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BUSINESS IN BRIEF 24/3

 U.S. firms concerned about automated customs system; Banks prudent in 2014 profit targets; Many skeptical about tobacco tax hike goals; Rock-bottom vegetable prices hit farmers; Land rental rates could be increased

Binh Duong earns over 2.9 billion USD from two months’ exports

The southern province of Binh Duong earned 29.94 billion USD from exports in the first two months of this year, up 12.5 percent against the same period last year, according to the provincial Department of Industry and Trade.

Of the figure, domestic enterprises contributed 343.6 million USD, a 13.5 percent rise, while that of the foreign-invested sector was 1.75 billion USD, an increase of 12.3 percent.

However, the province saw a sharp month-on-month drop of 24.7 percent in February’s exports, reaching only 899.6 million USD due to the long Lunar New Year festival.

During the month, the domestic sector experienced a 19.1 percent decrease at 153.6 million USD, while FDI firms suffered a drop of 25.7 percent to earn only 745.9 million USD.

In February total export revenue, wooden products made up 14.4 percent, reaching 129.2 million USD, down 16.2 percent over the previous month. Meanwhile, the province earned 148.7 million USD from garment and textile exports, decreasing by 12.9 percent.

The footwear sector reported a decline of 15.2 percent at 77.7 percent. However, it still made up 8.6 percent of the province’s total export revenue in the month.

This year, thanks to the General System of Preferences (GSP) applied in the EU market, Vietnamese footwear firms have enjoyed a tax cut down to 3-4 percent compared to the previous level of 13-14 percent, making them more competitive in the market.

At the same time, Binh Duong’s import revenue in February was also estimated to decrease sharply by 28.3 percent at 733.6 million USD. The result pushed the total imports in the first two months to 1.757 billion USD, up 12.1 percent over the same period last year.

U.S. firms concerned about automated customs system

U.S. firms have expressed concerns about the Vietnam Automated Cargo Clearance and Port Consolidated System and Vietnam Customs Information System (VNACCS/VCIS) which will come into force on April 1.

In a statement passed to the General Department of Customs, the American Chamber of Commerce in Vietnam (AmCham) pointed out some issues which worry its members.

According to AmCham, the VNACCS/VCIS system was developed 18 months ago but is scheduled to be up and running on April 1 this year, and this is a short duration. Therefore, Vietnam needs more time for human resource training and test running the system before it is officially launched.

Besides, there should be a duration of grace before fines are imposed on exporters, customs brokers and service suppliers for misunderstanding or accidental violation.

The new customs declaration process in VNACCS/VCIS is rather complicated, requiring 109 data filings for export and 133 filings for import to be declared correctly. U.S. firms are afraid that they would be fined if false statements are provided in the declaration form.

As a result, AmCham proposes the General Department of Customs delay the use of the VNACCS/VCIS system nationwide until a guiding document is available.

The General Department of Customs should coordinate with Japan’s customs or experts to provide technical support for customs officers and firms as well as to build a backup system in case the application of the new system fails.

Banks prudent in 2014 profit targets

Banks’ profit targets for this year are proving very modest compared to those of previous years as they face mounting bad debts.

In the past banks’ general shareholder meetings would adjourn and announce profit goals and other numbers 20-40 per cent up against the previous year.

But things are different this year with scores of banks anticipating lower credit indexes compared to last year as their key issue is controlling bad debts.

Eximbank just unveiled their Board of Directors’ Resolution with major business indexes for 2014.

Accordingly, this year the bank said it expects a 21 per cent jump in deposits and 23 per cent increase in lending with pretax profits forecasted at VND1.8 trillion ($85.7 million).

It also said it plans to keep its bad debts at around 3 per cent and dividend at 8.5 per cent.

Compared to 2013, the bank’s profit expectations this year are actually halved as bank executives admit they are looking at a difficult year; some even said the figure was still too high.

Bank leaders have argued that the meager 1.5-2 per cent disparity between deposit and lending rates is only enough to cover operating costs.

Last year, despite an 11 per cent credit increase against 2012, the bank only realised 31 per cent of its annual profit goal. It earned VND2.736 trillion ($130 million) in net profits, 44 per cent down against the previous year.

In another case, although Ho Chi Minh City-based Sacombank achieved its full-year pretax profit target of VND2.8 trillion ($133 million) and eyed 13 per cent credit growth last year, it was very prudent with its profit target.

The lender set a pretax profit goal of VND3 trillion ($143 million), only slightly up against last year.

“We came to this number after careful consideration as we realised it was unlikely to achieve high profits in the current context,” said Sacombank chairman Pham Huu Phu.

DongA Bank dropped its pretax profit target of VND1 trillion ($47.6 million) and only saw limited credit growth last year, and so was mulling very modest targets for 2014.

“It is essentially necessary to reduce our profit targets and while DongA Bank is among the top players with our high service quality and numerous card holders, we have to be cautious in our financial expectations for the year,” said the bank’s general director Tran Phuong Binh.

