IFC to invest in Vietnamese SMEs

Philippe L. Ahoua, the International Finance Corporation’s (IFC) Asia Pacific Region Treasury Client Solutions Spokesperson, has detailed the corporation’s intentions to invest in Vietnamese small and medium-sized enterprises (SMEs) in the near future.

Speaking on the sidelines of a seminar on Vietnamese capital market development, Mr. Ahoua noted the country remains without a credit rating agency for corporate bonds. As a developing market, Ahoua identified IFC’s task in Vietnam as to help domestic companies access capital through the corporate bond market.

He emphasised the corporate bond market’s potential capital is open to all private enterprises. Ahoua promised IFC has proper risk assessment procedures tailored to SMEs.

He outlined some of the group’s international corporate bond successes and summarised IFC’s aims to encourage credit and develop businesses in Vietnam.

He acknowledged the current economically challenging context has forced many companies away from new project development in favour of consolidation and restructuring.

Ahoua approved of Vietnamese management agency attempts to shore up the legislative framework regulating the corporate bond market.

Wood exports to pick up

Vietnam is Asia’s second largest exporter of timber products, second only to China.

Due to the US imposition of dumping tariffs on Chinese exports, Vietnam Timber and Forest Products Association (Vifores) General Secretary Nguyen Ton Quyen says, demand is expected to surge from September to December in the lead up to the holiday season.

According to Vifores, the consumption of timber products seems inversely related, down by 20 percent on the domestic market but up by 15% in export volume and value.

One reason is that both manufacturers and businesses are worried about the high level of products in stock. Even wood exporters who have received enough orders up to August next year are busy recruiting more labourers to fulfill their quotas.

The Ministry of Agriculture and Rural Development says in the first nine months of 2013, the total value of timber exports reached US$3.77 billion, up 12% on average compared to the same period last year. The US remains Vietnam’s leading importer, accounting for 36.7% of its total export volume (US$1.38 billion). It is followed by China (US$530 million) and Japan (US$471 million). Vietfores believes the wood processing sector’s export target of US$5.5 billion for this year, a 15% from last year is within reach.

According to Vietnam Customs statistics, the turnover of FDI enterprises made up 64% of the country’s total export earnings in the first nine months of the year. They are better than domestic enterprises in terms of management skills and capital sources to expand their distribution networks.

A number of foreign-owned enterprises have rented workshops and stores from domestic businesses to maintain stable supplies to the US and China.

The wood processing industry has yet to develop its new product lines to meet the customer demand. In fact, China has still gained the upper hand over Vietnam, earning almost US$11 billion from its timber exports in 2012, compared to Vietnam’s US$4.6 billion figure.

The US imposition of 56–122% anti-dumping tariffs on Chinese wood and timber exports is a boon for Vietnamese exporters.

The General Department of Forestry says the wood processing industry grew at an annual rate of 41–42% in the 2005–2010 period, and 20–30% in the last three years. Its wood and timber shipments have reached more than 100 nations and territories.

Despite its significant increase in material imports, the sector had a US$3 billion trade surplus in 2012.

The General Department of Forestry has asked the Ministry of Industry and Trade (MoIT) to include the wood–processing sector in the list of priorities given to highly competitive businesses from 2013 to 2020.

Bridge to further facilitate Vietnam-Cambodia trade

Vietnam and Cambodia will start the construction of Chrey Thom bridge on January 14 to meet the increasing need for transport and trade between the two countries, said the Cambodian Ministry of Public Works and Transport on December 24.

Located about 75 km from Phnom Penh, the 428-metre bridge linking Cambodia’s Kandal province with Vietnam’s An Giang province, is hoped to facilitate trade between Vietnam’s Mekong Delta and the capital city.

Over the past years, two-way trade has increased at a steady annual growth of 30 percent.

In the January-October period, their trade turnover reached US$2.94 billion and is projected to climb to US$3.5 billion by the year’s end and about US$5 billion by 2015.

Vietnam consistently takes the lead in the number of foreign arrivals to Cambodia with an average annual rise of 30 percent.

Brunei to cultivate Vietnam’s rice varieties

Brunei is experimenting 10 rice varieties of Vietnam in its Wasan region under a Memorandum of Understanding on agricultural cooperation signed in May between the two countries.

According to Brunei’s Ministry of Industry and Primary Resources’ Department of Agriculture and Agrifood, the selected varieties will be planted in Wasan’s four districts in the next season to see how they can adapt to rain-prone areas.

The department said the results will contribute to increasing Brunei’s rice production, improving its supply of the grain and food security.

Under the document, Brunei and Vietnam will also accelerate their partnership in agriculture production and aquaculture along with increasing flora and fauna gene exchanges.

The two sides have also agreed to strengthen links in agrifood and seafood preservation and processing technology in parallel with increasing trade in farm produce and seafood.

