Car importers knocked sideways by forex rates

 

The local currency’s devaluation spells bad news for car importers in coming months.

 

Last week, the price of imported Toyota cars was increased by up to VND101 million ($4,900) after the State Bank bumped the reference USD/VND forex rate’s mid point to VND20,683 per dollar.

 

Meanwhile, BMW Euro Auto did not change its price because it has applied new selling prices since the beginning of 2011 with the hikes in the range of VND100-500 million ($5,000-$25,000) per car, to match the inofficial market forex rate.

 

BMW Euro Auto general director Horst J. Herdtle claimed the devaluation of the dong affected his company’s business plan.

 

“We will try to have a more successful business year in 2011, but our expectations depend much on the devaluation of the dong.”

 

Last year, BWM Euro Auto enjoyed a 25 per cent sales growth.

 

A salesman at Thien Thanh auto salon in Ho Chi Minh City’s District 10 told VIR that imported car prices were vulnerable as importers used hard currencies to pay for shipments.

 

In addition, registration fees for cars with fewer than 10 seats have been proposed to rise from 10 per cent to 15 per cent of the vehicle’s purchase price for Hanoi, and from 12 per cent to 20 per cent for Ho Chi Minh City, according to a decree draft designed by the Ministry of Finance. The draft is receiving input from concerned state bodies.

 

In the first half of last year, the businesses of cars makers and importers were almost frozen due to big hikes in registration fees. Registration fees in Hanoi and Ho Chi Minh City doubled to 10 and 12 per cent, resulting in a 10 per cent jump in the selling price of cars.

 

Porsche Vietnam marketing manager Cao Ngoc Nguyen Duy said that if the decree draft was approved, it would impact negatively on the selling price of car importers.

 

“Porsche Vietnam planned to get a 30 per cent growth rate in 2011, but there are unpredictable factors that can affect our business,” Duy said.

 

Indian firm buys 85 pct of consumer goods maker

 

India’s Marico has bought an 85 percent stake in consumer goods maker International Consumer Products Corp for an undisclosed sum.

 

ICP, founded in 2001, make personal care products, cosmetics, and sauces/condiments categories under the X-man, L’Ovite, and Thuan Phat brands.

 

Lat year it achieved a turnover of more than US$25 million.

 

The Mumbai-based Marico is one of India’s leading makers of fast-moving consumer goods, making health and beauty products and others. It has a presence in 25 countries and an annual turnover of $600 million.

 

ICP founder Phan Quoc Cong, who holds the remaining 15 percent, will remain as the CEO

 

Hanoi to host Vietnam-Japan environmental meeting

 

A Global Eco-Business Forum will be held in Hanoi Friday to promote cooperation in green technologies between Vietnam and Japan.

 

The forum, to be held by the Vietnam Chamber of Commerce and Industry (VCCI)’s Vietnam Business Council for Sustainable Development and Japan’s Nikkei newspaper, is expected to attract 200 delegates.

 

It will showcase Japanese energy and environmental technologies and seek to boost cooperation between the two countries.

 

Policy makers, scholars, experts and businesses from Japan and Vietnam will hold discussions about green technologies.

 

The VCCI said senior Vietnamese officials, including Deputy Prime Minister Hoang Trung Hai, will take part.

 

From the Japanese side, officials from Ministry of Economy, Trade and Industry and the Japan Bank for International Cooperation, its ambassador to Vietnam, and business executives will also attend.

 

Domestic paper more costly than imports

 

Paper prices have jumped despite low demand.

 

It is quite surprising since the paper market normally becomes busy only from the second quarter onwards, Nguyen Minh Trung, marketing director of the Ho Chi Minh City-based Vinh Tien Paper Joint Stock Company, said.

 

A recent devaluation of the dong by the State Bank of Vietnam and sky-high interest rates are to blame for the rising prices, according to Phan Minh Nghia, deputy CEO of Tan Mai Paper Joint Stock Company based in the southern province of Dong Nai.

 

Global prices of raw materials are also rising again, he added.

