Import taxes reduced as of April 1

The Ministry of Finance has issued four new circulars on import tax reductions for a number of items.

Two circulars on preferential import tariffs under the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEF) and the Vietnam-Japan Economic Partnership Agreement (VJEPA) in the 2012-2015 period will take effect on April 1.

Accordingly, a number of goods in almost all fields will enjoy regular tax reductions for the next two to three years.

Taxes on electronic goods will be axed from 5 to 2.5 percent in 2014 and several types of digital cameras will even be free from the import tax.

Household items such as bath tubs, basins and kitchen utensils will also enjoy tax cuts from 19 percent in 2012 to 14 percent in 2014.

The remaining circulars on meeting commitments to the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) and ASEAN-India Free Trade Area (AIFTA) in the 2012-2014 period will also take effect as of April 30, 2012.

The Ministry of Finance says in order to be eligible for the new tax rates, commodities must be imported from Free Trade Agreement (FTA) member nations and be transported directly from the exporting country with a valid certificate of origin.

Stocks see correction on both exchanges

Shares entered a downward correction phase this morning as all stock indices lost value due to increased selling pressure.

On the HCM City Stock Exchange, the VN-Index slid 0.87 per cent to 455.27 points by the end of this morning's session.

The trading value stood high at nearly VND925 billion (US$44 million) on a volume of 67.5 million shares.

Over half of the 30 leading shares by market value and liquidity declined, driving the VN30 Index down 0.82 per cent to rest at 513.04 points.

Some blue chips bucked the trend, however, with shares of Sacombank Securities (SBS), Tan Tao Investment Industry (ITA) and Becamex Infrastructure Development (IJC) being traded at the ceiling of a 5-per-cent rise. ITA was also the most active share this morning with 3.1 million shares changing hands.

Gainers narrowly outnumbered decliners by 118-110 overall on the southern bourse.

On the Ha Noi Stock Exchange, the HNX-Index also closed the morning session down 0.59 per cent at 77.26 points, despite advancers outnumbered decliners by 153-107.

Market value totalled VND629.6 billion ($30 million) while the volume of trades reached 67.8 million shares.

Habubank (HBB) continued to dominate trading in Ha Noi with nearly 12.4 million shares exchanged, though it fell 4 per cent to finish this morning at VND7,200 a share.

Stocks rise on growing confidence

Stocks marched into the week with benchmark indices on both of the nation's stock exchanges gaining value yesterday on strong investor confidence.

Investor psychology further improved after Prime Minister Nguyen Tan Dung yesterday estimated first-quarter growth at 4 per cent. Inflation in March of just 0.16 per cent also suggested that the nation was on pace to achieve single-digit inflation this year, Dung said.

On the HCM City Stock Exchange yesterday, the VN-Index advanced by 1.14 per cent, ending the afternoon session at 459.26 points. Both value and volume of trades increased by around 6 per cent, totalling nearly VND1.2 trillion (US$61.4 million) on a volume of 94 million shares.

Trading among the market's leading shares was mixed, however, causing the VN30 Index – which tracks the 30 top shares by capitalisation and liquidity – to fall behind the pace set by the VN-Index. The VN30 ended the session at 517.27 points, an increase of 0.86 per cent.

Overall, gainers outnumbered losers by 185-68, with 51 codes closing unchanged. Of the gainers, 104 rose to their ceiling prices.

Petroleum stocks led the rise, following the announcment by PetroVietnam that it would introduce the PVN-Index in May to measure the performance of its affiliated companies listed on both stock exchanges, as well as on the unlisted public company market (UPCoM).

Petrovietnam Transportation (PVT), Petroleum Industrial and Civil Construction (PXI), Idico-Petroleum Trading Contruction Investment (PXL) and Mien Trung Petroleum Construction (PXM) in HCM City, and PetroVietnam-Nghe An Construction (PVA) and PetroVietnam Drilling Mud (PVC) in Ha Noi all soared on the news, with many sell orders yesterday left unfilled.

On the Ha Noi Stock Exchange, the HNX-Index retreated a little from morning gains, closing yesterday at 77.72, an increase of just 0.19 per cent over the prior session.

Advancers outnumbered declines by 268-56, and 167 codes hit the ceiling, but the value and volume of trades each fell by around 12 per cent, totalling VND982 billion ($46.8 million) on a volume of 99 million shares.

Speculative capital continued to flow into Habubank (HBB), pushing volume in the share to nearly 14 million, but HBB lost 1.3 per cent on the day to close at VND7,500 per share.

The Ha Noi Stock Exchange yesterday formally adopted a new reference price basis, under which the reference price for the following day will be calculated by the weighted average prices in the last 15 minutes of the previous trading day. This new method is expected to make it easy for speculators to push up share prices in the closing minutes of trading regardless of their performance in the session overall.

Foreign investors continued to pour money in Viet Nam's stock market, concluding another session as net buyers yesterday. They picked up shares on both exchanges worth a combined net of VND100 billion ($4.8 million).

Imprudent farming, selling lead to instability for cassava growers

Cassava farmers in the Central Highlands Province of Kon Tum are leading a roller-coaster existence because production is disorganised and inefficient, the Lao Dong (the Labour) newspaper reported yesterday.