Hanoi inaugurates its largest entertainment complex

Vingroup has officially opened its Vincom Mega Mall Times City complex in Hanoi on December 24.

Located in the city’s south, Vincom Mega Mall is the capital city’s largest underground shopping and entertainment complex and Vingroup’s second “Mega Mall” model project designed for Vietnamese consumers.

Addressing the inauguration ceremony, Vingroup Vice President Nguyen Viet Quang affirmed the company’s commitment to transforming Vincom Mega Mall Times City into one of Hanoi’s highlight destinations.

Matching the scale of Royal City, Vincom Mega Mall Times City offers visitors over 300 shopfronts, an 11,500 square metre Ocean Mart, a 5,400sqm Platinum Cineplex, and a 15,000 sqmfood court.

Vincom Mega Mall Times City’s Vinpearl Aquariumis the largest in Vietnam, home to more than 30,000 different creatures and a 400-metre artificial river space for music performances.

Vingroup also opened its Vin Kids Centre (VinKC) on the same day, incorporating the Vinschool kindergarten and Time City Vinmec International Clinic.

Vietnam sees higher trade surplus

2013 is the second consecutive year Vietnam has produced a high trade surplus estimated at US$863 million.

While the domestic sector faces a trade deficit of US$13.1 billion, the foreign direct investment (FDI) sector enjoys a trade surplus of nearly US$14 billion as it was mainly focused on manufacturing and assembling products with low added values.

According to the General Statistics Office of Vietnam (GSO), the country has achieved US$132.2 billion in export revenue, up 15.4% from last year’s figure.

The largest earner is the FDI sector with the lion’s share of the total export volume of electronics, computers and components, garments and footwear.

Vietnam’s largest export market is the EU estimated at US$20.4 billion, (up 24.4%), followed by the US at US$23.7 billion, (up 20.3%) and ASEAN at US$18.5 billion, (up 6.3%).

In the meantime, imports hit US$131.3 billion, a year-on-year increase of 15.4%, with the domestic sector accounting for US$56.8 billion, (up 5.6%) and the FDI sector, US$74.5 billion (up 24.2%).

GSO General Director Nguyen Bich Lam says there has been a change in the demand for imports as the country wants to process semi-products of low added value and then export them to other countries.

Products of high import value include machinery and equipment and tools estimated at US$18.6 billion, (up 16%), electronics, computers and components at US$17.7 billion (up 34.9%), cotton at US $8.4 billion (up 19.4%), phone handsets and components at US$8 billion (up 59.5%), plastics at US$5.7 billion (up 18.9%), garment and footwear materials at US $3.7 billion, (up 18.7%) and animal food and materials at US$3 billion (up 23.6%).

Vietnam’s largest import market is China accounting for US$36.8 billion (up 26.7%), followed by ASEAN, US$21.4 billion (up 2.8%), the Republic of Korea, US$20.8 billion (up 34.1%), Japan, US$11.6 billion (up 0.18%), the EU, US$9.2 billion (up 4.2%) and finally the US, US$5.1 billion (up 6.1%).

Most notably, of its total import value, input materials for production account for US$131.3 billion.

Work starts on 70MW hydropower plant in Tuyen Quang

A ceremony was held on December 24 to kick off construction of a 70MW hydropower plant in Quy Quan commune, Yen Son district, the northern mountainous province of Tuyen Quang .

The Yen Son Hydropower Plant has a total investment of 2.6 trillion VND (123.8 million USD) and once it becomes operational, the plant will provide 296 million kWh to the national grid per year.

Its first turbine is expected to start generation in the first quarter of 2016 and the second one, the fourth quarter of that year.

As the last of its kind on the Gam river system, the plant will help ensure water for agricultural production and create landscapes serving tourism, thus boosting the local socio-economic development.

Speaking at the ceremony, Vice Chairman of the provincial People’s Committee Tran Ngoc Thuc urged investors and constructors to focus all resources to complete the work on schedule.

He pledged that the province will create the best conditions for them to implement the project, especially in site clearance.

Vietnam sees trade surplus for second consecutive year

Vietnam is estimated to have a trade surplus for the second consecutive year in 2013, according to the General Statistics Office.

The country had a trade surplus last year as well, which was its first since 1993. During 2006-2011, the country suffered high trade deficits of up to 12 billion USD each year.

The office said the country had a trade surplus of 863 million USD this year after exports were estimated at 132.2 billion USD and imports, at 131.3 billion USD.

Compared with last year, both export and import values have climbed 15.4 percent.

Adjusted for inflation, the country's exports and imports increased 18.2 and 18.3 percent, respectively.

The office reported that Vietnamese firms posted a trade deficit of 13.1 billion USD, while foreign invested firms had a trade surplus of nearly 14 billion USD.

