Retailers face foreign competition

Vietnamese retailers are facing fierce competition from several new foreign players in the market, who also have strong financial potential and experience.

Responding to concerns about Thai commodities flooding the supermarkets, outdoor markets and convenience stores of the country, Prof Le Cao Doan from the Viet Nam Institute of Economics, said foreign enterprises from not only Thailand, but from South Korea, Japan, the United Kingdom, as well as the United States are planning to foray into the Vietnamese market.

However, the arrival of the new retailers will only benefit consumers, and local enterprises might fail in this competition, Doan stated.

The Deputy Minister of Industry and Trade Nguyen Cam Tu agreed, commenting during an online discussion held yesterday in Ha Noi that Viet Nam should not view the competition in a negative light.

"This could be an opportunity for Vietnamese companies to access new capital, and tap new and effective management experience," Tu added.

Tran Nguyen Nam, the deputy head of the ministry's Domestic Market Department, said the number of foreign firms penetrating the domestic retail market has risen sharply in the past few years with several big brands also entering the market.

For example, billionaire Charoen Sirivadhanabhakdi's retail conglomerate Berli Jucker (BJC) recently announced a plan to buy Viet Nam's cash-and-carrying wing of the Germany Metro AG for 655 million Euros (US$876 million).

The Central Group has two outlets in Ha Noi and HCM City and has acquired a 49 per cent stake in the company, which owns the Nguyen Kim electronic shopping centre chain.

However, Thailand is not the only investor paying attention to the local retail market, as other enterprises, such as Big C (France), Lotte, Lock&Lock (South Korea) and Aeon (Japan) are also rushing to develop their retail operations in Viet Nam.

Doan of the Viet Nam Institute of Economics said Vietnamese retailers lack capital and experience, and have low competitiveness.

Specifically, capital has been mainly invested in State-owned enterprises instead of small entities.

Dang Dinh Dao, the former head of the Institute of Economics under the National Economic University, added that the weakness of the local firms was high production costs and low quality.

In addition, Vietnamese firms should also strive to improve their prestige in the international market, he suggested.

Firms urged to prepare for AEC

Vietnamese firms have been urged to take initiative and prepare for participation in the ASEAN Economic Community (AEC), which is expected to be formed by the end of this year.

At a forum on the Government's e-portal held yesterday, experts said that besides offering many opportunities, the AEC will also pose challenges, such as the influx of products and services from neighbouring markets and skilled labourers, adding that, if Viet Nam does not enhance its competitiveness, the country might become a consumption market for other countries in the region.

According to Deputy Minister of Industry and Trade Nguyen Cam Tu, AEC is expected to create a firm base for Viet Nam to help integrate more deeply into the global economy.

The integration process has put Vietnamese firms in urgent need for changes to promote advantages, Tu said. However, he pointed out that firms are seemingly not paying enough attention and businesses lack detailed information about the AEC.

Tu stressed that Viet Nam must follow the roadmap for the formation of the AEC as 2015 has already started, adding that the country must follow other integration commitments also.

Economist Nguyen Hong Son said there is a lot of work to be done ahead, including stabilizing the macro-economic situation and improving the business climate for enterprises.

Son added that coordination amongst the Government, enterprises and associations is also critical for the integration.

He pointed out that detailed information should be provided to companies to enhance their awareness about the AEC, as well as opportunities and challenges that will stem from being part of the association.

A recent survey conducted by the Ministry of Planning and Investment revealed that 76 per cent of domestic firms had no knowledge about the AEC, 94 per cent did not understand the content of negotiations, while 63 per cent were unaware of the opportunities and challenges involved in participating in the AEC.

Support should also be provided to the firms to connect with foreign-invested companies, which will help Vietnamese firms to participate further in the regional and global value chain, and to enhance their capacity to deal with potential risks, which might arise from changes in the global market and policies of foreign countries, Son stated.

It is therefore important for firms to enhance their management capacity, he added.

Experts at yesterday's forum also pointed out that human resources pose a major problem ahead of the formation of the AEC as Viet Nam is facing a shortage of skilled labour and suffers from low productivity.

When the economic community is formed, there will be a free flow of human resources among member countries, which might put Viet Nam at risk of brain drain and boost competition from other labour markets that possess better skills and higher productivity.

"The quality of our labour force must be enhanced to meet regional standards," Son said.

AEC is expected to be formed by the end of this year by 10 member countries, with an estimated combined GDP of US$2.5 trillion.

ASEAN figures among the important trade and investment partners of Viet Nam. The export-import turnover of Viet Nam with ASEAN is estimated to be more than $40 billion.