Farmers in the province have rushed to produce cassava without a proper plan and seeking out markets that will purchase their produce regularly at reasonable prices, the report said.

Currently, Kon Tum Province has about 40,000ha dedicated to growing cassava – the second largest cultivation area for the crop in the Central Highlands region and the third largest area nationwide.

A sharp fall in market prices this year have hit the farmers hard, the report said.

Last year, the agreement Dak To Cassava Starch Processing Plant purchased fresh cassava for VND2,760 a kilo, but this year, the price has fallen to VND1,760, while dried cassava prices have fallen from VND4,700 to VND2,700.

The price of cassava is largely dependent on the amount of starch it contains. The company has agreed to a fixed price for cassava with starch content of 30 per cent. If this decreases by one per cent, the purchase price of cassava will decrease by VND30.
Local farmers have failed to do what is necessary to grow cassava with high starch content and are suffering from low productivity, low starch content and land degradation, the report says.

The report claims that without investments in intensive farming, the amount of starch is limited to 26-27 per cent, keeping cassava prices low at approximately VND1,000 per kilo.

The lack of market information and accurate demand forecasting has also been responsible for low prices, as has been the failure to find more markets to buy the farmer's produce.

Nguyen Van Hiep, deputy director of the Dak To plant, said yet another reason for lower prices is that demand from China, the largest buyer of cassava starch, has fallen.

Furthermore, purchases by domestic animal feed processing plants have also been low.

Tran Van Chuong, deputy director of Kon Tum Province's Department of Agriculture and Rural Development, repeated the mantra of intensive farming and the use of new plant varieties with high productivity.

He said farmers and businesses should establish close links with each other and sign contracts for consuming produce. The province, for its part, will implement an agricultural insurance scheme for farmers to minimise damage caused by natural disasters and unexpected price hikes, Chuong said.

He said close farmer-enterprise links will not only help the farmers avoid price squeezes, but businesses will also be confident that farmers would not sell their produce to small traders instead of factories that process the root.

PetroVietnam focuses on its core businesses

The Prime Minister has approved a proposal by PetroVietnam to discontinue development of a five-star hotel, trade centre, theme park and apartment complex in Ha Noi's Tu Liem District.

Instead the work will be conducted by real estate firm SSG. The two established Petroleum Viet Nam-SSG Real Estate JSC (PV-SSG) to implement the project.

The move is designed to encourage PetroVietnam to focus on its core sectors such as oil and gas exploration, petrochemicals and electricity production.

The project was designed to mark Thang Long-Ha Noi's millennium, said Pham Thi Thu Ha, deputy general director of PetroVietnam.

The project includes a five-star hotel complex on a 3.8-ha area, as well as a trade centre, theme park and the temporarily named PetroVietnam Tower on another 21.2-ha site.

On March 12 this year, the Prime Minister requested PetroVietnam inform the Ha Noi People's Committee how much work it had already carried out and to re-assign the remaining work to PV-SSG.

"Up to now, the municipal committee has approved the 1:500-scale plan on the 3.8-ha area for the hotel complex," Ha said. "The corporation has also formulated an investment plan, sought contractors, approved the designs and cleared the land."

PV-SSG has stated that it wished to focus on the 3.8-ha project, and has assigned PetroVietnam Construction Joint-stock Corporation (PVC) to carry out work on the remaining 21.2 ha. PVC owns a 31 per cent stake in PV-SSG.

On January, 3, 2012, PetroVietnam asked permission for PVC to carry out the 21.2-ha project.

PVC was charged with continuing the development of the trade centre complex, which would include construction of the PetroVietnam Tower, Theme Park and on the 21.2 ha site.

The PM also stated that PetroVietnam was only permitted to contribute a minimal amount of money to construct the corporation's offices and that it could not put its name on the project. He also stated that PetroVietnam Tower would have to be renamed.

Brokers to report client holdings more often

The State Securities Commission (SSC) has called on securities firms to report the balance of customer deposits every two weeks while increasing supervision on company operations.

The move is seen as a bid to force securities firms to comply with the requirement of separating investor accounts from company accounts.

Investors have recently complained that they could not withdraw their money from accounts at some securities companies, a sign that their capital is likely being abused.

Three months ago, the SSC fined VSM Securities with VND60 million (US$2,900) for not separating money in investor trading accounts from the company's accounts during January-September 2011. Earlier, four other companies, including Vietnam Industry Securities, An Phat Securities, Cho Lon Securities and Asia Pacific Securities, were also punished for similar reasons.

Currently, only 19 out of 100 securities companies have separated investor deposit accounts from their own accounts, according to Dau tu chung khoan (Securities Investment) newspaper.

According to many companies, it is not easy to separate deposit accounts for each investor due to limited bank technology. However, there are at least six banks now implementing such management services, including BIDV, Asia Commercial Bank (ACB), Vietcombank, Vietnam International Bank (VIB) and Orient Commercial Bank (OCB).

Pham Hong Son, director of the SSC Securities Business Management Department, said that on the basis of international market practices and recommendations from the International Organisation of Securities Commissions (IOSCO), it planned to add regulations on the management of investor money in a draft circular replacing Decision 27 based on establishment and operation of securities companies.

Under such new regulations, securities firms will be forbidden to use customer money in any manner as well as transfer money between client sub-accounts.