Foreign invested firms contributed 88.4 billion USD to the country's exports by value, up 22.4 percent from the previous year. Excluding crude oil, the export turnover of companies surged 26.8 percent to 81.2 billion USD. Vietnamese firms accounted for 43.8 billion USD, up 3.5 percent.

Chairman of the National Assembly's Economic Commission Nguyen Van Giau said that exports had surged over the past two years. He also noted that foreign invested firms had posted annual trade surpluses since 2008.

While acknowledging the contribution of foreign invested firms to the country's exports, experts pointed out that these firms, which are mainly processing and manufacturing firms, also had significant imports. Their real contribution to the economy, therefore, remains relatively insignificant.

Director of the Vietnam Institute of Economics Tran Dinh Thien attributed the situation to the lack of development of supporting industries, which has forced companies to depend on imports for raw materials and equipment.

Experts noted that going forward, the country's export turnover would continue to depend on foreign invested firms if suitable long-term strategies are not put in place for the development of supporting industries.-

Pangasius exports set to drop back on depleted resources

The value of tra fish ( pangasius ) exports is expect to fall slightly next year due to a lack of raw materials, difficulty in obtaining loans for investments and losses by farmers.

According to a representative of the Vietnam Association of Seafood Exporters and Producers (VASEP), while summarising activities in the fisheries industry at a meeting held in Hanoi on December 24, the association expects 2014 exports of tra fish to decrease 5 percent, for a total value of 1.7 billion USD.

Nguyen Huy Dien, deputy head of the Fisheries Department under the Ministry of Agriculture and Rural Development, said at the meeting that the industry would restructure production and exports of tra fish to continue developing the tra fish industry next year and in the future.

Last year, the department provided 110,000 tra fish for breeding to farmers and companies in Cuu Long Delta provinces, said Dien. These fish, however, will not be ready for harvesting and processing until 2015.

Also, the department has collected opinions on boosting the trade promotion of tra fish to increase its export value, as well as the added value of tra fish products and enlarging domestic consumption, he said.

Under the plan, the domestic consumption of tra fish would increase by 100 percent in 2015 and another 300 percent by 2020, while the export value of tra fish would reach 2.2 billion USD in 2015 and 3 billion USD in 2020.

Next year, it would also supply a proposal to the ministry on policies for loans, insurance and production cooperation for farmers and processors of tra fish for export.

According to the ministry, this year's output of tra fish fell by 7.6 percent to 1.15 million tonnes, compared to last year, and the export value of tra fish reached 1.8 billion USD this year, which was similar to last year.

The tra fish market is expected to recover by year's end due to the holidays, though farmers have already sold out their raw material of tra fish.

Dien said tra fish production this year faced many challenges, including a reduction in export prices and strict standards from two large export markets, the US and the EU.

Meanwhile, many farmers suffered losses while raising tra fish on a small scale due to a lack of capital, he said.

Vietnam has 236 tra fish exporters, and 94 of them have processing factories that account for 90 percent of total tra fish export value. Vietnamese tra fish has been exported to 149 countries.

Korean firms fund social buildings in Hai Duong

Social facilities worth more than 200,000 USD financed by nine enterprises from the Republic of Korea were handed over to authorities of the northern province of Hai Duong on December 24.

They were also partly funded by two enterprises in Hanoi and the Korea Trade-Investment Promotion Agency (KOTRA).

Meanwhile, other companies operating in the province, like Huyndai KEFICO, Silkroad CNT, Michigan Hai Duong and Global MFG, also donated cash in support of poor Vietnamese children and patients and joined in efforts to protect the environment.

Speaking at the event, RoK Ambassador to Vietnam Jeon Dae-ju noted that the Korean firms will work harder to become part of Vietnamese society.

Deputy Chairman of the provincial People’s Committee Nguyen Duong Thai, in his speech, said the move is a manifestation of the Koreans’ sentiments towards their Vietnamese fellows.

He expressed hopes that the Korean firms will expand the outreach to more underprivileged groups in the country.

Since 2012, KOTRA and the RoK Embassy in Vietnam have jointly held conferences to engage Korean enterprises in corporate social activities.

Over 125,000 USD in cash and kind was raised by 11 Korean companies at such event in the northern province of Vinh Phuc in 2012.

The RoK is now the third biggest foreign investor in Vietnam with over 2,900 firms pouring 28.7 billion USD in Hanoi, Ho Chi Minh City and their neighbouring localities.

Vietnam ranks third in shrimp exports

Vietnam has secured the third place among the world’s shrimp exporters this year with a total value of 2.5 billion USD, representing a yearly rise of nearly 33 percent and accounting for 44 percent of the total aquatic export turnover.

The figures were released by the Directorate of Fisheries at a conference on December 24 to review the sector’s performance this year and set tasks for 2014.

The amount of farmed shrimps in 2013 increased by 12.3 percent from last year to 548,000 tonnes, including 268,000 tonnes of black tiger shrimps and 280,000 tonnes of white-legged shrimps.