State giant Bank for Investment and Development of Vietnam (BIDV) has released a reasonable pretax profit goal of VND6 trillion ($285 million) for this year and bad debt rate of below 2.6 per cent, though last year it saw an increase of 23 per cent to more than VND4 trillion ($190 million) in post-tax profit.

Other state giant Vietcombank was also careful in its profit targets despite reaching VND5.7 trillion ($272 million) in 2013.

From 2008 to now, these banks had presented dwindling year-on-year profit goals amid a highly challenging business climate.

Many skeptical about tobacco tax hike goals

The jury is still out on whether a higher tax would help scale down smoking and its possible impacts on the tobacco industry and state coffers.

Results from a 2012 survey conducted by the International Tax and Investment Centre and Oxford Economics showed that Vietnam was the second largest market in illegal tobacco consumption among the 11 Asian nations polled.

Figures show 104.8 billion cigarettes were consumed in Vietnam last year, of which 17 billion were illegally imported, according to the Vietnam Tobacco Association (VTA).

Also according to the VTA, from 2006 to 2012 the volume of smuggled tobacco spiked 50 per cent (tantamount to six billion cigarettes) following successive rises of the special consumption tax (SCT) rate on cigarettes, from 45 per cent in 2005 to 55 per cent in 2006 and 65 per cent in 2008.

As such, the Ministry of Finance’s (MoF) newest SCT hike proposal has triggered concerns over a possible upsurge in tobacco smuggling.

Under the MoF proposal, the SCT on cigarettes would increase to 75 per cent in July 2015 and again rise to 85 per cent from January 2018.

The VTA estimates Vietnam’s tobacco industry would lose sales of 5.7 million cigarettes to smugglers when the tax goes up to 75 per cent and lose a further 10.4 billion cigarettes once the rate hits 85 per cent. Respective losses to state coffers would be $97.5 million and $198.5 million.

In fact, whenever the tax on cigarettes has risen notorious tobacco smuggling regions such as the southwest of the county, Quang Ninh mountainous area, coastal provinces and central region localities bordering neighbouring countries were vibrant with the influx of illegal products.

This is both because locally produced tobacco bears the additional cost of increased taxes and efforts to stymie illegal imports have thus far been ineffective.

Another factor is that local demand for tobacco products is huge despite a number of campaigns to educate people on the harmful effects of smoking.

Consumers cannot be expected to participate in the battle against illegal products by opting not to buy cheaper and therefore likely illegal products as many people in Vietnam are recently facing economic difficulties.

Another repercussion is that the tobacco industry and its workers, including tobacco growers, feel the negative effects of smuggling.

The VTA is assuming that a higher SCT rate in the current context would only result in downsized local production and very little increase to state coffers as smuggling would commensurately increase.

Instead, it has proposed the government ramp up anti-smuggling efforts to first stabilise the situation and ensure the state budget is getting its share of the profits.

A suitable tax hike plan would be important once illegal tobacco smuggling was under control.

HCM City wants VND30-trillion home loan program extended

The HCMC government has proposed the Steering Committee for Housing and Real Estate Market Policy extend the Government-initiated VND30 trillion home loan program to 60 months from the original 36 months from June 1, 2013.

The city is also seeking extensions for corporate income tax and value-added tax payments until the end of this year to help property enterprises lower prices to prop up sales.

According to the city government’s proposal, the property market here is still in distress. A slew of projects are struggling with sluggish sales despite discounts and promotions while some others have suspended construction work due to financial woes.

There are 27 projects having registered for conversion from commercial apartments into budget ones or service facilities and 15 others having proposed splitting their commercial apartments into smaller units to boost sales.

Five projects have been changed into budget ones so far with 6,733 units and one project with 360 apartment units has been converted into a hospital with 500 beds.

Last year 5,077 of 14,490 units in stock in the city found buyers with a total value of VND8.92 trillion.

Though the home loan program started in the middle of last year, a mere 2.53% of VND30 trillion has been disbursed last year. Early last month, the central bank lowered the interest rate for home loans to 5% per year from the previous 6%.

Rock-bottom vegetable prices hit farmers

Quang Dien District is located in the extremely low-lying area of the central Thua Thien - Hue Province.

Thus, the land of the local people is flooded for four months every year, from the lunar month of July to October.

In the lunar month of November, the people start sowing seeds to meet the increasing market demand for vegetables during Tet (Lunar New Year) and the post-Tet months when the prices are high.

But they are in trouble this year because the prices have nearly hit rock-bottom.

"The price for my lettuce now is 5,000 dong for 50 kilogrammes. It is so cheap that I don't want to harvest it for sale," said Tran Van Cu of Thanh Trung village in the district.

"It is painful to sell two big baskets of lettuce over which I spent a lot of effort to grow and harvest them.