Transactions related to customer money will be allowed only if consistent with existing laws. Securities companies have to draw up two methods of money management for customers to choose from, which involve opening accounts at banks to manage customer money or customers directly opening accounts at banks selected by securities firms themselves.

Delta seafood firms, farmers in chain of debts

The business cooperation between some seafood processing companies in the Mekong Delta provinces and catfish farmers have turned into a chain of debts, with the processors unable to pay farmers, who in turn also fail to repay the feed suppliers, and so on.

The chain can collapse at any time, burdening farmers’ with pressure to clear bank loans, while sending the businesses to bankruptcy.

In Can Tho city’s Thot Not District, for instance, a large number of catfish farms have been left deserted, while local farmers, who used to be billionaires from selling the fish, are now seeking buyers for their land plots.

In one typical example of the chain of debt, local farmer Ho Van Nghia said that in July 2011 he sold 260 tons of catfish at VND23,500 a kilogram to An Giang-based Vinafish Export Import Corporation. The contract was worth a total of VND6.3 billion, and was expected to be settled within 30 days.

However, the processor delayed fully repaying Nghia, and ended up owing him VND4.7 billion at the end of last year.

Even though he took the company to court, Nghia still has not gotten back his money.

“I myself owe bank loans and feed suppliers more than VND3 billion, and selling my house and land is the only way to have enough money for settling the debt,” said Nghia.

“Dozens of other farmers are in the same situation.”

For its part, Vinafish Co has laid off most of its workers due to the lack of input materials, according to some laborers who are still working for the heavily indebted company.

An employee of the company also admitted to Tuoi Tre that Vinafish’s workforce has been slashed from 600 to only 100 laborers.

When the company is able to buy fish for raw material, usually 30 tons at most, it simply hires some day laborers for processing, he said.

“But many other processors are doing the same thing, since this is a common problem in the seafood processing and exporting sector,” he protested.

Many of the 21 seafood processing plants in An Giang Province have reduced the number of workers, or have even shut down.

Even workers who have yet to be fired have considered returning to their hometown, as they cannot make ends meet with the modest wages due to the material shortage.

Nguyen Thi Thanh, a seafood worker, said she used to work for An Khang Co, and had move to several other firms after the company went insolvent.

But the other companies have also worked perfunctorily.

“Due to the material shortage, the plant has repeatedly closed,” said Thanh.

Seafood experts said what is most dangerous to the seafood sector is the domino collapse of the debt chains, if banks continue to tighten credit to the processors.

Under the banks’ tightened credit policy, seafood companies cannot access bank loans, and thus have no capital to buy fish from farmers.

Farmers will then have no money to replay feed suppliers, or reinvest in their farming, experts warned.

Duong Ngoc Minh, deputy chairman of the Vietnam Association of Seafood Exporters and Processors (VASEP), said seafood companies used to need only the fish buying contract to be eligible for bank loans.

“But they are no longer able to do so under the current credit policy,” said Minh.

“VASEP figures show that less than 10 percent of businesses have cleared their payments with farmers on time.”

As many as 80 percent of the seafood processing plants have had to cut production, and some even had to shut down operations, confirmed Minh of VASEP.

In Can Tho, the total production of the 12 local plants has dropped from 1,200 tons a day to only 300 tons a day, he said.

The fish processing plants’ shutdown has also lead to the closure of many seafood feed processing plants, he added.

“More than 70 percent of the fish feed manufacturing plants are in trouble, 40 percent of which have had to stop operation,” elaborated Minh.

According to the Can Tho Seafood Association, fish farmers have given up their farming en masse, resulting in the raw material shortage, while seafood processors have faced capital shortages to buy materials.

Earlier, since many processors have prolonged catfish payments to farmers, or even defaulted on the debts, many farmers have also demanded the latter pay them in cash in advance to be able to receive the fish.

This has also exacerbated the short supply of materials, the association said.

Seminar highlights local economy’s weaknesses

At a seminar about a policy framework for Vietnam’s economy in the middle and long term held in Hanoi on Wednesday, experts pointed out many internal shortcomings that caused instability.

Nguyen Duc Thanh of the Hanoi National University said the mistakes of the monetary policy in 2007 caused inflation to shoot up in 2008, and the spillover effects were still felt now.

“The worst concern is that such mistakes are prolonged. Policymakers are confused and the economy has to suffer,” he said.

Thanh said the banking system was becoming even more instable with rising bad debts, low asset values, alarming liquidity, sky-high lending rates and lowered deposit rates.

Nguyen Thi Kim Thanh, director of the Banking Strategy Institute, said the central bank found itself stuck with many targets to achieve such as curbing inflation and stabilizing the monetary market.

In the middle term, when the financial market and the bond market develop, the burden of the monetary policy will be relieved. However, capital pressure will remain high until 2015, making it necessary to expand credit, Thanh said.

She proposed the central bank should continue to tighten credit from now to 2014, because once credit is loosened, people will invest in efficient sectors, making it hard to tame inflation.

Former trade minister Truong Dinh Tuyen said the establishment of an independent central bank was worth considering.

Without this model, Vietnam will always struggle with the impossible task of balancing fixed exchange rates and free capital flows and monetary independence.

Thanh of the Hanoi National University said the gap of 10 percent between saving and investment was another cause of macro-economic instability in Vietnam.

