectors of both countries possess vast potential".
Jaruwan Suwannasat of the Thailand Convention and Exhibition Bureau (TCEB) said more and more Vietnamese businesses had come to visit trade shows in Thailand to seek business opportunities.
Besides focusing on raising the quality of trade shows to attract more foreign visitors, including Viet Nam, TCEB will implement programmes to support visitors, she said.
About 3,488 Vietnamese visitors visited exhibitions in Thailand last year, ranking second in terms of foreign visitors visiting trade shows and exhibitions in Thailand, according to TCEB.
VN must accelerate ODA disbursement
More than US$20.9 billion of Official Development Assistance (ODA) has not yet been disbursed, according to statistics released at a conference held on Saturday by the National Steering Committee for ODA and Preferential Loans.
The meeting was chaired by Deputy Prime Minister Hoang Trung Hai, who is also head of the committee. According to the committee, around $8 billion of the funding must be disbursed for projects and programmes scheduled for completion in 2014.
According to the online newspaper VnExpress, the total amount of ODA disbursed in 2013 reached US$5.14 billion, 23 per cent higher than the previous year.
However, many obstacles continue to affect the disbursement of ODA, including important policy differences on compensation, land clearance and resettlement between Viet Nam and its network of donors.
Other difficulties include changes in zoning at the local level and a lack of counter capital due to limited state and provincial budgets.
In light of delays in ODA disbursement, Deputy PM Hai instructed all agencies and ministries to reassess projects that were not meeting specific deadlines.
Deputy Minister of Planning and Invesment Nguyen Chi Dung added to the call, saying ODA management and policies needed to be amended, while legal documents related to construction, investment, bidding and public investment needed to be revised with important additions.
Work is also needed to review the implementation of ODA projects and tackle the shortcomings of complex projects, he said, adding that extra support was needed to help project owners overcome difficulties.
The Ministry of Planning and Investment also called for oversight to ensure technical standards were being met and projects with subcontractors not meeting requirements were being put on hold.
Dung also called for increased co-ordination between the Committee and the six development banks (Asia Development Bank, World Bank, JICA, Korea Eximbank, KfW-Germany and AFD-France), with a meeting every three months to review the progress of ODA-funded projects and identify those falling behind schedule.
Deputy Minister of Transport Nguyen Ngoc Dong said the biggest obstacle had been land clearance. Because of this reason, the Ministry of Transport had not been able to implement 39 projects with a total investment fund of $17.7 billion, with $15.6 billion coming from ODA.
Japan has disbursed the most assistance with $1.7 billion, followed by the World Bank with $1.35 billion and the ADB with $1.3 billion
The conference was held as Viet Nam's officials continue to investigate the possible misuse of Japanese government aid, reported first by Japanese media. According to the report, Japan Transportation Consultants admitted to paying around $780,000 to win a $41 million railway project in Viet Nam.
New electricity grid ensures stable supply
The 500kV electricity grid from Pleiku – My Phuoc – Cau Bong is expected to be operational by the end of April, providing a stable electricity supply for southern provinces.
More than 400 workers and engineers of the No 1 Electricity Construction Joint Stock company are finishing the final work on the grid located in Ben Cat District, Binh Duong Province.
"We have built 69 km of the grid in the southern provinces of Binh Phuoc and Binh Duong through challenging terrain in mountainous areas. We have had difficulties in ground clearance and all our human resources have been mobilised to work through noon until sunset," Dang Van Nghia, deputy general director of the company, told the Sai Gon Giai Phong (Liberated Sai Gon) newspaper.
The 427km project, starting from Pleiku in the Central Highlands province of Gia Lai to HCM City, runs through 21 districts of six provinces with 926 pillars. About 5,000 households had to move out of the district.
The project was carried out by the Viet Nam Electricity Corporation's National Power Transmission company and managed by the Central Power Construction Management Unit.
"Currently, 95 per cent of work has been completed. The final ground clearance will be done on April 10 to make sure everything is finished on April 30," Nguyen Van Tuan of the management unit said.
In Cu Chi District in HCM City, 700 households had to move for the project and only 40 of them remain.
"At present, Cu Chi district has 43 projects that require ground clearance. The 500 kV is one of the most important three national projects. We will meet directly and try to solve and explain everything for those who have to move," said Le Minh Tan, chairman of the Cu Chi People's Committee.
According to figures, southern provinces will save at least VND1.2 trillion (US$56 million) on oil to run thermoelectric supply with a capacity of 400 million kWh.