The villagers continue to use traditional methods of carrying the vegetables, which involves hanging two baskets on either ends of a pole balanced on the shoulder. Cu gets up at 1am to harvest the lettuce crop so that the trader can transport them to faraway markets by 4 am or 5 am.

He cannot calculate how much loss he has suffered, saying: "The problem now is that I don't have enough money to buy seeds and fertilizers to continue cultivating."

Cu does not want to harvest his crop and lets his lettuce bloom, which means they cannot be used as food anymore. This means that he cannot start cultivating anew on his 0.2hectare field.

Almost all farmers in the village are in trouble because it is an area of intensive vegetable cultivation of lettuce and some herbs.

These are not eaten by pigs so that local people dumped the vegetables as waste. They could not give the vegetables to neighbors too as almost every household in the village has its own vegetable stock.

The people in another village, Tan Thanh, grow the same species of vegetables and they too faced the problem of rock-bottom prices. Tran Thuc, a farmer, said he expected to earn some money for his living but the situation now is bad.

"My efforts were wasted. I got up at 1am waiting for traders, but none stopped for my lettuce," he said. Thuc dumped the lettuce and prepared the land again to cultivate a new lettuce crop, hoping for better prices.

According to Le Quang Tuan, deputy chairman of the People's Committee of Quang Thanh Commune, which includes Thanh Trung and Tan Thanh villages, a total of 65 hectares cultivate vegetables for a yearly revenue of nearly VND13 billion.

"It will be a big problem if the farmers quit cultivation for other jobs," he said.

There are several causes for the low prices and the problem of a "bumper crop leading to falling prices" is right on top.

Viet Nam News investigated and found that a bundle of about three bunches of lettuce, weighing 0.1 kilogramme, costs VND5,000 in the market, which is equal to the cost of two baskets of 50 kilogrammes of lettuce that the traders paid to farmers in the field.

This means the lettuce sold in the market is 500 times more expensive than the lettuce sold in the field.

Another factor for the low prices is the abundance of vegetables in the market. According to sellers in markets around Hue, there have been steady supplies from the Central Highlands' provinces of Da Lat and Gia Lai since Tet.

They were surprised at vegetables being transported from the Central Highlands at a time when supply exceeds demand in Hue. They would not know that in Da Lat, tonnes of vegetables are being fed to cows.

Viet Nam News failed to get a proper explanation from the local market control division as the office did not specify which sections deal with the issue.

Adding to the supply from the other provinces, many villages in the district, which had not been growing vegetables, have began to cultivate them.

"The villages in the neighboring Quang Tho Commune, where flowers are grown to meet the demand during Tet, began to cultivate vegetables too in their flower fields," said Ho Van Tung, a farmer in Thanh Trung village in Quang Thanh Commune.

Tung and other farmers in the village blamed this on the district's agriculture promotion division, which encouraged the flower farmers to grow vegetables along with flowers to make more profit.

The farmers in the commune identified another reason for the abundant vegetable supplies, saying that the evening fog makes the vegetables grow faster and thus many plants turn ripe for harvest at the same time.

Officials at the local agriculture division refused to comment on the factors mentioned by the farmers as well as on measures to be taken to deal with the situation that is hitting the local farmers hard.

The floods this year will give the farmers more nightmares. As usual, they will endure the hardships coming from the two-month or three-month joblessness. They pin their hopes on the dry lunar month of November, when they can start cultivation and expect a profitable crop. But with the fall in prices, the farmers will find it hard to survive the flood season with hope.

Land rental rates could be increased

The Finance Ministry has proposed increasing land rental rates as part of a draft decree on land rental, water surface rental and land use fees that will likely be submitted to the Prime Minister next month.

The land rental rate currently ranges from 0.25 to two per cent of the land price, depending on what the land is used for and any investor incentives that the province or city offers.

However, under the proposal, the rent would start at one per cent of the land price. Rates in urban areas, commercial or transport hubs and crowded residential areas could reach three per cent of land prices.

At a meeting in the capital on Monday, representatives from Ha Noi and northern Bac Ninh Province's Finance Departments said that the increased rent would burden enterprises, especially during the current economic slowdown.

At a similar meeting in HCM City last month, representatives from the southern provinces of Long An and Khanh Hoa said increasing rent could raise land prices.

The minimum rent increased from 0.25 per cent in 2005 to 0.75 per cent in 2010, and the land price went up 10-15 times as a result, they pointed out.

Chairman of HCM City Real Estate Association Le Hoang Chau said that land prices in the city were so high that they depressed investors.

"To get land for operations, investors mostly pay compensation based on market prices, which are much higher than those imposed by local authorities. They also have to pay land rental based on future land prices, meaning they pay twice for the same land plot," he said.

Deputy director of the HCM City Finance Department Ta Quang Vinh suggested that rental rates be based on what the land was used for.

It should also be made clear when the land rental rate was based on the land price frame and when it was lowered by the provincial People's Committee as an incentive, he added.