The economic growth model focuses on promoting investment but investment quality is going downhill. State-owned enterprises waste their huge resources in irrelevant and inefficient investments.

The model to develop the economy in width requires boosting investment, which has widened the gap between saving and investment, Thanh explained.

The gap is often evened out by foreign capital sources, but as foreign resources dwindle, domestic capital is used instead, causing inflation and instability.

Former minister Tuyen shared Thanh’s view, saying the fact that the majority of investment capital was allocated to inefficient State firms resulted in the vicious cycle of inflation.

He said these weaknesses had been pointed out before, but it was hard to overcome them.

Meanwhile, chief economic expert of the World Bank Deepak Mishra said though tax collection made great contributions to the State budget revenue, Vietnam had to fulfill debt obligations in the coming time, which would likely lead to the State budget deficit.

If the State budget deficit continued to stay high, it would be difficult to stabilize the macro-economy, Mishra said.

Crushed by high capital costs

Ask entrepreneurs about the toughest challenge facing them now and the answer will be high capital costs.

High capital costs became the most highlighted issue during a meeting between HCMC leaders and enterprises earlier this week as well as in a report released this Wednesday by the Vietnam Chamber of Commerce and Industry.

According to the report about the local business environment and entrepreneurs’ confidence, rising capital costs were seen as the key bottleneck in the economy.

The State Bank of Vietnam as the highest authority tasked with monetary and financial issues of the economy has long been aware of what enterprises are facing, and has vowed to take measures to pull down the interest rate.

Governor Nguyen Van Binh in a press conference in Hanoi on Monday announced a decision that will force all banks to adhere to a new deposit interest rate ceiling of 13 percent a year instead of 14 percent that had been in place for months.

The governor also unveiled a road map to pull down the interest rate by one percentage point each quarter so as to bring the ceiling deposit rate to around 10% next year.

But the problem persists. According to local media, access to lower-cost capital for most enterprises remains extremely difficult.

“Enterprises are not happy, and the market is not excited after the Governor announced the rate cut,” Tuoi Tre said.

For a long time, enterprises haven’t been interested in rate-cutting programs launched by banks, simply because very few of them can be eligible for the cheaper funds, Tuoi Tre said, explaining the lukewarm attitude of enterprises toward the rate cut.

Vnexpress, in criticizing the central bank’s monetary management, said imposing ceiling deposit rates didn’t help reduce lending rates for enterprises.

This e-newspaper suggested that the central bank should control the lending rate rather than the deposit rate in order to encourage competition among banks as well as ensure a reasonable capital cost for borrowers.

As the deposit rate is capped, smaller banks cannot mobilize funds and thus have no capital to ensure healthy liquidity and to lend to their clients, while bigger banks enjoy ample funds that they use to lend to smaller credit institutions on the inter-bank market at rates as high as 40 percent a year, Vnexpress said.

Capping the deposit rate has choked off competition, while clients still have to borrow money at very high rates.

At the aforesaid meeting in HCMC on Tuesday, businesspeople complained that most of them had to borrow funds at annual rates of 20 percent a year or higher, rather than the soft rate of 15 percent - 16 percent as announced by banks.

A representative of Dai Phat Group said the company had just taken out a loan of VND30 billion and would have to pay an interest sum of US$6 billion a year.

Nguyen Trong Hanh, deputy director of the HCMC Tax Department, said that banks only cared about lending each other via the inter-bank market rather than granting credit to enterprises, adding that “recent announcements of rate cuts by banks are just lip services.”

Businesses were also worried about the fact that because of a shortage of funds and high capital costs, up to 2,500 enterprises in HCMC, or 15 percent of the total number, reported losses in February alone.

Sai Gon Tiep Thi quoted Nguyen Hoang Minh, an official of the central bank based in HCMC, as admitting that “banks focused too much on liquidity rather than supplying funds for enterprises.”

Tuoi Tre went further and criticized the monopolistic role of banks in the economy. This paper charged that banks had many sources of cheap funding, so the capital cost at banks averaged out at only 10 percent.

“They will make big profits when lending at 15 percent a year, but most of them charge clients at over 20 percent,” Tuoi Tre said.

“For a long time, in order to stabilize prices, local authorities have taken many measures to boost inventory of commodities, but capital as a special commodity is being floated,” Tuoi Tre said. “While many enterprises have to register input costs and selling prices of their products, banks have all the freedom to fix their lending rates.”

On the sidelines of the meeting between HCMC leaders and enterprises on Tuesday, the HCMC Association of Small and Medium Enterprises reported that over 60 percent of its members didn’t have enough capital to maintain business.

Pham Ngoc Hung, vice chair of the association, proposed that the central bank put a cap on the lending rate rather than the deposit rate to help businesses survive tough times.

Given the road map on reducing interest rates as announced by central bank governor Nguyen Van Binh early this week, the preventively high capital cost will remain until this year’s end and into next year, meaning the struggle with the high capital costs will be a long-lasting ordeal for enterprises.
 
Food processors face capital shortage
 
The food and beverage industry has great potential for development, yet local producers have met many difficulties, especially a shortage of capital.

Food consumption in Viet Nam will increase by 67 per cent from 2009 to 2014, according to a Business Monitor International (BMI) report.