 

The firm is now selling printing and writing paper at VND23.1 million (US$1,116) per ton, an almost VND2.2 million increase since late last year, and newsprint at VND14.49 million per ton, a VND800,000 rise.

 

But the prices of paper imported from Indonesia and Malaysia remain at VND21.5 million-22 million.

 

N.C., a major paper importer based in HCMC, admitted it was partly due to unsold inventory from the third and fourth quarters of last year.

 

Trung said his company was notified of a price hike by domestic suppliers in mid-January, with the new prices being much higher than that of imports.

 

Last year consumption was around 2.4 million tons of paper, of which half was imported, according to the Vietnam Pulp and Paper Association.

 

However, even domestic manufacturers depend on imports for 50 percent of their raw materials, it said, meaning domestic prices are dependent on global prices.

 

The government has plans for growing more forests to produce pulp for the paper industry but most of its projects remain on paper, an analyst, who wished to remain unnamed, said.

 

Domestic producers using outdated technologies cannot compete with imports, an unnamed official from the VPPA said, adding local firms are now facing a challenge since Vietnam abolished import tariff on printing and writing paper from ASEAN member countries and cut the tax on newsprint to 3 percent.

 

Domestic firms prove competitive during Tet

 

Reasonable prices and improved designs and packaging saw food and fashion businesses make windfall revenues during Tet earlier this month, insiders have said.

 

Big fashion brands like An Phuoc, N&M, Foci, Vinatex Mart, and Mattana achieved a 50 percent rise in revenues, with some reporting increases of up to 300 percent.

 

Stocking in advance was a popular strategy to keep prices down, many of them said.

 

Accurate forecasts of market trends and a boost in consumption triggered by the “Vietnamese for Vietnamese Products” national campaign contributed to the success, according to Ngo Thi Bau, general director of Foci Limited Company.

 

Vietnamese consumers are getting increasingly sophisticated, she said, adding they tend to prefer high quality products.

 

Nguyen Duc Muoi, director of food company Vissan, said sales of products jumped 51 percent while revenues were up 16 percent.

 

Reasonable price will ensure clients coming back, he said.

 

Domestic confectionary producers managed to break into the high-end segment to add to their traditional dominance of the mid- and low-end ones, finally breaking down the prejudice against locally made products, Quynh Trang, external affairs director of French supermarket chain Big C, said.

 

Nguyen Xuan Luan, deputy CEO of Ho Chi Minh City-based confectionary company Kinh Do Group, said his firm achieved success in the high-end segment thanks to the expansion of its distribution network around the country.

 

Confectionery firms hiked prices by just 5-15 percent while globally prices had surged at the end of 2010.

 

But local companies still had to share the high-end market with foreign competitors, Phan Van Thien, deputy CEO of the Dong Nai Province-based Bibica Corporation, said.

 

Vietnamese products, despite being competitive in quality, continue to lack the brand appeal that makes buyers feel proud to give them as gifts to others, he admitted.

 

Confectionery firms should improve design, packaging, and taste to compete in this market segment, he said.

 

HCMC: CPI up 1.61 percent in Tet month

 

CPI in Ho Chi Minh City this month is estimated to increase 1.61 percent over January, 9.22 percent up compared with the same period last year.

 

Among the commodities with the highest increase, the groups of drinks and tobacco; entertainment and tourism; and restaurant services see the highest rises at 3.45 percent, 2.58 percent and 2.48 percent respectively over the previous month.

 

According to HCMC’s Bureau of Statistics, the sharp increase in foodstuff prices is due to many reasons.

 

The first is that this month’s CPI was calculated during Tet holiday. The rises in prices of these items were caused by high demands during the lunar New Year celebration.

 

The high increase in gold prices and the appreciating US dollars also influenced commodities prices.

 

Meanwhile, the planned 15.28% hike in electricity fees in March is going to raise commodities prices further.

 

Price hikes may shred paper producers

 

Local paper manufacturers are set for severe competition from imports after increasing the prices of writing and printing paper and newsprint by VND2 million (US$95) a tonne.