Cassava exports rebound, but still vulnerable

Vietnam’s cassava exports recovered in 2014 and surpassed the US$1 billion mark, however the industry continues to face challenges with sustainability and is not out of the woods yet, according to the Ministry of Agriculture and Rural Development (MARD).

For calendar year 2014 MARD reported exports were up 5.4% on-year in volume and 2.6% in value to 3.29 million tonnes at US$1.3 billion.

China topped the import markets accounting for 84.65% of market share, which were up 18% on-year. Exports to markets across the board excluding the Republic of Korea (RoK) and Taiwan, enjoyed growth.

In the first half of last year, MARD said exports of cassava dipped 24% against the prior year while its stockpiles increased twofold on the back of stiff price competition from Thailand and the dispute between Vietnam and China in the East Sea.

In addition, the RoK– the second largest importer – limited imports as its government called on producers to use potatoes to replace cassava to protect domestic production.

In the second half of last year, consumption markets began notching upwards and by the end of October most cassava producers had cleared their stockpiles.

In the fourth quarter prices began moving up and pushed to US$252 per tonne at the Saigon Port and to US$247 per tonne at the Quy Nhon port, up on average around US$20 per tonne over the prior year.

According to the MARD’s Plantation Department, cassava cultivation areas reached 548,800ha in 2014, yielding more than 10 million tonnes. Cultivation areas doubled and productivity increased over twofold from 15.35 tonnes per ha in 2005 to 18.5 tonnes per ha in 2014.

Cassava development in localities remained plagued with obstacles such as overproduction, low productivity, undiversified products, unstable consumption markets and loose coordination between producers and processors.

Deputy Head of the Plantation Department Tran Xuan Dinh said the cassava industry's development remained unsustainable for 2014 adding that it is necessary now to make timely and proper adjustments.

The department plans to reduce cultivation areas to 500,000ha over the next two years and to 450,000ha by 2020 to maintain production at a capacity of roughly 11 million tonnes.

President of the Vietnam Cassava Association (VCA) Nguyen Van Lang in turn said cassava products are mainly exported to China at wildly fluctuating prices. Currently, the export market faces difficulties as China has placed limits on imports.

He added that China, the largest export market of Vietnamese cassava, has also closed 70 per cent of its ethanol-producing factories as China's ethanol industry continued to stagnate, reducing cassava imports.

Over the next five years, demand for material cassava to process and produce ethanol has been forecast to increase by 50%, opening up a huge window of opportunity for the cassava sector.

In order to sustainably develop businesses need to pay more attention to finding ancillary outlet markets in order to avoid overdependence on China as currently is the situation, Lang stressed.

For his part, VCA Secretary General Pham Vu Ha said over the past 20 years, the cassava sector has concentrated solely on producing starch to the detriment of technology, quality and trademark development.

As a consequence the market has been much weaker than in neighbouring Thailand.

It is high time for producers to diversify their products and produce higher added value and alternative products such as ethanol and food, Ha underscored, which would benefit the sector in the long run.

A gradual reduction of exports of raw products would be replaced by increased domestic demand at higher and more stable prices, Ha said.

He added that to stimulate production and consumption of bio-fuel E5 that is made from cassava; the State should consider building support policies for producers, distributors and consumers.

VN farmers benefit from medicinal plant crops

A new cooperation model in farming and trading medicinal plants has brought initial results in the northern province of Nam Dinh , where resources from the public sector (government and donor), private sector and from different communities are used for joint activities.

Farmer Nguyen Thi Suu, who lives in the province's Hai Hau District's Hai Loc Commune, is among the first applying the model.

She is oblivious of the freezing winter around her as she fertilizes her day thia canh (gymnema sylvestre) field and is only focused on the upcoming harvest.

Suu started planting day thia canh six years ago. Her family owns 360 square meters of land that grows medicinal plants, and harvests thrice per year on average, which generates an ncome of VND4.5 million (US$214) each time.

"Compared with rice planting, medicinal product planting has doubled our profits and does not take much time," she said.

Since planting the field in 2013, Suu has earned more than VND15 million ($714). Along with 18 other households in the commune, her family has seen their annual income rise, with significant contribution from the farming of medicinal plants.

Their life as farmers in the Hai Loc and Hai Toan Communes changed after receiving support from the BioTrade project funded by the Swiss Government through the State Secretariat for Economic Affairs (SECO). The programme is also supported by the Vietnamese governmental agencies, notably the National Institute of Medicinal Materials (NIMM) under the Ministry of Health.

The three-year project was implemented by the HELVETAS Swiss Intercooperation from 2012 to 2014 in the Hai Toan and Hai Loc Communes. Farmers transformed their paddy fields, which had not earned them much, into two cultivation zones for the two medicinal plants.