Accordingly, there remains considerable scope in the country's food and drink demand, given the positive dynamics of low unemployment, strong tourism growth and increasing remittance inflows.

"In the longer term, domestic demand looks bright. A massive youthful population, sector immaturity and a plethora of macroeconomic driving factors make the Vietnamese consumer goods sector a high-growth prospect," the report stated.

The food industry currently has an annual average growth rate of over 11 per cent, according to the HCM City Food and Foodstuff Association.

Nguyen Van Phong, chief accountant of the HCM City-based Viet Hung Food Industry, said the food and beverage sector looked promising, but enterprises still met many impediments caused by high inflation and interest rates.

Companies had to compete more seriously, both locally and on an international level, as a certain number of consumers still preferred imported food of which the quality, food safety and hygiene standards were much higher, said industrial analysts.

"In order to rein in sales prices, firms have to cut costs to compensate for higher input spending on raw materials, higher interest rates and the necessity of business improvement," Phong said.

The average interest rate at 18-20 per cent per year in 2011 was a great bottleneck for most producers.

"We hoped that the rate would continue decreasing to 15 per cent as part of efforts to ease price hike pressures," he said.

Under Government and State Bank guidelines, commercial loans will prioritise financial resources for small – and medium-sized enterprises, farm production, exports and support industries, of which the food and drink sector forms an integral part.

Poor management causes business plans to fail

Dysfunctional business behaviours lead to strategy failure, including decisions taken while unaware of relevant risks, as well as self-interested behaviours, such as deliberate understatement of risks or overstatement of benefits to get approval for a proposal, according to a recent survey issued by the Association of Chartered Certified Accountants (ACCA).

Many of these behaviours involved dishonesty, while others were due to mere bias, the survey revealed. For the survey, more than 2,000 ACCA members across the world were asked about the frequency of 14 dysfunctional behaviours in their companies.

Up to 68 per cent of respondents cited underestimation of risks as one of the main reasons for failure of organisational strategies.

Overestimation of their ability to predict and control future events was selected by 59 per cent of the respondents. Decisions biased by personal interests were cited by 41 per cent of those involved in the survey.

At least 31 per cent said there was an inappropriate propensity to risk-taking, either too high or too low.

Four per cent said bad luck sometimes was involved, including events occurring despite careful planning, which led to failed organisational strategies.

When asked about the causes for strategic failure, non-executive directors were more likely to suggest personal bias, and less likely than others to point to poor judgement, according to the survey, which was released at a seminar in HCM City recently.

Asked why leaders undertake unethical behaviour, the respondents cited pressure as the top reason. They said the pressure could stem from unexpected financial difficulties or fear of the future for their organisations or their own jobs.

However, among senior non-executive directors, planned dishonesty or opportunistic abuse of power were seen as bigger problems.

Non-executive directors also responded differently from other respondents when asked about unethical forecasting practices and the behaviours that undermined decision-making in times of uncertainty.

A majority of board members said that overly optimistic forecasts were never made in their own organisations, but only 20 per cent of financial controllers or accountants believed that this never happened.

As for behaviours that can undermine decision-making, personal power battles or the skewing of predicted risks or rewards to favour a desired outcome were cited by both executive and non-executive board members as practices that could frequently occur.

Delta region offers investment incentives

Companies that want to invest in the Cuu Long (Mekong) Delta region will likely be given preferential treatment under a plan drafted by the Ministry of Planning and Investment.

The objectives of the proposal include increasing the area's number of exports with high-added value, and creating businesses that would offer non-agriculture employment for local residents.

The plan also aims to protect the environment and minimise the effects caused by climate change.

Under the proposal, companies that invest in areas of priorities in the region would receive credit support and tax relief.

These include companies involved in processing agriculture and aquatic products; supplying services for enterprises; and professional training, technology transfer, silo construction and tourism development.

Preferential credit policies for enterprises would be offered under various forms, with low or zero interest rates, and with an appropriate grace period and simple eligibility requirements.

Enterprises participating either completely or partly in the delta would either be exempt from taxes or have lower taxes. Fast depreciation rates might also be allowed.

The plan also encourages the setting up of units specialising in supply of services, especially those related to the provision of business information, legal consultation, partner discovery, trade promotion and technology transfer.

Additionally, the Government wants to improve the quality of vocational training units, and offer a stimulus to companies to establish non-state vocational training establishments and apply new technology to production activities.

After getting approval by the Government, the programme would use all available resources to settle the most urgent problems facing the development of the region's major products.

In particular, rice cultivation areas in the region would be rearranged to ensure sufficient supplies for domestic and export demand.

The project also plans to make adjustments to current land-cultivation allocation to create opportunities to develop fisheries and agriculture production on a large-scale and in a sustainable manner.

Localities will be required to re-plan areas specialising in growing fruit trees based on the strengths of each locality, and create conditions for farmers to carry out technology transfer to ensure product quality and food safety.

Another important feature of the plan is the development of infrastructure in the region.

The aim is to improve the road networks in the delta region, with priority given to roads that link provinces and cities in the key economic zone with other localities and seaports.

The local waterway and port systems would also be upgraded with investment priorities given to construction of a passage on Hau River, development of Can Tho Port into a trade centre for the delta region, and the changing of Can Tho Airport into an international airport.