For 2014, the directorate keeps the two aforementioned kinds of shrimp, tra fish and mollusc as key products for aquaculture.

Listed firms starve shareholders of transparency: Vietstock

The transparency level of listed companies on the nation's stock exchanges remains weak, as most do not release company information to their shareholders.

According to statistics released by Vietstock, only 29 out of the 694 listed companies on both national stock exchanges took the initiative to distribute compulsory information to investors, as required by Circular 52/2012/TT-BTC of the State Securities Commision about information publication on stock exchanges.

Those releasing information were mainly Ho Chi Minh City-listed companies, as opposed to only four listed on the Hanoi Exchange.

Real estate companies topped the list, with four companies releasing information, including Binh Chanh Construction Investment (BCI), Ba Ria-Vung Tau Housing Development (HDC), Technical Infrastructure Development (IJC) and real estate giant Vingroup (VIC).

The list of companies complying with regulations on publishing information also included three banks, including Vietinbank (CTG), Eximbank (EIB) and Military Bank (MBB), as well as three retail companies, Ben Thanh Trade and Services (BTT), Cu Chi Trade and Industry Development Investment (CCI) and Sai Gon General Services Corporation (SVC).

The remaining 95 percent of listed companies were found to have not released information. Experts noted that the numbers indicated that many listed companies are not properly serving their investors, which might cause their stocks to be undervalued.

Experts urged listed companies to pay attention to investor relations (IR), which would help ensure transparency and the rights of shareholders, while enhancing companies' images in investors' eyes.-

Quang Tri targets 7 percent growth for 2014

The central province of Quang Tri has set a 7 percent economic growth target, a rate of poor households of 2.5 percent, and 9,500 jobs for next year.

It also strives to collect more than 1.6 trillion VND (76.2 million USD) for the State budget in 2014.

Chairman of the provincial People’s Committee Nguyen Duc Cuong said that to reach the targets, the province plans to continue streamlining administrative procedures; give credit priorities to agriculture, exports production, support and high technology industries; and renovate State-owned enterprises.

Quang Tri will also increase human resource quality, science and technology application, and price management as well as ensure social welfares, he said, adding that it will promote cooperation with other central provinces and localities along the East – West economic corridor.

In 2013, the province has achieved an economic growth of 6.7 percent and industrial production of 5.5 trillion VND (262.6 million USD). Its export revenue reaches 118 million USD, a year-on-year increase of 23.5 percent.

There are now 2,518 enterprises, 459 branches, 39 representative offices and 61 business centres in the locality with a total registered capital of over 16 trillion VND (761.9 million USD). They have provided jobs for nearly 33,000 people.-

Vietnam runs trade surplus of 1.8 bln USD with Japan

Vietnam recorded a trade surplus of 1.8 billion USD with Japan in the first 11 months of this year, representing a year-on-year increase of 33 percent, reported the Vietnam Customs.

Textiles were exported more to Japan than other commodities, accounting for 18 percent of the country’s total exports to Japan and seizing the lead among Vietnam’s nine major export lines.

Vietnam mainly imported machines, equipment, tools and spare parts, computers, electronic devices and components from Japan. It also bought steel, steel products, materials for textile and footwear sectors and plastic products.

The import of these goods made up 73 percent of Vietnam’s total import turnover from Japan.

Japan traded with Vietnam over 24.6 billion USD in goods in 2012 and the figure is expected to rise to 25 billion USD in 2013.

The two countries signed a lot of significant documents like the agreements on Vietnam – Japan economic partnership, investment encouragement and protection, and double taxation avoidance.

They are working together in negotiations on the Trans-Pacific Partnership (TPP) agreement.-

Bonanza year for local cement exports

Vietnam exported 13 million tonnes of cement and clinker by mid-December, a 65 per cent jump against the same period last year, with nearly 1.1 million tonnes per month sold abroad, according to Ministry of Construction estimates.

At the current pace, Vietnam’s cement exports this year are expected to reach a record 14 million tonnes, far exceeding the set target of 10.2 million tonnes.

Thang Long Cement, based in the northern province of Quang Ninh, shipped 30,000 tonnes of bulk cement to Peru, increasing the company’s total cement export volume this year to nearly 800,000 tonnes.

Thang Long Cement’s CEO Johan Samudra said this year had proved fruitful in terms of exports and expressed confidence the company would grasp more opportunities to increase co-operation with other local and foreign partners to bolster sales.

Learning some hard lessons from 2012’s poor export results, state cement conglomerate Vicem bolstered its efforts. By the end of November Vicem’s export volume had surpassed two million tonnes (including 1.1 tonnes of clinker and around 900,000 tonnes of cement) up massively on the one million tonnes recorded in 2012.

“With stable growth seen in recent months, we will surely reach our target of 2.2 million tonnes this year,” said a Vicem source.