The Hai Toan's group has 28 participating households, with five hectares allocated for planting dinh lang (polyscias fruticosa), while another Hai Loc group has 19 members, with three hectares set aside for planting day thia canh.

Mai Van Quyet, the vice chairman of the Hai Hau People's Committee, says the district has used a total area of 647 hectares for growing medicinal plants, mostly dinh lang and day thia canh. He added that the plants have reaped economic benefits for the local people, contributing to their socio-economic development.

"The implementation of the project has drawn the participation of HELVETAS, NIMM, experts from enterprises, farmers, and local management agencies. This is an effective approach to the process of meeting targets for the project," he stated.

"At the moment, the district has harvested 15 hectares of medicinal plants, following GACP-WHO standards. Two collaboration groups currently operate in the area, which are necessary requirements for production and consumption that helps boost the farmers' incomes."

The Hai Hau District also offers many good conditions for expanding production and processing medicinal plants. Its ground water resources meet hygiene requirements and its soil has heavy metal content below a certain threshold. These result in favourable conditions for the production of medicinal plants, based on GACP-WHO standards.

Vu Van Trien, head of its agriculture office, said the district has successfully built a closed production process, thanks to the support rendered by HELVETAS, NIMM, Traphaco and the Nam Duoc enterprises.

"The district has 647 hectares with more than 20 species of natural ingredients, including 172 hectares of dinh lang. The total revenue generated by fresh dinh lang will be VND910 million ($43,300) per hectare per year. With a harvested area of 45 hectares, its profit will be VND40 billion ($1.9 million) per year," he pointed out.

Trien noted that day thia canh brings in an income of VND423 million ($20,140) per hectare per year, and its total revenue will reach VND6.3 billion ($300,000). "Planting medicinal plants contributes to stabilising the life of farmers. Many households have grown wealthy through planting and selling medicinal plants, especially dinh lang," he added.

Under the scope of the Biotrade project, HELVETAS has supported the Hai Hau People's Committee to develop its plan for farming medicinal plants until 2020, with its orientation aimed at 2030.

In 2014, the collaboration group of the Hai Loc Commune reported an average income of 423.8 million per hectare, which is triple the amount of returns offered by rice planting. Therefore, the total area brought under day thia canh plantation was increased to 8.2 hectares.

Lam Thanh Van, the head of the group, said the medicinal plant was cultivated separately by households and the project helped them localise it in the area. It was harvested after six to seven months, and harvesting 360 sq.m brought in VND15 to 16 million per year ($714 to 761).

"The output for each year has been growing because farmers have much more experience planting day thia canh. The Nam Duoc company is committed to purchasing all products at a negotiated price.

Meanwhile, the dinh lang planted in 2013, will only be harvested in 2017. Farmers in the collaboration group of Hai Toan were taught the techniques and given practical training for all processes, from seed selection to transport and treatment under the supervision of HELVETAS and Traphaco.

Tran Khac Luong, chairman of Hai Toan People's Committee, said based on market information; the communes still believes there will be a market for the products during the next three to four years.

"The localisation of day thia canh in one area has helped people get regular work and raise their incomes. Earlier, farmers used to plant it spontaneously, but now they cooperate with each other and find it more convenient to sell products," he said.

Farmer Nguyen Thi Ha had planted dinh lang trees more than a decade ago, and sold them for thousands of dong per kilogram. When informed about the project, she joined the group from the first day because "it earns more economic profits for my family".

"There are many advantages of joining the group. We are instructed on the ways for planting and caring for trees by following GACP-WHO standards. They also help us sell products to the Traphaco company at a price higher than what the market offers," the 42-year-old farmer said.

Selling pressure hampers growth on City exchange

Rising selling pressure in the afternoon restrained the market uptrend on the HCM City Stock Exchange yesterday as investors sat on the sidelines awaiting a clearer market outlook.

The benchmark VN-Index inched up 0.12 per cent to close the session at 572.22 points but the market condition was negative with 103 stocks declining, 100 increasing and 105 ending flat.

Reduced cash flow in the market showed in drops in both market volume and value. Almost 80 million shares worth VND1.5 trillion (US$70 million) were traded by the end of the session, down 10 per cent compared with Monday's level.

The rally of several large-cap stocks like PV Gas (GAS), Vietcombank (VCB), Vinamilk (VNM), Bao Viet Holdings (BVH), Phu My Fertiliser (DPM) and Hoa Phat Group (HPG) kept the market afloat by the day's end.

On the other end of the spectrum, Vietinbank (CTG), Eximbank (EIB), BIDV (BID), Sacombank (STB) and PetroVietnam Drilling and Wells Service Corp (PVD) all plunged, pulling the VN30, which tracks the top 30 shares by market value and liquidity, down 0.4 per cent to 609.19 points.