For the commercial area, the plan calls for creating land and capital conditions for projects involved in construction of storehouses used for agriculture and aquatic products, and the development of wholesale and border markets.

HCM City stabilises prices of drugs

The prices of 70 vital drugs made in Viet Nam will be stabilised this year under a HCM City programme.

The programme includes 40 drugs to treat heart disease, diabetes, diarrhoea, allergies, and some other conditions.

Nine pharmaceutical companies would take part in this year's programme, five more than last year, the HCM City People's Committee announced.

Besides, nearly 2,000 pharmacies are also taking part, with authorities hoping to get all 4,000 in the city involved in it.

The drugs included in the programme account for half of the most essential ones, including antibiotics, vitamins, and anti-pyretic and anti-inflammatory medicines, according to the city's Department of Health.

They are sold at 10 per cent or more lower than market prices.

To encourage people to use local products, the drugs chosen for the programme are ones that meet the World Health Organisation's Good Manufacturing Practice requirements, according to People's Committee vice chairwoman Nguyen Thi Hong.

The city was committed to ensuring proper supply through an increased number of pharmacies, Hong said, adding that doctors would be ordered to prescribe Vietnamese-made drugs, especially for low-income patients.

This year's programme starts on April 1 and will go through March 3 next year.

It is part of a larger programme to stabilise the prices of four groups of essential products, the others being food and foodstuffs, milk powder, and school items. It also seeks to promote Vietnamese-made goods.

Exporters face hurdles in accessing EU market

Vietnamese export growth to the EU through 2013 is not expected to be robust as the area continues to have economic difficulties, leading to lower consumer demand, according to the deputy head of the Ministry of Industry and Trade's European Market Department.

Tran Ngoc Quan, speaking at a seminar held yesterday by the Viet Nam Trade Promotion Agency in HCM City, said that the EU's strict technical barriers on hygiene and the environment were also affecting Vietnamese exporters.

Since the economic turndown in 2009, many EU countries have had to increase exports to overcome the financial crisis, leading to fierce competition for markets among EU members.

Exports must satisfy requirements of all 27 EU members, a difficult task because the tastes, consumption style and business culture in every country are different. The EU market has 492 million consumers with income of about US$34,000 each person per year.

Quan said Vietnamese exporters should check the payment capacity and finances of their partners carefully when doing business.

In the past, some exporters experienced slow payments by their buyers, some of whom went bankrupt.

He recommended an increase in exports of processed products instead of raw materials to add more value.

Exporters should try to improve production to reach international standards and meet export-market requirements, minimising the number of violations in competition laws and anti-dumping regulations.

Businesses should access the site www.exporthelp.

europa.eu to update information about EU regulations.

"The Vietnamese firms should not run businesses for the short term or conduct business fraud. They should know how to protect their benefits and image of Viet Nam in general," Quan said.

The Government should intensify trade promotions to gain more access to markets.

To help exporters, the Government also should organise meetings for businesses to keep them up-to-date on trade promotions, EU regulations, free trade agreements and trade commitments.

At the seminar, participants learned about trade opportunities from representatives from the Netherlands and Italy.

Jos Schellaars, Consul General of the Netherlands in HCM City, said the country was 10th in the world in terms of GDP per capita and was a major source of imports, exports and FDI.

The country is a dominant player worldwide in logistics, the chemical industry, flower seeds, dredging, Fast-Moving Consumer Goods, chip production, equipment and food.

The country has 57 per cent of all European distribution centres, and rail transport connects ports and industrial sites to the rest of the EU.

Bruna Santarelli, Italian Trade Commissioner in Viet Nam, said Italy was the seventh largest exporter and eighth largest importer in the world. It ranks fifth on commodity production in the world, and second in the EU, after Germany.

At least 65 per cent of Italy's production comes from industrial machinery and hi-tech, fashion, furniture, porcelain pottery, construction materials, food and wine.

Although export growth of Viet Nam is fairly stable in most sectors, trade in Italy resulted in a surplus of more than 300 million euros (US$398.4 million) in the first 10 months of last year.

"We hope trade between the two countries will become more balanced," she said.

The Italian Trade Commission plans to promote trade and investment between Italy and Viet Nam (trade shows, seminars, B2B matching missions), and offer more detailed information to Italian companies interested in doing business in Viet Nam.

$1bn park supports key sector

Three domestic firms last week inked a strategic cooperation deal to build a $1 billion  industrial park in the capital to muscle up supporting industries.

Industrial property developer N&G Corp, electronics and IT firm Hanel and DOJI Gold & Gems Group will develop the Hanoi Southern Supporting Industrial Park (Hanssip), based on the expansion of Dai Xuyen industrial cluster, covering 700 hectares in Phu Xuyen district, the southern gateway to Hanoi. It is situated on the main Phap Van-Cau Gie-Ninh Binh expressway and National Road 1A, about 85 kilometres from Haiphong port and 60km from Noi Bai international airport.

The specialised industrial park will welcome supporting industries, mainly hi-tech part production for textile and garments, leather and footwear, electronics-informatics, automobile and motorbike manufacturing sectors. The industrial park will meet Japanese supporting industry standards and include an urban service, logistics and trading area, plus banks, healthcare services and schools to ensure good living conditions for workers and experts working at the park.