Businesses turn away from luxury neighbourhood

A number of luxury house spaces for rent in the new urban area of Trung Hoa-Nhan Chinh are being abandoned because of fleeing businesses and high rental fees despite economic downturn.

According to a broker, a 300-square metre space there is leased out for several hundreds of millions of VND per month. However, most businesses have moved out after just a few months. The broker said, "The owners do not come here at all unless they're showing a space for rent."

Two years ago, the Trung Hoa-Nhan Chinh urban area was the real estate hub and attracted a lot of trading floors headquarters. Then several services, such as restaurants and cafes followed and were opened here to serve the office workers. However, most of the houses in this neighbourhood are being abandoned.

Hai, a businessman said in 2011 he spent VND500 million (USD24,000) to open a restaurant but only lost money. "I calculated everything very carefully but it still failed. The economy has gone south fast since that year," he said.

Another former business-owner in this area said she had to close her cafe because of dwindling customers. She said, "Two or three companies shut down in just over a month. My brother's trading floor next door was not in good shape either, so when I shut down this cafe, he also shut down his trading floor."

The rent in Trung Hoa-Nhan Chinh urban area was around USD6,000-10,000, even before the economic downturn, not many domestic companies could afford to stay here for long.

On the other hand, owners of these buildings remain relatively unaffected by the recession and often own numerous properties. An owner even said he is keeping his house empty because he still cannot find a tenant. He said, "As my previous contract stated, I leased out this place to a real estate company for three years but they moved out and still owe me rent. I fear that some nameless company will ruin the space somehow so I'd rather lock it up and let it be for now."

Meanwhile, another owner said his space had been ruined when a cafe owner tried to renovate the first floor. If somebody wants to move in and live here, he will have to spend a lot of money to fix the house. "I don't want to lease it out, I don't want to live in it." he said.

Female entrepreneurs weather the storm

Despite crunch time as result of the economic slowdown, Vietnamese female entrepreneurs have stood firm and ridden out the crisis to run their business efficiently.

Calamity is man's true touchstone.  The domestic and global economic slowdown is a genuine test for businesspeople, especially females, to show off their best qualities to steer their companies through difficult times.

Though businesswomen are burdened with housework, they, with their intelligence, creativity, diligence, patience, and compassion, many have reaped much success at work, raising their profile domestically and globally.

The Vietnam Chamber of Commerce and Industry (VCCI) recently presented the Gold Rose Award to female entrepreneurs, in recognition of their outstanding performance and contribution to the community.

Bui Thi Quy, general director of the Long My Phat sugarcane and alcohol company in Hau Giang province, starts her daily routine at 5.00am and leaves the office in the evening.

Despite her age, she still shuttles daily between her home and the office managing the company’s operation, maintaining cooperation between farmers and the company, and generating jobs for local people.

Last year, the company earned more than VND100 billion in revenue and generated jobs for approximately 500 people, mostly local labourers.

Quy recalls the award as a testament to the company’s effort in maintaining production and growth in difficult times. Apart from the profit target, she has joined many charity campaigns, showing her responsibility toward the community.

“The current low sugar prices put growers at a disadvantage. Therefore, the most important thing for the sugarcane industry is purchasing all the material from growers to ensure they benefit from the purchase and keep growing sugarcanes,” Quy says.

“The company and I myself do our utmost to stabilise material prices for farmers in order to develop our long-term and close-knit relationship.”

Nguyen Thi Bach Mai, general director of Dong Nai port JSC in Dong Nai province, is known for her outstanding managerial skill in cargo handling – a profession normally reserved for men.

To reap present-day success, Mai says she pays special attention to developing human resources and creating an innovative working environment to motivate employees to show off their skills and creativity.

Assuming the chair in 2009, Mai has built a contingent of competent managers and skilled employees who managed not only to ride out difficult times but prosper, typified by the opening of a route linking the port to the national transport system which raised the competitive capacity of the port itself.

Since late 2011, the amount of cargo to Dong Nai port has increased dramatically and the company’s employees have worked three shifts a day to handle bulk cargos.

Although its container warehouse has been enlarged capable of containing cargos equivalent to 5,000TEU in total, it has yet to meet ship owners’ demand at times.

“There is no secret about the success, except for our strong resolve,” Mai confides. “The bottom line is creating a conducive, dynamic and innovative working environment, and at the same time promoting unity among workers into a strong collective.”

“I encourage an organisational change to create the best possible conditions for my workers to contribute to the company.”

VCCI President Vu Tien Loc says in Vietnam one out of every four businesses is owned by women. In whatever circumstances, female entrepreneurs dare to think, do, and confront problems, demonstrating excellent qualities of Vietnamese women.

“In the context of crunch time, women are able to run their business better than men,” Loc says. “The fact shows over the past three years, many businesses owned by women have not only ridden out the crisis but also turned challenges into opportunities, expanding outlets, increasing profit and promoting brands.”

