Oversupply depresses fruit prices

Farmers in the Cuu Long (Mekong) Delta region are facing financial losses because of falling prices of guava, rambutan and blue dragon fruit due to a bumper harvest.

Le Van Man, a guava grower in Can Tho City's Phong Dien District, said that he sold traders a kilo of the fruit for VND1,200 while costs for fertilisers and pesticides were estimated at VND1,500, not including labour costs.

Another farmer in Tien Giang Province's Cho Gao District, Do Van Ha, had to transport blue dragon fruit to National Highway 1A to sell at better prices than those paid by traders. A kilo of blue dragon fruit sold for VND2,000-4,500.

Supply had increased steadily while demand had remained the same, said Doan Huu Tien of the Southern Fruit Research Institute (SOFRI).

"Most fruit growers rushed to grow fruit trees, which have good prices at the moment, without considering the risk of a potential decline in prices due to oversupply," Tien said.

A master plan on specialised fruit areas in accordance with Global Gap and VietGap standards as well as policies to implement the plan are crucial to the sustainable development of fruit cultivation in the Cuu Long (Mekong) Delta, according to Dr Nguyen Minh Chau, head of SOFRI.

Existing specialised growing fruit areas, including Nam Roi grapefruit, Hoa Loc sweet mango, Lo Ren star apple and Cai Mon durian were still developed on a small scale, Chau said.

Limited support from the Government for farmers has hindered the expansion of specialised growing areas on a large scale as well as discouraged them to follow procedures required to obtain Global Gap and VietGap certificates.

Phu Quoc mega project threat

Local authorities are urging Swiss-backed Trustee Suisse Group to get a move on with its mega tourism project on Phu Quoc Island.

Kien Giang People’s Committee recently announced it had set deadlines for Trustee Suisse and its local partner – Vinaconex R&D Corporation – to sign off on a detailed master plan of their Asia Pearl tourism project and land compensation and resettlement plans. The investors have been told to submit a detailed investment plan to the local authority within one year, while the deadline for the land compensation and resettlement plan is six months from August 22.

Le Van Thi, chairman of the provincial People’s Committee, said the local authority wanted to see strong investors invest in Phu Quoc, but stressed Trustee Suisse and its partner had been dawdling on project implementation.

The investors have yet to complete the paperwork necessary to receive investment certificate for the project.

“This doesn’t prove the determination of the investors to invest in Phu Quoc,” said Thi.

Trustee Suisse initially came forward with its around $2.6 billion Asia Pearl proposal in 2007. At the 102 hectare site, it remains the largest tourism project to have ever been proposed for Phu Quoc, an area the government plans to develop as a recreation, trade and finance and banking hub.

Kien Giang People’s Committee gave the investors the nod for a luxury tourism project but snubbed their plans for a golf course and casino.

The latest move by the local authority shows its determination to improve investment in Phu Quoc Island. Last month, the authority warned all investors intentionally delaying their investment projects on the island that they could be forced to give up their seats to stronger ones.

Phu Quoc, 120 kilometres off the coast of Kien Giang in Vietnam’s south, is home to 75 projects capitalised at around $2.2 billion. The provincial authority has also given in principle agreement for 180 other projects in Phu Quoc Island.

Long Thanh investors to gain wings

Investing in the gigantic  Long Thanh international airport in southern Dong Nai province is set to become easier in the near future.

“Without breakthrough mechanisms such as supporting and risk-sharing measures, making large-scale airport projects like Long Thanh become foreign direct investment ones will be hard,” said Minister of Transport Dinh La Thang.

Opportunities to invest in the $6.7 billion airport project, Vietnam’s largest ever transport infrastructure project, would become clearer after its feasibility study report was available, he said.

Southern Airports Corporation (SAC) is charged with carrying out the feasibility study and establishing particular management mechanisms for the project.

“The Vietnamese government was recommended to pour capital from the state budget into airport infrastructure items, administrative areas and some other non-profitable items, which account for some 60 per cent of the total costs of the project,” Thang said.

Meanwhile, it had been suggested that profitable items such as passenger terminals, an aircraft maintenance area and airport facilities be opened to airlines and private companies under the form of build-operate-transfer (BOT) or public-private partnership (PPP), the minister added.