FLC Group (FLC), a member of the VN30, remained the most active code with trading of nearly 5.8 million shares. FLC closed unchanged at VND10,800 a share.

On the Ha Noi Stock Exchange, the HNX-Index widened its loss to another 0.32 per cent to finish yesterday at 84.99 points.

The HNX30, the tracker of the top 30 shares by market liquidity, also slipped 0.46 per cent to stand at 165.60 points.

Liquidity kept waning here with market volume reaching the lowest level since mid-August at 40 million shares worth VND545 billion ($25.5 million).

FLC's investment arm, KLF Joint Venture Global Investment Co (KLF), was again the most active code with 9.5 million shares exchanged, decreasing 0.87 per cent to settle at VND11,400 a share.

Foreign investors turned to be net sellers in HCM City with a net sell value of VND33.43 billion ($1.6 million) but rebounded to be net buyers in Ha Noi after heavy selling on Monday, picking up shares worth only VND6.9 billion ($322,400) in the capital city.

Food Ingredients Viet Nam expo to be held in HCM City

Some 150 companies from 20 countries will participate in the second Food Ingredients Viet Nam exhibition in HCM City from May 20 to 22.

They will showcase many kinds of ingredients with the main aim of supplying to Vietnamese companies.

According to the organiser, UBM Asia, the first exhibition held last year was very successful.

While last year most of the ingredients on show related to flavours and colours, this year there will be more health-related ingredients and halal food, according to UBM.

"Four thousand visitors are expected to visit the exhibition," it said, adding that this year would see the participations of Chinese companies and others from the EU and ASEAN.

The organisers are hoping that with many of the companies now knowing each other after last year, the second event will be more successful.

Besides the display of products and co-operation opportunities, the exhibition will also feature exhibitions and seminars about the food sector.

VN Steel Corp to withdraw from non-core sectors

The Viet Nam Steel Corporation plans to withdraw capital from non-core businesses as part of an approved restructuring plan, according to a corporation official.

The corporation's Deputy General Director Vu Ba On said it would give priority to withdrawing capital from companies that had reported a low operational efficiency and losses, as well as firms in the non-core business sectors.

Last year, the corporation gradually withdrew capital from companies with low operational efficiency and losses as scheduled, including from the Bac Thai Metallic, the Tan Thuan Steel and Vnsteel Thang Long companies. Meanwhile, it did not withdraw its capital from some sectors, such as finance, cement and property, as scheduled earlier.

The corporation's Design Consulting and Metallurgical Company has not been converted into a joint stock company as planned and the dissolution and operational stoppage at the Southern Steel Sheet JSC has been slow due to disputes related to partners and rent.

Additionally, this year, the corporation would continue to adjust its development strategy for the 2015 to 2025 period, On revealed, adding that the corporation would implement the strategy after getting approval, reported vietnamplus.vn.

The corporation would also promote an inspection and supervision of operations in the sectors of investment, product quality management, input material source management, as well as technical improvement at subsidiaries and joint ventures to reduce production costs and boost efficiency in production and business.

For production and business, member companies of the corporation would have to prepare essential materials for production since the beginning of this year and also conduct steel market studies at home and abroad to ensure a reasonable inventory and competitive prices.

Trading and service companies should come up with solutions to enhance collaboration and for the management of goods bought and goods in stock, as well as follow market development to buy input goods at competitive prices.

According to the corporation, it consumed 2.97 million tonnes of steel last year, 4.2 per cent higher than 2013, but saw a 7.1 per cent drop in revenue last year to VND24.9 trillion (US$1.19 billion), due to lower selling prices.

The corporation stemmed losses in production and business profits and the parent corporation gained VND70 billion ($3.33 million) in profit for the whole of 2014, nearly doubling its plan.

Meanwhile, total pre-tax profit at its subsidiaries and joint ventures in 2014 saw a year-on-year increase of 65 per cent to VND847 billion.

Rubber industry faces falling prices

The rubber industry is expected to continue struggling this year, with profits declining or even reporting losses, owing to the sharp fall in rubber prices in the world market.

Experts said the sector must reduce exports of raw material and diversify export markets to avoid reliance on a single market to overcome this difficult time.

According to the Viet Nam Rubber Industry Corporation, the rubber industry's profits will narrow as rubber prices in the market are forecast to slip to VND31,000 (US$1.5) per kilogramme this year, while production costs will hover around VND30,000 ($1.4).

The rubber industry of Viet Nam had a hard time last year when prices fell to a five-year low of $1,500 per tonne. The group pointed out that the fall in rubber prices was partly due to China - one of the biggest rubber import markets for Viet Nam - cutting rubber imports at some point of time.