According to Cam Pha Cement’s general director Hoang Xuan Vinh, the company retained stable market share in key export markets such as Bangladesh, Indonesia, the Philippines and Malaysia. It estimated its export volume at about 850,000 tonnes this year.

Head of the Ministry of Construction’s Building Materials Department Le Van Toi said difficulties in the domestic market had seen cement firms dedicating themselves to finding markets for their products.

Southeast Asia and the Middle East remained key export markets for Vietnamese cement.

Earlier in the year, off the back of a poor performance in 2012, the sector had set a modest target of around 56-57 million tonnes in total sales for 2013 in Vietnam. Exports have exceeded expectations, having a positive impact on the cement sector’s total consumption this year, which was expected to exceed 60 million tonnes. Domestic sales surged approximately 10 per cent against 2012.

Indian drugs banned after quality failures

India-based pharmaceutical firm XL Laboratories Pvt., Ltd has had all of its products permanently banned from being marketed in Vietnam for consistently trading sub-standard products.

The Ministry of Health’s Drug Administration sent word of the ruling to XL Laboratories’ India headquarters, explaining that it had revoked the registration numbers of drugs produced by the company which fail to meet Vietnam’s drug quality standards.

In addition, no new registrations will be granted to the company and authorities have stopped receiving registration applications for new products made by XL Laboratories Pvt., Ltd.

The punishments came following reports from the National Institute of Drug Quality Control, the Ho Chi Minh City Institute of Drug Quality Control and the Hanoi equivalent found XL Laboratories to have been producing sub-standard medicines as far back as 2010.

“XL Laboratories’ medicine quality violations are very serious, frequent and consecutive over the past few years,” said Drug Administration head Truong Quoc Cuong.

XL Laboratories’ drug standards infringements in Vietnam came to light in January 2013, prompting the Drug Administration to stop granting certificates for drug and drug material operations to the company. The administration then suspended the nationwide use of anti-arthritis Diclofocal, a XL Laboratories product imported by Vimedimex in Ho Chi Minh City.

As a result of the findings, the Drug Administration launched a crackdown on the producers of poor quality drugs in September 2013, asking departments of health nationwide, the Vietnam’s National Institute of Drug Quality Control, the Ho Chi Minh City Institute of Drug Quality Control, and all drug importers to examine imported pharmaceutical products from 37 foreign drug firms.

The companies, hailing from Canada, Cyprus, France, Germany, India, South Korea, Pakistan, the Philippines, Russia and the US, have been highlighted for inspection having been discovered previously marketing low quality products.

Latent bond market yet to deliver

The corporate bond market saw robust growth this year, but experts have warned that many challenges lie ahead.

“Together with credit, corporate bonds are an increasingly important channel for firms to raise capital,” stated the latest report of the Ministry of Finance’s (MoF) Banking and Finance Department.

By December 11, registered corporate bond volume reached VND52.2 trillion ($2.48 billion), with VND33.6 trillion ($1.6 billion) worth of corporate bonds issued this year.

This is 17 per cent higher than the issued volume in 2012 and 1.8 per cent higher than the total volume of issued corporate bonds during the entire 2006-2010 period, according to the report.

From 2006 until present, $900 million in overseas bonds have been issued by firms as diverse as Masan, Vingroup and Vietinbank. BIDV is expected to issue $500 million bonds on the international markets in the near future.

Ngo Ha Quan, head of capital markets at Standard Chartered Bank, said six foreign banks had participated in the domestic bond market and five state-owned banks were also major investors.

He added that only five of the country’s 20 insurers in Vietnam were active in the bond market. In general, most investors focused on five-year term bonds. The corporate bond market in Vietnam featured the participation of 17 corporate entities at the end of the third quarter. Real estate company Hoang Anh Gia Lai Group led the market with VND3 trillion ($142.85 million) in bonds, according to the latest report of the Asian Development Bank’s (ADB) Asia Bond Monitor publication.

However, the MoF’s Banking and Finance Department said that corporate bond market value was still modest and most corporate bond issuers were household names in Vietnam.

One of reasons for the modest returns is that the corporate bond market’s infrastructure still lacks credit agencies, secondary transaction systems and a bond yield curve.

The tight bond issue criteria, especially the regulation that only profitable firms can issue corporate bonds, was also a big obstacle for many enterprises, said the department.

In November, the Vietnam Prosperity Bank (VPBank) and state-run mining group Vinacomin successfully issued VND2.5 trillion ($119 million) and VND5 trillion ($238 million) worth of long-term bonds respectively. Vinacomin’s issue is the biggest dong-denominated bond issue by a state-owned business group so far.

In late August, state-owned bank BIDV sold over VND3.1 trillion ($147.6 million) worth of 10-year bonds that carry an annual coupon of 10.5 per cent in the first five years and 11 per cent for the remainder of the term. Hoang Anh Gia Lai has also issued bonds.