According to the Japan International Cooperation Agency (JICA), opening the project up to the private economic sector, especially in the realm of non-aeronautical operations, would help the project’s financial internal rate of return (FIRR) increase to 12 per cent – a feasible rate given Vietnam’s economic context.

But according to Japan Airports Company (JAC), the firm responsible for Long Thanh project planning, the FIRR was only 4.1 per cent, lower than coupon rate of treasury bonds. Therefore, state-owned enterprises had to get on board in a big way and loans had to come with low interest rates.

Under the Long Thanh airport plan approved by Prime Minister Nguyen Tan Dung late last month, the airport will belong to communes of Phuoc Long, Bau Can, Long An, Binh Son, Suoi Trau and Cam Duong in Dong Nai’s Long Thanh district.

The airport will be 32 kilometres from Bien Hoa airport, 43km from Tan Son Nhat international airport, 40km from the centre of Ho Chi Minh City and 24km from the centre of Bien Hoa city.

The airport, set to cover 5,000 hectares, is to welcome a maximum of 100 million passengers and five million tonnes of cargo yearly. It will be able to receive A380-800 aircraft and other planes of equivalent size.

Because the project is so large, JAC proposed three-phase construction.

The first phase, to last from 2018-2020, will involve the building of two runways and a terminal serving 25 million passengers as well as 1.2 million tonnes of goods a year.

Also in the first phase will be an aviation industrial park and an aeronautical institute. Total costs for this first stage are estimated at $4.34 billion.

According to JAC, airports in Ho Chi Minh City and surrounding areas will serve 25 million passengers and 639,000 tonnes of cargo by 2020. The figures are forecast to reach 44.5 million passengers and 1.2 million tonnes of goods by 2030.

Paper project set for wrap up

'If it [Lee & Man] doesn’t resume construction, we will have no choice but to revoke [the licences for] these paper projects'

Lee & Man Paper Manufacturing has entered the last chance saloon.

Hau Giang People’s Committee is losing patience with the Hong Kong firm and has warned it will revoke the firm’s investment certificates if it does not push ahead with two long-delayed projects.

Early this month, the provincial authority ordered Lee & Man to get on with construction of its pulp and packaging paper factories in the province by September 20. The authority said an inspection team would visit 10 days later to check up on progress at the Lee & Man site.

“If the firm doesn’t resume construction, we will have no choice but to revoke [the licences for] these paper projects,” said Truong Canh Tuyen, director of Hau Giang People’s Committee’s Administration Department.

In 2007, Lee & Man was handed investment certificates to build two factories totally worth $600 million in Song Hau Industrial Park in Hau Giang. The firm’s plans involved building plants able to produce 150,000 tonnes of pulp and 420,000 tonnes of packaging paper a year.

Figures from Hau Giang People’s Committee show that Lee & Man has disbursed only $35 million in its Vietnam projects since 2008.

What it has done is clearing 75 per cent of its 83 hectare site along with building three warehouses, internal roads and a small workshop only.

The latest Hau Giang People’s Committee warning is the second time this year that Lee & Man has been brought to task over the slow implementation of its projects.

The first time, back in April, Lee & Man committed to finishing clearing the site by June.

“It made a promise, but did nothing. This is unacceptable,” said Tuyen, adding that the projects’ delay had negatively impacted on the province’s economic development, as well as lives of residents.

Lee & Man is one of the leading paper manufacturers in China, specialising in producing linerboard and corrugating mediums used to produce cardboard boxes.

The paper manufacturer has four paper production plants in China, but the projects in Hau Giang are the company’s first manufacturing facilities outside that country.

Lee & Man’s representative in a meeting with the provincial authority said the projects’ delays were the result of the global economic recession.

But while Lee & Man is delaying investment plans in Vietnam, it remains in expansion mode in China. On its website, the firm said it was expanding four production lines in China, which are expected to commence production at the end of next year adding an annual effective capacity of 1.6 million tonnes to the firm’s output.

Shell has LNG dream to grow

Global giant Shell is eager to pump liquefied natural gas and related technology into Vietnam.