 

In mid-January notebook printer Vinh Tien Co received notice of the hike. Nguyen Minh Trung, the company's marketing director, said locally made paper now cost much more than imports.

 

Tan Mai Paper JSC has hiked the price of writing paper by VND2.2 million to VND23.1 million and that of newsprint by VND800,000 to VND14.49 million.

 

Phan Minh Nghia, deputy general director of Tan Mai, said the company was forced to put up prices because of the weakening of the dong and high bank interest rates.

 

But the prices of printing and writing paper imported from Indonesia and Malaysia remained unchanged at VND21.5 million to VND22 million per tonne.

 

According to the HCM City unit of the Viet Nam Paper Manufacturers Association, last year 2.3 to 2.4 million tonnes of paper was consumed, half of it imported.

 

But raw materials are locally available for just 50 per cent of production. The dependence on imported raw materials is the main reason for price hikes when global raw material prices rise.

 

The Government has many afforestation projects to produce raw materials for paper industry but most of them will take several years to mature.

 

The Viet Nam Paper Manufacturers Association says poor quality makes some local products less competitive.

 

Following tariff cuts under Viet Nam's WTO commitments, there is no import tax on writing and printing paper and a 3 per cent tariff on newsprint imported from ASEAN member countries.

 

Beer consumption overflows

 

Four breweries with a combined capacity of 350 million litres per year began operations in the last 10 months.

 

Sai Gon Brewery and Beverage Co (Sabeco) opened the Sai Gon-Phu Ly Brewery in May 2010 and its Sai Gon-Song Lam Brewery and Sai Gon-Quang Ngai Brewery in June, all with a capacity of 100 million litres per year.

 

Ha Noi-Vung Tau Brewery Co, a joint venture between the Denmark-based Carlsberg and State-owned Ha Noi Beer and Beverage Corp (Habeco), opened a brewery in Ba Ria-Vung Tau last month.

 

The $42 million unit can produce 50 million litres of Ha Noi and Carlsberg beers annually, and will double its capacity later.

 

Andre Van Den Berg, general director of the brewery, has said it will supply high-quality Ha Noi and Carlsberg beers in the south to enable a stronger presence for both brands in this market.

 

According to figures from the Ministry of Industry and Trade, 2.38 billion litres of beer was consumed in Viet Nam last year, 19.8 per cent up from 2009. It is expected to reach 2.8 billion litres this year.

 

Sabeco and Habeco hold 35 per cent and 20 per cent, respectively, of the country's beer market, according to the Viet Nam Beer, Alcohol and Beverage Association.

 

Nguyen Quang Minh, general director of Sabeco, says in 2010 Sabeco's total production reached 1.1 billion litres of 333, 333 Premium, Sai Gon Export, Sai Gon Lager, and Sai Gon Special beer brands, an increase of 21 per cent over 2009.

 

"We expect to see 20 per cent growth rate in 2011."

 

Habeco produced around 600 million litres in 2010, a year-on-year increase of 31.6 per cent.

 

Of the other brewers, Heineken produced 400 million litres and Tiger, 300 million litres.

 

"Viet Nam is one of the largest beer markets in the Asia-Pacific and has the highest growth potential," Christopher Kidd, regional director of Singapore-listed Asia Pacific Breweries Ltd, which makes Heineken and Tiger, says.

 

Deputy Minister of Industry and Trade Ho Thi Kim Thoa says the beer market is set to become more and more competitive as more companies enter the fray. Beer brands recently finding their way into Viet Nam include Budweiser, Sapporo, San Miguel, and Foster.

 

Overseas tours more costly

 

Outbound travellers will have to pay more for foreign tours with most HCM City-based travel agencies announcing increases of 5 to 10 per cent in prices following the State Bank of Viet Nam's decision to devalue the dong recently.

 

Nguyen Van My, director of Lua Viet Travel Company, says his company has put up prices of foreign tours by 10 per cent.

