Japan firms eye investment via public-private partnership

As the government can afford only a half of the $160 billion needed for the country’s infrastructure development, Vietnam can hopefully solve the problem thanks to Japanese investment via the public-private partnership (PPP) scheme, a forum heard yesterday in Tokyo.

Speaking at the investment forum between the two countries held by Vietnam’s Ministry of Planning and Investment and the Japanese Mainichi Newspaper, Deputy Planning and Investment Minister Dang Huy Dong said the government can no longer raise capitals from its traditional channels like issuing bonds or mobilizing ODA funds.

“With the PPP scheme, the government accounts for only 30 percent of the capital investment, and the rest will be funded from the private sectors,” he said.

He said the scheme is expected to attract $20 billion in foreign investments every year.

Speaking highly of the Japanese investors’ competitiveness in the infrastructure development sector, the deputy minister predicted that private businesses from Japan would account for 20 to 30 percent of the PPP investment market in the coming years.

Katsuhiko Murayama, head of the Financial Cooperation Division under the Japanese Ministry of Economy, Trade and Industry, said many Japanese enterprises have shown interests in investing in Vietnam via PPP.

“Some [Japanese] enterprises, especially those of small and medium sizes that have encountered business difficulties in the domestic market are eying Vietnam for investment,” he said.

Yoshimori Kanda, assistant director of the Asian division of Sojitz Corporation, said the government’s holding 30 percent of the capital is an appealing factor that could win the investors’ trust.

“The Japanese investors will see their chances in Vietnam,” he said.

Many international financial institutions including the JICA, IFC and those investment funds from Korea, Japan and Britain are willing to contribute to the state funds to support the PPP projects.

Norio Hattori, former Japanese ambassador in Vietnam, said Vietnam’s neighboring countries like China, Thailand, and the Philippines have succeeded in applying the PPP scheme for their infrastructure developments.

He thus believed that the application of the PPP scheme in Vietnam would too yield good results.

Economic meltdown hits interior makers in central province  

An economic turmoil has force many furniture makers in the central province of Binh Dinh to reduce operation or shut down this year.  

Statistics show there are 160 furniture manufacturers in the province with the total fabricating output of 345,000 cubic meters of wood per year.

Binh Dinh Province’s export turnover of furniture amounted to more than US$1.1 billion in the period of 2006 and 2010, an equivalent of nearly 61 percent of the province’s figure.

Most of local producers are small- and medium-size enterprise, which meet up quality requirements of big foreign traders.

“Local furniture makers focus solely on outsourcing. They are not eager to upgrade equipments and techniques to boost output, as well as create their exclusive patterns,” an expert told Dau Tu Tai Chinh Newspaper.

“Their competitiveness remains low due to a shortage of skilled workforce and poor cooperation with their counterparts.”

Therefore, local manufacturers struggle to weather the economic meltdown, he says.

So far this year, input cost of the furniture sector has surged more than 30 percent so far this year, while export prices have remained unchanged, according to furniture makers in Binh Dinh Province.

“A high lending rate combined with low profit margin are scaring off local producers,” says a director of a furniture maker, who asked to be unnamed.

Financial experts ask businesses should focus on interior furnishings in an effort to boost the interior output to 40 percent of the province’s figure by 2015.

The Binh Dinh Province People’s Committee announces it will subsidize 30 percent of the expense that interior makers are required to make for setting up the environment impact assessment of their investment projects.

It will also finance 15 percent of the cost of building waste water treatment system and 70 percent of the expense of training manual workers.

The local authorities help interior manufacturers to hire experts in order to improve their fabricating techniques twice a year.

The top export product from Vietnam to the EU last year was footwear, valued at 1.75 billion euros. It was followed by textiles and garments, coffee, seafood and furniture.

Tra fish exports worth $828m in first half
 
Viet Nam tra fish exports were worth US$828.6 million in the first half of this year, the Association of Seafood Producers and Exporters has reported.

It represents an increase of 27 per cent year-on-year, while volume was up 4.9 per cent.

The average export price in June was $2.79 a kilogramme compared to $2.15 a year earlier.

Exports to the US have rocketed this year, nearly doubling to more than $118 million by June 15.

Exports to South American countries and ASEAN members were also sharply up, including a 137 per cent rise in shipments to Brazil, and 42 per cent to Singapore, Thailand and the Philippines.

Speaking at a meeting held in Can Tho last Friday, Deputy Minister of Agriculture and Rural Development Vu Van Tam said the production and consumption of tra in the first half had exceeded targets. Tam attributed this to the sector's focus on quality rather than quantity, the improving global image of Vietnamese tra, and the close co-operation between farmers and processors.

By the end of June the area under tra fish farms had risen by 385ha year-on-year to 3,980ha. Of this, 1,933ha have been harvested, yielding 597,324 tonnes.

The price of tra remained high in the first half at VND23,000-29,500 a kilogramme, the Directorate of Fisheries said.

However, since May an abundant harvest has pushed down prices by VND3,000-5,000.

Duong Ngoc Minh, deputy chairman of VASEP, said it cost farmers who did not need to borrow – and those processors who also raised fish – around VND20,000 to produce a kilogramme.

For farmers without financial resources of their own, the cost rose to around VND24,000 due to the high loan interest rates and inputs they bought on credit, he said.

Farmers should become members of tra co-operatives, buy feed directly from producers, and tie up with processors to ensure they sell their harvest so that they can reduce costs by 15-20 per cent, he added.