Thanh Le, general director of Shell Vietnam, told VIR that the world’s leader in manufacturing and exporting liquefied natural gas (LNG) saw Vietnam as having great energy investment potential.

“In South East Asia, Vietnam will surpass Malaysia and Thailand as a lucrative energy market. In Asia, big markets will be China,  India, Indonesia and Vietnam. Vietnam is one of Shell’s potential key markets,” Le said.

He said Shell wished to sell LNG to Vietnam and build a large offshore movable LNG terminal next to offshore oil rigs.

Under its plan, Vietnam’s government would begin importing LNG from 2014-2015 to fuel power plants. “We have worked with PetroVietnam to offer some help, as Shell is the world’s leading LNG maker and exporter,” Le said.

A terminal could be built in cooperation with the government and Shell can be a potential partner, he said.

Shell already built a terminal of this type offshore of Australia, which is the world’s first movable floating terminal. Shell also inked a deal with Indonesia recently to build a similar one and provide LNG to this nation.

Last month, the government gave the nod to PV Gas, an affiliate of state-run PetroVietnam, to build a depot for storing imported LNG in central Binh Thuan province’s Ham Tan district. The $1 billion project is expected to come online in the next few years and will receive three million tonnes of LNG annually.

Le said Shell Vietnam was working with PetroVietnam for possibilities for it to join this project, which was also coveted by some Japanese investors.

“We are effectively working with PetroVietnam. At present, PetroVietnam is doing a feasibility study. Shell Vietnam will continue working with other relevant agencies and commits to provide technical assistance [for the study],” he said.

Currently, locally-made LNG can meet part of Vietnam’s total demand, so Vietnam has had to import LNG from Thailand, Malaysia, Singapore, mainland China and Taiwan. However, foreign LNG sources have been shrinking due to strong LNG price fluctuations and exporters’ policy changes.

PV Gas reported that Vietnam’s LNG consumption was 810,000 tonnes last year and was expected to be one million tonnes by 2013.

PetroVietnam recently opened bidding for exploring and exploiting eight offshore blocks. Shell Vietnam was studying data of these blocks.

Le said Shell also wanted to buy into PetroVietnam’s Petec company to “more clearly understand how Vietnam’s oil and gasoline distribution market is going.”

Petec’s proposal to sell a 25-30 per cent stake to Shell was recently rejected by the government.

Le revealed that Shell would be one of the biggest marketers of ethanol worldwide and Vietnam had a great material source for the second generation ethanol technology.

“If the Vietnamese government more encourages usage of biofuel in Vietnam which makes the market size large enough, then ethanol manufacturing here would be our great interest.”

However, the firm currently shows no interest in constructing oil refinery projects in the country “due to Shell’s global policy changes,” though Shell once wanted to implement an oil refinery project in Vietnam.

Le warned that Vietnam would face big environmental challenges if it continued attracting projects to build coal-fired thermo-electricity plants, as these projects would emit toxic gas due to coal combustion.

Vietnam-India ARC-ICT Center launched

The Vietnam-India Advanced Resource Center in Information and Communications Technology (ARC-ICT) was launched in Hanoi on September 16.
 
The launching ceremony of the Vietnam-India Advanced Resource Center in Information and Communications Technology, Hanoi, September 16, 2011  

Participants to the launching ceremony include visiting Indian Foreign Minister S.M Krishna, Vietnamese Minister of Information and Communications Nguyen Bac Son, and Chairman of Hanoi Municipal People’s Committee Nguyen The Thao.

The $2 million project is entirely funded by the Indian government. It is India’s biggest capacity-building project in Vietnam.

Indian Foreign Minister S.M Krishna expressed his belief that the center would become a symbol of the two countries’ strategic partnership.

The center will operate with assistance from India’s Center for Development of Advanced Computing (C-DAC).

Last May, the Hanoi Information and Communications Department coordinated with the C-DAC to select 28 technicians for further training in India in preparation for running the center.

Property market pins hopes on trusts estate investment trusts

Creating a market for real estate investment trusts (REIT) was one possible solution for reviving the real estate market, a workshop held in HCM City last week to introduce REITs heard.

REITs are like mutual funds that invest only in property.