Foreign retailers seek looser rules
Foreign business associations have urged the Government to loosen and make more transparent the economic needs test (ENT) that foreign retailers have to pass to establish their second and subsequent outlets.
With a population of nearly 90 million, rapid economic growth, and a youthful population eager to keep up with the latest trends, Viet Nam is a potential gold mine for retailers, Hong Sun, secretary general of the Korea Chamber of Business in Viet Nam, told a consultation and dialogue held with businesses on ENT criteria in HCM City last Friday.
"But foreign distribution companies have not been able to fully penetrate the market due to the ENT process – an effective tool the Viet Nam Government has used to control the development of foreign distribution networks in Viet Nam," he said.
During the ENT process, the licensing authority examines the suitability of the retail outlet in an area based on factors like population density, number of existing retail outlets there, market stability, and local zoning plans.
"With ENT, the licensing authorities in Viet Nam have been able to disallow foreign distributors from opening a second and subsequent distribution outlets if they conclude that the new outlets are not necessary," Hong said.
But the Ministry of Industry and Trade last year issued a circular to relax conditions, allowing an ENT exemption for foreign retailers establishing an outlet of 500 sq.m or less in an approved area with complete infrastructure.
Csaba Bundik, executive director of EuroCham Viet Nam, said Viet Nam opened its distribution market to 100 per cent foreign ownership as part of its WTO commitments, but the ENT criteria causes difficulties for foreign retailers seeking to expand their networks.
The ENT is vaguely defined and there is no nation-wide implementing legislation to clarify the ENT criteria, resulting in unpredictable, discretionary, and varied interpretation by different local authorities, he said.
He called for a clear definition and criteria for ENT, adding that the Ministry of Industry and Trade and other relevant ministries need to provide clear guidance for investors and licensing agencies and to ensure that the criteria are applied consistently by local authorities.
Vo Van Quyen, director general of the Domestic Market Department, said: "Because of the very poor starting point for its retail sector, the country obtained a very important agreement from WTO members on the application of the ENT in relation to establishment of a retail sale point which is not the first one."
Distribution is a highly regulated sector for foreign investors, and this was the premise based on which the country opened its doors to them, he explained.
Authorities collected feedback from involved parties like foreign direct investment retailers and regulating organisations to draft ENT regulations to ensure transparency, he said.
But the implementation of the regulations is inconsistent, he admitted.
He promised that efforts would be made to improve the situation and smoothen things for foreign retailers.
Dinh Thi My Loan, chairwoman of the Viet Nam Retailers Association, said: "In reality, Viet Nam opened its market earlier than committed with the WTO.
"The ENT is not at all a barrier for foreign investors to enter Viet Nam's retail market," she said adding that the changed regulations make it easier for foreign retailers to open small outlets.
The more than 700 supermarket and megamarket outlets and over 100 shopping malls in the country only account for 25 per cent of the distribution in Viet Nam, meaning there is plenty of opportunity left for foreign investors, she said.
Hong Sun said: "A more wide open market will attract more foreign investors to the distribution sector in Viet Nam. At the same time, domestic companies need not worry since they have better access to traditional distribution channels and have a better understanding of domestic consumers."
But foreign investors are not willing to make a substantial investment to open one retail outlet without some level of confidence that they would be permitted to open additional outlets in the future, he said.
Number of firms set up surges in March
The number of firms established in March and their total capital almost doubled from the previous month, according to figures from the Department of Planning and Investment.
There were 7,487 new companies who invested a total of more than VND35 trillion (US$1.66 billion).
In the first quarter as a whole the number of firms that were incorporated and the number that closed down were comparable, though the former increased by 16.9 per cent year-on-year, almost twice the latter figure.
But in Cuu Long (Mekong) Delta provinces, the number of firms that closed down was up 26.1 per cent while the number of start-ups rose by just 2.5 per cent.
Le Xuan Nghia, director of the Business Development Institute, the figures reflect the churning going on in the economy. Sectors like services, processing, and manufacturing are attracting plenty of investment while construction and financial and insurance services have declined, Tien phong newspaper quoted him as saying.
He predicted this process would continue.
Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry, said many local firms have become mature and begun to focus on long-term effectiveness and are pulling out of unstable sectors.
Le Duy Binh, director of the Ha Noi-based Economica Company, alluding to the continuing rise in the number of firms being dissolved, said many small firms like his own have little access to government incentives.
Binh recommended the government increase Consumer Price Index (CPI) to improve purchasing power. The Government should also ensure social security by reducing value-added tax, and improving social insurance.