Vietnam’s inflation highest in Asia: Bloomberg

Vietnamese inflation accelerated for an 11th month in July after the central bank cut a key interest rate even as the nation faces the fastest price gains in Asia.

Consumer prices rose 22.16 percent from a year earlier, data released by the General Statistic Office (GSO) showed on July 24.

It may peak as high as 23 percent in August before slowing to 18 percent by year-end, said Prakriti Sofat, a Singapore-based economist in Barclays Capital.

Prime Minister Nguyen Tan Dung in February cut the credit-growth target and ordered a tighter monetary policy to try to tame inflation, revive confidence in the economy and prevent another credit-rating downgrade.

The government’s strong commitment to sustaining the stabilisation effort is essential to re-establishing confidence in the VND and restoring macroeconomic stability more generally, said Benedict Bingham, the International Monetary Fund’s senior resident representative in Vietnam.

However, a tight economic policy would threaten the Vietnamese government’s full-year target of 6-percent GDP growth rate, said Moody’s Investors Service.

Investing over US$100 billion in electricity

By 2015, all communes and 98.6 percent of rural households will have access to electricity.

The Prime Minister has approved a national electricity development plan for 2011-2020 with a vision to 2030. Accordingly, Vietnam will produce and import 194 -10 billion kWh of electricity by 2015, 330 - 362 billion kWh by 2030 and 695 - 834 billion kWh by 2030.

The plan prioritizes developing renewable energy such as wind and solar power to increase the proportion of electricity generated from these sources from 3.5 percent of the total electricity supply in 2010 to 4.5 percent in 2020 and 6 percent in 2030. The plan also focuses on hydroelectric power, aiming to raise its total capacity from the current 9,200MW to 17,400MW in 2020. The first nuclear power generator will be put into operation in 2020 and will generate around 70.5 billion kWh by 2030, accounting for 10.1 percent of the country's total electricity production.

Vietnam will need to invest around US$48.7 billion for the plan up to 2020 and US$123 billion for the entire 2011-2030 period.

Auto makers in a massive spin

Black clouds are hovering over scores of Vietnam-based automobile makers facing troubles with import taxes.

The Vietnam Automobile Manufacturers’ Association (VAMA) has sent a document to the Ministry of Finance (MoF), the Ministry of Industry and Trade (MoIT) and the Ministry of Science and Technology (MST) proposing that the MoF does not impose the 82 percent complete built unit (CBU) tax rate on automobile parts imported by VAMA member companies. The rate should only be imposed if some of the parts fail to meet the breakdown level requirements outlined in the MST Decision 05/2005/ BKHCN.

Decision 05, issued in 2005 to guide the calculation of the localization ratio, stipulates the specific breakdown levels of automobile parts. Details on import tax rates are provided in MoF Circular 184/2010/TT-BTC, dated November 15, 2010.

The circular stipulates that if at least one part in the imported set of components has a breakdown level lower than that prescribed in Decision 05, the set would be subject to import tax rates applied to the CBU. Tax rates for parts and CBUs are 0-27 percent and 82 percent, respectively.

“VAMA member companies are serious investors who have invested hundreds millions of dollars in vehicle manufacturing and assembly in Vietnam for many years. The Circular 184 has caused tremendous difficulties to VAMA members and a number of members are facing shutting down production. This is because if we open customs declarations, all imported kits will be hit with an import duty of 82 per cent,” said VAMA Chairman Akito Tachibana, who is also General Director of Toyota Motor Vietnam.

In a bid to protect local production and encourage localisation, tax policies have been designed to encourage importing automobile parts rather than sets of parts, and the parts with higher breakdown levels will enjoy lower tax rates.

Authorities required Ford Vietnam to pay tens of billions of dong in tax arrears, after discovering it had made incorrect tax declarations. Other automobile manufacturers like Toyota Motor Vietnam, the Republic of Korean-backed Vidamco and Japan’s Honda Vietnam, are also facing accusations of tax evasion.

For example, in April 2011 the Hai Duong province Customs Agency discovered hat the breakdown level of Ford Vietnam’s imports was lower than declared, therefore, the tax rate applied to Ford’s imports must be the same as that applied to the CBU.

Based on Ford Vietnam’s four declarations, it had to pay only VND4.83 billion (US$233,500) for four consignments of imports in April. However, the customs agency later asked the firm to pay an additional VND17.94 billion (US$867,000).

Ford had to temporarily stop operations for days as it could not open a new customs declaration because, if the declaration was opened, all imported kits would have an import duty of 82 per cent applied to them.

Vidamco said that, due to the current legal regulations, it might have to shut down production in the coming days, leaving thousands of employees jobless.

The MST, MoIT and the Ministry of Transport have established a team to inspect the breakdown levels of the imported component sets to decide whether Decision 05 should be revised. “Pending the results of the inspection, importers are allowed to continue getting customs clearance with the current tax rate according to what they declared. However, importers have to make written commitments with customs agencies that they will obey the final conclusions of authorised agencies on imported components,” said MoF Deputy Minister Do Hoang Anh Tuan.

Central Institute for Economic Management economist Nguyen Tu Anh said Decision 05 should not be revised as “it has been going well since 2005.” “Automobile makers just want the decision to be revised so they can enjoy lower taxes to benefit themselves. VAMA is strong, and it can force ministries to make concessions,” he said.

There are accusations that concerned ministries have already made many concessions in policies towards automobile assemblers in Vietnam, and some observers have even raised questions about policy corruption.