"Shortage of channels to raise funds for the real estate market is a challenge to developers and investors," Phan Thanh Mai, general secretary of the Viet Nam Real Estate Association, said.

"REITs could be the answer."

Le Cao Tuan, deputy head of the office of the Central Steering Committee for Housing and Real Estate Market Policy, said: "The Vietnamese government will provide support for setting up REITs by creating a legal framework in the shortest possible time."

Milton Cheng, general director of Baker&McKenzie's REITs for Hong Kong/China, said: "REITs invest primarily in real estate or real estate-related assets, typically list on a stock exchange, and have the benefit of certain tax incentives to achieve tax transparency."

REITs helped "monetise" assets and served as an exit vehicle for pipeline developments while providing a steady income stream, capital gain, and access to an illiquid asset class via liquid instruments, he said.

With a market and policies in place, the model would "democratise" holdings of commercial real estate and attract international institutional investors, he added.

But he also pointed out that a viable REIT market required clear land ownership, corporate governance framework, tax exemption and incentives, and foreign exchange control.

Frederick Burke, managing partner of Baker&McKenzie in Viet Nam, said Viet Nam was also yet to have a pool of originators, a pipeline of good quality assets, or a specific regulatory regime,

Capital and cash management structures were not flexible and there was no experienced regulator with relevant skills, he said.

A large number of income-producing assets was emerging and there was also a need for new channels to raise funds, he added.

Nguyen Van Hoang, CEO of VREIT Management, said REITs offered high dividend payouts and special tax treatment.

"Around the world, many rich people focus on REITs thanks to the stable income they provide. Pension funds, for instance, are interested in hotels, schools, shopping malls and factories."

In Viet Nam, the heavy dependence on the banking system for funds causes many difficulties to the real estate sector. It needs an estimated US$130 billion by 2020, or around $15 billion a year.

China probe policy slows rubber exports
 
Exports of rubber to China via the border are at a standstill as China has tightened policies on inspecting rubber imports via cross-border trade.

Rubber exports to China via Luc Lam Border Gate in Quang Ninh Province have stalled since July, as Chinese traders began buying rubber only occasionally and then stopped totally, Sai Gon Tiep Thi (Sai Gon Marketing) newspaper has reported.

Le Van Xuong, head of the Binh Long Rubber Company's Representative Office in Quang Ninh Province, said that rubber trade among Vietnamese exporters and Chinese traders at Luc Lam Border Gate was still frozen.

Chinese customs inspection officers and police at the border post have not granted customs clearance licences, preventing Chinese traders from buying rubber from Vietnamese exporters, according to Xuong.

Tran Thi Thuy Hoa, general secretary of the Viet Nam Rubber Association, said Vietnamese exporters were not surprised at China's policies of controlling rubber imports via cross-border trade because China often applies these policies to inspect businesses at border crossings.

The policies also aimed to reduce rubber export prices, which have increased strongly since early this year, Hoa said.

Rubber export prices to China fell from CNY 31,500 (US$4,921) a tonne in mid-August to CNY29,000 the first week of this month.

In recent years, Vietnamese exporters have tried exporting rubber to China via official export channels.

But the export quantity via this channel did not improve because of high taxes, Hoa said.

Chinese importers had to pay a tax of 25 per cent for official imports, but did not have to pay taxes for cross-border imports.

In addition, procedures for cross-border exports were simple and fast, so both sellers and buyers preferred this kind of export.

China accounts for 60-65 per cent of Viet Nam's rubber export quantity.

Viet Nam exported a total of 449,000 tonnes of rubber worth $1.9 billion in the first eight months of the year, according to the Viet Nam Rubber Association.

Sauce trademark owners usurped

HCM City-based law firm Bross&Partners Law Co has cautioned the Phu Quoc Fish Sauce Association that the Phu Quoc fish sauce trademark has been registered by a local firm in Hong Kong.

Le Quang Vinh, director of the law firm's Intellectual Property Department, said despite the geographical indication which allows only fish-sauce makers on Viet Nam's Phu Quoc island to use the label, it was registered for a fish sauce on May 11 by Hong Kong-based Viet Huong Trading Ltd Co.