Statistics from the Ministry of Agriculture and Rural Development also showed that Viet Nam exported 1.07 million tonnes of rubber last year, the same as in 2013, but earned only $1.8 billion, 28 per cent lower than 2013's export value, due to the price drop.

The average export price for rubber during the first 11 months of 2014 was $1,695 per tonne, falling by 27 per cent from the same period last year.

Vo Sy Luc, Chairman of the Viet Nam Rubber Industry Corporation was quoted by Thoi Bao Kinh Doanh (The Business Times) as saying that rubber prices had been slipping since 2012 from more than VND100 million ($4,670) per tonne to around VND29 million ($1,355).

This has hit rubber farmers hard, with many in the south-eastern region cutting down their trees to switch to other crops. The total area under rubber tree plantation that was cut down is estimated to be more than 4,000 ha.

According to the group's General Director Tran Ngoc Thuan, Viet Nam currently exports rubber in raw form, mainly latex or rubber with just preliminary processing, which can result in low added value.

Industry insiders estimate that rubber values could increase by up to 20 times if raw materials are processed into finished products.

Doan Xuan Hoa, Deputy Director of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production, pointed out that only 18 per cent of the latex from Viet Nam is processed, adding that if the rate is increased to 25 per cent, Viet Nam will become less dependent on foreign markets.

Experts have urged rubber companies to invest more in latex processing to boost added value, warning that the industry will continue to be at a disadvantage in case no improvements are made.

The Minister of Agriculture and Rural Development Cao Duc Phat said that in the long term, the rubber industry must restructure for sustainable development, and focus on enhancing quality and efficiency.

Domestic cassava businesses go in search of new markets

Vietnamese cassava businesses should look for new export markets to avoid dependence on the Chinese market, the chairman of Viet Nam Cassava Association (VCA) told Thoi bao Kinh te Viet Nam (Vietnam Economic Times) newspaper.

Nguyen Van Lang said most of the cassavas were exported to China, leading to price uncertainties, while China has recently limited purchases, citing a price squeeze.

However, China is still the largest cassava import market for Viet Nam, accounting for 84.65 per cent of market share. Last year, it saw an increase of 18 per cent over 2013.

The country last year exported 3.29 million tonnes of sliced cassava and cassava products, earning an export turnover of $1.3 billion, an increase of 5.4 per cent in volume and .6 per cent in value compared to 2013, according to the Ministry of Agriculture and Rural Development,

Pham Vu Ha, general secretary of VCA, said for the last 20 years Viet Nam's cassava processing sector had not invested in technology to improve quality and build trademarks.

As a result, Viet Nam's cassava trademark did not equal that of Thailand's.

Thus, domestic businesses would need to review changes, for instance, and invest in starch processing instead of production only.

Businesses could also make processed products such as foodstuff or ethanol to increase product value.

Ha said to promote ethanol production and consumption, the State needed to issue financial support policies for producers, distributors and consumers.

For a long period, the cassava sector would have to decrease raw cassava exports to focus on satisfying domestic production.

Moreover, there would be some adjustment in cassava growing and production in order to promote sustainability, Tran Xuan Dinh, deputy head of Cultivation Department, said.

For instance, the country's cassava growing area would be reduced from 549,000 in 2014 to 500,000 ha by 2017 and to 450,000 ha by 2020.

The harvested cassava output would be stabilised at 11 million tonnes.

According to the Cultivation Department, cassava has been grown in mass quantities with unplanned development, leading to low productivity.

Last year, cassava productivity was 18.2 tonnes per ha, much lower than India (31.43) and Thailand (21.09).

There are still now many diversified products because of poor varieties, and the link between producers and processors is not close.

Moreover, cassava-starch processing facilities have caused environmental pollution in many localities.

In the first six months of last year, sliced cassava exports fell by 24 per cent over the same period in 2013. The sliced cassava in storage at factories doubled compared to 2013.

This occurred because Thai businesses had exported a high volume of sliced cassava at lower prices, which led to more purchases made by Chinese importers.

For the remaining months, the market has gradually recovered. By October, the Vietnamese businesses sold out all the cassava in storage.

In the fourth quarter of last year, the cassava export price was US$252 per tonne, an increase of $20 per tonne.

However, the businesses at that time did not make a profit because last year's transportation fee increased 1.5-2 times compared to 2013.

The sliced cassava price is expected to increase only slightly this year.

MoIT tells EVN to update power tariffs

The Ministry of Industry and Trade has asked Electricity of Viet Nam (EVN) to update power tariffs, based on input factors, following the group's proposal to raise electricity selling prices.

According to the ministry, the calculation for revised tariffs should be based on electricity tariffs for the period between August 1, 2013 and December 31, 2014.

The new proposed price should include inputs, which are not taken into account while calculating the current average tariff.