Business is a battlefield and Vietnamese businesswomen know how to lead their companies through difficult times, seize opportunities and move forward. They are the nation’s ‘generals’ during peacetime, instilling work passion and determination to win in young generations to reap future successes.

Transport market to be restructured

The PM has recently passed the Strategy on the development of transport services by 2020 with a vision towards 2030.

The strategy aims to better transport service quality, cut fees, maintain transport order and safety, protect the environment, meet the rising transport demand for goods and passengers, and raise national competitiveness.   

The domestic transport market would be restructured until 2020 in which road transport would be reduced and the market shares of railway and inland waterway would become bigger.

By 2030, total transport output would reach 4.3 billion tons of products and 14 billion of passengers. In the 2021-2030 period, transport of goods and passengers would grow 6.7% and 8.2% yearly.

The strategy also looks to open new air routes to other destinations, improve transport quality and safety for taxi services.

It also targets to speed up equitization process of domestic transport enterprises./.

Dong Nai eyes accessing US market

The southern province of Dong Nai is implementing a variety of measures to support productivity and market expansion into the US, aiming to raise overall export growth by 10-11% in 2014.

This year, it will carry out programs on trade promotion, economic restructuring, industrial promotion, and those on labour and credit to ease business difficulties.

It will organise business conferences to capitalize on free trade agreements (FTAs) and the Trans-Pacific Partnership (TPP) agreement due to be signed later this year.

The provincial Department of Industry and Trade (DIT) Director Le Van Danh says the US economy is expected to pick up stream this year, creating numerous prospects for Vietnam’s exports to find a niche in the marketplace.

He says the department is striving to keep regular contact with businesses to more timely address their concerns so as to boost exports to the US.

To this end, it will conduct trade promotion programs and strengthen links with representative offices of economic groups in HCM City to provide more exposure for their export products in anticipation of expanding the market.

Recently, the provincial People’s Committee sat down with the American Chamber of Commerce (AmCham) in Vietnam to work out detailed plans for expanded cooperation in overseas investment and exports, especially in human resource training.

Nguyen Ngoc Tuan, Vice Chairman of the Dong Nai Import-Export Association, says this year the US will remain the No1 importer of Dong Nai products and the business community needs to be keenly aware of technical barriers that the US imposes.

Since late 2013, the purchasing power of products, such as garments, footwear, ceramics, timber products, and machinery and equipment has been on the rebound, especially in the US market.

Based on the number of signed contracts for these products so far this year, this trend is anticipated to continue and bodes well for exports throughout the remainder of 2014.

In 2013 US imports from the province were US$3.17 billion in value, the largest importer and accounted for 30% of the province’s total exports.

When the TPP is signed, the US market will open wide for Dong Nai businesses as tariffs will dramatically decrease, allowing for more competitive pricing and giving Made-in Vietnam products an edge.

Key products which have a tremendous opportunity of finding a footing in the US include footwear, garments, cashew nuts, wood and timber products, steel, agricultural products and seafood.

From now until 2015, the province aims to develop corollary markets, such as Cambodia, Japan, the Republic of Korea, India, Australia, Chile, Myanmar, Sri Lanka, and the United Arab Emirates which have high demands for key provincial products.

Office space booms across the capital

The Hanoi office market is thriving with new commercial infrastructure, leading to higher occupancy and decreasing rents, noted CB Richard Ellis Vietnam Co Ltd (CBRE)'s Hanoi branch.

The new emerging central business district (CBD) in the West continues to show considerable development, but on the other hand, the current CBD area around the Hoan Kiem district is also considered a favourable office location.

In the last five years, the number of Grade A and B office buildings have increased significantly from 35 units to 76 units, an increase of 117%. As a result, the availability of Grade A and B office buildings nearly tripled from 330,000 square metres to approximately 1 million square metres by the end of the final quarter of 2013.

This is a boom period for tenants, as high supply and low prices have created favourable conditions, and the tenants have a wide-array of available options that can match their expectations, according to Nguyen Bich Trang, a senior manager from the Hanoi branch's Office Service.

Due to the aforementioned increased availability of office space, rentals in West, Mid Town, and CBD have remained under check due to competitive pressure over the past few years.

For instance, in the last quarter of 2009, the highest average asking rent for a Grade A office space was recorded at a level of US$50 per square metre per month, which at that time was amongst the highest rents in the Southeast Asian region.

Currently, the average asking rent for a Grade A office space broadly ranges between US$18-43 per square metre per month, with the later being approximately 50% lower as compared to the rental levels in 2009, noted CBRE, one of the foreign property service providers in Vietnam.

One has to take into account that the current asking rents are excluding incentives, such as rent-free periods, free parking, or longer fit-out periods. Depending on the tenant, the size, and lease term, total incentives can reach up to 20%.

The Grade B office rentals showed a downward trend from US$25 - 35 to US$15 – 24 per square metre per month in 2013, which represents a staggering decrease of approximately 30-50%.