Viet Huong has applied to relevant agencies in the Chinese region seeking protection of the label, and Vinh warned that if Viet Nam did not object to the infringement within a certain time, the trademark would be protected under Hong Kong law.

In 2001 Phu Quoc fish sauce became one of Viet Nam's first products to have its appellation of origin recognised worldwide, meaning the name can be used only for fish sauce products made on the Vietnamese island.

Other appellations of origin worldwide include champagne (a region in France), tequila (a town in Mexico), and Havana (cigars).

Rally runs aground on economic worries, profit-taking pressures

The recent strong surge in share values on the nation's stock market was brought to a halt last week, with market insiders predicting a downward adjustment in the opening sessions of this week on strong profit-taking pressures and global economic uncertainties.

Many stocks had regained about 20 per cent of their value over the past month, and some had even seen their prices double, including Viet Hai Shipping and Real Estate (VSP), noted the head of analysis and consulting for Kim Eng Securities Co, Phan Dung Khanh.

With such a large return in a short time, the stock market was the nation's highest-gaining investment channel during the month.

But, Khanh added, "The latest gaining phase on Viet Nam's stock market was stopped last week after the VN-Index posted gains for 13 consecutive sessions – its most impressive growth since the heyday of the market in 2006-07," Khanh said.

FPT Securities Co analysts said the impressive growth of Viet Nam's stock market since mid-August was largely motivated by expectations of short-term investors of lower interest rates and easing inflation.

But pressures on authorities to once again increase petrol prices and electricity rates could reignite inflation, Khanh warned.

Meanwhile, inflation data for September, due to be released this week, was expected to reflect a one-month increase in consumer prices of around 0.7-0.8 per cent, according to the vietstock website.

Many international institutions, including the Asian Development Bank, IMF and World Bank, as well as investment banks like JP Morgan Chase have repeatedly cautioned that looser monetary policy could diminish policymakers' efforts to stabilise the economy, undercutting the confidence of businesses and consumers in the Vietnamese dong and putting pressure on the country's foreign reserves.

"The rising cycle of Viet Nam's stock market has been cut short," wrote vietstock analysts. "Short-term speculative tactics will likely become the main investment trend."

On the HCM Stock Exchange last week, the VN-Index lost 0.6 per cent over the course of the week, closing on Friday at 457.11 points. However, the volume of trades continued to be high, averaging 66.3 million shares per session and a value of over VND1.17 trillion (US$56 million).

On the Ha Noi Stock Exchange, the HNX-Index closed the week at 74.88 points, a loss of 2.47 per cent from the previous week's close. Daily market volume rose by over 12 per cent, however, reaching 68 million shares, worth an average of VND788.8 billion ($38 million) per session.

Industrials fell, with real estate and financials also declining by an average of 4-6 per cent. A strong performance by Bao Viet Holdings (BVH), however, lifted insurance shares by an average of 12 per cent during the week.

Foreign investors concluded the week as net sellers, unloading a combined VND692 billion ($33.3 million) worth of shares on the two exchanges – their second biggest wash-out since the beginning of the year.

While they bought shares worth a total of VND1 trillion ($48 million) in HCM City, they sold up to VND1.76 trillion ($84.7 million) worth of shares during the week, accounting for over 30 per cent of total market value. Shares of property developer Vincom (VIC) and software giant FPT were the most heavily sold during the week.

Market watchers believed that the heavy activity among foreign investors was due to two exchange-traded funds – Market Vectors Viet Nam (VNM) and FTSE Viet Nam Index X-Trackers – restructuring their portfolios.

Interest-free loans to lure businesses

The HCM City government will offer interest-free loans to local companies doing business in the city, Laos and Cambodia.

With a stimulus package of VND8 trillion (US$381 million), the city has approved interest-fee loans of up to VND100 billion ($4.7 million) over a seven-year period.

Representatives of more than 100 companies in the HCM City Enterprises Association attended a conference held last Friday in HCM City to learn about the policy.

Priority will be given to projects related to medicine, education, culture, production and environment.

The city has promoted the use of high technology at hospitals, educational facilities, vocational training schools, theatres, cinema, dormitories, waste treatment systems, forest plantations and others.