Construction firms report H1 losses
 
Local construction corporations are concerned about whether they will be able to overcome the current difficulties in the second half of the year.

Many have reported revenue losses in the past six months, partly due to the global economic downturn.

In a Ministry of Construction online briefing session, general director of Song Da Construction Corporation Duong Khanh Toan said that in the first half of the year, before-tax profit was only VND560 billion (US$27 million), reaching 18 per cent of the target.

Toan said the main reason for low profits was that investors lacked the capital to pay for construction, thus debt exceeded the capabilities of the units.

In particular, the total value of construction on the Lai Chau hydropower plant reached VND1.3 trillion ($63.1 million), but advance payments from investors only amounted to VND264 billion ($12.8 million).

Building contractors have not yet received any payments for June or July, and Song Da Corp has had to find funding from alternate sources to pay workers' salaries. A lack of capital scared investors, making them less likely to test construction, Toan added.

Toan said the ministry should have protocols to help investors pay for building contractors.

Moreover, high loan interest rates and depreciating equipment were seen as obstacles to business activities, Toan said.

"Housing and urban business usually brings high profits, but at present corporations face many difficulties due to the slow market and the tightening of fiscal policy," Toan lamented.

Nguyen Dang Nam, general director of the House and Urban Development Corporation, said that real estate businesses had probably never struggled as much as they were now.

Le Van Chung, CEO of the Viet Nam Cement Industry Corporation, said enterprises producing construction materials were not exempt from these difficulties.

Chung said that prices of materials and fuel were on the rise, including coal (up 41 per cent), petrol (32-43 per cent), steel (nearly 30 per cent) and electricity (15.2 per cent), while output was quite slow.

Profits of manufacturers reached only 2-3 per cent and low interest rates were not enough to pay dividends to shareholders following the bank interest, Chung added.

Representatives of corporations suggested the Government review the monetary policy to help enterprises avoid stagnation.

Vinatex aims to boost local fibre content

The Viet Nam National Textile and Garment Group (Vinatex) plans to invest US$2.1 billion over the next 10 years to set up facilities to make polyester yarn and other raw materials and increase local content in its products.

The country's biggest garment firm – it employs more than 2 million – will set them up in eight Central Highlands and northern mountain provinces to add value and boost exports.

They include 31 fibre plants, 21 fabric plants, and 164 garment units.

By 2020 the company hopes to make more than 65 per cent of its raw materials.

Le Tien Truong, its deputy general director, told Tuoi Tre newspaper that next year, when the Dinh Vu Polyester Factory in Hai Phong – Viet Nam's first – reaches full capacity, the current polyester import of $450 million would stop.

By 2020 the group targeted production of 300,000 tonnes of fibre, 675 million square metres of fabric, and 706 million pieces of garments a year, and exports of more than $5 billion, he said.

The group needed VND1.3 – 1.5 trillion (US$62 – 71 million) a year for the expansion programme, improving human resources, and others, he said.

The huge investment would enable it to grow production by 12-14 per cent a year and export by 15 per cent.

In the first half of this year Vinatex earned revenues of more than VND19.37 trillion ($940.3 million), a year-on-year increase of 33 per cent. In the second half it targets VND17.5 trillion ($849.5 million) in revenue and $1.2 billion in export value.

The Viet Nam Textile and Apparel Association, the industry grouping, said the country's total apparel exports were worth $6.16 billion in the first half. It expects full year exports to top $13.5 billion, up by almost half since 2009 when they were worth $9.2 billion.

PMH back to home market via condo sale launch

Phu My Hung Corporation (PMH) announced on Thursday to come back to the residential market by launching a new condo project in HCMC’s District 7 early next month.

The company had seen its sale activities coming to a standstill since a land-use-fee dispute erupted around two years ago.

PMH will gauge the market feedback through the Canh Vien 3 condo project under development near the Crescent mall and the commercial and financial center in the new urban town of Phu My Hung.

Canh Vien 3 covering 4,000 square meters will have two 13-story buildings with 116 apartments measuring a minimum of 119 square meters each. Besides a commercial section, the project will consist of serviced facilities such as swimming pool, fitness center, children’s playground and parking lot for 116 cars and motorbikes.

This is the 32nd condo project the corporation has developed in the town, and when in place it will increase the total area of housing in the town to some 1.9 million square meters.  

PMH said the average selling price of those apartments was VND40 million per square meter, and a flexible payment method would apply with 10 installments over 18 months. As scheduled, the developer will hand over the apartments by December this year.

As for the land-use-fee dispute, Phu My Hung has received approval for extending the deadline for paying the fee to early December this year, instead of June 30 as required by the city government.

Buyers must pay the duty based on the date of the sale contracts being signed. After the period, the fee will be calculated based on the land price at the time buyers submit the document for tax payment.

Nguyen Thanh Tai, vice chairman of HCMC, said in a document issued on June 9 that homebuyers would have to hand their land-use fees to PMH, which would then transfer the money to the State.

The land use fee will be paid when PMH and buyers sign contracts, and the amount will be calculated based on the land prices decided by the HCMC government each year.

The spat over who would pay the fee has caused difficulties for the corporation and buyers who have been unable to pay the duty so as to get home ownership certificates. There are some 8,000 files piled up relating to the payment of the fee.

PMH has set August 30 as the deadline to receive requests for home ownership certificates from buyers. Those requests will be passed to relevant authorities before the new deadline expires in early December this year.
 