Phan Duc Hieu of the Central Institute for Economic Management (CIEM) said all related agencies should work closely together to assist businesses.
"To help enterprises overcome challenges, incentives should be more specific and consistent," he said.
HCM City imports, exports tumble in first quarter
HCM City's imports and exports fell by 6 per cent and 7 per cent year-on-year in the first quarter mostly because of lower prices, a socio-economic review meeting last week heard.
Its exports were down to US$6.33 billion, Vo Si, deputy director of the city's Department of Planning and Investment, said, attributing it to a fall of 12.8 per cent in crude oil exports and of 11.3 per cent in industrial products like apparel, computers, and electronics and components, gemstones, and precious metals.
He said the increase in local demand for crude oil for refining has led to a decrease in exports in recent years.
Exports of gold and gemstone are also in a downtrend since they are now under Government control, he said.
The rising trend among foreign companies to shift from production to retailing and distribution also caused exports to slide, he added.
Tran Anh Tuan, chief of general research at the HCM City Institute for Development Studies, said exports of computers and electronic components had fallen due to their low competiveness in international markets since they are made locally under outsourcing contracts with foreign companies.
Imports fell to $5.4 billion, with those of key products like computers and electronics plunging by 16 per cent, dairy products by 15.5 per cent, steel by 12.4 per cent and others like apparel, fibre, and pharmaceuticals by smaller rates.
Steelmaker sales could notch new $1b record
Hoa Phat Group (HPG), Viet Nam's second largest steelmaker, has estimated its turnover could exceed US$1 billion for the first time in 2014, allowing it to pay a shareholder dividend of up to 30 per cent.
The information was released by the group's chairman, Tran Dinh Long, at its annual shareholders' meeting yesterday in Ha Noi.
Long said first-quarter revenue had reached VND6 trillion ($284.4 million) with a profit of VND800 billion ($37.9 million).
"Based on these positive results, HPG is confident that it can hit its business targets this year," Long said.
Hoa Phat Group is among the few companies that performed well last year, despite the economic slowdown.
The group reported a total revenue of VND19.2 trillion ($910 million) and a net consolidated profit of VND2.01 trillion ($95.3 million) in 2013, exceeding its yearly targets by 4 per cent and 68 per cent, respectively.
Steel production continued to play the leading role, contributing 78.7 per cent of total revenue and nearly 83 per cent of the group's profits, thanks to the Hoa Phat Integrated Steel Complex which was put into operation in October last year.
In 2013, its construction steel output reached 727,000 tonnes, an increase of 17 per cent compared to 2012, while sales grew 699,000 tonnes, up 14 per cent. From 2014 onward, combining the full capacity of the complex of 850.000 tonnes per year, the group's total construction steel production capacity will reach 1.15 million tonnes per year.
Regarding its liability, Long said HPG's borrowing was only VND5-7 trillion ($237-332 million), while its equity reached nearly VND10 trillion ($473.9 million). HPG also deposited nearly VND2 trillion ($94.8 million) in local banks last year.
HPG has set very ambitious targets for this year. The group plans to raise its charter capital to nearly VND4.19 trillion ($199.5 million), while the revenue target is set at VND23 trillion ($1.1 billion) and the post-tax profit goal is VND2.2 trillion ($104.3 million).
The projected dividend rate has increased from 20 per cent to 30 per cent, of which 15 per cent will be paid in cash and the remainder will be offered in shares.
HPG plans to use VND41 billion ($1.9 million), about 5 per cent of the profit in excess of last year's target, to reward the company's managers.
Long said it was a moderate rate given the group's impressive business results.
Deputy PM praises committee
Deputy Prime Minister Vu Van Ninh yesterday applauded the effort of the Steering Committee for Enterprise Renovation and Development at a meeting in Ha Noi, saying that the committee had fulfilled its assigned tasks for 2013 and early 2014.
Speaking at the meeting, held to assess the committee's performance in the past year and implement its tasks this year, Ninh said the committee had carried out effective co-operation with relevant agencies and made appropriate proposals to the Government.
In 2013 and 2014, the committee reported, it advised the Prime Minister properly on carrying out reforms of State-owned enterprises (SOEs) in order to improve their efficiency.
The committee submitted 24 legal documents to the Prime Minister, including important ones on SOE equitisation, dissolution and re-organisation.
In 2013, the Government re-arranged 101 SOEs and equitised six.