The ministry will co-operate with the relevant ministries and agencies to review updated information from the EVN and adjust power prices going forward.

The group's Deputy General Director Dinh Quang Tri said the adjustment would not be implemented before the Tet (Lunar New Year) Holiday.

EVN had earlier requested that the supplemental emerging costs be factored into power tariffs this year.

Deputy General Director Duong Quang Thanh told a press conference in Ha Noi that the group's business in 2014 would be reviewed and launched plans for 2015, saying the new inputs would include raising coal prices, gas and taxes on water, which have significantly affected its operations.

In addition, supplemental fees levied on the forest environment in 2011 and 2012 had driven up electricity production costs and have not been included in the current power prices.

It was for these reasons that EVN proposed to the Government that it should revise the state budget and Official Development Assistance (ODA) to complete power projects for rural and remote areas, while supplementing those costs into power tariffs.

EVN reported a significant loss of VND16.8 trillion (US$789.6 million) in 2014, despite having increased retail electricity tariffs.

Its revenue in 2014 was pegged at VND196.3 trillion ($9.3 billion), up 13 per cent over 2013. Also, after-tax profits last year were estimated to be VND300 billion ($14.2 million), while its return on equity (ROE) was 0.2 per cent.

Scarce recompense for victims of real estate frauds

Frauds in real estate cause significant financial damages to investors but the chance for victims to collect what they have invested is very slim.

The recent arrest of National Assembly deputy Chau Thi Thu Nga, chairman of the real estate developer Housing Group, was predicted two years ago. At that point, all the contracts putting money into the real estate projects of Housing Group reached their deadlines at which Housing Group was legally obligated to payout its investors but Nga did not honour them.

Between 2008 and 2014, for two blocks in the B5 Cau Dien apartment project in Hanoi, Nga and accomplices signed 752 contracts with a cumulative worth of VND377.2 billion ($17.7 million). Now the money is nowhere to be found, because her house was determined by the police as collateral for a loan at Vietinbank and her car is rented, not bought.

The Housing Group case is one of  many real estate frauds busted recently. In another case, Le Hong Bang, general director of the Vietnamese real estate exchange JSC, signed 578 contracts with 397 people, collecting  VND347 billion ($16.3 million) in 2009. As of now, Bang has repaid VND63 billion ($2.9 million) to 82 people while the remaining money cannot be  found anywhere.

Similarly, Tran Ung Thanh, general director of Hong Ha JSC, mobilised VND169 billion ($7.9 million) from 143 people, under the agreement that the money will be invested in an apartment project in Hanoi, but after Thanh was given a life sentence and court-ordered to pay back the money, he was unable to and victims were left without any form of compensation .

According to Vietnamese law, perpetrators of fraud have to return  misappropriated properties  to the victims. However, this part of the sentence has largely proven difficult  to enforce.

SBV looks set to resolve weak banks in 2015

In 2015, the State Bank (SBV) is going to restructure the banking system vigorously via mergers and acquisitions (M&As) between banks.

Big names in the local banking sector including Vietcombank, BIDV and Vietinbank are said to be merging with smaller and weaker banks in the first half of the year.

According to SBV, in 2015, SBV will speed up the process of bank restructure. SBV has set target to resolutely deal with weak banks with no prospects for recovery and further development. SBV may announce dissolution, bankruptcy or entail compulsory intervention to resolve cross-ownership and to form large-scale, stronger and more competitive commercial banks.

SBV revealed that there will be at least six to seven bank M&As in 2015 alone. The authority is also firm on the banking restructuring by stressing that it will not exclude circumstances where it has to impose extreme measures such as compulsory purchases of shares and designated M&Á for some banks.

During the Vietcombank conference on Business Implementation 2015, SBV Governor Nguyen Van Binh emphasised that the process of restructuring has gone through the first phase in handling weakest banks across the banking system. In the second phase, SBV will focus on stronger banks and direct these banks to take on smaller banks.

The first merger to be expected the most is the case of Vietcombank and Saigonbank. As a largest bank in Vietnam, Vietcombank shows high safety indicators, while Saigonbank, even though small in size, yet is considered as a transparent bank. Vietcombank currently holds a large number of shares in Saigonbank and both banks are seen to have close relationship with one another.

Meanwhile, BIDV is expected to merge with another bank, possibly MHB, while Vietinbank is said to pair up with a smaller bank, perhaps one of PGBank, Ocean Bank or GPBank.

Other bank M&As could include Maritime Bank merging with Mekong Bank and SouthernBank to join Sacombank.

SBV aims at reducing the total number of banks to around 20 commercial banks to 2017. As such, there will be more than 10 bank M&As expected to happen in the coming time. M&As in the banking system will prepare a common ground for competitions and growth in the economy, according to the National Financial Supervisory Commission chairman Vu Viet Ngoan.