 Fertiliser giant to stabilise prices

Deputy Prime Minister Hoang Trung Hai called on PetroVietnam Fertiliser and Chemicals Corporation (PVFCCo) to stabilise fertiliser prices and maintain reserves as required by the Government last Wednesday.

Reportedly, selling prices of urea fertiliser increased by VND1.6 million (US$77) per tonne.

PVFC Co plans to save input costs and balance the quantity of fertiliser imported.

Seven-month pepper exports hit record

Viet Nam exported 78,000 tonnes of pepper during the first seven months of this year, earning US$420 million, equal to the value of the whole year in 2010, according to the Viet Nam Pepper Association (VPA).

The US and Germany are the two largest importers of Vietnamese pepper, while the Netherlands, the United Arab Emirates and Egypt also bought large volumes.

The country expects to earn pepper revenues of over $766 million this year, $346 million more than the figure last year.

Vinashin builds ship for Taiwan investor

The Sai Gon Shipbuilding Industry Company (SSIC), a member of Vinashin, handed over the New Lucky VII ship to its owner, Franbo Lines Corporation (Taiwan), last Wednesday.

The 6,850-tonne cargo ship, designed by the two Japanese companies of Kitada and AZ and built with advanced technology from Spain, the Republic of Korea and the US, will be used to transport timber products.

The 102m-long and 17m-wide ship was built at a cost of US$7.27 million.

On the same day, SSIC also inaugurated a dry dock to launch new ships and repair damaged vessels. It is considered the largest dry dock in southern Viet Nam and can handle ships with a capacity of up to 25,000DWT.

Vinalines to erect $310m shipyard

Viet Nam National Shipping Lines (Vinalines) broke ground on the Vinalines South ship repair yard in Tan Thanh District, Ba Ria – Vung Tau Province, on Tuesday.

With a design capacity of 100,000DWT, the dockyard costs almost VND6.5 trillion (US$310 million). The investment comes from Vinalines's capital and commercial loans.

Reportedly, existing Vietnamese yards currently serve only 20 per cent of demand for ship repairs.

PetroVietam, ministry join hands

The Viet Nam National Oil and Gas Group (Petrovietnam) signed a contract to establish a venture with the Materials of Defence Industry Company (GAET) under the Ministry of Defence to produce ammonia and ammonium nitrite, which are commonly used as fertilisers, from natural gas.

The venture, 60 per cent owned by PVN and the rest by GAET, aims to produce 450,000 tonnes of ammonia and 200,000 tonnes of ammonium nitrite per year.

Natural gas and crude oil for production are taken from offshore fields in the Cuu Long and Nam Con Son basins.

Military Bank, Deloitte sign deal

The Military Bank (MB) on Thursday signed a strategic contract with Deloitte Viet Nam to seek support in corporate governance and minimise business risks.

The Ha Noi-based bank expected that such co-operation will help the MB ensure the necessary conditions to meet the State Bank of Viet Nam's requirements and gradually approach global banking standards.

Bank launches interbank ATM service

A Chau Bank (ACB) has officially launched an interbank transaction service that can be used via clients' automated teller machine (ATM) cards.

The service's implementation is divided into three phases. The first phase enables clients to make payment transactions through cards issued by the Sacombank only. By early August, cardholders can perform transactions with Vietcombank and by year-end, they will be able to use their cards at any ATM.

Supermarket brands draw fire
 
A new supermarket strategy based on producing goods under in-house labels, pose several challenges to domestic manufacturers in providing low priced, high quality products.

As part of the new strategy, supermarkets aim to co-operate with local manufacturers in producing goods such as home appliances and food, attaching in-house labels for distribution via their own systems upon completion.

Cutting down on costs associated with advertising and distribution, the new strategy aims to ensure high quality while affording an opportunity for supermarket prices to be lowered by 10-30 per cent.

One manufacturing director admitted that his company faced a number of difficulties due to the introduction of cheaper products, which would make their own products less competitive.

For example, supermarket notebooks are sold at VND3,900 each, while the price for the same product was usually double that at other retail outlets.

During May, a supermarket introduced a new type of soap, branded with its own label, the price of which was around 30 per cent cheaper than that of its competitors.

Due to lowered prices, manufacturers are set to become weaker, possibly even turning into outsourcing units for supermarkets, according to a market expert.

However, some believe that new supermarket products could do little harm to already established brands. They are only being distributed through modern systems, which helps manufacturens innovate, operate at full capacity and earn higher profits while avoiding direct competition.

According to a report, drawn up by the Centre of Business Studies and Assistance (BSA), around 50 domestic manufacturers have been producing goods for supermarkets.

The BSA report cites the Saigon Coop as an example of a supermarket which has co-operated with 45 domestic producers, including Kinh Do corporation, the Sai Gon Paper Company and Phong Phu Garments, in producing products.

According to the report, the trend is nothing new, led by Metro Cash & Carry who introduced many of its own products upon first entering the Vietnamese market.

Since 2007, Big C has also started producing in-house labelled products, with many additional domestic supermarkets following in the footsteps of their foreign counterparts.

The Saigon Co-op currently sells 150 in-house labelled products while Vinatex Systems, run by the Viet Nam Garment and Textile Group, has been selling in-house labelled products under its Vinatex Fashion trademark.

Vinatex is set to announce three new trademarks during the course of the year, to be distributed at over 60 of its stores nationwide.

Sugar craving a headache

Vietnam may resume sugar imports to keep local firms sweet.