Other large enterprises, state-owned groups and corporations also have plans to issue bonds. State power generator Electricity Vietnam is preparing to issue VND10 trillion ($476 million) worth of bonds.

“Besides commercial banks, state-owned groups and insurance companies, it is necessary to encourage institutional investors such as securities funds, bond funds or voluntary pension funds into the market,” stated the department.

Vinacomin chairman Tran Xuan Hoa said given the problems with the global economy, corporate bond issues on the domestic market were a good way of addressing capital shortfalls for many Vietnamese enterprises.

Imported beer pricy, losing edge over local beer

The price of imported beer from Belgium, Germany, Holland, England, and France, 3 – 4 times higher than local beer, is losing market shares as customers tend to buy cheaper products in the face of economic slowdown.

This year, imported beers including St. Sebastian Grand Cru, Duvel, and Chimay from Belgium, Oettinger and Royal Dutch from Germany, Singha from Thailand, and Corona from Mexico, can be found in any supermarket in Ho Chi Minh City’s District 1 and 3.

Most of these foreign products cost 3 – 4 times higher than local beers, despite being the same size. For instance, Chimay beer may cost around VND95,000 to VND280,000 per bottle, depending on the type and size.

England and Belgium products are sold at about VND250,000 to VND255,000 per bottle with a capacity of 250 milliliters. German beers sold in District 3’s Nguyen Thong Street such as DAB, Bitburger, and Germania seem to be cheaper as their price varies from VND22,500 to VND31,500 per bottle.

Le Xuan Huy, a large beer dealer in HCMC’s Tan Binh District said that due to the expensive price, most foreign beers imported to HCMC are sold in supermarkets and stores in the city center rather than small beverage shops.

Vietnamese people’s choice of beer depends on individual preference and varies by region. “333,” “Saigon Green,” and “Saigon Red,” which account for 40 percent of the total output of 2.9 to 3 billion liters of beer consumed yearly in Vietnam, are most popular in the central region.

Phan Dang Tuat, Chairman of Saigon Beer-Alcohol-Beverage Joint Stock Corp (Sabeco), said the company focuses on providing customers with “333” and “Saigon Red,” targeting middle and low income consumers.

But Sebeco will target the premium segment soon, said Tuat, adding that the company is preparing its strategy to reveal a new product to compete with imported beers. “It will not only have a competitive price but also be of better quality,” Tuat asserted.

He expects that the entrance of Sabeco’s “Saigon Gold” early next year will make the market more competitive.

According to Nguyen Bao, owner of a food store in HCMC’s District 3, 6 out of 10 customers choose “333” beer as it is cheap and affordable. The price only varies from VND200,000 to VND220,000 per carton. In comparison with Heineken at around VND390,000 per carton, Tiger at VND290,000 per carton, or Sapporo at VND380,000 to VND390,000 per carton, “333” is the most affordable beer.

H.T., who works for a foreign company which mainly collects research data and surveys the FMCG group, said Vietnamese are “always open to tasting new products when invited to do so but only buy popular brands.”

This is also the reason why Foster’s, Zorok, and even Sapporo, which were mainly given as gifts in previous years, are not attractive anymore, as not all foreign products could successfully enter the Vietnamese market.

Long-termism gives FDI cutting edge

Long-term business plans and sound finances have helped many foreign invested enterprises reap healthy profits in Vietnam this year.

Kiyoshi Sato, deputy general director of Japanese-backed Makoto Sangyo Vietnam, said despite the country’s economic woes, the company’s 2013 revenue from electronics product sales was expected to grow 30-40 per cent against last year. An identical rate was also expected in 2014.

Japanese-invested precision engineers IIYAMA Seiki Company’s president, Tadashi Terasaka was also upbeat over Vietnam’s economic prospects, claiming that IIYAMA Seiki had established a factory in the northern port city of Haiphong in June 2013.

“We are planning to expand this factory to sell products domestically and for export to China. We’ll be able to manufacture 30,000 products a month,” Terasaka told VIR.

Both Sato and Terasaka underlined their long-term access to capital and business plans which obviously included careful market research that indicated growing demand for their products. They also said their performance had not been particularly affected by Vietnam’s economic problems which they considered to be a short-term issue.

Pham Vu Hai, director of the Northern Investment Promotion Centre under the Ministry of Planning and Investment’s Foreign Investment Agency, said the two firms were typical of many foreign invested enterprises (FIEs) performing well in Vietnam this year.

“FIEs can ride out difficulties as they have business experience, solid networks and no problems accessing finances. Unsurprisingly you can see they are outdoing local enterprises, especially in the export sector,” he told VIR.

Operating in Vietnam since 2004, the South Korean-backed garment maker KJ Vina in the southern province of Binh Duong has seen its export revenue grow by an average 15-20 per cent on-year. The 1,600-employee company’s investment is fed by its parent company in South Korea and its products are exported to the US and Canada.