“We are determined to develop Hanssip, contributing to the development of supporting industries in Hanoi and in Vietnam,” said N&G Corp chairman Nguyen Hoang. Hoang told VIR that N&G Corp, Hanel and DOJI late last week arrived in Tokyo to sign a cooperation deal with Shimizu Group, one of Japan’s top-five leading architectural, engineering and general contracting firm, to jointly develop Hanssip.

Hanssip is the second industrial park in the north specialised in attracting supporting industry investors. Privately-run Kinh Bac Corporation in 2009 developed an industrial park in northern Bac Ninh province, 40 kilometres from Hanoi, to lure Japanese investors operating in supporting industries.

In another development, construction started last week at Long Duc Industrial Park in southern Dong Nai province. Developed by the joint venture involving Japanese firms Sojitz Corporation, Daiwa House Industry and Kobelco Eco-Solutions and local partner Donafoods, the $50 million park also prioritises attracting Japanese investors in supporting industries.

In Vietnam’s economic development strategy for 2011-2020, the Vietnamese government considers developing supporting industries as an important task to help slash the trade deficit and make Vietnam an industrialised country by 2020. “Businesses conducting production activities in Hanssip will receive much support such as quick and simple procedures, tax incentives, workforce training assistance and particularly flexible bank loans,” Hoang said.

Nguyen Huy Tuong, vice chairman of Hanoi Municipal People’s Committee said Hanoi was now home to eight industrial parks, but all were fully occupied. Meanwhile, the city has planned to relocate thousands of manufacturing facilities from inner city areas and Hanssip will be a destination for the relocated enterprises.

Hanssip will also help develop the Phu Xuyen satellite urban area as per Hanoi’s master plan vision to 2050.

Golf projects have a chance to tee off

The fate of 28 additional golf course projects remains up in the air, but developers can still shoot for projects.

The government is to delay 28 golf course projects to safeguard agriculture-rich land and protect the environment. However, investors will still be able to shoot for projects if they come up to par.

Minister of Planning and Investment Bui Quang Vinh said the ministry had submitted to the government a new golf course management direction draft to review golf course development.

“First, all golf courses developed outside the national plan will be cancelled. Second, all golf courses which are built on cultivated and paddy land or transformed into properties will be investigated. Third, we regulate that golf courses cannot be located in rice-cultivated land or protection forest. Fourth, golf courses will only be developed in areas of tourism potential,” Vinh said in a recent online dialogue of the Government Office.

The Ministry of Planning and Investment earlier submitted a proposal to the government to add 28 golf course projects to national golf course development plan till 2020, raising the planned golf courses in Vietnam to 115.

Although the proposal has yet to receive the government’s thumbs-up, Vinh said the government could approve new golf course projects if they did not occupy agricultural land and met environment protection criteria. Golf courses could be developed in sandy areas or fallow-bald hills. “It will be a waste if we do not approve golf courses in fallow areas,” said Vinh.

Golf has been developing in Vietnam since late 1990s. Vietnam has 87 golf course projects in 34 provinces and cities. More than half are developed by foreign developers. At present, 29 golf courses are operational, 22 are under construction and 13 have received investment certificates. The remaining 23 golf courses are approved in principle.

However, golf courses eating up rice-cultivation land and polluting the environment is a hot topic.
The ministry also admitted the golf industry was contributing to the country’s economy. In 2010, tax collection from 29 golf course developers was estimated at around $25.4 million and the courses created 9,744 jobs.

“If we put courses in the right places, they will create jobs, attract tourists and boost the development of service sector,” Vinh said.

Nguyen Ngoc Chu, vice chairman of Vietnam Golf Association, said the number of golf courses in Vietnam was not high if compared with neighbouring countries.

For example, Thailand has 256, Malaysia 230 and Indonesia 152 courses. “The question is not that how many golf courses we have, the question is how we manage them effectively,” said Chu.

Right now, golf courses are taxed at a rate higher than most recreational or leisure activities in Vietnam, higher than neighbouring countries. Chu said this obstacle should be removed to encourage golfers and attract more investment into Vietnam’s golf industry.

M&A boom in southern markets

Mergers and acquisitions are on the rise as investors seek to be more profitable and avoid going bankrupt.

Ho Chi Minh is currently the hub for such deals. One of the first major deals was in 2011, when Singapore's Dancin Holdings bid for Tan Tao A urban area project, owned by Khang An Investment Real Estate JSC. It later was shored up when the property fund company JSM Indochina announced that they would transfer the land use rights of Peninsula project to Sao Sang Saigon JSC.

In 2012, the pace of M&A picked up in real estate market, when Capita Value Homes Company acquired 70 per cent stake in a high rise project from Khang Dien Saigon JSC, and also Hoang Anh Gia Lai buying 100 per cent another project in District no. 7

Many companies have decided to transfer their projects. Hoa Sen Group said it is considering transferring a series of its real estate projects, including Hoa Sen Phuoc Long and Hoa Sen Riverside Apartments, Hoa Sen - Gemadept Airport. A number of industrial zones or resort projects in Hoa Binh Corporation are also set for transfer.

Also, Dat Xanh Investment Corporation has made successful acquisitions of four property projects, including Majestic and Gold Hill projects in Dong Nai Province, the Bella in Ho Chi Minh City and the Marina in Binh Duong Province. Thien Minh Group also took over the Victoria Hotels property in Vietnam.