Tran Thi Mieng, an official from the Ministry of Agriculture and Rural Development (MARD), said: “MARD should ask the Ministry of Industry and Trade to allowing the resumption of sugar imports in August to satisfy domestic demand and avoid speculation.”

She said that prices in many markets such as Thailand were on the rise and Vietnam’s sugar stockpile was small.

In the 2010-2011 sugarcane crop, which began in September last year and finished in July, domestic sugar firms produced 1.15 million tonnes of sugar, a year-on-year increase of 260,460 tonnes, plus 293,000 tonnes of sugar inventory and 93,000 tonnes of imported sugar from the beginning of the year.

Therefore, the total domestic sugar supply was estimated at 1.436 million tonnes. More than one million tonnes of sugar were consumed from the beginning of the 2010-2011 crop to July.

Under Vietnamese law, sugar is imported into the country using a quota system established by the Ministry of Industry and Trade (MoIT) every year, in consultation with the MARD, Ministry of Finance and Vietnam Sugarcane and Sugar Association (VSSA). The MoIT already set an import quota of 250,000 tonnes of sugar across this year. In May, because of oversupply, the MoIT asked enterprises to hold off raw and refined sugar imports until July to help domestic refineries reduce their stockpiles.

However, VSSA confirmed it was not necessary to import sugar at least until October. VSSA representative Ha Huu Phai told VIR that the domestic supply was secured until that month.

He said favourable weather and an expanded sugarcane growing areas had helped raise the sugar output of the 2010-2011 crop.

Rescue mission for wood workers

Wooden handicraft and furniture manufacturers have been given the kiss of life.

Vietcombank is offering a commercial supportive programme specially tailored to wood industry businesses and handicraft manufacturers with a committed credit package of VND1 trillion ($48.3 million).

Under the programme, Vietcombank will render a package support to businesses acquiring export letters of credit (L/C) or finance their export contracts on the condition these firms will later make import/export payments through Vietcombank’s system.

This is one of the ‘life pontoons’ to help businesses weather through a difficult period.

Alongside support from banks, Ho Chi Minh City Handicraft and Wood Industry Association (HAWA) chairman Nguyen Chien Thang said the association had founded the Alliance Handicraft & Wooden Fine Art Corporation (HAWA Corporation) to support member units in handling big orders.

“HAWA Corporation acts as a go-between as its people come to member units to search suitable businesses for export contract fulfillment. Besides, businesses short of export orders can contact HAWA Corporation for further assistance,” Thang said.

Vietnam houses over 2,500 wooden handicraft and furniture manufacturers with 41 per cent of them having capital reserves of less than VND500 million ($24,000) each.

Industry experts assumed Vietnam would not achieve its target of reaping $4 billion from wooden handicraft and furniture export in 2011 given the current tough business climate.

In 2010, Vietnam posted around $3.5 billion from wooden product export, up 30.5 per cent against 2009’s, according to the Ministry of Industry and Trade. The figure was $1.4 billion in the first five months of 2011with the export figure in May amounting to $230 million, around 11 per cent lower than April.

Livestock a bridge too far

Businesses are hesitate to invest in livestock breeding despite exceptional profit rates.

Pumping money into livestock breeding was risky currently despite its exceptional profit margins of 20-25 per cent, said Nghe An Animal Breed Centre director Luu Cong Hoa.

“Besides, the [animal husbandry] sector is always threatened by epidemic outbreaks. Once an outbreak took place, we need to kill all affected animals, causing production standstill and badly influencing breeders’ sentiments,” said Hoa.

Director Le Van Me at Phu Son Husbandry Joint Stock Company based in southern Dong Nai province, said hiking meat prices stemmed from spontaneous livestock breeding development.

Besides epidemics, high lending rates are another hurdle. “Overly high [lending] rates of 25-26 per cent per year and restricted access to loans has scared away any investors who wish to jump into the sector despite its current high margins,” said Hanoi-based Co Dong pig breeding cooperative chairman Tran Van Chien.

High margin rates and meat price upsurges have not yet translated into an easier life for businesses active in the sector. For instance, the Saigon Food Industry Joint Stock Company invested extensively in hundreds of slaughter houses and processing plants and signed purchase contracts with local farmers. Its factories, however, currently operate under capacity on the back of soaring breed and animal feeding costs.

In fact, in 2010 the government enacted Decree 61/2010/ND-CP stimulating businesses to invest in agriculture and rural development. In June, the Ministry of Finance made public Ordinance 84/2011/TT-BTC guiding the implementation of the decree.

Accordingly, businesses operating in agriculture will benefit from land rent reductions/exemptions, preferred loans and be supported in epidemic prevention and brand promotion.

Not only farmers, big breeding farms also found hard to get bank loans, according to the Department of Agriculture and Rural Development in central Thanh Hoa province.

Head of Ministry of Agriculture and Rural Development’s (MARD) Animal Husbandry Department Hoang Kim Giao said the department had proposed government agencies allow breeding businesses and cooperatives to benefit from Decree 61 incentives, particularly loan incentives.

In this respect, deputy head of State Bank’s Credit and Banking Department Cat Quang Duong said the interest of each loan was based on each production sector’s risk degree. Duong, however, pledged to scale up support to animal breeding businesses through suitable loaning schemes.

State-owned enterprises ‘need scrutiny'

Experts have raised concerns over Government capital control at State-owned enterprises (SOEs), since only 12 per cent of the country's SOEs were audited in the period from 2007-09.

Dinh Trong Hanh, head of the State's Auditing Regulations and Quality Control Department, said the modest number of audited businesses had not reflected the realities of tax law implementation at the SOEs.