The General Statistics Office reported that the country’s total 11-month export turnover reached $121 billion, up 16.2 per cent against the same period last year. Locally-owned enterprises were responsible for $39.9 billion, up just 3.6 per cent on-year. Meanwhile, FIEs racked up $81.2 billion in turnover (including crude oil exports), up 23.5 per cent on-year.

Nguyen Viet Ha, managing director of the US-backed investment consultant Bower Group Asia Inc, told VIR that almost all FIEs in Vietnam had stayed afloat amid economic difficulties, which was in stark contrast to local firms.

“FIE business plans are often well-prepared with a long-term vision, in which all risk possibilities have been taken into account. FIEs also have good financial health fuelled by overseas banks which can help them ride out market changes. For example, during 2011 and 2012 the annual average lending rate of 20 per cent in Vietnam barely affected FIEs, but local firms suffered,” Ha explained.

It is expected that Vietnam would likely attract over $21 billion in foreign direct investment (FDI) this year, far higher than last year’s $13 billion. However, Ha warned that FIEs were being hit by a 10-15 per cent rise in labour costs for skilled employees, and the Philippines, Myanmar and Cambodia were becoming rivals in terms of FDI attraction.

“Vietnam’s tax and land incentives remain limited and administrative procedures and site clearance problems still plague the country,” she said.

Echoing her view, Seiki said it had taken nearly one year for his company to be licensed and be allocated a manufacturing site, while it would have taken just a week to complete in Japan.

Retailers told link up or die

Industry experts have advised local retail firms to team up to outweigh their foreign peers as Vietnam will allow wholly-foreign firms to enter the retail sector from early 2015.

Vu Vinh Phu, chairman of Hanoi Supermarket Association told VIR that his association and the Vietnam Retailers Association (VRA) recommended domestic retail enterprises to enter marriages on convenience to build bigger firms in anticipation of an influx of foreign retailers following the further opening of the retail market to foreign investment.

Under Vietnam’s WTO commitments, from January 11, 2015, Vietnam will permit the establishment of wholly foreign-invested retail companies. Currently, foreign firms can only operate in Vietnam’s retail sector via a joint venture with a Vietnamese partner or through franchising.

Phu said that at the moment domestic retailers have not been good at promoting co-operation.

“Vietnamese retailers favour promoting joint ventures with a foreign partner but they should consider setting up an alliance with domestic retailers to increase their competitiveness rather than develop alone,” added Phu.

Local retailers were expected to continue facing difficulties next year as economic downturn and decreased consumer spending will continue to bite. Phu stressed that domestic retailers with scant capital, limited management ability and feeble logistics would need to work out how they would compete in a liberalised market.

The country’s total retail sales and service revenues in the first 11 months of this year reached VND2,386 trillion ($113 billion), the General Statistics Office (GSO) reported. The figure represented a 12.6 per cent year-on-year rise. However, the GSO added that the increase would have only been 5.5 per cent if price hikes were excluded.

One of leading Vietnamese retailers, Phu Thai Group Joint Stock Company’s general director Pham Dinh Doan said that many domestic retailers including Phu Thai had raised concerns about foreign retailers setting up shop in Vietnam. But the growth towards domestic alliances among retailers was regarded as something of a first in Vietnam’s cut-throat retail sector.

Doan said that the four largest domestic retailers Satra, Hapro, Phu Thai Group and Saigon Co.op had planned bigger firms seven years ago. However, the dream has not yet been realised.

“It seems that it won’t just be the big four retailers that are interested in such an alliance. More domestic firms want to develop it in the retail sector in order to compete with foreign retailers. Once Vietnam opens the door further, rich foreign retailers will no longer be forced into partnerships with Vietnamese firms,” added Doan.

According to the VRA, Vietnam’s retail market remains full of potential. In 2013, modern retail outlets in Vietnam only held a 25 per cent market share, in contrast to the Philippines 33 per cent, Thailand 34 per cent, China 51 per cent, Malaysia 60 per cent and Singapore 90 per cent.

The Ministry of Industry and Trade estimated that by 2020, Vietnam would host some 1,200 to 1,300 supermarkets, and more than 300 shopping centres.

The recently released Vietnam Retail Market Forecast to 2014 Report published by AT Kearney said that Vietnam’s total retail market was forecast to see an annual growth rate of 23 per cent, offering many opportunities for both domestic and foreign retailers. According to the report, in the next few years, a short wave of consolidations will emerge as foreign retailers try to establish their positions and penetrate the market.

So far, existing foreign retailers in Vietnam have been quickly expanding their businesses.

Casino, owner of the Big C supermarket chain, has increased its total number of supermarkets in Vietnam to 24. The company plans to open five supermarkets and shopping centres annually over the next three years.