“In principle, financial institutions must ensure the mutual benefit of the whole economy in each country they are in. In other countries, weak institutions are often required to go bankrupt. As for us, merger is a fundamental change to overcome the weaknesses in the banking sector”, said Ngoan.

Vietcombank to become No.1 bank in Vietnam

The State Bank (SBV) Governer Nguyen Van Binh urged Vietcombank to become a leader in the banking sector in a conference for Business Implementation in 2015 held by Vietcombank on January 16.

Vietcombank showed healthy results and indicators in its 2014 financial results, as such, the bank should focus on restructuring, improving corporate governance in accordance with international practices and managing bad debts as a role model amongst other banks in Vietnam, Binh commented.

“To be considered as the leader, Vietcombank must show its ability in many aspects including managing bad debts, total assets and accounting for a bigger proportion in both wholesale and retail banking,” stressed Binh.

The bank’s 2014 total assets was reported at VND500 trillion ($23.36 billion), however, to become the number one in total assets, it could take years to achieve if there is no step forward, Binh added.

The governor also encouraged Vietcombank to merge with other banks in 2015 in a bid to strengthen the banking system and shrink down the number of local commercial banks this year.

"To become the number one in terms of size and market share, there is no other way better and faster than merger and acquisition. Vietcombank has long-established strengths in wholesale banking, thus merging with banks who have strong retail edge will help Vietcombank rapidly expand the retail market”, said Binh. “As such, the bank will be one step closer to be the No.1 bank in Vietnam.”

During the conference, Vietcombank general director Pham Quang Dung shared that after its success in 2014, Vietcombank will strive to achieve the minimum profit of VND6 trillion ($280.37 million) in 2015 and at the same time build up a plan for mergers and acquisitions in accordance with SBV’s direction.

Masan buys 32.8 per cent of competing seasoning maker

Masan Food Corporation, a subsidiary of Masan Consumer, recently announced it had bought 2.66 million shares, or 32.8 per cent, of Cholimex Food JSC.

Consequently, Cholimex Food has become an associated company of Masan.

Masan and Cholimex are two of the biggest firms in the chilli sauce segment, an important branch of the spice industry.

Masan earlier offered to buy 3.97 million shares, or 49 per cent, of Cholimex Food but two major shareholders of Cholimex, namely Cholon Investment & Import-Export Company Ltd. (Cholimex) holding 40.72 per cent of shares and Nichirei Foods Inc. (Nicheirei) holding 19 per cent of shares, refused to sell shares to Masan. In total, the three firms hold 92.6 per cent of Cholimex’s shares.

Masan wants to invest in Cholimex to increase presence in the market, while Nicheirei and Cholimex want to maintain independent businesses and fair competition in the market. It’s unclear whether the two sides are going to find a common voice.

HDBank finances resort project in Ba Ria-Vung Tau

HCMC Development Joint Stock Commercial Bank (HDBank) has inked an agreement to provide a credit package worth VND300 billion for Cotec Asia Company to develop the Blue Sapphire resort project in Ba Ria-Vung Tau Province.

The bank will offer preferential loans at an interest rate of 3.8% per annum in the first six months to customers buying villas and luxury apartments of the project and meeting certain requirements. The preferential interest is applied to the lending contracts signed between now and the end of March.

HDBank said loans would be disbursed at the request of customers.

Cotec Asia, a member of Cotec Group, began work on the Blue Sapphire resort project in 2010. The luxury resort covers an area of around 76,900 square meters and consists of 36 villas and 260 seaview apartments.

The basic construction of the 36 villas is complete and ten of them have been sold to customers.

VPBank supports rice, seafood firms

* Vietnam Prosperity Bank (VPBank) has set aside VND1 trillion to offer preferential loans for rice and seafood companies based in the Mekong Delta.

Each of the small and medium enterprises (SME) buying, processing, supplying and exporting rice and seafood in the region can borrow a maximum of VND100 billion in 12 months.

VPBank said the preferential loans for rice and seafood firms in the Mekong Delta have simple procedures and flexible lending terms.

Power tariff hike proposal under consideration

The Ministry of Industry and Trade is consulting the Ministry of Finance, the Ministry of Planning and Investment and the central bank over a power price adjustment plan, Tuoi Tre reports.

Earlier, Vietnam Electricity Group (EVN) proposed adjusting the power price annually.

According to the trade ministry, with comments of related ministries and agencies late last month and early this month, it asked EVN to update its power price calculation plan based on input costs.

The period for power price updates is between August 1, 2013 (the most recent power price adjustment) and December 31, 2014. After receiving a report and related documents from EVN, the trade ministry will consider the power price plan.