 

The prices are dependent on US dollars prices in the market and it is very hard for his firm to buy dollars at the official rates quoted by banks, he explains.

 

Ben Thanh Tourist Co has said prices of overseas tours are up at least 5 per cent though not for those booked prior to the devaluation.

 

Nguyen The Khai, director of Hoan My Tourism Co, says his company will price tours based on the average between the official and black-market dollar exchange rates.

 

Saigontourist, Vietravel, TST and Fiditour have said tour prices will be calculated at dollar rates quoted by banks.

 

Vo Anh Tai, director of Saigontourist Travel Service Co, says the outbound sector will suffer from the higher value of the dollar even as the inbound sector benefits from it. However, he is worried that hotels and airlines will put up their dong prices since many quote their prices in dollars.

 

Travel agencies who sold inbound tours to international travellers before the devaluation are in for a windfall since the dollar is now worth 9.3 per cent more against the dong.

 

Adequate petrol supplies promised

 

The Ministry of Industry and Trade has confirmed there will be enough fuel imported for the needs of production and domestic consumption.

 

The ministry said importers were committed to their plans and wholesalers had been asked to ensure an even distribution of fuel to petrol stations.

 

Meanwhile, the ministry's Market Management Department would continue probing for illegal pricing, measurement and quality activities as well as speculation, smuggling and misinformation, it said.

 

Early this month, petrol dealers and distributors asked ministries to adjust petrol prices due to rising global prices as the domestic stabilisation fund showed signs of running out of money.

 

Province casts eye on slow projects

 

The central province of Quang Nam was determined to revoke investment licences from slow-moving projects, especially in the tourism sector, said the provincial People's Committee Chairman, Le Phuoc Thanh.

 

The latest report by the provincial Planning and Investment Department revealed that investors had registered 33 tourism projects in Dien Ban District and Hoi An Ancient Town, which had a huge potential for tourism development.

 

Nine of those projects had already been started, while the remainder were delayed, mainly due to complications regarding land clearance and compensation, said the Department director, Nguyen Van Tri.

 

The province would remove obstacles facing investors and call for closer co-ordination from local authorities and relevant departments to facilitate the projects, Thanh said.

 

Last year, the province revoked investment licences from five resort projects, including the US$4.15 billion Dragon Beach Complex – once viewed as the largest project ever in the central and Central Highland regions.

 

Despite favourable conditions created by provincial authorities, developers had failed to start projects on time, due to financial problems, said Le Tri Thanh, head of the committee's Investment Promotion and Business Support Department.

 

Previously, the province had concentrated only on attracting as much foreign direct investment as possible, rather than monitoring the quality of projects or the financial capacity of investors, Thanh admitted.

 

Director of the Ministry of Planning and Investment's Foreign Investment Agency Do Nhat Hoang said that the cases in which local authorities had revoked investment licences were those in which the investors had faced difficulties in raising capital or obtaining finance during the recent economic crisis.

 

The authorities had extended licences, despite numerous delays, but eventually revoked them from slow-moving projects without legitimate reasons for delays.

 

Viet Nam supports project to boost agriculture in Laos

 

The Vietnamese Ministry of Agriculture and Rural Development has sought approval for a project to help develop Laos agriculture, rural areas and farmers.

The project is part of an agreement on economic, cultural, scientific and technological co-operation signed between the two Governments on August 1, 2009.

 

It aims to help the Laos Ministry of Agriculture and Forestry build a detailed strategy for the development of the sector, including assessing the current situation and studying international experience.

 

The Vietnamese Government funded the VND5 billion (US$238,000) project, scheduled to run from this month until June next year.

 

The Ministry's Institute of Strategy and Policies for Agriculture and Rural Development and the Laos National Institute for Agriculture and Forestry Research have created the project.

 

Glass half full as red carpet is rolled out

 

Vietnam’s low manufacturing costs and weaker currency are expected to help it draw more foreign investors from China, Japan and South Korea.

 

MiTAC Precision Technology Corporation, an international supplier of specialised plastic and metal mechanical parts, is a case in point.