The Steering Committee also co-ordinated closely with the Steering Committee to restructure the State-owned shipbuilder Viet Nam Shipbuilding Industry Corporation (Vinashin), which ran up debts of over US$4.2 billion.
The Deputy Prime Minister asked the Ministry of Labour, Invalids and Social Affairs to examine the management of salaries and bonuses paid in State-owned groups. The Ministry of Finance, meanwhile, was asked to intensify inspections of State-owned enterprises to make sure they conformed to financial regulations and the Ministry of Agriculture and Rural Development was asked to continue researching the restructuring of agricultural and forestry enterprises.
Deputy Prime Minister Ninh asked the Ministry of Construction and the Ministry of Information and Telecommunications to submit their codes of conduct.
Buyers return to Ha Noi market
Property transactions in Ha Noi had started to pick up since the beginning of the year, indicating a change of direction for the languishing market, according to the Ministry of Construction.
According to the Xay dung (Construction) newspaper, 1,290 transactions were successfully completed in the first two months of the year, twice as many as the same period last year. They included 820 social housing apartments and 470 commercial apartments.
The successful transactions were mostly for completed or nearly-completed apartments priced of VND15-22 million (US$714-1,000) per square metre.
A number of commercial developments located outside the city centre also attracted buyers with prices from VND13-16 million per square metre and guarantees the projects would be completed on time and handed over as scheduled. They sold 100 apartments in the first two months of this year.
The increasing number of transactions was due to the efforts made by investors and agents to restructure developments and adjust prices, according to the ministry.
This month, new developments have also been released onto the market and are proving popular, including Starcity Le Van Luong, Mulberry Lane, Victory Van Phu and Xuan Phuong.
Ha Noi's property market expects the recovery to continue in the second and third quarters when developments are launched, such as Mipec Riverside, Berriver Long Bien, Golden Place, Golden Land, Eurowindow MultiComplex and Golden Silk.
Nguyen Manh Ha, head of the House Management and Real Estate Market Department under the Ministry of Construction, said the capital's property market had started to recover in early in 2013 as the inventory started to fall.
From January 1 to February 25 this year, the inventory fell by 2.8 per cent against December 2013 and 23 per cent against the same period last year. Empty properties were mainly located in areas far from the city centre without technical or social infrastructure, he said.
Many experts have noted that the interest rate cuts will lead to depositors moving their investments from savings to other assets with higher profits. While many money holders were looking for lucrative investment choices, the recovery in the real estate market has seemingly grabbed their attention.
Deputy Governor of the State Bank of Viet Nam Nguyen Dong Tien remarked at a recent conference that besides the stock market, the real estate market will majorly benefit from the interest rate cuts in an ideal market.
Experts urge VN firms to build online profiles
Just 20 per cent of Vietnamese companies have registered international and local internet domain names, and the lack of web-based exposure could hurt other firms in the future, experts said at a seminar yesterday.
The seminar, held in the northern coastal city of Quang Ninh by the Viet Nam Internet Network Information Centre, was titled "Protecting Vietnamese trademark with domain.vn."
According to VNNIC, only 20 per cent of 500,000 companies in Viet Nam have their own website with registered domain names.
VNNIC deputy director Tran Minh Tan said internet domain plays an important role in business operations now as it helps companies advertise themselves in the cyberworld.
"Nowadays, the success and fall of a company can partly be due to the way they do business in the internet world. I think Vietnamese businesses should consider the Internet an important part of their operation." Tan said.
The centre informed the seminar that over 90,000 new ".vn" domains were activated last year, bringing the total number of national domain names to 263,900.
The increase has helped the country keep its number one position in Southeast Asia for national domain registration and activation, it said.
Among these, domains with Vietnamese names accounted for 127,166, said the centre, which functions under the Ministry of Information and Communications.
The VNNIC said it earned revenues of VND143 billion (US$6.8 million) from domain activation and subscription fees in 2013, exceeding its annual target by 15 per cent.
According to the Ministry of Information and Communications, internet service providers (ISPs) in Viet Nam earned VND15 trillion (more than $714 million) in revenues last year, with VND5 trillion ($238 million) coming from 3G network services.
Between 2009 and 2013, the number of internet users increased by 170 per cent, and broadband availability climbed 7.5 times compared with 2005-09.
Viet Nam's internet penetration is at 35.6 per cent, and 40 per cent of the country's online population are aged between 15 and 24, the seminar heard.
The number of internet users is expected to reach 60 million by 2018, and total revenue from internet services and content is expected to climb to VND100 trillion ($4.7 billion).