A source from Parkson Vietnam Co., Ltd told VIR that so far, the Malaysian shopping centre operator had eight shopping centres in Vietnam and last week, the company opened its ninth store in Ho Chi Minh City, with its tenth store due to open in mid-2014.

Meanwhile, Germany’s Metro Cash & Carry Vietnam now possesses 19 stores nationwide, a number expected to rise to 30-35 over the next three to five years.

The Korean company Lotte Mart has been gradually consolidating its presence in Vietnam with four centres already operating in Ho Chi Minh City, Dong Nai and Danang. The fifth Lotte centre will be opened at the beginning of next year in Hanoi’s Mipec Tower. The Korean company Lotte Mart has also unveiled its plan to open 60 supermarkets in Vietnam by 2020.

Saigon Co.op and Singapore’s retailer Fairprice has received approval for a commercial joint venture for the Co.op Xtra and Co.opXtraPlus joint supermarkets in 2014. The second Co.op shopping centre was opened last week in Hanoi.

Foreign retailers are maintaining confidence in Vietnam’s retail growth while the upcoming legal change has caught the attention of leading global retailers. According to the property consulting firm CBRE, France’s number one retailer Auchan, for instance, early this year stated it planned to invest $500 million in Vietnam over the next 10 years.

In another case, E-Mart, South Korea’s largest retailer would likely opt for a joint venture as it prepared to officially tap into Vietnam in 2015.

Inox firms sceptical on Posco claim

Local firms using stainless steel have stated that complaints related to cheap steel being dumped in Vietnam were not the root cause of Posco VST and Inox Hoa Binh’s losses.

Domestic firms that use imported steel are sceptical over Posco’s dumping claims

Debate has continued following the preliminary result of an anti-dumping tariff on imported cold-rolled stainless steel that was released three weeks ago by the Ministry of Industry and Trade’s Vietnam Competition Authority (VCA).

Local consumers of stainless steel criticised Posco VST, a wholly-owned affiliate of South Korean steel maker Posco Steel, claiming it suffered losses, not because of steel imports but rather because Posco VST increased its production in excess of the market capacity.

This information was found to be true in the case of nearly twenty stainless steel users in a document provided last week to Prime Minister Nguyen Tan Dung.

The document seen by VIR said “Posco VST and Inox Hoa Binh increased their production in a manner which surpassed the market size. In reality this was the main reason for their loss.”

The VCA conducted a six month long investigation on imported cold-rolled stainless steel, made at the request of petitioners including Posco VST and Inox Hoa Binh. The investigation was carried out on batches of products which were imported between April 1, 2012 and March 31, 2013. Following this analysis, the VCA indicated it is due to levy an anti-dumping duty for 120 days on steel imports from mainland China, Malaysia, Indonesia, and Taiwan. The highest tariff, 30.73 per cent, would be imposed on Taiwan’s Yuan Long stainless steel corporation.

Posco VST and Inox Hoa Binh, which account for 80 per cent of domestic stainless steel production, claim that cold rolled stainless steel imports have been sold in Vietnam at 20 to 40 per cent below domestic makers’ prices. They assert this has damaged the domestic stainless steel manufacturing sector.

In contrast, the document compiled by nearly twenty companies that use cold-rolled stainless steel for their products maintained that during 2009-2012 Vietnam’s stainless steel sector increased its capacity in excess of demand. After launching its second production facility, Posco VST’s total capacity in 2012 reached 245,000 tonnes of stainless steel, surpassing Vietnam’s total demand for stainless steel.

The document stated “Posco VST borrowed a large sum for its investment and has to pay a high interest rate of $10 million per year. That is the primary reason leading to their loss.”

Posco VST also exported its products at a significantly lower price which brought about a loss. Their cold rolled stainless steel coil exports to Brazil currently incur an import tax of 35.6 per cent.

According to the Department of Tax in the southern province of Dong Nai, home to the stainless steel factory of Posco VST, the company accumulated a loss of $66.8 million from 2008 to 2012.

In the same period, Posco VST paid $2.3 million in personal income tax, value-added tax and excise to the tax department. It has not had to pay any corporate income tax because companies operating at a loss are exempt.

Therefore stainless steel users appealed to the prime minister to consider not levying anti-dumping tariffs on imported cold-rolled stainless steel from mainland China, Malaysia, Indonesia and Taiwan. They also requested he check and modify the VCA’s preliminary results.

Son Ha buys about 7,000-8,000 tonnes of Posco VST’s steel annually, which only satisfies 30 per cent of the company’s demand.

“The problem is not the competitiveness of Posco VST, but the issue is that they can’t supply the requisite diversity of stainless steel products to the local market. Also, some of Posco’s products don’t meet necessary quality standards,” said a company source.

Stainless steel users also raised concerns that if the government were to levy anti-dumping policies, it would drastically impact both companies using stainless steel and end-users. Twelve months after the investigation into stainless steel imports began, the final result of the dumping is scheduled for July 2014.

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