 

Last week, the Taiwanese-backed firm trumpeted its plan to expand production in Vietnam this year to cash into the country’s cost advantages.

 

MiTAC Precision said in a statement that with labour costs in China having augmented greatly over the recent years and the labour shortages in the coastal regions becoming increasingly serious, the quality of production had been affected. “

 

Compared to China and neighbouring countries, Vietnam has relatively lower manufacturing costs, cheaper electricity and a stable labour supply, with labour wages being merely half of that in China.”

 

A Mitac Precision Technology Vietnam Company Ltd. representative said Mitac was constructing its second factory in northern Bac Ninh province, where its first plant was located. This new factory would become operational this April and another factory might be built in the future. Total investment capital was not revealed.

 

Late last month, Danang People’s Committee granted investment certificates to four garment firms of Japan’s Morito Group namely Oishi, Amagasaki Seikan, Inoue Ribbon and Fukui Denka Koygo. The four projects have a total initial investment capital of $15 million and will produce garments on five hectares in the city’s Hoa Khanh Industrial Park. Morito provides textile components to brands like Adidas, Nike, Gucci and D&G. Morito’s move is part of its plan to gradually shift garment and textile production from China to Vietnam, a trend that the Vietnam Textile and Apparel Association (Vitas) forecast would continue in the future.

 

A senior consultant from Hanoi-based Brooks Bower Asia (BBA), a globally-known premier corporate services firm, said that in contrast to the still appreciating reminbi, yen and US dollar, the depreciation of the Vietnamese dong was more favourable for exports and had already lured many foreign investors to set up plants here or divert purchase orders to the country. The Mitac Vietnam representative said that foreign firms used reminbi or US dollars to buy dong to pay their workers.

 

The consultant of BBA said China’s land rentals were also rising, while the country began to selectively attract foreign investment projects, which were required to use high technology without labour-intensive performances. “Besides, China is applying strict quality standards for goods exported from this country, because the world’s consumers’ confidence in made-in-China goods has strongly declined.”

 

“We heard that there would be hikes in prices of petrol and power here next month. But, such hikes would not affect foreign enterprises’ shift to this country, because the hikes are still far lower than in China or Japan and South Korea,” the MiTAC representative said.

 

Twin threats poised to ratchet up inflation

 

Recent aggressive dong depreciation and proposals for electricity price hikes could potentially further ignite inflation.

 

The State Bank has just devalued the dong against the US dollar by 9.3 per cent, to VND20,693 per dollar from VND18,932.

 

The central bank’s move was to stabilise the forex market, adding that it would not negatively impact on inflation.

 

However, analysts claim the depreciation would fan the flames of inflation, warning that it would threaten the economy’s stability.

 

“We believe the weaker dong will have a negative impact on inflation and inflation expectations,” said Prakriti Sofat, an economist at Barclays Capital.

 

According to Barclays Capital’s estimation, a 1 per cent weakening of the dong versus the dollar added roughly 15 basic points to inflation.

 

But the weakening dong will not be the only factor creating an upward inflation rate trend, following the 9.3 per cent depreciation of dong, the government decided to increase power tariff next month.

 

Meanwhile, fuel traders already asked permission to increase fuel prices due to rising global crude oil prices.

 

Tran Xuan Gia, chairman of Asia Commercial Bank and also former Minister of Planning and Investment, said the price increases could result in the government failing to curb inflation as targeted by the National Assembly.

 

“We are facing a series of strong price adjustments focusing on important products and services. This will create a new pricing level in the country,” he said.

 

Inflation was 11.75 per cent last year and analysts said it was on the upward trend as it rose 1.74 per cent in January against December, 2010. This year, the National Assembly targeted to curb the rate below 7 per cent.

 

National Financial Supervisory Committee vice chairman Le Xuan Nghia told VIR the government needed to hike electricity and fuel prices because the state budget could not cover the subsidy in the long term. He said if the government approved the proposals to increase electricity and fuel prices, inflation would rise an additional 2.4 per cent this year.