Despite this decline, CBRE expects that the Grade B office rentals have yet to see their lowest levels and that the Hanoi office rental levels will continue to drop in 2014.

For the Grade B market, CBRE also expects that this year, a further increase is inevitable. Regarding the Grade A market, the forecast looks less dramatic as the Lotte Center Hanoi is the only upcoming Grade A development in the capital city.

Another inevitable effect of the additional office stock is increased availability. Vacancy itself is not a bad thing as up to 5-10 percent is considered an acceptable rate in any given market, according to CBRE.

However, last year, the available space increased to 20-50%. The only downward trend was apparent in Grade A buildings in the West, where the Keangnam Hanoi Landmark Tower and Indo Plaza Hanoi have been steadily leasing out their office space since their completion in 2011.

The increasing office stock has helped to strengthen the net absorption in Hanoi . The five-year net average absorption (2009 – 2013) was 84,000 square metres per annum. The average net absorption over the past two years was even higher, at 91,000 square metres.

" Hanoi has been recording historically high take-up numbers, which is the result of decreasing rental levels along with an ongoing flow of new office developments," claimed CBRE.

"It, therefore, becomes attractive for especially large tenants to relocate and expand their Hanoi office," Trang reported.

Construction material sales fall

Consumption of building materials in HCM City is falling fast.

Figures show consumption has dropped by as much as 50 per cent year-on-year despite being at the height of the annual building season, according to local traders.

Traders selling building materials in District 2, Thu Duc and Binh Thanh say that the annual building season in HCM City normally starts after Tet however, there has been no sign of it this year.

They say that most of their customers are only buying materials to finish private projects they started last year.

Huynh Tan Hien, owner of a shop in Thu Duc District, said that the volume of customers coming to his shop this year was half of last year and most of them were small retailers rather that big construction companies.

Hoang Thi Hang who sells enamelled tiles in the same district, is in the same situation. She said that since the beginning of this year, her shop has received all the latest new models and styles from her suppliers, but customers just weren't interested.

A steel trader said in the first two weeks of this month he sold only a couple of tonnes of steel, which was a massive drop from last year despite that prices remained unchanged.

Retailers said that cement prices normally increased by nearly 10 per cent, but not this year. Prices of most building materials like tiles and bricks have stayed the same.

Explaining the situation, Nguyen Tien Nghi, former deputy chairman of the Viet Nam Steel Association said that it would take some time for the real estate market to show signs of recovery but the slump would be forgotten by the second quarter of this year .

Rice prices inch up amid competition from Thai imports

Rice prices in the Mekong Delta increased slightly after the government approved the purchase of one million tonnes for a national temporary reserve last weekend.

Early last week, the price for winter-spring rice remained high, but then it suddenly fell, partly due to competitive pressure from Thai rice.

Farmers like Le Van Tam were surprised by the sudden plunge in price.

Tam had planted 8,000sq.m of rice this year, yielding nearly eight tonnes. He was paid VND4,700-4,800 per kg on March 9 but due to a late harvest of five days, the price fell to VND4,200 per kg.

Tam said he then began to store rice at home, waiting for a higher price.

Traders also stopped doing business as prices declined sharply. Many of them were even willing to lose deposits that farmers had put down for advance purchases.

"Rice-export companies buy rice through traders. I had deposited money to buy 50ha in Thoi Lai District in the southern province of Can Tho at a price of VND4,600. But the price fell, and I felt somewhat lost," trader Nguyen Van Tuong said.

"This is the first time ever that the price for winter-spring rice has unexpectedly dropped to such as low level," said Duong Quoc Nieu, a warehouse owner at the 21st rice port in An Nong commune, Tinh Bien District.

According to figures from the Viet Nam Food Association (VFA), in mid-February, Thailand sold 600,000 tonnes of rice and another 800,000 tonnes in March.

The Thai Government also plans to sell 1 million tonnes per month and Thai farmers another 5 million tonnes by the end of March.

"Thailand's rice export price is expected to fall, and this will affect Vietnamese rice exports," said a VFA representative.

Meanwhile, demand from international rice importers has not been high as they are waiting for the expected lower prices.

However, after the Vietnamese government decided to buy one million tonnes of rice last weekend, farmers and traders resumed business as prices inched up.

Since early this year, the five biggest rice exporters in the world, including Thailand, India, Viet Nam, Pakistan and the US, have sold only 4.1 million tonnes, a fall of 7.2 per cent compared to the same period last year.

According to the Ministry of Agriculture and Rural Development, this year's winter-spring rice crop will have a high yield and there will be great pressure to export.

Mekong Delta provinces this year have harvested 650,000 of a total of 1.6 million ha of rice, with total expected capacity of nearly 11 million tonnes, an increase of 34,000 tonnes compared to the same period last year.

By the end of February, VFA's members had exported 638,000 tonnes for $275 million, a drop of 13.5 per cent in quantity and 16 per cent in value compared to 2013.