Recently, EVN sought approval to add costs to this year’s electricity tariffs as its profit margin was low last year when it was profitable.

More foreign tourists go to Phu Quoc

Phu Quoc has welcomed more international travelers, thus helping cushioning the impact of declining Russian arrivals in the island off mainland Kien Giang Province.

Le Minh Hoang, director of the Kien Giang Department of Culture, Sports and Tourism, said some 600,000 travelers visited Phu Quoc last year, a staggering rise of 37% year-on-year. International tourists accounted for 55% of the total number, which was higher than an average of 22% in previous years.

“International air routes and the opening of Vinpearl Resort have helped bring more international tourists to Phu Quoc. Particularly, the Phu Quoc-Siem Reap route has attracted many travelers from a third country,” Hoang said.

Many chartered flights transporting Russians to Phu Quoc have been suspended. Hoang said previously there were four chartered flights a month but travel agencies now only arrange chartered services when they have had enough bookings.

The strong increase in foreign visitors to Phu Quoc last year was also attributed to the Prime Minister’s decision that allows foreigners to have a visa-free stay of less than 30 days on the island.

The tourism sector of Kien Giang Province is pinning high hopes that more foreign tourists will travel to Phu Quoc this year and investors of tourism projects have been stepping up the construction pace to tap into this opportunity.

Auto prices unlikely to fall this year

Falling prices of some auto models in the two final months of the lunar calendar have given consumers hopes that prices will drop in line with an import tax cut road map, but experts predict that the auto prices will decline this year.

Truong Hai Auto Corporation (Thaco) has announced to provide special offers of up to VND50 million for each of its customers. However, a representative of the firm told the Daily that such a move simply aims to encourage customers to buy cars at the year-end and have nothing to do with Vietnam’s tax reduction road map.

Lowering the selling prices is impossible this year as the Ministry of Finance set the road map for import tax cuts early this year. Accordingly, up to 90% of nearly 10,000 groups of items imported from ASEAN are subject to tariff exemptions from this year and only 7% will have import tax lowered gradually to 0% by 2018, including completely built-up (CBU) vehicles.

CBU autos of under ten seats imported from ASEAN countries are entitled to a 50% rate this year and the rate will be lowered to 40% next year, 30% in the following year and 0% in 2018. Therefore, the prices of imported cars may not drop this year as expected by many.

The Vietnam Automobile Manufacturers’ Association (VAMA) also shares the same opinion.

With the aforementioned import tax adjustments, the Government, according to industry insiders, wanted to create opportunities for domestic auto assemblers to be better prepared when the import tax in the ASEAN region is cut to 0% in 2018.

As anticipated by analysts, if the import tax rate is more than 30%, domestically assembled autos still can compete with imported units as the import tax rates slapped on auto components are much lower.

Due to less competition from imported cars, many domestic auto assemblers are not much affected and still manufacture models which sell well on the market.

In the past few years, the import duty on CBU vehicles has declined gradually with the most considerable reduction recorded last year.

Under the road map of the ASEAN Free Trade Area (AFTA), the tax rate on CBU imports from the bloc has dropped from 60% in 2013 to 50% early last year, leading many consumers to expect auto prices to fall this year.

However, the prices of some car models, especially those of small capacity which auto joint ventures do not manufacture, are even higher.

According to analysts, automakers and joint ventures have become both manufacturers and importers. Therefore, it is obvious that they cannot let car models they assemble domestically compete with imports.

Regarding special consumption tax imposed on autos, VAMA said the current tariffs are still valid while the new law on the tax will not take effect until January 1 next year with the rates slapped on autos unchanged. Besides, the Ministry of Finance has not approved proposals to lower special consumption tax.

As a result, according to VAMA, there is little chance of auto prices declining this year.

Nevertheless, the Ministry of Industry and Trade is studying proposals concerning special consumption tax which may affect auto prices and buyers.

Since the Prime Minister approved the auto development strategy last July, the ministry has considered incentives for strategic car lines. According to one plan under consideration, luxury cars and ones with high capacities may be subject to a high special consumption tax of up to 195%, up 135 percentage points against the current rate.

On the contrary, the rates on autos of small engine capacity may be low, at 30% for cars of less than 1.5 liters (down 15 percentage points) or 45% for those of 1.5-2.0 liters. With such proposed tax rates, the ministry wants to develop small cars with a focus on small, fuel- and cost-efficient models.

Though the tax rates are still under discussion, importers of luxury cars and consumers have objected.

An expert said the proposed tax rates are infeasible as consumers will not buy cars if the tax is too high, thus affecting budget collections.

On the other hand, such proposed tax rates would affect policy stability which the Government wanted to last 10 years when approving the auto development strategy.

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