 

Barclays Capital, in a note sent to its clients, expects Vietnam’s inflation to hit 14 per cent for 2011, versus 13.5 per cent it previously forecasted.

 

Curbing inflation therefore would be the priority among the government’s immediate measures to stabilise the marcoeconomy, the cabinet meeting last Thursday heard.

 

Minister of Finance Vu Van Ninh said that the state spending in 2011 would continually be cut back by 10 per cent while state funds on basic construction stayed unchanged against last year.

 

At the meeting, the State Bank Nguyen governor Van Giau proposed the growth targets for credit this year at 20 per cent, instead of 23 per cent as announced previously.

 

Can Tho strives to become high-tech hub

 

The Mekong Delta city of Can Tho is investing VND4 trillion in high-tech development from now until 2020, with 70 percent of capital sourced from non-state sectors.

 

Accordingly, it will build many research centres and laboratories and conduct many projects to apply research results to production and life.

 

In addition, the city will support enterprises in renewing technologies in the fields of food preservation and processing, mechanical engineering, construction materials, chemistry, biology and automation.

 

Vietnam hosts Asian fair in Belgium

 

Vietnam together with the Friendship Association of Belgium, Netherlands , Luxembourg and Asian countries (BELASIA) hosted the 19th Asian Fair in the Belgian capital city of Brussels on February 19 and 20.

 

Present at the event were Belgian Deputy Prime Minister and Foreign Minister Steven Vaackere and Vietnamese Ambassador to Belgium and Luxembourg Nguyen Manh Dung, who is also head of the Vietnamese mission to the European Union.

 

The annual fair, which drew the participation of 60 booths from 16 countries and territories in Asia, is aimed at promoting the tourism industry in Asia and showing the increasing interest of Belgian people in the region, said the Belgian Deputy PM.

 

It aimed to tighten friendship and development cooperation in numerous areas between Asian countries and Belgium, he added.

 

According to Vietnamese Deputy Foreign Minister Doan Xuan Hung, the fair is a valuable chance to promote the land and people of Vietnam to European countries.

 

Apart from displaying traditional products, including handicrafts and bonsai products, and promoting the country’s tourism as well as the national flag carrier Vietnam Airline, Vietnam took the occasion to introduce a wide range of charitable activities launched by Belgian organisations to support Vietnamese children.

 

US delays making final definition of catfish

 

The US Department of Agriculture (USDA) has said it would collect more opinions until June 24, 2011, before determining which species must undergo the “catfish” inspection programme.

 

USDA said in a press release on February 18 that the Food, Conservation and Energy Act of 2008, known as the 2008 Farm Bill, requires the department to define the term “catfish” for this new inspection programme.

 

Hence, USDA provided two options for the definition of “catfish” and seeks public comment on the issue. One option is the current labelling definition in the 2002 Farm Bill, which includes all species in the family “Ictaluridae”. The other option is to define “catfish” as all species in the order “Siluriformes”, including the three families typically found in human food channels, including “Ictaluridae”, “Pangsiidae” and “Clariidae”.

 

USDA also set out the new requirements that will apply to “catfish” produced in or imported to the US. Among these requirements is that products labelled as “catfish” must bear either a mark of inspection of USDA’s Food Safety and Inspection Service (FSIS) or a mark of inspection from the country from which they were exported.

 

During the inspection programme, FSIS will focus on factors affecting the safety of the product being produced, such as water quality and feed.

 

The 2008 Farm Bill expanded the definition of “catfish”, including Vietnam’s tra fish, and brought “catfish” into the list of species under management of USDA instead of the US Food and Drug Administration.

 

The move went counter to the previous regulations under which USDA had not considered Vietnam's tra fish as “catfish” and Vietnam’s tra fish were not permitted to be labelled as “catfish” when being exported to the US.

 

Industry insiders said the US’s new bill aims to protect the domestic “catfish” industry and hamper Vietnam’s tra fish exports. It also threatens to derail US-Vietnam trade relations.