Lukewarm response to export credit insurance

Only 46 export credit insurance policies were taken after three years of implementing a Government's pilot prog-ramme, according to the Ministry of Industry and Trade's Export and Import Department.

The insurance was applicable for the export of products worth VND12.59 trillion (US$572.36 million). The total premium for the exported goods was VND17.23 billion ($820,000), while compensation was VND13.33 billion ($634,000).

The export credit insurance pilot programme during the period between 2011 and 2013 initially targeted to insure 3 per cent of the country's import-export turnover. As the country's annual export value hit US$120-130 billion, the pilot programme failed to meet its set target.

The department acknowledged that the number of insurance policies taken by the exporters in the pilot programme was modest, though such insurance is considered an effective measure to help domestic exporters to minimise their payment risks.

The department attributed the restriction to the challenges faced by both the exporters and insurers during the implementation of the programme.

The insurance companies still lacked the necessary experience in promoting the export credit insurance, while the local exporters failed to pay due attention to the insurance, as it has remained unfamiliar to them, the department claimed.

Online news Vietnam-Net quoted Nguyen Thi Thu Ha, the general director of Saphia Packaging Company in Long An province as saying that she lacked information about the insurance products.

"I tried to contact a lot of Vietnamese insurance companies to seek information about the export credit insurance, but the staff there told me they did not know about this," she said.

In 2010, the Government launched the pilot export credit insurance scheme, under which it committed to prop up 20 per cent of the original insurance premiums, in an effort to encourage export companies to opt for export credit insurance policies. For instance, if the insurance policy is valued at $20,000, businesses will only have to pay $16,000.

However, the financial support is not enough to persuade businesses to spend money on insurance policies.

Seven out of the total 30 non-life insurers in Viet Nam are eligible to provide insurance policies under the pilot programme.

The beneficiaries of the Government's financial support are a group of 8 farm and seafood producers and a group of 14 industrial producers, manufacturing products, such as garments, shoes, electronics, and computer parts.

However, Huynh Thi My, the secretary general of the Vietnam Plastics Association, admitted that very few plastics companies have their exports insured, or have the intention of taking export credit insurance policies, according to VietnamNet.

To boost insurance, the department emphasised that the insurers must streamline rules on export credit insurance, while the Government should continuously offer support to the insurers to raise awareness about insurance among the local exporters.

The finance ministry has also proposed the Government to entrust it and the State Bank of Viet Nam the task of mapping out support initiatives related to the export credit insurance in the country's investment and export credit policies.

The ministry has also planned to revise the debt provision regulations so that the exporters using the export credit insurance will not have to set aside money for provision.

Mekong Delta to grow subsidiary crops on rice land

Farmers from the Mekong Delta provinces plan to use 112,000 ha of land for growing subsidiary crops like maize and soybeans from now to 2015 in order to contain the spread of summer-spring rice disease.

The disease, along with a water shortage during the dry season, affected the grain output, which varied from 3.5 to 4.2 tonnes per hectare.

The shift is therefore expected to protect over 1.6 million ha of grain and stablise the output of over 9 million tonnes of the product during the summer-autumn crop, according to the local Plant Cultivation Department under the Ministry of Agriculture and Rural Development.

The department suggested upgrading irrigation work and equipping local farmers with better cultivation techniques.

It is also necessary to seek consensus between businesses (consumers) and farmers (manufacturers) through economic contracts, agriculturists said.

The Mekong Delta region – the country’s largest rice granary - comprises of 12 provinces and one centrally-run city with a total area of 40,000 square kilometres and a population of 18 million.

Mekong Delta produces 4.3 mln tonnes of winter-spring rice

The Mekong Delta produces 4.3 million tonnes of winter-spring rice, reported the Ministry of Agriculture and Rural Development (MARD).

In March and April, the figure stood at 3.2 million tonnes.

According to the Ministry of Industry and Trade (MoIT), the nation exported 753,000 tonnes of rice worth 322 million USD up until March 10, down a huge 93.7 percent and 97.7 percent in volume and value, respectively, as its consumption abroad has turned sluggish.

It forecast that the overseas shipment of the grain will hit nearly 1.2 million tonnes in January-March quarter, down 300,000 tonnes year-on-year.

Orders for rice delivery from January to March 10 totalled 1.89 million tonnes. Of those, 1.14 million tonnes are on the waiting list while over 513,000 tonnes remain in stock.

At the mid-March meeting on rice production and trading in Can Tho city, Prime Minister Nguyen Tan Dung requested that MARD immediately purchase 1 million tonnes of rice for stockpiles lasting four months.

Relevant units and rice exporters were also asked to extend their commercial reach, both in regular and new markets.

The Government and MoIT will negotiate with other countries to sign State-level cooperation deals in this regard.

For long-term solutions, it has been advised that regional localities cut about 112,000 hectares of summer-autumn rice to ease selling pressure. The acreage of rice should be cultivated with or supplanted by fruit or industrial trees such as corn, soybean, sesame, peanut and watermelon.