Other projects such as trade investment in Laos and Cambodia, automobile production, food production and others will receive a 50 per cent interest rate subsidy.

Pham Linh, deputy general director of Orient Commercial Joint-Stock Bank, said during the conference that he supported companies and would try to help overcome their difficulties.

"I believe the support will contribute to stabilising the economy in the city and the country as well," he added.

Capital eyes mould industry
 
Mould manufacturing needs to overcome several hurdles in order to become one of Ha Noi's key industries, according to the Department of Industry and Trade.

The department's survey of production methods found that foreign moulds were still preferred by enterprises due to their superior quality and lower cost. Businesses reported that domestic moulds were neither sufficiently durable nor sophisticated.

Vietnamese companies produced moulds mainly to serve in their own manufacturing process but rarely sold them on the market.

According to deputy director of the Department of Industry Management Luu Minh Duc, the industry currently lacks high-level skills, techniques and human resources, and investment in equipment for mould production is costly.

Duc said that human resources played an especially decisive role in the development of mould production, which depended mainly on experience, knowledge and creativity.

A lack of co-operation between mould producers is another cause of concern, according to Bui Ngoc Huyen, director of Xuan Kien Automobile Company.

Activities, such as fairs and exhibitions, were needed to advertise domestic moulds and promote co-operation, which would help raise capacity and sophistication, he added.

He also urged that financial incentives be put in place, including a tax on imported steel, the material used for moulds.

"Promoting the sector's development is crucial," Duc emphasised. He reasoned that moulds could be highly valuable when used to produce high-quality goods.

There are 30 enterprises producing moulds in Ha Noi, about half of which receive foreign investment, mainly from Japan, China and Taiwan.

Meanwhile, the demand for moulds has been increasing as thousands of Ha Noi enterprises use moulds in production.

According to the Ministry of Industry and Trade, the sector employs about 1,500 people and has a turnover of VND500 billion (US$23.8 million) per year.

Ngo Van Tru, deputy director of the ministry's Department of Heavy Industry, said moulds were included in the list of industrial products to receive incentives from the Government.

Under the master socio – economic plan for Ha Noi to 2020 with vision to 2030, ratified by the Prime Minister in July, mould production would become an important industry of the capital.

Illegal enterprises keep customers from City's port

The Phu Dinh river port is expected to be fully operational late this month, but privately built ports located along the Cho Dem River are taking away business from the country's largest river port.

The construction of the 64-ha Phu Dinh Port in District 8 is nearly complete, but little activity has been seen in recent months.

The city has spent more than VND360 billion (US$17 million) for land clearance to build the port.

Early this month, most important facilities were completed, but only a few boats have been loading goods at the port.

Tran Hoa Lan, director of the port, which is located near Binh Dien Wholesale Market, said there were several small ports that had been erected by local people along the river.

These ports have no wharf and warehouse, and they offer boat owners cheap prices for the loading service, he said.

During the 2011 Tet holiday, the city government allowed the under-constructed Phu Dinh Port to receive boats loading goods, but no boats appeared.

According to Sai Gon Giai Phong (Liberated Sai Gon) newspaper's reporter, there are many ports along Tau Hu, Ben Nghe, Doi and Te canals.

The paper quoted Tran The Ky, deputy head of HCM City's Department of Transport, as saying the department does not allow Phu Dinh Port to operate exclusively in the city.

However, every port must operate under the law and should be built according to the city's zoning plan.

The department will co-ordinate with District 8's administration to conduct inspection along the canals and impose stiff penalties to violators and shut down illegal ports.

According to the city's zoning plan, the city also has a river port system in District 4 and 7 as well as other areas.

However, Phu Dinh Port is considered a main river transport link connecting various transport routes between HCM City and Cuu Long (Mekong) Delta and southeastern provinces.

The Phu Dinh Port's management board has carried out solutions to attract customers such as extending the period of leasing warehouses or allowing customers to build appropriate warehouses with their products.

Leaders of Phu Dinh Port have asked the department to create favourable condition for the port's operation.

The 1.5km road connecting Vo Van Kiet Street to Ho Ngoc Lam Street leading to the port needs to be upgraded.

PV