"We should have an adequate awareness of the role of tax auditing in SOEs, clarifying targets for work and strictly implementing them," Hanh said.

He added that the limit was due to the fact that targets of auditing at SOEs had not been clearly defined. Thus, State auditing had focused on obedience to the law and relating regulations.

"The main purpose of the work was to increase the effectiveness of SOEs. In addition, the scale of tax auditing at the enterprises was too small to provide an overview of the situation."

Figures from the Viet Nam Tax Consultants Association (VTCA) showed that taxes and fees accounted for over 95 per cent of the State budget. The average growth rate of State budget collection in the period of 2006-10 was 16.5 per cent.

SOEs accounted for 23 per cent of that total, which fulfilled their role in the business sector and contributed to the State budget, comprising 7,500 of the country's 500,000 businesses.

Hanh said the State auditing agency lacked a unified system, and co-operation between the tax sector and businesses had been limited.

State Audit Viet Nam (SAV) Deputy Chief Le Hoang Quan said the average rate of businesses' violations in implementing their tax duties was 10 to 15 per cent, slightly reduced from earlier periods.

He said violations had been found in all of the audited enterprises, which did not declare the correct amount of taxable funds.

"The violations were the fault of both businesses and the lack of effective management policies."

He said some tax policies had not yet caught up with business development. Viet Nam has issued 10 laws on taxes and tax management that include multiple decrees and circulars, making it difficult for tax officers to get a good hold on the laws.

VTCA's chairwoman Nguyen Thi Cuc agreed that there were several reasons for the situation, but most of the confusion was due to the overlap between the General Department of Tax and SAV, adding that a business could be audited by both offices.

Cuc said the tax department had experienced a loss of tax revenue from SOEs and other businesses. In 2009 alone, SAV collected more VND536 billion (US$26.1 million) in tax owed from previous years by183 audited businesses.

She said auditing agencies should co-operate in order to help enterprises save time and money.

Meanwhile, the Finance Ministry has completed a financial supervision mechanism for SOEs and will begin applying it this quarter to effectively manage capital at the businesses.

A representative from the ministry said this mechanism was necessary to manage capital, as SOEs hold 70 per cent of the country's fixed assets, 20 per cent of its social investments, 60 per cent of bank credits and 70 per cent of official development assistance capital.

The mechanism includes lists of investment projects, ways to mobilise capital, debt management and business results for SOEs, as well as those where State capital dominated.

Twenty-two State groups and corporations will be implicated by the mechanism, including Electricity of Viet Nam, Viet Nam Coal and Minerals Group, Viet Nam National Petroleum Group, Viet Nam Post and Telecommunications and Vietnam Airlines.

New models create niche market

The mounting pressure to restructure business models and improve management offers a big opportunity for the enterprise resource planning market in Viet Nam, industry insiders say.

Enterprise resource planning, or ERP, integrates internal and external management information across an entire organisation, embracing finance and accounting, manufacturing, sales and service, and customer relationship management.

ERP systems automate this activity using software and facilitate the flow of information between all business functions inside the organisation and manage connections with outside stakeholders.

The country's ERP market is rated as having massive potential since family-run businesses will eventually be pressured to restructure to improve management while private firms will also need to adopt global norms.

ERP is particularly relevant to businesses that need a modern management model to minimise risks and ease pressure to disclose information to shareholders.

Experts said the ERP market has already grown since Viet Nam's accession to the World Trade Organisation when many ERP suppliers, consultants, and implementation partners began to enter the country.

Vo Hong Ky, general director of E&A Co told Sai Gon Tiep Thi that suppliers targeted medium and large-sized firms with annual revenues of more than VND500 billion (US$25 million).

This segment was under constant pressure to sustain growth rates and had ambitions to achieve a breakthrough in the market, he said.

Businesses of this size were generally aware that the use of information technology would help increase competitiveness and focused on optimising the chain of production, distribution, business, and customer care, he pointed out.

What concerned businesses most was not the cost but whether ERP application would yield the desired outcomes, he added.

Experts said the growth of the ERP market depended on the requirements of each business during a certain period of development, with the banking, financing, and insurance sectors embracing it in 2000.

It was not until 2007 that ERP spread to other sectors and expanded market size.

Sectors under pressure to manage cash flows and efficiently distribute commodities, like retail, real estate, steel, and foodstuff, have begun to invest in ERP.

Property giant Hoang Anh Gia Lai (HAGL) group recently reached a deal worth nearly US$1 million on the ERP licence with German-based SAP firm.

The initial costs for HAGL to apply ERP is estimated at $5 million.

Oil importer and distributor Petrolimex's $13 million ERP project is the largest of its kind by a State-owned business.

Several other multimillion-dollar ERP projects are being undertaken in phases by the taxation, cement, electricity, and telecom sectors.

Sectors such as financing, banking, and insurance have taken the lead in using ERP, with each bank spending tens of millions of dollars on solutions to provide modern retail banking services.

It does not include the annual cost of billions of dong to operate and upgrade the system.

Experts said besides thousands of currently operational small-scale ERP projects, the launch of vast schemes would significantly enlarge the market.

Vu Dinh Thang, deputy general director of Global Cybersoft, said businesses buying ERP solutions were looking for best practices for an industry, adding that ERP's effects are not limited to individual businesses but have expanded to entire industries. Since businesses have better recognised the role ERP plays in improving management, making preparations for an ERP project – from solution choice to consultancy – has become more professional, he said.