Fragrant and high-quality rice should be prioritised.

Up to March 10, the region harvested 620,000 out of 1.6 million hectares of rice with an average output of 6.83 tonnes per hectare.

Exporters told to prepare for trade defense measures

Trade defense measures adopted by other countries against Vietnam’s commodities remain high barriers and local enterprises should prepare themselves for new cases, heard a seminar in HCMC on March 14.

Vietnam’s exported goods have faced a total of 73 trade defense cases since 1995, the Ministry of Industry and Trade’s Competition Authority said at the seminar.

These include 43 anti-dumping cases, 15 self-defense cases, five anti-subsidy cases, and ten tax evasion charges. This year to date, there have been two new cases, according to the seminar.

On January 30, 2014, Thailand’s Department of Foreign Trade initiated investigations into Vietnam’s non-alloy steel plates. The Indonesia Trade Safeguard Committee (KPPI) on January 23 reported to the World Trade Organization (WTO) its decision to take self-defense measures on some iron or hot-rolled steel from Vietnam.

Steel, footwear and yarn are the three products of Vietnam facing the highest number of trade defense measures. Most of enterprises suing Vietnam’s imported products are from the U.S., EU, Turkey, India and Brazil.

Statistics about trade defense of the Competition Authority show that Vietnamese goods have frequently been affected by self-defense measures taken by developing countries like Indonesia and Thailand.

Self-defense is a quick tool which does not need much effort collecting statistics like anti-dumping or anti-subsidy measures. Besides, a self-defense case does not direct at a specific business, and thus Vietnamese enterprises do not pay much care to this but suffer huge losses if self-defense measures are employed.

Vietnam is imposing self-defense measures against cooking oil imported from Malaysia, Indonesia (with a tax rate of 5% declining gradually in four years) and anti-dumping measures on cold stainless steel imported from China (6.45-6.99%), Malaysia (14.38%), Indonesia (12.03%) and Taiwan (13.23-30.73%).

Lower deposit rate cap won't have significant impact: banks

The State Bank of Viet Nam lowered the interest rate cap on bank deposits of up to six months by 1 percentage point to 6 per cent as part of efforts to boost credit growth.

It cut policy interest rates by 0.5 percentage points, and the refinancing rate now stands at 6.5 per cent, the discount rate at 4.5 per cent, and the overnight rate at 7.5 per cent.

"The cut is supported by factors including inflation being controlled (less than 6 per cent in February) and loan demand from both enterprises and individuals remaining modest," HSBC Viet Nam's deputy general director, Pham Hong Hai, said.

"Mobilisation by commercial banks might reduce but there will be no significant changes," he said, though admitting that investors might now consider other asset classes.

There is little possibility that banks would compete to get deposits by flouting the rate cap because liquidity is abundant, according to Hai, adding it would have no impact on foreign exchange rates either. The rate cap for US dollar deposits also went down by 0.25 per cent.

Nguyen Hung, general director of TPBank, too believed the cut would have no impact on deposits, saying banks were already offering low interest rates on short-term deposits.

Meanwhile, many people have changed their investing habit to deposit for longer terms to enjoy higher interest rates, he added.

Le Quang Trung, deputy general director of the Viet Nam International Bank (VIB), said credit growth would benefit from the cut and the growth target of 12-14 per cent for this year is now feasible.

The Bank for Investment and Development of Viet Nam (BIDV) yesterday announced deposit rates of 5 per cent for one month for individuals, and 5.5, 6.0, 6.5, and 7.5 per cent for two, three-five, six-to-11, and 12 months and above respectively.

The short-term lending rate may be fixed at a maximum of 8 per cent, with seven – to 12-month terms carrying a rate as low as 5.5 per cent, the bank said.

Tuoi tre (Youth) newspaper quoted Nguyen Son of the Institute of World Economics and Politics at the Viet Nam Academy of Social Sciences as saying interest-rate cuts are not enough to boost the economy.

"The cut will encourage cash flow into business operations only if the economy is well restructured," he said.

If other solutions to stimulate economic development were not implemented effectively, the cash would find its ways into gold, property, and securities, which could create a bubble, he said.

He called for focusing on restructure of the State-owned enterprises and allowing real-estate companies to go bankrupt if needed.

He also suggested measures like tax cuts to boost consumption since taxes make up 26-27 per cent of the GDP against around 20 per cent on average for developing countries.

"The interest rate issue is no longer a matter of concern for enterprises, the focus is now on [market] demand," LienVietPostBank Vice Chairman Nguyen Duc Huong informed the Voice of Viet Nam (VOV). He suggested that public investments should be accelerated, and the stock market should offer more room to foreign investors in order to attract more capital for such investments.

A representative of Vietcombank Securities Company reported that while bad debts and the health of businesses remained the major decisive factors leading to limited credit growth, the lowered deposit interest rate cap was positive news, as the stock market was likely to see more capital inflows.

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

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