One of the biggest players in these deals has been the C.T Group. In March, the group announced its $24 million bid for South Korea's GS firm to develop golf projects in Cu Chi District, Ho Chi Minh City.

Previously, the acquisitions were often made by foreign companies, trend has been changing. Vietnamese firms have been making a series of large M&A deals.

A representative of the C.T Group said the deals are being made not only in the realty market but in other industries as well, with the busiest areas in Ho Chi Minh City and southern regions.

Prospects for Vietnam’s exports to EU through gateway markets

A seminar was held in HCM City on March 23 to discuss ways to sharpen the competitiveness of Vietnamese exports to the EU.

Currently, Vietnamese businesses are facing challenges penetrating the EU market and having their commodities circulated in the 26 EU member countries. The EU market always has strict technical regulations relating to human health, the environment, sustainable development and anti-dumping measures. Therefore, Vietnamese businesses should improve their product quality and devise proper strategies to effectively access the demanding market.

In 2011-2013, Vietnam enjoyed the EU’s Generalized System of Preferences (GSP) with a tax rate reduction of 3.5 percent on average compared to GSP rate making up 25 percent of Vietnam’s total export turnover in the EU market.

The EU plans to adjust GSP regulations in 2013 by minimizing GSP for highly competitive countries to create favourable conditions for businesses in developing countries, including Vietnam, to improve their competitiveness in the market.

Tran Ngoc Quan, Deputy Head of the European Market Department under the Ministry of Industry and Trade asked domestic businesses to learn more about their partners, especially their payment methods.

In addition, they should devise proper strategies for exporting processed and unprocessed products, improve product quality, grasp regulations to protect themselves, and explore trade agreements.

Moreover, developing chain business models and penetrating EU distribution networks will bring more opportunities and advantages for Vietnamese products.

Jos Schellaar, Dutch Consul General in HCM City said “with advantages of economics and trade, the Netherlands will help Vietnamese goods achieve greater penetration of the demanding EU market.

Meanwhile, Bruna Santarelli, Chief Representative of the Italian Trade Commission Office under the Italian Embassy in Vietnam, said that Italy - the world’s seventh largest exporter and eighth importer- makes up 3.5 percent of global trade. The Trade Commission Office has offered many free services to help Vietnamese businesses expand investment and business in the country.

Vietnam-EU two-way trade turnover has increased from US$4.1 billion in 2000 to the current US$24.29 billion in which Vietnam’s exports to the EU hit US$16.5 billion and its imports from the country reached US$7.74 billion.

EU, Italy keen to foster trade ties with Vietnam

Shoes are one of Vietnam's key exports to the EU

Vietnam is a potential market in Southeast Asia, and the European Union and Italy want to increase economic, trade and investment cooperation with this nation.

The view was shared by Antonio Tajani, Vice President of the European Commission, Marta Dassu, Under Secretary of State for Foreign Affairs of Italy, and Elisabetta Belloni, Director General for Development Cooperation of the Italian Ministry of Foreign Affairs, during meetings with Deputy Foreign Minister Bui Thanh Son.  

Son was attending the ASEAN Awareness Forum in Italy on March 22-23.    

Tagiani said he is interested in the Asian markets, especially Vietnam, and confirmed that he will try to promote trade and investment cooperation between the EU and Vietnam, as well as bilateral partnership to a new level.

He revealed that he will lead a delegation of between 30-50 companies from EU member countries to Vietnam to sound out investment and cooperation opportunities.

At another reception, Deputy FM Son and his Italian counterpart Marta Dassu discussed measures to strengthen Vietnam-Italy relations in the lead up to the 40th anniversary of the establishment of diplomatic ties.

Dassu stressed that Italy considers Vietnam a key partner in Asia, and it wants to increase all-round cooperation, particularly in economics, with the Southeast Asian nation.

She asserted that Italy will be a trusted and responsible partner of Vietnam in development cooperation.  

The diplomat suggested that both sides increase the exchange of delegations in 2012-13 aiming to raise bilateral trade to US$3 billion, while creating conditions for their business communities to establish partnerships in various forms, including the public-private partnership (PPP) model.

She said major cooperation areas will be focused on transport infrastructure, water supply, power plant construction, health care, and the environment.

Dassu invited Vietnam to take part in an international exposition in Milan in 2015 which is scheduled to bring together giants from Italy and other countries to showcase the latest technology in food processing, clean and renewable energy.  

Meanwhile, Elisabetta Belloni told Son that Italy will speed up cooperation projects with Vietnam, primarily those on health care and energy.

According to Son, despite economic difficulty, Italy includes Vietnam in its priority list of official development assistance (ODA) recipients, offering preferential loans to human resource development and infrastructure construction projects.

Currently, both countries are carrying out the roadshow program to connect their business links.

Son proposed that Italy include Vietnam in its non-refundable aid recipient program to help the latter develop education and training of human resources.

He also proposed that Italy receive Vietnamese students, expand training cooperation between their institutions, and support the building of an advanced scientific and technological research centre.  

Both sides agreed to work on plans to lift bilateral relations to a new level in the near future.

Deputy FM Son left Italy on March 24 for Greece to inaugurate the Vietnamese Embassy headquarters slated for March 26.