Vietnamese banks receive record financing from IFC

International Finance Corporation (IFC) has loaned a record US$505 million for the fiscal year 2011 so Vietnamese banks can help local companies increase foreign trade and create jobs through its Global Trade Finance Program.

The programme, since its launch in Viet Nam in late 2007, has helped improve the capacity of nine banks to cover the risks of granting trade finance to local companies, mostly small and medium-sized enterprises.

Under the programme, the banks have issued 268 guarantees to support $1 billion in trade finance transactions.

This year Lien Viet Bank, Orient Commercial Bank, Tien Phong Bank and VIB Bank joined the programme.

IFC's other partners in Viet Nam are An Binh Bank, Asia Commercial Bank, Sacombank and Eximbank.

"IFC's Global Trade Finance Program has helped extend our capacity considerably to deliver trade finance for local importers and exporters over the past few years when trade lines have been limited," said Do Diem Hong, Techcombank's Executive Vice President.

Techcombank, an IFC partner since 2007, has been the programme's largest user in Viet Nam.

Simon Andrews, IFC regional manager for Viet Nam, Cambodia, Lao and Thailand, said that IFC helped ensure continued trade flows vital to enterprise growth despite liquidity constraints and helped Viet Nam's banks attract more trade lines from other foreign banks.

‘Buy local' campaign makes inroads
 
The Government's "Vietnamese Use Vietnamese Goods" campaign has improved awareness and impacted perceptions of Vietnamese consumers, a study has found.

Global market research company Nielsen conducted the study in HCM City and Ha Noi in March, polling 150 respondents across all income levels in either place.

The Vietnamese Goods Trend Survey found that 83 per cent of consumers in HCM City and 95 per cent in Ha Noi are aware of the campaign launched in 2009.

The campaign has had some impact on the purchase intent of consumers in the two cities, with 62 per cent of HCM City consumers and 49 per cent of Hanoians saying "I would probably purchase more Vietnamese goods."

Most consumers consider Vietnamese goods as those manufactured in the country even if they are international brands.

In Ha Noi, 82 per cent think the easiest way to determine a Vietnamese product is the "High Quality Vietnamese Product" logo on it, while in HCM City, a majority expect to see a "Made in Viet Nam" label.

Consumers in HCM City associate the following attributes with Vietnamese goods: wide availability (49 per cent), reasonable price (39 per cent), wide variety (35 per cent), good quality (20 per cent), and premium brand (13 per cent).

Hanoians associate wide variety (54 per cent), wide availability (41 per cent), reasonable price (32 per cent), and good quality and premium brand (26 per cent).

Vietnamese goods are widely preferred for food and beverages, but not in the non-food and beverage categories.

Corporate bond risks spark investor concerns

Many listed companies are opting to issue bonds to raise capital in light of the prolonged downturn of the stock market. However, the risks are now raising greater concerns among investors.

Earlier last month, Tan Hoa (Viky) Plastics Co (VKP) approved a VND40 billion (US$1.9 million) convertible bond issue, even though the company has suffered losses for two successive years and is on the verge of bankruptcy. VKP shares are traded at just VND2,000 per share – the cheapest shares on the HCM City Stock Exchange.

In developed markets, only financially healthy companies which were rated by the prestigious rating agencies such as Standard & Poor's or Moody's could issue bonds successfully, said Thang Long Securities Co deputy director Mac Quang Huy.

"We don't have a similar rating mechanism in Viet Nam, so many more risks exist," Huy said, suggesting that issuing companies be required to publicise their finance health for potential buyers to assess their investments.

A Viet Nam Bond Market Association specialist also warned investors to be cautious about the risk of default in investing in corporate bonds.

Saigon Machinery Spare Parts Co (SMA) announced last month that it would postpone interest payments on one-year bonds it issued last year due to financial difficulties. SMA called on bondholders to support the company by lending the company the interest money for one year at an interest of 18 per cent per year.

Sacombank Securities Co, which just reported a loss in the second quarter of this year, plans to issue three-year convertible bonds this year worth VND800 billion ($38.8 million). But instead of defining a prior coupon rate, the company said it would set the interest rate for bondholders who decided not to convert bonds into shares – but in no case higher than 13 per cent per year.

Bondholders, meanwhile, would be able to convert bonds into shares based on the lowest price computed under one of the following two options: by book value per share based on the latest audited financial statement, or by the average closing price of 30 consecutive trading sessions prior to the conversion date..

Viet Nam Bond Market Association vice chairman Trinh Hoai Giang was quoted in the newspaper Dau tu Chung khoan (Securities Investment) as saying that foreign investors were offered multiple options when buying convertible bonds overseas but investors in Viet Nam were mostly forced to convert into shares at maturity, whether they liked it or not.

Power plant construction begins

Construction work has started on the Quang Trach Thermal Power Plant No 1, with a capacity of 1,200MW, in the central coastal province of Quang Binh.

With a total investment of US$1.7 billion, the plant will be built on an area of 300ha in Quang Trach District. It is designed for two turbines using coal-fired steam technology. Once completed and put into full operation in December 2015, the plant is expected to provide the national grid with about 8.4 billion kWh per year.

Amway receives GMP certificate

Amway Viet Nam, which runs a factory in AMATA Industrial Park of Dong Nai Province, on Wednesday received a Good Manufacturing Practice (GMP) certification from the SGS for its manufacturing and distribution of cosmetic and personal care products.

The Switzerland-headquartered SGS provides inspection, testing, certification and verification services. It certified that Amway Viet Nam meets the ASEAN guidelines for quality management system, human resources, manaufacturing facilities, sanitary and hygienic conditions, warehousing and distribution. The US-owned Amway Viet Nam put its US$15 million factory into operation in October, 2007.

Xpress Money links with DongA Bank

The money transfer firm Xpress Money has joined with the remittance affiliate of DongA Bank for a new payment-at-home service in Viet Nam.

This is the first time Xpress Money has co-operated with a bank in Viet Nam for the service.

"Viet Nam is a potential market with around four million Vietnamese living in around 100 countries," said Xpress Money's Vice Chairman Sudhesh Giriyan.

UK-headquartered Xpress Money is present in more than 90 markets with a global agent network of 80,000. DongA Bank Remittance represented US$1.2 billion out of the total $8 billion sent to overseas Vietnamese last year.

Logistics firm DHL opens Long An depot

Logistics company DHL VNPT Express opened a new depot in Long An Province on Wednesday to add to its three other depots and three service centres.

"Long An is a vital region in Viet Nam's Key Southern Economic Zone, the commercial base continues to expand as manufacturers take advantage of abundant labour, availability of land and well-structured industrial parks. It's also close to HCM City, wihch makes it a desirable place for investors," said the company's general director, Tim Baxter, about the opportunity for logistics services. With an investment of US$1 million over five years, the new depot will be able to handle 80,000 shipments annually.

Industrial gas separation plant starts

The construction of an industrial gas separation plant with a capacity of 110 tonnes a day began in the Thang Long II industrial zone in the northern province of Hung Yen on Tuesday.

Covering an area of more than 1,000sq.m, this is the biggest ever industrial gas separation plant in Viet Nam, with a total investment of over US$14 million. It applies advanced technology from Japan and will provide liquid oxygen, nitrogen and argon for industrial manufacturing.

The plant is being built by the Northern Viet Nam Japan Gas Joint Venture Limited Liability Company, which is a joint venture between the Viet Nam Gas Company and the Viet Nam Industrial Gas Joint Stock Company.

$14m footwear factory licensed

The Quang Ngai Industrial Zones Authority granted an investment certificate for Rieker Viet Nam to build a US$14 million footwear factory in the coastal province of Quang Ngai, the biggest investment in the IZ so far.

The project will cover an area of 10ha in Tinh Phong IZ and its first phase of construction will begin next month for completion early next year. The second phase will start later and finish in late 2014.

New regulations to govern IPOs of State-owned enterprises

Regulations on equitising State-owned enterprises will be modified from September 5.

According to a new decree, only three types of enterprises, compared to six as before, can be equitised.

These are the parent companies of State-owned corporations, companies controlled by ministries and provincial-municipal authorities, and State-owned companies that have not been transformed into one-member limited-liability companies.

The three types of companies can sell shares to strategic shareholders before the initial public offering. Each company will have a maximum of three strategic investors after the equitisation.

Securities watchdog rakes in fines against violators worth $262m

The State Securities Commission in the first six months of this year took action against 40 individuals and 27 companies violating securities regulations. Total fines were VND5.4 trillion (US$262 million).

Notably, the commission imposed a penalty of VND300 million ($14,500) per person against those who manipulated the share prices of veterinary pharmaceutical producer Cai Lay (MKV) and Ha Tien Transport Co (HTV).

On Tuesday, the commission fined Kenanga Viet Nam Securities Co VND40 million ($1,900) as it had not archive documents on customer transactions.

Singapore fund buys convertible bonds from Vietnamese developer

Northbrooks Mauritius Investment Pte Ltd, a unit of Singaporean Temasek Holdings, has completed payment of VND1.13 trillion (US$55 million) for convertible bonds issued by property developer Hoang Anh Gia Lai Group (HAG).

The bonds matured last Friday and can be exchanged for shares in the group's Hoang Anh Gia Lai Rubber Co.

Majority of listed brokerage houses post losses in first half

Sixteen out of 28 listed securities companies have announced their business results for the first six months of this year.

However, 10 of them posted losses, with Sai Gon-Ha Noi Securities Co (SHS) losing the most - VND382 billion (US$18.5 million).

Other securities firms losing included Bao Viet Securities Co (VND80.9 billion), VNDirect Securities (VND130 billion).

Mekong Housing Bank rolls out successful IPO worth $9.5 million

More than 17.8 million shares in Mekong Housing Bank have been sold for VND11,025 each. Total value was VND196.8 billion (US$9.5 million).

About 64.6 million shares were auctioned on Wednesday at VND11,000 in the bank's initial public offering.

PetroVietnam subsidiary increases stake in affiliated companies

PetroVietnam Construction Co (PVX) this week bought more shares in Sai Gon Petroleum Construction and Investment Co, PetroVietnam Premier Recreation (PVR), and PetroVietnam Finance Land (PFL).

PVX added 541,400 PSG shares in its portfolio to hold a 19.3 per cent stake in this company, while it bought 657,200 PVR shares and 800,000 PFL shares to increase their holding percentages to 31.9 and 34.3 per cent, respectively.

Companies prepare to pay cash dividends on 2010 profits

Construction company VNECO 9 (VE9) will pay dividends for last fiscal year by 18 per cent of the share price on August 15. Ex-dates will be next Friday, and the final day for registration will be August 2.

Meanwhile, transportation company Hai Minh (HMH) will conduct the first phase of dividend payout of this year at 15 per cent on August 25. Final day for registration will be August 10.

PV